CENTRAL RETAIL HEALTHCHECK 2018 STRENGTH UNDER PRESSURE

It’s indicative of the strength of occupier demand in the Central London retail property market that shop rents rose, on average, by 3% during 2017 – even in the face of continued economic uncertainty and lower levels of consumer spending.

London continues to be the destination for international brands – 30 ‘new faces’ arrived last year – while the level of new UK retailers taking space in the capital for the first time was also encouraging.

2018 will be a milestone year for London’s shopping scene. It will hopefully see the opening of the Elizabeth Line which will give much easier access to many of the capital’s shopping destinations. The 1m sq ft extension of the Westfield shopping centre in will open, and we’ll also see traffic banished from a large section of as part-pedestrianisation is introduced.

The hyper rental growth of the past three years is now at an end, and the level of vacant shops has gone above 2% for the first time in since 2010 – but this is still a void rate which is the envy of most shopping environments.

The macro challenges which have impacted all great global shopping cities will remain in 2018 but it will also bring exciting change.

CENTRAL LONDON RETAIL HEALTHCHECK 2018 2 EXECUTIVE SUMMARY

The diversity and quality of retail brands opening in the West End continues to impress. 46 new openings were recorded on the core shopping streets.

Encouragingly, one third of new openings are British.

Over 50% of stores on the core shopping streets are international brands. We are beginning to see “country brands clustering” on specific streets.

Jermyn Street retains its position as the most British street, with 93% of retailers being home-grown.

A decline in international tourism has resulted in a decline in annual West End sales.

Central London is not immune to the challenges facing the retail sector – rental growth slowed to 3% y/y to mid-2017 and vacancy rates have exceeded 2% for the first time since 2010.

CENTRAL LONDON RETAIL HEALTHCHECK 2018 3 ELIZABETH LINE BOOST TO TRADE

2018 will see the long-awaited completion of the Elizabeth Line, a £14.8bn infrastructure project to relieve central London congestion and improve accessibility. Ultimately, nine carriage, 200m long trains will have a 1,500 passenger capacity – almost twice the capacity of standard trains. At peak times there will be 24 trains per hour.

Trains started operating from The Elizabeth line will be 60 In terms of key West End stations, Liverpool Street in June 2017 miles long, running from Reading passenger usage of and the roll out will follow the and Heathrow in the west to is expected to increase from a schedule below: Shenfield and Abbey Wood in daily 185,000 to 225,000. A new the east. The line will service station entrance is already open • June 2017: Liverpool Street 41 stations, including 10 new on Marylebone Lane. This will be to Shenfield (TfL Rail) termini at Paddington, Bond supplemented by a new gateway • May 2018: Heathrow to Street, , entrance for the Elizabeth line Paddington (mainline Farringdon, Liverpool Street, from Hanover Square to alleviate platforms) (TfL Rail) Whitechapel, Canary Wharf, congestion. • December 2018: Paddington Custom House, Woolwich and Tottenham Court Road is also (Elizabeth Line platforms) Abbey Wood. expected to process over to Abbey Wood, through the The new line will service an 200,000 passengers per day. new central tunnels estimated 200 million passengers The eastern ticket hall is already • May 2019: Paddington per annum, bring an additional 1.5 operational, six times larger than (Elizabeth Line platforms) to million people within a 45-minute the original and bringing much Shenfield journey time of central London needed improved access via a • December 2019: Full through and add an estimated £42bn to new exit adjacent to . service (including Elizabeth the UK economy. The western ticket hall will exit Line services to Reading) onto a newly pedestrianised Dean

Street for easy access into Soho.

CENTRAL LONDON RETAIL HEALTHCHECK 2018 4 THE INTERNATIONAL SHOPPER

Average Transaction Value (ATV)

ATV (£) YoY Sales Change

ATV (£) YoY Sales Change 1600 50 1400 40 1200 30 1000 20 800 10 600 400 0 200 -10 0 -20 April May June July Aug Sept Oct

Source: Global Blue

Share of Total Sales China UAE Saudi Arabia Kuwait There has been a slight are visiting, however, Chinese tourists are essential to 50 decline in international are taking advantage of international sales, consistently 40 tourism, which may be Brexit bargains, with the contributing the largest proportion 30 attributed to heightened average transaction value of spend (35% in October 2017). 20 safety concerns in the growing steadily to £1,443 However, more recently, their 10 capital and a gradual in October 2017. share has fallen due to growing strengthening of sterling expenditure from other non-EU 0 Over the last six months, the against the major countries. That said, demand -10 largest contributors to Tax- currencies since the June from Chinese shoppers shows Free spend in the West End -20 2016 EU referendum, no sign of waning, with average April May June July Aug Sept Oct have been from China, the meaning that overall sales spend up 30% YTD to £1,663 in Note: October 2017 Kuwait figure is estimated UAE, Saudi Arabia and Kuwait. are down. Tourists who October 2017. Source: Global Blue

CENTRAL LONDON RETAIL HEALTHCHECK 2018 5 BRAND NATIONALITY

London has always been of Italian occupiers can be found, Brand Nationality and Bruton Street, which is a prime destination for British Italian American French Spanish Swiss Other home to the largest proportion international brands 100 of French brands out of our and that interest is still core pitches, including a UK 80 growing with, currently, debut for luxury leather goods 60 less than half of stores house Moreau Paris. Its third % on core shopping streets store opening after Paris and 40 being occupied by British Tokyo, Moreau reportedly paid a premium to be located amongst 20 brands (46.9%). the likes of Isabel Marant, Diane 0 holds its place Von Furstenberg and Paul & Joe. as the most British street (93% Vibrant South Molton Street has of retailers), strengthened Long Acre

become the go-to location for Kings Road Neal Street Bond Street Bond

by recent additions such as Street Dover Source: Colliers International Mount Street Bruton Street Regent Conduit Street international brands to launch Street Jermyn Carnaby premium eyewear brand Cubitt Road Brompton Albemarle Street Albemarle Monmouth Street Monmouth Redchurch Street Redchurch

their UK stores, such as Spanish East Street Oxford Oxford Street West Street Oxford

and shoe connoisseurs Grenson, South Molton Street fashion retailer T.ba, French further enhancing the area’s High Street women’s fashion IKKS and French position as the home of British Source: Colliers International pureplay fashion retailer Sezane. craftsmanship. By contrast, These will soon be joined by Sloane Street is dominated by the major French lingerie brand, the most prestigious French Empreinte. and Italian fashion and jewellery brands, representing two thirds of During 2017, we have tracked the street’s offer. 46 new openings on Central London’s core shopping streets, Other diverse pitches include 16 of which are British brands. Albemarle Street, where a hub

CENTRAL LONDON RETAIL HEALTHCHECK 2018 6 BRAND NATIONALITY

There have been eight new Marks & Spencer is leaving its New Openings openings on Regent Street, flagship store British International Total reinforcing its position as one on Long Acre in September. of the leading upmarket fashion The property is likely to be 18 16 destinations in Central London. redeveloped into several shops 14 Debut brands include luxury with new offices above. 12 Italian sportswear label Paul & 10 Microsoft has secured an Oxford 8 Shark, the launch of the H&M Circus flagship store of 22,000 sq 6 group’s ARKET and Weekday, 4 ft. The property is owned by the the first European flagship 2 Crown Estate and was formerly 0 from Canada Goose, Asics’ a Benetton store which has largest store in the world and relocated to the eastern stretch a new flagship for British label

of Oxford Street East near the new Long Acre Kings Road Neal Street Bond Street Bond Dover Street Dover

Pepe Jeans. Mount Street Sloane Street Bruton Street Regent Street Regent Conduit Street Tottenham Court Road Elizabeth Street Jermyn Carnaby Street Carnaby Brompton Road Brompton Albemarle Street Albemarle Monmouth Street Monmouth South Molton Street, Monmouth Line station. Street Redchurch Oxford Street East Street Oxford Oxford Street West Street Oxford Street and Jermyn Street have South Molton Street

On Bond Street, the former 11,000 High Street Kensington each welcomed two new British Source: Colliers International sq ft DKNY store at 27 Old Bond stores, with debuts from handbag Street is set to become a new creator Hill & Friends and lingerie Alexander McQueen flagship company Beija London. store. The brand’s current stores On Brompton Road, the area on Savile Row and Bond Street adjacent to Knightsbridge will be consolidated into the new station is currently undergoing store which, it’s understood, redevelopment, which will will feature fresh product lines improve the quality of the retail including furniture and interiors. offer. In 2017, there were two new openings, one for British brand All Saints and also a new flagship store for jeweller Seiko.

CENTRAL LONDON RETAIL HEALTHCHECK 2018 7 Nationality / New Openings Commercial St

Old St OTHER RECENT & PIPELINE OPENINGS 14

12 Oxford St 10 9 13 8 17 5 4 11 15 15,000 sq. ft. flagship store in the 3 1 6 US online fashion label Nasty Gal, which Boohoo K1 development on Sloane Street. The luxury fashion retailer is the acquired earlier this first of seven brands to join the year, opened a pop-up Sloane St development, which is being built on Carnaby Street in 2 from 2018. Brompton Road November 2017. The 16 Premium trainer brand Cruyff, 2,700 sq. ft. shop is the which creates sports-influenced brand’s first bricks and footwear inspired by the mortar venture outside legendary Dutch footballer Johan 7 Kings Road of the US. Cruyff, is now setting its sights on the UK market. Boden opened a new store on King’s Road in October, following The former BHS unit on Oxford 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 the success of five John Lewis Street saw Polish fashion chain concessions. Reserved open in September 2017. Remaining space is to be David Beckham’s Kent & Curwen taken by crazy golf operator has opened a store on Floral Swingers and new concept Street in Covent Garden. & Other Market Hall, which will convert Stories has also opened on Floral 36,000 sq ft into 25 restaurants, Street. Skechers is to open on 10 food stalls, four bars, a demo James Street, Covent Garden. kitchen and event space. The store on Brompton Road is relocating to a new

Note: –z nationality not known Source:• Colliers International

CENTRAL LONDON RETAIL HEALTHCHECK 2018 8 AVAILABILITY

Vacant floorspace in year following the closure of the Vacancy rates have fallen on Long Central London has risen Austin Reed, Banana Republic and Acre in Covent Garden, down French Connection stores. This from 7.5% in July 2016 to 2.0% above 2% for the first time has since been remedied by new in July 2017 - the second lowest since 2010, reaching 3.0% lettings to Lululemon’s flagship, vacancy rate among our sample in July 2017 (+1.2%). H&M’s two new brands, Arket and pitches after Oxford Street West. Availability Rates By comparison, the Weekday, and Smeg fridge’s first However, we expect this to be London Unit Vacancy London Floorspace proportion of empty units standalone store. tempered by some new space National Unit Vacancy National Floorspace coming onto the market this year. has increased at a much Out of the sample pitches that 16 slower rate, indicating Colliers International monitors, So far, Central London seems 14 that it is larger units that continues to have survived relatively 12 10 are more likely to be to have the highest vacancy unscathed from political and rate, at 7.3% of units in July economic uncertainty. Despite % 8 sitting empty. 2017. The area is at further risk a slight increase in vacancy 6 Whilst unoccupied space has of deterioration with nearby rates, they remain well below 4 been constrained for a number of Westfield London’s 740,000 sq the national average of 12.2%, 2 years by buoyant demand, extra ft extension opening in 2018, reflecting the capital’s strong, 0 space has recently been released though there are some signs that vibrant and dynamic retail market. Jul-13 Jul-15 Jul-16 Jul-14 Jan-17 Jan-15 Jan-16 to the market following several the high street is retaliating with Jan-14 high profile brands downsizing a strengthened line up, including Source: Colliers International their portfolios or entering Dishoom which opened in administration. Regent Street November. saw a temporary spike in vacant space at the beginning of the

CENTRAL LONDON RETAIL HEALTHCHECK 2018 9 RENTAL GROWTH

Prime Rental Change 2012 to 2017

Following three Whilst there has been a general Fringe consecutive years of cooling across London, some areas remain buoyant, such as Marylebone double digit rental growth Holborn Knightsbridge, the only area Covent City across Central London that has maintained double Soho Garden (as of mid-2017), rents digit growth since 2016. This Bayswater are still climbing, but to a coincides with very strong trading results from , which has West End much lesser extent. Over the past 12 months, rents benefitted from international visitors taking advantage of the have increased an average weak pound, particularly Chinese Kensington Knightsbridge of 3.0%, fluctuating tourists. across different pitches Victoria The strongest local growth since within the city. 2016 has been on Earls Court Chelsea Rents are readjusting in Road in Kensington, where several areas which saw Capco’s major regeneration significant growth last year, project is underway. including Covent Garden, where rental values on James Street increased 45% between 2015-16, coinciding with the introduction of 61%+ 41-60% 21-40% 0 -20% Charlotte Tilbury.

Source: Colliers International

CENTRAL LONDON RETAIL HEALTHCHECK 2018 10 PEDESTRIANISATION ON OXFORD STREET

Plans to transform part of Oxford Oxford Street is home to 300 Street into a pedestrianised shops, accounting for five million boulevard are set to get underway square feet of retail space and this year, to coincide with the generating an annual turnover of full launch of the Elizabeth line. £5 billion. Despite the anticipated The pedestrianisation project uptick in turnover, some concerns intends to address air quality have been raised about increases concerns, high collision rates in rents following the works, in an and severe overcrowding, as area which already contains some well as improving the shopping of the most expensive retail space experience. in the world.

CENTRAL LONDON RETAIL HEALTHCHECK 2018 11 FOR MORE INFORMATION

Paul Souber Mark Charlton Head of Central London Retail Agency Head of Research & Forecasting [email protected] [email protected]

Colliers International This report gives information based primarily on Colliers International data, which may be helpful in anticipating trends in the property sector. However, no warranty is given as to the accuracy of, and no liability for negligence 50 George Street is accepted in relation to, the forecasts, figures or conclusions contained in this report and they must not be relied on for investment or any other purposes. This report does not constitute and must not be treated as London W1U 7GA investment or valuation advice or an offer to buy or sell property. +44 20 7935 4499 Colliers International is the licensed trading name of Colliers International Property Advisers UK LLP (a limited liability partnership registered in England and Wales with registered number OC385143) and its subsidiary companies, the full list of which can be found on www.colliers.com/ukdisclaimer. Our registered office is at 50 George Street, London W1U 7GA.​ This publication is the copyrighted property of Colliers International and/or its licensor(s). © 2018. All rights reserved. 17484