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The companies in the Luxury sector 2020 Sector report What are the real estate trends of the luxury industry? SUMMARY

Study scope remains the leader of the • Activities, companies and range globalised market. Although levels ...... 05 • Global market: a few key figures ... 06 supported by strong expansion, notably

throughout Asia, the sector’s companies • Sector challenges are still affected by a number of • Changing clientèle ...... 08 demographic, ecological and numeric • More responsible , mutations, each with its own challenges. a desire for longer-lasting goods .... 12 Regardless of their range (premium, luxury or ultra-luxury), the must Real estate trends • Company locations...... 14 contend with changes in their clientèle • Focus on transactions concerning and consumption methods, forcing them more than 5,000m2 ...... 18 to innovate while remaining true to their • Focus on the interior design DNA. of service areas ...... 22

In terms of real estate, luxury company locations must reflect their image Case study: Luxury brands • Maintaining the head office ...... 26 through emblematic locations and • Transferring the head office ...... 27 buildings. • Site grouping ...... 28 • Extension of the head office ...... 29 Find out more about the latest trends in the luxury industry, in terms of Colliers International & you movements, service site locations and Our response to your challenges work environments, in this study based • A full service offer to meet your needs ...... 30 on a number of case studies. • Our references ...... 32 • Contacts ...... 34

2 | The luxury sector The luxury sector | 3 4 | The luxury sector Activities, companies and range levels Study scope

Luxury* sphere

Personal luxury goods Other luxury goods (, and , beauty, accessories, other) (outside scope)

+ ULTRA-LUXURY

Luxury and spirits

LUXURY Luxury boats Luxury restaurants and aircraft and Sales price Luxury Luxury real PREMIUM LUXURY estate

- Other luxury Art, - Production volumes + services collectibles

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

The luxury sector | 5 Global market: a few key figures

A market Leading exhibiting strong growth French players

Global turnover in the personal luxury Among the top 100 global corporations in the goods segment represented €281 billion luxury sector on the list published by Deloitte in 2019. (Global Powers of Luxury Goods, 2018), France With +62% growth since 2010, this positive remains a leader of the luxury industry with trend is expected to continue over the next 9 players listed, including LVMH (1), (4), three years, with a 4-5% annual increase, L’Oréal (7) and (11), known as "KHOL" according to the study by Bain & Company. on the international stage, the equivalent of Tech Giants of the digital sector.

Turnover for personal luxury goods 21% 23% Beauty Clothing (€ billion) Source: Bain & Company - 2018 281 262 Turnover 254 245 244 distribution 212 219 by sector 2018 207 Source: Bain & Company - 2018 200 186 167 22% 34% Watches Accessories Jewellery

100

0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Estimation

6 | The luxury sector The top ten global corporations Classed according to 2017 turnover in USD $ billion Source: Deloitte - 2019

2017 RANKING COMPANY COUNTRY 2017 TURNOVER

1 LVMH France 27.99

2 The Estée Lauder Cie Inc. USA 13.68

3 Cie Financière Switzerland 12.81

4 Kering France 12.16

5 Luxottica Group Italy 10.32

6 Limited* UK 9.62

7 L’Oréal Luxe France 9.55

8 Switzerland 7.82

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

10 PVH Corp. USA 7.35

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

The luxury sector | 7 Changing Sector clientèle challenges

Demographic Growth Brand evolution in Asia diversification

The luxury market has By 2025, Chinese customers The commercial strategy reached the mature stage are expected to represent of luxury professionals is in France and Europe. 85% of new consumers, evolving to become more The proportion of new owing to the emergence of offensive. The goal is to Y (millennials) and Z a middle class with rising diversify their offer to attract generation customers income, and its own age- new customers without is increasing, and they related consumer habits. diluting the brand’s essence are operating a profound to ensure the loyalty of their transformation of These Asian millennials core market. consumption habits in differ from their Western this market. counterparts in their The brands are implementing consumption of luxury integrated development Their new expectations goods. More loyal to brands, policies, notably by concern the concept of they are looking for quality purchasing service providers "experience" and are less above all else. In spite of (external growth) or related to actual possession being highly connected, extending towards new of the goods. Above all, they remain deeply attached derived products. they are seeking "singularity" to physical stores. through luxury and want recognition for their preferences, whether these are cultural or morphological.

8 | The luxury sector Challenges

• Being in phase with customer expectations: immediacy, experience, quality, singularity. • Diversifying their activities and proposing new products. Evolution of annual turnover between 2018 and 2019 by major • Gaining new customers. geographic region Source: Bain & Company - 2019

+30% Impacts 30%

• “Product” luxury is turning 20% into “experience” luxury.

+11% • Cultures and sub-cultures will 10% +9% be replacing consumption +5% trends. +2% • Luxury is becoming more 0% "casual" and turning towards . Japan China Europe • The leading luxury brands are Americas Other Asia developing outside Europe, for example, by manufacturing in China for the Chinese market.

The luxury sector | 9 Challenges

• Developing CRM and customer relations strategies. • Diversifying communication and consumption channels..

Impacts

• Recruiting web marketing, innovation and data management professionals: Innovation Director, Digital Brand Heritage, Customer Experience. • Developing partnerships between on-line and physical boutiques: from “point of sale” to "point of contact" with customers.

10 | The luxury sector Changing strategy

Towards the digital Birth of a digital transformation: strategy bricks & clicks

On-line sales increase by more The luxury brands communicate than 20% each year to win new on-line customers and are expected to account for and gain their loyalty by 40% of growth in this market in deploying a personalised the coming years. Customers are approach, processing data tending to seek information first and using social networks and and digital technology offers a way influencers. around the barriers, which can be intimidating, of making a purchase Luxury goods companies are in a luxury store. entering the era of Digital Customer Relations, which The boundaries between on-line consists in proposing "high and physical stores are becoming end” service quality via their increasingly blurred, to the on-line platforms (product point of proposing partnership personalisation, fast delivery, operations with major retailers to verification of in-store availability, sell part of a collection exclusively geolocation of delivery services, for a limited period of time. in-store appointment scheduling, or teams of advisers and stylists).

The luxury sector | 11 More responsible consumption, a desire for longer-lasting goods

A new driver Emergence of Turning old of excellence a second-hand into new goods market According to the study New businesses and services Among the giants of the conducted in 2018 by Bain & are being developed to luxury industry, upcycling, or Company, 94% of customers extend the life of luxury recycling into higher quality believe that luxury brands goods, notably via rental products, is attracting the should be more committed services or second-hand attention of brands such as to environmental issues; this sales. , where handbags is even stronger and other accessories than for other industries. In 2018, the second-hand are manufactured from luxury goods market tarpaulins and advertising The brands have understood boomed, thanks to major banners. this growing demand from growth in Europe, and the their consumers. Sustainable strong growth of specialised However, upcycling also development concerns are on-line platforms. Jewellery involves reusing ordinary thus altering an entire eco- and watches are the top goods (plastic bags, wire system, from suppliers to categories of this second- coat hangers). final consumers, in terms hand market. of R&D as well as product "Turning old into new" could impact. be a lever of future growth for luxury brands seeking to attract new generations of proactive consumers.

12 | The luxury sector 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.

The luxury sector | 13 Real Company estate locations trends

Concentrated in

Head offices are mostly located in the Paris QCA business district, with a shift to inner suburbs, specifically toNeuilly-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 Map of luxury industry service sites Moët- (Paris 7), acting as the pioneers (head offices, workshops, R&D, etc.) Establishments with more than of a new centre for luxury. 30 employees identified as non-retail “luxury” activities Source: SIRENE 01/01/2019 listing

Paris QCA: prestigious Parisian addresses

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

1 2 Paris Courbevoie Bobigny

Pantin Neuilly-sur- 17 Seine

8 9 10 16 2 3 1 11

4 6

3

Charenton-le-Pont

14 | The luxury sector Location of corporate headquarters

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.

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

17 18

9 10 19 16

2 11 8 1

3

7 4 20 6 12

5

15 13

14

The luxury sector | 15 A long-standing history of presence in the suburbs

Sectors emerging in the suburbs, in areas In the eastern suburbs, the Pantin/Bobigny/ such as Neuilly/Levallois/Clichy/Saint-Ouen/ Le-Pré-Saint-Gervais/Aubervilliers 2 Asnières 1 to the west due to historic sector operates over a grid of historic installations like L’Oréal and Chanel. locations of luxury manufacturers (, Chanel), proposing large premises and plots When preserved a secondary of land. site (malletier) in this sector, the L’Oréal group intensified its presence in the western Similarly, Manufacture de la Mode, a suburbs, making the most of the large areas 20,000m² industrial site in Aubervilliers, will available, and developed the equivalent of a be grouping together the entities of Chanel’s campus. Paraffection subsidiary, currently divided among a number of sites in Paris, Pantin and Aubervilliers.

YSL, Paris 7: Abbaye de Penthémont

16 | The luxury sector Chanel, Aubervilliers : Manufacture de la Mode The luxury sector | 17 Focus on transactions concerning more than 5,000m

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, 2 five transactions concerning more than Take-up > 5,000m (in m² and number of transactions) 20,000m² (16%) were recorded. These transactions were related to major site Source: Colliers International France grouping projects, for groups such as Christian Parfums or L’Oréal. 80.000 m² 3

The activity peak observed in 2014 was due to two transactions involving more than +20,000m² and one 13,500m² transaction 60.000 m² for L’Oréal (site grouping in Levallois-Perret and extension in Clichy). 4 16% More than 40.000 m² 4 3 5 20,000m2

2 2 3 Distribution by

transaction size 20.000 m² (number - 2 from 2004 to 2019) 1 1 1 1 Source: Colliers International France 0 0 0 2005 2007 2009 2011 2013 2015 2017 2019 56% Between 5,000 and 10,000m2

18 | The luxury sector 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 13% the Paris QCA business district and the Acquisition Neuilly-Levallois in the Croissant Ouest area, involving very large surface areas (> 20,000m²). Contract type Among the 11 transactions since 2011, (number - 80% were endogenous transactions - from 2004 to 2019) Source: Colliers i.e. involving surface areas within the same International France geographic sector as the initial location. 87% Most transactions in Île-de-France were Rental rentals (87%). 13% of companies in this sector opt to buy their premises, which is in line with the average for large surface area 3% transactions considering all sectors for the 16% Outer suburbs period indicated, also 13%. Inner suburbs

Movement 16% Paris locations (not QCA) (number - from 2004 to 2019) Source: Colliers International France 42% Paris QCA 23% Croissant Ouest

The luxury sector | 19 Focus on the last 15 major transactions

7 Coty F Paris 2 1 Yves St-Laurent T Paris 1 F Paris 8 Metropolitan 6,510 m² T Paris 7 Rental Abbaye de Penthémont 9,180 m² Rental 8 Christian Dior Parfums 2 Sisley F Paris 8 - Levallois T Paris 8 T Neuilly-sur-Seine 3-5 Av. de Friedland Kosmo 10,247 m² 23,901 m² Purchase Rental 15 Hermès 3 Chanel 9 Chanel T Paris 8 T Paris 1 T Paris 8 HIGHT 39-41 Rue Cambon 52 Av. des Champs Elysées 8 rue de Penthièvre 16,860 m² 7,232 m² 8,159 m² Purchase Rental Rental

2015 2016 2017 2018 2019

4 Bpi - Shiseido 10 Moët-Hennessy F Paris 1 - Paris 16 T Paris 7 T Paris 8 24 Rue de Sèvres Carré Saint-Honoré 7,385 m² 7,384 m² Rental Rental 11 5 F Paris 1 F Boulogne-Billancourt T Paris 8 T Neuilly-sur-Seine 79-81 Bvd. Haussmann 41 Rue Ybry 5,323 m² 13,413 m² Rental Rental 12 Hermès 6 Balmain T Le Pré Saint-Gervais T Paris 8 Canopy 52 Rue d’Anjou 6,283 m² 5,017 m² Rental Rental 13 Chanel F Paris 9 T Paris 9 Cambon Madeleine 12,012 m² Purchase 14 LVMH T Paris 8 Bayard Seine 7,335 m² 20 | The luxury sector Rental Unlisted companies held by a family shareholding generally prefer to buy, like Sisley, owned by the Ornano family, and Chanel, owned Site grouping by the Wertheimer brothers. This often means Transfer owning the head office but renting less strategic ND properties. F From (initial address) T To (destination) Movement

Levallois- Perret 17 18

7 8 5 12 Neuilly- sur-Seine 10 11 9 16 13 19 9 2 6 4 15 11 3 2 8 14 1

3

1 4 10 7 6

5

Boulogne- Billancourt 12 15 13 Source: Colliers International France

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The luxury sector | 21 22 | The luxury sector 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 Average, low density service with all Colliers projects (26% for the luxury sector surface areas in the Luxury sector compared with 18% for all sectors) suggests a (m² expressed in rental surface area) 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 20.2m²/workstation Lawyers/Notaries in an increasingly digitalised sector.

19.4m²/workstation Public sector (15% (18% across all sectors) across all sectors)

13% 26% 17.8m²/workstation Individual offices Shared offices Health / Health insurance / (partitioned areas containing (partitioned areas Life insurance a single workstation) containing 2-8 workstations) Below average density

16.8m²/workstation 16.7 Luxury m²/ workstation average Average for the Luxury sector 14.9m²/workstation Banking / Insurance

61% Open space offices (non-partitioned areas, with 13.4m²/workstation open passages, containing a Consulting / Audit

Above average density (67% large number of workstations) across all sectors)

* Ratios calculated from projects conducted by Colliers International France

The luxury sector | 23 Interior design simulation for a single-tenant building: specific needs of the “High End” sector

The sector is characterised (creation studio, showroom, by a set of specific real estate storage, etc.), each with their requirements, essential to its own constraints, which must business. be taken into account as early in the process as possible. For example, the "product pathway", i.e. the physical For these companies, design route taken by the product of the work environment from design to marketing therefore includes this notion, including digitalisation, as well as that of the more requires specific places conventional user pathway.

G+7 Functional organisation G+6 Cross-section of the principle diagram G+5 Source: Colliers International France G+4

VIP reception areas / Office G+3

Services / Shared areas G+2 Hall G+1 Creation studio & photography studio

Open office space / Possible part GF flex-office Events Modular Virtual and physical working & Photo­ presentation showrooms (accessible G-1 by invitation) graphy Stockroom Stockroom studio Modular area for events: fashion shows (catwalk and removable park cloakrooms) for presentation to international networks Product stocks (hanging storage, boxes)

24 | The luxury sector The luxury sector | 25 Maintaining Case studies the head office Luxury brands

Date Surface area 2008 20,000m2

Strategic locations on the outskirts Price Condition of the capital... and reinforcement N/A Renovated of its Parisian DNA Having restructured its Neuilly head Contract Address office, the Chanel group opted to lease a Acquisition 135 av. Charles de new site in Aubervilliers for all its creative Gaulle, Neuilly-sur- professions, to bring these functions closer Seine 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.

135 avenue Charles de Gaulle in Neuilly Benefits

• 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, Manufacture de la Mode Chanel in Aubervilliers 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.

Offices and flagship store, rue Cambon, Paris 8

26 | The luxury sector Transferring the head office

Date Surface area Q2 2012 17,200 m2

Observation of a counter-movement Price Condition to create a differential advantage: Restructured Rive Gauche as brand territory N/A

th Located at no. 10 Avenue Hoche in the 8 Contract Address arrondissement, Kering chose to remain in Acquisition "Paris 7 Rive Gauche" central Paris, with a pre-commercialisation 40 rue de Sèvres, lease for 17,200m² with Altarea Cogedim Paris 7 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.

Benefits

• Conservation of a Paris address in a Laennec ‘‘Paris 7 Rive Gauche’’ 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). YSL, 37-39 rue de Bellechasse, Paris 7

The luxury sector | 27 Site grouping

Date Surface area Q4 2017 23,901m2 Bringing teams together and boosting the Group’s image outside Paris Price Condition With most of its activities based in the €630/m2 Restructured Paris QCA business district (Capital 8, rue de Téhéran and Avenue Hoche) and in the Contract Address Place de Seine (ex-Upp) building in Levallois- Rental 192 av. Charles De Perret, Christian Dior Parfums opted to Gaulle, Neuilly-sur-Seine 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.

Benefits

• Capitalising on image (between Paris and Kosmo, Neuilly-sur-Seine 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.

28 | The luxury sector Extension of the head office

Date Surface area 1978 - 33,500 m2 extension 2020

Price Condition N/A Renovated / New (extension) Occupation in campus form in the Clichy / Levallois / Saint-Ouen area Contract Address Acquisition ‘‘Centre Eugène Built from brick and steel, the historic Schueller’’ Eugène-Schueller centre rises up from 41 rue Martre, Clichy 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 Le Loft, extension at 41 rue Martre, Clichy in the same sector:

• 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) Seine 62, Levallois-Perret

Benefits

• Bringing teams together and encouraging inter-campus collaboration. • Redynamising the head office and creating an attractive environment. Campus Charles Zviak, Saint-Ouen

The luxury sector | 29 Colliers

A full service offer International to meet your needs France & you

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

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

Transaction advice Rental / Purchase / Disposal. Search for new locations. Site grouping.

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

Stay or Leave Re-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.

30 | The luxury sector The luxury sector | 31 Our references

Aubervilliers | 2018 | 20,000m² Neuilly | 2018 | 4,200m² Paris 8 | 2016 | 385m²

Levallois | 2018 | 2,000m² Paris 8 | 2017 | 600m² Neuilly | 2012 | 7,300m²

Levallois-Perret Methodology DELIVERY March 2019 1,200m2 x2 | 80 workstations • Assistance with change management • Assistance with internal communication Project goals • Coordination of all external teams With a view to a future grouping • Coordination of the overall IT operation for Guerlain’s teams, project: application, digitalisation, this mission involved testing new room reservations working areas on current sites to • Mutualisation of meeting rooms analyse and discuss managerial and unused offices (management) modifications. Achievements Missions conducted • Mutualisation of meeting General contractor rooms with unused office areas • Supervision of work and interior (manager) design as contractor assistant • Creation of bubbles and empty • Interior design of two buildings, spaces for modular installations 1,200m2 each • Creation of meeting areas • Assistance for the "test & learn" that did not exist previously project (corpoworking or similar)

32 | The luxury sector Missions conducted General contractor: • Project coordination • Assistance with the change to open, shared office space • Assistance with technological evolutions: "test & learn” method Crystal Park | Neuilly S/s • Revamping (turning old into new) DELIVERY 2018 • Creation of an internal coworking 4,200m2 | 400 workstations centre on the 6th floor • Supervision of work (contractor assistance) • Transfer, Furnishings

Project goals Achievements Formerly located in Haussmann- • Change from a traditional Monceau, Estée Lauder grouped environment to a flex-office together several of the group’s • Creation of an application to entities, operating a transfer to reserves rooms and services new premises in Neuilly-sur-Seine. • Experience in offices furnished Designed by Gensler, with all new according to Retail area design furnishings, the new offices are • IT innovations: digital wall at highly connected and digital, which reception, wifi and connections also involved Colliers’ assistance • Leaving Paris for the inner with IT issues. suburbs

Rue Erlanger | Paris 16 DELIVERY 2015 1,000m2 | 40 workstations

Project goals 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 Achievements transferred to a single platform, • Traditional interior design with separated by a landing floor and fully refurbished in 2015. shared areas and offices • Closed offices for senior managers • Shared areas (8-10 people), more Missions conducted suited to the cosmetics sector General contractor: • Use of high-quality, noble • Interior design of a platform materials: glass walls, office • Company transfer furnishings

The luxury sector | 33 34 | The luxury sector Contacts

Our business team Experts in this field

Cyrille BERTHET Head of the Tenant Representation department +33 (0)6 74 79 46 38 [email protected]

Damien GIRARD Associate Director | Tenant Representation +33 (0)6 37 69 46 56 [email protected]

Our team Research

Laurence BOUARD Head of the Research Department +33 (0)6 81 56 49 02 [email protected]

Olivier CHANON Research analyst| Research +33 (0)6 07 21 84 03 [email protected]

The luxury sector | 35 colliers.com