The recent announcement of the opening of the first Qela store (owned by Qatar Luxury Group) at 50 avenue Montaigne, and the grand opening by the Swiss Bucherer at the end of April of the largest multibrand watch store in the world at 12 boulevard des Capucines, provide the occasion for Cushman & Wakefield, the world’s largest privately owned commercial real-estate consultancy firm, to present this overview of the luxury retail market.
“The upcoming opening of two Berluti shops (rue du Faubourg Saint-Honoré and rue de Sèvres) and the Hermès Group’s grand opening of its first Shang Xia store outside China (also on rue de Sèvres) will make 2013 a very exciting year in terms of openings, after the significant momentum already observed in 2011 and 2012 in Paris,” stated Pierre Raynal, Head of Retail Agency at Cushman & Wakefield France.
· The rapid development of international tourism and the rise in spending by visitors from emerging economies benefit the luxury market, especially in Paris, one of the world’s leading tourist destinations.
“In 2012, Europe’s major luxury destinations witnessed numerous projects for new stores, expansion, and refurbishment. Examples are the new Tom Ford flagship store on Sloane Street in London, the Prada flagship store in the Galleria Vittorio Emanuele II in Milan, the redevelopment of the Cartier store on Via Montenapoleone in Milan, and the new Chanel store at the Piazza di Spagna in Rome,” explained Mr. Raynal. As the birthplace of the most prestigious maisons de couture and the world’s leading tourist destination with London, Paris has also benefitted from this effervescence.
· Approximately one hundred luxury stores have been opened in France since 2011.
“The opening of the Shangri-La in 2009 and the Mandarin Oriental in 2011, the planned opening of the Peninsula in 2013, and the reopening by the Raffles Group of the Royal Monceau in 2010 illustrate the arrival of new foreign operators determined to benefit from the rapid growth in the number of Asian tourists. These tourists, with their enthusiasm for prestigious brands, also attract the attention of major luxury retailers, a phenomenon that explains why department stores and boutiques in Paris airports are more and more luxury oriented” analyzed Mr. Raynal. But the real story behind the sharp rise in spending by foreign tourists lies in the astounding number of luxury-retailer openings in a handful of Parisian shopping streets. “Just under a hundred luxury stores—creations, extensions, refurbishments, and pop-up stores—have been registered in France since 2011, most of them in Paris or on the Côte d’Azur,” commented Mr. Raynal.
· The expansion of major groups and the ambitions of new players sharpened the appetite of retailers for prime retail slots in France.
“Lettings transactions completed over the past two years in the Paris luxury market and on the Croisette, in Cannes served to reinforce the dominance of players long established in France. Eager to advance their distribution strategies, retailers already present in France through department stores and multibrand retailers have announced plans to open their own shops in France,” explained Mr. Raynal. Certain Richemont Group retailers (e.g., Vacheron Constantin, IWC, A. Lange & Söhne) have opened their first single-brand store, on rue de la Paix. A new breed of market participant has also appeared, as exemplified by Qela, a brand only recently created by Qatar Luxury Group, which plans to open a Qela store at 50 avenue Montaigne in 2013.
· Prime rental values naturally continued their ascent in 2012, even occasionally crossing the symbolic threshold of €10,000 / sq. m. / year (Zone A).
The intensely competitive environment has contributed to the continuing rise in rental values. Prime rental values on avenue Montaigne and rue du Faubourg Saint-Honoré leapt 23% between January 1, 2011, and December 31, 2012. Rental values for the most attractive slots may soon exceed the symbolic threshold of €10,000 / sq. m. / year (Zone A). Under the circumstances, and given the severely restricted supply available for the principal Parisian luxury markets, the demand from prestigious retailers occasionally spills over into submarkets near the most established thoroughfares. This is particularly true for rue de Marignan—in the heart of the Golden Triangle—whose address closest to avenue Montaigne has recently aroused interest among several retailers (e.g., Azzedine Alaïa, owned by Richemont Group).
· The luxury market is expanding gradually beyond the most established luxury shopping streets into neighboring submarkets.
The changes seen in Paris have been concentrated mainly in the historic center of the French luxury market (Avenue Montaigne, rue du Faubourg Saint-Honoré, Place Vendôme). However, other Parisian thoroughfares have performed well, benefiting doubly from their proximity to certain historic luxury markets and from high numbers of visitors. Nearly a dozen openings of both historic and newcomer luxury retailers have occurred in Rue Saint-Honoré since 2011, a street which saw its status as a major luxury destination reinforced significantly by the opening of the Mandarin Oriental two years ago. The Opera district is also being transformed. Boulevard des Capucines will soon see the grand opening of the largest luxury-watch store in the world, in the former Old England flagship store. In addition to this megastore, several luxury boutiques (Tag-Heuer, Cartier, Omega) will open to serve a largely Asian clientele, a clear declaration of the ambitions of the timepiece sector in this neighborhood near rue de la Paix.
· The luxury market could slow in the coming months because of a shortage of high-quality locations.
The numerous transactions that will enliven the Paris luxury market in 2013 will be mainly the final phases of projects and transactions begun over the past two or three years. “It is very likely that the excitement seen over the past two or three years will not persist, at least not in the short term, because numerous retailers have recently adopted a more moderate rhythm of development,” observed Mr. Raynal. However, as the capital of the most visited country in the world, Paris will continue to occupy an important place in expansion strategies of major luxury groups, whether historic brands or new ones, arising from capital of emerging countries or from the strategies of large groups that wish to enhance their attractiveness to Asian customers. This trend could continue over the coming months in the form of new openings, although highly targeted development with strict geographical limits will continue to define the strategies of most luxury companies.
“Despite the shortage of available space on Paris’s most prestigious thoroughfares, it is unlikely that new luxury districts will emerge, with the possible exception of Le Marais, which offers numerous advantages. Le Marais, where Helmut Lang has just announced that it will open its next store, has become an essential neighborhood for fashion. It enjoys high visitor numbers of both foreign tourists and affluent Parisian consumers, and benefits from the transformation under way of the Samaritaine and BHV, as well as from extended opening hours on Sundays,” concluded Mr. Raynal.