LONDON — After the coronavirus quarantine lifts, it will be the local economy that bolsters luxury brands in central London, according to Matt Farrell, managing director at Trophaeum Asset Management, which owns prime retail property in Mayfair, central London and internationally.
Farrell said Bond Street and its neighbors should recover more than any other luxury district in the world, due to London’s superwealthy international residents who fuel the high domestic spend in the neighborhood.
“London doesn’t have to depend on Saudis, Indians, Russians, Americans and Italians flying in because they already live here. London has large wealthy international communities, compared with Paris, Milan and Madrid, which do not have the same advantage,” he said.
He predicted that while people with lots of disposable income may have no choice but to buy their luxury online right now, they’ll want to return to brands’ physical stores as soon as they can for the experience of picking up and trying on products.
“Patriotic shopping” will also be another trend among the wealthy, Farrell believes. “People generally — no matter where they are living — will be less keen to travel. They’ll want to help their local economies, and repatriate money to keep their countries going,” he said, adding that China is bouncing back now due purely to domestic spend.
“Italians will opt for Sardinia instead of Mykonos, while the British might decide to go to the countryside — to Cornwall, Devon, Hampshire or Scotland,” he said.
While luxury may be poised for a post-virus comeback, the short term won’t be easy for anyone, in particular the commercial landlords.
“They have been left out to dry by the government. So far, there have been no official mortgage holidays announced,” said Farrell. “If you have created your property portfolios from scratch, with debt, there is no oxygen to fund mortgage payments,” especially if tenants are trying to renegotiate — or withhold — rent payments.
Trophaeum Asset Management owns most of the retail property on Albemarle Street, a variety of locations on Bond Street and chunks of prime space around London. Earlier this year it purchased a 15,000-square-foot retail block on New Bond Street — the most expensive shopping thoroughfare in Europe — from a firm controlled by the banker Joseph Safra.
Last month, the British government laid out a relief package that will help retail tenants, but it hasn’t done much for the landlords, who are now under pressure to accept lower rent payments — or none at all. The government’s offer includes 330 billion pounds in loans and 20 billion pounds in other aid; grants for retailers and pubs, and a promise to pay 80 percent of workers’ salaries if companies promise not to lay them off.
Other landlords who are in the position to offer lifelines to retailers are doing so: As reported, Value Retail has waived all of its second quarter charges for the brands at its nine European luxury outlet villages, while property giant Argent is giving its tenants in Coal Drops Yard, near King’s Cross Station, a three-month rent holiday to see them through the second quarter.
”We know that these businesses are going to feel the impact quite significantly and we want to support them through this period,” said Argent’s James Rayner. “We really hope that the public will continue to support them, whether that’s through their online stores or by engaging with them on social media. We and all the businesses at King’s Cross and Coal Drops Yard look forward to welcoming people back when we’re able to do so.”