Brands increasingly keen on large spaces in Europe’s key arteries

Physical shops are more popular than ever. This is reflected in the luxury industry’s retail strategies. To attract and retain customers, as the post-Covid rebound fades and demand becomes ‘normalised’, the labels are banking on ever-larger physical shops, where they can showcase a wider range of products and encourage more experiential shopping, especially in the most prestigious locations. These are the findings of Cushman & Wakefield’s first report on luxury retailing in Europe.

The first observation is that the brands have been particularly active, multiplying the number of openings in 2023. They have set up 107 shops in twenty key luxury retail arteries across sixteen cities in twelve European countries, more than 60% of them in the clothing and accessories sectors, with 20% dedicated to watches and jewellery and the rest to shoes, eyewear and other items. A third of these new openings are linked to one of the brands owned by the three luxury giants – LVMH, Kering and Richement – half of which were opened in France, Italy or the United Kingdom. 

The remaining two-thirds concern around sixty brands, including Ralph Lauren, Burberry, Stone Island Moncler, Tod’s, Swatch, the labels of the OTB group, Roberto Cavalli and Ferragamo. One third of these sales are in the same three destinations, and two thirds in nine other countries. Furthermore, the number of openings continues to increase this year. As the study anticipates, “LVMH has a number of shops scheduled to open in the main luxury streets in 2024, notably for its Louis Vuitton, Tiffany, Dior and Fendi brands”.

In fact, the houses are mainly concentrated in the most prestigious high streets and locations for the luxury market. As a result, rents in these areas rose by 3% in 2023, compared with an average increase of 1.6% for the retail sector as a whole. Over the last five years, while rents on European shopping streets have fallen by 10% compared with their levels at the end of 2018, those on luxury thoroughfares have returned to their pre-2019 levels, notes the commercial property giant. This upward trend “is expected to continue and become more widespread, with average rental growth of between 1% and 2% per annum between 2024 and 2027,” according to the study.
 
Three of Europe’s main luxury thoroughfares – Via Montenapoleone, New Bond Street and the Avenue des Champs-Élysées – are among the five most expensive retail destinations in the world. In 2023, 40% of openings took place on the main luxury streets in France, Italy and the United Kingdom. Almost half of the openings in the fashion sector were in these three countries, but jewellery and watches were more active in the other European markets.
 
Last year, Paris opened a total of 25 luxury shops. This was by far the largest number, judging by the list of major openings drawn up by Cushman & Wakefield in its report. In Italy, Milan recorded six new openings and Rome three. London saw eleven new stores between Sloane Street and Bond Street. Germany will have six new shops in 2023 between Munich and Düsseldorf, Spain thirteen between Barcelona and Madrid, Portugal three in Lisbon, Brussels three, Prague five, Switzerland eight, Stockholm four, Copenhagen three and Amsterdam, in the Netherlands, no less than seventeen.

 
At the same time, good locations have become scarcer. “Of the 20 streets analysed, 16 have vacancy rates of less than 5%, seven of which no longer have a vacant site,” notes the report. This situation has been exacerbated by the trend for luxury retailers to expand their retail space in order to “increase product ranges in a single shop and offer private and exclusive spaces for their VIP customers.”
 
For the authors of the report, “physical shops remain crucial to the luxury retail market, especially as brands position their shops as a place of experience.” To stimulate brand engagement and customer loyalty, brands are not hesitating to equip their points of sale with new technologies or adapt them to host events and exhibitions. Luxury brands are also diversifying into restaurants, cafés, hotels and beaches.
 
This trend has prompted the labels “to establish themselves in other locations, either temporarily or permanently. This is particularly true of luxury beach resorts, where brands can gain a firmer foothold with an established customer base. Some retailers are opting to diversify locations, partly to attract younger, aspirational customers, working on brand awareness and creating opportunities to engage new customers in a deeper journey over time,” the report points out.
 
Against this backdrop, the industry is looking to invest more and more in luxury commercial property, whether as owners or for investment purposes. Especially in Europe, in Paris, London and Milan. In 2023, the major groups have been particularly active. LVMH has acquired the building housing its flagship Louis Vuitton shop at 101 avenue des Champs-Élysées, as well as the building at 150 avenue des Champs-Élysées.
 
In Paris, Kering bought 35 avenue Montaigne, which houses its flagship Saint Laurent shop as well as offices, and 235 rue St-Honoré, as well as a building in the luxury quadrilateral in Milan, Via Montenapoleone 8 – the largest property investment transaction in Europe since March 2022. In early 2024, François-Henri Pinault’s group also announced the acquisition of a building at 715-717 Fifth Avenue in New York in January 2024.

Prada also acquired two buildings on Fifth Avenue. In London, the Swiss group Swatch has acquired 171 New Bond Street, home to its Harry Winston brand, and 32-33 Old Bond Street, which houses a Saint Laurent boutique, while fashion designer Manolo Blahnik has snapped up 31 Old Burlington Street for its headquarters.
 
“We expect the largest players in luxury retail to continue to be keen to invest in property assets to strategically position themselves for the long term, albeit selectively,” says Cushman & Wakefield in its outlook.
  
With their countless boutiques, the major luxury groups are hoping to benefit from the strong presence of tourists in Europe, particularly from the Middle East and China. Arrivals of wealthy Chinese travellers to the Old Continent will more than double in 2023 compared to 2022. In particular, they have more than tripled in France, Germany, Switzerland and the UK, even though their spending is still well below pre-pandemic levels. For a return to pre-2020 levels, we will have to wait until 2025 in terms of spending and 2026 in terms of presence, according to Cushman & Wakefield.