Australia’s luxury market set to grow further

According to CBRE, large international brands from Europe and North America are looking to gain a foothold on the country’s eastern seaboard, setting-up shop in Australian capital cities.

“Retailers have a positive outlook in 2016 and 2017, with growth to be centred on the eastern seaboard as global brands move to expand their presence in Australia, targeting core locations such as Sydney, Melbourne and Brisbane,” said CBRE’s head of retail brokerage leasing, Leif Olson.

New York’s Elie Tahari, Italy’s Kiton, France’s Goyard and American fashion labels Rag & Bone and James Perse are expected to expand their presence in Australia.

“We are working with all of these retailers who have confirmed their expansion plans for Melbourne and Sydney over the next six to 18 months,” said Olson.

According to CBRE, Australia still has relatively low penetration of the world’s top luxury brands compared with markets such as Hong Kong and Shanghai, which are home to 80 to 90 per cent of the world’s top brands.

“The penetration rate of luxury retail is just 50 per cent – primarily due to the dominance of department stores in this segment of the market,” said CBRE’s head of Victorian retail leasing, Zelman Ainsworth.

Last year, foreign retailers – Cartier, Sephora, Omega and Valentino – opened 40 stores in Sydney, Melbourne, Brisbane and Perth. This compared with 35 openings in 2014, said CBRE.

Additionally, Australia’s tourism boom is contributing to the need for more luxury retail, as more wealthy visitors come to its shores. The number of Chinese visitors to Australia rose 21.6% to 1.0012 million in 2015, and has more than doubled over the past five years, Australian Bureau of Statistics figures show.

According to Tourism Research Australia, Chinese tourists spent $7.7 billion in Australia last year, and annual spending could be worth up to $13 billion by 2020.

CBRE’s Luxury Retail 2015 report found more than half of all Chinese-led luxury purchases are now transacted overseas. Chinese consumers prefer to shop abroad due to more favourable prices and China’s ‘anti-extravagance legislation’.

“Chinese purchasers account for 30% of the luxury spend worldwide and 70% of these purchases take place overseas, showing that the downward shift in their economy has prompted Asian consumers to rethink their purchasing habits,” said Andrew Phipps, Head of Research and Consulting, EMEA, CBRE.

“The advent of the new ’anti-extravagance legislation’ in China and their consumers‘ growing awareness of price differentials of up to 70% has led to many preferring to make their purchases overseas, where the prices are far more attractive,” said Phipps.

The shift in Chinese shopping habits is providing opportunities for luxury brands to grow their presence in Australia. Coupled with a steady political structure and close proximity to Asia, Australia is a target destination for luxury expansion over the next five years.

“Australia is one of the best performing countries for major international retailers,” added Ainsworth.

“Also, the stable political environment and the clear synergies with Asia are further benefits retailers are able to leverage from.”

Cartier store Sydney