“The retail real estate world is in the dark. There is no databank saying this location is worth the money and that one isn’t,” explained Marc-Christian Riebe, founder of Location Group and author of the 1,000-page survey, which focuses on “the most important brands,” representing only a single-digit percentage of total new shop openings around the globe.
Additional results of the study, called “Street Front” Online Market Platform, will be available online in September with an alpha version for Switzerland. The platform will contain detailed information, including rents and prices, for 250,000 properties in prime locations of 500 cities worldwide.
“Look at it from the point of view of the manager in charge of expansion,” explained Riebe. “Zara opens 500 new stores each year, H&M 250. Zara closes down approximately 25 to 30 of them in a given year, H&M 12 to 13, because they lacked conclusive information about the location at the time of opening. Considering that a new store can easily cost 10 million to 30 million euros [about $13 million to $40 million] in top locations such as Oxford or Regent Street in London, that’s a costly mistake.”
Riebe said the data provided on the online platform would also reveal some surprises.
Konstanz, Germany, a city located on the Swiss-German border and near Austria and Italy, is a case in point, said Riebe.
“Rents in the pedestrian area of Konstanz have quadrupled in the past seven to eight years as thousands of Swiss are taking advantage of the weak euro to go shopping, causing traffic jams at the border every Saturday. Consequently, Konstanz can show off the highest increase in purchasing power in Europe. You can be sure that is of interest to the brands.”
In Germany alone, Location Group counted 187 cities with more than 50,000 inhabitants. “And nobody knows what is happening there in prime locations,” Riebe marveled.
The largest cities worldwide remain the biggest draw. “Brands orient themselves according to their competition,” Riebe said. “Before they settle at a given location, they will plant an observer in front of a competitor’s store, for two to three days a week, who will register how many people go in and how many come out with a shopping bag. It’s an obvious decision. Zara wants to be where there is H&M, then Esprit follows suit, and so on. ”
The Retail Market Study details the development of commercial real estate prices in the world’s prime locations.
“Asia [has had] the highest increase in rent prices,” Riebe said.
According to commercial real estate firm CBRE, Hong Kong, home to the world’s highest retail rents, has seen rents jump 19 percent since 2011 to reach an annual rate of $42,933 a square meter, or almost $4,000 a square foot, said Riebe.
By comparison, annual rents are at 15,410 euros a square meter ($1,431 a square foot) on London’s Bond Street, and $2,625 a square foot on New York’s Fifth Avenue. Commercial real estate consultants Cushman & Wakefield reported that annual rents on Paris’ Champs-Elysées have hit 18,000 euros, or $23,352, a square meter ($2,170 a square foot).
It takes brands up to two years to find a suitable location in Hong Kong. But stable tourist spending, low unemployment and a strong market growth rate generate strong sales, according to the survey.
Nevertheless, some brands are tightening their belts in Hong Kong. Swedish retailer H&M gave up its flagship, which opened in 2007 in the city’s Central District. The slot is going to Zara, which will be paying $1.4 million in monthly rent, or twice as much as H&M, according to Location Group’s data.
But this has positive side effects, too, said Riebe. As prime locations on major streets become more scarce, side streets are seeing a makeover.
Riebe cites Zurich, where Christian Louboutin set up shop off the beaten tracks on Wühre, next to Zinnengasse, with the most desirable spots already taken. “Luxury brands travel in packs. When they see their competitors make a good business in a non-prime location, they are eager to get a slice of the cake. And so Eres is set to open there soon, Mulberry is about 100 feet away. I bet you, in two to three years, the local shops will have disappeared and Zinnengasse will be a top-notch destination.”
The analyst cited a spike in interest among luxury brands to expand in Northern Europe. “They are increasingly eying Scandinavia with Stockholm, Copenhagen, Oslo and Helsinki. These are the cities in Europe that will experience the most significant growth of luxury brands. But also Warsaw,” he said.
Riebe calculated Poland’s total purchasing power volume at 188 billion euros, or $243.9 billion, “the highest among all Eastern European countries with the exception of Russia and Turkey, which puts the country in an excellent position,” he said.
Gambling destinations like Las Vegas and Macau are also booming, said Riebe. “Take Louis Vuitton’s latest store opening at the City Center in Las Vegas. It’s one of the brand’s 10 largest stores and alone generates $40 million a year. A Louis Vuitton store in a major European city makes $20 million to $30 million a year in revenue. Taking into account that Macau’s potential is actually about 80 to 90 percent that of Las Vegas, the prospective opportunities there are immense.”
@juicebeauty, where @gwynethpaltrow holds the title of creative director of makeup, has become one of the foremost labels in the organic beauty category –– with sales on track to hit $100 million this year. What’s behind the rapid growth the brand is experiencing right now? It all started in 2005 when the wellness movement was just getting started. Read more on WWD.com. #wwdbeauty
Stay up to do date with breaking news and trending stories with WWD’s “The Essentialist.” Our newsletter delivers the top news in fashion right to your inbox. Want more info? Link in bio. #wwdfashion (📷: @kukukuba)
"I want to tell a story that inspires people to feel good about themselves, but also I'm making a commentary about the lack of female stories and female directors and saying this should change," said @imheathergraham on her latest project "Half Magic." The comedy feature, which the actress wrote and directed, is based on her own struggles as a woman in show business. Read @andrewnodell's full interview with Graham on WWD.com. #wwdeye (📷: @jgreenery)
@meltcosmetics cofounders @lora_arellano and @danabomar built their brand on a single idea: a true matte lipstick. To set the brand apart, they said they always put their customers first –– including a personalized note in each package. #wwdsummits #wwdbeauty
@moncler unveiled its latest project, #MonclerGenius, yesterday at Milan Fashion Week. The Italian outwear maker gave show-goers a preview of the monthly collections – which were created by eight designers and creative talents including Pierpaolo Piccioli, Simone Rocha, Craig Green and more – that will start rolling out in the summer.