Australia Seeing Largest Ever Influx Of New Luxury Brands

Australia offers significant opportunities for luxury retailers at a time when the Asian market is reaching saturation point.

This is one of the conclusions from a new CBRE report, The Future of Luxury Retail in Asia Pacific: New Demand Drivers and Shifting Occupier Requirements.

Most major luxury retailers are now well established in Asia Pacific with China and Hong Kong being two of the most penetrated markets at 89% and 81%, respectively. However, following several years of rapid expansion, these markets are approaching saturation point and several luxury brands have halted expansion amid sluggish sales.

Conversely, the penetration rate of luxury retail in Australia is just 50% - primarily due to the dominance of department stores in this segment of the market.

However, the tide is shifting, as luxury brands launch stand-alone stores in Australia to exert stronger control over their business operations and brand.

In 2014, a total of 16 luxury retailers entered Australia or opened their first stand-alone store in five cities - double the total in 2012 and 2013 combined.

"Australia, unlike much of Asia, is far from saturation point in terms of luxury retailing," said Tim Starling, Head of Retail Tenant Representation Australia.

"At present we are witnessing the largest influx of new luxury brands in the country's history. This is coming from two distinct sectors, with fashion/ready to wear and jewellery retailers being the most inquisitive."Mr Starling said the inquiry was being driven by larger groups such as LVMH, Kering Group and Richemont, however brands such as Valentino and Moncler also had Australia on the radar.

"Another trend we are witnessing involves brands being more willing to seek space in shopping centre environments," Mr Starling said.

"This was previously a 'no no' for many of the new brands looking to enter the market. However, new development activity is giving landlords the ability to create successful 'luxury quarters', with Chadstone in Melbourne being the best example of this in Australia."

Penetration of Luxury Retailers in Asia

Emergence of Affordable Luxury

Often referred to as bridge brands, affordable luxury retailers, for example Michael Kors - provide high quality branded goods at lower price tags than top-tier luxury retailers. Several top-tier luxury brands are already so well established in the region that they are at risk of over exposure, a trend which is prompting many consumers to look for differentiation. Mr Palmer said affordable luxury brands were increasingly targeting Australia, including the likes of Kate Spade, Michael Kors, Coach, Furla, with Tory Burch expected to open in Australia in the not too distant future.