Luxury euro rent growth has risen twice the street level, a new report says

LONDON – Average prime rental growth on Europe’s luxury high streets was almost double that of mass-market high streets, Cushman & Wakefield said in its inaugural European Luxury Retail report, published on Thursday.

Based on an analysis of 107 openings – 60% fashion and accessories and 20% jewelery and watches – across 20 key luxury retail high streets in 16 cities across 12 European countries last year, the report found that luxury rents had better results as sector players. they are hyper-focused on location.

Average annual rent growth for luxury high streets reached 3% in 2023, while for all high streets, rent growth averaged 1.6%. Rental levels on Europe’s high streets remain 10% below end-2018 levels over the past five years. Luxury high street rents have returned to levels seen at the end of 2018, the report said.

London remains a top player in luxury retail, with New Bond Street seeing eight openings in the past year, several of which are brands moving into larger stores. Vacancy in the central area of ​​the street is close to zero percent.

Robert Travers, head of retail for Europe, the Middle East and Africa, said opportunities for retailers to secure space, particularly for larger in-demand stores, continue to be limited as brick-and-mortar stores remain crucial amid a of normalization after years of explosive growth.

The report says luxury retailers have increasingly recognized the importance of integrating their brands into more areas of their customers’ lifestyles by expanding into the hospitality sector, such as hotels, restaurants and cafes.

Last June, Christian Louboutin partnered with the Marugal hotel group to open a boutique hotel on Portugal’s Alentejo coast. Louis Vuitton, Versace, Gucci and Breitling have recently opened restaurants in global destinations, notably Dubai, Seoul and Tokyo. Ralph Lauren expanded its coffee concept to Paris last year with a location on Boulevard Saint-Germain.

Presence in key luxury beach and alpine resort towns was also vital to create deeper engagement with their seasonal customers. Moncler, for example, opened a 3,200 square meter store in St. Moritz in December, while Valentino took over the luxury Palazzo Avino hotel on Italy’s Amalfi Coast in the summer.

The report anticipated that after the current period of normalization, growth in luxury retail sales in Europe is expected to slow to more modest levels.

Therefore, retailers will remain focused on core luxury locations and will also continue to look for opportunities to expand their store size, particularly to increase the range of products that can be carried in a single store and to to offer more private and exclusive spaces for locals. VIPs and big spenders from China and the Middle East.

An example of this is the renovated Dior megastore at 30 Avenue Montaigne in Paris, which includes retail space, the Monsieur Dior restaurant, a haute couture atelier, an area for custom jewelry and La Suite Dior, a private suite available only to VIP guests. , which must be requested in order to book a stay.

Appetite to invest in real estate assets, particularly by the largest luxury retail players, for long-term strategic positioning, albeit on a selective basis, will continue to be strong, the report said.

Both LVMH Moët Hennessy Louis Vuitton and Kering have recently acquired real estate assets in Paris, particularly near prime luxury retail locations. In June 2023, LVMH acquired the building that houses its Louis Vuitton flagship store at 101 Avenue de Champs-Élysées. In December 2023, LVMH then acquired 150 Avenue de Champs-Élysées.

Meanwhile, Kering acquired two buildings in Paris in 2023 – 35 Avenue Montaigne, which houses the Saint Laurent flagship as well as offices, and 235 Rue St-Honoré, where it is opening a giant Gucci store. The group also acquired Via Montenapoleone 8 – a five-storey building that houses the Saint Laurent store as well as other brands and office space last month.

In London, Swatch Group last year acquired 171 New Bond Street, which houses its Harry Winston brand in October 2023, as well as 32-33 Old Bond Street – home to the Kering Saint Laurent Bond Street store.

Cushman & Wakefield believed rental levels would continue to rise in many key European luxury high streets, with average annual rent growth of between 1% and 2% per year between 2024 and 2027.