The number of luxury store openings globally slowed down during 2023 (-13% on an annual basis), but several areas show a countertrend due to the propensity of the various brands to diversify their strategy at a geographical level by focusing on retail-oriented city. The last one says it Global Luxury Retail Report realized by Savills according to which the East dominates in terms of the number of new luxury shops.
New luxury shops, the areas where the most are opening
Activity in the region Asia-Pacific recorded a 31% increase in openings compared to the previous year, accounting for 17% of total openings globally. There China continues to dominate new luxury brand openings with a 41% share. However, brand trust in the market has declined as a result of consumers’ lack of response to it; this, together with the reduction in the availability of space on the market, has led to a slowdown in the growth of the number of new stores (-12% on an annual basis), albeit in comparison with a 2022 of strong expansion.
Tokyo and Singapore contributed to nearly half (40%) of new openings in the broader Asia-Pacific region, helped in part by improving tourism spending, a weakening Yen in the case of Tokyo, and easing of visa restrictions for tourists of mainland China.
Also the North America recorded growth with New York ranking in first place (12%) with a doubled number of new openings compared to 2022. In second place we find Los Angeles; There is an increase in activity in many affluent cities and tourist destinations such as Atlanta, Dallas, Chicago and Aspen.
“In the immediate aftermath of the pandemic we saw a huge increase in new store expansion, particularly in China,” he comments. Marie Hickey, Director in Commercial Research at Savills – so it is not surprising that in recent years there has been a slowdown following the normalization of the markets. Weakening consumer confidence and spending in China, combined with limited store availability in Europe, North America and the Middle East, leads us to expect the slowdown in new openings to continue into the first part of 2025. This does not mean that there is no desire to expand and optimize real estate portfolios, particularly in the future growth markets of Asia and the Middle East. However, we believe that larger groups, with more mature store portfolios, will be more selective when it comes to store expansion strategies.”
Luxury shops in Europe, Milan, the capital of luxury
Europe has seen a slowdown in openings (-17% year-on-year), but this reflects a limited availability of space in the continent’s main luxury streets following the increase in openings (83%) in 2022, rather than a reduction in brands’ appetite.
Milan confirms itself as the capital of luxury on a global level. Via Montenapoleone has maintained its position as the most expensive high street location in Europe with rents per square meter per year equal to €15,000, followed by €12,200 of Bond Street in London and above €7,400 of Champs Elysées in Paris, a hybrid location between luxury and mass markets. For the next few months we expect rent growth in places such as Bond Street in London and Madison Avenue in New York, but at a relatively low rate and not enough to displace Hong Kong and Milan from their current positions.
“Luxury brands today are more than ever focused on locations and expansion into target markets,” he comments Francesca Cattagni, Head of High Street Leasing at Savills. – The global luxury landscape continues to expand both in terms of new geographies and offerings. This allows properties to offer brands new opportunities and, at the same time, helps tenants cope with new demand needs. In the Italian market, the expansion of luxury brands continues in the main tourist destinations, in main cities such as Milan (where the availability of new spaces is close to zero) and in regional markets where emerging destinations stand out.”
High street, Savills real estate forecasts
The Savills report also examined the future dimensions of the markets in relation to the presence of luxury brands and identified the cities currently under-represented. While Tokyo, Seoul, New York, Paris and London have, unsurprisingly, the greatest brand presence, there are more “immature” locations that appear to be relatively less represented. Despite the short-term challenges facing the luxury market in China, based on its size and growing affluence, some of its largest cities have attractive room for growth, such as Shenzhen, Hangzhou and Wuhan, which are currently underserved compared in Shanghai and Beijing. Since the cost of labor in these locations is lower, the return on investment for luxury brands is potentially quicker. Other markets that have stood out in terms of size, growing wealth and relative underrepresentation compared to similar markets include Mumbai, Delhi, Jakarta, Bangkok and Dubai, with the latter’s attractiveness further strengthened by growth in international tourism.
