Central London retail areas to expand – Savills
Premiums and rising rents are becoming the norm for prime retail streets in Central London, says Savills. In its latest research into this market, the firm has considered whether the current trends of record high rents and record low yields can continue.
The key driver for the leasing market in future will be the low vacancy rate, Savills says. It notes there is still a long list of international and domestic retailers who want a store in one of the three key central London retail streets – Oxford Street, Regent Street and Bond Street. “With few new units being delivered over the next 12 months, the path for rents and premiums will undoubtedly be upwards,” it says.
The 12 new retail units at Park House – of which Savills understands half are already under offer – could deliver new high rents for the western end of Oxford Street. The Primark-anchored scheme at the eastern end of Oxford Street, meanwhile, which has previously lacked an anchor retailer, is expected to set new rental levels for this end of the street. Void rates along the whole street remain very low. In future Savills expects retailers and developers to begin spilling over into the lower reaches of Tottenham Court Road and the upper end of Charing Cross Road.
While Oxford Street is seen as being all about footfall, Regent Street has become the preferred location for quality fashion retailing – Savills says hefty premiums have become “the order of the day” for retailers wanting an outlet on this street. The supply of units on Regent Street is expected to remain extremely short for the foreseeable future, and Savills sees no reason why it should not in future deliver the same or higher rents than Oxford Street.
The vacancy rate on Bond Street – the preferred street for luxury retailers – is more or less zero. “Off-market deals will remain the tone for the future as retailers chase the few available units”, Savills says. As a result, some increasingly acceptable alternative locations are emerging, including Conduit Street, Bruton Street, Albermarle Street, Dover Street and Mount Street, and Savills expects this to lead to a wider “luxury district” in the capital in future.
Looking at the investment market, Savills expects that while demand will remain strong, yields on Bond Street will remain broadly stable over the next 12 months, while yields on Oxford Street – particularly at the eastern end – will harden further.
Savills today reported a 20% increase in underlying group pre-tax profit for the half-year to 30 June and said the following in its statement to the London Stock Exchange with regard to the UK commercial property market: “UK Commercial Transaction fee income grew marginally to £19.7m (H1 2010: £19.2m) reflecting the continuation of a strong investment market in Central London offset by continued pressure on fees. Although debt availability improved somewhat, markets continue to be driven largely by equity investors with Central London enjoying international demand for office and retail assets. Commercial leasing markets generally remain sensitive to the uncertain climate for occupiers with the exception of prime retail in London, where record rents have been achieved. The City market saw vacancy rates below 2010 levels due to the strength of activity over the last year and current lack of new stock, although take up in the City office market was considerably down on the first half of 2010.”
