The Central London retail market shows no signs of slowing, with a raft of new domestic and international retailers recently taking space and more expected to do so in the coming months.
Rents are still under pressure in both prime and secondary locations, with competition for prime space leading to strong demand for locations previously considered “peripheral”. Mayfair is a noteworthy example, with emerging streets such as Conduit Street, Dover Street and Brook Street seeing marked improvements to tenant mix which has resulted in significant rental growth.
Regent Street and Bond Street continue to generate high levels of footfall and Oxford Street saw one of the largest recent deals, with Dubai retailer Toy Store taking a 27,000 sq ft flagship store in the West One Shopping Centre, reportedly setting a new rental tone.
Knight Frank’s latest survey of key streets shows that the average vacancy rate in Central London was just 2.8% at the end of June, representing a fall of 25% on six months earlier. Some locations have zero availability and there is also evidence that units are being marketed 1-2 years in advance of release.
In the investment market, pricing remains keen and there have been cases of occupiers hedging against higher rents by acquiring stores for occupation in strategic locations. Asian capital remains a major force in the market, with both newcomers and existing investors seeking to increase their Central London exposure. However, there is some evidence of early entrants now taking profits, with some assets bought in the downturn currently on the market. While overseas money remains largely focused on core Central London, UK institutions have been buying in more fringe submarkets.
Darren Yates, partner, retail research team, Knight Frank, commented: “London’s retail market continues to go from strength to strength, with a long line of retailers and restaurants seeking space and rents still under pressure in both prime and off-prime locations. In the investment market, low levels of supply over the summer months have helped to fuel vendors’ aspirations on pricing, which will be tested in a busier final quarter. However, with rents largely still rising and significant investment demand, there are no signs of a capital growth cooling.
Alastair Bird, partner, retail investment, Knight Frank, commented; “With yields on the top streets such as Bond Street and Oxford Street at record levels, investor appetite in locations outside of W1 such as Kensington High Street and Kings Road has strengthened as they offer both a rental and yield discount. We are currently marketing some very interesting opportunities in Kensington which have seen significant interest for these reasons.“
