Luxury Retail Strasses Heat Up Berlin

<CS:BOLD>BERLIN -- It's been a long time coming, but Friedrichstrasse is finally taking shape as the city's newest high-status, high-fashion shopping street.<BR><BR>In the past few months, Hugo Boss, Hermes and Yves Saint Laurent Rive Gauche have all...

BERLIN — It’s been a long time coming, but Friedrichstrasse is finally taking shape as the city’s newest high-status, high-fashion shopping street.

In the past few months, Hugo Boss, Hermes and Yves Saint Laurent Rive Gauche have all opened flagships there. They join Escada, who pioneered the move east to Friedrichstrasse in 1991, as well as the street’s luxury anchor, Quartier 206, which opened in 1997. Quartier 206, a tony multistore enclave, houses the Strenesse Gabriele Strehle, Strenesse Blue, Etro, Cerruti, Stephane Kelian and La Perla designer boutiques, as well as the 27,000-square-foot Departmentstore, a specialty shop featuring Azzedine Alaia, Comme des Garcons, Dior, Dolce & Gabbana, Dries Van Noten, Earl Jeans, Calvin Klein, Martin Margiela, Manolo Blahnik and Yohji Yamamoto, among others.

Gucci, another key tenant in Quartier 206, took a new space twice the size of its original digs in August, conveniently freeing up the first Gucci site for YSL.

Other upscale names on the block include Montblanc and luxe footwear retailer Budapester Schuhe. Galeries Lafayette also has a major presence on Friedrichstrasse.

Located on the former east side of town and now smack in the middle of Mitte — known as Berlin’s old/new center, and a hub of retail, cultural, gastronomical and political activity — Friedrichstrasse was historically an important shopping mile. Indeed, high-end retailing in Berlin got its start there with the opening of the well-known Kaisergalerie in 1873, but the ravages of World War II and the ensuing GDR years did much to erase the street’s charm. For years after the fall of the Berlin Wall, this potential retail oasis was far more like a desert. While consumer traffic has picked up, it still can’t compare to the city’s main shopping boulevard, Tauentzienstrasse-Kurfurstendamm.

“Friedrichstrasse won’t ever overtake Ku’damm-Tauentzienstrasse,”a spokesman for the Berlin Retailers Association commented. “For one thing, it doesn’t have the space.”

Friedrichstrasse has about 475,000 square feet of total retail space, compared to 650,000 square feet alone for KaDeWe, Berlin’s main department store on Tauentzienstrasse, he pointed out.

“But Friedrichstrasse has its legitimacy. It addresses a very specialized consumer — the luxury segment — and the [retailers] we talk to there are all satisfied. Sales have been growing by about 15 to 20 percent every year,” the spokesman added, largely boosted by tourist traffic.

(The street Tauentzienstrasse-Kurfurstendamm can be also referred to as Tauentzienstrasse, Tauentzien-Ku’damm or Ku’damm.)

Rents here are relatively inexpensive, compared to other major cities. According to Andreas Kogge, deputy director of the local real-estate agency Kemper’s, rents on Friedrichstrasse are currently about $8.50 a square foot for spaces 1,100 to 1,600 square feet, and between $5 and $8 a square foot for larger spaces. He said that after Louis Vuitton moved into Ku’damm, rents on that immediate stretch rose a solid 25 percent to their current levels of $8.50 to $10.70 a square foot. All dollar figures are translated from the German mark at current exchange rates.

The Berlin Retailers Association puts the rent rates slightly higher, at $17 to $19 a square foot for Tauentzien-Ku’damm and $16.60 for Friedrichstrasse.

There is little openly available space on the most desired stretches of Freidrichstrasse, and Kogge said demand is growing. However, the best spaces on both Friedrichstrasse and Ku’damm are quite limited. For luxury and designer brands, it’s a matter of about four blocks on Friedrichstrasse and about five blocks on Ku’damm. Both streets are longer, but less-attractive buildings from the Seventies have made a barrier of sorts on Ku’damm, although a few higher-end names, including Bally, have ventured a few blocks down, and this might expand the key area. Attempts to expand onto side streets have largely failed. And on Friedrichstrasse, large hotels or H&M branches have effectively blocked streets at certain points, and a retail strip hasn’t yet been established on the other side.

Still, Friedrichstrasse benefits from being near a number of four- and five-star hotels, some of the city’s most elegant restaurants, the German seat of government and key tourist destinations, including the Brandenburg Gate, Unter den Linden and Gendarmenmarkt. But when it comes to turning a profit for its retail residents, one industry observer suggested: “Nobody’s really making money there, yet. Maybe in two or three years.”

That, however, hasn’t deterred Hermes, YSL or Hugo Boss from zeroing in on Friedrichstrasse, though all three companies would not disclose first-year sales goals for their new stores. Hermes has been present here since the Fifties. Last year, the French luxury house opened spacious new quarters on Ku’damm, and in late November, Hermes opened a second Berlin store at the corner of Friedrichstrasse and Franzosischestrasse.

The bilevel shop, its ceilings more than 20 feet high, features 2,500 square feet of sales space on the ground level. Scarves, leather accessories and perfume are housed in the entry area; men’s wear, shoes and Art de Vivre in the middle, and Art de la Table and then women’s rtw discreetly positioned on its own toward the back. The 1,500-square-foot mezzanine above is an exhibition space only. Its first show opened Dec. 12 with equestrian paintings by Rene Princeteaux. The interior was designed by the architectural bureau of Rena Dumas, RDAI, which has built all of the Hermes stores in the last 20 years.

The decision to move east came in 1995, when Hermes chairman and chief executive Jean-Louis Dumas-Hermes announced his intention to open several international flagships.

“One was New York, the other on the Ginza in Tokyo and the third in Berlin Mitte,” Laurent Mommeja, director of Hermes Europe, commented. “Berlin is a matter of faith. We have great confidence in the role Berlin is playing today and even more in the role it will play tomorrow.”

The city is large enough to warrant two points of sale, he said, not only being the capital of Germany “but it’s also a capital of Europe.” He added Hermes’ belief in the city has been confirmed by the company’s performance on Ku’damm, which chalked up double-digit gains this year. Nor is he worried about cannibalization, citing Mitte’s draw for a more international clientele of business travelers, tourists and visitors coming to town for special events.

The new retail design concept of Yves Saint Laurent Rive Gauche was unveiled for the first time in Europe in the new YSL store in Quartier 206. The black shop corresponds to the prototype set by the New York flagship on Madison Avenue. Almost 2,500 square feet of retail space is divided into intimate salons offering the women’s, men’s, accessories and fragrance collections all on one floor. It is YSL’ s second store in Berlin.

“When we acquired the Mendez portion of the business, we acquired a store in West Berlin on Ku’damm. It’s a small store, but in a good location, so we kept it,” YSL president Mark Lee said. That store was given a temporary facelift a few months ago, but the company plans to “go back and address all these inherited stores, which number about 20, over the next two years. We knew we couldn’t do it all right away.”

Nevertheless, “when the second opportunity came up in Quartier 206, we grabbed it. It gave us the chance to show our full men’s and women’s collections, and it’s a proven location.”

Today, Lee continued, the store in Mitte is a “showcase” as it is the sole YSL store in Germany for the moment. Instead, YSL focuses on key retail accounts like Eickhoff in Dusseldorf and Fischer in Stuttgart.

“But in the next 18 to 24 months, we’re looking to open elsewhere in Germany,” Lee said. “We’re not really covered in Germany, and it’s an important market. Germany’s a big, rich country.”

Hugo Boss also chose Friedrichstrasse as the site for its first flagship in Berlin. Philipp Wolff, director of communications for the German megabrand, said that “after the flagship opening in New York, this is a further high point for the year. The Berlin store is very important for us, emotionally. We sell to many key accounts here, but we’re proud to be present in Berlin in an atmosphere we consider representative of the Boss world. And Friedrichstrasse is the heart of Berlin.”

This is the company’s second domestic retail project, following Hamburg, in cooperation with the SinnLeffers German specialty chain. No further stores are planned at present. The flagship here occupies almost 9,000 square feet on three floors, with a total of eight oversize shop windows, and houses all the Boss label collections: Boss men, Boss women, sportswear and golf apparel as well as the Baldesssarini label. The 2,000 square-foot women’s department on the ground floor has its own entrance, and is organized in little niches, each presenting a style vignette.

Designed by an in-house team, the store repeats signature Boss retail features: a large entryway, which here spans two floors, creating an atrium effect; a bar on the first floor; freestanding fixtures in glass and steel; built-in fixtures in dark stained oak; sofas and club chairs in dark brown leather, and two large video monitors to screen fashion shows and image films.

“It’s kind of a new thing for Boss to be involved in retail,” said one observer. “They have so many [retail] customers, but they’re now paying more attention to point of sale. It’s an important communication tool.”

But especially with SinnLeffers as partners, he continued, the Berlin store is not just to boost profile. “They’re doing it to make money.”

Friedrichstrasse, however, is not only the site of new openings. The 5,500-square-foot Donna Karan Collection and 5,000-square-foot DKNY shops in Quartier 206 closed at the end of 2001. Karan was Quartier 206’s first big designer name, and both shops were opened in 1997 in partnership with AMJ Holding, the owners and developers of Quartier 206.

According to AMJ Holding, the stores closed because the franchise contract between AMJ Holding and Donna Karan expired, and no new agreement could be reached with LVMH Moet Hennessy Louis Vuitton, the new owner of Donna Karan International.

“We regret the situation,” stated Josef Voelk, director of AMJ Holding. “But the step was necessary in that there was no agreement with new owner LVMH over an extension of the franchising contract or for the parent company to further operate the store [on its own].”

At the same time, Voelk said that the Etro and Gant USA shops in Quartier 206, both former franchises with AMJ Holding, were being taken over by their parent companies.

Meanwhile, back on the other side of town, Ku’damm is also heating up. Rena Lange moved into spacious new digs, and Burberry completely transformed its Berlin store, one of Ku’damm’s mustiest relics of Seventies retail design. The British fashion house broke through to the second floor, which formerly housed offices and stockrooms, to create an airy, two-level, 4,600-square-foot shop. Men’s wear and accessories are on the first floor, with a broad stairwell with polished red Venetian plaster walls leading to the women’s department and bar upstairs.

“The German market is really important for us,” said Pat Doherty, senior vice president of marketing. “We’ve always had a wonderful response from the German consumer to our product,” which helps explain why Germany, with its stores in Dusseldorf, Munich, Frankfurt, Hamburg and here, house the most Burberry doors of any one country in Europe.

The Berlin store more than doubled its size, and the window setup was completely reworked, to bring the formerly recessed windows directly onto the street. “That really invites you in,” Doherty said, and with the renovation of the store, we have a better opportunity to showcase what’s happening to the brand, and to present the full story.”

Friedrichstrasse or Ku’damm, east or west, however, Berlin remains one of Germany’s most difficult retail markets.

“Berlin’s practically the poorest city in Germany,” the spokesman for the Berlin Retailers Association remarked. “We have double the number of unemployed, and the structural change of the last decade is something most West German cities had 40 years to accomplish.”