The companies in the Luxury sector

The companiesin the Luxury sector

2020 Sector 2020 Sector reportreport

2 | The luxury sector

SUMMARY

Study scope• Activities, companies and range

levels• Global market: a few key figures

• Sector challenges• Changing clientèle• More responsible consumption,

a desire for longer-lasting goods

Real estate trends• Company locations• Focus on transactions concerning

more than 5,000m2

• Focus on the interior design of service areas

Case study: Luxury brands• Maintaining the head office• Transferring the head office• Site grouping• Extension of the head office

Colliers International & youOur response to your challenges• A full service offer to meet

your needs• Our references• Contacts

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What are the real estate trends of the luxury goods industry?

France remains the leader of the globalised luxury goods market. Although supported by strong expansion, notably throughout Asia, the sector’s companies are still affected by a number of demographic, ecological and numeric mutations, each with its own challenges. Regardless of their range (premium, luxury or ultra-luxury), the brands must contend with changes in their clientèle and consumption methods, forcing them to innovate while remaining true to their DNA.

In terms of real estate, luxury company locations must reflect their brand image through emblematic locations and buildings.

Find out more about the latest trends in the luxury industry, in terms of movements, service site locations and work environments, in this study based on a number of case studies.

The luxury sector | 3


PREMIUM LUXURY

LUXURY

ULTRA-LUXURY

* Luxury goods are defined as being non-basic consumer goods with a large element of creativity and handcrafting.

Production volumes

Sale

s pr

ice

-

-

+

+

Study scope

Other luxury goods (outside scope)

Luxury hotels

Luxury real estate

Wines and spirits

Luxury cars

Luxury boats and aircraft

Luxury restaurantsand food

Art, collectibles

Other luxury services

Personal luxury goods(clothing, watches and jewellery, beauty, accessories, other)

Luxury* sphere

Activities, companies and range levels

0

100

200 186

2011

207

2012

212

2013

219

2014

244

2016

245

2015

254

2017

167

2010

262

2018

281

2019Estimation


A market exhibiting strong growth

Global market: a few key figures

23%Clothing

34%Accessories

22%Watches Jewellery

21%Beauty

Turnover distribution

by sector 2018

Among the top 100 global corporations in the luxury sector on the list published by Deloitte (Global Powers of Luxury Goods, 2018), France remains a leader of the luxury industry with 9 players listed, including LVMH (1), Kering (4), L’Oréal (7) and Hermès (11), known as "KHOL" on the international stage, the equivalent of Tech Giants of the digital sector.

Global turnover in the personal luxury goods segment represented €281 billion in 2019. With +62% growth since 2010, this positive trend is expected to continue over the next three years, with a 4-5% annual increase, according to the study by Bain & Company.

Leading French players

Turnover for personal luxury goods (€ billion) Source: Bain & Company - 2018

Source: Bain & Company - 2018


2017 RANKING COMPANY COUNTRY 2017 TURNOVER

1 LVMH France 27.99

2 The Estée Lauder Cie Inc. USA 13.68

3 Cie Financière Richemont Switzerland 12.81

4 Kering France 12.16

5 Luxottica Group Italy 10.32

6 Chanel Limited* UK 9.62

7 L’Oréal Luxe France 9.55

8 The Swatch Group Switzerland 7.82

9 Chow Tai Fook Jewellery Group Limited China (H-K) 7.57

10 PVH Corp. USA 7.35

Source: Deloitte - 2019

* Chanel Limited entered the top ten following simplification and rationalization of the group’s structure into a single entity.

The top ten global corporationsClassed according to 2017 turnover in USD $ billion

Changing clientèle

Sector challenges


By 2025, Chinese customers are expected to represent 85% of new consumers, owing to the emergence of a middle class with rising income, and its own age-related consumer habits.

These Asian millennials differ from their Western counterparts in their consumption of luxury goods. More loyal to brands, they are looking for quality above all else. In spite of being highly connected, they remain deeply attached to physical stores.

The commercial strategy of luxury professionals is evolving to become more offensive. The goal is to diversify their offer to attract new customers without diluting the brand’s essence to ensure the loyalty of their core market.

The brands are implementing integrated development policies, notably by purchasing service providers (external growth) or extending towards new derived products.

Growth in Asia

Brand diversification

Demographic evolution

The luxury market has reached the mature stage in France and Europe. The proportion of new Y (millennials) and Z generation customers is increasing, and they are operating a profound transformation of consumption habits in this market.

Their new expectations concern the concept of "experience" and are less related to actual possession of the goods. Above all, they are seeking "singularity" through luxury and want recognition for their preferences, whether these are cultural or morphological.

Challenges

• Being in phase with customer expectations: immediacy, experience, quality, singularity.

• Diversifying their activities and proposing new products.

• Gaining new customers.

Impacts

• “Product” luxury is turning into “experience” luxury.

• Cultures and sub-cultures will be replacing consumption trends.

• Luxury is becoming more"casual" and turning towards streetwear.

• The leading luxury brands are developing outside Europe, for example, by manufacturing in China for the Chinese market.

+30%

Chin

a

Japa

n

Oth

er A

sia

Amer

icas

Euro

pe

+2%+5%

+9%+11%

0%

10%

20%

30%


Source: Bain & Company - 2019

Evolution of annual turnover between 2018 and 2019 by major geographic region

Challenges

• Developing CRM and customer relations strategies.

• Diversifying communication and consumption channels..

Impacts

• Recruiting web marketing,innovation and datamanagement professionals:Innovation Director, DigitalBrand Heritage, CustomerExperience.

• Developing partnershipsbetween on-line and physicalboutiques: from “point ofsale” to "point of contact"with customers.



Towards the digital transformation:bricks & clicks

Changing strategy

On-line sales increase by more than 20% each year and are expected to account for 40% of growth in this market in the coming years. Customers are tending to seek information first and digital technology offers a way around the barriers, which can be intimidating, of making a purchase in a luxury store.

The boundaries between on-line and physical stores are becoming increasingly blurred, to the point of proposing partnership operations with major retailers to sell part of a collection exclusively for a limited period of time.

The luxury brands communicate to win new on-line customers and gain their loyalty by deploying a personalised approach, processing data and using social networks and influencers.

Luxury goods companies are entering the era of Digital Customer Relations, which consists in proposing "high end” service quality via their on-line platforms (product personalisation, fast delivery, verification of in-store availability, geolocation of delivery services, in-store appointment scheduling, or teams of advisers and stylists).

Birth of a digital strategy


More responsible consumption,a desire for longer-lasting goods

A new driver of excellence

Emergence of a second-hand goods market

Turning old into new

According to the study conducted in 2018 by Bain & Company, 94% of customers believe that luxury brands should be more committed to environmental issues; this demand is even stronger than for other industries.

The brands have understood this growing demand from their consumers. Sustainable development concerns are thus altering an entire eco-system, from suppliers to final consumers, in terms of R&D as well as product impact.

New businesses and services are being developed to extend the life of luxury goods, notably via rental services or second-hand sales.

In 2018, the second-hand luxury goods market boomed, thanks to major growth in Europe, and the strong growth of specialised on-line platforms. Jewellery and watches are the top categories of this second-hand market.

Among the giants of the luxury industry, upcycling, or recycling into higher quality products, is attracting the attention of brands such as Guerlain, where handbags and other accessories are manufactured from tarpaulins and advertising banners.

However, upcycling also involves reusing ordinary goods (plastic bags, wire coat hangers).

"Turning old into new" could be a lever of future growth for luxury brands seeking to attract new generations of proactive consumers.


Challenges

• Winning new markets.

• Responding to the environmental concerns of the Y and Z generations.

• Manufacturing differently, locally, ethically.

Impacts

• Appearance of new businesses and segments in the luxury goods market.


Real estate trends

Company locations

Concentrated in Paris

Head offices are mostly located in the Paris QCA business district, with a shift to inner suburbs, specifically to Neuilly-Levallois 1 , for larger, higher quality premises (new/restructuring projects).

Declining presence on Paris’ Rive Gauche (southern Paris) 3 is to be noted, except for a handful of big names, such as Yves-St-Laurent or Moët-Hennessy (Paris 7), acting as the pioneers of a new centre for luxury.

Map of luxury industry service sites (head offices, workshops, R&D, etc.)Establishments with more than 30 employees identified as non-retail “luxury” activitiesSource: SIRENE 01/01/2019 listing

Paris QCA: prestigious Parisian addresses

Sectors on the outskirts related to luxury brands: head offices or secondary addresses

Paris1 2

3

169

1

17

64

311

10

Charenton-le-Pont

Courbevoie

Neuilly-sur- Seine

Pantin

Bobigny

2

8


Map of the corporate headquarters of the main players of the world’s Top 20 luxury brands present in France

In France, the leading luxury groups mainly have Paris addresses for their international headquarters, closely linked to their brand strategy and image. However, they may also have secondary service or production sites in the suburbs, being less symbolic.

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3

4

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67

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Location of corporate headquarters


A long-standing history of presence in the suburbs

Sectors emerging in the suburbs, in areas such as Neuilly/Levallois/Clichy/Saint-Ouen/ Asnières 1 to the west due to historic installations like L’Oréal and Chanel.

When Louis Vuitton preserved a secondary site (malletier) in this sector, the L’Oréal group intensified its presence in the western suburbs, making the most of the large areas available, and developed the equivalent of a campus.

In the eastern suburbs, the Pantin/Bobigny/Le-Pré-Saint-Gervais/Aubervilliers 2 sector operates over a grid of historic locations of luxury manufacturers (Cartier, Chanel), proposing large premises and plots of land. Similarly, Manufacture de la Mode, a 20,000m² industrial site in Aubervilliers, will be grouping together the entities of Chanel’s Paraffection subsidiary, currently divided among a number of sites in Paris, Pantin and Aubervilliers.

YSL, Paris 7: Abbaye de Penthémont

The luxury sector | 17Chanel, Aubervilliers : Manufacture de la Mode


Between 2004 and 2019, 32 large transactions were recorded in the Luxury goods/Cosmetics sector in Île-de-France, representing a volume of more than 370,000m².

Most of the transactions (84%) concerned surface areas between 5,000m² and 20,000m². Over the period in question, five transactions concerning more than 20,000m² (16%) were recorded. These transactions were related to major site grouping projects, for groups such as Christian Dior Parfums or L’Oréal.

The activity peak observed in 2014 was due to two transactions involving more than +20,000m² and one 13,500m² transaction for L’Oréal (site grouping in Levallois-Perret and extension in Clichy).

56%Between 5,000 and 10,000m2

16%More than 20,000m2

Focus on transactions concerning more than 5,000m

40.000 m²

60.000 m²

80.000 m²

20.000 m²

Distribution by transaction size

(number - from 2004 to 2019)

2005 20192015 20172009 201320112007

0 0

2

4 5

1

0

1

3

2

1

2

3

4

1

3

Take-up > 5,000m2 (in m² and number of transactions)Source: Colliers International France

Source: Colliers International France


Contract type

(number - from 2004 to 2019)

87%Rental

13%Acquisition

Paris and the Croissant Ouest area have been the preferred locations of the companies in this sector since 2004. In Paris, the largest movements concerned the Paris QCA business district and the Neuilly-Levallois in the Croissant Ouest area, involving very large surface areas (> 20,000m²).

Among the 11 transactions since 2011, 80% were endogenous transactions - i.e. involving surface areas within the same geographic sector as the initial location.

Most transactions in Île-de-France were rentals (87%). 13% of companies in this sector opt to buy their premises, which is in line with the average for large surface area transactions considering all sectors for the period indicated, also 13%.

Movement locations(number -

from 2004 to 2019)

42%Paris QCA

23%CroissantOuest

16%Paris

(not QCA)

16%Inner suburbs

3%Outer suburbs




Focus on the last 15 major transactions

Yves St-LaurentParis 8Paris 7Abbaye de Penthémont9,180 m²Rental

1F

T

F

T

F

T

T

F

T

F

T

F

T

T

T

T

T

F

T

T

T

T

2 SisleyParis 83-5 Av. de Friedland10,247 m²Purchase

3 ChanelParis 139-41 Rue Cambon16,860 m²Purchase

10 Moët-HennessyParis 724 Rue de Sèvres7,385 m²Rental

12 HermèsLe Pré Saint-GervaisCanopy6,283 m²Rental

15 HermèsParis 8HIGHT8 rue de Penthièvre8,159 m²Rental

11 ChaumetParis 1Paris 879-81 Bvd. Haussmann5,323 m²Rental

4 Bpi - ShiseidoParis 1 - Paris 16Paris 8Carré Saint-Honoré7,384 m²Rental

5 SephoraBoulogne-BillancourtNeuilly-sur-Seine41 Rue Ybry13,413 m²Rental

6 BalmainParis 852 Rue d’Anjou5,017 m²Rental

2015 2016 2017 2018 2019

9 ChanelParis 852 Av. des Champs Elysées7,232 m²Rental

8 Christian DiorParfumsParis 8 - LevalloisNeuilly-sur-SeineKosmo23,901 m²Rental

7 CotyParis 2Paris 1Metropolitan6,510 m²Rental

14 LVMHParis 8Bayard Seine7,335 m²Rental

13 ChanelParis 9Paris 9Cambon Madeleine12,012 m²Purchase


Unlisted companies held by a family shareholding generally prefer to buy, like Sisley, owned by the Ornano family, and Chanel, owned by the Wertheimer brothers. This often means owning the head office but renting less strategic properties.

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1

2

3

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6

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F

T

Transfer

ND

Movement

Site grouping

From (initial address)To (destination)

7


1

2

9 10

11

15

16

17 18

3

4

5

67

8

Levallois-Perret

Neuilly-sur-Seine

Boulogne-Billancourt

19

14

13

12

Average, low density service surface areas in the Luxury sector(m² expressed in rental surface area)


Focus on the interior design of service areas*

Recent projects in the luxury sector implemented by Colliers illustrate the current trends for service areas organised as open areas with dedicated workstations (61%).

Over-representation of shared offices compared with all Colliers projects (26% for the luxury sector compared with 18% for all sectors) suggests a changing business sector in terms of office interior design.

The interior design of the offices of luxury goods companies is an opportunity to show off their innovation ambitions and constitutes a showcase in an increasingly digitalised sector.

26%Shared offices(partitioned areas containing 2-8 workstations)

61%Open space offices(non-partitioned areas, with open passages, containing a large number of workstations)

13%Individual offices

(partitioned areas containing a single workstation)

Average for the Luxury

sector

* Ratios calculated from projects conducted by Colliers International France

14.9m²/workstationBanking / Insurance

13.4m²/workstationConsulting / Audit

20.2m²/workstationLawyers/Notaries

19.4m²/workstationPublic sector

16.7m²/

workstationaverage

17.8m²/workstationHealth / Health insurance / Life insurance

Abov

e av

erag

e de

nsity

Belo

w a

vera

ge d

ensi

ty

16.8m²/workstationLuxury

(15%across all sectors)



StockroomStockroom

Events Modular

Hall

G-1

G+1

GF

G+2

G+3

G+4

G+5

G+6

G+7


Interior design simulation for a single-tenant building:specific needs of the “High End” sector

The sector is characterised by a set of specific real estate requirements, essential to its business.

For example, the "product pathway", i.e. the physical route taken by the product from design to marketing including digitalisation, requires specific places

VIP reception areas / Office

Services / Shared areas

Creation studio & photography studio

Open office space / Possible part flex-office

Virtual and physical working & presentation showrooms (accessible by invitation)

Modular area for events: fashion shows (catwalk and removable cloakrooms) for presentation to international networks

Product stocks (hanging storage, boxes)

Car park

Photo-graphy studio

(creation studio, showroom, storage, etc.), each with their own constraints, which must be taken into account as early in the process as possible.

For these companies, design of the work environment therefore includes this notion, as well as that of the more conventional user pathway.

Functional organisationCross-section of the principle diagramSource: Colliers International France


Case studiesLuxury brands

Strategic locations on the outskirts of the capital... and reinforcement of its Parisian DNA

Having restructured its Neuilly head office, the Chanel group opted to lease a new site in Aubervilliers for all its creative professions, to bring these functions closer to the production sites based in Pantin. Chanel also invested in offices at no. 52, Avenue des Champs-Elysées (7,232m²), 19 rue Cambon and in Cambon-Madeleine (12,012m²) above its legendary flagship premises.

• Creation of synergy between the various craft professions within a single structure in the suburbs.

• In terms of Retail, the group’s brands are mainly found at emblematic addresses near Place Vendôme or Place de la Madeleine, such as the historic rue Cambon, with Chanel’s flagship store as well as brands like Goossens, Maison Michel and Barrie.

• Desire to preserve Chanel’s historic DNA in rue Cambon, which was the workshop and private address of its founder, Gabrielle Chanel.

Maintaining the head office

135 avenue Charles de Gaulle in Neuilly

Manufacture de la Mode Chanel in Aubervilliers

Offices and flagship store, rue Cambon, Paris 8

Address135 av. Charles de Gaulle, Neuilly-sur-Seine

Date2008

Surface area20,000m2

PriceN/A

ConditionRenovated

ContractAcquisition

Benefits


• Conservation of a Paris address in a prestigious, sought-after district.

• Kering’s image boosted by the restructuring of a historical monument site. Use of elegance, prestige and heritage to distinguish itself.

• Capitalising on a location that was not previously known for luxury goods, unlike Rive Droite. Pioneering the creation of a new centre for luxury, with its location close to Bon Marché (owned by LVMH), according to an approach similar to that applied in the Retail sector.

• The group’s emblematic brands are also grouped in the Rive Gauche area, including Balenciaga (Laennec site) and Yves Saint Laurent (37-39 rue de Bellechasse, 9,180m² in 2015).

Observation of a counter-movement to create a differential advantage: Rive Gauche as brand territory

Located at no. 10 Avenue Hoche in the 8th arrondissement, Kering chose to remain in central Paris, with a pre-commercialisation lease for 17,200m² with Altarea Cogedim for the site of the former Laennec hospital (previously the Hospice des Incurables) in the 7th arrondissement, moving in in 2014 after more than a years’ work.

Transferring the head office

Laennec ‘‘Paris 7 Rive Gauche’’

YSL, 37-39 rue de Bellechasse, Paris 7

Address"Paris 7 Rive Gauche"40 rue de Sèvres, Paris 7

DateQ2 2012

Surface area17,200 m2

PriceN/A

ConditionRestructured

ContractAcquisition

Benefits


Kosmo, Neuilly-sur-Seine

Bringing teams together and boosting the Group’s image outside Paris

With most of its activities based in the Paris QCA business district (Capital 8, rue de Téhéran and Avenue Hoche) and in the Place de Seine (ex-Upp) building in Levallois-Perret, Christian Dior Parfums opted to leave Paris, leasing 23,900m² in the Kosmo building in Neuilly-sur-Seine, bringing its teams together in 2019, with a professional showroom at the bottom of the building.

• Capitalising on image (between Paris and La Défense, the most beautiful property in Neuilly, with exceptional visibility).

• A sought-after address in the Croissant Ouest district on the outskirts of Paris and on the banks of the Seine.

• New premises to reinforce the LVMH group’s presence in Neuilly (Sephora, Moët).

• Making the most of the restructuring work on the building at the end of 2019 to bring the 1,100 employees of the marketing, digital, packaging-media creation and development functions, supporting functions (IT, HR, finance, purchasing, etc.), and the teams working the French market and Travel Retail Europe together on a single site.

Site grouping

Address192 av. Charles De Gaulle, Neuilly-sur-Seine

DateQ4 2017

Surface area23,901m2

Price€630/m2

ConditionRestructured

ContractRental

Benefits


Le Loft, extension at 41 rue Martre, Clichy

Campus Charles Zviak, Saint-Ouen

Seine 62, Levallois-Perret

• Bringing teams together and encouraging inter-campus collaboration.

• Redynamising the head office and creating an attractive environment.

• Multi Divisions France – Campus So France, Levallois (28,385m²)

• Research & Innovation, Operations – Campus Charles Zviak, Saint-Ouen (35,000m²)

• Selective international divisions – Campus Seine 62, Levallois (38,635m²)

Occupation in campus form in the Clichy / Levallois / Saint-Ouen area

Built from brick and steel, the historic Eugène-Schueller centre rises up from the site of the former Monsavon factory in Clichy-la-Garenne. The employees of L’Oréal’s head office moved there in 1978.

This site is currently being extended, thanks to the purchase of approximately 7,000m² of adjacent buildings, previously owned by Banque de France; the project is due to be delivered in 2020.

L’Oréal also rents three other campuses in the same sector:

Extension of the head office

Address‘‘Centre Eugène Schueller’’ 41 rue Martre, Clichy

Date1978 - extension 2020

Surface area33,500 m2

PriceN/A

ConditionRenovated / New (extension)

ContractAcquisition

Benefits


Colliers International France & youA full service offer

to meet your needs

Lease contract re-negotiationOptimisation of lease contract terms and rental conditions. Definition of the best negotiation levers.Representation in meetings with your landlord.

Site contract terminationNegotiation of conditions for an early release.Search for a replacement / sub-tenant.Negotiation of lease contract termination and restoration costs.

Transaction adviceRental / Purchase / Disposal.Search for new locations.Site grouping.

Real estate strategyAsset enhancement.Occupation optimisation.Reduction of real estate costs.Creation of decision assistance tools.

Stay or LeaveRe-negotiation mission conducted in parallel with the search for an alternative solution to optimise all negotiation levers.

We are also known for our contributions to office design projects. Our Workplace and Project Management teams can assist you with these solutions, from project design to work completion.

Our references


Paris 8 | 2016 | 385m² Aubervilliers | 2018 | 20,000m²

Paris 8 | 2017 | 600m² Neuilly | 2012 | 7,300m²

Neuilly | 2018 | 4,200m²

Levallois | 2018 | 2,000m²

• Mutualisation of meetingrooms with unused office areas(manager)

• Creation of bubbles and emptyspaces for modular installations

• Creation of meeting areasthat did not exist previously(corpoworking or similar)

Achievements

• Assistance with changemanagement

• Assistance with internalcommunication

• Coordination of all external teams• Coordination of the overall IT

project: application, digitalisation,room reservations

• Mutualisation of meeting roomsand unused offices (management)

Methodology

With a view to a future grouping operation for Guerlain’s teams, this mission involved testing new working areas on current sites to analyse and discuss managerial modifications.

Project goals

General contractor• Supervision of work and interior

design as contractor assistant• Interior design of two buildings,

1,200m2 each• Assistance for the "test & learn"

project

Missions conducted

Levallois-PerretDELIVERY March 20191,200m2 x2 | 80 workstations

Rue Erlanger | Paris 16DELIVERY 20151,000m2 | 40 workstations


• Change from a traditionalenvironment to a flex-office

• Creation of an application toreserves rooms and services

• Experience in offices furnishedaccording to Retail area design

• IT innovations: digital wall atreception, wifi and connections

• Leaving Paris for the innersuburbs

Achievements

General contractor: • Project coordination• Assistance with the change to

open, shared office space• Assistance with technological

evolutions: "test & learn” method• Revamping (turning old into new)• Creation of an internal coworking

centre on the 6th floor• Supervision of work (contractor

assistance)• Transfer, Furnishings

Missions conducted

Formerly located in Haussmann-Monceau, Estée Lauder grouped together several of the group’s entities, operating a transfer to new premises in Neuilly-sur-Seine. Designed by Gensler, with all new furnishings, the new offices are highly connected and digital, which also involved Colliers’ assistance with IT issues.

Project goals

Crystal Park | Neuilly S/sDELIVERY 20184,200m2 | 400 workstations

General contractor: • Interior design of a platform• Company transfer

Missions conducted

• Traditional interior design withshared areas and offices

• Closed offices for senior managers• Shared areas (8-10 people), more

suited to the cosmetics sector• Use of high-quality, noble

materials: glass walls, officefurnishings

Achievements

The cosmetics company wanted to move into larger premises, the former site having become too small. This was also an opportunity to change all furnishings, for better quality equipment. By Terry transferred to a single platform, separated by a landing floor and fully refurbished in 2015.

Project goals

Damien GIRARDAssociate Director | Tenant Representation

+33 (0)6 37 69 46 [email protected]

Contacts

Our team Research

Laurence BOUARDHead of the Research Department


Olivier CHANONResearch analyst| Research


Cyrille BERTHETHead of the Tenant Representation department


Our business teamExperts in this field


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The companies in the Luxury sector

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