Luxury Retailers Are Leasing Large
Luxury retailers are expanding their footprints across the United States, which remains the largest luxury market in the world.
Over the past year, luxury retailers have leased 650K SF of new space in the U.S., a big jump from last year's 250K SF figure, according to JLL.
Demand from consumers that weren't strongly affected by the pandemic allowed luxury retail brands to focus on expansion. In 2021, luxury retailers made $64.1B in sales. In 2022, that number climbed to $70B, and this year, sales are projected to reach $75B.
Malls account for 38% of new store openings, according to JLL. Some malls, whose performances rely on these retailers, are creating designated wings for luxury brands.
Outside of malls, 80% of luxury retailers prefer urban centers, JLL reported. Earlier this year, Louis Vuitton leased 43K SF in Manhattan. The retailer plans to build a new flagship in the city, in similar fashion to Rolex and Tiffany. NYC has turned into a competitive market for retail space because of it: Ground-floor availability dropped 7.2% across the city's most popular areas in the first quarter, CBRE found.
On average, retailers are leasing 5K SF or more, a 28% increase from the previous year.
Retailers are expanding their scope beyond cities like Chicago, New York and Beverly Hills. Instead, they are looking to the Sun Belt, which has experienced an uptick in population in the past few years.
In Q2, Ralph Lauren opened a flagship location in Miami's Design District, where retail vacancy is 3.7%, below the national average. Luxury shopping center Bal Harbour Shops, just north of Miami, has fully leased a new $500M wing that will add 40 high-end stores to the area.
While leasing is in a boom phase, JLL forecasts that expansion could slow in the near term, as vacancy and supply are still low, with the national average at 4.2%.