Suburban London high streets have been supported by increased homeworking since the pandemic, with some suburbs experiencing significant retail resilience. The Savills Outer London retail resilience ranking outlines those markets presenting opportunities for expanding retail and leisure operators
Outer London retail and leisure resilience – here to stay?
We previously examined the impact of homeworking on localised retail spend and the newly established ‘doughnut effect’ across Greater London, following the lockdown periods in both 2020 and 2021. Off the back of this recognised trend, we have developed the Savills Outer London Resilience Ranking (summarised below) to identify potential current and future retail hotspots.
Despite Covid restrictions seemingly a thing of the past, flexible working arrangements have become a more permanent feature, with staff encouraged to take more ownership over where they work. UK office occupancy figures from Remit plateaued at 30-35% in November 2022, compared to a pre-pandemic average of c.70%, according to a BCO member survey. This equates to a significant uplift in time spent locally compared to pre-pandemic years.
Google Mobility Data, using mobile phone tracking, reinforces this point, with outer London boroughs outperforming inner London boroughs on average in terms of mobility versus a pre-pandemic benchmark. Although the gap between the two narrowed slightly in the second half of 2022 as staff returned to the office more frequently than in 2021.
So what does this mean for retailer sales and expansion plans?
Increased time spent at home would suggest a higher propensity to spend on retail goods locally, but is there evidence to support this theory?
Pret A Manger’s transaction index reveals that suburban London sales have not only outperformed compared to the West End and City, but also against pre-pandemic levels, up 15.3% per week on average in Q4 2022.
In turn, this has influenced Pret’s expansion plans, with a focus on suburban and key commuter hubs. Other retailers have followed suit, driven largely by coffee/takeaway chains. Gail’s has continued its outer London expansion following funding from Bain Capital and EBITDA Investments in 2021, focusing predominantly on affluent neighbourhoods. Its 100th site opened in October in East Sheen, with additional recent London openings in areas such as East Dulwich.
While coffee shops have been one of the most active subsectors in terms of new openings between 2020–2022, strong additions have also come from supermarket chains, notably discounters Lidl, or new concepts like Amazon Fresh, and restaurant operators, including German Doner Kebab, Tonkotsu and Neat Burger.
Identifying opportunity markets beyond Central London
The entrenchment of agile working has opened up new areas beyond Central London for retailer and F&B expansion. But, what are these areas and which present the strongest opportunities with the most robust fundamentals?
Starting with an original list of 197 Zone 2+ retail centres, we carried out an initial screen based on house price growth and F&B openings in order to identify areas going through significant change in terms of both resident population and, in turn, local provision. This exercise shortlisted 40 locations for a deeper analysis to assess their fundamentals and subsequently rank their potential appeal to expanding retailers and F&B concepts looking beyond Central London. These fundamentals centred around four key pillars;
- Health: vacancy rate, change in vacancy 2022 vs 2019, net change in occupied units 2022 vs 2019, average monthly footfall and footfall change vs 2019.
- Vibrancy: F&B openings including independents since 2020, net change in F&B units since 2020.
- Size: population within 1-mile radius, population growth forecasts through to 2025, total weekly consumer spend within 1-mile radius.
- Affluence: average household income and weekly consumer spend per capita restaurants/cafes within 1-mile radius.
* For the purpose of identifying markets with future retail growth potential, we have excluded outer London’s most established markets from the ranking, particularly self-sufficient ‘towns’ such as Richmond and Kingston.
Which locations ranked highest and why?
Drawing on the weighted score across the four pillar fundamentals detailed above, we were able to rank the shortlisted 40 outer London locations, with the North London neighbourhoods of Highbury & Islington and Kilburn ranking first and second, respectively.
Interestingly, when looking at the top 10, there isn’t one type of location which dominates. There is a mix of affluent locations (notably Balham and Putney), emerging areas experiencing demographic change, and numerous locations with strong local appeal and high daytime footfall. We will be examining each of the individual fundamental pillars and their respective high-ranking locations through a series of articles to be released over the coming weeks.
Highbury & Islington tops the ranking, scoring well across all four pillars but led by its size score, with a local population just shy of 146,000 (64% higher than top 40 average). Highbury & Islington was the strongest performing suburb in terms of its average monthly footfall figures reaching 1.5 million in H1 2022 on the busier segments of Upper Street, outperforming the top 10 average by 71%. This has been supported, in part, by its well-connected transport network coupled with the newly refurbished Angel Central shopping centre. A mixture of convenience-led operators on Chapel Market and a more comparison-led offer within Camden Passage/Upper Street supports regular footfall, serving its large catchment population. Despite a 2.8 percentage point rise in unit vacancy between 2019 and 2022 to 9.3%, Highbury & Islington remains below the top 40 average of 9.6%.
Nearby Holloway Road ranks third, benefitting from the appeal of Islington and sharing strong fundamentals in terms of its sizeable and relatively affluent catchment whilst offering cheaper leasing opportunities. As a result, occupational demand has been strong, with 47 new F&B openings between 2020 and 2022, outperforming the top 40 average of 26 openings, and supporting a 1.4 percentage point drop in unit vacancy between 2019 and 2022, to 9.9%.
Emerging London neighbourhoods experiencing demographic change feature heavily within the top 10, including Dalston, Walthamstow, Finsbury Park, Brixton and Tooting. Some are supported by further size growth, with Walthamstow and Finsbury Park expected to see local population expand by 3.0% and 3.6%, respectively, between 2020 and 2025, outstripping the 2.2% average across the top 10. These emerging neighbourhoods also benefit from a vibrant retail and F&B mix, with the five suburbs, collectively, representing a quarter of all independent F&B openings across the top 40 locations between 2020 and 2022, totalling 223 individual openings. Tooting and Brixton somewhat spearhead this trend, ranking first and second in terms of their vibrancy score, supported in part by their respective F&B-centred marketplaces (Brixton Village Market, Pop Brixton, Tooting Broadway Market etc.).
What does this mean for expanding retailers and F&B concepts?
The wider UK retail sector is facing significant macroeconomic headwinds this year, which is expected to be more pronounced over the first half of 2023. However, we do believe suburban and commuter neighbourhoods in Greater London are likely to continue to outperform, benefitting from ongoing homeworking and localised spending habits, creating more self-sufficient retail locations across outer London.
For some retail and F&B occupiers looking for expansion opportunities beyond Central London, size and affluence of the local markets will be key. However, by examining vibrancy and health, new emerging markets may move up the agenda, particularly as these areas tend to enjoy lower occupational costs (rents and rates) and may be able to deliver enhanced margins.