The fifth edition of the Global Luxury Retail report by Savills International presents a detailed analysis of the luxury retail market and new store openings worldwide, with a focus on identifying the most attractive store expansion opportunities over the next 12-18 months. The strengthening luxury retail sector highlights the resilience of this niche, with emerging and new markets likely to present some of the most exciting opportunities.
In terms of new luxury store openings globally, there was an 11 percent increase last year, with the Chinese market accounting for 41 percent of all new store openings. However, compared to 2021, there was a decline in new openings in China, caused by declining tenant confidence and the closure of some retail spaces. Europe saw a 77 percent increase in new store openings year-on-year, with London’s Bond Street being one of the most active markets, while the Middle East saw a doubling of its global market share in this segment.
The luxury retail market saw an increase in the activity of clothing and accessories brands, while watch companies were the ones to expand into new markets. Large global centres dominated new openings, especially in smaller markets that benefit from a specific customer profile and a high number of tourists. Luxury hotel brands have also expanded, enhancing the hospitality offered in these cities. While the pandemic has led consumers to place more emphasis on experience, hoteliers’ interest in luxury customers has declined, focusing instead on leisure markets and resorts.
Bain is forecasting that the global personal luxury market will grow by 5-7 percent per year through 2030, representing a total expansion of more than 50% to €580 billion. With brands continuing to drive sales growth through their owned store network, realising this market potential will no doubt mean more stores globally alongside upsizing existing stores in key markets.
The luxury retail segment also sees new growth opportunities in emerging and attractive tourist markets such as Vietnam, Thailand, Saudi Arabia and the US cities of Austin, Scottdale and West Palm Beach. The association between the hospitality industry and luxury retail is generating new opportunities, with luxury hotels and hospitality groups expanding globally and creating new destinations for branded stores.
However, the availability of opportunities in some markets is declining, leading to rents in some locations rising above pre-pandemic levels, highlighting the need for good advice based on sound market knowledge and a well-developed development strategy. Central and Eastern Europe is one of the least developed markets for luxury retail, with most countries in the region characterised by a lack of high-street retail (the existence of a dedicated street or area in large cities where retail space is occupied exclusively by luxury brands) largely due to the existence of a very large number of shopping malls.
“Although Calea Victoriei in Bucharest has emerged in recent years as a potential destination for high-street retail, the presence of major international brands is limited and the profitability of these stores is low compared to the European average. The low number of tourists compared to the rest of the European capitals is still an impediment for luxury brands that would like to enter the Romanian market. Given the size of the market, it is very unlikely that the major Romanian cities will ever become key destinations for luxury retail customers. However, the development of the luxury residential segment in recent years, the increase in the number of Romanians with above-average incomes as well as the plans of some developers to bring new luxury brands to Romania in the coming years reveal a potential for expansion of this segment in the Romanian market as well,” says Codrin Matei, Principal Partner, Crosspoint Real Estate, an associate of Savills in Romania.
The study also highlights opportunities for luxury brands in locations such as Bond Street, Toronto, Vancouver and Montreal. While landlords continue to provide incentives to compete globally, smaller luxury groups and independent brands are becoming increasingly interested in acquisitions. Luxury brands are expanding retail spaces in their home markets to enhance the in-store brand experience and showcase their full range of products.
For brands that have delivered on their growth strategy – Madison Avenue in New York and Bond Street in London – the pandemic has been a timely trend, leading to an increase in the number of luxury high-street stores, many of which are diversifying their portfolios, with South East Asia being the first choice.