Commercial real estate is enduring its most tumultuous period for years, but that hasn’t stopped advisers in London proposing an unlikely bet for their clients: Oxford Street.
Once considered the crown jewel of Britain’s retail sector, Oxford Street suffered a collapse in visitors during the pandemic and struggled to recover. Two years ago, workers dismantled a 25-meter-high mound made of scaffolding that local politicians hoped would lure back tourists to the west of the street. Marble Arch Hill, by then coated in decaying vegetation, was mocked by critics as contrived, tacky and expensive — hardly the qualities with which a globally renowned shopping district would want be associated.
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A candy store on Oxford Street in London, in January 2023. Photographer: Tom Skipp/BloombergIt marked a low point for Oxford Street, with footfall remaining slumped and many shops lying vacant. The road was blighted by American-style candy stores that were subsequently raided on suspicion of tax evasion, and commercial investment almost completely ground to a halt, according to one real estate banker.
Since then, a steady recovery has taken hold. The Elizabeth Line — a £19 billion ($23.9 billion) new metro service — started serving local stations later in 2022, while prominent retailers are opening new stores and a £90 million regeneration is planned. Oxford Street still ranks as the busiest retail destination among Europe’s capital cities.
“The state of the street is great and it’s changed so significantly in the last 12 months,” said Alan Spencer, head of UK retail at estate agent Savills. “It’s an extraordinary transformation really.”
The number of visitors to Oxford Street bounced back strongly last year, with the eastern section up 19% compared with 2022 — the fastest growth of any of the West End’s major districts. The rise “is generally attributed to the improved retail and leisure mix,” according to a report by the New West End Company, a lobby group of retailers and property owners that produced the numbers.
It also credited the Elizabeth Line, which is bringing hundreds of thousands of extra people to the area every day. Transport for London has found that the five most popular journeys on the service all include Tottenham Court Road station, at Oxford Street’s eastern end.
Still, footfall remains down on pre-Covid levels. Across Oxford Street as a whole, the NWEC figures show a 12% year-on-year jump in 2023 but a 23% drop compared with 2019.
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Rents have also fallen, according to Fergus Keane, head of central London investment at BNP Paribas’s real estate business, who said UK retail has “had its correction” and looks very attractive. “A lot of investors, and particularly global investors that want to have a bit of London, those guys are coming back for retail now,” he said.
A boarded up shop with graffiti supporting the National Health Service on Oxford Street in January 2021. Photographer: Chris J. Ratcliffe/Bloomberg
The sector’s slump began before the pandemic as consumers increasingly shopped online, a trend exacerbated by Covid. Yet high interest rates and the ongoing popularity of remote working has recently crushed office valuations across the world and particularly in the US. In some markets, retail is suddenly — and unexpectedly — looking like the more attractive option for property investors.
After taking “an absolute kicking for seven or eight years,” the UK retail sector has “probably found its level and it’s bouncing back,” Keane added. “It’s the comeback kid.”
Great Portland Estates Plc, a London-based property investment company, has made a strategic decision to invest along the route of the Elizabeth Line, said Sarah Goldman, its head of retail. This includes blocks along Oxford Street itself, housing brands such as jewelry retailer Pandora A/S.
Goldman said a “phenomenal” amount of tenancy deals were struck along the street last year, adding that the shopping district’s recovery should speed up with every new store that opens. Keane said about £100 million was invested in 2023, a figure he expects to be three or four times higher this year.
Music retailer HMV returned to Oxford Street in November, replacing one of the road’s notorious candy shops, while a branch of Ikea is expected to finally open this autumn following delays. Krispy Kreme Doughnuts Inc. is cutting the ribbon on a new store on Friday, complete with an influencer studio and plans to stay open until 9 p.m. to catch tourists leaving West End shows and nearby restaurants. Other recent arrivals include Dr. Martens Plc, Under Armour Inc., Steve Madden Ltd. and an outlet for football team Paris Saint-Germain.
Ikea’s decision to replace the former Topshop store by Oxford Circus has raised eyebrows, with the Swedish furniture giant more associated with out-of-town retail parks. Yet it’s one of several new retailers on the street that believe shoppers want an in-person experience rather than relying entirely on online purchases.
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The Marble Arch Mound in London in August 2021. Photographer: Hollie Adams/Bloomberg
“Our customers want to smell, they want to taste,” said Peter Jelkeby, head of UK and Ireland at Ikea. “They want to have a seat, they want to touch and feel. They want to come out and interact.”
The experience of visiting Oxford Street is central to its recovery and planned revival. A “miniature world” of toys and models, called Pocket Planet, is being developed toward the west end of the street, hoping to prove more successful than the Marble Arch Hill. The City of Westminster local authority, meanwhile, is planning a £90 million revamp to widen footpaths by 40%, add more seating areas, greenery and better lighting.
“We’ve managed to get ourselves in a place where everybody’s confident to invest and trade,” said Geoff Barraclough, a Westminster councilor in charge of planning and development.
Ikea is expected to open a store on Oxford Street this autumn. Photographer: Betty Laura Zapata/Bloomberg
The politics around Oxford Street remain challenging, however. Marks & Spencer Group Plc, a favorite retailer of Britain’s middle classes, is locked in a legal battle with the government over its plan to demolish and rebuild its flagship art deco store on the street.
Michael Gove, the UK’s secretary of state for housing and communities, blocked the development last summer due to concerns about the impact on nearby landmarks and the building’s sustainability — a move described as “utterly pathetic” by CEO Stuart Machin. The dispute reached the High Court this week.
M&S is locked in a legal battle over its plan to rebuild its flagship art deco store. Photographer: Jason Alden/Bloomberg
Other retailers have spoken out in support of the plans which M&S says are vital to its future on Oxford Street and the prosperity of London’s West End. Goldman from GPE agrees. Gove’s decision “gives us limited confidence, as developers, that we can invest in this city,” she said.
Gripes with the Conservative government also include a tax break for foreign shoppers that ended when Britain left the European Union. Rishi Sunak, the current Prime Minister who was Chancellor of the Exchequer at the time, refused to reinstate the policy, which the Treasury sees as expensive and potentially vulnerable to fraud. Campaigners cite a study by the Centre for Economics and Business Research which said the so-called “tourist tax” costs the UK economy about £11 billion and deters two million visitors per year.
Sunak’s Chancellor Jeremy Hunt ordered a review of VAT-free tourist shopping by the Office for Budget Responsibility, the UK’s fiscal watchdog, earlier this month. Its findings are due on March 6.
Nonetheless, large retailers on the street sound happy to be there. John Lewis, the department store chain owned by its employees, said footfall rose at its seven-floor flagship on the street last year, partly due to tourists but also because British consumers “are rediscovering the joy of shopping in person” after Covid.
Music retailer HMV returned in November, replacing one of the roads notorious candy shops. Photographer: Carlos Jasso/Bloomberg
“Oxford Street is trading very, very well,” added Eoin Tonge, finance director at Associated British Foods Plc which owns fashion chain Primark. “We’ve definitely seen a really good comeback on Oxford Street, helped by tourism, but generally it’s been buzzy.”
The decline of recent years presents an excellent buying opportunity, according to BNP’s Keane. “I’m telling my clients right now, get in now, it’s at the bottom, you’re gonna make a lot of money,” he said. “That’s what I’m telling them — and some of them are listening.”
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