By guest author George Arnett from Vogue Business
Shopping in Europe’s luxury capitals could resume this spring, but there is change on the way.
The rollout of Covid-19 vaccines across Europe has raised hopes that city centres could soon be full of shoppers again.
After a year of closures, depleted footfall and negligible tourism, a resurrection of city centres would represent hugely positive news for luxury brands. But the world has shifted to new ways of working — and shopping. That represents a challenge, both short term and long term, for retailers, landlords and urban planners.
Planners say the pleasures of social interaction in city centres post-Covid will become even more important. “In the past, people came to cities for the economic opportunities and the social opportunities,” says Léan Doody, associate director and cities and planning leader for Europe at built environment specialists Arup. As many city centre workers shift to long-term working from home, for at least part of the week, Doody speculates that “the social opportunities that the city offers become more important”.
Expect a dialing up of the experiential and an injection of buzz into shopping districts. Luxury brands have always hosted art exhibitions, parties and opening cafés, but will likely explore more opportunities. Amended planning legislation in England could help that process: Julia Poulter, a real estate partner at Lewis Silkin, who works with high-end brands and is co-founder of luxury networking initiative The Collective, says new legislation has paved the way to make it easier for brands to transform London stores into hybrid locations incorporating restaurants or brand museums.
“I’m not saying we’re going to become like Disneyland,” says Katie Thomas, associate director — Bond Street & Mayfair at the New West End Company, “But I think we will definitely see experiences come up and [stores will become] places to have fun, as well as shop.”
Across Europe, the market for prime luxury slots in the likes of Bond Street, Via Montenapoleone and Rue Saint-Honoré remains highly priced and competitive. Current occupants are evaluating how to double down on the in-store experience while further integrating their expanded online sales platforms.
Authorities are looking at planning changes, the greening of shopping districts and further pedestrianisation in moves to improve the city-centre experience. In January, Paris Mayor Anne Hidalgo announced plans to turn the Champs-Élysées into an “extraordinary garden” after basing her reelection campaign on the concept of a 15-minute city where all urban necessities are accessible within a quarter of an hour. Meanwhile, Milan has been working to reallocate city space from cars to pedestrians and cyclists. Ambitious plans to pedestrianise London’s Oxford Street were shelved two years ago, but Westminster Council has recently enlisted design firm Publica to help with a GBP 235 million transformation of the area.
Precisely how shifts in office working and residential patterns will change the dynamics of city centres remains guesswork. Vacant retail and office space could initially attract interest from the hospitality sector, with office blocks turned into hotels, for example. Demand for hotels in the city centre is high in Milan — with the upcoming 2026 Winter Olympics a key driver, says Nicole Brambila, senior agent and consultant at leading Italian realtor GVA Redilco.
However, city centres will continue to be workplaces for very many people. “The office is very much not dead, and neither is the city centre,” says Arup’s Doody. “But people will choose to work from home, say two to three days a week. This is a fairly consistent number that comes out from surveys.”
That said, premium office spaces in city centres may, paradoxically, be in greater demand. This is linked to the changing role of the office: with fewer employees on-site per day, companies may prefer to focus on high-quality city centre locations rather than larger spaces on the outskirts. “On the office side, we’re seeing very much a flight to quality, tier one versus tier two,” says Paul Williams, CEO of major London office landlord Derwent. He adds employers are also looking for adaptable spaces and accessible amenities.
In the short term, the permanent closure of many stores following the pandemic is going to hit city centres. That’s particularly evident in London: some 57 of 264 stores on central Oxford Street are already permanently closed, according to the New West End Company. And major retail landlords are still receiving around half or less of the usual rent from city centre tenants.
Temporary rent reductions are common across Europe, but there have been fewer permanent store closures in Paris or Milan. The worst may yet be to come for these cities, particularly London, suggests Ben Binns, national director of EMEA retail at JLL, amid the adjustment to an enduring consumer pivot towards online shopping. Brambila says mid-market retailers are already thinking about how they can be more strategic with their retail footprints in Italian cities.
This unlocking of space could present an opportunity in the long term. That’s certainly how landlords are trying to put a positive gloss on the situation in London. “The demise of some of the well-known names on the high street is making available space that, pre-pandemic, would have been locked away on decades-long leases in buildings subject to greater planning restrictions, resulting in lots of inflexible space,” says Sam Bain-Mollison, retail director at major London landlord Shaftesbury.
More effective multi-format thinking is an imperative for retailers in all the big European cities. “It will be essential for luxury retailers to have a holistic strategy which brings renewed focus to clientelling 2.0 — better arming sales associates with the right data and technology to seamlessly engage with clients across channels,” says Sarah Willersdorf, head of luxury at Boston Consulting Group.
More flexibility in leases could lead to an increase in pop-ups and concept stores on short-term leases, a trend already in play pre-pandemic, says Luisa Janisch, associate director, research at CBRE. Beyond Europe, Hong Kong is one location moving in this direction. Speaking at the Urban Land Institute Europe Conference last week, Raymond Chow, executive director of landlord HongKong Land, emphasised a new flexibility from landlords — this includes more versatile deals and support for fit-out costs for clients.
Michelle McGrath, executive director at CapCo in London, a landlord managing over 1.2 million square feet of space in the Covent Garden shopping district, says that baking flexibility into arrangements has obvious benefits for landlords as well as brands. “You want to be a dynamic place that can move with trends and move with the consumer, so flexibility works both ways.”
All these trends are interlinked. Without a rich and diverse retail and cultural offering in city centres, people will take longer to rediscover them. Urban planners urge landlords to think beyond quick return on investment and pick tenants that enrich an area culturally — restaurants, cultural centres, even independent bookshops.
More radical options include a revival of residential living in city centres. Architect Sir Norman Foster has called this month for empty office space to be converted into high-rise apartments. That would certainly be a transformative process for much-depleted central London where fewer people live in central shopping districts than in Paris or Milan.
While the short-term problems are multiple, new long-term visions are uplifting. “That kind of thinking of cross-subsidising and understanding with what kind of space you make money, and what kind of spaces stabilise and make your urban quarter attractive… is slowly becoming the norm,” says Dr Philipp Rode, academic and executive director of LSE Cities. “The kind of cities you create by squeezing the profit out of every single square metre will eventually be unsuccessful.”