Many have concluded that 2018 represents a year of crisis for traditional retailers, who have been ostensibly undermined by consumers’ insatiable desire for online shopping.
The reality, however, is a much more complex picture of transition. Those retailers who have struggled most in the current retail environment have been too slow or poorly placed to adapt to changing consumer behaviours and to embrace the digital age.
Retail is being disrupted, but it isn’t dying. It is thriving in new forms. Digital integration and omni-channel retail experiences are the new normal. But even in an increasingly integrated retail and online world, the store remains a vital pillar of the customer experience and location is crucial.
This is true for all retailers and high streets, but especially so for premium retail.
Main streets
This week at MAPIC, Cushman & Wakefield launched the 30th anniversary edition of our Main Streets Across the World report, detailing the most expensive retail locations around the globe.
For the first time in five years, Hong Kong’s Causeway Bay has replaced New York’s Upper 5th Avenue as the world’s most expensive retail street by rental value, with rents now at $2,671 per sq ft/year. A significant decline in New York rents has seen Upper 5th Avenue slip back to second place globally, with average rents at $2,250 sq ft/year compared with $3,000 in the previous 12-month period.
London’s New Bond Street remains the most expensive European location, in third place globally, with rents broadly flat year-on-year at $1,744 sq ft/year, underlining the fact that luxury and high-end retailers still see the UK’s capital as a key retail destination.
Although average rents have remained largely flat in the world’s most premium shopping streets (with the exception of Upper 5th Avenue), location has never been more important or valuable. There are very significant disparities in the rents within individual streets on our list, and the best locations on the best streets continue to command a huge premium.
Experience the brands
‘New retail’ business models, where retailers offer customers a seamless online and offline experience, driven by data, requires a physical store in a prime location to succeed.
Physical stores remain a vital part of the overall shopping experience and a crucial part of consumers’ buying decisions.
Customers invariably still want to be able to touch and feel the quality of an item before making a purchase, and their money does not have to go through the till for the store to have justified its value.
Importantly stores are also places to experience brands, a stage for the retailer as well as the merchandise, and customers will naturally gravitate towards the most engaging brand experiences.
Sense of place
Main street locations that offer a dynamic mix of non-retail uses, including food and beverage as well as stores, will continue to thrive. There are also significant opportunities for landlords to further enhance premium retail locations.
Traditional high-end shopping destinations have been dominated by luxury stores, but lacking in wider premium uses, such as boutique office space, luxury residential and quality food and beverage or hotel uses. Main streets that combine a clear sense of place and an exciting mixture of these uses will be most in demand around the globe.
Location has become even more important as retailers adapt, and despite the disruption of digital transition, this will be reflected in main street rents for some time to come. The challenge for landlords is to create an environment that goes beyond retail and gives occupiers the best possible platform for their brands.
Justin Taylor is head of EMEA retail at Cushman & Wakefield
