Luxe landlords: High-end brands are moving into real estate

When considering luxury brands like Louis Vuitton and Aston Martin, property development is likely not what first comes to mind. But many of these companies are now looking to real estate as a new frontier for their portfolios. These brands are investing in a mix of commercial and residential real estate in an attempt to both promote their products and create a new form of marketing for high-end brands.

While some companies are focusing on creating their own condos, apartments and residential buildings, others are in the process of buying out large swaths of city neighborhoods for retail spaces. And data shows that these types of developments are set to skyrocket in the coming decade.

Why are these brands investing in residential real estate?

There is a "growing list of luxury brands hoping to use real estate to turn their cultural cachet into cold, hard cash," said Business Insider. Italian automaker Pagani — which produces cars with multimillion-dollar pricetags — recently "unveiled plans for Pagani Residences, a 70-unit condo development in Miami's North Bay Village." These condos, similar to their cars, will sell at around the $3 million range.

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Pagani is the "latest high-end car brand to lend its name to a shiny condo project along the Miami coast, joining the likes of Mercedes-Benz, Porsche, Aston Martin and Bentley," said Business Insider. Non-auto brands venturing into the condominium market include Italian eatery Carbone, Dolce & Gabbana and Elle magazine, according to the outlet.

While other cities are seeing these types of developments, Miami seems to be a hotspot for this trend, where "no one will even build a luxury building in the city without a name brand attached to it," said Curbed. The "traditional residential model of just building a really nice building is not enough anymore," Peter Bazeli, a real estate development advisor, said to the outlet. A new development "has to have a brand, has to conjure up the idea of what the lifestyle can be."

Globally, there are "about 700 branded residences, with nearly the same number in development, all scheduled to launch by 2030," said Forbes. Buyers are "attracted to such projects by the prestige associated with elite brands." For those who are "fashion lovers, car lovers and for those who want high levels of service, the famous brand has an implication of longevity and even permanence — it delivers status and a certain way of life," architect Bernardo Fort-Brescia said to Forbes.

Why are these brands investing in commercial real estate?

Beyond setting up places for people to live, luxury brands are "racing to buy properties on the world's most famous shopping streets" because they "fear that, if they don't buy their flagship store from the landlord, one of their rivals will do so and send them packing," said The Wall Street Journal. Land is going quickly on New York City's Fifth Avenue, and "Europe's luxury brands have spent more than $9 billion buying boutiques on the world's top shopping streets since the start of 2023." Both Prada and luxury conglomerate LVMH are "hunting for luxury properties in New York, according to real-estate sources."

LVMH in particular, which owns brands like Louis Vuitton, Dior and Hennessy, has "become a major developer, buying up coveted buildings on Fifth Avenue in New York and the Champs-Élysées in Paris," said The Nation. The "sheer extent of LVMH's holdings and the rhetoric it uses in describing them makes clear that its end game is to defend and obscure private property's hold on shaping cities."

Building in these high-rent spaces caters to a new generation of consumers who can "signal on their social media feeds, on their TikTok accounts that they are in the know and in with these luxury brands," Rebekah Kondrat of Rekon Retail said to The Real Deal. And the push is likely to increase; these companies are "taking real estate off the market, likely forever," Jason Richter of Capricorn Retail Advisors said to the outlet. This could "in many respects increase demand."