CENTRAL LONDON RETAIL HEALTHCHECK Winter 2015 CENTRAL LONDON RETAIL HEALTHCHECK NOVEMBER 2015

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THE CHANGING FACE OF LONDON SHOPPING

The astonishing trajectory of London’s retail property market continues. As rents spiral upwards and brands from across the world target London, new shopping areas are emerging across the capital. The latest Central London Retail Healthcheck reports on what is happening across 16 of the West End’s established and emergent retail pitches, and vividly illustrates how the sector continues to go from strength to strength. By monitoring vacancy, unit turnover, rental levels, brand nationality and character, the research paints a picture of London’s shopping scene that goes beyond simple statistics. We look at the continuing internationalisation of London’s shopping scene, and how the retail offers on some of its best-known streets are changing as new brands arrive in town.

CENTRAL LONDON PRIME SHOP RENTS ARE NOW 50% HIGHER THAN 2009 LEVELS EMERGING RETAIL LOCATIONS SEEING INFLUX OF DOMESTIC AND INTERNATIONAL BRANDS

EMERGING PITCH VACANCY RATES FALL 50% YEAR ON YEAR IN THE FACE OF INCREASING DEMAND FEWER THAN HALF THE SHOPS IN LONDON’S WEST END ARE NOW OCCUPIED BY BRITISH BRANDS

INTERNATIONAL BRANDS ARE BRINGING A NEW FLAVOUR TO LONDON AS CLUSTERS OF STREET IDENTITIES EMERGE LONDON’S LEADING STREETS ARE DEVELOPING PRODUCT SPECIALISMS BRANDS ARE WILLING TO INVEST SIGNIFICANT SUMS IN SECURING THE RIGHT LOCATIONS AND CREATING BRANDDEFINING STORES

CENTRAL LONDON RETAIL HEALTHCHECK WINTER 2015

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CENTRAL LONDON PRIME SHOP RENTS ARE NOW 50% HIGHER THAN 2009 LEVELS

RENTAL GROWTH 2009-2015

THE INCREASE IN CENTRAL LONDON RETAIL RENTS CONTINUES TO GATHER PACE, WITH THE RATE OF GROWTH OVER THE PAST TWO YEARS FAR EXCEEDING OUTER LONDON

+49%

+20%

-11% 2009

2010

2011

2012

2013

2014

2015 Source: Colliers International

CENTRAL LONDON RETAIL HEALTHCHECK WINTER 2015

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Rents on Bond Street are expected to reach a new high of £1,700 Zone A in 2016 and this has compelled brands to look at opportunities elsewhere in the Mayfair core.

AS RENTS SPIRAL UPWARDS, MANY RETAILERS ARE LOOKING BEYOND THE CAPITAL’S TRADITIONAL PITCHES, PUSHING UP RENTS ON EMERGING STREETS 43%

Mount Street is a rapidly maturing alternative to Bond Street. The proactive management of the tenant mix by Grosvenor helped establish the street as a high end destination.

EMERGING PITCHES

RENTAL GROWTH 2014-2015

As a template for the rise of a new luxury destination, Mount Street shows how the initial opening of a renowned brand (here it was Marc Jacobs) can be the catalyst for rapid change, pronounced rental growth and sustained occupier demand from high profile international brands, particularly when supported by dominant freehold ownership and public realm investment.

ESTABLISHED PITCHES

37%

25% 21%

13%

13% 10%

10% 10%

10%

8%

8%

8%

7% 2%

Al be

m

ar

le St re Do et ve r St Ol re d Bo et nd St Br re et ut on St Ox re fo et rd St W Sl es oa t ne Ne S w tre Bo et nd St Ox re et fo rd St Co Ea nd st ui tS tre M et ou nt St Je re rm et yn St re et Pi cc ad Re ill y ge nt St re et Ki ng s Ca Ro rn ad ab y Br om Str ee pt on t Ro ad

3%

Source: Colliers International

CENTRAL LONDON RETAIL HEALTHCHECK WINTER 2015

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EMERGING RETAIL LOCATIONS SEEING INFLUX OF DOMESTIC AND INTERNATIONAL BRANDS MOUNT STREET - FROM TRADITIONAL PRESERVE OF ANTIQUE SHOPS TO ESTABLISHED INTERNATIONAL FASHION DESTINATION

A total of 20 new luxury brands have opened on Mount Street in the last five years, which means that more than half of the available shops have found new occupiers. This remarkable level of change is testament to the rapid journey the street has taken to becoming a ‘super luxury’ destination for the capital. Public realm improvements, management of the tenant mix and demand from international brands priced out of more established West End destinations have all played a role in this rise.

Mackintosh (Fashion)

Oscar de la Renta (Fashion)

Ralph Lauren (Fashion)

2010

Nicholas Kirkwood (Shoes)

Jessica McCormack (Jewellery)

2012

Loewe (Accessories)

Nicholas Kirkwood (Shoes)

2011

2014

Pringle of Scotland (Fashion) Paule KA (Fashion)

Carolina Herrera (Fashion)

Christopher Kane (Fashion)

Parmigiani (Jewellery)

Marni (Fashion) Dior (Fashion)

Moynat (Accessories)

2013

Celine (Accessories)

2015

Gina (Shoes) Roksanda Ilincic (Fashion) Richard Mille (Watches) Source: Colliers International

CENTRAL LONDON RETAIL HEALTHCHECK WINTER 2015

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ALBEMARLE STREET THE NEXT ‘SLEEPING BEAUTY’ TO AWAKEN NEW OPENINGS ON ALBEMARLE STREET SINCE 2013 Albemarle Street has seen five fashion and accessory brands arrive in the past two years - tripling the street’s offer. With planning permission submitted for a new maison concept in the current Guinot beauty salon and Boodles recently knocking their Bond Street unit through to create an entrance on Albemarle Street, we expect further openings to emphasise Albemarle Street’s fashion credentials.

Boodles knock through from Bond St Alexander Wang (Fashion)

Pre 2013

2014 Paul Smith Extension (Fashion)

Garrard (Jewellery)

Aquazzura (Shoes) Amanda Wakeley (Fashion)

Barbara Tipple (Jewellery) Asprey (Jewellery)

Faliero Sarti (Accessories)

2013

Marina Rinaldi (Fashion)

2015

Gismondi (Jewellery)

Buccalleti (Jewellery)

Source: Colliers International

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EMERGING PITCH VACANCY RATES FALL 50% YEAR ON YEAR IN THE FACE OF INCREASING DEMAND

By contrast, looking back even a year or two, there was a much higher degree of vacancy on ‘emerging’ West End pitches. In 2014, 8.7% of units in our sample of emerging locations were vacant. This was still comfortably ahead of the average UK vacancy rate of 14%, but was triple the rate of the established pitches. However, during the past 18 months, these locations have seen increasingly active occupier demand, particularly from international brands, which has led to rapidly falling vacancy and a significant pace of change on streets such as Albemarle Street, Dover Street and Mount Street.

8.7% VACANCY RATE BY UNITS

Vacancy rates on established West End pitches such as Bond Street, Oxford Street and Regent Street have been consistently below 3% of floor space for the past five years. Any low level fluctuation has been down to small and/ or peripheral units becoming free for short periods of time.

DURING THE PAST 12 TO 18 MONTHS THE NUMBER OF VACANT SHOPS IN EMERGING RETAIL LOCATIONS HAS SHRUNK AND THE LEVEL OF VACANCY IS NOW MORE CLOSELY ALIGNED TO THE SCARCITY OF UNITS ON PRIME PITCHES

3.5%

3.4% 2.6%

EMERGING PITCHES

ESTABLISHED PITCHES

Source: Colliers International

CENTRAL LONDON RETAIL HEALTHCHECK WINTER 2015

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FEWER THAN HALF THE SHOPS IN LONDON’S WEST END ARE NOW OCCUPIED BY BRITISH BRANDS

62%

60%

57%

56%

55% 55% 48% 48%

46% 42% 32% 31% 23%

ALL

BOND ST.

CARNABY ST.

MOUNT ST.

REGENT ST.

SOUTH MOLTON ST.

BRUTON ST.

BROMPTON ROAD

CONDUIT ST.

OXFORD ST. - WEST

DOVER STREET

ALBEMARLE ST.

KINGS ROAD

PICCADILLY

OXFORD ST. - EAST

25%

SLOANE ST.

36% 35%

JERMYN ST.

By contrast, Sloane Street has only 23% of stores occupied by British brands, the same level of representation French brands have on the street. Italian retailers are the dominant brand nationality on Sloane Street and occupy 41% of the stores. Today, nine of the 16 streets surveyed have more international brands than British, reflecting the globalisation of London shopping.

88%

% BRITISH BRANDS

Jermyn Street has a long history as a British shopping destination dating back to 1664. This British tradition remains alive in 2015, with 88% of the shops that run between Haymarket and St James’s street representing British brands, the highest of all the streets surveyed.

JERMYN STREET IS THE ‘MOST BRITISH’ STREET IN LONDON, WHILE SLOANE STREET IS THE ‘MOST INTERNATIONAL’

Source: Colliers International

CENTRAL LONDON RETAIL HEALTHCHECK WINTER 2015

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INTERNATIONAL BRANDS ARE BRINGING A NEW FLAVOUR TO LONDON AS CLUSTERS OF STREET IDENTITIES EMERGE

Jermyn Street, Piccadilly, Albemarle Street and Dover Street, continue to represent ‘British Best’ with luxury brands accounting for over 80% of the total retail units, and well over half these still being British occupied.

THE IDENTITIES OF THE CAPITAL’S BEST-KNOWN SHOPPING STREETS ARE CHANGING AS LUXURY RETAILING BECOMES MORE PRONOUNCED AND INTERNATIONAL BRANDS BRING NEW CHARACTER TO LONDON’S STREETS

Carnaby Street represents ‘Fashion Forward’an independent and international mix of brands bringing the best in youth fashion from around the world to the market.

The most luxurious streets where over 90% of the retail operators are luxury brands, such as Bond Street and Sloane Street, have less than 50% British brands today, but are home to ‘International Icons’ such as Dior, Hugo Boss and Prada. Meanwhile, the ‘Globalised Goods’ cluster of Regent Street, Brompton Road and Kings Road, have elements of luxury, are home to some impressive flagships and mix British and international brands. CENTRAL LONDON RETAIL HEALTHCHECK WINTER 2015

Bond Street

Dover Street

Mount Street Piccadilly

Bruton Street

LUXURY

Oxford Street, both the established western section and the rapidly improving eastern end, cater to the ‘Mixed Mass Market’. The broad range of goods on offer, particulary through department stores, give a wide appeal and the street retains a strong British emphasis.

BRITISH BEST

Sloane Street

Jermyn Street

Conduit Street

INTERNATIONAL ICONS GLOBAL GOODS

S. Molton Street Kings Road

Regent Street

Brompton Road

FASHION FORWARD Carnaby Street

Albermarle Street

MIXED MASS MARKET Oxford St (West) Oxford St (East)

BRITISH

Source: Colliers International

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LONDON’S LEADING STREETS ARE DEVELOPING PRODUCT SPECIALISMS • 73% of Dover Street is now occupied by fashion brands

PRODUCT CONCENTRATIONS ON SOME OF OUR STREETS ARE MANY TIMES THE WEST END AVERAGE, REFLECTING DEVELOPING SPECIALISMS AS CERTAIN TYPES OF RETAILER CLUSTER TOGETHER

• Watch specialists make up 16% of the stores on Bond Street

8.0x

Drilling down further still, each London street has product groups for which it is known; South Molton Street is a key destination for luxurious, international childrenswear, while Jermyn Street remains the leading location for classic British menswear. Those searching for a handbag should head to Mount Street or Brompton Road, whilst Kings Road remains the best West End destination to get inspiration for interior design.

CENTRAL LONDON RETAIL HEALTHCHECK WINTER 2015

SOUTH MOLTON STREET

KINGS ROAD

3.8x 7%

BOND STREET

16%

45%

3.2x

2.9x

2.4x

2.3x 5%

6%

ALBEMARLE STREET

CARNABY STREET

OXFORD STREET- EAST

PICCADILLY 24%

31%

The character of Bond Street has been altered by a series of watch shop openings in 2014-15, as Blancpain, Patek Phillipe, IWC and Jaeger-le- Coultre all headed to this most premium of locations for standalone stores. Today, watch specialists make up 16% of the stores on Bond Street behind only Fashion (31%) and Jewellery (22%).

Although the new Alexander Wang flagship implies that Albemarle Street is following a similar journey towards fashion, British jewellers and art galleries are still very much a part of the retail landscape here, with jewellery specialists continuing to make up 31% of the total retail units and fashion currently at 25%.

4.2x 12%

JERMYN STREET

• South Molton Street has 4 times more childrenswear retailers than the average for the West End at 7%

There are also changing specialisms elsewhere, with Dover Street market attracting four neighbouring fashion openings in 2014-15, led by Victoria Beckham, and elevating Dover Street to a credible fashion destination where almost three quarters of units are fashion focussed.

5.3x

2.0x

2.0x

1.8x

1.6x

5%

DOVER STREET 73%

BRUTON STREET

OXFORD STREET- WEST

CONDUIT STREET

67% 59%

MENSWEAR

SPORTS

FASHION

LINGERIE

NUMBER OF TIMES THE WEST END AVERAGE

JEWELLERY CHILDRENSWEAR

HOMEWARE WATCHES

PERCENTAGE OF SPECIALSM BY STREET

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BRANDS ARE WILLING TO INVEST SIGNIFICANT SUMS IN SECURING THE RIGHT LOCATIONS AND CREATING BRAND-DEFINING STORES

In the face of unrelenting demand even on ‘emerging’ pitches, and with individual identities developing, brands are becoming more willing to invest significant sums in securing the right West End location and creating a brand-defining destination store. Whether it is through the payment of large premiums (boutiques on New Bond Street have traded for premiums of more than £10m), extensions into neighbouring units or by undertaking ambitious refurbishment projects such as the Hermes flagship at 155 Bond Street, retailers are determined to derive maximum brand impact from their prime London locations. Head of Central London Retail Agency, Paul Souber, comments: “London has never been more popular with international retailers and their arrival on these shores is changing the face of the shopping scene.

CENTRAL LONDON RETAIL HEALTHCHECK WINTER 2015

Whilst our research shows there is currently no shortage of occupier demand on West End streets, there is increasingly fierce competition from both global cities and destinations beyond the core of London. The culture and heritage of London gives it a distinct retailing advantage, but it will take infrastructure investment and co-ordination, such as the New West End partnership between their Occupier BID and newly formed Property Owner BID, to make sure it continues its upward trajectory. We need to invest in the city, promote its excellence and develop an influential and united voice to develop streetscapes that are the envy of the world, attract the biggest global brands and create the best shopping experience.”

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Please contact us if you wish to discuss the contents of this report

Paul Souber Head of Central London Retail Agency [email protected]

Colliers International 50 George Street London W1U 7GA +44 20 7935 4499

Jess Ford Senior Retail Analyst [email protected]

This report gives information based primarily on Colliers International data, which may be helpful in anticipating trends in the property sector. However, no warranty is given as to the accuracy of, and no liability for negligence is accepted in relation to, the forecasts, figures or conclusions contained in this report and they must not be relied on for investment or any other purposes. This report does not constitute and must not be treated as investment or valuation advice or an offer to buy or sell property. (December 2015) © 2015 Colliers International. Colliers International is the licensed trading name of Colliers International Property Advisers UK LLP which is a limited liability partnership registered in England and Wales with registered number OC385143. Our registered office is at 50 George Street, London W1U 7GA. 15429

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