The more the global retail environment is sluggish, and luxury brands are starting to buy real estateBuying a property seems to be the new "safe haven" for luxury brands.
According to Fashion Business News, Prada announced on Wednesday that it will start with 4The $2.5 billion acquisition of New York's Fifth Avenue*** building, located directly across from Trump Tower between 56th and 57th Streets, is one of the world's most prominent retail real estate projects with a total area of 7870,000 square feet, of which more than 6850,000 square feet. According to public documents, Prada has been renting the store in the 12-story building at 724 Fifth Avenue in New York since 1997. The Board believes that the property currently has high strategic value and significant long-term potential with the addition of residential, hotel and retail space in the vicinity. According to the plan, Prada will continue to operate the stores in the building, which will also serve as the location of the group's offices and storage rooms. It is worth noting that Prada and the building's original owner, 724 Fifth Fee Owner LLC, had previously fought in the New York State Supreme Court for more than three years in connection with the building's renovation work, which was not settled until the beginning of this year. According to Cushman & Wakefield's latest research report, New York's Fifth Avenue is the world's most expensive shopping district, and Prada previously had to pay more than $22 million in annual rent for the store. The U.S. market has been an underperforming market. In the first nine months of the year, the group's sales in the U.S. were **13%, with double-digit growth in Asia Pacific, Japan and Europe. In fact, this is not the first time Prada has acquired a property. In 2019, the group acquired ownership of four Milan stores from the founder's family business, including the Galleria Emanuele II, which opened in 1913The more sluggish the global retail environment, the better the time for luxury brands to buy real estate. With the real estate market declining, many landlords will actively seek buyers in order to alleviate the problem of cash flow, and luxury brands will often be willing to take the opportunity to buy core business district buildings to avoid the continuation of costs such as rent and management fees**. Another luxury brand, Chanel, also made a move to acquire properties at the beginning of the pandemic in 2020 for about 3£100 million** acquisition of the property rights of London's New Bond Street***, which was once its largest store in the world. Coincidentally, LV boss Bernard Arnault has also been buying real estate in recent years, buying a building on the Champs-Élysées in Paris earlier this month at a cost of about 1 billion pounds, or about 550,000 euros. The building is located on the upper right side of the Champs-Élysées, next to Cartier***, 100 meters from the Arc de Triomphe. Bernard Arnault also spent 7The 700 million euro purchase of the LV Champs-Élysées *** building is less than six months after the transaction. He is also considering opening a new LV store and the first LV hotel at 103 Champs-Elysées, which is owned by Qatar**. In February this year, Kering spent about 300 million euros to acquire four buildings at 12-14 rue de Castiglione in Paris for the construction of the new Gucci Super ***, and then acquired the former Canadian embassy at 35 Avenue Montaigne to build a Saint Laurent boutique opposite Dior's headquarters. According to incomplete statistics, LVMH and Kering spent about 2.4 billion euros on real estate in the past year, with the aim of consolidating their leading position by acquiring boutiques and headquarters. Some industry insiders believe that as stores in core business districts have become an important part of brand equity, the acquisition of the building can allow Prada to better grasp the initiative, and it is also a signal that the brand continues to bet on the US market. U.S. retail sales unexpectedly rebounded to their highest level since April 2022 in November, despite problems with declining household savings and deteriorating credit conditions. U.S. consumer confidence also rose by the most since early 2021 in December, rising to 110 from a revised 101 in November7。Chief economist Dana Peterson said this reflected a less pessimistic outlook for business, the labour market and personal income for the current and next six months. UBS analysts also believe that there are still long-term growth opportunities for the luxury industry in the United States, and it is expected to resume growth as soon as the second half of next yearAt the same time, Prada is also confident in the Chinese market. Gianfranco D., CEO of the brand'Attis said in an earlier interview that the company aims to double its business in China in the medium term, which means that the corresponding investment will increase, including opening larger stores, launching more localized products and holding more marketing activities. It should be noted that the purpose behind the acquisition of the store building is to avoid risks, and from another point of view, it also means that the industry is facing downside risks, and the industry's expectations for the future development of luxury consumption are not optimistic. Bain & Company said global luxury sales are unlikely to grow significantly in the fourth quarter as global consumers become more cautious about spending on shopping, and global sales of personal apparel, accessories and beauty products are likely to be flat from the same period last year, down 3% at current exchange rates. Overall, affluent people are becoming cautious. According to a report released by consulting firm Agility Research & Strategy, optimism among high-net-worth individuals has waned over the past six months since April, with more than 600 millionaire upstarts admitting that real estate and financial markets are not performing well, affecting future luxury shopping decisions. Although Prada was confident in the growth of the fourth quarter and full year of this year, it was not recognized by the capital market. As of Thursday**, Prada's share price ** exceeded 1%, and the cumulative share price in the past six months was nearly 14%, with the latest market capitalization of HK$113.8 billion.