The battle for prime retail space in central London is spilling out into surrounding streets and buildings.
There are few streets in the world that are as synonymous with luxury as London’s Bond Street. Considered the global stage for many upscale brands, retail space on this street not only comes at an eye-watering price but is also like gold dust in terms of availability.
As the luxury market in London has remained largely immune from the financial crisis, helped in part by wealthy Asian shoppers propping up retailers’ tills, demand for a spot on London’s most upmarket streets is high. Zone A rents on central Bond Street, the UK’s most expensive retail street, have soared to £800 per sq ft in December 2012, from £600 in June 2011. Every year sees yet another retailer set a new record for rent. Last year, Swiss jeweller Boghossian took the crown when it agreed to pay £1,050 per square foot for its debut UK store on Bond Street.
However, securing a Bond Street store can involve quite a wait. Peter Mace, head of central London retail at property firm Cushman & Wakefield, says there’s “no fluidity” in this location: “As London is looked on as being as important as Paris and New York, it is increasingly unlikely that retailers will come out of their stores, because they all want representation in the same area.”
Demand for such a prestigious address is having a twofold effect: first, retailers are opening up in neighbouring streets, thereby creating new luxury shopping destinations. Second, existing tenants are moving upstairs and downstairs in their current premises to chisel out fresh retail space.
Secondary streets in an area known as the London Luxury Quarter, which spans from St James’s in the south and Bond Street station in the north, have become popular locations for luxury retailers. According to financial data provider Real Capital Analytics, transactions in the Quarter reached $650m (£428m) in 2011, up 50% on 2010.
Helen Franks, head of commercial leasing for London at property landlord Grosvenor, says: “Not only is the Quarter an incredibly desirable location for international brands to launch London flagships, it’s also a nurturing environment for contemporary brands and designers seeking to enter the London retail market for the first time.”
According to property experts, new luxury hot spots within this hub include Mount Street, Brompton Cross, St James’ Estate, Dover Street, Albemarle Street and South Molton Street.
Designer brand Jenny Packham, one of the first luxury retailers to move into the area when it opened a two-floor shop on Mount Street in 2008, has seen the area evolve. “Along with Marc Jacobs, we were the first luxury brand to arrive,” says international brand director Blaire McColl. “Now, it’s grown. London is an international destination and Mount Street represents the best of what we have to offer within the luxury market.”
Mount Street has certainly become a firm favourite of the luxury elite, with Céline and Oscar de la Renta both signing up for stores in the last year, adding to an esteemed line-up including Lanvin, Marc Jacobs and Roland Mouret.
Nearby on Bruton Street, womenswear designer Alice Temperley opened a 2,500 sq ft flagship store for her Temperley London label in December. Temperley says she always wanted to be in the London Luxury Quarter.
“Our Bruton street store, flanked by British fashion powerhouses such as Stella McCartney and Matthew Williamson, gives our brand the best opportunity to showcase itself as a world class luxury player.”
These secondary streets may not have the kudos of Bond Street, but they’re quickly gathering pace asprestigious, and cheaper, alternatives. For instance, Dover Street is about £300 per sq ft compared with the heady heights of up to £1,000 for Bond Street.
And while Bond Street may be considered the holy grail for many retailers, property agents say there’s an upsurge in luxury retailers who prefer to open stores on alternative streets such as Dover Street, known for its more distinctive boutiques such as designer indie Dover Street Market.
George Graham, co-owner of one such indie, Wolf & Badger, agrees that Dover Street has become a luxury retail destination in its own right in recent years. “This is thanks largely to an attitude shift away from the increasingly ‘samey’ traditional luxury retail destinations and towards a more personal, independent and differentiated concept of luxury retail.”
But it’s not just new retailers looking to find retail space in the area. Those performing well in their current location are choosing to extend their shops by taking over offices upstairs or downstairs, or even acquiring the adjacent store. According to Cushman & Wakefield, retailers secured an additional 35,000 sq ft of new retail space on Bond Street and Sloane Street last year, mainly through converting office space into retail space.
In the past year alone, numerous retailers extended their Sloane Street properties, including Italian lifestyle brand Loro Piana, which expanded from 2,280 sq ft to 3,500 sq ft by buying the lease next door and combining the two properties to create one flagship store, and Salvatore Ferragamo, which bought the lease for the first floor of its building to convert into retail space. On Bond Street, Chanel and Christian Dior are also reportedly converting upper-floor offices into retail space.
Mace points out that with first floor office space on Bond Street and Sloane Street costing around £55 per sq ft, expanding is a considerably cheaper alternative to opening up street level shopfloors in Zone A.
Many luxury retailers in the area are taking a long-term view and snapping up their own buildings. Louis Vuitton and Hermès have both bought shops on Bond Street, while Prada was rumoured to have paid £90m for the freehold of its Old Bond Street shop.
Mark Henderson, chairman of London Luxury Quarter, which promotes luxury retailers in the city’s West End, says the move by such luxury brands “proves they believe that the area will continue to remain a top destination for luxury retail”.
And the demand for key retail sites will be accelerated by the development of London’s new high-capacity train service, Crossrail. Market research firm Euromonitor’s apparel analyst Ashma Kunde says: “This will certainly add to Bond Street’s desirability by boosting the area’s footfall and accessibility.”
And rents too, no doubt causing London’s luxury hubs to span out even further.