Average rents on Rodeo Drive jumped 20% in the last year, lifting the storied shopping district in a worldwide ranking of the most expensive pockets of retail real estate, according to a study released Friday.
Rents in the Beverly Hills area between Wilshire and Santa Monica boulevards ranked 21st out of 226 locations in the 12 months ended June 30. For the year before, Rodeo Drive ranked 32nd out of 223 locations.
With annual average rents of $264 a square foot, Rodeo Drive remained the sixth-most-expensive shopping district in the country, the same ranking as last year, according to the annual report by Cushman & Wakefield, a New York-based real estate services firm. Rents averaged $220 a square foot a year earlier.
"I think that slowly the market is turning around" after the drop in tourism and spending following the Sept. 11, 2001, terrorist attacks, said attorney Bob Baradaran of Century City law firm Greenberg Glusker, who has helped negotiate leases on Rodeo Drive. "I've seen retail leases around Los Angeles pick up over the last year and more transaction activity going on."
The only other California locale listed among the 10 most expensive in the United States was Union Square in San Francisco, where rents fell 8.3% to $275 a square foot per year, dropping its ranking to 5th behind North Michigan Avenue in Chicago, where rents average $300.
Rodeo Drive is unique in its fame and appeal, Baradaran said, with a limited amount of space. Most stores do business in less than 10,000 square feet. Clothier Brooks Brothers made news in April when it agreed to take a 22,000-square-foot space abandoned by Tommy Hilfiger Corp. three years before.
According to the study, the world's highest rents were in the Plaza District of New York, where shopkeepers pay an average of $850 a square foot for space on Fifth Avenue.
Next on the list were Avenue des Champs-Elysees in Paris at $671, Causeway Bay in Hong Kong at $500 and Oxford Street in London at $470.
This year, twice as many locations in the study showed a rise in rents rather than a fall, with rents stable in about 40% of the shopping districts.
Consumers are demanding more from their shopping experience: They want a greater sense of "destination," more fun and more to do, but they want the prices of what they buy to be competitive, said David Hutchings, Cushman & Wakefield's head of European research. Retailers are responding by seeking larger, modern units in the most accessible and highest-profile locations.
"The best areas are getting better -- attracting the cream of the retail world, with a resulting increase in rents," Hutchings said. "The mediocre areas are falling away -- with less demand, more empty shops and falling values."