Driven by London’s rapid growth and economic dynamism, the capital’s retail scene is massive and rapidly evolving. Now the seemingly exponential level of occupier demand coupled with rising rents is galvanising property developers into action.
Colliers International research has identified more than 30 major retail development projects planned in and around greater London over the next few years. This equates to a staggering 10m sq ft of net new retail space: the equivalent of seven Bluewater shopping centres.
Not surprisingly, some commentators are asking if there will be enough spending power to make all this new space viable. It is an appropriate moment to look at the health and prospects for London’s retail scene.
the capital’s retail scene is massive and rapidly evolving
During the last 10 years the population of London has grown by one million people and it is predicted to grow by a further million over the next decade. This will make London one of the most densely populated capital cities in Europe with a population of more than nine million.
Tourism is a major economic influence with 25m visitors coming to London last year, of which nearly 17m were from overseas. For the first time, London has overtaken Paris as the world’s most visited tourist destination. Last year spending from these visitors topped £4bn in the capital’s shops.
In addition, Londoners each spend, on average, around £3,500 annually on comparison retailing.
China is a massive influencer of every international business environment and London may be a particular beneficiary following the relaxation of visa requirements for Chinese visitors.
Presently around 150,000 Chinese visitors come to the UK each year, but in France this figure is over 1.1m because of greater ease of entry. Proposals to simplify UK entry for Chinese nationals could bring a massive influx of spending into the capital. The Chinese are already the highest spending visitors to London averaging £1,600 of spend per head per visit.
Some estimates calculate that if the UK was to attract the same numbers of Chinese visitors as France then we could benefit from more than £1.2bn of additional consumer spending annually.
London has overtaken Paris as the world’s most visited tourist destination
The effect of Chinese spending power is not lost on luxury retailers in the West End where over half have Mandarin speaking staff.
International retailers are also flocking to London. New entrants in the core West End include ElevenParis, Scotch & Soda, Lavand, Filson/Gant Rugger, Cath Kidston, Hunter, Sunspel and Warehouse, and top European and US retailers like G Star, Chanel, Lulu Lemon, Tiger and J Crew.
Against this backdrop, rents on prime shopping streets have continued their upward trajectory.
The fierce demand for space at locations such as Regent Street, Bond Street, Oxford Street and Sloane Street has produced a ripple effect where displaced domestic retailers and incomers cannot afford the top rents and are therefore taking space elsewhere.
The white hot Bond Street market has seen record premium deals and record rental growth. Watches of Switzerland moved to a 16,000 sq ft flagship store on Regent Street whilst collecting a £10m premium on its former Bond Street store. We advised GINA on the sale of its Bond Street store lease to La Perla for a premium in excess of £5m. GINA relocated to Mount Street and its former Bond Street home was sold to a Hong Kong investor for a sub 2% yield.
Zone A rents on Bond Street now stand at over £1,200. The effect of this rising demand and rental levels has seen some luxury retailers migrating to nearby Mount Street, where Grosvenor has transformed what was once a quiet Mayfair thoroughfare into an exclusive blend of luxury fashion, restaurants and galleries.
And it is not just Mayfair streets like Dover, Albemarle and Conduit that are the beneficiaries of this ‘ripple effect’. Covent Garden, Marylebone, Seven Dials, Spitalfields and Shoreditch are all now attracting high quality retailers who are seeking dynamic retailing environments at more affordable rents.
Historically the London shopping scene has focused on its established shopping streets rather than large shopping malls, but this orientation has changed more recently with the advent of Westfield London and Stratford. These two schemes alone produce combined sales of over £2bn with more than 66m visitors annually.
developers have been quick to react
The scope for London to radically increase its shopping scene is clear and developers have been quick to react.
Among the projects that are set to change the retail landscape
in London with a significant retail component include:
- King’s Cross: a 67-acre development which will include 500,000 sq ft of retail space
- Brent Cross: the expansion of London’s original out of town shopping centre to provide a further 600,000 sq ft
- of retailing
- Westfield London: is getting a 550,000 sq ft extension anchored by JLP taking the centre to a mammoth 2.2m sq ft
- Battersea Power Station: 1.5m sq ft of retail and leisure,
- hotels and residential
- Earls Court & Olympia: 77-acre development encompassing four new ‘villages’ and 7,500 new home
We believe that London can cope with this level of new retail development, as the overall population increase will essentially mean that there will simply be more shoppers.
London is poised to enter a unique phase of its existence as one of the world’s greatest shopping cities
Equally important is that so many of these developments are holistic: building proper infrastructure to enable access to public transport, and provide a true mixed-use approach incorporating housing, offices, leisure and retail. Projects of this magnitude will create the shopping equivalent of their own ‘micro-climates’.
The new landscape will certainly pose challenges for the existing owners of large tranches of London shopping but the control and vision that single ownership brings can ensure an orderly delivery and design of new retailing areas.
The work of major owners such as Shaftesbury on the Carnaby Estate and the Crown Estate on Regent Street have vividly shown the benefits of single ownership and how retail environments can be shaped for maximum appeal to shoppers.
The proponents of the raft of new developments will be equally alive to how this level of control can be used to both woo retailers and attract shoppers.
London is poised to enter a unique phase of its existence as one of the world’s greatest shopping cities. Its retail boundaries will broaden and the proliferation of shopping will be profound.