Given the current business environment, yield movements and available free cash, it therefore makes good business sense for major luxury brands to take advantage of their financial power and become owners of prime locations, says Ludwig.
“It helps them protect their long-term presence in key cities, particularly within prestigious shopping destinations,” she says.
What’s more, these brands face little competition from traditional real estate buyers, thanks to higher interest rates and a shortage of core capital. It means they can leverage their significant available funds to secure the most desirable locations.
Ulrich says ownership also brings the benefit of greater autonomy and control, allowing brands to make investments into store façades, designs and layouts without needing permission from landlords or having to enter lengthy negotiations with joint tenants.
“In this segment, customers are not just purchasing a product, they’re buying into the story and lifestyle the brand represents, so it must deliver on the brand promise,” Ulrich says. “Physical stores provide more options for those high-end client experiences that help preserve premium pricing.”
Ludwig expects to see premium brands remain focused on creating flagship temples of retail in the coming months.
“Selective acquisitions of prime sites are likely to continue – alongside improved layouts and those unrivalled in-store experiences we’ve grown so used to,” she says.