Insight - Will London’s Oxford Street survive Covid?

Lower sales: People walk past a sign displaying Covid-19 guidelines in the West End of London. Sales from retail, hospitality and leisure in the area are on course to bring in just £2bil (US$2.7bil) in the year to March 2021, down from £10bil in the year earlier. — AFP

“IN a West End town, a dead end world, ” sang the Pet Shop Boys in the mid-1980s.

Fast forward 35 years and the electronic-pop duo would be just about right. Covid restrictions and a lack of global tourism have turned the West End, London’s premier shopping and dining district, into a shadow of its former self.

Sales from retail, hospitality and leisure are on course to bring in just £2bil (US$2.7bil) in the year to March 2021, down from £10bil in the year earlier, according to the New West End Company, which represents businesses around London’s Bond Street, Oxford Street and Regent Street.

The damage was laid bare on Tuesday when landlord Shaftesbury Plc, which owns about 600 properties, including many shops, bars, restaurants and offices in the area, wrote down the value of its estate by £700mil. It was a wise move.

Toughest tier

Starting yesterday, London moves into the toughest tier of the UK’s coronavirus restrictions. Even when rules are eventually softened as more people get vaccinated, city centre locations in the UK and across Europe will take time to recover. That is going to require some imaginative thinking from landlords, retailers and restaurant operators.

About half of London’s West End retail and hospitality sales come from international tourists. With the vaccine rolling out around the world, some travel is expected to resume. But it’s possible that things won’t start to improve until at least the end of next year.

In the meantime, the UK government plans to scrap tax-free shopping for international travellers from Jan 1, which could cost billions of pounds in sales. Burberry Group Plc, Britain’s biggest luxury brand, warned last month that it would be hit particularly hard, as it would lose its “home market advantage” against Paris- or Milan-based rivals.

This all comes against the backdrop of continued competition from online retailers led by Inc, and digital fast-fashion companies such as Boohoo Group Plc. That’s one reason for the struggles of Philip Green’s Topshop, which occupies a prime position on Oxford Circus.

It’s not just tourists who will need to return either. City-centre economies rely on office workers. Although there might be a gradual return to the workplace throughout 2021, some form of remote working is likely here to stay. Not only does this threaten hundreds of local shops and eateries, it also makes it harder to repurpose empty stores into offices.

Converting assets

One option for vacant retail and office units is to convert them into residential properties, where demand remains steady for now. Not all Londoners want to flee to the suburbs. If more space becomes available in desirable post codes, the 25,000 people who live in and around the West End could see their numbers grow.

There are some glimmers of hope for retailers who don’t just want to make way for homeowners. Even under the UK’s Covid restrictions, fast fashion retailer Primark saw a stream of shoppers in its Tottenham Court Road store last week. At the other end of the market, there was a queue to get into Burberry on Regent Street.

Plus, the shopping mecca has reinvented itself several times before. Consider Selfridges, the West End store that was transformed from comfy to cutting edge in the 1990s under Italian businessman Vittorio Radice. Today, it’s an example of how a department store can thrive in an online world.

The pandemic has also shown how things can be transformed. Over the summer, some local roads were blocked off to cars to make room for more social distancing and al fresco dining. Preserving such changes could continue to elevate the area, as would adding more green space.

Stores with big footprints could also be split to house more innovative brands, breaking up the largely mainstream store mix. A third of ground floor units could change over the next two to three years, predicts the New West End Company.

The district doesn’t need to stay a ghost town. But it will need to look very different. — Bloomberg

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. Views expressed here are the writer’s own.

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