Luxury retailers push up Sydney super prime rents
Super prime rents in the Sydney CBD have risen as high as $13,000 per square metre as a result of a resilient luxury brands market, according to a new retail report by Colliers.
This top-of-the-market price was paid by a retailer in the Pitt Street mall. On average, high street retailers on Pitt Street Mall in the CBD are paying between $8,000 and $10,000 per square metre.
Nora Farren, director of research at Colliers, told Property Observer “normal levels of growth are expected in the short to medium term”.
“There has just been so much growth on the back of the completion of Westfield Sydney and Mid-City Centre [both on Pitt Street],” she says. “I do not expect to see similar growth until we see new developments.”
During the past few years, strong rental growth was driven by the lack of space and reshuffling that occurred during the construction of Westfield Sydney. The report says rents are now expected to stabilise, with higher incentives returning to the market.
While Castlereagh Street has traditionally been the heart of the luxury precinct in Sydney, a number of retailers are now choosing to locate on George Street, including Burberry at 343 George Street and Louis Vuitton at 70 King Street. As a result a new luxury precinct is forming on George Street between Martin Place and King Street.
Melbourne has also enjoyed a strong luxury market of late, with the likes of Jimmy Choo, TAG Heur, Prada, Tiffany & Co and Miu Miu all opening stores in Melbourne during 2010.
Collins Street is still the major luxury shopping destination in Melbourne, with rents reaching as high as $6,500 per square metre.
In the Perth market, luxury retailers can be found around the Hay Street precinct between William and King streets in the CBD.
In Brisbane, there are a cluster of luxury retailers at Queens Plaza on Queens Street Mall, and on Edward Street in the CBD, where rents as high as $7,500 per square metre have been achieved.
The growth of luxury brands is attributed to a flight to quality over the past few years, “with consumers showing a preference for investment pieces, making fewer, but more expensive purchases,” Farren says.
The sale of luxury goods rebounded strongly last year. The Luxury Goods Worldwide Market Study by consultants Bain & Company estimated that the global luxury market grew by 15% in 2010.
The report also notes the expansion of the luxury brands market into the suburbs with Chadstone shopping centre in Melbourne, and Westfield Bondi Junction in Sydney having recently introduced new international luxury brands.
According to Colliers, a legacy of the GFC is that consumers are a lot more value-conscious and now prefer to shop either high or low.
This is resulting in a polarisation of retail with the bargain and premium sectors benefitting most, and middle market retailers losing ground.
