Tourist expenditure on luxury brands has helped retailers in Perth perform well despite an overall weak retail environment.
JLL WA head of retail properties senior director Ann Manifis said luxury retailers have continued to perform nicely due to the “inelasticity” of demand for luxury goods.
Ms Manufis said the strong performance was attributed mainly to inbound tourism with tourist expenditure on luxury items such as heritage brands including Chanel, Louis Vuitton and Gucci, being consistently high and virtually independent of growth in the Australian economy.
“Interest in luxury brands from local consumers has also increased in recent years. This is in part due to product polarisation, where consumers are buying more fast-fashion clothing items, while also purchasing more high-end pieces such as handbags and jewellery,” she said.
Colliers International head of retail leasing Ahmad Ibrahimi said luxury sales were not at the peaks recorded during the mining boom but new formats and larger spaces in redevelopments, including Raine Square and Forrest Chase, were expected to accommodate at least some of the luxury brands that were keeping a close eye on Perth.
“Most luxury brands have limited themselves to Perth’s CBD, but a few smaller boutiques have experimented with complementary stores in regional shopping centres,” he said.
“Luxury brands have a well-earned reputation for attracting a cohort of affluent buyers, and there is also a correlation between their performance and sales in nearby spas, up-market cafes, salons and other service-driven businesses.
“The availability of luxury brands also helps to increase hotel occupancy, particularly from international visitors.”
According to Colliers International, redevelopments in Perth’s CBD have created new options for luxury retailers looking to expand their footprints. The redevelopments might also attract interest from luxury retailers who were yet to open stores in Perth.
“We expect to see more luxury retailers as suitable new supply is made available,” Mr Ibrahimi said.
Ms Manifis believed luxury retailers were likely to once again look towards Perth in light of the new mining boom forecast.
“It was seen in the previous mining boom that many luxury stores opened in the city, and King Street’s luxury retail precinct was built. Tourist numbers in the state are forecast to rise in the near term, which will have a positive effect on luxury retail,” she said.
Perth has been a stagnant market for luxury for some time for several reasons, according to Tim Starling, CBRE head of retail tenant advisory.
This was due to a boom and bust economy, the size of the population and tourist numbers compared to Sydney and Melbourne.
“For these reasons, brands have to date shown little interest in this market while they focus on the core east coast markets – making sure they are fully built out before crossing the country,” he said.
“Do we see this changing? Not for the time being, but the success of the newly upsized and relocated Louis Vuitton store in Perth will play a crucial role in the interest from the wider LVMH group brands.”
The performance of the luxury retail market was having an impact on other retail markets via more consumers across shopping sectors and brands, Mr Starling said.
“It’s common to see designer bags being worn as a statement piece often with non-luxury outfits. Designer sneakers are particularly popular at the minute and the greater impact this has had on the footwear market, for instance, is huge, with multiple brands looking to cash in on the ‘in-between’ price band for those that cannot afford luxury ones,” he said.
“This impact is prevalent across a number of categories within retail.”
Ms Manifis said luxury retail tended to be highly concentrated in parts of the CBD and had a limited presence in regional shopping centres.
“The positive performance of luxury retail has thus not had a great effect on the other retailer categories or shopping centres,” she said.
Mr Ibrahimi said while most luxury brands had limited themselves to Perth’s CBD, a few smaller boutiques have experimented with stores in regional shopping centres.
“Luxury brands have a well-earned reputation for attracting a cohort of affluent buyers and there is also a correlation between their performance and sales in nearby spas, up-market cafes, salons and other service-driven businesses,” he said.
“Market conditions play the most significant role in retail demand for luxury goods and the recent downturn has had a major impact on bottom lines. With the economy now picking up and consumer confidence expected to follow, it will be interesting to see how these brands plan their future in Perth.”
Like all retailers, luxury tenants had been somewhat cautious to commit to new stores, Ms Manifis said.
“However, Louis Vuitton is due to open a store at the Raine Square redevelopment in September 2019,” she said.
“The luxury retailer is moving from the King Street store, which opened in 1993, in large part due to the high rents on the strip.”
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