Is London’s Luxury Ground-Zero Under Threat?

LONDON, United Kingdom — Toned a rich, discreet, dark blue and priced at £400, Mayfair was the most expensive property zone on the London edition of the board game Monopoly when it was launched in 1936. Today, that same £400 is fast becoming the standard monthly leasing price per square foot of premium retail space in the neighbourhood's maze of Georgian and Regency backstreets.

The heart of the British art market and, until recently, synonymous with understated, top-bracket retail, the side streets of London’s Mayfair have recently become the habitat of choice for international fashion and luxury goods brands searching for more affordable and discreet alternatives to nearby Bond Street — London’s traditional luxury retail corridor — as the city’s tonier quarters become something of a ground zero for high-net-worth individuals from around the world.

“The global appetite for luxury retail is growing and London is at the forefront of this growth,” says a report by real estate agents Jones Lang LaSalle, continuing: “The traditional luxury core in Mayfair remains the primary focus for premium brands in London.” There are growing concerns, however, that Mayfair’s high-end hipness has come at the cost of the particular character that made the area desirable in the first place.

Bordered to the west by a strip of grand hotels along Park Lane and to the east by Regents Street, Mayfair has long been a magnet for wealth; both British and international. Within this network of quiet streets, a gentleman with money to spend could pass a day elegantly dispensing it on fine watches, bespoke suits, handmade shoes and works of art, with pauses in between to visit his barber for a shave, take in a first-class lunch and relax at his club. In the late 19th century and early 20th century, the draw of Mayfair was no one thing in particular — rather it was the sense that it offered the best of everything.

Today, while parts of the area are characterised by flashy showrooms selling Lamborghinis and Bugattis, a traditional, unostentatious sensibility has stuck with some of the quieter streets of Mayfair, resulting in a district that, in places, still appears to be in a timewarp. Particularly towards the western end, around Shepherd’s Market, and as far as Green Park tube station, the area still conceals pockets of hidden, dusty elegance, tucked out of view, bang in the centre of London.

Dover Street — hub of the British art scene in the 1950s and 1960s — was, by the time Comme des Garçons' Dover Street Market opened in 2004, a stained and dilapidated spectre of grandeur. It was seen as a brave and counter-intuitive location, symptomatic of founders Rei Kawakubo and Adrian Joffe's determination to play by their own rules (and budgets). But ten years later, Dover Street is set to become home to the first flagship store of Victoria Beckham, which joins Acne, McQ and A.P.C. — all now present on the street.

Scheduled to open in the autumn of this year, the 7,000 square foot Victoria Beckham store fixed a record high for leases in Dover Street, estimated to be around £325 per square foot for its ‘zone A’ (the area defined by the width of the shopfront and the first 20 feet of its depth). According to real estate agents Knight Frank this figure marks an increase from £250 per square foot for ‘zone A’ space over the last eighteen months alone.

Similar evolutions, accompanied by similar rent hikes, are occurring across Mayfair in the streets that Knight Frank refer to as the 'overspill' areas: connecting roads now picking up the demand for premium pitches on major luxury thoroughfares such as Bond Street (which last year saw rents hit a record high of over £1000 per square foot, and which is now lined with luxury mega-brands and idling, chauffeur-driven Bentleys).

“This demand shows no sign of slowing and, as a result, side streets close to the main pitches are now seeing this overspill demand,” explains Darren Yates of Knight Frank. “We’ve seen this with South Molton Street in recent years. Now, we’re seeing it with the likes of Dover Street, Davies Street, Bruton Street, Conduit Street and so on, which have traditionally not been seen as major retail locations.” When Christian Dior agreed a ten-year lease on a 3,300-square-foot property on Conduit Street, last year, the estimated £360 per square foot ‘zone A’ rate likewise set a new record high for the street.

A price map shared with BoF by Knight Frank now sets 'zone A' on Conduit Street at upwards of £500 per square foot, the highest of all the Mayfair "overspill" streets. At the heart of Mayfair's transformation, Mount Street, which in 2011 commanded a then-staggering £325 per square foot for 'zone A' space, is now listed at over £400 — up from around £90 only seven years ago.

Jewellery designer Julia Muggenburg first opened her Belmacz Gallery on Mount Street in 2000. At the time, "it was quiet and dignified — a gracious sleepy backwater where everything happened behind closed doors or by appointment," she recalls. Today, Mount Street is arguably London's most fashionable address, with a pioneering Marc Jacobs store now joined by international houses such as Balenciaga, Goyard, Moynat, Lanvin and Oscar de la Renta. And just last week, Céline opened a London flagship with 3,300 square feet of retail space on the street. Muggenburg's Belmacz Gallery has since moved around the corner to Davies Street, but despite the changing face of the area, she still finds the area magical: "Mayfair is soft and non-aggressive and elegant. It feels like a walk in the park."

What's more, Mount Street's galloping rent increases have not deterred a new generation of designers from selecting it as their first retail base. Joining luxury footwear designer Nicholas Kirkwood, who opened a store and studio on the street in 2011, this year will see openings from London-based labels Roksanda Ilincic and Christopher Kane. "It's the most beautiful street in London," enthuses Kirkwood, who recent sold a majority stake in his business to LVMH. "I would never have been able to afford a space on Bond Street, so I was looking around the area in general and I found this place purely by chance. We have delis and a butcher's shop — it's a residential area. Mount Street still has a community feel that you lose on Bond Street."

Unusually for a city centre, property in Mayfair is actually becoming more residential with buildings that were until recently offices being converted back into apartments. Questions, however, hang over how many of these homes are actually occupied and how many are investment properties purchased by ‘non-doms’ (non-UK domiciled individuals). According to a booklet put out earlier this year by Westminster Council, “the cost of residential properties is amongst the highest in the country, generally serving the super prime market, with the area having become a prime area for foreign investment. This has implications for the character of residential property and its resident profile in these quarters, as homes are often underoccupied or can be left vacant purely as investments.”

The Grosvenor Estate, which developed the area in 1677 and owns 300 acres of Mayfair, including Mount Street, has a reputation for being extremely exacting in their vetting of tenants and their determination to nurture the long-term reputation of their London property. The small neighbourhood around Mount Street is home to both Claridge’s and the Connaught Hotel — and with further international hotels on Park Lane to the West, and excellent transport links into the area, shoppers in the Mayfair area include a highly international mix of visitors from Russia, Asia and the Middle East. The area “offers some of the best shopping and leisure opportunities in the world — many wealthy people buy luxury goods in London which, to date, have not been readily available in their home countries,” explains Darren Yates of Knight Frank. One local retailer grumbled rather less politely that the neighbourhood was starting to feel “like a VIP lounge for the international super rich.”

Mount Street had already changed considerably by the time Kirkwood moved in; since then, the main shift that he’s seen has been in the makeup of the shoppers — specifically a huge upswing in customers from China, over the last three years, for whom Mount Street has now become an established stopping point. While it may have nothing like the footfall of Bond Street, Mount Street’s growing status as a destination shopping area brings a high calibre of customer. “A lot of people go to stores on Bond Street to look, not to buy, whereas here people come to buy,” says Kirkwood. While he anticipates his next rent review with some trepidation, he remains sanguine: “It’s still nothing to the level of Bond Street.”

Few of the longer-established institutions in the area are willing or able to face the rent hike with such calm. Over on Albermarle Street, once home to newsagents, stationers shops and cafes catering to the local business community as well as a post office and a smattering of galleries, the opening of fashion designer Amanda Wakeley's new store has caused rents on the street to triple from £100 per square foor for 'zone A' to £300 and above. "Business has never been better," says John Martin, who's eponymous art gallery has been on Albermarle Street since the early 1990s, "but no business can plan for rent increases on that scale. The rents aren't capped, so they can keep going up; it's almost impossible to grow a successful business in those conditions."

There is mounting fear that Mayfair’s flourishing identity as a location for fashion retail might destroy the very special nature of the area that attracted the fashion world in the first place. Currently, Mayfair has one of the largest concentrations of art galleries and auction houses in the world, including just under 100 commercial galleries and the Christie’s, Sotheby’s and Bonhams auction houses. Britain is estimated to have 29 percent of the global art and antiques market, much of which is rooted in this area. In 2013, a petition to protect galleries on Cork Street from redevelopment attracted 15,000 signatures. In response to this and other expressions of concern, London’s Westminster Council this year put forward a recommendation to designate Mayfair a “special policy area” with a view to working with landlords in the area to protect art galleries and niche, luxury retailers offering goods that are “bespoke, unique or one of a kind, antique [or] limited edition.”

Speaking to a meeting of gallery owners at the end of February, Councilor Moss described initially reactions to the recommendation. “The response has been overwhelmingly supportive of the special protection area model being extended to cover Mayfair. The City Council and its Members… are steadfast in our determination to utilise whatever measures we have at our disposal, ensuring all possible progress is made in sustaining this world renowned area of our city.” But the success of the “special policy areas” will depend on the amenability of the landlords in the area. While large landlords like Grosvenor, Crown and the Pollen Estates are likely to take a long view of supporting varied retail in the area, Westminster Council is concerned that smaller landlords may wish to follow a potentially destructive path toward maximum short-term rental income.

While the larger art world has been rather hostile to the fashion industry's arrival in the area, on the ground, the story is more nuanced. "You can speak to Paul Smith or the people at Louis Vuitton and they're hugely supportive of keeping galleries in the area — they are, after all, partly why Mayfair has such cachet," explains gallerist John Martin. "The will is there among landlords and in the fashion world to make sure that Mayfair doesn't become a ghost town, or another Westfield, because it does no one any good. Maybe the fashion world could seize the initiative and champion the area for galleries? Surely it's better for them to rub shoulders with art galleries, artists and artisans than yet another international chain store."

That desire for a healthy mixture of enterprise in the area is certainly echoed by Roksanda Ilincic, who was drawn to the area’s artistic history when selecting Mount Street as the location for her first shop. “I think it is important to protect our heritage and to maintain creative galleries in central London,” she says. “I also think it is important to embrace different forms of creativity as well as art, such as fashion, and maintain a balance of each.”

While the struggle for a healthy symbiosis between fashion, art and community plays out, Mayfair's fashion retail zones continue to expand. Grosvenor Estates recently announced that it had switched its focus for development to Duke Street in the north of Mayfair, which, later this year, will see the unveiling of the Duke Street Emporium, a 5,500-square-foot fashion and lifestyle store created by the Jigsaw Group and Corbin + King's new Beaumont Hotel.