Diversification key to future Oxford Street success
Over the past few weeks London’s Oxford Street has once again been in the media for all the wrong reasons. The revelation by our friends at the ever-pro-active New West End Company that over one in five stores on the street are permanently closed rather predictably generated a slew of lurid headlines.
We find this a real shame as the fact is that Oxford Street remains one of the world’s premier shopping destinations, where rents have risen significantly over the last decade. Admittedly the street, like most locations, has issues: plans to pedestrianise the prime stretch from Tottenham Court Road to Marble Arch, including a light rail transport system, have repeatedly come and gone, while work on the still unopened cross-city heavy rail link Elizabeth Line has been disruptive for over a decade.
But fundamentally and certainly on paper, Oxford Street ought to be thriving, given its status, excellent geographic location and proximity to what will be (post-Covid) some of the busiest transport hubs in the capital. Yes, it is true that some stores are at present boarded up but we think that with the right vision in place, the shutters will come up again, though not necessarily on the type of stores which were there before or even shops at all.
We believe the nub of the issue centres on Oxford Street’s occupier base. Traditionally a fashion hotspot, a series of well-publicised closures has resulted in a now eclectic mix of retailers. This prompted P-THREE to analyse the street’s current occupiers so that we could provide positive evidence-based suggestions on how occupational change could revitalise the area and bolster its strengths for the coming decade.
Our analysis (by fascia, not floorspace) confirms that the street is currently dominated by a mix of mid-market fashion and footwear stores (the retail sectors hit hardest by online sales) and vacant units (see table below). Many of the vacant units were previously let to fashion/accessory retailers, pushing the total occupancy rate of that sector on the street to one-third of all fascias.
We believe that Oxford Street has the potential to not only maintain its position as a leading global destination street, but to enhance it. However, to do so it must diversify away from the current occupational base and simultaneously broaden its mix of uses.
Tourism has always been one of the drivers of the street’s 100 million annual visitors, but in the future, they will want more than just shopping. Oxford Street needs to set its sight on housing one or more of the capital’s busiest tourist attractions (something as unique to the area as the London Eye, Sea Life London, Madame Tussauds, the National History Museum and Tate Modern are to their respective locations). And it needs to cater better for modern visitors, often family groups, by providing inviting outdoor spaces (as Argent has so artfully done at London’s King’s Cross) and other unique selling points (such as the wonderful destination-in-its-own-right Museum of Ice Cream on New York’s Broadway).
We’re not suggesting that all new leisure should be directed towards tourism, however, as Oxford Street houses, and is surrounded by, a sizeable amount of office space. Covid-19 has forced a rethink of the role of the office, possibly for good, so Oxford Street is in an excellent position to capitalise on a new-found demand for leisure space that caters for those working in offices nearby.
Based on the current number of store frontages, the P-THREE vision for a thriving Oxford Street later this decade has a new occupational mix as shown in the table below:
Unsurprisingly, there will be a reduction in the number of fashion outlets, but we are particularly excited by the arrival of several new types of occupiers (highlighted in the table above), including new-generation department stores (similar to US concepts Neighborhood Goods and Showfields), which will act as ultimate curators, showcasing the most creative, relevant, and elevating brands and new retail, where stores have evolved from a simple point of sale to a touchpoint for consumer engagement that includes entertainment or personalised shopping expeditions as part of the experience. While we expect an increase in food and beverage outlets, ideally interspersed with retail at regular intervals along the whole of prime stretch, the number of existing outlets on neighbouring streets means we don’t expect as high an increase as we would in areas with a much more limited existing food and beverage offer.
A number of factors make diversification of Oxford Street’s occupier base much more achievable than in the past, including:
Vacancy rates – will encourage landlords to be more flexible about future occupier types
Reduced demand – from the mid-fashion sector will be replaced by increasing interest from other sectors, as well as non-retail occupiers
Rental reductions – re-based rents make the street affordable to a new range of potential brands and spaces
Retail space conversion – as retailers move from simple sales floor to spaces that articulate stories about their brand/s
Flexible leases and new-generation pop-up concepts – will bring vitality in the short-term and act as an incubator for potential long-term occupiers
The biggest hurdle for Oxford Street isn’t (as its detractors suggest) its physical layout, though an innovative public realm programme led by Westminster Council and the London Assembly (similar to those planned for Paris’ Champs-Élysées and Barcelona’s Las Ramblas) will certainly be necessary. And we’re heartened to see a Westminster council-led temporary scheme to ensure social distancing will have a positive effect on the street’s physical environment.
The toughest nut to crack for Oxford Street is how its multiple stakeholders can act as one to develop an over-arching leasing strategy that would enable the street to emulate the success of Crown Estate’s neighbouring Regent Street and other central London villages in single ownership. Sadly, there is no obvious and straightforward solution, though we think a couple of those previously raised may be worth revisiting:
Building on the excellent work achieved by the New West End Company BID (business improvement district) and potentially run by the same experienced team, a turbo-charged, geographically-specific, mini-BID (effectively a BID within a BID) could be owned by all landlords whose buildings front Oxford Street, and have genuinely-achievable targets, along with measurable outputs.
Bringing together all of the street’s owners and pooling their properties for an agreed period of time into a SIV (single investment vehicle) would allow them to act as a single entity and make decisions that would benefit the street as a whole.
We acknowledge that achieving the necessary buy-in from stakeholders and overcoming various legal and other matters mean that a viable solution is still some time away, though we wholeheartedly believe it is worth striving for. It would mean that, for the first time in its history, Oxford Street’s various zones, each with their own identity, could be developed in a co-ordinated and harmonious way, complementing the simultaneous evolution of a curated tenant mix. Not only would that generate some amazing headlines, more importantly it would ensure the long-term prominence and economic well-being of one of London’s most familiar and cherished destinations.
FOOTNOTE
If the occupancy table has piqued your interest and you’d like to go through the numbers in greater depth we’d be very happy to do this with you – just drop any of us a line.
Article by Hannah McNamara, Thomas Rose and Justin Taylor, Co-founders of P-THREE
