Luxury retailers are proving resilient in the face of falling sales due to the global pandemic with leases being signed and sites reviewed across Sydney’s core strips of George, King, Market, and Castlereagh streets.
Although the pace is slower than a year ago as the main international shoppers of high-end branded goods dwindle, the stores that will survive are now laying down the foundations in preparation for a return of customers.
Those brands that were already struggling, pre-COVID, will likely disappear, warn retail leasing experts.
Alex Alamsyah, partner and head of retail leasing, Knight Frank Australia, said it is a case of “the survival of the fittest”, when it comes to the future of the retail sector.
“It is not the strongest of the species that survives but the most adaptable, however in the reality of the luxury retail world the strong brands will survive and the small independent and weakly positioned names will undergo structural issues and, in some cases, even disappear,” Mr Alamsyah said.
One brand adaptation is the new Louis Vuitton store in Sydney which now includes a “Maison” area for exclusive customers.
He said, based on a number of lease deals signed in Sydney, the luxury sector has been more recession-proof than most others.
Amid the dire predictions, the global market for luxury goods has flourished for decades. In 2019 the global value of the sector was estimated to be €1.26 trillion ($A2 trillion), but in 2020 global luxury retail sales could decline by up to 40 percent and remain in negative territory until the impact of COVID-19 eases.
Post the global financial crisis, evidence shows that in 2008, luxury retail was one of the few sectors that didn’t decline as significant when compared to the rest of the sector.
Mr. Alamsyah said new leases had been inked by Fendi at 135 Elizabeth Street, formerly Hermes, which has moved to The Trust Building in Castlereagh and King streets, opposite the new Valentino at the Dexus-owned MLC Centre, and Rolex has signed at 192 Pitt Street.
Lotte Duty-Free at 55 Market Street, which is also eyeing off a site in Melbourne’s Bourke Street Mall, and Mecca Cosmetica will move into the former Top Shop at 45 Market Street.
Popular cosmetics group Sephora will relocate to the nearby former Soul Pattinson chemist at 160 Pitt Street to increase the pressure on the nearby department stores Myer and David Jones.
It is understood that several big brands have signed at the new retail podium at 388 George Street, including a high-end jeweler and popular apparel retailers, but Mr Alamsyah declined to comment.
It is also expected that Scentre will reveal new tenants including Chanel, Harry Winston, Loro Piana, Brunello Cucinelli, for the development at the former David Jones menswear store at 77 Market Street in conjunction with Cbus Property.
Scentre Group director development and strategic asset management, Stewart White, said the city’s home of luxury, Westfield Sydney is experiencing a wave of luxury brand rejuvenation, expansion and renewal as it prepares for the return of more international customers when borders re-open.
Rents for the various stores, which range from 300 square meters up to 3000 sq m are from about $2.5 million up to more than $8.5 million per annum with the lease terms of between five years up to 10 years plus options to renew.
Reflecting the volatility of the sector is Deloitte Access Economics’ latest quarterly Retail Forecasts subscriber report, which shows total spending slumped in the June quarter, but a solid performance in June and July suggests stronger momentum in the September quarter.
Deloitte Access Economics partner, and retail forecasts principal author, David Rumbens, said retail spending has fallen at the fastest rate in nearly 20 years as COVID-19 cast a cloud over the consumer landscape.
“Looking forward, some parts of retail are expected to take longer than others to recover,” Mr Rumbens said.
“Supermarkets, specialty food and liquor, household goods, and other retailing have already exceeded December’s pre-COVID spending levels over a whole quarter.”
But he said it is expected to take much longer for department stores, catered food and apparel to reach this benchmark.