Occupational demand remains buoyant for prime opportunities, but caution amid increased operational and fit-out costs is tempering rental growth
The good news in Q2, from an operator perspective, was the improving number of visitors to the West End. According to data from NWEC, year-on-year (YoY) footfall for each month of Q2 was positive, averaging +3.4% YoY for the quarter, which was a reversal of the -1.5% average reported in Q1. This was underpinned by a relative improvement in domestic footfall and continued growth in international visitors to the district; domestic YoY monthly footfall averaged -2.1%, a tightening of the -12.5% seen the previous quarter, with growth in international footfall still in double-digit territory, averaging +16.0% YoY for the quarter.
But, while a growing number of people were visiting the West End, it appears the softening in consumer confidence globally that materialised in late 2024, accelerating in the immediate aftermath of Trump’s Tariff announcements, continued to weigh on Q2 headline spend. Total YoY spend trends in the district averaged -2.2% for Q2, an acceleration on the -1.5% Q1 average, a trend that was mirrored across both domestic and international spend. The only key street in the West End to counter this wider trend was Bond Street, which reported a +1.0% YoY increase in YTD spend according to NWEC.
We expect cautious consumer spend will remain a key feature in Q3 as expectations of inflationary pressures, in response to the new tariff environment, start to mount
Marie Hickey, Director, Commercial Research
The softening in top-line spend is being driven by reduced ATV (average transaction value), reflecting more considered consumer spending as transaction count in Q2 actually increased YoY against Q1; +2.9% YoY average for Q2 vs +0.7% for Q1.
As expected and flagged in our Q1 update, US spend has proved to be a particular soft spot over Q2, with more pronounced YoY declines post-April driven by a contraction in ATV. Weaker consumer confidence will be coming into play, as will the softening in the US dollar against the pound, tempering headline retail spend.
Looking to the second half of the year, we expect cautious consumer spend will remain a key feature in Q3 as expectations of inflationary pressures, in response to the new tariff environment, start to mount. Domestic spend in the West End is likely to be more exposed to this as UK consumer confidence remains relatively flat and the Savings Index reported more meaningful increases, pointing to mounting concerns around personal economic conditions and exacerbated by growing speculation of possible tax rises in the Autumn Budget. International spend is likely to be more resilient, supported by improving consumer confidence in the eurozone and a continued uptick in international arrivals.
Rental growth continued, albeit growth has slowed significantly; only a select number of streets reported upward pressure
First store openings by new international entrants to London on course to surpass 2024 levels The second quarter of 2025 saw 17 new international brands make their London debut, bringing the half-year total to 21. This is 10.5% above that seen over the first half of 2024 and suggests full-year numbers are likely to be ahead of the 38 seen last year.
The continued activity from new entrants highlights the enduring appeal of London to expansive brands and operators. However, this acceleration in new openings also demonstrates the extended fit-out periods facing new opportunities due to constrained contractor availability and mounting costs, with some of these first store openings being on leases secured in 2024. For example, we have anecdotally heard of situations where total fit-out costs on a per-unit basis are now 40% higher than what they would have been in 2018.
Despite these challenges, interest from new international entrants remains buoyant. The US tariff environment is leading some brands, particularly those from Asia, to refocus global expansion strategies on EMEA to the benefit of London. But with the availability of good quality space in prime locations still heavily constrained, the ability to secure opportunities remains a significant challenge. This is being compounded by greater caution amongst some landlords, with some prioritising more established brands with proven track records when new opportunities arise.
Average prime rents in the West End reported further growth in Q2, but momentum continues to slow
Vacancy across the Prime West End (Oxford, Regent and Bond Street) saw a +22 basis points (bps) increase in Q2 to reach 2.0%. Despite this small increase, vacancy remains well below the long-term average of 7.4% and almost half of the 3.7% reported in Q2 2024.
But this limited supply is not translating into widespread rental growth. Occupier appetite remains buoyant, but confidence to bid aggressively on new opportunities has become more muted in response to wider global uncertainty, particularly in the face of mounting fit-out and operational costs. As a result, the slowing in rental growth that materialised in Q1 has continued into Q2, with rents across the core West End (including Soho and Covent Garden) slowing to +6.8% YoY with QoQ performance of +1.5%, down on the +1.9% seen in Q1. More telling was the fact that of the 19 core West End retail locations we track, 15 reported no quarterly change in rents in Q2. In the same quarter in 2024, only six locations reported no change in prime headline rents.
One of the notable exceptions to this, albeit beyond the West End, was Cheapside, which reported a +14.3% YoY increase in rents in Q2. The first movement in rents since Q1 2021 and the first positive change in rents since Q4 2015. Increased footfall and spend in the City, as more people travel into the office, reduced availability and lower total occupational costs have all helped to generate more demand momentum.
More muted rental growth will continue over the next six months as softer consumer and occupier confidence weighs on top-line performance. This is likely to be compounded by the upcoming Business Rates revaluation that will come into effect in April 2026, as early indicators point to increases in rates payable across a number of prime locations.
The pace of investment slowed in Q2, albeit H1 volumes are 130% up year-on-year
There was £399.8 million invested into Central London retail in Q2 2025, this was down on the £1.2 billion reported in Q1 which was dominated by Norges Bank Investment Management’s (NBIM) acquisition of a 25% stake in the Shaftesbury Capital Covent Garden Estate, with a further 25% stake acquired in Grosvenor Estate’s Mayfair portfolio totalling a reported £882.5 million. Looking at year-to-date volumes, bolstered by Q1 activity, transactional activity totals £1.6 billion, up +130% YoY and +101% above the H1 ten-year annual average. This level of activity is already ahead of full-year 2019 figures, with expectations that year-end volumes could exceed £2.0 billion, its highest level since 2018.
Focusing on key retail streets across the wider West End only, Q2 volumes were largely in line with Q1, bringing H1 volumes to £495.0 million. This is 18.9% up YoY, and with a number of known acquisitions expected to complete in H2, full-year volumes are expected to be significantly above the £522.9 million transacted in 2024. This acceleration will be supported by increased activity on Oxford Street, underpinned by improving occupational metrics and the more attractive debt environment. This is evidenced in the off-market acquisition of 149–151 Oxford Street in Q2 by an owner-occupier, demonstrating occupier confidence and long-term capital commitment to the street. This is the first owner-occupier acquisition on Oxford Street since Ingka Investments, the investment arm of Swedish brand IKEA, purchased 214–218 Oxford Street in 2021, part of which now accommodates an IKEA store.
Indicative prime yields for Oxford and Bond Street held in Q2 at 4.25% and 3.00%, respectively, albeit largely in response to relatively limited transactional evidence. Significant capital continues to target prime assets; flagship stores in top-tier locations, which could prompt yield compression should assets of this quality come to market.
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