There is a market for luxury goods in Luxembourg and customers can be seen queuing outside high-end stores as coronavirus measures set limits on the number of customers in shops.
Watchmaker Omega only a few days ago opened a flagship store at the corner of Rue Philippe II and the Grand-Rue, a first in the Benelux for the Swiss brand, which has only 12 points of sale of this type in the world.
Also on Rue Philippe II, the Hermès boutique is currently undergoing a makeover, confirming it will stay in the capital, while a few meters away, Louis Vuitton last November upgraded its space by moving to the old Bonn Frères furniture store.
"Luxury is doing well, and demand emanates from this sector; we will not stop seeing luxury boutiques opening in the coming months," says Virginie Chambon, retail director at Impakt SA. Three new premium brands are preparing to open by June, according to Chambon: clothing brand Brunello Cucinelli will move into premises on Rue Philippe II left vacant by the departure of Tango to the Royal-Hamilius centre; jeweler Messika will settle next to Louis Vuitton, in direction of Place d'Armes; and multi-brand fashion store Saint-Joseph is expected at the bottom of Rue Philippe II, in place of the former Marc Jacobs store on the corner of Rue Notre Dame.
Waiting for the right tenant
"The arrival of Brunello Cucinelli is a good signal that we are sending to the market: luxury is there, and it is diversifying. It is not only the big brands of the LVMH, Richemont and Kering groups," says Chambon, adding that "jewelry and watchmaking is a luxury segment which continues to do well despite the health crisis."
This trend can also be observed in shopping centers, such as the opening of Swiss multi-brand jewellery and timepiece store Les Ambassadeurs at the Cloche d'Or and the recent extension of Windeshausen at the City Concorde.
“We are in a segment where we can enter shopping centres with a fairly high-end positioning," says Dimitri Collignon, head of retail at JLL. Luxury brands are keeping commercial rents at a high level, he says, at around €150/month/m2 excluding VAT on prime locations. "All these 'prime' pitches do not lose value," says Collignon, adding that "these rental values, maintained at around €150/m2, somewhat reassure owners in their position of waiting for the right tenant to maintain a very high rent.”
Pandemic impact
The roughly 20 shops standing empty in Grand-Rue and Rue Philippe II, however, are only of limited interest for international luxury brands as they are fairly small. Exceptions include the former Pull & Bear site, currently a pop-up-store, and the soon-to-be-empty Zara premises.
“A few occupants have emerged, but I think that the problem of rent will arise: large tenants are very rare, often active in the fashion segment, which is currently experiencing difficulties, or in sport, whose margins don’t allow paying this level of rent. In my view, the solution lies in a partnership between occupants and owners, such as ‘turnover rent’,” says Chambon, referring to flexible rent set based on a shop’s turnover.
It remains to be seen, however, if owners will play along with such schemes. Dimitri Collignon fears that the end of pandemic restrictions will give landlords the impression that things can continue just as before the crisis.
But while high-end brands have been willing to pay higher rent, this is in return for high visibility and customer footfall. With tourism weakened by the crisis and concerns over profitability, brands will think twice before signing up for expensive real estate, likely to leave many shops in the capital standing empty in the shadow of the luxury flagships.
This story was first published on Paperjam and has been translated and edited for Delano.