Retail rents in Causeway Bay ranked third highest in the world, following New York's Fifth Avenue and Paris' Avenue des Champs Elysees, real estate consultant Cushman & Wakefield Healey & Baker said.

Leasing a shop in Causeway Bay costs an average of US$569 (HK$4,438) per square foot a year, compared to US$950 psf at shops between the 50th and 59th Street at New York City's Fifth Avenue, which ranked No.1, Cushman & Wakefield's 2004 annual survey said.

``Improvements in consumer confidence and strong recovery in the tourism industry have been the main drivers behind the sharp rental growth in Hong Kong since the Sars epidemic last year,'' said the firm's Asia research director John Su.

Retail rents in Causeway Bay have risen by 54 per cent as the relaxation in visa requirements for tourists from mainland China has benefited the retail sector since July 2003.

The survey tracks retail rents in the world's top 229 shopping locations in 45 countries. ``Most countries in the region have experienced solid economic recovery over the past 12 months and many international retailers have reacted quickly to expand their presence in places like Hong Kong, Japan and Singapore,'' Su said.

Cushman & Wakefield's head of research David Hutchings expected healthy economic growth rates to bring confidence to retailers, but warned inflationary effect of rising oil prices would put further upward pressure on interest rates.