Bvlgari flagship store in Sydney up for sale by Germany’s Deka Immobilien

The jewellery and bag retailer’s home on Sydney’s Castlereagh Street has been put up for sale by a German real estate investment company as it seeks to almost double its investment amid a luxury retail boom.

Bvlgari’s flagship store in Sydney has been put on the block by a German real estate investment manager.

Sydney’s prestigious Bvlgari flagship in Sydney’s Castlereagh Street has been put on the block by German real estate investment manager Deka Immobilien as it seeks to almost double its investment amid a luxury retail boom.

Deka picked up the famed shop for about $56m for in 2018 and then renovated, with the famed Italian fashion house committing to a fresh 10-year lease that stood it in good stead as cashed-up customers went on a post-pandemic spending spree.

Bvlgari has a history going back to 1884 and is known for its jewellery, watches, fragrances, accessories and leather goods. The Rome-headquartered enterprise was bought by the French conglomerate LVMH in 2011, making it an even stronger operation.

The luxury retail landscape is dominated by a handful of giants, with both tenants and landlords scrambling for prime retail locations, which is also lifting rentals. Big brands are increasingly purchasing their own or their competitors’ retail stores outright, bypassing rising rents and taking long-term control over their top properties.

This has been seen in acquisitions by luxury heavyweights. Prada, Kering, LVMH, Richemont and Hermes, with top chains estimated to have spent over $US13bn on real estate acquisitions in the past 24 months.

The building that houses Bvlgari’s gems in Sydney has been put up for sale.

The Sydney Bvlgari showed a yield of about 4 per cent when it last sold, and a fresh deal could come close to that mark as wealthy buyers and chains jostle for position in the best city strips.

Prices have soared. The retail stratum of the Castlereagh Street building changed hands in 2015 when a Spanish private investor picked up the flagship store for $28.7m, although this was before its latest renovations that could drive its price to about $100m.

High-end retailers have been chasing space in Sydney, particularly around Castlereagh Street, as workers lock in their return to the city and destination shoppers target the area known as Sydney’s golden mile.

Luxury flagships rarely change hands in Sydney, with just seven assets sold in the past decade. If anything, barriers to entry are rising as high construction costs crimp new building.

Deka Immobilien has tapped JLL’s Nick Willis and Sam Hatcher and Cushman & Wakefield’s Mark Hansen, Bridhe Woods and Daniel Wolman to handle the sale in the tightly-held part of the city.

Most of the assets in the CBD pocket are held by families for generations or by owner-occupiers, with Hermes acquiring the retail stratum of the Sydney CBD’s heritage Trust Building, also on Castlereagh Street, for a reported $105m in 2018.

Offshore players have also locked real estate in key cities. Ralph Lauren recently unveiled its $US132m acquisition of their store in SoHo, Manhattan, and Gucci owner Kering made a US$963m acquisition in NY City on Fifth Avenue.

“The Sydney King Street luxury precinct is ground zero for luxury retail in Australia. This has been further strengthened with the opening of the 25 Martin Place retail precinct including new flagship retailers Valentino, Missoni and Brunello Cucinelli, integrated with the new metro station that has drastically increased foot traffic in the location,” Mr Willis said.

The Bvlgari flagship could be picked up by an investor or even an owner-occupier. The property has a flexible lease tail expiring in 2028 and the ability for a market review.

Mr Hatcher said the global sector was underpinned by a robust income growth story as rents had continued to escalate, correlating with the tightly held nature of their top locations.

“The key is to acquire assets that provide significant mark-to-market rental reversion opportunities. Unique to this asset class is the sheer productivity of these stores, in some instances sales per retailer are well in excess of $100m in Moving Annual Turnover, coupled with ultra-low gross occupancy costs ratios below 10 per cent supporting unparalleled prospects for rental reversion potential,” he said.

Rental rates for new deals in this precinct have been rumoured to be from $8000 per sq m and up to $15,000 per sq m.

A recent Cushman & Wakefield report suggested Sydney’s nearby Pitt Street Mall ranked eighth for the world’s most expensive retail destinations.

Mr Hansen said the strength of the Bvlgari covenant, a subsidiary of global powerhouse LVMH, would draw capital to the rare property.

“We are expecting to generate significant interest from both domestic and international investors seeking a trophy asset with strong growth potential in a resilient market,” he said.

Originally published as Bvlgari flagship store in Sydney up for sale by Germany’s Deka Immobilien