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by Kelvin Wong and Simon Packard
BusinessWeek.com

Luxury retail rents may soon “bounce back” after two years of declines as the global economic recovery fuels demand for designer handbags, watches and clothes, Colliers International said.

Rents fell in most of the world’s costliest shopping streets in the first quarter from a year earlier, according to a report published by the Seattle-based property broker today. The average annual rent on Manhattan’s Fifth Avenue, previously the world’s most expensive shopping street in which to lease space, fell about 11 percent to $1,250 a square foot. That pushed it into second place behind Avenue des Champs-Elysees in Paris.

The global economy is set to grow 4.2 percent this year, according to the International Monetary Fund, helping financially healthy retailers to expand and spurring international brands to enter new markets. LVMH Moet Hennessy Louis Vuitton SA, the world’s biggest maker of luxury goods, reported in April an 11 percent rise in first-quarter sales.

“With many of the world’s rich feeling more secure and comfortable with luxury purchases, demand for high-end retail premises is expected to increase over the coming year,” Ross Moore, executive vice president and director of market and economic research at Colliers, wrote in the report.

Luxury goods retailers are also attracting “aspirational” consumers from the growing middle classes of Asia, the Middle East and central and eastern Europe, Moore said.

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