Brookfield Properties' luxury retail centers, which were humming along before the pandemic, have emerged in a stronger position despite a surge in inflation as the global health crisis shows signs of easing, a top leasing executive at the company said.
Kirsten Lee, a New York City-based executive vice president at Brookfield, said the company is looking to capture that demand by adding more properties and converting more space at its existing malls for high-end retailers. Lee spoke to CoStar News in Las Vegas as the major annual trade show for shopping center owners, ICSC 2022, kicked off.
The ties that luxury brands created with customers helped retailers at Brookfield's upscale centers perform well during the recession and disruption caused by the pandemic, Lee said, adding that the demand was a surprise.
"We had no idea what would happen during COVID, if those brands would emerge stronger than ever, if the entire retail category would be so impaired," she said. "But what we started to see kind of early days of COVID was, because of strong clienteling that luxury brands were already very good at — so they already have a very strong customer base — that they just got out their clientele books and started calling their best customers and keeping those relationships going."
As a result, Brookfield has been expanding its space for luxury retailers at its top centers. "We started about 18 months ago looking at our centers holistically and taking out sections of our malls or high street retail and kind of carving them out for luxury expansion," she said. "So we were very deliberate in how we decided to merchandise that space."
Lee said inflation does not appear to be affecting customers who shop at Louis Vuitton, Versace and other luxury brands.
"This is a very hard thing for your ears to hear and even mine, because history tells us that that cannot possibly be true. However, this is literally what we are hearing from every level, from the luxury CEO down to the store, the person who's working in the store, they see no price resistance whatsoever from that shopper," Lee said.
However, Lee said, it would be hard for the luxury retail market to keep up the explosive growth it's seen over the past two years.
"When you talk to the CEOs of these luxury brands, they feel that the growth that occurred between 2019 and 2021, that percentage of growth is not going to sustain," she said. "But the new normal has been achieved."
And those CEOs are looking to younger shoppers to help fuel future luxury sales, Lee said.
"They just look ahead at the Gen Z shopper, which is comprising a larger and larger share of their new business, and that Gen Z consumer is growing and wanting more and more luxury brands," she said. "So they are very bullish and remain very bullish on the future. So we hope to see more of that as we grow and refine our assets and our merchandising mixes."