Hermès Revealed as Buyer of Record $400 Million Beverly Hills Property
Rodeo Drive site is about twice the size of Hermès’s current location a few doors down
- Hermès snapped up two Rodeo Drive properties for a record $400 million, making it the largest retail real-estate acquisition in Beverly Hills.
- The newly acquired 25,000 square-foot location currently houses Tom Ford, Moncler and Balenciaga, whose leases still have years remaining.
- Luxury retailers are buying prime real estate globally, driving up Beverly Hills asking rents by nearly 50% since 2019 due to limited inventory.
Hermès is the mystery buyer behind the largest-ever retail real-estate acquisition in Beverly Hills, ending months of speculation over who now owns two adjoining properties on the city’s famed Rodeo Drive.
The French luxury-goods company shelled out a record $400 million for control of the buildings last summer. While the sale and the price were reported at the time, the identity of the buyer was never disclosed.
But people familiar with the matter said that Hermès acquired the storefronts currently occupied by Tom Ford, Moncler and Balenciaga.
It isn’t clear what Hermès plans to do with its purchase. It now controls the properties after buying an affiliate owned by the seller, Ireland-based ECA Capital Ltd. The roughly 25,000 square-foot location is at 338 North Rodeo Dr.
If Hermès decides to open a store at the property, it might have to wait a while. The current tenants’ leases still have years to run. But if it does so, it would have a store about twice the size of its current location a few doors down.
The purchase is the most expensive retail real-estate acquisition in Beverly Hills since at least the early 2000s, according to data tracked by real-estate firm CBRE that excludes land purchases.
Luxury retailers, flush with cash and eager to control their own real estate, have been snapping up prestigious addresses in major cities across the globe.
The parent companies of fashion houses including Gucci and Cartier have spent hundreds of millions of dollars buying their brands’ storefronts on streets including Fifth Avenue in New York, Avenue Montaigne in Paris and London’s New Bond Street.
Luxury giant LVMH has spent billions over several decades assembling an extensive portfolio worldwide. The owner of Louis Vuitton and Dior now controls a chunk of Rodeo Drive.
Hermès owns its store’s current location on Rodeo Drive, which it bought about 15 years ago. The luxury retailer rents many of its stores’ other locations, including its New York City flagship on Madison Avenue.
Many other retailers have been shrinking their U.S. footprints, looking to save on rent and because e-commerce has prompted some to display and stock smaller inventories in-store while selling other items online.
But luxury retailers have ample cash on their balance sheets to spend on real estate, even though luxury sales slowed in recent years. Many have expanded the sizes of their flagships.
“What you see now on Rodeo Drive is not only a commitment by the luxury brands that are able to buy their real estate, but you’re seeing the buildings get much bigger,” said Jay Luchs, a vice chairman at Newmark who brokered the 338 North Rodeo Dr. transaction.
A smaller percentage of luxury goods are sold online than other types of retail, prompting fashion houses to seek more space to showcase their handbags and watches. Many retailers are also adding restaurants, bars and cafes to their stores as they compete for customers.
Competition for retail real estate in Beverly Hills has heated up since the pandemic, in part because luxury giants have been purchasing properties and leaving less space available for everyone else. Asking rent prices have grown nearly 50% since 2019, according to CBRE, with one property leasing for a record-high annual rent of $1,380 a square foot at the end of last year.
Cain International, a London-based asset manager and developer, is trying to tap in to that demand with a 17.5-acre project under construction near Rodeo Drive. Known as One Beverly Hills, the $10 billion project is one of the most expensive under way in the U.S.
Outerwear retailer Canada Goose and jeweler Graff are among the tenants to have recently signed new deals in Beverly Hills. There is only one vacant storefront currently available for long-term lease on Rodeo Drive, said CBRE senior vice president Houman Mahboubi.
The squeeze for space is getting so intense that retailers whose leases aren’t expiring until 2029 or 2030 have already started negotiating renewals with their landlords, he said. These discussions typically happen six months to a year in advance.