Uniqlo, Astrid & Miyu and Lisa Eldridge have all agreed to open new shops in central London, writes Joanna Bourke
After much pain for London’s physical retail sector this year, from supply chain woes, business closures and famous chains like Debenhams and Topshop permanently disappearing from the high streets, investing in stores is going to be a lot harder. needed. But, despite the challenging environment, a range of brands have revealed West End deals.
Covent Garden homeowner Capco has said 10 brands have yet to open or will open sites on their property, while California-headquartered activewear label Fabletics has chosen Regent Street for its first UK pop-up shop.
At a time when the city is becoming less crowded with fewer tourists and office workers, and online competition is fierce, why are businesses choosing to invest in London stores now?
Here we look at what’s tempting some firms to sign leases, and what challenges still remain for companies with physical stores.
The lockdown has left some tenants unable to pay rent during the pandemic and forced some businesses to rethink shops. That, with some well-documented brands disappearing from city centers due to reorganization or going into administration, has left some gaps in desirable shopping destinations.
Linda Allett, UK head of consumer markets at KPMG, says that some retailers who have decided to move to safer sites “are finding some good opportunities in the deals currently available at prime High Street and downtown locations”.
Allett says: “After the pandemic, retailers still have some cards in hand as landlords need to find new tenants, especially those that will attract footfall on the high street.”
Emily Stella, retail analyst at research firm GlobalData, believes that in some cases it is a “buyers’ market and big-name retailers have the advantage of their ability to attract people to an area”.
Signs of improvement in footfall
The city and the West End saw a drop in the number of shoppers during the coronavirus crisis, with travel restrictions and stay-at-home guidance leaving the streets very quiet. Conditions are still tough, but GlobalData’s Stella says “footfall has recovered somewhat since the height of the pandemic”.
In an encouraging sign for occupiers in central London, business lobby group New West End Company said on Saturday 13 November West End footfalls were 13% higher than 2019 levels. It was shortly after that Christmas lights were turned on in the area.
Gavin Redrup, Head of London Retail at BNP Paribas Real Estate, says: “Retail leasing activity in the West End is driven by two very simple motivations. Rents are continuing to soften and have been for some time, so quality locations can be of great value. This has been coupled with a steady improvement in customer numbers in recent months and is giving major retailers the confidence to take the lead in key destinations.
new rental model
Phil Cain, Head of UK Retail Investments at property agent CBRE, says: “We are seeing household names taking up major store locations in central London and are increasingly looking at landlord base and turnover leases, resulting in occupants with The partnership approach is more.”
Rents are usually on fixed leases over a long period of time, and often lease structures may only include an upward rent review.
However, the turnover-based rent model is a way of allowing tenants to pay rent based on sales performance. This may allow landlords to enjoy the good times, but share some of the pain equally when business conditions are tough.
Cain expects a strong end to 2021 as “occupiers continue their search for flexible lease structures”.
It’s still important to have a store front
While online sales boomed for many brands during the pandemic, and proved to be a significant income stream for many businesses, many retailers have said this year that physical stores are still important.
Jewelery firm Astrid & Miyu is opening three more shops in London for Christmas, while shoe retailer Kurt Geiger opened new branches at the start of the year.
Kurt Geiger’s boss Neil Clifford told the Evening Standard in April: “While we have a strong online business, we know store and digital working together is the perfect retail cocktail. Customers like and where we have a retail presence. , we get about 40% better online business in that area.”
Meanwhile FTSE 100 property giant British Land said the value of its retail parks division rose 7.1% in the six months to September 2021.
These sites may not be located in central London, but many are in the outer transport zones of the capital. The landlord says: “This [sites] Increasingly preferred by retailers, as they are affordable and support online offers by clicks and convenience of collection, returns and ship from store and we see this as a long-term structural trend.
difficult to store
One headache that physical retailers struggle with is commercial rates. The tax is on most non-domestic properties and firms have long complained about how high and unreasonable the rates can be. Rates don’t take into account how sales are doing. They are also based on asset values from years ago, which does not reflect the slowdown many brands experienced during the pandemic.
A spokesman for the Fraser Group, which is closing its House of Fraser branch on Oxford Street in 2022, said in November: “As a business that continues to make significant investments in the British High Street, we think That it is appropriate to recognize and request an immediate review of the current Antiquated Trade Rates, which are surprisingly out of date. is inevitable. “
Memories of Sanctions Still Raw
Although the lockdown has been lifted, many bosses will never forget how tough they were on the high roads. It’s possible that some companies won’t feel confident enough to commit to a new store until life is back to normal.
KPMG’s Ellett says: “The big question on the minds of both retailers and landlords right now is how long consumer confidence will last or whether further waves of the pandemic or inflationary pressures could force discretionary household spending to be lower than expected. Huh.” Any decision to launch a new site will still feel like a gamble.