Shaken By A Slowdown, Luxury Retailers Focus On Just 3 U.S. Cities

After a few years of spreading their horizons across the United States in an attempt to broaden their customer base, luxury retailers dealing with falling revenues and a K-shaped economy are snapping back to the high streets they know best. 

Last year was a “winner-take-all” environment for luxury retail, JLL said in a December report. Only five corridors — Rodeo Drive, New York City’s Madison Avenue and Fifth Avenue, and Miami’s Bal Harbour and the Miami Design District — accounted for 80% of luxury retail openings in 2025.

“The actual money flow in America right now is in the main arteries and in these transient high net worth markets,” Masonre Director Brandon Miller said. 

The pandemic spurred an explosion in the luxury goods market, which is expected to reach $200B in 2033, up from $115.2B in 2024, according to JLL.

In the early part of this decade, luxury brands tried to capture a larger share of that growth by expanding into secondary markets like Atlanta, Dallas and Houston in an effort to get closer to their typical customer base and reach more aspirational shoppers, middle-income earners who might save up to buy a luxury item here and there.

But retailers are rewriting their store strategies in the face of rising inflation and a tenuous job market, said JLL Senior Director James Cook, who authored the December luxury retail study. 

A K-shaped recovery is sending middle-market consumers down to secondhand and discount goods, while wealthy shoppers continue to have cash to spend.

Luxury retailers are taking a hit from the loss of the middle class. LVMH’s revenue fell 5% last year and 6% in the first quarter of this year. Its shares fell 28% across Q1, the worst-ever start to a year for the company that owns Louis Vuitton, Dior and Tiffany, and executives warned the war in Iran is slamming into consumer confidence and worsening the forecast. French luxury house Kering, owner of brands such as Gucci, Saint Laurent, Balenciaga and Alexander McQueen, has seen its revenue fall 25% since its 2022 peak.

“Luxury retail is in a crisis; it’s not a slowdown, it’s not a pause, it’s a crisis,” Achim Berg, founder of industry consultant FashionSIGHTS, told The Daily Upside last week.

That has sent luxury retailers to the security of the most famous, established retail strips, where the top 10% of consumers shop.

Over the past year, retailers like Giorgio Armani, Dolce & Gabbana, Dior, Van Cleef & Arpels, and Santoni opened new stores along Madison Avenue, according to CoStar, as did Prada, Hubolt and Louis Vuitton on Fifth Avenue. Rolex, Boucheron and Casablanca opened their doors along Rodeo Drive.

Meanwhile, luxury retailers are shuttering outside of the core markets. Saks Global announced in March plans to close a dozen Saks Fifth Avenue stores and three Neiman Marcus locations, including in Chicago, San Antonio and Maryland. 

Kering announced in February it was culling 133 stores that no longer provide increased sales or align with its elevated brand position, The Street reported. Kering plans to shutter 11 Gucci stores in North America alone.

“You’ve had a retrenchment and refocused back on the high net worth shopper. What that meant is that places like Madison Avenue, Fifth Avenue, Rodeo Drive, are more important than ever,” Cook said. 

Opportunities are scarce there. 

The nearly 450K SF of retail that line the three blocks of Los Angeles’ Rodeo Drive have a single vacancy, a 5K SF space Givenchy vacated in 2024 to move to a larger Beverly Hills flagship store. 

That space shouldn’t stay empty for much longer.  

“Several brands are fighting for it,” said CBRE Senior Vice President Houman Mahboubi, who is marketing the storefront for lease following its renovation. 

Four or five major luxury brands have told him they will submit offers. After that, haute couture brands wanting a presence along Rodeo Drive will be out of luck. 

Mahboubi said the vacancy rate in the U.S. for overall luxury space is around 4.5%. The rate for the average shopping center is about 6%, according to a first-quarter Cushman & Wakefield report.

What space comes available gets gobbled up at a rent premium, with prime asking rents jumping 10% nationwide in 2025, JLL found.

Along Rodeo, rents have skyrocketed from a range of $840 to $1,000 per SF five years ago to between $1,100 and $1,400 per SF, Mahboubi said. 

On Madison Avenue, asking rents grew from an average of $623 per SF in 2022 to $894 per SF last quarter, a more than 40% increase, according to JLL. 

For luxury retailers, clustering is all-important to build brand equity, said Brandon Miller, a client sales executive with retail consulting firm Clarkston Consulting.

“A Rolex next to a Kroger sends a different message than a Rolex next to a Hermès or Louis Vuitton,” he said.

And while there are newer luxury clusters that are doing well, like Houston’s River Oaks District, which is home to Hermès, Cartier, Dior and more, the prime luxury corridors benefit in particular from historic reputations that signal wealth and a cultural association with prestige that attracts well-off tourists, Miller said.

“The brand reputation has grown over time for these corridors, making them culturally relevant on a global scale,” Miller said. “New properties don't have that same effect, yet. But they can still benefit from the halo effect of being around other luxury retailers.”

With space running out in the top five corridors, retailers are going to have to broaden their nets, and some have returned to select high-end malls and luxury open-air centers. 

But establishing a true luxury hub is incredibly difficult for developers to accomplish, Masonre’s Miller said.

The area’s demographics need to prove out that the high-end customer is there already, but beyond that, the pivot of a shopping destination into a luxury node requires buy-in from key luxury retailers, who create momentum and lure others nearby.

“It's tough to build new luxury. It’s tough to get the lynchpin brands to buy into a new placeholder,” he said.

Masonre founder and CEO David Abrams said, over the past 18 months, European luxury brands have strived to make new store inroads in the uber luxury corridors, adding to the feeding frenzy of demand. But they’re encountering the same challenge as U.S. luxury retailers.

“At the end of the day, you might be ready to expand right now in the U.S. That doesn’t mean there’s space available in the top streets,” he said.