Luxury goods market growth faster than expected, study suggests

The global market for luxury goods has emerged from the financial crisis significantly faster than expected, according to a study of Europe’s most important luxury shopping destinations.

London’s New Bond Street is the most expensive luxury shopping street in Europe, with top rents reaching €7,900 per square meter. On Avenue Montaigne in Paris rents reach up to €7,500 per square meter and on Moscow’s Stoleshnikov Lane rents are as high as €7,015 per square meter, the report from Jones Lang LaSalle shows.
 
‘The luxury sector is the most internationalised in the retail market, with brands adopting true global strategies. Most have big expansion plans into Asia and emerging markets, creating a new class of high-income consumers with an appetite for luxury goods,’ said Robert Bonwell, chief executive officer, EMEA Retail at Jones Lang LaSalle.

‘However the international appeal of traditional high end luxury retail districts in London and Paris has lead to brands resuming investment in mature western markets via extensive refurbishment and expansion of existing stores,’ he added.

According to James Dolphin, head of EMEA Retail Agency at Jones Lang LaSalle, despite the booming online offerings, retailing on Europe's most prestigious high streets remains a very important success factor for the luxury segment.
 
‘After two years of subdued spending, luxury retailers are responding to the return in consumer confidence with healthy expansion plans. Increased demand for prime space in the best locations is forcing rents up. Other retailers are also looking to benefit from the proximity to famous top level brands, and this additional demand for scarce showroom space is placing even more pressure on premiums,’ he said.

Leading international luxury groups have recently reported double digit sales growth or even record annual sales. Companies’ own store networks have played a significant role in accounting for this success, with business also driven by Asia, particularly the booming Chinese market.
 
The luxury retail sector has also bounced back in Europe, the report says. In 2010 a third of total revenue for some brands was generated with the highest sales recorded in Italy, followed by France, the UK, Germany and Russia.
 
The highest density of international luxury labels can be found in Paris. The top 100 luxury labels operate more than 150 luxury stores, proving the French capital remains Europe’s uncontested centre of fashion and luxury shopping. Only London has a similar density with 125 luxury outlets from the top 100 brands. Milan has just under 90, while Moscow and Rome follow behind with 66 and 59 luxury label stores, respectively.
 
‘The importance of London as a retail location for the luxury brands has continued, and the market, particularly in Bond Street which remains the number one focus for so many global brands, remains top of most occupiers priorities. The limited supply of stock has driven rental growth throughout the last two years and premium levels have also risen significantly as the demand for space has continued,’ said Martin Thomas, head of Jones Lang LaSalle Central London Retail Division.

‘Consumer spend in London comes from many global areas, with Russian, Chinese, and Middle and Far East money being prevalent. There are certainly no signs of this rental growth slowing down at present and trade remains strong for so many of the top luxury brands,’ he added.