Luxury store wars escalate on London's top streets
By Brenda Goh
LONDON (Reuters) - When rumors reached Bernard Arnault, the chief executive of luxury goods group LVMH, that an Irish state-run agency could seize control of developer David Daly's three shops on London's Bond Street, he quickly approached him about a deal.
Daly and adviser Savills soon set a 10-day deadline for talks, knowing that Arnault, France's richest man, was anxious to avoid an auction via Ireland's National Asset Management Agency (NAMA) that could result in a sale to rivals such as Chanel.
"LVMH was determined not to let what happened with the DKNY store happen again," one source familiar with the deal said. The freehold on DKNY's shop at 27 Old Bond Street was sold to Chanel in 2010. The sale derailed LVMH's plans to replace its DKNY branded outlet with a Dior shop and left Arnault furious, the source said.
Arnault via his agent Harper Dennis Hobbs and Daly agreed a 300 million pound ($462 million) deal within the 10-day window last month. All parties declined or were unavailable to comment.
Arnault's purchase shows how Bond Street, the UK's most expensive shopping destination, is fast becoming a battlefield for deep-pocketed fashion dynasties that are increasingly willing to shell out hard cash to guarantee ownership of top sites and hedge against spiraling rents.
Retailers accounted for more than three-quarters of property deals on Bond Street in 2010, consultancy CBRE said, paying out more than 250 million pounds. CBRE Executive Director Phil Cann said the trend would accelerate.
Unlike mid-market retailers, luxury brands have bounced back strongly from the 2008 downturn on the back of strong demand from emerging markets such as China and Russia.
The acute space shortage on the half mile stretch combined with strong demand from global brands that see a Bond Street presence as essential to European expansion plans, may boost rents from 975 pounds per square foot to 1,500 pounds by 2013, consultancy Cushman & Wakefield said. Continued...