Against a global backdrop of declining luxury retail sales, Rodeo Drive in Los Angeles is enjoying a full roster of tenants paying rent prices that are outpacing other high-end shopping districts worldwide.
Average annual retail rent on Rodeo Drive climbed 19% year over year to $1,100 per square foot in 2024, the second-highest rental rate in the United States behind New York's Fifth Avenue, according to Cushman & Wakefield’s annual tally of the world’s most expensive shopping streets. That’s more than the global average rental rate growth of 4% and the Americas average of 11% during the period.
The storied strip in Beverly Hills is fully occupied — save for one property owned by LVMH — with longtime tenants unveiling new store designs and international chains setting up shop to try to catch the eye of locals and tourists, said Carine Mamann, executive director at Cushman & Wakefield and a local broker.
"International brands used to open their first U.S. store in New York and their second in LA," Mamann told CoStar News. "Now it's the other way around."
Global luxury retail sales started slowing down this year after growing by double digits annually since 2020. In the first half of the year, 42% of publicly listed luxury companies lost money, with revenue declining by 0.4% year over year for the period, according to IT and consulting firm Accenture.
Beverly Hills hasn't been immune, with rents for the larger submarket down 2% year over year, according to CoStar data, and rent growth is not forecast to return to the long-term benchmark before 2026.
Still, luxury stores on Rodeo Drive such as Bulgari, Louis Vuitton and Rolex are growing their physical footprints, adding cafes, VIP space and private entrances to cater to celebrities and other A-list shoppers, brokers note.
Destination Los Angeles
This past year, Beverly Hills solidified its reputation as a mainstay for flagship retail locations, according to Julie Wagner, CEO of Beverly Hills Conference & Visitors Bureau.
Among the stores that have recently chosen Beverly Hills for their first U.S. outpost are British apparel brands Represent and Hunza G, Italian luxury brand Genny, Australian clothing retailer Silk Laundry, French jewelry label Messika, and Swiss watchmaker MB&F.
The area is benefiting from tourist traffic, with travel spending throughout California climbing 5.6% last year to a record $150.4 billion, according to tourism group Visit California, compared to the $144.9 billion spent in 2019 before the pandemic.
But the makeup of tourists has changed. Visitors from Asia and the Pacific were “the largest contributor to international travel spending in 2019” in California but spent roughly half as much in 2023, according to Visit California.
Despite the recent decline in Chinese tourists, Rodeo Drive has proven resilient, shifting to a strong domestic customer base and diversifying its offerings to attract a wider range of international visitors, according to JLL Retail Research Director Heli Brecailo.
Building brands
With Rodeo Drive's high rents that have only grown pricier in recent years, cash-rich privately owned brands would rather own property on the street than lease, brokers note.
Luxury conglomerate LVMH — the parent of Tiffany & Co., Bulgari, Givenchy and many other brands— owns roughly half the block.
The company is building a 48,000-square-foot, three-story flagship for its Dior brand, complete with a 1,440-square-foot rooftop restaurant, that's expected to open next year. LVMH bought the building for $122 million in 2016.
The French retail company opened the first permanent Givenchy store in Los Angeles in August on Rodeo Drive with the debut of a 4,500-square-foot space in the historic Frank Lloyd Wright-designed Anderton Court Shops complex at 332 N. Rodeo Drive. It will nearly double that footprint in the new year with a second store, making the location Givenchy's first flagship on the West Coast.
LVMH is expanding the Rodeo Drive building housing Bulgari and has also added shops for Patek Phillipe and Rolex at the street level of the former Luxe hotel at 360 N. Rodeo Drive, a building it acquired in 2021 for $200 million.
The firm isn't the only owner-occupier on the street. Chanel built out its largest store, a 30,000 flagship at 400 N. Rodeo Drive, after the French luxury firm combined two lots it acquired for $252 million and built out the high-end space.
Swiss luxury conglomerate Richemont, meanwhile, is renovating and doubling the store space for its Cartier brand at the three-story building at 370 N. Rodeo Drive it purchased for $20 million in 2000.
The missing piece
There's one vacant property on the thoroughfare, though plans have been in the works for several years — a two-level, 22,251-square-foot building on the corner of Rodeo and South Santa Monica at 468 N. Rodeo Drive owned by LVMH.
The firm paid $245 million for the former Brooks Brothers store in 2018, and pitched plans to convert the site into a five-star Cheval Blanc hotel, though residents voted against those plans last year.
People familiar with the company's plans said LVMH is proceeding with plans to convert the space into a Louis Vuitton store after the company asked an architectural firm to submit renderings for a 50,000-square-foot shop in February.
Plans to change the property have not been filed with the city planning commission, and LVMH did not respond to a request for comment.
The company has been pumping the brakes on store expansion this year after opening 108 new stores between 2021 and 2022 to meet a surge in demand. LVMH said revenue growth was flat year over year in the first half of 2024 after years of outsized growth following the pandemic. U.S. revenue was up by 1% during that time thanks to strong cosmetics and perfume sales.
Still, it continues to spend big on flagship stores. In New York City, for example, the company is renovating its Louis Vuitton property at the corner of Fifth Avenue and 57th Street to more than double its size from 91,060 square feet to 230,000 square feet.