Competition to buy the world’s most exclusive stores is intense despite modest rent growth. Even Blackstone is ogling the market.
3 min
Don’t expect any fashion bargains on Rodeo Drive in Beverly Hills, or New York’s Fifth Avenue. And property on these famous luxury shopping streets looks as overpriced as the clothes.
While the average commercial building is worth 20% less than in 2022, the world’s most exclusive shops have barely been touched by the highest U.S. and European interest rates in two decades.
Cartier’s Swiss owner, Compagnie Financière Richemont , recently bought a property on London’s Bond Street at a rock-bottom 2.2% rent yield. Similar to the way bonds work, the lower the rent yield, the richer the price paid. The Bank of England’s base rate is around double this level. Most investors these days wouldn’t buy real estate that generates less income than the cost of debt that might be used to purchase it.
Last month, Blackstone sold a luxury store on Milan’s Via Montenapoleone to Gucci owner Kering for a similarly eye-catching price. The building was part of a portfolio of 14 properties that Blackstone bought in 2021 for 1.1 billion euros, equivalent to roughly $1.2 billion. Kering coughed up €1.3 billion, or about $1.4 billion, for the Via Montenapoleone building alone, equivalent to a 2.5% rent yield.
The private-equity firm is understandably eager to do more deals like this, and has since bought another luxury store in London. It is a surprising focus for Blackstone, which for years steered clear of retail property.
Luxury rents are resilient, but they aren’t rising fast enough to justify such hefty price tags for the buildings. Last year, rents increased 3% on Rodeo Drive and were flat on Upper Fifth Avenue, according to data from Cushman & Wakefield .
What luxury retail properties do offer is scarcity. London’s Bond Street has 150 individual buildings, according to real-estate consulting firm CBRE . But because luxury brands are fussy about where they will open a flagship store, only around two-thirds of the street is considered posh enough, limiting their options.
Supply is even tighter on New York’s Fifth Avenue, where just four or five blocks of the six-mile avenue are ritzy enough to lure the world’s most expensive brands. The luxury shopping district of Rodeo Drive in Los Angeles has fewer than 50 individual buildings.
This creates intense competition for both space and ownership. The world’s biggest luxury company, LVMH , has more than 70 brands that need a foothold on prominent shopping streets. Increasingly, LVMH’s answer is to buy the best locations. The Paris-listed company owns at least six properties on Rodeo Drive and six on London’s Bond Street.
Luxury brands see their flagship stores as marketing tools. Counterintuitively, e-commerce has made its physical locations more important. Labels including Christian Dior have opened restaurants and mini museums in their boutiques to give shoppers an experience they can’t find online.
When they are investing this much money in refurbishments, it makes more sense to own than to rent . Luxury brands have spent more than $9 billion buying boutiques since the start of 2023, according to a Bernstein analysis, and they control increasingly larger tracts of major shopping districts. Back in 2009, brands owned 15% of the buildings on London’s Bond Street, says Phil Cann, an executive director at CBRE. Today, their share has jumped to 30%.
Luxury labels also need to avoid being kicked out of a property by a rival-turned-landlord, which is happening more often. British handbag maker Asprey was given its marching orders by Hermès on London’s Bond Street. The French brand bought the building that Asprey occupied since the 1840s and wants to convert it into an Hermès flagship. Rolex recently bought a store that is rented out to Patek Philippe, although its competitor doesn’t need to move out any time soon as there are still several years left on the lease.
Most luxury stores are still in the hands of sovereign-wealth funds or rich families who might have owned the buildings for decades. Given the enticing prices that brands are willing to pay despite high interest rates, more are considering cashing out.
Landlords from Hong Kong, who began parking their cash in luxury stores around 2010, are among those selling up. New York real-estate investor Wharton Properties also sold two Fifth Avenue buildings to Kering and Prada this year at very high prices that were equivalent to 2% rent yields. Wharton is experiencing some distress in other parts of its portfolio, so it might have needed to raise funds.
Luxury brands made huge amounts of money during the pandemic. Richemont currently has more than €7 billion of net cash sitting on its balance sheet. Merger and acquisition activity has been quiet, so real estate might be the next-best thing to pour their riches into.
Property deals on the world’s most expensive streets will continue to operate in their own twilight zone, no matter what central bankers do next.
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What a quarter-million dollars gets you in the western capital.
Alexandre de Betak and his wife are focusing on their most personal project yet.
Unmarried home buyers say they are giving priority to a financial foundation over a legal one
4 min
The big wedding can wait. Couples are deciding they would rather take the plunge into homeownership.
In reshuffling the traditional order of adult milestones, some couples may decide not to marry at all, while others say they are willing to delay a wedding. Buying a home is as much, if not more of a commitment, they reason. It helps them build financial stability when the housing market is historically unaffordable.
In 2023, about 555,000 unmarried couples said that they had bought their home in the previous year, according to a Wall Street Journal analysis of Census Bureau data. That is up 46% from 10 years earlier, when just under 381,000 couples did the same.
Unmarried couples amounted to more than 11% of all U.S. home sales. The percentage has climbed steadily over the past two decades—a period in which marriage rates have fallen. These couples make up triple the share of the housing market that they did in the mid-1980s, according to the National Association of Realtors.
To make it work, couples must look past the significant risk that the relationship could blow up, or something could happen to one partner. Without a marriage certificate, living situations and finances are more likely to fall into limbo, attorneys say.
Mark White, 59 years old, and Sheila Davidson, 62, bought a lakeside townhouse together in Newport News, Va., in 2021. But only her name is on the deed. He sometimes worries about what would happen to the house if something happened to her. They have told their children that he should inherit the property, but don’t have formal documentation.
“We need to get him on the deed at some point,” Davidson said.
White and Davidson both had previous marriages, and decided they don’t want to do it again. They also believe tying the knot would affect their retirement benefits and tax brackets.
Couples that forgo or postpone marriage say they are giving priority to a financial foundation over a legal one. The median homeowner had nearly $400,000 in wealth in 2022, compared with roughly $10,000 for renters, according to the Federal Reserve’s Survey of Consumer Finances.
Even couples that get married first are often focused on the house. Many engaged couples ask for down-payment help in lieu of traditional wedding gifts.
“A mortgage feels like a more concrete step toward their future together than a wedding,” said Emily Luk, co-founder of Plenty, a financial website for couples.
Elise Dixon and Nick Blue, both 29, watched last year as the Fed lifted rates, ostensibly pushing up the monthly costs on a mortgage. The couple, together for four years, decided to use $80,000 of their combined savings, including an unexpected inheritance she received from her grandfather, to buy a split-level condo in Washington, D.C.
“Buying a house is actually a bigger commitment than an engagement,” Dixon said.
They did that, too, getting engaged eight months after their April 2023 closing date. They are planning a small ceremony on the Maryland waterfront next year with around 75 guests, which they expect to cost less than they spent on the home’s down payment and closing costs.
The ages at which people buy homes and enter marriages have both been trending upward. The median age of first marriage for men is 30.2, and for women, 28.6, according to the Census Bureau. That is up from 29.3 and 27.0 a decade earlier. The National Association of Realtors reported this year that the median age of first-time buyers was 38, up from 31 in 2014.
Family lawyers—and parents—sometimes suggest protections in case the unmarried couple breaks up. A prenup-like cohabitation agreement spells out who keeps the house, and how to divide the financial obligations. Without the divorce process, a split can be even messier, legal advisers say.
Family law attorneys say more unmarried people are calling for legal advice, but often balk at planning for a potential split, along with the cost of drawing up such agreements, which can range from $1,000 to $3,000, according to attorney-matching service Legal Match.
Dixon, the Washington condo buyer, said she brushed off her mother’s suggestion that she draft an agreement with Blue detailing how much she invested, figuring that their mutual trust and equal contributions made it unnecessary. (They are planning to get a prenup when they wed, she said.)
There are a lot of questions couples don’t often think about, such as whether one owner has the option to buy the other out, and how quickly they need to identify a real-estate agent if they decide to sell, said Ryan Malet, a real-estate lawyer in the D.C. region.
The legal risks often don’t deter young home buyers.
Peyton Kolb, 26, and her fiancé figured that a 150-person wedding would cost $200,000 or more. Instead, they bought a three-bedroom near Tampa with a down payment of less than $50,000.
“We could spend it all on one day, or we could invest in something that would build equity and give us space to grow,” said Kolb, who works in new-home sales.
Owning a place where guests could sleep in an extra bedroom, instead of on the couch in their old rental, “really solidified us starting our lives together,” Kolb said. Their wedding is set for next May.
Homes and weddings have both gotten more expensive, but there are signs that home prices are rising faster. From 2019 to 2023, the median sales price for existing single-family homes rose by 44%, according to the National Association of Realtors. The average cost of a wedding increased 25% over that time, according to annual survey data from The Knot.
Roughly three quarters of couples move in together before marriage, and may already be considering the trade-offs between buying and renting. The cost of both has risen sharply over the past few years, but rent rises regularly while buying with a fixed-rate mortgage caps at least some of the costs.
An $800 rent hike prompted Sonali Prabhu and Ryan Willis, both 27, to look at buying. They were already paying $3,200 in monthly rent on their two-bedroom Austin, Texas, apartment, and felt they had outgrown it while working from home.
In October, they closed on a $425,000 three-bed, three-bath house. Their mortgage payment is $200 more than their rent would have been, but they have more space. They split the down payment and she paid about $50,000 for some renovations.
Her dad’s one request was that the house face east for good fortune, she said. Both parents are eagerly awaiting an engagement.
“We’re very solid right now,” said Prabhu, who plans to get married in 2026. “The marriage will come when it comes.”
