WHAT IS DRIVING THE LUXURY RETAIL BOOM?

TOP-end retailers, tapped out by a sales growth slowdown in China, have been making their way to Australia in droves, according to a new report.

While luxury retailers have been most active in Melbourne in recent years, the CBRE report says Sydney and the Gold Coast are poised to capture a bigger share thanks to new developments under way. 

They say the latest growth spurt has also been buoyed by willingness by many brands to break with tradition and sign up for retail space in major shopping centres.

The report has revealed luxury retailers have reached saturation point in China and Hong Kong, with market penetration of 89 per cent and 81 per cent respectively.

This compares with 50 per cent market penetration across Australia, largely driven by the domination of department stores Myer and David Jones in the premium goods sector.

CBRE says luxury brands are now fighting back and taking control of their branding In Australia, a move that has led to the largest ever influx of luxury retailers into the domestic market.

Store openings by these brands surged to 16 in 2014, double the rate of growth in 2012 and 2013 combined.

"Australia, unlike much of Asia, is far from saturation point in terms of luxury retailing," says Tim Starling, CBRE's national head of retail tenant representation.

"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."

Among the big-name newcomers leading the charge are LVMH, Kering Group and Richemont, while Valentino and Moncler are also in the frame, he says.

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

"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."

Chadstone is looking to up the ante through a $580 million expansion. However, the Gold Coast is also positioning itself for a piece of the luxury brand influx through the $670 million expansion of Pacific Fair which is currently under way.

Alistair Palmer, CBRE's national director of retail services, says growth in Chinese tourism is supporting the sector.

"Sydney Airport is also establishing a new luxury precinct, with many of the tier one and affordable luxury brands opening in order to capture the Asian tourist market," Palmer says.

CBRE says despite the slowdown in China, three key factors will continue to support growth in the luxury retail market, including the emergence of affordable luxury brands such as Kate Spade and Michael Korrs, and the rise of luxury children's wear.

CBRE says many luxury retailers are also combining food and beverage offerings within stand-alone stores, lifting the shopping experience to a new level.

In Seoul, Christian Dior's flagship store this year opened Cafe Dior by Pierre Hermé. The 'haute patisserie' offering is located on the top floor of the brand's new six-level boutique which features a curved façade that many have likened to flowing fabric.

"Including a food and beverage component in stores enables luxury retailers to provide their consumers with a more complete experience in which they can shop, relax and socialize," says Palmer.