London still has the greatest long-term growth potential as a luxury destination compared with other global cities, a new report has claimed.
The report by UK-based property services firm CBRE and luxury association Walpole looked at the potential of a handful of key luxury destinations to determine how London compares with the rest of the world.
It examined three locations in depth – London, New York and Hong Kong – as well as some of the newer luxury destinations, particularly Dubai, through the lens of the retail property market in those cities.
All three of the main cities it covered face challenges: London is gearing up for Brexit; New York is clouded by the uncertainty of the Trump presidency; and Hong Kong is suffering from a fall in tourist numbers.
But the report argues that London is best positioned to grow its luxury market, despite the challenges.
It points out that rents along key luxury shopping street Madison Avenue in New York have started to decline marginally, “suggesting the market is cooling”.
Meanwhile, Hong Kong faces growing competition from other Asian markets, such as Japan, Korea and mainland China, and a drop in the number of tourists from mainland China.
However, in London the drop in the value of the pound following the European Union referendum has led to a spike in international visitors, boosting sales for luxury retailers.
The report also points out that London has an over-arching eco-system to support its luxury market during turbulent times – including 94 five-star hotels, 65 Michelin-starred fine-dining restaurants and 45 private members clubs, as well as a number of world-famous cultural events.
“It’s not in the Schengen [Area of Europe in which free movement is allowed], so people that come here are the ones that have made an effort – the high-end serious spenders,” added Mark Henderson, chairman of Gieves & Hawkes, which is a member of Walpole.
“There is a nice balance of nationalities and people are still more comfortable where English is spoken – it tends to be either the first or second language of choice.”
The report noted that demand for property remains “incredibly high” and the luxury retail sector is spreading beyond the primary locations of Knightsbridge, Sloane Street and Bond Street to secondary locations such as Mount Street and Covent Garden – and even further afield to new developments around Shoreditch and Battersea.