The resilience of luxury retail in recent years may now be paying off, with retailers acquiring high-quality real estate on some of the world's most renowned streets, according to a JLL analysis.

Values in the billions of euros

Consider the luxury retail group Kering – owner of Gucci, Bottega Veneta, Balenciaga, and Saint Laurent – which recently acquired a five-story property on Via Monte Napoleone in Milan for EUR 1.3 billion (USD 1.4 billion). This followed its USD 1 billion acquisition of a property on Fifth Avenue in New York City.

Prior to this, Kering and other luxury retailers such as LVMH and Chanel made several acquisitions in Paris on Rue Saint Honoré, Avenue Montagne, Avenue des Champs Élysées, and other prime locations.

In fact, European luxury brands have paid over USD 9 billion to buy flagship stores in the world’s prime shopping locations since the beginning of 2023, according to analysis firm Bernstein Research.

High profits

“The largest luxury retail groups are currently buying high-quality real estate in major cities globally, as brands seek long-term security and greater control over their assets,” says Sandra Ludwig, Head of Retail Capital Markets EMEA for JLL.

Part of this is due to high profits translating into strong company balance sheets. One of the top 25 global retail players, LVMH, nearly doubled its market capitalization since 2019, with annual sales for the 2023 fiscal year reaching approximately EUR 86 billion (USD 92.7 billion).

The rise in international tourism has been another driving factor. Despite inflation, consumers have continued to split disposable income between travel and goods, meaning spending has increased for the fourth consecutive year, according to JLL's Global Real Estate Perspective.

Buying not leasing

Many brands are doubling down on physical stores as they gain a better understanding of evolving business models and the value that physical retail space brings. While this may not equate to more sites, it means better sites – driving competition for flagship buildings in top cities to heat up.

“While new store openings from high-profile luxury retailers are declining, location requirements and demand for larger store spaces have increased in priority,” says Josefine Ulrich, Director of Strategy and Retail Operations, EMEA.

She adds that while leasing is still a common strategy, it brings a degree of risk.