Central London Vacancy Almost Five Times Lower Than National Rate

autumn 21 central london retail HealtH check research & ForeCasting uk CeNTRAL LONDON ReTAIL HeALTH CHeCK BELFAST GLASGOW EDINBURGH LEEDS Central London Vacancy Almost Five Times Lower Than National Rate DUBLIN MANCHESTER BIRMINGHAM UXBRIDGE BRISTOL LONDON retail vacancy rate (units) Jul 21 4.4% Jan 21 4.9% Jan 27 5.4% retail vacancy rate (Floorspace) Jul 21 2.4% Jan 21 3.2% Jan 27 4.9% vacancy Churn* executive summary There is evidence of a widening two tier retail market with Central London continuing to significantly outperform the rest of the UK. The proportion of vacant retail units in Central London was 4.4% in July 21, down from 4.9% in January. The proportion of vacant retail floorspace also decreased over the same period from 3.2% to 2.4% - almost five times lower than the UK average of 11.4%. Since we began monitoring retail vacancy rates in January 27, the average size of vacant units has fallen by over 35%. We believe that the Central London retail vacancy rate is likely to continue to fall over the next six months as a result of temporary lettings over the festive period. The Central London retail market will maintain its resilience in the face of upcoming challenges as a result of continued strong retailer demand and ongoing investment and development, particularly in the West end retail core. Jul 21 9.6% Jan 21 9.1% *% of all units vacant for all or part of previous 12 month period length of vacancy* Jul 21 46.2% Jan 21 53.4% The summer 21 edition of the National Retail Barometer is available for download from www.colliers.com/uk/research *% vacant units unoccupied for six months or more www.colliers.com/uk

Introduction This is the sixth publication in the Colliers International Central London Retail Health Check series, which provides an overview of the current state of the retail market and assesses the extent to which these trends are impacting on the high street by using vacant units as a key indicator. Our autumn 21 update incorporates the results of fieldwork carried out in July 21. The methodology behind our ongoing research is outlined on the back page. Colliers International also produces a National Retail Voids Barometer which analyses changing retail vacancy rates in a sample of 15 locations across the UK. Figure 1: Like-for-like Retail Sales - UK v Central London 2 Central London UK Divergence of 13.2 percentage points 15 1 5-5 Jan-7 Mar-7 May-7 Jul-7 Sep-7 Nov-7 Jan-8 Mar-8 May-8 Jul-8 Sep-8 Nov-8 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Market Overview For the third successive quarter, the UK experienced both GDP and consumer spending growth in Q2 21 of 1.2% and.7% respectively. Coupled with a rebound in Nationwide s Consumer Confidence Index in August, the outlook for the economy is seemingly positive. However, there are two giant elephants in the room that look set to wreak havoc on the retail industry in the coming months public sector spending cuts and January s rise in VAT to 2%. Following the Spending Review on October 2th, the Chancellor has indicated that approximately 49, public sector jobs are likely to be lost, which will strike fear into the hearts of public sector employees across the country and will inevitably cause many consumers to exert greater caution over spending in the coming months until the full impact becomes clear. The impending VAT rise looks set to provide a boost to the UK retail market over the Christmas period as shoppers bring forward purchases, particularly those of a big ticket nature. Come January 4th, however, sales volumes could take a huge hit and retailers across the country need to prepare themselves for a tough trading environment and increased pressure on profit margins in the first half of 211. Although this applies to the UK as a whole, the Central London retail market has traditionally been a unique entity and has outperformed the wider market due to its international appeal as a shopping destination, benefiting greatly from high levels of tourist expenditure which has helped to keep retail sales consistently -1 Source: British Retail Consortium higher than the national figure. As a result, demand for space remains strong, especially from international retailers who are keen to make their UK debut in the capital. This has led to growth in prime retail rents in many parts of the city, particularly the West End where there are numerous proposals to improve the main shopping quarter. The strength of the Central London market is exemplified by the recent letting of the former Disney Store at 36 Oxford Street to Desigual, for a record Zone A of 71 psf. Demand for the 6,36 sq ft unit was such that the Spanish fashion retailer had to beat off stiff competition from Mango, Aldo and O2. The British Retail Consortium s (BRC) retail sales data has consistently highlighted the contrast in fortunes between the Central London and wider UK market a trend that has been widening in recent months (see Figure 1). In June, which is the latest Central London retail sales data available from the BRC, like-forlike retail sales grew by a massive 14.4%, p. 2 Colliers International

Figure 2: Number of Vacant Retail Units as a Proportion of Total Retail Units in All Survey Locations 16 14 Central London UK compared to only 1.2% for the UK as a whole. The 13.2 percentage point difference is the largest variance in retail sales growth since the BRC commenced the monitor in January 27. 12 1 8 6 4 2 Oct-6 Jan-7 Apr-7 Jul-7 Oct-7 Jan-8 Apr-8 Figure 3: Floorspace of Vacant Retail Units as a Proportion of Total Retail Floorspace in All Survey Locations 12 1 8 6 4 2 Oct-6 Jan-7 Apr-7 Jul-7 Oct-7 Jan-8 Apr-8 Jul-8 Oct-8 Central London Figure 4: Average Size of Vacant Units in all Survey Locations (Ground Floor Only) Sq Ft 3, 2,5 2, 1,5 1, 5 Jul-8 Oct-8 January 27 July 27 January 28 July 28 January 29 July 29 January 21 July 21 Jan-9 UK Jan-9 Apr-9 Apr-9 Jul-9 Jul-9 Oct-9 Oct-9 Jan-1 Jan-1 Apr-1 Apr-1 Jul-1 Jul-1 Survey Findings Colliers International s retail voids research supports this two tier market effect, with the latest figures from the Central London retail voids survey showing that the proportion of vacant units has fallen in the six months to July and now stands at 4.4%, down from 4.9%, and is the second lowest figure recorded since we began monitoring vacancy rates in the capital in January 27 (see Figure 2). This compares favourably to the latest vacancy rate of 14.8% for the UK as a whole from April 21. Figure 3 reveals that, in terms of the proportion of vacant retail floorspace, the fall over the six month period has been even greater and the vacancy rate has dropped to only 2.4% in July from 3.2% in January. The contrast in fortunes with the national market is marked - the latest Colliers International UK retail voids survey showed that in April the proportion of vacant floorspace was almost five times higher than the latest Central London figure at 11.4%. This fall in the amount of vacant floorspace can be attributed to a 17% reduction in the average size of vacant units in our survey locations from 2,121 sq ft in January to 1,758 sq ft in July (see Figure 4). So not only are there fewer vacant units in Central London than in the previous two surveys, but they are also smaller shops. In fact, since we began monitoring vacancy rates in January 27, the average size of vacant units has fallen by over 35%. These small vacant units may prove suitable for pop up shops in the run up to Christmas, much like last year when Marmite opened a 1 week pop up shop on Regent Street and, more recently, the Maybelline make-up boutique in Covent Garden to coincide with London Fashion Week. HMV is also a keen advocate of the pop up shop having opened 1 temporary stores around Britain in last year s festive season. The use of short term outlets is beneficial to retailers as it allows them to test drive new formats and/or locations without having to commit to a more costly permanent shop. In addition to the positive movement that Colliers International p. 3

has been witnessed in the six months to July 21 regarding the percentage of vacant units and floorspace, the proportion of vacant units that have been unoccupied for six months or more has also fallen, reaching 46.2% in July - down from 53.4% in January. The location that has experienced the greatest amount of change in tenancy has been Cheapside. As Figure 5 shows, the street has the highest vacancy churn rate of all our Central London survey locations at 2%, compared to an average of 9.6%. Cheapside is also the location with the highest proportion of vacant units and floorspace. The explanation for this is that much of the street is being redeveloped and has been under construction since 27. When completed, Cheapside will be anchored by two major retail developments, One New Change and Walbrook Square, which will provide 167 new retail units. One scheme that has already been completed is Menolly Investment s 17 Cheapside scheme, located directly opposite St Mary-Le-Bow Church and consisting of seven new retail units. At the time of survey in July 21, however, four of those units were still empty. Furthermore, Boots had relocated to one of the new units, meaning its former premises at 61 Cheapside was left vacant. Over the coming months we would expect the vacancy and churn rate on Cheapside to decline as new retailers move into the area in the wake of the opening of Land Securities One New Change on October 28th, which will provide 22, sq ft of retail floorspace. Market Outlook Consumer expenditure is predicted to come under further pressure over the next 12 months as the impending VAT rise, public sector job cuts, weak labour market and falling house prices all amalgamate to put a considerable dent in consumer confidence and purchasing power. On a national level, this could have a significant impact upon retailers as they may need to resort to heavy discounting in order to keep sales flowing, which would squeeze profit margins and place some retailers in a fragile position with the potential for administration. However, we believe that the Central London retail market will maintain its resilience in the face of upcoming challenges as a result of continued strong retailer demand and ongoing investment and development, particularly in the West End retail core. In fact, the New West End Company has ambitious plans to increase annual shopper spend by 66% to 1 billion by 22 and attract a further 5 million visitors annually. Proposals include new restrictions to reduce traffic by 4% between 1am and 4pm by 215, the provision of 5% more pedestrian space by 22 with a dedicated surface transit system down Oxford Street and the creation of a diagonal crossing at Tottenham Court Road. In addition, a new luxury quarter will be created around Bond Street, Mount Street, Jermyn Street and Savile Row. The objective is for the capital to overtake New York as being a global hub for international brands by way of securing an additional 21 international flagship stores by 212. The eastern end of Oxford Street has traditionally been the ugly sister to its more glamorous and popular western counterpart, which has been repeatedly reflected in the Colliers International Central London Retail Health Check since Figure 5: Number of Different Vacant Units Since July 29 as a Proportion of Total Number of Retail Units as at July 21 Oxford Street West Victoria Street Average = 9.6% Oxford Street East Brompton Road Bond Street Regent Street Kings Road Long Acre Kensington High Street Cheapside 5 1 15 2 25 Colliers International p. 4

the survey s inception in January 27. However, a makeover is underway which looks set to transform the area, the catalyst being Crossrail, which has received confirmed backing from the Government in the Spending Review and is scheduled for completion in 217. A key anchor will be the new 85, sq ft Primark store in the former Zavvi unit, also incorporating new space at 18/24 Oxford Street. When it opens next June it will be the value fashion retailer s biggest outlet in Europe and will provide a significant boost to footfall in this part of the street. Covent Garden is also seeing something of a renaissance following the opening of the world s largest Apple store in August. The 25, sq ft unit is on the corner of the piazza and is expected to overtake the flagship Regent Street branch as being the most profitable outlet. In close proximity is Shaftesbury s St Martin s Courtyard development, which is due to open in November. It will include the first standalone shop by Jaeger London, as well as French organic cosmetic retailer Melvita s first UK store. Elsewhere in the capital, The Crown Estate, continues to attract new names to Regent Street by way of US upmarket shoes and accessories retailer Michael Kors, which is to open in the 2,5 sq ft former Dollond & Aitchison in February 211. Similarly, New Bond Street has recently welcomed upmarket fashion brand Core Spirit to its line up the 4,56 sq ft shop being the retailer s first ever standalone store, having previously been sold online and in top-end boutiques and department stores. There is clearly a great deal of retailer interest in Central London, which should ensure that the vacancy rate continues on its current downward path particularly in the short term as we expect the number of empty units to fall slightly in the run up to Christmas due to short term lettings. This should be evident when we undertake our next Central London vacancy survey in January. Indeed, the future for the Central London retail market in the coming years is looking bright not least due to the prospect of an extra one million shoppers in the West End over the summer of 212 as the city plays host to the Olympics, generating 1 million of additional spend. Colliers International p. 5

central London london Retail spring Health 21 Check research AUTUMN & forecasting 21 48 offices in 61 countries on 6 continents United States: 135 Canada: 39 Latin America: 17 Asia Pacific: 26 ANZ: 168 EMEA: 95 LONDON - WEST END 9 Marylebone Lane London W1U 1HL +44 2 7935 4499 Research & Forecasting Dr Richard Doidge Director of Research Consultancy +44 2 7344 6872 richard.doidge@colliers.com Methodology The data presented in this report comes primarily from fieldwork we have undertaken on a six monthly basis since January 27. In January and July each year we survey ten streets in Central London, shown below in Figure 6, to identify units that are empty but available for occupation (hard voids) and those available but currently trading (soft voids). The area surveyed for each location only includes the ground floor retail space for all those units which have a frontage onto the main shopping area, as defined by the Colliers International Retail Agency team. The analysis of this primary data, in combination with other indicators, gives us an insight into the current and changing health of the Central London retail economy. Sarah Banfield Associate Director +44 2 7344 6513 sarah.banfield@colliers.com Retail Agency Paul Moody Director +44 2 7487 1796 paul.moody@colliers.com FIGURE 6: LOCATION OF RETAIL STREETS IN CENTRAL LONDON retail health check OXFORD STREET: EAST OXFORD STREET: WEST LONG ACRE BOND STREET REGENT STREET BROMPTON ROAD CHEAPSIDE Disclaimer: This report gives information based primarily on published data which may be helpful in anticipating trends in the property sector. However, no warranty is given as to the accuracy of, and no liability for negligence is accepted in relation to the forecasts, figures or conclusions contained in it and they must not be relied on for investment purposes. This report does not constitute and must not be treated as investment advice or an offer to buy or sell property. October 21 1249 Colliers International is the licensed trading name of Colliers International UK plc. Company registered in England & Wales no. 4195561. Registered office: 9 Marylebone Lane, London W1U 1HL. KENSINGTON HIGH STREET VICTORIA STREET KINGS ROAD Accelerating success. www.colliers.com/uk