Luxury retail might be struggling globally, but it’s thriving in London
It’s somewhat surprisingly that luxury retail in London is doing so well, particularly given eye-catching figures about a wider downturn in the luxury market, the effect of the tourist tax, and the potential exodus of high-net-worth non doms from the capital.
But while these “handicaps” – particularly the tourist tax – have hampered demand somewhat, luxury industry lobby Walpole said they haven’t made a significant difference on the demand for luxury goods in the capital, particularly not if you’re set up in the right place.
“The strength and growing wealth of the UK’s affluent residents, London’s enduring appeal and the resilience and innovation across the luxury sector means the overall outlook remains broadly positive,” the report said.
Helen Brocklebank, CEO of Walpole, added that the post-covid luxury bull market was undergoing a “normalisation” but that “the capital’s luxury fundamentals remain exceptionally strong”.
It’s also worth noting that the global luxury market, populated by the likes of behemoth umbrella companies LVMH and Kering, is a very different beast from the London retail market and is exposed to the Chinese downturn in a way London is not.
In fact, two-thirds of UK high net worth individuals in the capital expect their disposable income to increase in 2024, according to Agility Research, a luxury consulting firm specialising in affluent consumers.
London is home to 227,000 HNWIs – about 1 in 39 Londoners and about one tenth of the UK’s total.
According to Walpole, it’s these shoppers, not tourists or non-doms, who underpin the market (although shoppers and non-doms are still important): Four-fifths of luxury retailers in the capital rank “local resident affluence” as a primary factor for their success.
Much of this success is concentrated in a few key locations nestled in between super-prime residential spots.
Bond Street, Sloane Street and increasingly Marylebone high street all boast the biggest names, the most expensive goods and the largest investments: just four deals on luxury streets accounted for 60 per cent of all commercial investment in London in the first half of the year.
The golden quarter will be a test for the capital
Despite the positive indicators, retailer sentiment has dipped somewhat. The percentage of retailers feeling positive about their business prospects dropped from 71 per cent in 2023 to 53 per cent in 2024. However, looking ahead to the next two to three years, 66 per cent of respondents still remained optimistic.
This is likely due to the tourist tax: retailers have been vocal about calling for a return of tax-free shopping in the capital, saying it has reduced footfall and sales as customers skip London for Paris.
Confidence may dip further after the upcoming Autumn budget, which Prime Minister Keir Starmer has warned will be tough on those with the “broadest shoulders”.
Head of retail at CBRE UK Graham Barr, however, said that London has a unique charm which is unlikely to abate, even if taxes go up.
“Retailers always find London attractive because of the history, the character of the buildings and beauty of the locations. It’s unique. In other global hubs, shopping mall-like locations can sometimes look the same.
“In London, residents and visitors can have very different luxury retail experiences if they go to Knightsbridge and Shoreditch. And because of London’s size, luxury retailers can have several stores that won’t cannibalise each other,” Barr said.
But in the short term, how the capital fares over the upcoming golden quarter should provide a more solid idea of where luxury stands.