West End landlords face their footfall fears

Landlords in London’s West End are devising plans to protect their businesses – and support those of tenants – in the face of a dearth of tourists, as one of the capital’s biggest shopping and entertainment destinations emerges from lockdown. Luring back reticent Londoners, turning to tech to promote physical retail and evolving hospitality and leisure offerings are all on the agenda. But even with these efforts, business leaders admit the rest of 2020 is likely to be a struggle. Tourism accounts for half of the annual £10bn turnover created in the West End, and half of the 200m visitors to the area come from overseas, according to the New West End Company, a partnership of local businesses. Jace Tyrrell, its chief executive, warns that the area – like tourist-reliant cities such as Edinburgh – faces a slow recovery with social distancing and quarantines in place. “If high value markets such as the Middle East and China still see Britain, and London particularly, has a quarantine, they won’t put us on the list,” Tyrrell says, adding that he expects up to 80% fewer visitors to the West End over the summer. Empty streets A lack of international tourists is just one challenge. Empty offices have further limited footfall, which has been just a fifth of what it was pre-Covid, even as retail reopens. “The retailers have recommenced trading but the streets are empty – this means [retailers] are already either reducing their hours, staff or stock,” says Andrew Sell, head of asset management at Criterion Capital, which owns a £3.6bn property portfolio including several sites in Piccadilly Circus and Leicester Square. “We have operators like the Hard Rock Cafe and Five Guys reopening, but they’re nervous,” Sell adds. “If the tourists are not on the streets there’s very little that they can do.” Criterion Capital, like other landlords, has experienced the hard impact of the pandemic. The company has shuttered the four hotels it operates until at least September and has lost tenants including Body Worlds, an exhibition which occupied around 25,000 sq ft in the London Pavilion on Piccadilly Circus. “We’re working hard with a number of our occupiers to get them up and running again,” Sell says. “If we haven’t got an influx of tourists, be it UK or overseas, then Leicester Square and Piccadilly Circus is not how we normally envisage it.” Sell adds that the relationship between landlords and tenants has been strained during recent months, not least because of the government’s moratorium on lease forfeiture. Tenants proposing moving to turnover rents has also created tension. “In effect we take all the pain and they don’t take any, which is not good,” Sell says of some cases. “We have debt providers to repay and we have to find the revenue to pay them every quarter… The government have given [tenants] a massive excuse not to pay us and some of them are taking full advantage of that.” The Crown Estate has also found some occupiers reluctant to reopen, and is looking at the option of offering some turnover rents. “We have to be realistic that there needs to be a lot of business for these [retail] businesses to pay the costs of opening their stores,” says James Cooksey, Crown Estate’s director for central London. “For the F&B operators there’s also going to be a challenging period because they need the workers and there is the reduced amount of covers.” He adds: “We’re going to see a rapid adoption of our base rent with turnover linkage becoming the norm rather than the exception on some of the key retail streets.” Neighbouring estate Grosvenor waived retailers’ March quarter rents, and is now in conversations about the June quarter. “We’re very keen to keep as many of our retailers trading as possible as we go through this and come out the other side,” says Keith Bailey, location director for Mayfair at Grosvenor. Inviting Londoners back With footfall remaining low, attention is focused on bringing Londoners back into the area, which could help alleviate some of the near-term pain. At the Crown Estate, Cooksey says the scale and opportunity that exists with more localised spend from Londoners and workers should not be underestimated. Londoners account for 30% of visitors to Regent Street, part of the Crown’s London estate. Workers account for a further 10%, while domestic tourists make up 20% and overseas visitors 40%, he says. Landlords and Westminster City Council have been working to attract local visitors over the summer months, making the streets feel safer by widening pavements and encouraging food and beverage occupiers to embrace outdoor seating. Grosvenor, which saw more than 85% of its retail tenants reopen on 15 June, is looking at how it can mirror the more tranquil nature of Mayfair in the usually busy shopping streets of Oxford Street and Regent Street. This includes bringing its hotel and retail occupiers together to deliver private viewings in hotel rooms. The company is also encouraging retailers to use Near.St, a tech platform that recommends nearby shops to users based on their online product searches. “This period has seen a lot of the trends we were grappling with accelerated, particularly in relation to our retail and hospitality and the e-commerce aspects,” Bailey says. Cooksey sees a growing focus on making a change of use for a property simple to achieve, something that Westminster council leader Rachael Robathan has said her team wants to be “sensitive” to. “Flexibility in terms of lease length and time is one thing, but use is also really important,” Cooksey says. “From a Westminster perspective, they see that the old dynamics are shifting and certainly appear willing to have a much freer conversation over use than perhaps they would have done previously. I think policy is moving towards that.” Get the offering right, and landlords and business leaders are hopeful of mitigating some of the struggles of the coming months. As uncertainty continues over when tourists will return, Tyrrell too believes a near-term focus on Londoners will be necessary. “Over the last 10 years we’ve lost quite a big chunk of Londoners coming into the West End on the weekends because it is for the tourists,” Tyrrell says. “We need to re-invite them to the West End over the summer and remind them what the offer is.” To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette Photo: Jack Dredd/Shutterstock