Danny Schwarz and Stephen Dodge discuss the redevelopment of Oxford Street in Property Week

Commercial Real Estate

Danny Schwarz, Stephen Dodge
October 2024

Head of Commercial Real Estate Danny Schwarz and Trainee Solicitor Stephen Dodge explore the proposed pedestrianisation of Oxford Street, and discuss its potential impact on London’s retail and hospitality sectors, in Property Week.

Danny and Stephen’s article was published in Property Week, 2 October 2024, and can be found here.

Facelift will revive Oxford Street

Some shops may lose out, but pedestrianisation plan will broaden iconic retail destination’s tenant mix.

Last month, London mayor Sadiq Khan announced radical plans to pedestrianise London’s iconic Oxford Street. This proposal, Khan’s second for the famous high street, appears likely to succeed thanks to a Labour-led Westminster council, and for Oxford Street the timing could not be better; it is ripe for revitalisation.

The pandemic resulted in a slew of notable Oxford Street shop closures. With tourism statistics showing footfall is still yet to fully recover, it is clear that the retail district is struggling. This is hardly surprising; Oxford Street is often not London’s most desirable destination. Its pavements are cramped, the thoroughfare is plagued by antisocial drivers and the shopfronts are infested with much-derided American candy shops.

So, how will pedestrianisation breathe new life into Oxford Street? Case studies on the pedestrianisation of locations such as nearby Carnaby Street or Copenhagen’s Strøget Street are telling. Despite objections from business owners, particularly restaurateurs, these streets were closed to traffic and experienced significant increases in footfall. Local businesses benefited from an increase in customers.

However, there are risks involved in this latest proposal for Oxford Street. Prior to the announcement of plans for pedestrianisation, the post-pandemic rebound was in full swing on the street. Property vacancies are down 40% from 2023, with leasing activity breaking records in that year and remaining high now. With rents rising for commercial tenants on and around Oxford Street, mere speculation on the pedestrianisation proposal is likely to see rents continue to spike. The value of freehold titles could similarly creep upwards.

Tenants subject to upcoming rent review may see rates rise far beyond their short-run means and there is a risk that landlords may see an opportunity to trade up tenants, exercising break clauses to hike rents. Property lawyers will be busy with a flurry of breaks, renewals and disputes.

However, tenants on fixed rents may be buoyed by increased footfall and have a highly profitable few years. Tenants with high-volume businesses also stand to win regardless of their rents, as greater footfall will correlate directly to sales.

Winners and losers
Unfortunately, not everyone will be a winner as a result of Khan’s proposal. Low-volume luxury shops are often more reliant on patronage from customers who arrive by car and may prefer to move elsewhere, as their clients will not wish to brave crowds. At the other end of the spectrum, accessibility will be hampered by pedestrianisation, further inconveniencing those reliant on cabs or buses.

If these long-standing and successful luxury businesses fail, landlords will be seriously affected. Those who relied on the status quo, and did not obtain adequate guarantees or security at their last lease renewal, may also find themselves as low-ranking creditors in protracted insolvencies.

What is clear is that disruption creates opportunity and Oxford Street has already begun to change – no longer are all leases on the high street exclusively for retail use. Parts of John Lewis and similar buildings are being converted to office space, bringing a new type of consumer to the area, while parts of Debenhams are being converted for leisure use, alongside the openings of new entertainment venues. Spaces left behind in the ongoing – and welcome – retreat of American candy shops are similarly ripe for conversion into cafés, which could apply for pavement seating.

A new type of tenant, with a new clientele and different priorities, is coming to Oxford Street. Landlords may find it difficult to adjust to this new normal, but those who can be flexible and see the potential in their new tenants stand to gain from the new face of London’s iconic retail district.

If you would like further information regarding your obligations as tenants/landlords of retail spaces, please contact a member of our Commercial Real Estate team.