Divergence between consumer and occupier confidence emerged in 2025 as occupiers continue to take a longer-term view
Against a challenging global macro backdrop and following the Autumn Budget, West End spending remained under pressure. However, the headlines mask a more nuanced picture. A cautious consumer meant a more direct impact on average transaction values (ATVs), which weighed on total spend, even as both footfall and transaction counts continued to grow.
Bond Street stood out as a clear bright spot. Despite continued pressure on average transaction values, there was an improvement in total transaction volumes, supported by resilient domestic demand and a recovery in international spend in the second half of the year.
Rising footfall and gradually improving sentiment point towards a return to growth in West End retail spend in 2026
Marie Hickey, Director, Commercial Research
Weakened consumer confidence — both at home and overseas — was the defining consumer challenge of 2025, driven by geopolitical uncertainty and fragile economic conditions. While these headwinds persist, early indicators suggest confidence is beginning to stabilise. Domestic spending will remain constrained by weak economic growth and higher unemployment, while currency movements and geopolitical risk will continue to influence international visitors. That said, rising footfall and gradually improving sentiment point towards a return to growth in West End retail spend in 2026.
Oxford Street is likely to be a key beneficiary. The planned pedestrianisation in the second half of the year, and then subsequent public realm works, should drive a material uplift in footfall. The street was closed to traffic one Sunday in October last year, with a 50% increase in visitors reported alongside some retailers noted improved sales performance. While the full benefits of the scheme will only be realised on completion in late 2027/early 2028, gains are expected once works commence later this year.
Occupational KPIs remain positive, creating challenges for new and expanding occupiers
London’s occupational backdrop continues to show resilience. Vacancy rates continue to tighten and rental growth remains positive, underpinned by sustained demand over the past 18 months.
Prime West End rents rose again in Q4, increasing 0.4% quarter-on-quarter and delivering 4.1% growth over 2025. This reflects the acute shortage of high-quality space across Bond Street, Oxford Street and Regent Street. Similar trends were evident across Central London, where prime headline rents increased 4.3% over the year.
Rental growth was pronounced on Carnaby Street (+20% YoY), Cheapside (+17%) and Oxford Street West (+10%). Bond Street also performed strongly (+7%), despite more measured demand in the luxury segment as global headwinds continue to influence decision-making.
Demand remains firmly focused on best-in-class units on prime pitches. With supply extremely limited, competition between occupiers has intensified. Rising operational and fit-out costs are tempering confidence in some parts of the markets, driving some upward pressure on incentives outside super-prime locations.
There is, however, some relief for occupiers. The Business Rates revaluation taking effect on 1 April is not expected to materially increase business rate liabilities, as previously feared. On Oxford Street and Bond Street, average rates payable are expected to fall by 13% and 5%, respectively, offering some protection to store profitability, albeit there are variations across specific buildings and locations.
International new entrants rose sharply, led by F&B
The strength of occupier demand is reflected in the growing number of international brands entering the London market. In 2025, 54 international new entrants opened their first UK stores in London, up 26% YoY. Premium fashion and F&B concepts were the most active, with F&B new entrants doubling compared with 2024, in line with trends seen across other major European cities.
The US remains a key source of new entrants, particularly in F&B, alongside mainland Europe, with notable increases from Spain and Sweden.
Looking ahead, occupational demand is expected to remain robust, supported by a 17% increase in global capital deployment into consumer-facing retail, leisure and F&B, reaching £309 billion in 2025 — the highest level since 2021, a peak that facilitated the acceleration in requirements seen in the immediate aftermath of the pandemic. However, acute supply constraints on prime streets and elevated fit-out costs will limit the ability of occupiers to fully realise growth ambitions. As a result, we expect new entrant numbers for 2026 to be marginally below those seen in 2025. While this may temper rental growth in some locations over the immediate term, flagship and prime pitches should remain relatively insulated, supported by a gradually improving consumer backdrop.
Investor appetite strengthens as occupational resilience feeds through
The strength of the occupational market is now clearly feeding through into investor activity. Transaction volumes reached £2.8 billion in 2025, the highest level since 2016. Q4 volumes alone totalled £649 million up on the more muted activity seen in Q2 and Q3. Annual volumes were buoyed by Norges Bank’s acquisition of a 25% stake in both Shaftesbury Capital’s and Grosvenor’s Central London portfolios, but even when excluding these, activity remained strong relative to long-term averages and broadly in line with 2017–18 levels.
Investor demand has focused on value-add and mixed-use opportunities on prime retail streets, alongside best-in-class core assets. Importantly, buyer profiles have diversified, with institutional and private equity capital returning to the market, attracted by the strength of occupier demand and an attractive yield differential to historic norms.
Looking forward, investor confidence is expected to improve further as debt costs ease, although near-term geopolitical uncertainty will remain a moderating influence. Further downward pressure on yields should encourage additional stock to come to market, supporting transaction volumes, albeit below the exceptional levels seen in 2025.
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