HCMC’s Dong Khoi street named world's 13th most expensive retail destination

New York’s Fifth Avenue retained its top ranking as the world’s most expensive retail destination. Milan has overtaken Hong Kong for second, while Ho Chi Minh City’s Dong Khoi ranks 13th, wrote Cushman & Wakefield analysts.

The 33rd edition of our Main Streets Across the World report, which examines prime retail rental rates in key cities globally, shows that New York’s Fifth Avenue has retained its top ranking as the world’s most expensive retail destination, despite recording flat rental growth year-over-year.

Milan’s Via Montenapoleone jumped a spot into second, displacing Hong Kong’s Tsim Sha Tsui, which slipped to third. New Bond street in London and the Avenues des Champs-Élysées in Paris retained fourth and fifth positions, respectively.

The biggest mover was Istiklal Street in Istanbul, which rose from 31st to 20th position in response to inflation which caused rents to more than double over the past year, and which forced Kuala Lumpur’s Suria KLCC out of the top 20.

HCMC’s Dong Khoi jumped one rank to 13th.

The report focuses on headline rents in best-in-class urban locations across the world which, in many cases, are linked to the luxury sector. The rental values in this specific segment have been relatively immune to additional discounts, incentive packages or shared risk rental models that have become more prominent in the wider retail markets globally. The global index ranks the most expensive destination in each market.

Report author and head of international research for Asia Pacific Dr. Dominic Brown said the retail sector globally continued to show resilience.

“Retail has continued its path to recovery despite a new wave of post-pandemic challenges as central banks around the world have increased interest rates to tame the current inflationary cycle. In response, economic growth forecasts have been trimmed and consumers have reigned in discretionary spending.”

Headline rental changes

Globally, rents rose on average 4.8% year-over-year. Asia Pacific recorded the strongest growth (5.3%), followed by the Americas (5.2%) and Europe (4.2%).

Despite this comparatively strong growth, in most instances the increase in rents did not match peak inflation levels. Globally, rental levels remain below pre-pandemic levels in 55% of markets (70% of markets in Europe, 51% in Asia Pacific, and 31% in the Americas).

Spotlight on Asia Pacific

Regarding rankings for each region, in Asia Pacific, Hong Kong and Tokyo dominate the region’s most expensive streets, accounting for six of the top eight rankings.

Hong Kong’s Tsim Sha Tsui (main street shops) is the most expensive regionally (third globally) at $1,493/square foot per year (100 square feet = 9.29 square meters), followed by Causeway Bay (main street shops) at $1,374/sq ft/yr.

These are followed by Tokyo’s Ginza ($912/sq ft/yr) and Omotesando ($798/sq ft/yr), which placed third and fourth in the region, respectively.

Sydney’s Pitt Street Mall ($747/sq ft/yr) and Midosuji in Osaka, Japan ($730/sq ft/yr) also featured in the top eight places; Seoul’s Myeongdong ($642/sq ft/yr) and Gangnam Station ($572 sq ft/yr) rounded out the top 10.

At the other end of the spectrum, Anna Nagar 2nd Avenue and Pondy Bazaar in Chennai rank among the most affordable locations in the region with rents at $22/sq ft/yr and $24sq ft/yr, respectively.

Vietnam, Japan, and India all experienced substantial rises, with average growth rates ranging from 12% to 18%. Japan’s rental growth was driven by Midosuji in Osaka, which recorded an increase of 60% following a robust recovery in international tourism, while rents in Banjara Hills, Hyderabad, increased by 40% off a comparatively low starting point. Rent on HCMC’s Dong Khoi is $390/sq ft/year and Hanoi’s Trang Tien is $334/sq ft/year, increases of 17% and 20% respectively compared to last year.

On the contrary, Xiamen dropped -25% and Shenzhen also dropped more than 20% as consumer confidence in mainland China remained cautious and new supply entered the market. While just over half of Asia Pacific’s markets are yet to fully recover rental declines experienced during the pandemic, there have been improvements over the past year. Hong Kong remains the market with the greatest potential for recovery, with rents still at 42% below where they were prior to the pandemic; Australia has also seen limited recovery.

Dr Brown said: “Asia Pacific’s traditional prime retail destinations have continued to command strong rents, accounting for four of the top 10 most expensive locations globally. The region recorded an average 5.3% rental growth year-over-year which, combined with a comparatively strong economic outlook for 2024, bodes well for the retail sector’s continued recovery in key luxury markets.”

Luxury sales growth remains in positive territory despite slowdown

According to the report, over 95% of luxury brands reported profit growth in 2022, a trend which persisted into early 2023. However, the overall luxury sector slowed down as higher interest rates forced a normalization of its customer base, which expanded during the pandemic.

Although challenges are expected into 2024, high-end retail is expected to continue performing comparatively well thanks to its core customer base, which is typically more immune to rising living costs.