Barely a year after buying a huge building on the Champs-Élysées, Brookfield Asset Management received an offer last autumn that was so tempting it abandoned its plans to redevelop the Paris block.
The near-€1bn sale in December to Bernard Arnault’s LVMH netted the Canadian real estate investor at least €200mn, according to broker estimates, and marked a new record for the city’s most famous avenue. The luxury conglomerate plans to use the site as a store for Dior, its second-biggest brand after Louis Vuitton.
The location, near museums and monuments, is making the thoroughfare desirable again for top brands after years of the area being shunned.
“When you’re on the roof of 150 Champs-Elysées, you have the feeling you can almost touch the Arc de Triomphe,” said Vincent Kerboull, who runs French transactions for Brookfield and is part of the team that sold the 20,000 square-metre building to LVMH.
First laid out in the 17th century, the Avenue des Champs-Élysées was long the pride of Paris and remains a tourist magnet. But a tackier turn in recent decades has pushed away locals as a mix of rundown arcades, fast-food joints and souvenir outlets took over and whole empty blocks fell into decline.
Efforts to clean up the street have picked up in recent years as a flurry of property deals have pushed it back upmarket, with luxury brands led by LVMH pouring money and political capital into revamping the area.
High-end brands now occupy about 25 per cent of the avenue, up from 15 per cent five to six years ago, according to commercial real estate adviser Cushman & Wakefield.
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LVMH secretary-general and Arnault lieutenant Marc-Antoine Jamet took over as president of the avenue’s business association, the Comité Champs-Élysées, in 2021.
“For LVMH, the Champs revamp is clearly strategic,” said one person close to the company. “When Jamet joined the Comité, he was there to help smooth things for the group . . . and give [the organisation] more energy.”
With the wider retail world still grappling with the tilt towards online shopping, the biggest players in luxury are bolstering their physical presence, snapping up prime properties in high-end shopping streets around the world.
French rivals Kering and LVMH have spent more than €5bn between them on major real estate transactions since the start of last year. Gucci-owner Kering’s €1.3bn purchase from Blackstone in April of a building on Milan’s Via Monte Napoleone was the biggest property deal in Europe for two years. In January it also spent €885mn on a Fifth Avenue building in New York currently let to Dolce & Gabbana and Armani.
The companies insist property purchases aid their business rather than being core to it. They still lease the majority of their retail locations globally, but competition to buy some of the most eminent locations has picked up in the past 18 months, brokers say, defying a wider real estate downturn.
“The business of a group such as ours is not a real estate business. We use fine locations around the world to place the best brands, but we have to have the best brands and find the best locations at the best price,” Arnault said at the group’s annual meeting in April.
The real estate pile-in comes in part as luxury groups have been balking at investing millions in redesigning stores and renovating buildings where they are only short-term tenants. And in part it is to secure the spots so others cannot. For 150 Champs Elysées, Brookfield had looked initially at leasing the space to a variety of competing luxury brands.
“This is about protecting prime locations. It is a defensive strategy at its core,” said Chris Gardener, managing director at real estate adviser CBRE, who works on large retail transactions. “You could call it the ‘store wars’.”
Gucci-owner Kering has underperformed its peers in recent quarters but, with cash to spend, it has also made several big-ticket property purchases geared towards elevating its brands.
“Once a brand is making over €3bn in sales, these [kinds of locations] become indispensable,” Kering chief executive François-Henri Pinault told reporters in February. But “just because a building is available in a premium location, it doesn’t mean we’ll buy it. We will take it only if it makes sense.”
LVMH’s Champs-Élysées spree also included the acquisition of a building housing a multistorey Louis Vuitton store for a reported €770mn in 2023. The group is transforming another large property — a leased building the size of a city block currently encased in scaffolding that mimics a giant Louis Vuitton trunk — that is expected to include a Louis Vuitton-branded hotel.
“Luxury has outperformed the rest of retail, no doubt about that,” said Robert Travers, head of Emea retail at Cushman & Wakefield. “Once you get out of the top 10 streets, rents halve very quickly. There is no real estate sector that is as location-sensitive as luxury.”
Transforming the Champs-Élysées is taking time. The side streets directly off the avenue still host cheap brasseries, kebab shops and money changers. A McDonald’s restaurant is one of that group’s most profitable worldwide, according to brokers, meaning it is unlikely to leave.
But a gradual takeover of part of the avenue by some major sports brands — Nike and Lululemon have prime spots and Adidas has just opened its largest European store there — explain part of the avenue’s new allure, one that may be reinforced after Paris hosts the Olympic Games this summer.
“It’s an artery in the city that attracts young people,” said Vincent Ascher, a partner and luxury specialist at Cushman & Wakefield in Paris, adding that luxury groups were looking to broaden their clientele too. “The avenue is famous, instagrammable.”
However, it is still a less obvious choice for luxury groups that already draw customers to the nearby upmarket shopping streets of Avenue Montaigne or Rue du Faubourg Saint-Honoré.
Most real estate experts are sceptical that the Champs-Élysées could ever draw the most exclusive brands such as Chanel or Hermès.
“There are lot of people buying real estate,” Hermès chief executive Axel Dumas told reporters in March. “We are lucky. We like to be more offbeat. They buy a lot on Fifth Avenue. We are not on Fifth Avenue. They buy a lot on the Champs-Élysées. We are not on the Champs-Élysées.”
The growing push by LVMH coincides with a concerted effort by city authorities to redevelop the area in conjunction with the Comité, with proposals to make it leafier and more friendly for pedestrians and bikes. The city has held giant picnic events, car-free days and artistic showcases on the avenue in recent years in an effort to draw back Parisians.
Although LVMH properties have been targeted by protesters — climate and social activists Attac this year unfurled a huge “Tax the rich” banner on the giant Louis Vuitton box — the luxury group has so far largely sidestepped the planning battles that have bogged down some other redevelopment projects, such as during the construction of the Frank Gehry-designed Louis Vuitton Foundation art museum in western Paris or a rejected plan to build a Cheval Blanc hotel in Beverly Hills last year.
Emmanuel Grégoire, Paris deputy mayor in charge of urbanism and architecture, said luxury groups’ upgrades on the Champs-Élysées were welcome as they would make some buildings that had been given over to offices more accessible.
“We discuss it all with the brands, we negotiate the building permits and we’ve asked them to open up some floors,” Grégoire said. His main concern was preserving a balance on the avenue, he added, with theatres nearby and a sporty component as well as luxury.
Still, LVMH, France’s largest company, has left nothing to chance. Jamet, friendly with Paris mayor Anne Hidalgo and a fellow member of the Socialist party, is well-connected and well-versed in officialdom, people who have worked with him said. Hidalgo has a long-standing relationship with the group, attending fashion shows and lighting Christmas decorations on the avenue with Jamet and the Comité.
LVMH declined to comment. Jamet did not respond to a request for comment.
The group’s interests sometimes serve those of the city as well. When LVMH took on the leases to construct the Louis Vuitton Foundation in a park to the west of the French capital, Paris officials were also able to nudge the company towards investing in revamping an adjacent historic amusement park.
“Luxury groups like LVMH put means into maintaining and improving a lot of places [and] buildings,” the person close to the group said. “The French state needs private investors in its heritage — even though not everyone likes that in France.”
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