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Published
Nov 14, 2017
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Paris is top for luxury openings in 2017, London, Tokyo and NYC are key

Published
Nov 14, 2017

London lost its top spot on a list of key cities seeing luxury store openings this year. The new annual review by Savills saw Paris back in the lead this time.


The new Louis Vuitton place Vendôme boutique - DR



Not that London is losing its status as a luxury hub and after last year’s spate of openings, a slowdown was always on the cards. But Paris, after all, has been more used to being in number one position and the international real estate advisory firm said it has seen more luxury store openings than any other city this year, attracting 5.9% of the total number of store debuts. 
 
Savills’ latest Global Luxury Retail Report said that London fell to fourth spot this time, where it tied with Milan, each of those key cities seeing 5% of luxury openings globally.

And the rest of the top 10? Well, it was a top 11 given that two cities took fourth place. Tokyo was very close behind Paris in second place as its domestic market proved buoyant, and Singapore was third. After London and Milan came Hong Kong then New York, LA, Kuala Lumpur and Toronto. Overall in 2017, Europe has accounted for 38% of all luxury openings, with 28% in Asia Pacific and 20% in North America. 

The report said that the headwinds facing luxury retailing in 2016 and into the early part of 2017 were exacerbated by high occupational costs in cities such as New York and London, which goes some way to explain why these cities did not feature in the top three for new store openings. Yet given the size of their markets, their international visitors and presence of High Net Worth Individuals (HNWI), both cities continue to 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, Savills believes. 

WHY PARIS?

Anthony Selwyn, director of Savills global luxury retail, said that the return of Paris to number one was largely about French luxury brands opening new stores in the city. They included Balenciaga opening its third Paris standalone on Avenue Montaigne and LVMH’s return to Maison Louis Vuitton Vendôme. He said the latter “is a true representation of luxury retail on a global spectrum, and sets a precedent in terms of ultimate brand positioning in the heart of the world’s fashion capital.” 

But Paris has also seen several international brands choosing to open there as the city continues to recover from earlier terrorist attacks with new stores there this year including UK jeweller David Morris and German luggage specialist Rimowa, both on Rue du Faubourg Saint-Honoré.

Yet while the 2017 ranking has changed from last year, it has to be noted that fewer stores overall have opened this year. Globally, due to slowing growth in personal luxury goods spend in 2016, luxury brands have reined-in their opening plans and Savills estimates that the year will end with around 350 new store openings, down on the 470 reported in 2016.

THE CHINA FACTOR

“Slowing luxury goods sales in 2016, particularly in mainland China, saw luxury brands look to streamline their portfolios and focus their expansion plans on more strategic locations,” said Selwyn. “Destination cities in Europe, namely Paris, with their ‘retail heritage’ factor and high visitor numbers, have therefore accounted for the majority of all luxury openings this year. For the foreseeable future, I am confident that in addition to these factors, the surge in Chinese visitor numbers to Paris in the first half of this year is a sign of the times and likely to be a deciding factor in the expansion strategies of luxury retailers who will continue to consider Paris as a premier luxury retail destination.”

That view makes sense given the city’s recovery from earlier troubles. Savills said that while 2016 was marked by terrorist attacks that deterred high-spending international tourists, in the first half of this year, overnight visitors to Paris were up by up 15.1% and Chinese arrivals rose 23.7%. Chinese visitor numbers had dropped nearly 15% last year so the recent increase means that not only has the city recovered but more Chinese tourists than ever are flocking to its stores.
 
While central London stores such as Selfridges and Harrods are teeming with Chinese visitors, Marie Hickey, director of Savills European Retail Research said that “Paris welcomes more Chinese overnight visitors than any other European city, with  London for example attracting only 20% of the numbers that Paris welcomes annually.”

She added: “The variety of brands present in the city and cost of luxury goods, which tend to be much cheaper on the continent than they are in China, means the Chinese are one of the biggest drivers of revenue for Paris’s luxury retail stores.” 
 
And Chinese shoppers will be drivers elsewhere too. Savills also said that the unexpected bounce in luxury spend this year, with forecasts through to 2020 having now been revised upwards, should feed positively into occupational demand in 2018. “Improved luxury spend by Chinese consumers points to a resurgence in store requirements in China, and in those markets that receive high numbers of Chinese tourists, such as Hong Kong and Macau. However, this activity will be relatively constrained compared to historical highs with the focus very much on the prime retail locations in these cities.”

It also thinks that next year 2018 will see a greater focus on “strategic and under-represented markets, reflected in the target cities identified by luxury brands.” Savills tracks the active requirements of 30 luxury brands globally, with the top target cities in Europe being Frankfurt and Munich, while Paris and London also still feature in the top five. In terms of global targets, it is the US markets that dominate with Miami, New York and LA all identified as key cities for new store openings in 2018/19.

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