10-11 / 24
11
The headwinds facing luxury retailing in 2016 and into the early part
of 2017 was exacerbated by high occupational costs in cities such as
New York and London. It goes some way to explain why these cities did
not feature in the top three for new store openings. Yet, examining
the potential trading fundamentals in regards to size of market,
international visitors and presence of High Net Worth Individuals
(HNWI), both cities continue t`o look attractive. In fact, examining the
key global luxury destination cities purely on potential macro trading
indicators, the top three cities are New York, Tokyo and London.
Beyond these top three, there are a number of global
luxury cities that stand out in terms of potential macro
trading fundamentals and relative rental affordability.
Toronto is one such city.
Toronto, for example, out performs Sydney in terms of population,
presence of HNWI, overseas visitor numbers and volume of retail sales.
Yet, prime rents on its key luxury street are less than half of that seen
on Sydney’s luxury equivalent. Toronto’s relative ‘affordability’ and
luxury spend potential has no doubt helped to drive its appeal to
luxury brands and hence its feature in the top 10 cities for luxury store
openings in 2017.
Other high growth visitor destination markets such as Dubai, Seoul,
Miami, Los Angeles, Madrid and Tokyo, all of which have seen
international overnight visitor numbers increase by more than 20%
since 2013, are likely to prove attractive particularly in light of their
relatively lower store rental costs in some cases. Albeit domestic
trading conditions, brand saturation at a city level and total operating
costs will be key to ensuring these locations are sustainable trading
locations over the longer term.
What markets offer attractive expansion opportunities?
7,000
6,000
5,000
4,000
3,000
2,000
1,000
5
0
10
15
20
25
0
-1,000
NEW YORK
$3,200
LONDON
$2,918
HONG
KONG
$1,535
PARIS
$1,636
DUBAI
$381
SEOUL
$542
TOKYO
$1,157
MILAN
$1,418
LOS
ANGELES
$700
SAO PAULO
$286
SHANGHAI
$361
TORONTO
$318
SYDNEY
$723
MADRID
$236
MIAMI
$350
Source: Savills Research; Wealth-X, Mastercard Destination Index. Note: Rents are for luxury locations bar Seoul which is for high footfall location.
Paris and London rents are ZA and therefore on a per sq ft basis would be lower than that detailed above.
Approx. no. of high net worth individuals
International overnight visitors 2016 (millions)
Prime rent per sq ft per annum in the key
luxury street/area (as of Q3 2017)
Global luxury cities – affluence, international visitors & rents