Knight Frank recently released a study (PDF) indicating that Toronto has substantially more high-net-worth individuals than Chicago. Chicago, however, has considerably more free-standing luxury stores than Toronto. We spoke with luxury retail expert Farla Efros, COO of HRC Advisory, to learn more.
According to the Knight Frank report, Toronto is home to 1,216 ultra-high-net-worth (UHNWI) individuals, compared to 827 in Chicago. UHNWI are persons with investable assets of at least US$30 million, excluding personal assets and property such as one's primary residence, collectibles and consumer durables.
For those who are curious, the Knight Frank report indicates that Montreal has 534 UHNWI's, while Vancouver has 262.
Chicago, unquestionably, has more free-standing luxury stores in its central core, when compared to Toronto. North Michigan Avenue, and the areas around Oak Street, Rush Street and the Waldorf Astoria Hotel boast a plethora of luxury stores. Saint Laurent Paris, Brioni, Brunello Cucinelli, Tom Ford, Marc Jacobs, Lanvin, Christian Louboutin, Piazza Sempione, Tod's, Loro Piana, Harry Winston, Graff, Jil Sander, Ralph Lauren, Ermenegildo Zegna, Buccellati, Pomellato, Church's, Omega, Bottega Veneta, La Perla, Christofle, Giorgio Armani and Van Cleef & Arpels operate free-standing locations in Chicago's central core. None of these brands currently have free-standing Toronto locations.
Toronto, in comparison, houses free-standing locations for the luxury brands Mulberry, Versace, and Guerlain, none of which currently operate free-standing Chicago stores.
Furthermore, when examining upscale department stores, Chicago currently has Toronto beat. Chicago's core features locations for Saks Fifth Avenue, Neiman Marcus, Barney's New York, Bloomingdale's and Nordstrom. Chicago's suburbs include two Neiman Marcus locations, one Bloomingdale's, and four Nordstrom stores. Toronto, in comparison, has three Holt Renfrew stores and an arguably upscale Hudson's Bay store at Toronto Eaton Centre.
Although Chicago will see a handful of new luxury retailers over the next two years, Toronto's luxury growth will appear to be greater in comparison, at least in the shorter-term. This spring, Longchamp, Kiton, Corum and Jaeger Le-Coultre will open free-standing Toronto locations - and none of these are currently operating in Chicago. Furthermore, Dior, Brunello Cucinelli, Tod's, Zegna, Omega, De Beers and a number of other premium brands are seeking Toronto retail space, with brokers saying that many more are also interested, declining to go on record for this article. Yorkdale Shopping Centre, which has seen more luxury retailer movement than anywhere in Canada recently, plans to further expand luxury offerings. Toronto's luxury growth will be even more pronounced as upscale department stores enter the market. Saks Fifth Avenue will open two Toronto locations in 2016, and by 2017 Toronto will be home to three Nordstrom stores. Bloomingdale's is also said to be seeking Toronto retail space, anticipating its first location opening in 2018. In 2016, as well, Holt Renfrew will open a 122,000 square foot location at Mississauga's Square One.
Despite this potential growth of upscale stores in Toronto, Farla Efros, COO of HRC Advisory cautions that Toronto is not necessarily a slam dunk. “One would need to take into consideration that retail cost structure—retail rents and taxes, for example—to determine if Canadian shoppers could generate the productivity required to drive sustained profitability. Personal and sales tax levels are also higher in Canada". Ms. Efros says that although numbers indicate that Torontonians are wealthier, Canadians in general tend to be more cautious spenders. She also suggests that Chicago may be a more significant destination shopping experience, enjoying the influx of millions of foreign wealthy travellers that would buoy luxury retail. Michigan Avenue is known globally, whereas Toronto’s Bloor Street, while increasingly well known, does not have the same brand awareness of Chicago's 'Magnificent Mile'.
Given that luxury brands do their research, Ms. Efros' comments may explain why some brands have hesitated open stores in Toronto, while operating locations in Chicago. Things will soon change, however, as more luxury brands plan free-standing boutiques in Canada's largest and wealthiest city.