Retailers move away from London's central shopping streets as rate rises bite

Retailers are moving away from some of London’s most famous shopping streets amid spiralling costs, putting property values at risk, Deutsche Bank’s asset management division has warned.

Affordability for retailers in the capital is “increasingly stretched”, with brands, particularly those at the luxury end, “reassessing the value of a high-end store”, Deutsche Asset Management said on Wednesday - writes telegraph.co.uk.

This is likely to hit rents for the shops, potentially forcing down values as the wider property sector weakens. "Prime high street retail rents in central London are at considerable risk of decline," it said.

Simon Wallace, Deutsche Asset Management’s head of research for Europe, said retailers were increasingly looking away from traditional shopping areas such as Bond Street and towards more affordable options in areas such as Seven Dials, near Covent Garden.

“The affordability pressures are growing with regards to both rents and rates in those central areas,” he said.

He added that while the decline in the value of pound, which has attracted overseas spenders to London, had helped, it was a short-term gain.

“It’s a factor, but if you’re signing a lease [on a shop] for 10 years and rents increase and rates increase, it’s got to be a consideration over the entire lease.”

S hops in central London were particularly badly hit by a revaluation of business rates, which came into effect in April . Some retailers saw a rise of as much as 80pc because of the change in the value of the building since the last revaluation in 2010.

Deutsche's UK Real Estate Strategic Outlook said the “market fundamentals” for the property sector more broadly were weakening. “The economy continues to slow and uncertainty remains high,” it said.

It said it expected rents for London offices to fall over the next 18 months as continued political and economic uncertainty weighs on decision making for large firms.

While it predicted that development projects already under construction were likely to be completed, “some developers are responding to challenging conditions by curtailing future supply”.

“Rents are now falling in London and while overseas capital has been supporting prime pricing, anecdotally the market is thin and vulnerable to capital controls,” it added.

telegraph.co.uk
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