The calm follows the storm, and this is particularly applicable to the current retail and leisure landscape in central London.
After the uncertainty created by the pandemic we have found across the board - regardless of owner or occupier – that a sensible and flexible approach to lease terms is being adopted. The market is beginning to move forward again, and it is being predominantly driven by this shift in attitude and a willingness to move away from the ‘traditional’ way of doing business.
Our Central London Retail Tracker shows that there has been a high level of demand for retail and leisure space in some of the capital’s most well-known shopping destinations. In April we registered 102 active requirements, to add to the 320 we saw in the first quarter. It certainly feels like there hasn’t been this level of optimism in the market for the last ten years.
Retail is often the first sector to be consigned to the scrap heap whenever there is uncertainty or a downturn, but this approach overlooks its strength. In my opinion it is one of the most resilient, evolving, and fast paced segments of the commercial property market and we are now at the dawn of a new era for retail and leisure. This rebirth is being driven by new entrants who have grown out of lockdown and are experience-led, entrepreneurial in spirit, and exciting.
In this new future there will be less retail space, but what is left will be more profitable as competition will be reduced. Shoppers will be asking more of the stores that are left, focusing on experiences, personalised customer service and limited collection drops and a focus on sustainability.
We have seen leisure operators show increased appetite for larger floorplates to launch more experiential concepts for example, it was recently announced that life size Monopoly is coming to Tottenham Court Road.
Opportune market conditions
Of course, all of this has been made possible by the market conditions that have been borne out of the pandemic. Lease terms are now being offered on a more flexible basis and there’s a real sense of collaboration between owners and occupiers to create a space that works for both sides. In the instances where stores have been vacated, new brands can snap up this space which often benefits from ready-made infrastructure and requires a light touch refurbishment to give the store a refresh.
The current market conditions are not just a benefit for new entrants. Established operators are also able to move into more high-quality units, now not held back by the scarcity of space or rising costs that were the hallmark of some London markets. There is now opportunity to lease locations that would rarely come to the market. On Oxford Street, brands that have upcoming lease events or reasons to move are looking at alternatives along the road and getting “rebased, right sized” space - they have an advantage of knowing what the location can deliver once things are back to a relative normality.
There has been a real convergence of factors to make the central London retail market attractive including flexible lease terms, an increase in available space and a boom in entrepreneurial and new concepts. Deals have become relationship driven and are based around trust and partnership between occupier and owners. This is arguably the biggest fundamental change of the pandemic; the sector has become more open and honest. Long may it continue.
About the Author
Paul Souber is Co-Head of UK & EMEA Retail and is a highly experienced London retail property expert, with a particular specialism in the luxury sector. To get in touch, contact Paul.Souber@colliers.com.