Brunello Cucinelli waited two years to find the right home for its new London flagship, finally opening the doors to an expanded space in a Victorian-era art gallery on one of Europe’s most expensive shopping streets last June.
The new location is a stone’s throw from London’s famous Sotheby’s auction house on New Bond Street; it sits opposite Loewe and is a few doors down from Alaïa and Fendi; and its entrance is flanked by grandiose columns that give way to floor-to-ceiling window displays.
“The beauty of the building immediately struck a chord with us,” said Brunello Cucinelli chief executive Riccardo Stefanelli. “The space allowed us to have a wonderful windows display on one of the most important streets in the world.”
Brunello Cucinelli isn’t the only brand to open on the famous street over the past 18 months. In December, Versace opened its new London flagship store a few doors down, while Celine will soon open up across the street, relocating its current flagship from nearby Mount Street, a quieter luxury shopping location populated by brands like Roksanda and Christopher Kane. Balenciaga, too, is opening a new store.
The flurry of new openings point to subtle but significant shifts in the thoroughfare’s makeup. Luxury brands are converging on the street, squeezing out some of the more mid-market and more accessible luxury labels that once populated its middle section.
The changes reflect decisions made before the pandemic, but speak to luxury’s comparatively swift rebound and ongoing commitment to high-value brick-and-mortar. Going forward, securing prime real estate will be even more of a priority, experts say. In London, this is likely to mean a continued trend towards relocating flagship stores to Bond Street.
“Our goal is always to be positioned in the most important location in the most important city,” Stefanelli said.
Location, Location, Location
Bond Street has been a fashionable shopping destination since the 18th century, but received an influx of investment over the last decade from mega brands like Dior, Louis Vuitton and Chanel. These luxury powerhouses spent tens of millions of dollars building impressive retail emporiums in the most prime location along the thoroughfare; spending that reflected London’s status as a global luxury shopping hub and Bond Street’s position at its epicentre.
To be sure, the latest openings are taking place against a drastically changed backdrop. The pandemic temporarily cut off access to high-spending international travellers who drove sales on the street. Brexit and a recent decision to end tax-free shopping for international visitors to the UK — a huge incentive for high-spending tourists to splurge at their favourite luxury stores — cast uncertainty on whether they will return in the same numbers.
Bond Street has not been immune to these headwinds, with rates suffering in line with the wider market. It’s a contrast to previous recessions, when rents on Bond Street remained stable or even continued to rise. Peter Mace, head of the Central London Retail team at commercial real estate firm Cushman & Wakefield, who has been managing property on Bond Street for over 30 years, said he has only signed three deals across New and Old Bond Street since the start of the pandemic, a number that is “very low,” he said.
But there are already signs of a recovery. The location alone accounted for 55 percent of investment volumes across central London in the first half of 2021, according to a recent Savills research report.
In fact, Bond Street’s appeal as a prime location is likely to deepen as brands look to rationalise their store network and focus spending on the best locations following the pandemic, according to real estate executives in London.
Despite the rise of luxury purchases online over the last 18 months, the industry continues to view stores as integral to the luxury experience and brand building. Indeed, e-commerce is still expected to only account for about a third of luxury sales by 2025, according to Bain & Company research.
“The best locations are going to become even more desirable,” said Matt Farrell, managing director at Trophaeum Asset Management, a real estate firm that owns property in the area. “Brands will have less stores, but when they do have stores, they’re going to want the best doors and the best locations.”
The Bond Street Reshuffle
Historically, different parts of Bond Street have been more desirable than others, a fact reflected in the disparities in rent levels across the street. These can vary from around £750 to £800 ($1,038 to $1,107) per square foot up to around £2,200 ($3,044), according to Mace.
The cheapest rents are for stores located at the northern end of the street, in the area between Brook Street and the extremely busy Oxford Street, home to more high street labels. Rents steadily rise progressing down the street before peaking at the “prime pitch,” currently occupied mostly by hard luxury brands and LVMH labels. Today, rents at the most southern end of the street, known as Old Bond Street, sit around the £1,600 per square foot mark, according to Mace.
But rates have been creeping up, fuelled by growing demand for property on the street in anticipation of new infrastructure that is expected to funnel even more high-spending shoppers to the retail hub. The steepest increases have been in the central strip where some of the newer openings from top tier brands sit, said Anthony Selwyn, head of London and international retail at Savills. “It’s probably been the biggest growth area over the last five [or] six years in terms of rents,” he added.
For some brands, it’s become a steep price to pay. Shortly after Nicolas Girotto was appointed chief executive of Bally in May 2019, he made the decision to relocate the brand’s Bond Street store to nearby Regent Street, which has a higher footfall and attracts a more democratic shopper compared with Bond Street’s ultra-high-net-worth clientele. The new location “was more relevant for the brand in terms of positioning,” he said. Meanwhile, rent on Bond Street “was disproportionate to the foot traffic.”
The departure of mid-priced and accessible luxury brands opened up spaces for higher-end luxury brands to swoop in, which in turn further fuelled rate increases; for luxury brands, who they sit next to is just as important as where they sit.
“The prime pitch has been extended,” said Selwyn. “The cut off point historically used to be where Burberry and Miu Miu are, and none of the top tier brands would necessarily go further north than that.” Now, however, there’s little reason why the best luxury brands wouldn’t consider opening up in that part of the street. “That is going to become a stronger and stronger location,” he said.
Luxury’s Top Brands Set Down Roots
Meanwhile, luxury’s mega brands are continuing to make long-term commitments to Bond Street. For instance, Chanel, which first moved into 159 New Bond Street in 2013, purchased the freehold for its store for £366 million in the throes of London’s second pandemic wave. LVMH, Richemont and Hermès all also own property in the location.
Such moves reflect a strategic commitment to the area, said Farrell. “It gives occupiers and investors confidence, because they’re the strongest players in the market.”