Luxury goods retailers invest in premium retail sites

Competition for key central London stores reached a new level following the decision by Bernard Arnault, the chief executive of French luxury goods group LVMH (pictured) to purchase three stores on Bond Street for £300 million as reported in Reuters and Yahoo.

Fashionista understands that the shops include LVMH’s Louis Vuitton flagship store at 17-20 New Bond Street and two other stores let to US leather goods fashion retailer, Coach and luxury stationer, Smythson. Fashionista has noticed the trend on the capital’s most exclusive streets of luxury retailers using surplus funds to purchase freehold premises. In 2009, Hermes acquired the store currently let to Asprey for £75 million and, particularly relevant to LVMH, the freehold interest in its DKNY store at 26 Old Bond Street was acquired by rival brand (and occupier of 27 Old Bond Street) Chanel in 2010.

Aside from the benefit of strong projected rental and capital growth, this investment is also a long term measure to protect LMVH’s presence in a key market. As the list of international retailers looking to establish flagship stores in central London continues to grow, the purchase of a shop in this location will also provide a safeguard against the increasing level of rent, which Cushman & Wakefield has predicted for prime Bond Street Zone A premises could reach £1,500 per square foot by 2013.

Fashionista expects the trend of retailers’ becoming property owners to continue in high profile markets where demand is outstripping supply and, in turn, an increasing number of cases of a retailer becoming the landlord of a competitor tenant - what Fashionista would give to be a fly on the wall during discussions when these leases are due for renewal!