by Brianna Crandall — December 26, 2014—In the United States, five major cities—New York, Chicago, Las Vegas, Miami and San Francisco—have risen to the top of the list for luxury storefronts, according to a new report from global commercial real estate services firm JLL. The report, which debuted at the International Council of Shopping Centers’ (ICSC) recent conference, tracks the expansion of 350 retailers across the United States and assesses the vitality and attractiveness of retail markets, examining why the classic real estate principle of “location, location, location” remains essential to the success of brands.
The New World of Retail report indicates that while core metro areas ranked at the top of the list of preferred locations, they exhibit slower growth momentum compared to secondary cities. Several emerging retail markets like Dallas, Houston and Orlando possess the attributes for longer-term success driven by ongoing population and income growth.
“Luxury goods embody elegance and acute attention to detail, and the storefronts and locations that encapsulate these treasures must be as unique as the goods themselves,” said Michael Hirschfeld, Senior Vice President of JLL Retail. “The retail elite typically flock to core cities where they tailor service and product mix to shoppers, but many of these metros are saturated, and that’s pushing expansion in secondary cities.”
According to JLL’s report, luxury retailers continue to perform extremely well, having experienced double-digit increases in sales revenue in the last few years as their clientele was minimally affected by the economic upheaval. The affluent customer segment, which represents the top 20 percent of U.S. consumers who earn more than $100,000 annually, only accounts for one-fifth of the population, but 40 percent of all consumer spending. Last year, luxury retailers located in New York, San Francisco, Miami, Los Angeles and Honolulu recorded the highest sales per square foot.
“Luxury customers spend twice as much as the average consumer, which is pushing the segment to prescriptively look at securing the right physical location,” added Greg Maloney, Americas CEO of JLL Retail. “High-street storefronts are typically where luxury retailers make their market foray; however, the availability for flagship space remains short. Increasingly, brands are seeking additional space in core markets and turning to malls and outlet centers, which offer a strategic merchandising mix that creates strong synergies to drive sales.”
While the United States is not a developing country with fast-track growth, its stability provides a safe haven for brands that cannot be matched, according to the report. The United States continues to be the market of choice for luxury expansion because of the strong population growth, the variety and size of its markets and the influence of the Millennial generation creating demand for innovation in retail concepts. Luxury retailers will reportedly continue to eye opportunities in the historically strong and most well-known markets, like Manhattan, but also follow the robust population growth and housing market.
JLL’s The New World of Retail index ranks the top U.S. retail markets based on a combination of short-term variables and sustainable long-term characteristics including household income growth, the number of total retailers, rental rates, vacancy levels, gross leasable area, and the balance of supply and demand. To learn more about each city ranking download the full report upon brief registration on the JLL Web site.
