■ Central London retail investment volumes last year totalled £2.5 billion, 
9% up on 2013. This was its highest ever level.

■ Like the occupational market, the lack of opportunities on the prime pitches of Bond, Oxford and Regent Street, has meant investors have looked within the wider 'luxury quarter' and beyond in order to satisfy demand.

■ Activity outside the prime pitches accounted for 75% of total volumes, highlighting strong investor confidence in the wider central London retail market.

■ There was activity on the prime pitches in 2014 with the purchase of 130/137 New Bond Street by Oxford Properties, with Savills acting for the vendor, being the largest at over £300m. Yet, in terms of total volumes activity was down 35.5% primarily due to a significant decline in Oxford Street activity.

■ This decline on the prime pitches was expected following strong activity over the preceding four years as owners capitalised on strong interest. While stock availability may have fallen, demand has not. This continues to place downward pressure on prime yields, although they are currently holding at 2.5% to 3.0%. However, we would expect yields below this level if an exceptional asset came to market.

■ Some argue that current prime yields, being already below their 2007 level, will mitigate investor demand. This shows no sign of materialising considering the scope for rental growth at rent review, particularly in light of London's relative rental affordability compared to other Global retail destinations such as New York, Hong Kong and Paris.

■ The increasing occurrence of transactions with upcoming rent reviews where yields are below the 2.5-3.0% tone demonstrates this. Although for some it will be the trophy nature of the asset and the capital protection play that will be the primary attraction.

■ Overseas investors continue to dominate, although the scale of this has diminished as UK institutional funds and private investors doubled their 2013 spend.

■ European investors continue 
their robust interest spending close 
to £700m in 2014 only 2.6% down 
on 2013. Asia Pacific investment activity has contracted slightly due 
to a lack of trophy assets despite continued interest.

■ European investors and the UK institutional funds focused activity this year beyond the prime pitches as they look to asset management in order to enhance returns.

■ Some investors are looking to achieve this through estate creation. This approach provides greater control over tenant mix helping to create a more cohesive retail destination, ultimately enhancing overall values.

■ As a result we should see further investment beyond the prime pitches and the emergence of new more cohesive retail destinations across Central London over the next five to 10 years.

What's in store for 2015?

■ Upward pressure on rents to continue although the rate of growth is expected to slow due to availability constraints on the prime pitches.

■ The 'emerging' luxury pitches will continue to outperform the Central London rental growth average although Bond Street will continue to top the list for the majority of luxury brands.

■ Investment activity outside the prime pitches expected to continue as investors look for value add opportunities.

■ Downward pressure on prime yields to continue. However, we are unlikely to see any significant downward shifts in tone from 2.5-3.0% although we would expect yields below this level if an exceptional opportunity came to the market.

Taken from
Spotlight: Central London Retail - Q1 2015