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French luxury retail market: a rather resilient market

Highlights :

-In France, the tourism industry improved at the end of the year after a sharp slowdown in the second and third quarters

- An overall steady pace in openings with 57 openings (61 in 2015), of which more than 50% are creations or newcomers

- A significant slowdown in signatures around 40%

- Paris remains attractive : the French capital represents more than ¾ of the operations identified

- Fashion is still the most dynamic segment in terms of openings

Paris, 19th April, 2017

Highly dependent on wealth and tourism indicators, the luxury retail sector has been shaken by the global economic and geopolitics challenges of the year, according to the latest publication of Cushman & Wakefield.

A temporarily affected image of France

Paris recorded a significant decline in its touristic activity, with a 12% fall in international arrivals in 2016. As privileged targets of luxury stores, Japanese, Russian and Chinese tourists have ignored the French capital during the 2nd and 3rd quarter with more than 30% fewer arrivals in Paris. The impact on Paris retail activity was thus significant, given the majority of the "shopping" item in their budget. However, the figures of the end of the year seem to be optimistic, suggesting that this slowdown was temporary.  

Openings still active:

The analysis of luxury retail openings confirms that the level of openings was maintained at a steady rate in 2016. Totaling 57 openings, of which more than 80% are located in Paris, the luxury industry confirms its appetite for the major streets of the French capital. The Rue Saint-Honoré clearly stands out with more than a quarter of openings listed in Paris over the year.

“We are seeing a dramatic change in this street, which has seen a rapid rise in the range in a short time, to become finally the place to be for international brands. Here, creations and new brands represent more than 60% of the operations of the street. This metamorphosis is even more surprising in the case of a mature market such as Paris”, adds Vincent Ascher, Head of Luxury retail at Cushman & Wakefield

The “location” effect remains a major requirement for the implantation of luxury brands, as shown by the attractiveness of the Avenue Montaigne or the Rue du Faubourg Saint-Honoré, and more recently the rue des Archives in Le Marais which is being consolidated.

Stimulated by a limited supply, rental values follow the attractiveness of the streets, rising on the sought after streets such as the Rue Saint-Honoré and remaining stable on the more consolidated streets of the Paris market. They reach 13,000 € / m² ZA for the best locations.

Decline in commitments:

In a context of geopolitical uncertainty, the luxury industry is preparing to be resilient in the coming months. Indeed, taking into account the sharp slowdown in commitments in 2016 with a significant impact on the number of future openings, the time is now for recovery like a pendulum, as the final figures of 2016 announce the comeback of customers to luxury retail trade.

Full report available upon request