Luxury Retailers Are Buying Out Their Landlords

Luxury retailers, flush with cash, are spending big on real estate in the world’s most expensive and exclusive shopping corridors.

In New York City, Prada recently agreed to buy the building that houses its Fifth Avenue store as well as the building next door for more than $800 million. Gucci’s parent company, Kering, is also paying nearly $1 billion for a 115,000-square-foot retail space a few blocks south.

Luxury behemoth LVMH Moët Hennessy Louis Vuitton , meanwhile, is in discussions to purchase the Fifth Avenue retail space occupied by Bergdorf Goodman’s men’s store, according to a person familiar with the matter.

This activity follows a flurry of purchases in Europe, where high-end retailers have snapped up real estate on high streets including Avenue Montaigne in Paris and London’s New Bond Street in recent years.

Luxury’s real-estate shopping spree shows that retailers are using their considerable cash to free themselves from the control of landlords and plant their flags on streets where they want a long-term presence.

“The rents that the luxury retailers were paying on Fifth and in other prime locations were simply astronomical,” said Eric Menkes , co-chair of leasing for the New York-based law firm Adler & Stachenfeld. “There comes a point in time when these retailers looked in the mirror and said, ‘Why am I making my landlord rich?’”

Retail rents on upper Fifth Avenue haven’t surpassed pre pandemic levels, but they averaged $2,000 a square foot over the past year, making the corridor the most expensive retail destination in the world, according to real-estate firm Cushman & Wakefield.

High-end retailers renewing their leases are often subject to the biggest rent increases, because they don’t want to leave well-known, successful addresses and pay for expensive build-outs at new stores.

“You don’t want to give up that location,” Menkes said. “And your landlord knows that.”

While the most recent eye-catching deals have been signed in New York and Europe, luxury companies are also buying buildings elsewhere. The French fashion house Chanel paid $63 million for a building on Post Street in San Francisco in 2021, the same year LVMH bought a hotel in Beverly Hills.

Chanel selectively acquires real estate “to protect its long-term presence in key cities around the world, and secure prime locations for luxury retail,” a spokesperson said.

While real-estate purchases so far appear concentrated in the most exclusive shopping corridors, luxury retailers are also signing leases in new markets and for bigger footprints to accommodate their swelling collections as well as new offerings such as restaurants and bars.

A surge in shopping for luxury goods powered the world’s largest luxury retailers to record profits in recent years. Sales growth has since slowed, but LVMH, which owns 75 brands including Dior and Hennessy, still reported nearly $94 billion in sales in 2023, beating analysts’ forecasts and sending the company’s stock price soaring in European trading .

“The premium luxury groups have so much cash on their balance sheet,” said Eric Le Goff , vice chairman and head of luxury for the brokerage Retail by Mona. For companies not contemplating acquisitions, “why not deploy the cash into real estate where you know you’re going to be there, hopefully for the next 100 years?”

In addition to cash, well-performing retailers have the option of floating corporate bonds to pay for their real-estate purchases at a lower rate than the traditional real-estate investor could get for a bank mortgage, according to Will Silverman , a managing director at Eastdil Secured, a real-estate investment-banking firm.

“The spread between where they can borrow and where a traditional real-estate investor can borrow, might be several percentage points apart,” Silverman said. That spread has never been wider in memory, he added.

This dynamic could mean luxury retailers are competing mainly against each other for real estate at the most desirable locations.

Luxury companies tend to cluster, so once one deal is signed, “usually that causes others to all jump in and want to be in the market, which then causes demand to increase and prices to rise,” said Andrew Goldberg , vice chairman at real-estate brokerage CBRE.

One of Burleigh Heads’ most architecturally significant penthouses has hit the market for the first time since its completion five years ago.

The listing provides the first real look inside the two-level penthouse crowning Norfolk, Forme’s award-winning Goodwin Terrace development which was completed in 2021.

The penthouse sold off the plan for $5.35 million around 18 months before construction was completed and has remained tightly held ever since, meaning its resale offers the first insight inside one of Burleigh’s most architecturally impressive apartment buildings.

The four-bedroom residence spans approximately 461 sqm, comprising 276 sqm of internal living and a further 185 sqm of outdoor space across its two levels.

Its position on Goodwin Terrace gives the penthouse one of the Gold Coast’s comparatively rare true north-to-water aspects, with views stretching from Burleigh Headland along the coastline towards the towers of Surfers Paradise. Floor-to-ceiling glazing has been used extensively throughout the residence, framing the ocean outlook from almost every principal living space.

Forme, led by Managing Director David Calvisi, acquired the prime 1,012 sqm site, formerly home to The Fish House restaurant, before developing Norfolk as the first new multi-residential project delivered on Goodwin Terrace in around three decades.

The strength of the location was clear. The more unusual proposition was the building itself.

Forme appointed Koichi Takada Architects to design the 10-level development, marking the practice’s first Gold Coast building. Rather than treating Norfolk’s beachfront setting as a backdrop, Takada used the Norfolk Island pines along the foreshore as the basis for the architecture.

Curved balcony slabs and horizontal battens create the building’s distinctive layered exterior. Sliding timber screens can be repositioned for privacy, shade and protection from the coastal conditions, continuously changing the appearance of the façade.

Takada has compared the concept to the structure of a pinecone, whose overlapping layers open and close according to environmental conditions. In an earlier account of the project, the architect said the objective was to celebrate the site and create a stronger connection between the residences and the elements outside.

The response helped turn Norfolk into an architectural marker for Burleigh’s transformation.

Norfolk comprises 12 half-floor apartments, two dual-level penthouses and one two-level beach house. MIM Design created the interiors, Hutchinson Builders undertook construction and Plus Architecture supplied documentation services for the builder.

Inside Residence 901, MIM Design’s restrained palette brings together timber, natural stone and tailored joinery without competing with the outlook. Travertine surfaces have subsequently received paint-protection film, while the home is being offered with a custom furniture package.

A private lift opens directly into the main living level. Living, dining and media spaces are arranged along the view, accompanied by a concealed bar and a broad north-eastern terrace.

The kitchen has an oversized stone island, European appliances and bespoke cabinetry, supported by a butler’s pantry and separate scullery. An integrated RTI system controls lighting, climate, fans, security, entertainment and audio using in-home touchscreens or a smartphone application.

The principal suite occupies a private wing with ocean views, a dressing room and ensuite. Two additional bedrooms have their own ensuites, while a fourth bedroom can operate as an executive study. A concealed Murphy bed allows that room to accommodate guests when required.

The rooftop is what moves the residence beyond even a generously proportioned beachfront apartment.

Reserved exclusively for the penthouse, it contains a heated lap pool, landscaped gardens, several entertaining areas and an alfresco kitchen with a built-in barbecue. An integrated outdoor cinema allows the rooftop to function as an open-air screening room above the Pacific.

Four side-by-side secure car spaces, dedicated electric-vehicle charging and private storage address practical constraints often encountered by prestige-apartment buyers. The parking allocation is particularly relevant for owners moving from a large house or maintaining a car collection.

Norfolk’s wider amenities include a beach-club-style residents’ area, swimming pool, gymnasium and sauna. Burleigh Beach is directly opposite, while James Street, Burleigh Head National Park and restaurants including Rick Shores and The Tropic are within walking distance.

The building’s reputation has also moved well beyond its beachfront address. Norfolk received both jury and popular-choice honours in the mid-rise multi-unit housing category at the 2022 Architizer A+Awards. It won a Queensland Australian Institute of Architects award for multiple housing and was named the 2022 Medium-Density Residential Development of the Year by The Urban Developer. Further recognition came from the Master Builders awards and Architecture MasterPrize.

Calvisi later said the aim with Norfolk was to produce something the Gold Coast had not previously seen.

The penthouse is being marketed through expressions of interest by Dean Pegoraro of Whitefox Gold Coast.

Luxury Retailers Are Buying Out Their Landlords

A two-level penthouse atop Burleigh Heads’ award-winning Norfolk development has hit the market for the first time, offering sweeping ocean views and a private rooftop pool.