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Hong Kong retains its title as the world's most expensive retail market.

Hong Kong is the world's most costly shopping destination, according to global property advisor CBRE Group, as strong inbound tourist flows and sustained rises in domestic wealth feed occupier demand from international fashion and luxury stores. homes

In the first quarter of 2012 (Q1 2012), the CBRE rankings of prime global retail rentals remained unchanged from the previous quarter. With retail rates of US$3,864 per square foot (psf) per year, Hong Kong stays at the top of the list. At US$2,475 per square foot per year, New York remained in second place. Retail rentals in both cities increased significantly from quarter to quarter.

"As Manhattan's premier retail zones continue to lead US retail rentals, consumer demand for higher-end market streets in Manhattan, Los Angeles, and Chicago is remaining stable," said Anthony Buono, executive managing director, National Retail, CBRE. "Despite the fact that the economy is still weak but improving, consumer support has prompted investors to pay premium rates for retail venues in these cities, as evidenced by Vornado's recent $700 million purchase of the significant retail space at 666 Fifth Avenue in Manhattan."

The top five rankings remained unchanged from the previous quarter, with Sydney (US$1,112 psf per annum) third, Tokyo (US$1025 psf per annum) second, and London (US$956 psf per annum) fifth, as competition for prime locations in the city's West End contributed to a 5.6 percent annual rental increase.

Total retail rents climbed by a moderate 0.8 percent quarter-over-quarter in Q1 2012, as consumer and retailer confidence was harmed by fears about the eurozone financial crisis and lackluster global economic development. Despite these concerns, tenant demand for premium space remained strong in many major cities, and premium space was scarce in many markets.

The analysis focuses solely on each city's top tier retail streets, where the asking rents indicate the city's higher rent ceilings. The report's asking rents do not reflect the broader retail rental market in the cities mentioned.

In Q1 2012, the Americas area led the way with retail rent growth of 3.4 percent quarter-over-quarter, owing to strong demand in a few U.S. cities such as Washington, DC, Miami, and Seattle. Following considerable demand from international, fashion, and luxury retailers, Asia Pacific also saw positive quarterly growth (0.5 percent). Many American businesses continued to target Europe, the Middle East, and Africa (EMEA); however, the region had considerable rental decreases in some locations, notably Athens and Belgrade, and averaged a quarterly decrease of -0.2 percent.

Due to the uncertain economic climate, particularly in Europe, customers were cautious in their purchasing in Q1 2012, despite sales numbers showing an improvement over the previous quarter. North American consumer spending increased, but Asian retail sales remained favorable and benefited from a good holiday season. Despite the fact that occupier demand for prime space remained high and sales increased by 0.5 percent over the previous quarter, Europe is still being impacted by consumers' cautious spending habits.

Ray Torto, CBRE's Global Chief Economist, tells World Property Channel: "Overall, this quarter has seen more positive features than the previous one, with increased consumer spending, stable occupier demand, and new retail malls benefiting emerging markets. Despite concerns about the eurozone and a faltering global economy, retailer demand for prime property in key cities remains robust; nevertheless, prime space in many locations is in short supply. Because of the demand-supply imbalance, activity levels aren't as high as they may be. Similarly, retailers continue to seek for the best locations in Western Europe's more mature markets and Asia Pacific's wealthier markets."

"Cross-border retailing is also on the rise as emerging economies' middle classes expand and merchants in more established economies seek new growth prospects. The increased demand for modern, high-quality retail space in emerging nations has resulted in a surge in shopping center construction, making it easier for retailers to enter these markets."

Peter Gold, CBRE's Head of Cross-Border Retail, stated, "Despite a difficult consumer climate, occupier demand for top space in Europe remains high. With the likes of Forever 21, Victoria's Secret, and Kate Spade having recently joined, or set to join, the region, American retailers have been particularly aggressive in seeking out new prospects. Many retailers are having difficulty obtaining apartments in prominent locations within Europe's top tier cities. As a result of the imbalance between demand and supply, activity levels are not as high as they may be. This problem will not be rectified in the near future, as much of the space now under construction in Western Europe outside of these major cities, and it is putting upward pressure on rents in some areas."

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