Luxury store openings are back on track after the interruption of the pandemic and last year saw plenty of activity with European destinations the key beneficiaries, a new study from property specialist Savills shows.
It said renewed activity across Europe’s luxury market saw store openings increase by as much as 77% last year, as the continent welcomed back international visitors and saw a strong recovery in luxury spend.
The latest Savills Global Luxury report found that the strong performance across Europe saw its global share of new openings climb to 23%, ranking it second to China and ahead of North America.
That relatively fast recovery in luxury spend was important, but “a rebasing in rents on a number of key luxury streets in the region combined with improved availability in some cases also bolstered leasing activity”. For example, London’s Bond Street saw indicative prime headline rents soften by 27% between December 2019 and December 2021 and while rental growth has returned, as of Q1 2023, rents are still 17% below their pre-Covid peak.
Gobally, there was an 11% increase in new luxury store openings in 2022 as the market continued to outperform the wider retail sector.
And while China accounted for 41% of all new openings, the total number of luxury debuts there fell compared with 2021. Savills said “weakened occupier confidence” likely impacted openings in the face of rolling lockdowns in some parts of the country.
But as China openings declined, the wider Asia region increased. Its global share of new store openings rose to 12%, driven by some of the same factors that helped to drive activity in Europe. A focus on relatively under-served markets with a growing high-net-worth population, such as Vietnam, also boosted luxury brand activity in the region.
Another growth region in 2022 was the Middle East, also an under-served market that includes some hugely affluent consumers. The region saw its share of global new openings double to 6%. Dubai remained a primary focus for these openings in the region, but Saudi Arabia also became key.
Marie Hickey, commercial research director at Savills, said: “While we have seen a strong number of openings across traditional luxury markets, what has become increasingly clear is that brands are now open to a wider variety locations, a trend we expect to continue. While the major luxury destinations of Milan, London and New York will continue to hold the greatest appeal to many acquisitive luxury brands, availability challenges in these markets will temper activity over the next 12-18 months, meaning new store activity in markets beyond this top tier will continue to expand.”
BOND STREET BOOST
Looking specifically at certain cities, Savills highlighted London’s appeal, and especially that of Bond Street.
Anthony Selwyn, its co-head of the Prime Retail team, said London was one of the most active luxury markets in Europe last year taking top spot in the region when it came to new store openings.
Much of the activity was focused on Bond Street, boosted by major development there. And GPE’s big redevelopment project at the northern end means it’s “finally providing a suitable home for luxury brands across the whole spectrum from Piccadilly to the south through to Oxford Street to the north, although there are very distinctive contrasting rental values taking shape across [its] various segments”.
Interestingly, “for the first time in its evolution the most central part of Bond Street has become the most desired pitch, certainly amongst the elite luxury fashion brands, evidenced by Gucci recently securing a relocation to this central pitch”. It will be followed by Moncler and Off-White “with numerous others looking for new premises in this segment”.
But while rents overall have fallen, “with demand and short supply comes rent increases and [Savills] anticipate over the next 12-24 months this central part of Bond Street will command the highest rents” on the whole thoroughfare.
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