There is not enough Bond Street to go around, so luxury retailers are expanding their London shops by taking over upper floors previously used as offices.
Chanel and Christian Dior looking up as retailers jostle for space
There isn't enough Bond Street to go around, so retailers are looking up.
Luxury-brand owners such as Chanel and Christian Dior are expanding their shops by taking over upper floors previously used as offices along the United Kingdom's priciest retail strip. Others including Victoria's Secret UK are going farther out - jostling for space along the less swanky parts of the central London street, where demand far exceeds supply.
"Almost without exception, the first floors in the best space in Bond Street are now getting converted into retail," said Martin Thomas, the head of central London retail at the brokerage firm Jones Lang LaSalle.
"Those that haven't been converted, you can bet your bottom dollar that they will be fairly soon."
Bond Street shrugged off the UK's double-dip recession as high-end jewellers, boutiques and department stores in central London's West End shopping district attracted wealthy shoppers from abroad. Converting upper offices to shops is the cheapest way to expand on the road, where rents are a 10th of what the street level commands, according to the broker.
Property owners on the street are benefiting as retailers spend their own cash converting offices into shop space, which sells at a higher price in the area. The change can increase the value of a first-floor property by as much as 40 per cent, according to Neil Thompson, the portfolio director at Great Portland Estates.
The company said it had won approval to develop five stores on the street, according to a planning document.
Retailers on the best part of the street also tend to pay higher rents than office tenants for upper floors, meaning property owners get increased revenue and a better yield when the building is sold, said Dominic Rowe, a broker at Michael Elliott. He estimates the company has bought and sold about £500 million (Dh2.94 billion) of property for investors in the area over the past two years.
Demand for space is extending Bond Street's prime area as brands such as Belstaff, a British motorcycle jacket maker owned by Labelux Group, choose to open on less popular parts of the road, according to broker Savills. That is pushing up rents and boosting building values in those areas.
Bond Street's stores have annual sales of more than £1bn, according to New West End, which represents 600 retailers in that area of London.
"These major groups - be it Hermes, Chanel, LVMH or whoever - they have so much money on their balance sheets," Mr Thomas said.
"Rather than having £200m burning a hole in their pocket, they're preferring to invest it into real estate in the right location," he added.
"Bond Street didn't really ever have a recession."
* with Bloomberg News