Oxford Street is getting its mojo back.
This story first appeared in the May 18, 2016 issue of WWD. Subscribe Today.
The retail strip — a little more than a half-mile long that meanders almost 2 miles southeast of Sydney’s Central Business District through the picturesque, affluent suburb of Paddington, Australia — fell on tough times in recent years.
Once one of Australia’s most buzzed-about fashion hubs, the cool factor of the 300 boutique-strong “Paddo” strip started to wane in the Nineties due to rent hikes, an influx of high street chains and an exodus of independents. In the Aughts, two new billion-dollar retail developments at either end — Westfield Sydney and Westfield Bondi Junction — delivered a coup de grâce, cannibalizing tenants and foot traffic.
But the astronomical vacancy rates of recent years — 25.3 percent over the total Paddington strip, according to Cushman & Wakefield, but as much as 70 percent in the worst hit areas, reports the Paddington Business Partnership — are starting to fade from memory as a surge of development activity reenergizes the famous strip.
It’s not just nostalgia driving the renaissance.
Due to an influx of global brands since 2011, rents in the Sydney CBD have skyrocketed, notably in the pedestrian Pitt Street Mall precinct, where Zara, H&M, Uniqlo and others have razed multiple boutiques to build large flagships and where average rents now range from 18,000 to 25,000 Australian dollars, or $13,208 to $18,345, per square meter, according to Cushman & Wakefield. That works out to about $1,227 to $1,705 per square foot. All U.S. dollars are converted at current exchange. This has now pushed Pitt Street Mall to the world’s number-three spot on Cushman & Wakefield’s most expensive retail strips list, after New York’s Fifth Avenue and Causeway Bay in Hong Kong, Peter Seeto, C&W’s Sydney-based head of retail leasing, told WWD.
“I think it just shows the strength of retail in Australia and why the international brands want to be here,” Seeto said.
Suddenly, Oxford Street’s quaint Victorian terrace houses and 25,000 square meters (about 269,000 square feet) of total floor space — 15,124 square meters (162,800 square feet) dedicated to clothing and footwear, according to the Eastern Suburbs Economic Profile 2013 report — have reemerged as a charming alternative. A rent correction of anywhere from 25 to 50 percent, with rents now ranging from 1,000 to 2,500 Australian dollars a square meter (or about $68 to $170 a square foot) depending on the location, has been an additional sweetener.
“We are the bridesmaid waiting in line, but the reality is we’ve not looked this attractive for many years,” said developer Theo Onisforou, one of few Oxford Streeters to have been unaffected by the strip’s downturn. Onisforou started buying up boutiques in and around the Glenmore Road intersection 20 years ago. Today his precinct — “The Intersection” — embraces 30 boutiques, including Zimmermann, Ellery, Acne and Scanlan Theodore.
Over the past 12 months, some two dozen boutiques, restaurants and bars have opened elsewhere along Oxford Street. The fashion names, including Rosie Nice, KitX, Carousel and Ixiah, are mostly Australian independents, but the internationals have started sniffing around.
“Kit and Ace is looking, H&M is looking” Onisforou said. “I’m predicting that the internationals will start coming into the street because rents are so high in the CBD.”
One of a number of now high-profile Australian designers to get their starts at the 43-year-old Paddington Markets, located at 395 Oxford Street, fine jeweler Robert Clerc returned to his Paddington roots in July after purchasing two adjoining terrace houses — 418-420 Oxford Street — and enlisting Ian Moore Architects to convert the ground floors into a 1,421-square-foot boutique and gallery space.
In August, luxury multibrand retailer Eva Galambos became the anchor tenant of St. John’s, Australasia Properties’ redevelopment of the 19th-century St. John’s Presbyterian Church and adjacent Victorian manse at 261-263 Oxford Street into seven luxury apartments, two town houses and 5,118 square feet of retail.
At 3,073 square feet, the new Parlour X is nearly four times the size of Galambos’ previous store that operated at nearby Five Ways, Paddington, for 14 years. The store reported trade is up at least 25 percent since it opened.
Veteran Oxford Streeter Incu, located at 256 Oxford Street, not only survived the downturn, but in December it took over the adjoining shop to create a double-fronted, 2,583-square-foot store, to house the company’s rapidly growing women’s wear department, which now accounts for 55 percent of the business.
“We’ve hit the bottom and now we’re on the way up,” said Incu general manager Doug Low. “We’re getting more people in, we’re getting newer people in who never used to shop with us, particularly in women’s.”
In November, Sydney “bar czar” Justin Hemmes, chief executive officer of the Merivale hospitality group, reopened The Paddington Arms hotel, at 380 Oxford Street, as The Paddington bar/restaurant complex, the first of four venues Hemmes plans to launch in and around the site this year.
In December, The Unicorn — 106 Oxford Street — was reopened by a young Sydney hospitality consortium as a traditional “Aussie” pub.
Other projects in the pipeline include Solotel’s refurbishment of The Paddington Inn, 338 Oxford Street; the redevelopment of the old Commonwealth Bank, 259 Oxford Street, into a boutique hotel, and Paddington Square, a redevelopment of the old Paddington substation on the corner of Elizabeth and Victoria Streets, featuring about 8,000 square feet of retail space and commercial space.
“Justin Hemmes buying the pub [Paddington Arms], Incu, a great operator, taking more space and just on the level of inquiries on The Unicorn, you can tell that people have realized that ‘Hey, it’s on its way up again,’” said Steffan Ippolito, a partner with Oxford Real Estate, who handled more than 20 inquiries on the latter Art Deco hotel, including H&M, which according to Ippolito had The Unicorn earmarked for a potential first Sydney COS boutique. (It has since opened on Martin Place in the CBD and Westfield Bondi Junction.) “It’s good for landlords, it’s good for retailers, it’s good for the general public.”
Local government stimulus initiatives include allowing more parking hours from 3 to 4 p.m.; free parking for 15 minutes and free Wi-Fi for the length of the strip.
“The revival is starting and is gaining momentum day by day,” said real estate agent and retail consultant Ben Vaughan. “It’s Paddington adapting to market forces, really; a demographic of people in Paddington changing, and not just fashion retail that’s replicated throughout every Westfield up and down the eastern seaboard, but boutiques that have a point of difference and something that the residents can really claim as their own village.”