Prime rents in sought after retail destinations increase by nearly 6%
Retail property in luxury European locations performed strongly over the year to June 2013 with prime rents increasing by 5.7%, according to data released today at MAPIC in Cannes by Cushman & Wakefield.
Rental growth witnessed in streets which house the world’s leading luxury brands easily outpaced the rise recorded in Europe’s mass/ non-luxury market (1.3%).
Martin Mahmuti, a senior analyst in Cushman & Wakefield’s European Research Group, said: “The European retail market has been bolstered by a steady improvement in economic conditions. However, luxury locations were the main catalysts behind the rental growth revival, a contrasting performance compared with non-luxury locations, which while growing, did so at an unspectacular rate. Tourists from different corners of the world continue to provide the impetus for a number of luxury destinations and this will remain the case, particularly for sought-after streets in gateway cities.”
Europe remains a crucial luxury market accounting for 30-40% of sales globally for most major brands with France, the UK, Italy and Switzerland the top markets. More notably, it is also the most important manufacturing base for many of the world’s luxury brands.
The most expensive retail location in Europe was again the Avenue des Champs-Élysées in Paris which saw a rental rise of 38.5%. In the UK, meanwhile, with continued demand from international luxury brands, rents in London’s New Bond Street increased by 15.6% to make it the second most sought after street in EMEA. Milan’s Via Montenapoleone, which houses brands such as Dior, Gucci, Louis Vuitton and Prada, is placed third and saw a healthy increase of 7.1%.
In the UK, the rental growth trend over the year was underlined by the most expensive location in the country, New Bond Street, where values surged by more than 15%. Indeed, luxury locations such as New Bond Street and Sloane Street continue to attract exceptional interest from occupiers. On average, for each store there are around 10 international brands competing for it. Several existing luxury tenants are now looking to expand their space, with plans for their stores to be transformed into multi-level flagships (Jimmy Choo or Christian Dior) or take space in adjacent streets and link the units (Boodles).
Peter Mace, head of central London retail, Cushman & Wakefield, said: “International retailers are acutely aware of the relentless demand from consumers for luxury goods in London’s West End and are constantly vying for prime positions on London’s top shopping destinations; I haven’t seen this level of demand for many years. With a broad mix of nationalities and tourists as well as its status as a fashion hub, London’s luxury retail market will continue to thrive for the foreseeable future.”
France’s premier shopping destinations were yet again energised by extraordinary luxury retailer demand: more than 100 luxury stores – a combination of new shops, extensions, refurbishments and pop-ups – have opened since 2011. Further growth in tourist numbers and limited supply also contributed to the rental uplift.
The Paris retail market is expanding gradually beyond the most established luxury streets into neighbouring locations. The Boulevard Saint-Germain/Rue de Sèvres area is becoming more upmarket with the recent or scheduled openings of Hermes, Omega, Louis Vuitton, Shang Xia and Berluti. The Boulevard des Capucines, close to the Opera district, is also becoming more upmarket with the additions of Bucherer (largest luxury watch store in the world), Cartier, Tag Heuer and Omega. Indeed, the location benefits from the close proximity to Place Vendôme/Rue de la Paix and the sharp growth in tourists from emerging markets.
Christian Dubois, managing director of retail, Cushman & Wakefield in Paris, said: “Prime streets such as Champs-Élysées or luxurious destinations such as Avenue Montaigne remain more than ever a target for international retailers. They benefit from the combined demand of relatively recent brands supplementing their retail network in France, new foreign entrants expanding abroad, or established players inaugurating refurbished formats to face increasing competition.”
With Italy’s most expensive street, Via Montenapoleone in Milan, recording just over 7% rental growth, the country’s luxury market can certainly be viewed as healthy even if its wider economy is yet to emerge from recession. The destination continues to attract phenomenal interest from retailers, although Via Sant’Andrea and Via della Spiga today could represent alternative locations.
Recent important openings in Via Montenapoleone include Hermès, Jaeger LeCoultre, Moncler, Pinko and the relocation of Loro Piana, whilst in Via Sant’Andrea recent openings are Stuart Weitzman, Borsalino and Bottega Veneta .
Thomas Casolo, partner and head of in-town retail, Cushman & Wakefield in Italy, said: “Via Montenapoleone continues to be a global symbol of the extreme luxury market. Landlords are still trying to secure the best luxury retail tenants available – and the exceptional demand from international brands wanting a presence on the street is testament to its enduring popularity with retailers and consumers alike.”
According to Cushman & Wakefield’s latest findings, despite greater focus on Asia Pacific and South America, Europe’s status as the world’s largest and most established luxury market will not change in the short to medium term. The premier luxury locations in France, the UK and Italy will continue to be the most sought after, although the scarcity of available space will continue to encourage the emergence of new competitive destinations – often adjacent to the most established retail corridors. However, luxury retailers are also renovating, extending and experimenting with the space they have available in the premier streets, increasingly investing directly in their property, with moves towards larger and more showcase units becoming the norm.