Logical Luxury Fuelling High-End InvasionJuly 2023
Originally published in The West Australian Property Section by Kim Macdonald, Wednesday July 12 2023.
Lease Equity’s Jim Tsagalis believe the CBD will not only sustain the recent onslaught of brand stores but will soon welcome many more, claiming luxury has become part of Perth’s new norm.
Mr Tsagalis, who started Lease Equity with wife Karin 21 years ago, said Perth’s penchant for luxury is defying the cost-of-living crisis – with the CBD’s luxury sales up by 44 percent for the first four months of this year, compared with the same period in 2022.
Highlighting the two-speed economy gripping the broader mortgage belt, Mr Tsagalis said there is plenty of mostly resource-driven cash kicking around for discretionary spending.
Lease Equity is responsible for recently signing up Christian Dior to its first Perth store, which will be set over two stories with a 50m frontage facing Murray Street, taking up the same space as four homes.
It follows the expansions of Louis Vuitton, Tiffany, and the upcoming Fendi, among other luxury brands.
But it coincides with 12 interest rate hikes and a cost-of-living crisis the likes of which the State has not experienced.
Will Perth really embrace a brand such as Christian Dior, which sells T-shirts for $1700 to $2300? Who would be able to afford its cheapest item – a $600 water bottle?
Mr Tsagalis claims there is a willing and able cohort of shoppers in Perth, with many benefiting from an expansion in intergenerational wealth that was enhanced by the recent housing boom.
He said Gen X and Gen Y – fast taking over a Gen Alpha – was “on-boarding to luxury” at a younger age. Brands that were once the domain of 20 and 30-years-old are now being bought by 15 and 16-years-olds.
“In addition to that there is a rise and rise of the middle class,” he said. “In Australia, and in Perth in particular, there is a very affluent domestic market.”
Mr Tsagalis said there is a genuine shift in how people perceived luxury, claiming someone who questioned the value for money at the supermarket was also prepared to pay for a brand name garment or handbag.
“Why is that? The internet has made the world smaller,” he said. “People want to buy into quality, prestige and a social stratum and luxury gives people that with a transaction.”
As bizarre as the trend appeared on the surface, he said it was logical in today’s social-media-driven society.
“Luxury – it’s emotionally really logical,” he said. “It’s like comfort food. People want to buy into a brand”
“They want to buy into a status. They want to buy into how they look and feel. Instagram has accelerated everything.”
Mr Tsagalis said the move to luxury was the biggest trend he and his wife had witnessed in Perth since Myer opened in Forrest Chase, anchoring Perth’s second mall.
And the pair have seen some change, having leased more than half the retail shops in Perth at some point, a record which Mr Tsagalis claims is “unheard of anywhere else on the planer”.
They claim the gestational period between talking to an international retailer and opening a store in Perth can be as long as a decade.
So how have they managed to compete against Perth’s major commercial agencies, which are mostly part of deep-pocketed multinationals?
Mr Tsagalis, the son of a Greek migrant who worked as a labourer in Kalgoorlie, said it came down to hard work and showing up.
He recalled a recent story where he had met a client for a 9am coffee. By the time they greeted each other Mr Tsagalis had already made 39 phone calls.
The West Australian put him to the test, counting his incoming and outgoing calls on his mobile at 3.30pm on Monday afternoon.
The total number of his daily calls came to a grand total of 105 calls at that point.
“You’ve got to show up, you’ve got to make the call,” he said. “It’s not about the money. It’s because I love what I do.”