Luxury retail has been thriving. In fact, the global luxury goods market should reach a value of $495.16 billion in 2025 and is expected to grow at a rate of 3.94% per year until 2029.
So it’s really no surprise that luxury retailers are heavily investing in solid assets to secure their foundational stability: commercial real estate. They’re buying out their landlords and snapping up prime real estate in the world’s most coveted shopping districts, changing CRE dynamics in the process.
Luxury brands in Europe have spent over $9 billion on landmark CRE properties since early 2023. Some of the most noteworthy purchases include Prada’s acquisition of 724 Fifth Avenue in Manhattan for $425 million — a property they had leased since 1997. Kering also purchased 715-717 Fifth Ave. in Manhattan for $963 million to create several multi-level spaces for brands like Gucci, Brioni, and Balenciaga, and then acquired an 18th-century building in Milan’s exclusive via Montenapoleone for $1.4 billion. Furthermore, the iconic 745 Fifth Ave. in Manhattan — home to Bergdorf Goodman’s flagship store — is potentially being sold to either LVMH or Chanel.
The shift from leasing to buying
Why are luxury brands increasingly opting to buy prime CRE locations? The trend hints at a fundamental shift in their approach to retail space. Instead of increasing the number of their stores, these upmarket brands are instead choosing to enhance the quality and control of their key locations. The competition for iconic properties in major cities is heating up, pushing up property values and securing long-term advantages for the brands that manage to buy.
Strengthened financial positions
One of the key reasons luxury retailers are purchasing iconic buildings is their robust financial health. Major players like LVMH have seen substantial growth in market capitalization — nearly doubling since 2019, in fact — with annual sales reaching approximately EUR 86 billion ($92.7 billion) in the 2023 fiscal year. With this financial strength, they have the capacity to invest in prime real estate assets.
Boost from international tourism
International tourism has continued to grow despite economic fluctuations like inflation. It has almost fully bounced back from the pandemic, with 1.4 billion people traveling internationally in 2024. This number (released by UN Tourism) is just shy of pre-pandemic levels and shows an 11% rise compared to the previous year.
Luxury travel and hospitality in particular are projected to outpace all other industries in growth, fueled by both a surge in high-net-worth individuals (those with $1-30 million) and a growing group of aspiring luxury travelers ($100,000-$1 million). This latter often younger group is increasingly prioritizing and investing in premium travel experiences.
But these well-off tourists are not just sightseeing and staying in opulent suites. They’re also shopping for luxury. In fact, tourists are spending more on travel and luxury goods each year. Luxury American travelers spent an average of $9,500 per trip, and analysts expect them to spend even more — to the tune of $11,000 per trip — by 2030.
Owning CRE properties in prominent shopping districts allows luxury retailers to capitalize on this tourist influx while enhancing the shopping experience and attracting more customers.
Enhancing brand experience and recognition
And then there’s the fact that owning an iconic building contributes to a brand’s prestige and recognition while offering shoppers a unique experience that can’t be replicated online or in less distinguished locations.
For instance, while it’s certainly possible to find better value for an engagement ring in Manhattan’s Diamond District, purchasing one from Tiffany’s flagship store on Fifth Avenue adds a layer of social validation and credibility.
What’s more, younger generations (especially Generation Z) crave authentic experiences. These consumers are deeply integrated into social media and tend to value genuine brand interactions, making physical stores an essential aspect of the modern retail strategy.
Economic benefits of owning vs. leasing
Owning CRE in high-traffic shopping areas is becoming increasingly advantageous from an economic perspective as well. Analysis by CBRE using Placer.ai data predicts that foot traffic in prime retail districts will rebound to pre-pandemic levels by 2025, pushing up rents and property values. Owning their buildings insulates retailers from rising rents and provides stability in landlord-favorable market conditions.
Limiting risk
While the pace of new store openings may be slowing, the importance of securing larger and more prominent locations is only growing. Leasing — although common — carries risks and uncertainties. Given the fierce competition and limited availability of top-tier properties, brands risk being outbid by competitors willing to pay top dollar for leases, or those ready to purchase the properties to guarantee their presence for years to come.
Reevaluating rental expenses
Luxury retailers also seem to be rethinking the high costs of renting in prime locations such as Fifth Avenue, where average rents reach $2,000 per square foot (it is the most expensive retail area in the world, after all). This shift in perspective has led many brands to consider the financial benefits of owning over leasing. They’re recognizing that purchasing CRE properties could be more sustainable financially than enriching landlords through exorbitant rents.
Building a more permanent presence
Of course, ownership of iconic buildings allows retailers to develop their brands more holistically and introduce new strategies to attract new customers. The industry consensus is moving towards an omnipresent, omnichannel approach, where physical presence complements digital and non-traditional marketing channels like food & beverage services and exclusive membership programs. Establishing a permanent presence in top shopping streets lets retailers focus more on these new ventures, making it easier to enhance their brand’s appeal and deepen customer relationships.
There’s certainly a lot of value in locational permanence. Maintaining a prestigious address is fundamental for projecting exclusivity for luxury retailers — and landlords understand this. They know that luxury retailers are willing to pay a premium to maintain their presence in these locations, so when leases come up for renewal, they often significantly increase the rent.
The high costs associated with relocating and establishing a new store combined with the desire to stay in successful locations strengthens the case for buying CRE property to secure a long-term presence and leverage over rental negotiations.
Global expansion through strategic acquisitions
CRE acquisitions by luxury brands are not limited to traditional luxury markets like New York and Europe — they’re also happening in other key markets such as San Francisco and Beverly Hills. More and more upscale retailers are securing prime locations to ensure a long-term presence in vital cities globally, reflecting a broader trend among these luxury purveyors to solidify their retail footprints.
Expanding into new markets and offerings
To better showcase their expanding product lines and incorporate new services like dining and entertainment, luxury retailers are expanding their store footprints and entering new markets — a move designed to attract a broader customer base by offering a more comprehensive lifestyle experience.
Financial strategies and market dynamics
With their strong cash positions, these brands can acquire CRE properties expected to hold or increase in value and secure their lasting stability and market dominance. Furthermore, these luxury retailers often enjoy access to favorable financing — like issuing corporate bonds at lower interest rates than standard real estate loans — giving them a cost advantage over typical CRE investors when acquiring prime locations.
Competitive clustering effects
When a luxury brand moves into a prime spot, it often sets off a race among its competitors — and this race drives up demand and property values in that area. This ‘luxury cluster’ effect shows just how important location is: being near other high-end brands boosts visibility and attracts more shoppers.
Impact on retail space availability
Luxury brands are focusing their real estate purchases on the world’s most prominent retail districts. This trend is likely to remain niche due to the limited availability of exceptional properties in these high streets. The competition for prime locations is intense, and by purchasing these properties, luxury retailers solidify their presence in the best spaces available to strengthen their market position — all while making it increasingly difficult for other retailers to find available spots in these coveted areas.
The luxury brands that purchase properties typically dedicate these spaces exclusively to their own stores, further tightening the market for prime retail leasing as a consequence. For example, on Fifth Avenue — already a competitive market — only a few ground-floor retail spaces were directly available in early 2024. This scarcity of available space means that if one group owns significant CRE in the area, it reduces the chances of that space ever being rented to another luxury brand, effectively controlling the market and limiting competitors’ options.
Financial stability and strategic control
At the end of the day, owning properties allows these brands to ensure long-term locations for their stores without worrying about future lease renewals or potential evictions by competitors. This level of control is crucial for luxury brands whose physical stores play a significant role in their overall business strategy — including driving in-store traffic through digital marketing efforts. It also allows them to create larger and more extravagant stores featuring private shopping suites, cafes, and restaurants to enhance the shopping experience.
Owning their CRE properties gives brands like Kering and Prada control over these investments and the future of their physical locations. This approach is consistent with the luxury sector’s legacy-building model, which includes controlling their retail environments for decades or even centuries.
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