Sydney’s Pitt Street retail district has been named as the fifth most expensive shopping destination in the world for retailers, according to a new survey conducted by Cushman and Wakefield.
Retailers are paying nearly $10,000 per square metre of retail space, while experts say the arrival of international retailers has played a large part in pushing up prices.
Simon Fonteyn, founder and chief executive of Leasing Information Services, told SmartCompany other retailers including H&M, Forever 21 and other Gap-owned brands are searching for stores in the area – a move that could further inflate prices.
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“The main issue for these retailers is floor space,” he says. “They tend to operate in much bigger boxes than domestic players.”
More international retailers have been entering the Australian market over the past few years, although they’ve been hesitant to establish generous roll-out plans. That wariness has helped them escape some of the difficulties seen in the retail market over the past two years.
Pitt Street’s position on the list exceeds those of famous shopping destinations such as Milan, instead only being bested by a handful of locations. Hong Kong’s Causeway Bay replaced New York’s Fifth Avenue for the most expensive retail destination.
Paris and Tokyo took out the third and fourth spots on the list. The list was compiled by analysing 326 different locations in 62 countries.
Expensive retail rents have been a key issue in Australia. They have been partly blamed for the collapse of iconic retailers Angus & Robertson and Borders nearly two years ago, and have also been responsible for the trend towards smaller store sizes.
This, in turn, has created more issues as retailers find it harder to manage inventory levels – a liability that has caused some shoppers to buy more goods online.
However, Fonteyn says Pitt Street retailers won’t necessarily be paying the amount quoted by the report – such a total ignores incentives.
“Those are face rents before incentives, and those can be quite high. That could include a contribution to a fit-out, or a discount.”
“But to be sure, the international companies are driving up the price.”