Shaking The Status Quo: Can Anything Pop The Feel-Good Factor Back Into Oxford Street?

After a number of attempts to revive a fractured and unwieldy Oxford Street, a much-vaunted pop-up initiative is promising to pep up vacant units and help oust downmarket retailers, and a number of headline openings from Paris St.-Germain to Dr. Martens and HMV point to renewed retailer interest.

Yet a new golden age for Britain's most famous retail thoroughfare is far from assured, with rents flatlining, a reliance on landlords to help deliver the pop-up project, delays to the arrival of Ikea and Marks & Spencer threatening to pull the plug on its famous Marble Arch flagship.

So just what is the truth about the plans and prospects for a street that has been in structural decline for more than a decade?

Earlier this year, small businesses were invited to apply to take over shops on Oxford Street rent-free as part of a project launched by Westminster City Council, in partnership with New West End Company and temporary space specialist Someday Studios.

Called Meanwhile On: Oxford Street, the programme aims to activate empty spaces previously taken up by “low quality occupiers such as American candy stores,” the organisers said.

Successful applicants — about 300 companies have applied so far — will be given a prime store location for an initial six-month rent-free period at a minimum reduction of business rates of 70%. The target is to support 35 brands over three years, with the first store opening this autumn.

Yet the practicalities of how the programme might work will rely on landlords playing ball.

“We are in active and encouraging conversations with landlords to secure the first stores for the programme, making sure we have the right spaces on the right terms,” Westminster Council told Bisnow in a statement. “We've had an overwhelming number of detailed and innovative brand applications, and are currently finalising the first shortlist and look forward to welcoming some of them to Oxford Street soon.”

In addition to landlords providing rent-free spaces and the business rates reduction, the programme offers fit-out and management of stores and support for brands through guidance, promotion and marketing.

That is a concern for John Hoyle, founder of temporary space provider Sook, which has two locations in the West End, one on Oxford Street and another on South Molton Street as part of a 12-location estate that now includes a site in South Africa.

“Although any initiative that brings in fresh brands should be welcomed, personally I think there would be more of a legacy had the initiative been based around a more commercial arrangement, with the landlord being paid on a revenue share and the brands expected to contribute,” Hoyle said.

“That puts the model on a more sustainable footing than simply providing grants, heartening as the intention is, and also introduces landlords to a different and profitable way of leasing their space.”

The other challenge for finding the pop-up space may be that more retailers have begun to target Oxford Street for permanent stores.

Despite departures and downsizing among the street’s department stores, new lettings announced recently include a flagship Dr. Martens and the newly opened brand store for French football giant Paris St.-Germain. Also on the way or already arrived are Reserved, Footasylum, Kurt Geiger and Steve Madden. And despite a delay, Ikea will also be landing at the intersection with Regent Street.

Meanwhile, the Labour-led Westminster Council appears to be clearing out the shopping street's abundance of "low quality" American candy stores, initiating an enforcement crackdown that could make way for new businesses.

The number of American candy stores on Oxford Street has fallen from a peak of 29 to 21, according to a report presented to the full chamber on 9 October.

Yet tackling the proliferation of such shops has proved a tough challenge, with landlords letting the units out to possibly sidestep business rates on vacant premises, while complex sublettings to shell companies mean that ownership has become increasingly opaque.

“We have ramped up the pressure on candy stores, souvenir and vape shops, to make clear the status quo is not acceptable,” the report says. “Following multiple attempts to engage with each freeholder and long leaseholder, requesting that they do all they can to stop letting agents leasing empty properties to candy stores or souvenir shops, we then carried out a transparency release of those who failed to engage positively with the council.” 

This exercise triggered a number of conversations with freeholders and long leaseholders on specific actions that could help to remove candy stores in their particular contractual situations. Those conversations are ongoing, the report continued.

“We have energetically pursued unscrupulous traders who sell unsafe or fake goods, impounding more than £1M of items in 18 months,” Westminster leader Adam Hug added, accusing the candy stores of forming part of a “sophisticated operation skilled at exploiting UK legal loopholes” that have cost taxpayers at least £8M in unpaid business rates.

The number of shops fell to 21 previously, only to rebound to 29 by February, according to Local Data Company. Despite bringing the number down to 21 again, the council has been working to stop new stores from popping up.

A number of the agents active in the West End are bullish about prospects for Oxford Street, and Savills Retail Director Sam Foyle said that American candy stores are “yesterday’s news.”

“There is a huge amount going on behind the scenes, and we are really active on Oxford Street,” he said. “We’ve had the busiest year along the street for five years, and I think that those who continue to focus on the American candy shops are stuck in the past. The story has moved on.”

Foyle credits a lot of the renewed interest in Oxford Street to significant revisions of business rates and rebased rents down from peak values. Savills estimated that total occupational costs as a percentage of turnover on Oxford Street West have reduced from 29.2% in 2019 to 18.5% in 2023.

“Put simply, the cost of occupancy for retailers is significantly less than it was before,” he said.

Knight Frank Head of Retail Research Stephen Springham said he believes prime rents on Oxford Street have stabilised. Rather than returning to growth, though, they are stagnating, with the headline prime zone A at £625 per SF, down from £850 per SF pre-pandemic. However, Springham said that this is a very broad measure.

“There is definitely interest again, but it is selective rather than at any price,” he said.

The reduction in operational costs is good news for retailers but means landlords face a painful valuation correction. Stronger demand could also make them seek a permanent tenant rather than participate in the pop-up scheme.

Foyle also said the ongoing redevelopment work at department stores such as John Lewis and the former Debenhams, plus the fact that a number of incoming brands like HMV have not opened their doors yet, means that imminent improvements are not yet visible.

“As the new brands oust the candy stores and the hoardings come down, people will have a much more positive view of how Oxford Street is transforming,” Foyle said.

He said he is also upbeat about the announcement of a much-needed overhaul of Oxford Street after Westminster City Council and NWEC formally signed a memorandum of understanding to jointly fund £7.7M for the next phase to improve the streetscape.

Construction work is expected to start in autumn 2024, covering the entire 1.1-mile length of Oxford Street from Marble Arch to Tottenham Court Road and including improved footways, greening and seating. Junctions joining the street, including Oxford Circus, will be redesigned to create more space for pedestrians, and the council will install 12 new pedestrian crossings as well as improving 45 existing crossing points. 

NWEC CEO Dee Corsi called it a “once-in-a-lifetime opportunity,” but with Paris pledging an extensive redevelopment of the Champs-Élysées to make it ready for the Olympics in 2024 and Milan going through a citywide regeneration, London’s two biggest fashion and luxury rivals have also upped their game.

The dramatic demise of San Francisco’s main retail district, which prompted Westfield to hand back the keys to its Market Street mall earlier this year, is also a fair warning of how quickly situations can deteriorate.

Sook's Hoyle also said he is cautious about whether the revival of retailer interest reflects new momentum along Oxford Street or simply that brands and retailers are able to strike no-brainer deals.

“It’s good to see new retailers take permanent space along Oxford Street, but I think we have to be realistic. The fresh impetus is largely because of the softening rental market and the need for landlords to offset business rates,” he said. “Yes, it’s great news, but for the brands rather than the landlords. Many are getting fantastic deals.”

He said that he remains concerned that discounting rents “does nothing to shake up the status quo or to change thinking” on Oxford Street or more generally on other UK high streets experiencing vacancies.

“We’re seeing the same old model being used with dwindling returns, which then artificially preserves valuations,” he said. “Instead, landlords and agents need to be far more innovative and look at revenue models that drive stronger incomes and reflect a more modern way of doing business.”