What markets offer attractive expansion opportunities?

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 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.

^{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.}

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.