Bond Street and Beyond – Luxury Retailers Look to Neighbouring Streets

Bond Street and beyond – luxury retailers look to neighbouring streets 27 February 2015 | By Samantha Lyster Bond Street is one of the most famous luxury destinations in the world, but brands are finding it harder to acquire space there. Since its inception in 1683, when Sir Thomas Bond headed the group of developers that first saw the potential in the area, London’s Bond Street has welcomed the wealthy and fashionable. But today, high rents and low availability of units is forcing many luxury retailers to look to neighbouring streets. One such beneficiary is nearby Mount Street. According to sources, the thoroughfare’s most recent prize is Italian designer Marni, which apparently signed the lease for 2,000 sq ft at number 95 on Christmas Eve. But can other areas really have the pull and glamour of Bond Street? The first stores to colonise Bond Street (comprising Old and New Bond Streets) were actually occupied by antique and art dealers, but over the years, it has become synonymous with luxury brands. As its reputation as a desirable destination has grown, so have the costs associated with setting up on the street. Cushman & Wakefield states prime rents are now around £1,250 on the first 30 sq ft. But despite the deep pockets required, a store on Bond Street is still, according to luxury retailing expert Allyson Stewart-Allen, a must-have for many of the traditional luxury brands. “Certain luxury retailers would want to be on Bond Street,” she says. “It still communicates something about that brand. Also Bond Street is synergistic. By default, retailers will get footfall given the collection of brands in the street.” Value for money However, the tight supply of suitable units is not just pushing up rents but also sale prices - Prada paid £90m for 17-18 Old Bond Street in 2013. The upshot is that both retailers and investors are migrating to surrounding streets in search of value for money, and this spillover is creating not only a new luxury shopping experience for consumers, but also providing opportunities for those looking to broaden their central London property portfolios. In its 2015 first -quarter report, Savills notes that the London luxury market is existing in a similar way to its New York counterpoint, with a series of ‘villages’ emerging, each with its own distinct offer. Mount Street is an example of this. As the street is 90% owned by one landlord, the Grosvenor Estate, with 65%-70% of the units directly under its control, it has benefited from a carefully curated vision. “Mount Street has had significant investment, not only in the stores but also the pavements and road surfaces,” says Grosvenor’s Mayfair director, Haydn Cooper. “We really try to enhance the area so that it has a unique point of difference. We want to keep its character, which is why we work with and support existing tenants, such as the butcher Allens of Mayfair; we want to keep that vibrancy and energy.” The other significant difference is rents - a Zone A property would cost around £500 for the first 20 sq ft. For some designers, such as Christopher Kane, who may be opening their first, and potentially only, London store, this must be an appealing proposition. The placemaking credentials that such brands offer are also paying off for Grosvenor - rents increased by more than 20% last year. Savills says that it is the emerging pitches that have shown the most rental promise recently. Dover Street, Conduit Street and James Street saw Zone A increases of 57.1%, 38.9% and 25% respectively in 2014, although Marie Hickey, director of research, hastens to add that these rises came off low bases. Mount Street is gaining credibility as home to the more cutting-edge luxury retailers, such as Marc Jacobs, which heralded the swing towards the location becoming a fashion destination when it moved in 2007. “It hit the map with Marc Jacobs opening up, but it has been a slow burn,” says Cushman & Wakefield’s head of central London retailing Peter Mace. “Previously, it catered for a wealthy local population, but now it has become a real destination for Japanese, Chinese and Russian luxury-buying tourists.” Mount Street’s streetscape has made it an attractive location for luxury brands, he adds. It is a pleasant area to stroll through. Dover Street, conversely, is unlikely to become a major luxury retailing destination in his view, because of its traffic issues, even though it was chosen for Victoria Beckham’s first store and Alexander Wang is set to open there soon. There is also the question mark hanging over the location of Dover Street Market. When the Comme des Garçons venture relocates to the former Burberry building in Haymarket, a large space will open up, and it may not necessarily be a retailer that takes it on. Indeed, according to Savills, the streets of Mayfair are still on the hit list for restaurants and art dealers, the traditional occupiers of these ‘off-pitch’ areas. “For example, Caprice Holdings secured the former Natwest Bank site on Berkeley Square, which set a new benchmark for restaurant values at £190/sq ft,” says Savills’ Hickey. Flagship stores While there is a lot of talk about the luxury brand movement towards Conduit Street and South Audley Street, one of the most interesting areas to emerge is Grosvenor’s Duke Street. The estate is in the midst of developing the area as a hotspot for luxury menswear. Last year, the street saw the first ever flagship for British tailoring label E. Tautz open and the second London store for heritage menswear brand Private White V.C. “There’s been a lot of change in tenancy in recent years and we’re curating a menswear theme,” adds Cooper. “It’s an exciting time.” It is also drawing in shoppers from nearby Selfridges and helping to cultivate the idea of central London as a destination for high-spending male as well as female consumers - not a bad idea when you consider that since 2009, men’s spending in luxury retailing has outpaced that of women, according to a 2013 study of luxury goods by consulting firm Bain & Company. In response to this, brands such as Lanvin, Hermès, Dolce & Gabbana and Prada have upped the menswear element of their collections. In its quarterly earnings call in April last year, Prada announced that over the next three to five years, it would add 50 more dedicated men’s shops to its existing 30. The opening of stores spreading in just one element of a brand’s range - be it Burberry cosmetics or Chanel nail polish - is set to become more commonplace, says Stewart-Allen. “I would not be surprised if Hermès were to open up a store devoted to scarves or one to jewellery,” she adds. “Fragrance and accessories are often, for many consumers, the entry point to a brand,” says Stewart-Allen. “Once you purchase an item you then have a relationship with that brand. It’s not such a psychological jump to buying a belt. Brands want to migrate consumers up through the brand.” Stewart-Allen acknowledges that luxury brands, however, will always want a flagship store. And this is a major issue for London, claims Eric Eastman, CBRE executive director for UK retail, which noted in a recent report that very large units - the type of stores that brands now seek as flagships - are in chronically short supply in the capital’s traditional luxury hunting grounds. “There are simply too many global luxury brands now for the traditional luxury pitches in London to absorb them and that’s why new luxury pitches are beginning to emerge,” he adds. “Covent Garden is beginning to attract brand attention due to the major upgrading of the area and mix by Capital & Counties Properties. Chanel has opened on Covent Garden Piazza; so has Burberry and Dior. One of the most notable features of the central London retail market in recent years has been the steady evolution of Regent Street from tired backwater to global shopping attraction,” he says. “Regent Street has become a magnet for affordable luxury retailing, in part because it is one of the few streets in London with an abundance of stores of flagship size. A lot of the affordable luxury brands that have opened on Regent Street over the past five years have either previously been on Bond Street and relocated or have chosen to have branches on both streets.” Another trend, according to Cushman & Wakefield’s Peter Mace, is for brands to expand within existing occupancies, either going up into offices or down into the basement. Brands such as MaxMara and Jimmy Choo are among the occupiers to convert space. “Brands are continuing to expand their product range and therefore it makes sense for them to want to make the most out of the space available,” he says. Of course, it is far easier to take over office space if the luxury brand retailer actually owns the building. Luxury goods groups such as LVMH have already been shopping for stores and Prada purchased its own. Despite concerns over the Russian and Chinese economies, both of which have assisted in fuelling the rise in London’s luxury shopping market, agents are optimistic about the sector. The fact that brands faced with a tight supply in traditional areas are becoming creative in the way they retail in London, shows how important the city is to the global luxury consumer. Streets of gold With the low growth of rents on Bond Street - according to Savills’ 2015 first-quarter report it was just 4% last year - the question is why retailers would want to buy property on the street? Martin Thomas, head of central London retail at JLL, says that for the major luxury goods groups, like so many cash-rich companies, it is better to have money invested in bricks and mortar than sitting in a bank.

Load more