Changes in the way Londoners shop and a rise in new boutique mixed-use developments is transforming the supply, desirability and asset value of Mayfair and West End homes located above shops, finds new research from Mayfair and West End property specialist Wetherell.
Wetherell highlight that across Prime Central London flats located above shops were not viewed as desirable places to live. Historically, flats above shops in Mayfair were worth 10% less than regular adjacent homes. Now however, new boutique developments are being built across London’s West End, offering apartments built above luxury retail boutiques, smart signature restaurants and chic cafes. Wetherell calculate that this new generation of flats above luxury brands can sell at a 10% price premium compared to regular adjacent homes.
Across London’s West End, Wetherell highlight that there are three different types buildings containing flats located above shops. The first type are Georgian, Victorian and Edwardian properties which have small shops, pubs and cafes on the ground floor with flats above which were originally built for shopkeepers, artisans and other tradespeople. Until five years ago, these West End properties were worth 20% less than regular homes.
The second type are flats constructed above large supermarkets and mega stores across inner London which were constructed and popular over the last ten to five years ago. A 60,000 sqft store can have 250 apartments above and behind it. Wetherell highlight that over 4,500 of these type of homes have been constructed across inner London over the last decade by the UK’s top 5 grocery chains. Across London’s West End around 300 of these types of home have been built since 1994. Smarter than their Victorian counterparts, flats above supermarkets have tended to be worth just 5% less than regular homes.
Over the last few years there has been a sea change in the way Londoners shop driven by the internet, the rise in home delivery and work patterns. Instead of travelling infrequently to large supermarkets shoppers are shopping online and having heavy goods home delivered. For everyday convenience food, Londoners are shopping more often, buying smaller quantities and shopping locally. This has led to a shrinking of retail space, the closure of large superstores and a rise in demand for local shops and exclusive outlets. These changes have led to the development of the third type of flats above shop buildings. This third type consists of newly built premium apartments in boutique developments which are located above smart local shops, luxury retail outlets, signature restaurants and chic cafes.
There are now 447 new homes in the development pipeline in Mayfair of which 50% (around 200 homes) will be built above local retail outlets, luxury brands and smart signature restaurants. These boutique developments typically contain 25 apartments. Examples include Clarges Mayfair on Piccadilly, providing 34 ultra prime apartments; a scheme of 32 apartments above at restaurant at 60 Curzon Street and 42 flats above a retail project on Old Burlington Street.
It has been calculated that this new generation of flats above shops will sell at a 10% to 20% price premium compared to regular adjacent homes and if the flat is of super-prime quality and above a really famous luxury brand the premium can be as high as 100%. This is because of the quality of the homes, and the cachet provided by the luxury brands and super-smart outlets located below.
Mayfair apartments average £2.5 m, so a price premium or discount of 5% or 10% due to the type of retail outlet below makes a highly significant difference to the value and saleability of an apartment in this valuable marketplace.
Peter Wetherell, Chief Executive of Wetherell says: “Historically there has been a premium for living in an entirely residential building. There was also a stigma attached to living above a shop, often due to worries about noise and their connections to shopkeepers rather than affluent Londoners. Now however, a new generation of boutique developments are being built across Mayfair and the wider West End which offer homes located above luxury brands. Buyers no longer see these homes as being above retail, instead it is a lifestyle offering and something desirable and chic, hence the transformation in values in the above shop sector.”
Living above a shop has advantages. An apartment above a designer clothing shop or jeweller brings with it cachet and also means no overnight noise from neighbours, as well as a level of security during the day and floodlit and alarmed/CCTV premises at night. The above-the-shop apartments are also often larger because the retail premises are built on wider and deeper footprint compared to residential properties.
Retail premises in the UK are zoned into categories: fast-food, retail and restaurant, but planning permission can be sought for a change of category by a retail operator. This means that it’s possible a property bought with a boutique under it could end up overlooking a fast food restaurant.
Buyers need to research the local market and commercial property and look into the leases and commercial health of the retail premises below.