Oxford Street was one of the few streets in the West End to see an acceleration in vacancy contraction and rental growth in Q4
West End full-year sales performance for 2024 was relatively subdued at +0.5% year-on-year (YoY), according to data from the New West End Company (NWEC). The final quarter of the year saw, on average, a 1% growth in sales YOY, with December sales being flat, albeit this was off a very strong comparison period in 2023. The highlight was international spend in the West End, which continued to report positive growth over Q4, finishing the year 3.3% up on the same period last year. By contrast, domestic spend performance remained a laggard, and despite a pickup in October, domestic spend deteriorated on a YoY basis in November and December. This is likely a reflection of softening consumer confidence in the face of news flow surrounding downgrades to the UK economic outlook.
There were some nuances to performance across the West End. While Bond Street reported full-year 2024 sales down 0.5%, performance moved back into positive territory over Q4. December, for example, was up 2.8% YoY, the strongest across the key retail streets in the West End. This improvement resonates with some of the financial updates being delivered by some of the major luxury groups and brands, suggesting that performance in the global luxury market is starting to stabilise.
Over the course of December, Regent Street was a lead performer, reporting an annual increase of 2.5%, ahead of the 2.3% reported for the wider West End
Marie Hickey, Director, Commercial Research
Looking forward, international spend in the West End is expected to remain buoyant in 2025, considering forward booking data. US visitor spend, in particular, who have been major spenders in London over the last 18 months, will be boosted by the recent strengthening in the dollar against the pound.
While spend performance was relatively mixed, footfall levels across the West End continued to improve, rising by an average of 3.1% YoY in Q4. Over the course of December, Regent Street was a lead performer, reporting an annual increase of 2.5%, ahead of the 2.3% reported for the wider West End.
Vacancy has tightened for the tenth consecutive quarter, driving rents higher once again
Occupier sentiment remained strong into Q4, and as a result, the West End saw the tenth consecutive quarter of falling vacancy rates; prime West End vacancy now sits at 2.2%, down 108 bps compared to last quarter.
Oxford Street has seen some of the strongest vacancy contractions in the West End, and across London. Year-end vacancy on the street reached 1.4%, driven by a marked contraction on the west end of the street, particularly following the letting of 417–419 Oxford Street to Mango. The historic low levels of vacancy, most notably of good quality prominent space, has accelerated the growth in prime headline rents on the street. Oxford Street East reported a 33.3% YoY increase in headline rents in Q4, with the western end seeing a 25% uplift – this is close to 10 percentage points higher than that reported the previous quarter. As a result, this is squeezing the differential to 2019 rental levels, being one of the few remaining key streets in the West End to still be in recovery mode. The growth in rents in Q4 means that the differential to Q4 2019 prime rents on the West and East ends of the street stands as -11.8% and -7.7%, respectively.
Across the wider West End, there continued to be upward pressure on prime rents, with Q4 reporting a 12.8% YoY increase, a slowing on Q3 and pointing to some normalisation in performance, as expected. In contrast, the growth in prime rents across the whole of Central London remained relatively stable with a 10.4% annual increase in Q4, 10 basis points (bps) up on Q3. This was supported by a further improvement in average prime rents in the City (+14.8% YoY), the second consecutive increase following 19 quarters of negative or flat change in the City average. The affluent London neighbourhoods also remained key drivers of rental growth across the wider Central London market. A key strong performer has been King’s Road; vacancy on the street fell from 6.2% in Q1 down to just 2.6% in Q4, with prime headline rents up 20.0% YoY as of Q4 2024, driven by improving occupational demand from premium brands and F&B concepts, some opening their first ever stand-alone stores in the UK on the street. For example, We Norwegians and Farm Rio selected the location for their first stores in London.
Looking forward, we continue to be mindful of the impact the increased NI contributions that come into effect on the 1st of April could have on operator margins and, in turn, occupational demand. It will and has been generating headwinds to occupier confidence in some parts of the market. However, for good quality space in prime locations, we don’t expect there to be a significant impact as occupiers will be taking a longer, more strategic view, particularly as the availability of this type of space remains heavily restricted.
Investment activity remains subdued due to limited availability, though buyer sentiment remains strong
A total of £65.9 million was transacted across four deals in Q4 2024, reflecting ongoing buyer sentiment despite limited stock. The largest transaction of the quarter was the sale of Oxbourne House at 354–358 Oxford Street, which was sold to US investors Ares. This brought full-year retail investment volumes across Central London to £849.8 million. While full-year volumes were down 29.1% on 2023, it is understood that buyer sentiment remains strong. The challenge has been lack of product rather than being a reflection of sentiment. With reduced transactions, there remains no clear precedent to shift prime yields as of yet. However, the continued improvement in prime rents will improve returns, meaning that in some locations we could see downward pressure on yields start to materialise in 2025.
As with retail spend, the strengthening in the dollar, against the improved occupational market, is likely to enhance the attractiveness of Central London retail assets to US investors, albeit the specific of the assets will be key. Subject to improved stock levels, this will help to elevate transaction volumes in 2025.
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