The luxury hotspots of the future

This article is part of our new editorial package, The Future of Shopping, in which we predict how the retail landscape will be shaped over the next decade. Click here to read more. In Chengdu, the capital city of southwestern China’s Sichuan province, there is a subterranean playground for luxury brands. Beneath acres of luscious green parkland and water sculptures lies the SKP mall, comprising an underground network of 70 stores. Its unveiling at the end of 2022 — attracting tenants such as Louis Vuitton, Chanel, Hermès and Fendi — catapulted Chengdu to top place in the ranking of cities for new luxury store openings last year. But new contenders are already coming for its crown. Outside of the traditional high-end capitals like London, Paris, New York and Milan, Chinese cities remain the focus for luxury store openings despite economic headwinds, according to a ranking by real estate firm Savills (Shenzhen and Sanya were second and third, behind Chengdu). However, this could change over the next decade: separate research from data firm New World Wealth and Henley & Partners that tracks the global spread of millionaires suggests attention will remain on South China’s tech hub Shenzhen, but other global cities may rise up the priority list for store openings. Individual wealth is set to surge in Miami and Austin in the US, Cape Town in South Africa and Riyadh in Saudi Arabia, marking them as the hotspots of the future. Savills notes a boom in openings away from the traditional luxury capitals. “As occupational costs in these emerging luxury markets tend to be lower than top tier luxury cities, return on investment can be much quicker, an added appeal to expansive luxury brands,” says Marie Hickey, director in commercial research at Savills. To project movements of millionaires, New World Wealth looks at factors like GDP forecasts, key sector growth and tax incentives. The company shared with Vogue Business the five cities with the highest projected growth rates in millionaires over the next decade outside of the traditional luxury capitals of the world*. Some already have a well-developed luxury retail market, while others are not particularly well catered for by high-end international brands — presenting opportunities for the future. Riyadh, projected millionaire growth rate 2023-2033: 90+ per cent The capital of Saudi Arabia has been asserting its place as an international retail destination. Over half of Vogue Business Index brands now have an independent store space in Riyadh, with most spread across three different malls on a three-kilometre strip of Olaya Street: the Kingdom Centre, Centria Mall and Al Faisaliah Mall. In addition to a strong pull to Saudi nationals, the country is also increasing its appeal to wealthy people internationally. A recent Knight Frank survey of high-net-worth individuals from countries with sizable Muslim populations, showed that 82 per cent were keen to buy property in the Kingdom. Riyadh was the second most popular choice after the holy Islamic city Makkah. There are approximately 18,200 millionaires (in USD) currently residing in the Saudi capital — New World Wealth figures project 35,000 by 2033. The city has been at the heart of efforts to diversify the Saudi economy and build up sectors beyond oil, with sights set on becoming a hub for chemicals, real estate development, telecommunications and banking. It is also home to the Public Investment Fund, which has gained headlines through its massive investment in international sports, but also has taken stakes in many of the world’s best-known companies. Riyadh is among the youngest capital cities in the world, according to the UN. “It is where the bulk of job creation [in Saudi Arabia] is taking place… hence why we are seeing that increased demand for luxury retail in particular,” says Faisal Durrani, partner and head of Middle East research at real estate firm Knight Frank. Shenzhen, projected millionaire growth rate 2023-2033: 90+ per cent After years of living in the retail shadow of financial powerhouse and traditional luxury destination Hong Kong, Shenzhen has established itself as a powerful destination in its own right. Alongside its role as the ‘Silicon Valley of China’, it is also home to the sixth-largest stock market in the world. It already ranks among the leading destinations for luxury store openings according to Savills. These new developments and store concepts may give Shenzhen some advantage over Hong Kong, despite the favourable price difference still making a cross-border shopping trip attractive. “If you’re looking at purchasing a luxury product you may get a better deal in Hong Kong,” says James Macdonald, head of research at Savills. “If you’re looking at spending the whole weekend you may have a better experience in Shenzhen.” “Love of tech is in the DNA of the city, and a commonality among educated talent that relocates to Shenzhen,” says Allison Malmsten, China strategy consultant and APAC marketing director at Daxue Consulting. “It’s a great space for brands to showcase their tech collabs and pop-ups,” she adds, pointing to Burberry’s social retail store partnership with Tencent as an example. Like Riyadh, the city’s population skews younger than others. Cape Town, projected millionaire growth rate 2023-2033: 85+ per cent The South African city of Cape Town has 7,400 millionaire residents, with that number expected to nearly double over the next decade. New World Wealth research director Andrew Amoils, who is based in the city, says internal migration of the wealthy from other parts of South Africa like Johannesburg is increasingly common, and the city has also become a second-home hotspot for the international super-wealthy. Henley & Partners and New World Wealth expect Cape Town to overtake Johannesburg to become Africa’s wealthiest city by 2030, thanks in part to a movement of company headquarters from South Africa’s capital to its Western Cape. Just 17 per cent of Vogue Business Index brands have an independent store there (although those that do include big names like Louis Vuitton, Gucci and Burberry). All of these stores are based in the Table Mountain-framed V&A Waterfront shopping centre. Michael Zahariev, co-founder of South African, pre-owned luxury retailer Luxity — which also has a retail unit in the development — says brands like Chanel, Hermès and Saint Laurent, who don’t have a retail presence in the country, perform particularly well among its clientele. “There’s certainly a demand in the secondhand market, which means there definitely would be demand in the primary market.” Austin, projected millionaire growth rate 2023-2033: 80+ per cent Texas has many boomtowns, but Austin may be the one worth keeping the closest eye on. It is the city in the US with the fastest-growing population of millionaires, with the number (33,000) more than doubling between 2013 and 2023. Sixty thousand are expected to live there by 2033. Development in the city has been rapid, with notable tech companies including Tesla and Oracle relocating there. No state income tax and competitive housing prices compared to cities in the Bay Area have also been big draws (though the city has not escaped the recent spate of tech layoffs). Given the city has formed part of a relocation away from Silicon Valley, understated brands popular with the tech set like Loro Piana could be big winners there. Luxury retailers have been relatively slow to catch onto the hype. Like in Cape Town, only 17 per cent of Vogue Business Index brands have a standalone retail presence there (though many might be discovered in department stores like Nordstrom and Neiman Marcus in the city). Most of these stores can be found a 16-minute drive north of downtown at The Domain mall, including a recently opened Burberry store. Hermès, on South Congress Avenue, is the most notable luxury store close to the city centre. Miami, projected millionaire growth rate 2023-2033: 70+ per cent In contrast, luxury brands have quickly recognised the wealth growth in Miami. Shoppers travelling to South Florida can find a big concentration of international luxury brands in both the Miami Design District and the Bal Harbour Shops area of Miami Beach. Aventura Mall, in the north of Miami-Dade County, has also become a luxury retail hotspot for brands including Louis Vuitton, Gucci and Hermès. A decade ago, construction was in full swing in Miami’s Design District; an LVMH-funded revival of the previously run down location. Ten years later and over half (58 per cent) of the brands included in the Vogue Business Index have a store in the Design District, including Louis Vuitton and Chanel. In that same time, the number of millionaires living in the city has increased by 78 per cent. Miami is now home to over 35,000 millionaires and 164 centimillionaires (people with a net worth over $100 million), with an influx of high-income individuals attracted by similar factors as in Austin: sunny weather and a lenient tax regime. The city has been dubbed ‘Wall Street South’ as financiers and major firms like Citadel have begun setting up their headquarters there. The nearby areas of Palm Beach and Naples are also experiencing rapid wealth growth, meaning expansion opportunities are likely to keep growing. — *Established luxury capitals are Beijing, Dubai, Hong Kong, Las Vegas, London, Los Angeles, New York, Milan, Munich, Paris, Seoul, Shanghai, São Paulo, Sydney, Tokyo Comments, questions or feedback? Email us at feedback@voguebusiness.com. More on this topic: Cash-rich, time-poor? Fashion sourcers are luxury’s new secret weapon Inside Japan’s enduring appeal for luxury Why Dolce & Gabbana is investing in Saudi Arabia

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