Luxury Insights

It's In the Bag

A Kate Spade store interior. The Americana iconography and pop colors attract a coveted market segment attractive to luxury brands. Image source Pintrest.

Kate Spade, the American fashion house known for kitschy, colorful lines of clothing and accessories, will be purchased by luxury retailer Coach for $2.4 billion. The deal comes as the crowded luxury market competes with fast fashion and e-commerce brands.

Why is the Kate Spade brand so attractive to a traditional luxury brand like Coach? The unique twist on fashion and attainable price point has attracted the coveted millennial buyer.

Kate Spade has a truly unique and differentiated brand positioning with a broad lifestyle assortment and strong awareness among consumers, especially millennials.
Victor Luis, CEO of Coach

While Coach handbag prices can top out at $3,000, Kate Spade targets the entry-level luxury consumer with prices between $100-500. Building this multi-level brand is part of the Coach strategy to attract and retain consumers as they move through income levels and age brackets.

Learn more

• Coach is buying Kate Spade for $2.4 billion from Joe Ciolli, Business Insider
• Coach's $2.4 Billion Kate Spade Deal... from Elizabeth Paton, Vanessa Friedman, and Rachel Abrams, The New York Times

Family Matters: Why Family Offices Matter for Real Estate Professionals

Family offices are not just for billionaires anymore. As investments and fund management impact the portfolios of people in nearly all economic classes, it is important that real estate professionals in the luxury market take note of the ways individuals and families manage their assets. For the enterprising, the family office is the next frontier.

The new headquarters of the Perot Family Office in Dallas, Texas provides space for 250 staff dedicated to management of the family's wealth. Image source Mithun, Inc.

What is a family office?

As The Wall Street Journal notes, family offices began in the 19th century to manage the fortunes of the tycoons of the day (think Rockefeller) and offer similar services as private banks and wealth managers but are devoted to a single family. Nowadays, the affluent millionaires, of which there are more than 100,000 families in the U.S. alone, are teaming together to share the expenses of a devoted staff in a multi-family office.

The concept of the family office is expanding rapidly. UBS, one of the largest wealth management firms in the world, recently announced a new division dedicated to guiding families in creating offices of their own. This announcement comes at a time when high net worth families are becoming increasingly worried about the future of their wealth. The UBS Family Office Compass expects that 70 per cent of family offices will experience generational transition within the next 15 years.

John Matthews with UBS Wealth Management Americas notes that, "It is crucial for families wanting to create lasting financial success to identify their driving purpose and to formulate an overall family strategy. Clarity of purpose for the family, and in turn, the family office leads to improved performance of the family office over time."

How can this impact real estate professionals?

Family offices are seeking the expertise of advisers to guide their investments in areas with the greatest return such as natural resources, domestic equities, and real estate.

“The one place family offices think they can still generate double-digit returns is in operating businesses and real estate,” says Kristi Kuechler, president of the Family Office Exchange private investor center.

As family offices shift their wealth in anticipation of generational changes and increase their direct investments into real estate, professionals in the industry must use their training and resources to provide hyper-local data in a high-touch way that the staff of these offices expect from any adviser. Savvy professionals in the luxury real estate market can advise a family office on how best to develop a portfolio of investments in markets around the country with the most potential for return.

The Institute for Luxury Home Marketing produces the Luxury Market Report and more than 30 local market reports for its members to use as a tool to develop an effective real estate investment strategy for their clients. 

To learn more, visit the articles used for reference this post:

• Family Office Compass, UBS
• Financial Advice, Served Rare by Julie Steinberg and Kelly Greene, The Wall Street Journal
• Perots' new Dallas campus... by Steve Brown, The Dallas Morning News
• Rich Families Go Solo on Deals... by Margaret Collins and Simone Foxman, Bloomberg News
• UBS Urges Ultra High Net Worth Families... from Business Wire

The San Pellegrino Effect: Wealth, Cuisine and Travel

The list is here! For many, the announcement of the Top 50 Restaurants in the World is a harbinger of vacations to come, and entire trips are planned around a twelve course tasting menu. Snagging a reservation at any of the restaurants on the 2017 list is hard enough, but a new trend has emerged making just getting to some of these gastronomic paradises even more difficult.

A tasting plate at Eleven Madison Park, named the best restaurant in the world for 2017. Image source theworlds50best.com

In past decades, a majority of the restaurants honored on the San Pellegrino Top 50 Restaurants list were (and still are) in the expected culinary destinations of the world: London, New York, and, of course, Paris. Each of these cities is also an economic capital of the world, so it comes as no surprise that where the wealthy live and work is where they eat. The restaurants that emerge in these cities rely on their affluent citizens to sustain them year after year. In line with that expectation, Tokyo's notoriety for fine dining came only after years of sustain economic growth throughout the 1990s.

However, recent years have seen restaurants added to this list from unexpected places without the support of sustained economic growth or a concentration of high net worth individuals. Wealth-X, a leader in global wealth research, explains that social media has "super-charged" word of mouth, meaning that the sharing of reviews and the awareness of awards makes the remote locations of some of the newest top restaurants a destination for the jetsetting crowd. As Winston Chesterfield, custom research director for Wealth-X, notes:

An entry in the list acts as a siren call to luxury concierges, jetsetters, and the world’s elite – and as such, almost guarantees full tables for the next 12 months.

The native, resident populations are, most often, not the focus for these modern marvels of food. Though they are, no doubt, a discerning group whose palates often inspire the innovative menus, the close presence of internationally renowned, multi-starred, celebrity-visited establishments is largely inexplicable and as remote from their existence as the cities from which these international individuals visit.

These individuals are the intended, the chosen ones. The premium-cabin-flying, luxury experience nomads, whose moving meccas are the next travel experience, the next luxury hotel concept, the next cuisine. These experiences have become as much a currency as the designer wallets which they plonk on the tables, and perhaps even more so than the motor cars they arrive in.

Read more about the changing trends in fine dining and where your clients may be eating next at LuxurySociety.com.

Canadian Home Prices Rise In February as Toronto Stays Strong

Canadian home prices continue to rise, despite new regulations on foreign buyers in some markets and concerns of a real estate bubble. Prices across Canada were up 13.4 percent compared to a year ago, the biggest 12-month increase since November 2006, indicating strong growth and recovery after the global financial crisis.

Image source HousePriceIndex.ca Teranet - National Bank House Price Index

The Toronto market continued to defy expectations, showing home prices rising for the 13th straight month, despite tighter mortgage lending rules. Reuters reports that some economists worry that the market could turn into a bubble if further regulations are not put in place to help control prices.

 

Read the full article written by Leah Schnurr (edited by Jonathan Oatis) on Reuters.com

See more details of the report on the Canadian Housing Marketing from Teranet - National Bank

 

U.S. Luxury Prices Flatlined in the Last Quarter of 2016

Santa Clarita, an affluent suburb outside of Los Angeles, saw the biggest price growth of the fourth quarter last year. Wish Sotheby's International Realty

The stock market rally has done little to move prices in the luxury real estate marketed consistently across the United States. In select cities, particularly Santa Clarita, California, average luxury home prices did rise more than 113%, however many cities saw a double-digit decrease in luxury home prices. The average luxury home price across the U.S. remained flat in the final quarter of 2016, rising a slight 0.7% year-over-year.

Read the full article at Mansion Global by Fang Block and see how your luxury market is performing this week with The Institute's Luxury Market Report.

Nine Things To Know About Today's Billionaires

“Luxury real estate is very competitive in the U.S.,” says Lucio Bernal, an Expert Trainer with the Institute for Luxury Home Marketing and President of the Palm Springs Regional Association of REALTORS. “There is a direct correlation between luxury real estate and the number of billionaires in the U.S. — it’s those billionaires who are essential in keeping our luxury business active and robust.”

As the number of billionaires around the world increases, it’s helpful to understand how global business trends are affected by these people and the sources of their wealth.

In a recent New York Times article entitled “Where the Big Money Is,” Juan Velasco and Paul Sullivan explored today’s billionaires around the world through statistics. The infographics in the article present research by Wealth-X, which uses a database of regularly updated information on high net worth individuals.

Here are the top nine things to know about today’s billionaires: 

Image Source: New York Times February 19, 2017

1. Four of the top five billionaires in the world are American.

Bill Gates leads the pack at $89.3B, while the other top billionaires include household names such as Warren E. Buffett (#2, $73.5B), Jeff Bezos (#4, $68B) and Mark Zuckerberg (#5, $50.7B). The only non-American in the top 10 billionaires is Spanish clothing retailer Amancio Ortega Gaona (#3, $70.7B).

2. Europe has the most billionaires of any region.

With 806 billionaires, Europe is far and away #1 on this list. After Asia (645) and North America (628), there is a much lower concentration of ultra high net worth individuals in other regions: Middle East (166), Latin America & Caribbean (154), Africa (41), and Pacific (33).

3. The city with the most billionaires is New York City.

“The Big Apple” is home to 97 billionaires — followed by Hong Kong (79), Moscow (74), London (68), Beijing (38), Singapore (37), Sao Paulo, Brazil (36), Dubai (35), Istanbul (32), and Mumbai (31).

4. The world’s 2,473 billionaires had a combined wealth of $7.7 trillion in 2015.

For context, the U.S. GDP (Gross Domestic Product) was approximately $17.9 trillion in 2015, and China’s GDP was about $11 trillion. If the world’s billionaires were a country, they would come in third after those two nations.

6. The most common industry for billionaires is finance/banking/investments.
   The wealth of 377 billionaires comes from the finance/banking/investment industry, followed by: industrial conglomerates (317), real estate (141), nonprofit and social organizations (122), manufacturing (120), technology (114), textile, apparel and luxury goods (111), food products (103), and various other industries (1,068).
7. There are 8.1 male billionaires for every 1 female billionaire.

While there are only four females among the top 50 billionaires, a 2015 Business Insider article revealed Wealth-X research that “The World’s 15 Richest Self-Made Women Are Worth $53 Billion — More Than the GDP of Iceland.”

7. The majority of male billionaires are self-made, while the majority of female billionaires inherited their wealth.

60.5% of male billionaires are self-made — while 29.1% of them have a combination of inherited and self-made wealth, and 10.4% inherited their fortune. When it comes to female billionaires, 16.5% are self-made, 27.5% have a combination of inherited and self-made wealth, and 56% inherited their money.

8. The average ages of billionaires are 63.2 for men and 62.2 for women.

Today’s billionaires, categorized by age:

• Below 35 - 1.5%
• 35-44 - 6.2%
• 45-54 - 20.7%
• 55-64 - 25.7%
• 65-74 - 25.9%
• 75-84 - 13.4%
• Above 85 - 6.6%

9. The most common interest among billionaires is philanthropy.

While philanthropy tops the list of billionaires’ interests and hobbies at 56.3%, others include: travel (31%), art (28.7%), fashion and style (25.2%), politics (22.2%), wine and spirits (15.9%), boating (14.9%), health and exercise (14.8%), automobiles (14.5%), collectibles (14.1%), football/soccer (13.1%), reading (12.3%), cultural events (12.1%), golf (11%), and dining (10.9%).

Conclusion

These ultra-high net worth individuals play a major role in the luxury real estate market, so knowing as much as possible about them is essential for real estate professionals who serve affluent clientele. Living in “The Information Age” makes it easier to understand client needs and build successful relationships with them. Institute members have access to Online Wealth Lookup and WealthEngine's Prospecting Tool to assist them in learning more about the affluent buyers and sellers in their luxury markets.

Super Bowl LI Boosts Luxury Market in Houston

Super Bowl Sunday was this past weekend, and that one event had a positive impact on the host city. With more than a million tourists who came to watch the Atlanta Falcons take on the New England Patriots, Houston’s growing luxury real estate market experienced a real boom.

Like any city hosting a large sporting event, Houston revitalized many of its areas as the city tried to accommodate more than one million tourists, as well as wealthy individuals and celebrities who tend to stay at exclusive and luxury areas. With that in mind, Houston already has a growing luxury housing market, and the Super Bowl has driven many changes to the area. For example, the George R. Brown Convention Center underwent a large renovation project, worth around $175 million.

According to Avishai Sivan, CEO of Tena Holdings, a Houston based real estate investment firm, “ The Super Bowl couldn't have come at a better time. It helped the city plow through the economy's oil dip in more ways than one. From road construction around NRG stadium to a number of other new developments and improvements to the city, preparations over the past few years for the big game, hopefully will have a lasting effect on the real estate market and property value in Houston.”

Click here to read the full article.