Rents for prime central London shops soared 9% in the final quarter of 2015, the fastest growth since 1988, as luxury retailers battled over a limited number of sites in the capital’s hottest locations. Over the whole year, rents in the heart of the capital rose by an average 18%.
Phil Cann, head of UK retail at CBRE, which monitors rental costs, said demand was being driven by cosmetics, jewellery, accessories and other high-profile brands – including electric car firm Tesla and electrical gadgets maker Dyson – which are seeking to open their own stores in upmarket locations such as Regent Street, Oxford Street and Covent Garden.
“Retailers are under quite significant challenges in their domestic markets and have two options: e-commerce or overseas expansion. London, whether you’re Australian, American or Canadian, is a very attractive option. ” Cann said.
London stores are also benefiting as retailers seeing a shift towards online shopping opt for fewer but higher-profile outlets. Prime sites such as the Westfield shopping centres in Stratford and White City and prime West End locations have seen rents rise while secondary locations have suffered.
“There is an overall trend towards fewer, more impactful, stores that support online operations,” said Bryan Roberts, a retail analyst at shopper loyalty firm TCC Global. He said many brands see a London store as a marketing investment.
The stronger economic performance in London compared with the rest of UK, partly helped by visitors from abroad, in recent years has also fuelled demand. The jump in central London rents was far in excess of a national rise in prime retail rents of just 0.8% compared with the previous quarter as the number of visitors to high streets slid by nearly 4%.
New infrastructure developments are also playing a part. Rents around Tottenham Court Road tube station soared by as much as 30% last year, ahead of the arrival of Crossrail in 2018, when three times more people a day are expected to travel through the busy junction.
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