A combination of ongoing tourism arrival growth, large-scale events and improving weather has continued to support the West End’s consumer environment. According to New West End Company, consumer spend across the West End has reported positive growth versus 2019 levels for the first four months of 2023.

Operational demand has also remained robust, with a handful of high-profile store announcements. Seven international brands opened a debut London store in Q1 2023 (two more than in Q1 2022), including On Running on Regent Street and both PDPAOLO and Stetson in Covent Garden.

2023 appears to have bucked the trend in terms of demand for larger-sized units; a part of the market which has seen relatively limited leasing demand in recent years. The Business Rates revaluation coupled with rebased rents has once again opened attractive opportunities for retailers to consider flagship store openings on prime West End pitches.

HMV returned to its 16,000-square-foot Oxford Street flagship following a four-year hiatus, during which the unit was used by temporary candy store operators. The building saw its business rate tax bill reduce from £1.3 million to £780,000, reducing its total occupational cost and, in turn, enhancing its appeal. Rateable values on Oxford Street retail units fell 36.6% on average as of April 2023, enhancing the attractiveness of the street as a retail location. For example, we estimate that total occupational costs as a percentage of turnover on Oxford Street West have reduced from 29.2% in 2019 to 18.5% in 2023.

Footaslym secured a 20,000-square-foot space at 73–85 Oxford Street, opening in H2 2023, while Manière De Voir signed a ten-year lease on a 5,189-square-foot unit at Oxbourne House, which will be its first flagship store. Under Armour is also poised to open its first West End site in H2 2023, in Zara’s former store near Oxford Circus. Four major signings in the opening quarter emphasizes the ongoing appeal of Oxford Street to occupiers.

Unit vacancy on Oxford Street subsequently improved in Q1 2023, albeit marginally by 0.5% to 13.2%. While this remains high by historical levels, a further five vacant units are currently under offer on the street, suggesting vacancy is set to continue improving in the coming months.

The upturn in occupier sentiment across prime pitches has resulted in Core West End prime Zone A rents improving by 1.1% in Q1 2023, compared to the previous quarter. As demand for prime units on key West End streets continues and vacancy eases, it is likely that Prime Zone A rents will continue to see upwards momentum through 2023.

Central London retail investment overview Q1 2023

More clarity in terms of the rental tone across West End retail assets following a rebasing, and more recently rental stabilisation, is likely to support demand for prime retail investment going forward.

However, available stock continues to curb Central London investment opportunities, with just five deals completing in the opening quarter of 2023. Regardless, total investment volumes in Q1 2023 exceeded full-year 2022 levels, totalling £616.1 million. Lazari’s £430 million acquisition of Fenwick’s on Bond Street, completing in January 2023, is accountable for a 70% share of Q1 2023 volumes.

Two further Bond Street acquisitions saw total investment on the street reach £598 million in Q1 2023. This represents a 97.1% share of total Central London investment volumes, as strong buyer demand for prime units on the street continues. Private investors remain particularly active, with private Guatemalan buyers acquiring Alexander McQueen’s 27 Old Bond Street for £143 million, while Anthony Joshua secured 73 New Bond Street/11 Dering Street for £25 million.

Robust demand for available units has resulted in Bond Street prime yields holding again in Q1 at 3.00%. Meanwhile, Oxford Street reported a 25 bps outwards shift – more akin to movements reported across the wider London commercial property market and in line with rising borrowing costs.

Further reading:

Spotlight: Shopping Centre High Street Q1 2023

UK Leisure report 2022

The latest edition of Re:Imagining Retail is out now – read issue 2 here