MAIN STREETS ACROSS the WORLD 2015/2016 a Cushman & Wakefield Research Publication

A Cushman & Wakefield Research Publication MAIN STREETS ACROSS THE WORLD 2015/2016 A Cushman & Wakefield Research Publication CONTENTS INTRODUCTION 1 GLOBAL MACROECONOMIC OVERVIEW 2 MOST EXPENSIVE LOCATIONS 6 EMEA OVERVIEW 8 ASIA PACIFIC OVERVIEW 12 AMERICAS OVERVIEW 16 GLOBAL RETAIL RENTS 18 TECHNICAL SPECIFICATION 23 CONTACTS 24 CAUSEWAY BAY, HONG KONG INTRODUCTION Welcome to 27th edition of Cushman & Wakefield’s global flagship report, Main Streets Across The World. This report tracks over 500 of the top retail streets around the globe, ranking the most expensive in each country by their prime rental value and thus enabling us to analyse the headline trends in retail real estate performance. Our latest results show that rents have risen in 35% of streets around the world – despite the increased global uncertainty experienced over the last 12 months Going forward, improving employment prospects, rising real wages and healthier consumer confidence in advanced economies are set to offer positive momentum for the retail sector. Information on the markets has been provided by Cushman & Wakefield, external sources and the alliance partners of legacy Cushman & Wakefield listed in the table below: COUNTRY ALLIANCE PARTNER Austria BAR bareal Immobilientreuhand GmbH Bahrain Cluttons LLP Bulgaria Forton International Channel Islands Buckley & Company Ltd. Denmark RED – Property Advisers Estonia Ober-Haus Real Estate Advisers Finland Tuloskiinteistot Oy Georgia Veritas Brown Greece Proprius SA Ireland Lisney LLP Israel Inter Israel Real Estate Consultants Kazakhstan Veritas Brown Latvia Ober-Haus Real Estate Advisers Lebanon Michael Dunn & Co S.A.L Lithuania Ober-Haus Real Estate Advisers Malaysia IVPS Property Consultant Sdn Bhd New Zealand Bayleys Realty Group Ltd. Norway Eiendomshuset Malling & Co. Oman Cluttons LLP Qatar Cluttons LLP Rep. of Macedonia Forton International Romania Activ Property Services SRL Serbia Forton International Slovenia S-Invest d.o.o South Africa ProAfrica Property Services Switzerland SPG Intercity Commercial Property Consultants Thailand Nexus Property Consultants Ltd. United Arab Emirates Cluttons LLP 1 A Cushman & Wakefield Research Publication GLOBAL MACROECONOMIC OVERVIEW The tectonic plates of the global economy saw a shift in 2015 as market forces moved against many emerging economies in favour of selected advanced economies. Volatility in equities, commodities and energy markets – coupled with continuing speculation over monetary tightening in the U.S. and UK, a strong U.S. dollar, continued quantitative easing (QE) in the Eurozone and Japan and a slowdown in global trade – have all conspired to shape the global economic environment over the last 12 months. The world economy is expected to expand by 2.5% in 2015 (Fig 1), consistent with annual performances since 2012; however, the contribution to growth from emerging markets continues to decline as major economies such as China, Brazil and Russia slowdown or even contract. Improvements in advanced economies, principally the U.S. and UK, have propelled growth to an estimated 2% per annum in 2015, up from just 1% in 2012-13, helping to balance out this muted performance in emerging markets. Overall, while emerging markets remain the main contributors to economic growth, over the remainder of 2015 and in 2016 they are likely to face the greater headwinds. Indeed, emerging market performance has been the principal reason why the global economic growth outlook has been revised down over recent quarters and, more importantly, is a key explanation why the downside risks now appear more prominent than they did just a few months ago. Fig 1: ADVANCED ECONOMIES HAVE BEEN IN RECOVERY SINCE 2013, WHILE EMERGING MARKETS HAVE BEEN SLOWING SINCE THEIR PEAK IN 2010 10 Forecast 8 8.4 7.4 6.4 6 5.9 4.8 4.8 4.3 4.2 4 3.8 3.8 3.3 3.4 2.9 2.6 2.7 2.6 2.5 2.4 2.5 2 2.0 2.2 1.9 1.6 1.7 1.9 1.2 1.1 GDP, real, % pa real, GDP, 0 0.1 -1.4 -2 -3.5 -4 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Emerging markets World Advanced economies Source: Oxford Economics BEIJING, CHINA 2 CHINESE SLOWDOWN SHOPPERS ON TOUR One crucial concern facing the future of the global picture is According to the United Nations World Tourism Organisation, the Chinese economic slowdown. Third quarter 2015 world tourism increased by 4% in the first half of 2015 – estimates of economic growth were 6.9% per annum: the representing an additional 21 million international arrivals slowest since the first quarter of 2009. Nevertheless, some of overnight visitors. Europe and Asia Pacific each recorded positive news emerged from the consumer sector as retail growth of 5%, while the Americas saw an increase of 4%. sales increased by 10.9% over the year to September 2015, A strong U.S. dollar (Fig 3) is likely to have moderated having dipped to 10% per annum earlier in the year. Despite international visitation and spending in the U.S. and other this, the slowing economy and a strong U.S. dollar have U.S.-dollar-linked economies, such as Hong Kong. Conversely, hampered consumer demand for high-end goods, QE in the Eurozone and Japan has weakened the euro and particularly evident in Hong Kong. Chinese luxury consumer yen, which is likely to have aided international visitation and demand is also still feeling the effect of the corruption spending in those locations. In addition, lower oil prices have clampdown initiated in 2012 by President Xi Jinping, which reduced operational costs for airlines – albeit with a lag made the purchase and display of expensive watches and resulting from fixed hedging contracts protecting operators designer accessories off-limits for government officials and from oil price uncertainty. Over time, as these hedging state-owned company executives. contracts expire, many of the largest airlines are expected to pass on the fuel savings directly to consumers via reduced 1 In contrast, the ongoing Abenomics policies of Japan have ticket prices which should help to support tourism in 2016. weakened the yen, making the traditionally pricey Tokyo an attractive alternative as a shopping destination. Retail locations in South Korea and Europe have also benefited Fig 3: U.S. DOLLAR INDEX from weakening currencies and the increased willingness 105 of Chinese consumers to travel abroad in search of high- quality goods. 100 95 MORE MONEY IN THE POCKET 90 More broadly speaking, the global consumer has benefited from many of the macro trends evident in 2015. The oil price 85 decline from US$115 per barrel in mid-2014 to US$50 per 80 barrel by mid-2015 has reduced petrol prices, domestic 75 energy costs and lowered input costs for a variety of ICE close, US$ index, 70 consumer products, prompting disinflation for a whole range of goods and services. In turn, commodity prices have fallen 65 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 for a wide range of natural resources as slowing economic Source: Macrobond growth and industrial production persists in key emerging economies.This has provided further disinflationary pressure across the globe, resulting in inflation rates of near zero in the Nonetheless, the most popular tourist destinations are U.S., UK and Eurozone. enduring, with cities such as London, Paris, New York, Singapore, Hong Kong, Tokyo and Dubai all regularly In the near term, lower prices for goods and services is a appearing towards the top of the global rankings based on positive for the consumer – especially during a period when visitation and spending. This long-lasting appeal is what unemployment rates are falling and generating upward wage drives tourism to these vibrant and dynamic locations year pressure, prompting a period of improved real wage growth after year, helping to bolster retail demand across many of in many economies (Fig 2). In addition, a continuation of the the main shopping streets tracked in this publication. low interest rate environment has afforded households a stable and prolonged period of lower debt servicing costs and enabled a recovery in household balance sheets. KEY MACRO THEMES AFFECTING Fig 2: REAL EARNINGS GROWTH, 2015 FORECAST GLOBAL RETAIL IN 2015 8 7 6 5 China 4 3 Eurozone Spain 2 France Dollar strength Emerging market UK Italy 1 Canada impacting weakness/China U.S. S. Korea 0 Germany tourist flows slowdown % Per annum % Per -1 -2 Japan China Disinflation/ -3 Australia anti-corruption deflationary -4 (luxury goods) pressure Brazil Source: Oxford Economics Economic recovery and real wage growth in advanced economies 1 Abenomics refers to the economic policies advocated by Shinzō Abe since the December 2012 general election, which elected Abe to his second term as Prime Minister of Japan. 3 A Cushman & Wakefield Research Publication GLOBAL MACROECONOMIC OVERVIEW DRIVING RETAIL IN THE LONG-TERM Looking ahead, the expectation is that global economic growth will improve in 2016 thanks in general to AGEING POPULATIONS ACCELERATING better domestic demand and corporate Ageing populations in Europe, URBANISATION investment. However, in an environment Japan, China, the UK and U.S. are all According to the United Nations, 54% of where economic performance is contributing to lower future growth the world’s population resided in urban increasingly divergent, there will be prospects as the labour force shrinks areas in 2014, which is up from 30% in considerable differences from country and greater government spending is 1950 and likely to increase further to to country. Amongst others, economic allocated to pensions and healthcare. 66% by 2050. As populations become fortunes will depend upon exposure to There are many different approaches more densely located, opportunities commodities, trading deficits and to the problem, some of which arise for retailers to benefit from geo-political stability.

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