Brandon Senia’s Post

Taking advantage of lower rents at this time, high-end brands like Prada and LVMH are spending billions on prime retail properties to secure flagship locations, control renovations, and limit competition. This trend is concentrated in top retail districts with scarce availability. #luxury #retail https://hubs.li/Q02FTQsk0

Luxury brands and conglomerates like Prada, Gucci, Chanel, Kering, and LVMH are snapping up prime retail properties in cities like New York and San Francisco like they're playing a high-stakes game of Monopoly. Instead of building hotels, they're planting their flagship stores to secure their spots on the board and keep competitors at bay. This strategy isn't just about flexing financial muscles; it's about gaining total control. By owning the properties, these brands can pick their neighbors, manage renovations without a landlord breathing down their necks, and limit competition in prime areas. It's the retail equivalent of ensuring your party guests are all on the VIP list. Why are they doing this? Long-term investment goals and the Scrooge McDuck-sized piles of cash they've been raking in from recent growth. Owning the real estate means they avoid the whims of landlords and skyrocketing rents, which in high-demand areas can be as volatile as a fashion week runway. In short, they're ensuring their flagship stores stay fabulous and exclusive. And let's face it, when you're a luxury brand, being able to say, "I own this place," has a certain je ne sais quoi. It's like a stylish insurance policy against the unpredictable world of retail. Here are some relevant hashtags: #LuxuryRetail #PrimeRealEstate #FlagshipStore #RetailStrategy #LuxuryBrands #Prada #Gucci #Chanel #Kering #LVMH #NewYorkRetail #SanFranciscoRetail #FashionInvestments #RetailControl #StoreOwnership #RetailTrends https://lnkd.in/gZVGWjPA

Following explosive growth coming out of the pandemic, the luxury #retail segment has remained resilient despite the current macroeconomic headwinds, with U.S. luxury retail sales reaching over $75 billion last year, according to JLL.

💎Luxury retailers are buying storefronts & moving to high-end malls. Between July of last year and this year, upscale chains leased over 360,000 SF in the U.S. Following the pandemic, there was explosive growth in the luxury retail segment. 🙌 Between 2020 and 2023, luxury retail sales experienced a compounded annual growth rate of 8.6%. 📈(JLL via CoStar) With the U.S. retail vacancy rate at 4.1%, it makes sense for upscale retailers to acquire their flagship stores. 🏪 Some examples: ▪️Kering, parent to Gucci and Balenciaga, paid almost $1 billion for a 115,000-SF multilevel space in Manhattan. (via CoStar) ▪️Italian Prada Group acquired a pair of adjacent office buildings for a total of $835 million. (via CoStar) I'm definitely seeing this on the ground. The competition for space is fierce and luxury retailers are zeroing in on prime retail space. It’s a long-term strategy in terms of investment when you are buying your real estate. Likely a good faith in their sales in those locations and long-term commitment to those markets! Read more here https://bit.ly/3zs2UZg

Luxury brands are locked in a retail arms race that favours players with the scale to keep up with ever-escalating costs and capital expenditure requirements. In recent years, flagship stores have grown larger as well as more lavish, not to mention the new generation of VIP facilities. The toolbox of store animation activities has grown to encompass restaurants, bars, temporary exhibitions and other cultural events, as well as more frequent merchandise drops. Efforts to generate foot traffic have reached new heights, too. Now, top luxury groups are opening a new front in the competition: buying real estate to secure landmark locations. And the implications for second-tier brands are serious. Second-tier players with lower retail space productivity were already struggling to stay on key luxury streets — such as Fifth Avenue in New York, Avenue Montaigne in Paris and Canton Road in Hong Kong — as rents hit new highs. They certainly can’t keep up with top luxury groups offering hundreds of millions of euros to buy store locations outright. Read the full story below, by Luca Solca

In coveted neighborhoods like Fifth Avenue in New York or Beverly Hills in Los Angeles, high-end brands such as LVMH (Louis Vuitton’s owner), CHANEL, Prada Group and Kering (Gucci) are spending hundreds of millions of dollars on properties that house their flagship stores or could in the future. For my latest story at Modern Retail, I featured real estate leaders including CBRE global chief economist Richard Barkham (at #NAREE2024), Barrie Scardina of Cushman & Wakefield and Andrew Goldberg with CBRE to speak to the implications of these transactions on these neighborhoods as well as Gartner analyst Brad Jashinsky on why these companies have the cash and are doing this now. What kinds of buying or leasing decisions are you seeing retailers make in your market? Which brands are you seeing more of? Let me know here or at mitchell@modernretail.co #retail #CRE #luxury #newyork #losangeles #sanfrancisco

From CRE Daily: Luxury Retail Booms Across the U.S. with $75B in Sales The luxury retail market in the U.S. reached $75 billion in 2023, driven by post-pandemic growth, though inflation is cooling demand. In-store shopping: After two years of post-pandemic growth, luxury retail hit $75 billion in 2023, with an 8.6% annual growth rate from 2020 to 2023. The U.S. and Europe led the global luxury market, each accounting for 28% of sales. However, U.S. market share fell 4% in 2023 as inflation cooled demand. Brick-and-Mortar: Nearly 50% of new luxury stores opened last year were in malls, contributing to Class A malls having the lowest vacancy rate at just 5.8%. Leap’s Amish Tolia notes that brands prefer physical stores, especially in high-end locations like Madison Avenue in NYC and Rodeo Drive in Beverly Hills, as e-commerce has proven less profitable due to complex customer returns. Expanding to new markets: While prime urban areas remain popular, luxury retailers are increasingly expanding into secondary markets like Texas and North Carolina to reduce operational costs. Alvarez & Marsal’s Matthew Krell emphasizes that profitability, not just sales volume, is driving this push into more affordable locations. ➥ THE TAKEAWAY Looking ahead: While luxury retail growth will slow amid economic uncertainty, JLL says the sector is still on track to surpass $82 billion in sales by 2028. The in-store experience and strategic expansion into both top-tier and emerging markets will keep the momentum going, even as growth normalizes at a 1.9% annual rate.

💎 Luxury Brands Relocate and Expand to Appeal to In-Store Shoppers 💎 🛍️ Key Highlights: * Physical Sales Dominance: Over 80% of retail sales still occur in physical stores, emphasizing the importance of the in-store experience for luxury brands. * E-commerce Trends: While e-commerce saw a slight rise to 16% in Q2, it remains below the pandemic peak of 16.4%. 🏢 Strategic Focus on Retail Spaces: * Scarcity of Desirable Retail Space: The limited availability of prime retail locations is pushing luxury brands to reinvest in existing flagship stores for enhanced customer service and personalized experiences. * Store Expansions: Brands like Gucci, Louis Vuitton, and Chanel are expanding their current mall locations to offer unique in-store experiences. For instance, Gucci recently expanded its boutique at Costa Mesa's South Coast Plaza to 17,500 square feet. 🌆 Shifting Demand in Key Markets: * New Corridors: Luxury brands are gravitating towards emerging retail corridors in New York and Chicago to cater to affluent consumers. * In NYC, the Upper East Side resurgence and available space on Madison Avenue are leading to new openings. * In Chicago's Gold Coast, luxury brands are drawn by the affluent residential base and strong luxury co-tenancy. 🏗️ Real Estate Acquisitions: * Buying Spree: Luxury conglomerates are investing heavily in real estate, with Prada Group and Kering making significant purchases. * Kering invested nearly $1 billion for a 115,000-square-foot multilevel luxury space on Fifth Avenue. * Prada Group acquired adjacent office buildings for $835 million, including its flagship. 💼 Strategic Shift: JLL notes that these acquisitions reflect a strategic shift among luxury brands to own prime real estate, viewing them as long-term investments. This approach can provide stability against rising rents and solidify their presence in key markets. https://lnkd.in/gBXUYhW6

Several factors driving this industry trend. These acquisitions represent substantial investments for these brands. The transition from tenant to landlord comes with advantages and disadvantages.

“Luxury global retail sales reached over $75 billion in 2023, according to a new report by JLL. The U.S. and Europe accounted for the largest shares of the market, with both comprising roughly 28% of overall luxury retail sales. Global luxury retail sales are expected to see a compounded annual growth rate of 1.9% from 2024 to 2028, surpassing $82 billion by the end of 2028.” “In total, luxury brands leased over 360,000 sq. ft. in the U.S. from July 2023 to July 2024. Almost half (48.5%) of new luxury stores opened in malls. Street retail accounted for 48.5% of openings. Hospitality and “other” accounted for the remaining space.” - Marianne Wilson