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Rent rises, online competition squeeze London's diamond district
[LONDON] When thieves made off with millions of pounds of jewels from an underground vault in Hatton Garden last year, it shone an unwelcome spotlight on the historic centre of London's jewellery trade just as it fights for survival.
The jewellery industry's roots in the area stretch back to medieval times. In the 17th century, houses for the gentry were built and goldsmiths, including Percival Johnson, founder of metals processor Johnson Matthey, moved in.
Italian craftsmen arrived in the early 19th century and many adapted their skills after the diamond rush in South Africa. Diamond giant De Beers moved to nearby Charterhouse Street in the early 1930s.
For years the dilapidated area bustled with couples looking for bespoke engagement rings at a better price than in the capital's West End.
Now, online competition and rocketing rents have put the craftsmen under pressure, cutting footfall to retailers and forcing some to consider shutting altogether. De Beers is also moving away, as its parent company cuts costs.
"Business in Hatton Garden has changed dramatically," Gary Williams, director of precious metals processor Presman Mastermelt, said.
"There is less footfall, there's less business being done. And ...rents are going up."
Research by Mintel shows the internet has become an increasingly important retail space for jewellery, particularly among younger consumers.
Websites such as Blue Nile and 77 Diamonds give a price point from which to negotiate in Hatton Garden, where higher overheads make their prices tough to match.
"Now the consumers really have a huge advantage," said Tobias Kormind, managing director of http://www.77diamonds.com, which has a showroom in smart Hanover Square in London's West End.
Hatton Garden jewellers have been slow to adapt to the online market. There's a communal website, but you can't make transactions through it and the start-up costs of putting together a website are steep for small businesses.
They hope customers will still want to touch and try a piece before they buy it, and to create bespoke pieces to order, the jewellery equivalent to Savile Row tailoring.
"We can create something here that will really raise the profile of the integrity, and the meticulous craftsmanship, and the skill that goes into a jewel that sits on your finger," said Jason Holt, chief executive of Hatton Garden shops Holts Gems.
The hub is bracing for a potential surge of new activity when the new multi-billion pound Crossrail train terminal opens in nearby Farringdon in 2018.
The new line will bring new customers but it is also pushing up the cost of doing business.
"One of the major issues that's making Hatton Garden difficult is the conversion of workshop space to offices and residential," Stephen Berman, manager of Hatton Garden jeweller Arlington & Co, said.
"That is having an effect on the community." Rents in the area have as much as doubled in the last three years, from 35 pounds to 70 pounds a square foot, according to commercial property agency Richard Susskind & Company.
Steps have been taken to safeguard the jewellery sector in Hatton Garden, such as a push for planning requirements that oblige landlords to provide space to jewellers at below market rents. But demand from companies in the media and tech sectors continues to push prices up.
Tenants of 30 years' standing in Hatton Garden are coming onto the market to find they will have to pay double or triple their previous rent for the same amount of space, said one estate agent. "The majority are (in) jewellery," he said.
The area is already diversifying. Nearby Leather Lane is building its reputation as a global food hub. New businesses from Amazon to Goldman Sachs are moving into Farringdon.
The jewellery sector is fighting back. It sees a push on marketing, particularly to the lucrative Chinese tourist market, as key to changing its fortunes.
Last month the Hatton Garden Business Improvement District (BID) launched a 2.5 million pound plan to revitalise the area with better marketing and a facelift. Jewellers welcomed the plan but are still gloomy about the area's long-term prospects.
"We'll lose some working jewellers, it's inevitable," one Hatton Garden business manager said. "Some businesses can't survive - the world is changing. You're talking about a quality bespoke product that somebody sits and creates, and that's dying all over the UK."