In the face of subdued sales performance, vacancy continued to contract over Q1 2024, with the prime West End reporting double-digit year-on-year rental growth of 11.7%
Despite an increase in foot traffic in the West End compared to 2023, sales remained below last year's levels throughout the first Quarter. According to the New West End Company, international sales had a strong start into 2024 as a result of extended holidays, resulting in the first week of January accounting for 31% of the total international spend for the month. Yet despite the initially strong figures for 2024, the rest of the Quarter witnessed reduced spending compared to 2023, especially from Gulf countries. The decline in sales is likely a result of Ramadan, as from 10 March onward there was a significant 17% drop in sales compared to last year's figures. The Easter weekend also had a significant impact on foot traffic and spending, with Good Friday experiencing the highest footfall for the month, and Saturday the lowest. This is expected to be as a result of people opting to leave the Capital for the Easter weekend.
Slowing inflation and the positive read-through to real disposable incomes will help to bolster domestic spend
Marie Hickey, Director, Commercial Research
Looking to the end of the year, continued growth in international arrivals, with numbers now having fully recovered, is likely to have a positive read-through to sales performance in the West End, although the removal of tax-free spend is likely to result in average transaction spend being muted versus pre-pandemic levels. Likewise, slowing inflation and the positive read-through to real disposable incomes will help to bolster domestic spend, albeit consumer caution will continue to generate a lag. Combined, this points to improving levels of retail spend in the West End as we move through 2024.
Prime West End vacancy rates continued their downward trajectory in Q1 24, coming in by 110 bps to hit 4.3%. This brings vacancy to its lowest level since Q2 2019.
The engine of this contraction in Q1 has been Regent Street, where there has been a flurry of recent deal activity. Likewise, we have seen vacancy declines on Oxford Street West and Bond Street. Notable deals on Oxford Street include Puma at 376–384 Oxford Street and Future Stores at 91–101, underscoring the sustained business interest in establishing a presence in the area.
Continuous occupational demand for West End units has perpetuated the upward trend in rents witnessed over the past year. Prime West End (Bond Street, Regent Street and Oxford Street) rents increased by 11.7% year on year, and the Luxury Quarter increased rents by 13.9% year on year, driven largely by Bond Street. The uplift in prime headline rents has been supported by the limited supply of good-quality, prominent units. The scarcity of high-quality units along prominent streets has also played a part in the lower number of new international entrants to London in Q1.
Investment transaction levels in the first Quarter of 2024 were £263.3 million, broadly in line with last year’s figures once the large Fenwick’s deal, which completed in Q1 2023, is excluded from the comparison. Notably, there were no significant transactions observed on the key prime streets such as Oxford Street, Regent Street or Bond Street in Quarter One but rather increased activity on secondary streets such as South Molton and Albemarle. While not included in the Q1 2024 volumes as the deal completed in April, the recent Blackstone deal on New Bond Street for £230 million underscores the persistent appetite for prime West End units.
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Further reading:
Spotlight: Shopping Centre High Street Q4 2023
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