Luxury overseas brands have discovered Australia in the past few years and are now accounting for a significant share of the retail market, in terms of sales and physical presence, which has put pressure on rents, according to agents.
And as demand rises and landlords build flagship stores, the inflow will continue. But while the likes of Zara, H&M and Uniqlo received rock star openings, the largest number of stores, across the country, are leased and operated by Hugo Boss, with 21 freestanding stores, followed by Ralph Lauren with 12, Louis Vuitton with 10 stores, Gucci, Coach and Max Mara all with nine stores, Bally with eight, and Chanel and Tiffany & Co. with seven each.
Locally, the largest store network is operated by domestic brand Oroton, which currently has around 45 stores nationally.
Colliers International agents say consumers also covet the superior in-store experience and exclusivity of luxury shopping.
Growth in accessible luxury will benefit the industry as a whole, as the sector is opened up to a wider and younger audience. IBIS World forecast industry revenue to grow at an annualised rate of 8.5 per cent over the five years to 2019/20, to total $2.4 billion.
The so-called fast fashion stores are focused on the prime strips of Bourke Street Mall, Melbourne, and Pitt Street Mall, Sydney, with Forever 21 coming soon, followed by the new entrant, Microsoft.
Once the capital city central business districts are saturated, the retailers will hit the larger malls with a vengeance.
Michael Bate, head of retail at Colliers International, has identified 62 major luxury brands globally, of which 42 are currently active in the Australian market.
He said that between these 42 brands they operate 239 stores across the country. The remaining 21 luxury brands without freestanding stores do have some presence in Australia, either through department store concessions or wholesale channels via independently operated specialty stores.
"Across Australia, half of all luxury retail stores are located within shopping centres; 29 per cent are in high street locations; and 11 per cent are housed in outlet centres," Mr Bate said.
"The balance is spread across airports, casinos and hotels. The Sydney CBD and Melbourne CBD remain the leading luxury cities in Australia accounting for 35 per cent of all luxury retail stores across the country."
In Brisbane CBD and Perth CBD markets, they have seen an increase in the number of store openings in recent years, but still only account for 9 per cent and 4 per cent of national stores respectively.
But the rents are also rising, due to the demand, which is also seeing other retailers seek out space away from the expensive areas.
CBRE research has determined improving sales turnover per square metre, coupled with lower bond yields, should lift CBD rental growth expectations and support further yield compression across Australia in 2015.
In the first quarter of 2015 super prime net rents grew by 1.5 per cent nationally, while prime and secondary rents both recorded 2 per cent growth. This brings the annual growth rates to 11 per cent, 8 per cent and 6 per cent respectively.
CBRE's head of retail representation, Australia, Tim Starling, said Sydney is being seen as a key global gateway city and as the flagship destination of choice for retailers entering the Australian market.
"Foreign retailers continue to have substantially higher margins than domestic retailers, and place significantly higher emphasis on branding and advertising, which helps achieve high foot traffic and online sales," Mr Starling said. "This will continue to drive the 'bulge effect', where domestic retailers are pushed to secondary locations and spaces they typically wouldn't occupy as a result of additional competition and rising rents."
