Location and retail rents

Where’s the best place to open a retail outlet? Unfortunately, the ‘best’ sites are likely to be the most expensive. We all like a league table, and one has just been published that identifies the 10 shopping streets with the highest rents. What do these values tell us?

Perhaps it’s no surprise that London’s New Bond Street is now the most expensive retail location in Europe, according to a report.

What’s perhaps more interesting is the rate of change in rentable values. It’s the 19.4% rise in Bond Street rents that surprises me. What does that indicate about the London economy? Rents are down in Paris and static in much of the rest of Europe.

But the force driving rental values is no mystery. One of the report writers points out that demand from firms to secure premises in key locations was easily outstripping supply and “New Bond Street remains one of the most sought after locations in the world for luxury brands. This trend is likely to continue for the foreseeable future on the basis that there are still a large number of retail requirements that remain unsatisfied.”

Clearly the luxury goods market segment has come out of recession. Will the rest of the economy follow?

Another final point well worth watching: international retailers looking for prime locations and strong tourism meant that “emerging markets” were seeing steep rent rises. Paris may be down, but Sao Paulo and Mumbai are rising fast. Quoting the report again: “The world’s emerging economies looks set to experience significant growth in the retail sector, thereby boosting demand for good quality, well-located property.”