(Bloomberg) -- Vacancy rates on London’s prime shopping streets have fallen to their lowest level since 2019, in a boon for landlords after a wave of bricks-and-mortar closures during the pandemic.
The rate of unit vacancies fell 40 basis points to 3.2% during the third quarter across Oxford Street, Bond Street and Regent Street, according to research from UK broker Savills Plc.
The market has strengthened after a number of so-called Company Voluntary Arrangement deals, through which landlords can lower rents to help ailing retailers. Thousands of stores were closed during the pandemic years, hammering retail-store valuations.
Funds managed by Blackstone Inc. acquired a property on New Bond Street in April for £230 million ($295 million), as the world’s largest asset manager pivoted back to physical retail.
Oxford Street’s vacancy rate fell 90 basis points from the second quarter to 2.7% in the three months through September — well below the 2019 quarterly average of 3.2%, Savills told Bloomberg News. The area, among the busiest in Europe pre-Covid, initially struggled to recover from a collapse in visitors owing to UK lockdowns.
Limited retail space is putting upward pressure on rents in the core West End area including Covent Garden — which rose 13% in the third quarter from a year earlier, Savills said.
Regent Street’s prime headline rent across the period was £825 per square foot, making it the only street out of the three destinations to see higher rent than its 2019 level of £800 per square foot. The road hosts the flagships of UK retailers from designer department store Liberty to athletic apparel maker Gymshark.
One headwind for retailers is Chancellor of the Exchequer Rachel Reeves’ budget earlier this month, said Marie Hickey, director of research at Savills. Policies including a rise in employers’ national insurance contributions — a payroll tax — “might bring a slight easing in competitive tension in response to its potential impact on costs and margins,” Hickey said.
Still, demand for space is “expected to persist as occupiers continue to focus on securing long-term leases in prime locations,” she added.
Graham Barr, head of UK retail at CBRE Group Inc., said Oxford Street has reported a surge in flagship lettings over the past year.
“While online retail continues to grow, the emphasis is on enhancing the in-store experience,” Barr said. “Vacancy rates in prime retail locations are returning to pre-pandemic levels, with demand now outstripping supply in areas such as Covent Garden and Regent Street.”
CBRE, the Dallas-based commercial real estate services firm, said in an October report that the prime rent on New Bond Street — home to luxury fashion boutiques such as Chanel and Gucci — has tripled since 2010.
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