While the famous shopping destination was already facing headwinds, the coronavirus crisis has been a perfect storm for Oxford Street. The question is whether retailers will hang around to pick up the pieces or abandon it altogether.
- Data shows that retail vacancies on Oxford Street have hit their highest point in at least a decade due to the coronavirus pandemic
- Superdry chief executive believes central London will bounce back, while Asics is “constantly evaluating where [it can] get the highest return on investment”
- Direct-to-consumer and technology brands are still interested in taking space on Oxford Street
Last week, Debenhams revealed it would shut its Oxford Street store. It is just the latest closure to hit the famous shopping street. The iconic Topshop flagship is also up for sale while Gap is shutting one of its two Oxford Street shops.
Meanwhile, the former HMV and Forever 21 flagships still remain empty after being vacated months ago.
For many retailers and landlords, the last 10 months have also led to profound questions about the future of physical retail destinations themselves.
Pre-Covid, Oxford Street was already facing some fairly significant headwinds, such as the hugely inflated business rates on the street – sometimes three, four or even five times rents in some places. However, the last 10 months has created a perfect storm for the shopping street that puts its future as a shopping mecca in doubt.
Empty stores
The current vacancy figures on Oxford Street paint a stark, if not entirely surprising, picture.
Local Data Company data shows that 9.1% of space is vacant – with 24 of the street’s 264 functional units standing empty.
However, CWM equity partner Jonathan De Mello says it’s not just about the empty stores, but what is occupying many other once-prime retail units – namely, shops catering for tourists, sweet shops and the occasional bureau de change.
“There are still some good brands and retailers with stores on Oxford Street, but the majority of those have tended to congregate around the tube stations – Oxford Circus, Tottenham Court Road and so on,” he says.
“Those bits in between have mostly been taken over by tourist tat.”
Even during the periods over the last 10 months when restrictions have been relaxed enough to allow for ‘non-essential’ retail stores to open, Oxford Street has suffered from the collapse in footfall from both office workers and, perhaps most importantly, tourism.
Springboard data captures this fall. In March 2020, as the pandemic first struck, footfall on Oxford Street fell 60.4% year-on-year.
At its lowest, during April and May last year, footfall numbers were down more than 90% on normal levels.
Despite rebounding somewhat over summer, to a high point of -56.4% in September, increases in the national tiers and another full lockdown late in the year have seen numbers plummet again. Footfall was down 76.4% during November and 68.1% during the crucial December run in to Christmas.
With companies unlikely to encourage employees back into cities full-time for the foreseeable and British Airways warning that international tourism could take two or three years to return to pre-Covid levels, De Mello believes the short- to medium-term prognosis for Oxford Street is poor.
“Perhaps of all the retail destinations in the UK, Oxford Street is the most reliant on tourism,” he says.
“That shows no sign of coming back in a hurry. Also, between the fall in office workers and the endless delays to things like Crossrail, it’s hard to see when domestic footfall is going to be coming back.”
“When we start expanding again, I’m going to focus on regional hubs and cities. They are just so dominant with no real competition for footfall”
Property manager of international retailer
Landlords are starting to get worried. The property manager of one international retailer with UK stores says that many shopowners have been offering more competitive deals on Oxford Street. However, he says that post-vaccine rollout, he is more interested in expanding his store estate elsewhere.
“There are deals to be done [on Oxford Street], although I don’t think landlords are desperate just yet. When we start expanding again, I’m going to focus on regional hubs and cities.
“If you’re in Kent, for example, everyone goes to Bluewater. If you’re in Bristol, you go to Cribbs Causeway or the city centre. Manchester and The Trafford Centre. Sheffield and Meadowhall. They are just so dominant with no real competition for footfall.
“That’s where the smart money is. I’m not going to expand into London again, for 18 months at least, after this.”
Stick or twist?
Right now, Oxford Street is a very expensive problem for many retailers.
JD Sports boss Peter Cowgill told Retail Week late last year that its store on the street was one of the worst-performing in its portfolio.
“There is no point investing in these city centres at the moment when footfall is as low as it is. One of the most uneconomic places at the moment has to be Oxford Street – high rents, low footfall. What’s the point?
“We are committed to high-level, experiential stores, but they are suffering in city centres at the moment, and in London in particular.”
But are retailers with stores on the great shopping street willing to wait it out or can we expect a further exodus?
For fast fashion giant Primark, which has stores bookending both ends of the mile-long shopping street, there’s no doubt Oxford Street will return.
A spokesman said: “As two of our largest destination city centre stores, many of our Oxford Street customers are tourists and commuters so it was unsurprising that we saw a decline in footfall last year.
”Looking ahead, we know our customers are looking forward to shopping with us again and we are optimistic that Oxford Street will bounce back.”
It’s certain that other retailers are weighing up their options.
Asics executive vice-president for EMEA categories Gary Raucher, who trades from a flagship store on Regent Street, said he was “constantly evaluating what is the best opportunity for us and where can we get the highest return on our investment”.
“I don’t have a specific opinion on Regent Street, but what we are trying to do is constantly test and learn.
“One of our most successful stores in Europe is in Amsterdam and one of the reasons for its success is its proximity to Vondelpark, the city’s equivalent of Hyde Park.
“Does it make more sense for us to be next to a park where people can experience running outside, or to be in the middle of a tourist destination? Those are the things we are trying to learn and evolve from.”
“There’s no doubt stores like Oxford Street allow us to showcase Lush at its very best, but those stores have got to adapt to the world we are in”
Paul Wheatley, Lush
Lush property director Paul Wheatley says it is reconsidering its focus on larger-format, city-centre stores.
“We need to see how those [large-format] stores work in a post-Covid world,” he says.
“There’s no doubt stores like Shinjuku [in Toyko] and Oxford Street allow us to showcase Lush at its very best and give us a point of difference, but those stores have got to adapt to the world we are in.
“The challenge is city centres across the globe aren’t doing well, and we have to make sure our model is sustainable enough to have local stores where they are needed.”
However, many retailers have faith that central London will recover.
Superdry chief executive Julian Dunkerton, when asked about Oxford Street, said: “I fully expect a bounceback in London. London is London – no city has tourists at the moment and it is a particularly tourist-led city. But when tourists do come back, London will come back.
“I’m fully committed to a physical space in London because it is a key international city.”
Hotel Chocolat chief executive Angus Thirlwell, who trades from stores on Regent and Bond Streets, as well as Seven Dials in Covent Garden, says: “I believe at some point the footfall will come back. It may not be exactly the same. It’s more likely it won’t be exactly the same. But that doesn’t necessarily correlate.
“If there’s 25% less footfall, it doesn’t necessarily correlate to a store taking 25% fewer sales. Particularly not for our business model.”
Taking up space
Even if Oxford Street never returns to pre-Covid footfall levels, CWM’s De Mello still believes it has a future as a retail destination.
However, he believes it may be more of a location to showcase brands and build their profile, rather than simply a place to make transactions.
“I know of five or six brands that are still looking at an Oxford Street store in the same way they would an advertising campaign on TV or using an influencer on social media. Taking the budget from marketing, rather than from the property team,” he says.
”These brands think of Oxford Street as a place for showrooms, like with Samsung’s Experience store, for example. It’s less a question of generating footfall or even sales, and more about marketing the brand to consumers.”
One property source agrees and believes that DTC and technology firms such as Huawei, Samsung and Tesla, athleisure stars, like Gymshark and Under Armour, and fast-growing online retailers such as Shein are all keeping an eye on Oxford Street.
He also says that Amazon, which has been opening grocery and general merchandise stores in the US, is rumoured to be interested in taking space on the iconic shopping street.
”The direct-to-consumer and technology-led retail brands are definitely looking at Oxford Street still,” he says. “But don’t count against a few international entrants throwing their hat in the ring as well.”
The business tax hurdle
While the coronavirus crisis and the drop in footfall have had profound implications on Oxford Street and its environs, it’s not the biggest existential crisis it faces.
According to retailers and landlords alike, that remains business rates. New West End Company (NWEC) chief executive Jace Tyrrell made this point last year.
“I know there are hundreds of businesses in the West End that are going to decide whether to stay or leave depending on what happens with business rates.”
“Rates in London are particularly onerous compared with other cities, so it absolutely has to deal with its rates situation”
Julian Dunkerton, Superdry
While the government intervened early in the pandemic with a 12-month business rates holiday, which has subsequently been extended by a month to the end of April, it has made no commitments to further exemptions or even real reform beyond that period.
It’s a point also raised by Superdry’s Dunkerton. “Rates in London are particularly onerous compared with other cities, so it absolutely has to deal with its rates situation. When you’ve got empty stores in key locations in the centre of London, you know there’s a problem somewhere.”
Figures produced by Altus Group help illustrate the impact rates have on retailers in the capital, and on Oxford Street more specifically.
They show that, of the top 20 business rates bills in the UK, 15 are paid by retailers with stores on Oxford Street.
Top 20 retail business rates bills | Rateable value 2017 | Rates payable 2020/21(without business rates holiday) |
---|---|---|
SELFRIDGES, 398-454 OXFORD STREET, LONDON | £33,220,000 | £17,673,040 |
HARRODS, 87-135 BROMPTON ROAD, LONDON | £32,120,000 | £17,087,840 |
JOHN LEWIS, 278-306 OXFORD STREET, LONDON | £19,910,000 | £10,592,120 |
DEBENHAMS, 334-338 OXFORD STREET, LONDON | £10,370,000 | £5,516,840 |
MARKS & SPENCER, 456-472 OXFORD STREET, LONDON | £9,200,000 | £4,894,400 |
LOUIS VUITTON, 17-20 NEW BOND STREET, LONDON | £8,560,000 | £4,553,920 |
RALPH LAUREN, 1-5 NEW BOND STREET, LONDON | £7,730,000 | £4,112,360 |
JOHN LEWIS, 2-32 KINGS ROAD, LONDON | £7,670,000 | £4,080,440 |
MARKS & SPENCER, 169-173 OXFORD STREET, LONDON | £6,680,000 | £3,553,760 |
CHANEL, 158-159 NEW BOND STREET, LONDON | £6,600,000 | £3,511,200 |
H&M, 360-366 OXFORD STREET, LONDON | £6,420,000 | £3,415,440 |
PRIMARK, 499-517 OXFORD STREET, LONDON | £6,350,000 | £3,378,200 |
TOPSHOP, 214-218 OXFORD STREET, LONDON | £6,140,000 | £3,266,480 |
ZARA, 333 OXFORD STREET, LONDON | £5,940,000 | £3,160,080 |
PRIMARK, 14-24 OXFORD STREET, LONDON | £5,850,000 | £3,112,200 |
HARVERY NICHOLS, 109-125 KNIGHTSBRIDGE, LONDON | £5,850,000 | £3,112,200 |
GAP, 376-384 OXFORD STREET, LONDON | £5,650,000 | £3,005,800 |
RESERVED, 252 OXFORD STREET, LONDON | £5,430,000 | £2,888,760 |
CHRISTIAN DIOR, 160-162 NEW BOND STREET, LONDON | £5,280,000 | £2,808,960 |
IKEA, VOLTA WAY, CROYDON | £5,240,000 | £2,787,680 |
NIKE, 230-236 OXFORD STREET, LONDON | £5,160,000 | £2,745,120 |
BURBERRY, 21-23 NEW BOND STREET, LONDON | £5,020,000 | £2,670,640 |
IKEA, 255 NORTH CIRCULAR ROAD, LONDON | £5,010,000 | £2,665,320 |
VICTORIA’S SECRET, 111-117 NEW BOND STREET, LONDON | £5,000,000 | £2,660,000 |
HOUSE OF FRASER, 308-322 OXFORD STREET, LONDON | £4,760,000 | £2,587,284 |
For the international property manager, this simply makes the street unviable.
“I looked at a unit on Oxford Street, by Selfridges, at the beginning of the pandemic. Rents were more than manageable, on a turnover basis, but the rates were something like £400,000 a year. That’d be almost bigger than my rates and rents on the other stores combined.”
He added: “All the other issues we’ve been talking about pale into insignificance compared to rates. We desperately need clarity of what’s happening with the rates. If they come back to full by the end of April, but the footfall doesn’t, it’ll be a complete disaster.”
The property source agrees. “Look at what happened with Starbucks. One of the biggest companies in the world. They opened a branch on Oxford Street and they physically couldn’t churn out enough cups of coffee to cover the rent and the rates.”
The future of Oxford Street
While clearly significant, business rates reform is out of retailers’ – and indeed landlords’ – hands. What then, in the short to medium term anyway, does the future hold for Oxford Street?
NWEC has pushed in the past for the street to be pedestrianised to encourage more footfall. The latest effort fell flat in October after residents lobbied Westminster City Council.
The issue is unlikely to go away, however. In July last year, nearby Seven Dials said it would be pedestrianising the majority of the district.
In Nottingham, the city centre around Broadmarsh is set to be pedestrianised. Supporters of the plan say it will generate millions for the local economy.
Another possible hint lies in recent moves by John Lewis.
The department store chain announced in October 2020 that it plans to convert as much as 302,000 sq ft of the 678,700 sq ft store into more flexible retail or office space.
Could more of Oxford Street be converted into office space?
While big landlords such as British Land and Landsec are convinced offices remain a strong bet in the long term, quite what the legacy from the coronavirus pandemic will be for full-time office work is only beginning to take shape.
The property source says that getting local authorities to relax zoning regulations is critical and would allow for more food and beverage occupiers to come in to diversify the street.
“Oxford Street needs to make itself more interesting. You obviously had Market Halls and the Swingers [crazy golf course] near Oxford Street, but they didn’t have entrances on the street,” he says.
”Also, Tesla looked at taking showrooms there last year, but the council ended up blocking them because they didn’t think it counted as retail. That needs to change.”
There are no easy answers for Oxford Street, with many potential solutions hinging on matters beyond both retailers’ and landlords’ control. However, it appears its future as a destination may rely on a diminished retail offering.
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