A half-mile stretch of Oxford Street will see more than 1M SF of new office space with a potential end value of more than £2B built in the space of the next few years. One of the largest development sprees of recent years in London’s priciest office district is on the way, and it all comes from department stores.

Earlier this month the owner of the empty former Debenhams department store on Oxford Street submitted a planning application to refurbish and extend the building. The new scheme will comprise 376K SF of office space and just 72K of retail and leisure compared to the current more than 350K SF of retail space.

The building is owned by Ramsbury, the investment vehicle of the billionaire Persson family, which owns retailer H&M. The new scheme has been designed by architect AHMM.

The application is part of a rush to turn Oxford Street department stores and large retail flagships into offices, with the stores located on the UK’s most famous shopping street shrinking the amount of space they dedicate to retail. Buildings that once housed department stores and competed for shoppers will now compete for office tenants.

John Lewis said it would convert 300K SF of its Oxford Street flagship to offices; Marks & Spencer said it was extending its store at the Marble Arch end of the street and would include 200K SF of offices in the new scheme; and the owner of the House of Fraser store is converting part of the building to 145K SF of offices.

The value of department stores has plummeted in recent years as consumers turn away from their increasingly commoditised offerings. Retailers and investors that own those buildings hope the conversion to offices will create valuable assets.

Average office rents on Oxford Street are about £85 per SF, data from Devono Creasa showed. That would equate to about £32M of rent a year if the Debenhams office space was fully leased, which capitalised at 4% would value the building at about £800M. Applying the same numbers to other office space being built on the street means offices with a value of about £2B are currently in the pipeline — if all of the schemes can find tenants.