Hospitality businesses in London’s West End enjoyed strong trading last year, but competition for prime retail space could hamper future expansion, according to a new report.
The London’s West End: Review and Outlook report was authored by Jones Lang LaSalle and commissioned by the New West End Company and Heart of London Business Alliance.
It analysed business performance, rents and property transactions in the core West End area, which includes Bond Street, Oxford Street and Regent Street, as well as Leicester Square, Piccadilly and St James’s.
It found that businesses in the West End benefited from a 19.5 per cent increase in overseas visits to London, with monthly footfall up 0.1 per cent compared to a 0.4 per cent decline in footfall across the UK.
Around a quarter of West End visitors were international in 2013, with Middle-Eastern and South East Asian visitors spending the most.
Healthy visitor numbers helped drive food and beverage sales up 4.5 per cent year-on-year, while theatre ticket sales increased 11 per cent to £585m, with attendance up 4 per cent.
West End hotel performance remained ‘consistent and stable’, with a 2 per cent decrease in average room rates helping boost occupancy rates to 83 per cent.
The report concluded that demand for prime retail and leisure space continues to increase, and the West End recorded its second highest volume of letting activity since 2007 last year, with 3.4m sq ft let, up 34 per cent year-on-year.
In the hospitality sector, top-end restaurants such as Villandry, Chop Shop, and Café Royal all opened in prime space in West End last year.
There was also growing investor confidence in the capital, with transactions in London’s hotel market totalling £1.4bn.
Looking forward, the report predicted that the West End’s hospitality sector will grow further in 2014, with increased demand for space by well-known chefs and 45 new hotels due to be built in the area.
It added that economic recovery, further growth in international tourism and a five-year improvement plan for Bond Street and second phase of the Oxford, Regent and Bond Street should further boost leisure sales in the area.
However, it also outlined some key challenges for businesses in the area, including over-reliance on tourism and lack of retail property stock for investors, as well as planning restraints which could reduce investor appetite in comparison with other European capitals.
Rising rental prices could also pose a problem for businesses, with core prime rents are forecast to increase £115 per sqft by the end of 2014 as a result of short supply, and Bond Street rents expected to shoot up by 10 per cent.
Guy Grainger, UK chief executive of Jones Lang LaSalle said: “The health of the West End is vital to the overall economic health of London and indeed the rest of the UK too.
“Record levels of prime rent on all of the major shopping streets in the area, unprecedented levels of interest for Core West End space from leisure operators in the last year, and continued economic recovery all point to a strong showing for 2014.
“However, complacency is dangerous and it is only through constant evolution that the West End will remain a prime tourist attraction for domestic and international visitors as well as investors.”
Richard Dickinson, chief executive at New West End Company, said: “This report clearly shows the strength of the West End as a global shopping and leisure powerhouse but we also need to be constantly on our guard and not be over reliant on any one sort of shopper – such as tourists.
“The Core West End also has to provide new retail and leisure space of the right type and scale if we are to keep in front of the competition. If we stand still on these and other key issues we will find our leadership position quickly undermined.”