Global Cities Survey (March 2022)

Below we highlight a small selection of some of the indicators included in the survey.

• With respect to economic output, over the last two quarters of 2021, the London economy appears to be performing well against its competitors – especially Hong Kong which experienced a major reduction in output of more than 8% (Q4 2021). In the same quarter, London’s economy is estimated to have grown by just over 1%.
• Unemployment continued to fall in London (which now has the second lowest rate out of our cities in Q4 2021). New York, Berlin and surprisingly Hong Kong all saw reductions too. Paris data for slightly earlier (Q3 2021) suggests a similar trend is at play. Despite a downward trend, New York continued to experience a higher unemployment rate than in other cities – this perhaps demonstrates the lasting impact of using an expanded employment insurance system, rather than a comprehensive furlough scheme that kept employees in their jobs.[1]
• Office vacancy rates reached new highs in Manhattan (New York City) – reaching more than 20% in Q4 2021. In contrast Central London’s office vacancy rate fell in the second half of last year, ending at 7.9%. Vacancy rates were comparatively low in Paris and Berlin, but higher in Hong Kong, at around 10%.
• London saw office take-up bounce back in Q4 2021 as demand rose. New York and Hong Kong continued to experience higher vacancy rates than before the pandemic.
• Prime office rents increased in London (West End and City), Paris-Île de France and Berlin in Q4 2021. Asking rents for Grade A office space (new or fully refurbished space) continued to fall in Manhattan and the Sheung Wan and Central areas of Hong Kong. Prime office rents are now higher than in Q4 2019 in the West End, Paris-Île de France and Berlin, but not in the City of London, New York (Midtown) and Hong Kong.
• Based on Google indicators of mobility, the Omicron variant hit retail and restaurant Furthermore, none of our cities are currently at pre-pandemic levels of workplace visits. Manhattan was still seeing 37% fewer visits than in January 2020, a much lower rate than NYC’s suburbs. When we collected our data, London was sitting in fourth place after recovering from the Omicron crash. London and New York (especially Manhattan) were seeing a slower recovery in retail visits and public transport usage than Paris-Île de France and Berlin.
• Demand for air travel tells the story of the late stages of the pandemic at an international level. New York City has stayed on top since our last update, a full 35 points closer to its pre-pandemic numbers than any other city. Paris and London saw sharp declines from November to December 2021 as strict travel curbs were reimposed. London’s Southend Airport even shut for several months due to the lack of demand. Air passenger traffic in Hong Kong remains remarkably near zero, as strict quarantine requirements from most countries remain in effect.

Overall, London appears to be competing successfully when measured across a range of indicators included in this report. However, as the impact of the pandemic starts to recede, the effects of Russia’s invasion of Ukraine is opening a new chapter of uncertainty for the global economy and major cities on the world stage – including London. How it will affect growth, investor confidence and international visitor demand will perhaps become clearer in the weeks and months ahead.

[1] Institute for Government. (10 January 2022). Coronavirus: how different countries supported the unemployed. Retrieved from: https://www.instituteforgovernment.org.uk/explainers/coronavirus-unemployment-support

Unemployment continued to fall in London, New York, Berlin and even Hong Kong as 2021 came to a close and demand for labour rebounded. Paris data (Q3 2021) suggested a similar trend (data for Q4 has not yet been released).

Black and minority ethnic New Yorkers and young Black Londoners continue to experience a much higher unemployment rate than their White counterparts.

London’s unemployment rate decreased from 5.6% to 5.2%, notwithstanding the end of the furlough scheme in September 2021 and the onset of the Omicron variant.

London no longer has the highest unemployment rate in the United Kingdom, although it is still above the average in England. Given the rising demand for labour in the capital, unless the Ukraine war and post-Brexit labour and skills shortages curtail recovery, unemployment could reduce further still. If the current trend continues in early 2022, London’s unemployment rate could be set to return to its pre-pandemic level of 4.8%.

The unemployment gap between White and Black, Asian and Minority Ethnic groups (BAME) has widened during the pandemic, and UK data shows it is not closing: in Q3 2021, the unemployment rate for people from a Black or Minority Ethnic background was more than twice the rate for White people.[1] This was especially the case for young people: data from November last year showed that Black Londoners (16-24) were twice as likely to be unemployed as White Londoners of the same age.[2] The gap in unemployment between Black or Minority Ethnic and White Londoners over the age of 16 had been slowly closing from the mid-2010s but this was reversed by the pandemic – as Black and Minority Ethnic groups saw a much larger rise in unemployment than White people nationally.[3]

New York City has seen a considerable decline in unemployment to just over 8% after having suffered highs of more than 18% at the peak of the pandemic in mid-2020. Despite this, it still has a much higher unemployment rate than in 2019, which shows the lasting effect of job losses during the pandemic, as US schemes to protect employment have arguably proved less effective than schemes in the UK, France or Germany. This is partly because the US Paycheck Protection Program was only available on a first-come-first-served basis with a cap in total spending. This meant not all businesses could benefit. It was focused on small and medium size businesses, with an upper limit on support to each business. Support terminated in May 2021.[4]

As in London, the New York’s unemployment rate for minority ethnic groups was higher than for White groups; unemployment for Black non-Hispanic people has risen over 2021 to 15.2% in Q4, whilst rates for White non-Hispanic groups rates were at 6.3%.[5] Some of these disparities predate the pandemic – across New York State, 2019-2020 saw unemployment rates for both Black and White groups increase by 5.4 percentage points, but for Hispanic groups, unemployment increased by 9.4 points.[6]

Paris-Île de France and Berlin continue to see higher unemployment rates compared to London but lower than that for New York. Both cities’ labour markets have been relatively sheltered from the impact of the pandemic thanks to government furlough schemes, which unlike the UK’s, existed before the pandemic (and were not covid-related when they were introduced). As such these schemes have not been wound down. Berlin’s unemployment rate has only increased by 1 percentage point between Q1 2020 and Q4 2021, but it entered 2020 with the highest rate of any of our surveyed cities. As far as we are aware, France and Germany do not collect statistics on ethnicity and unemployment.

With its tightly sealed labour market, Hong Kong remains the city with the lowest unemployment rate and has remarkably outperformed its pre-crisis figures. A state-funded voucher scheme to stimulate domestic consumption appears to have reduced the unemployment rate in sectors related to consumption, though strict social distancing rules and the closure of enterprises such as gyms and bars are likely to have put downward pressure on job growth.[7] Falling job-posting numbers in the territory suggest that unemployment may start to rise at some point.

[1] House of Commons Library (25 February 2022). Unemployment by ethnic background. Retrieved from: https://commonslibrary.parliament.uk/research-briefings/sn06385/

[2] Cohen D. (30 November 2021). Young black Londoners twice as likely to be unemployed as white counterparts. The Independent. Retrieved from: https://www.independent.co.uk/news/uk/home-news/black-unemployment-young-people-london-b1966612.html

[3] House of Commons Library (25 February 2022). Unemployment by ethnic background. Retrieved from: https://commonslibrary.parliament.uk/research-briefings/sn06385/

[4] Small Business Administration. PPP. Retrieved from; https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program/ppp-loan-forgiveness#section-header-2 and Institute for Government. (10 January 2022). Coronavirus: how different countries supported the unemployed. Retrieved from: https://www.instituteforgovernment.org.uk/explainers/coronavirus-unemployment-support

[5] Parrott, J. (27 January 2022). New York City’s pandemic jobs deficit stood at 421,000 in December 2021; 15.2 percent Black unemployment in the fourth quarter. Center for New York City Affairs. Retrieved from: http://www.centernyc.org/reports-briefs/new-york-citys-pandemic-jobs-deficit-stood-at-421000-in-december-2021

[6] Department of Labour NY State. (January 2022). Current Population Survey Data New York State: 1970-2021. Retrieved from: https://dol.ny.gov/system/files/documents/2022/01/cps-1970-2021_0.pdf

[7] Magramo K. (18 January 2022). Coronavirus: latest Hong Kong unemployment rate drops to 3.9%, but labour chief warns extended social-distancing curbs could lead to joblessness rising again. South China Morning Post. Retrieved from: https://www.scmp.com/news/hong-kong/hong-kong-economy/article/3163848/coronavirus-latest-hong-kong-unemployment-rate

Central London’s office vacancy rate fell throughout the second half of 2021. January’s data (not shown) points to a new rise, but it remains to be seen whether this will be maintained.[1] Demand at the end of last year was much higher than in previous quarters, but still 9 percentage points below the annual average for the city[2] and availability remains higher than pre-pandemic.

At the end of 2021, office vacancy rates reached new highs in New York City, with over 20% of space empty.  Vacancy rates were comparatively low in Paris in Berlin, but high in Hong Kong, at around 10%.

New York and Hong Kong had higher office vacancy rates before the pandemic. New York’s high rate is most likely a function of job losses, and perhaps an acceleration of pre-Covid trends.

[1] CBRE (2022). Central London Office Figures January 2022. Retrieved from: https://www.cbre.co.uk/research-and-reports/Central-London-Office-Figures-January-2022

[2] Avison Young (2021). Central London Office Analysis. Retrieved from: https://www.avisonyoung.co.uk/central-london-office-analysis/q4-2021

Prime office rents increased in London (West End and City), Paris-Île de France and Berlin in Q4 2021. Asking rents for Grade A office space (new or fully refurbished space) continued to fall in Manhattan and the Sheung Wan and Central areas of Hong Kong. Prime office rents are now higher than in Q4 2019 in the West End, Paris-Île de France and Berlin, but not in the City of London, New York (Midtown) or Hong Kong.

The rebound of West End and City office rents point to these areas’ continued attractiveness. Shaftesbury PLC, a major landowner in the West End, reported that nearly 90% of tenants paid their rent on time as last year came to a close, demonstrating the relative health of commercial operations in the area.[1]

By contrast, the downward trajectory in rents for Grade A office space in Manhattan has continued for the fourth quarter in a row. Other data by CBRE suggests rents are now 6% below their level in Q4 2019.

The decline in Grade A office rents in Hong Kong has slowed down but not stopped – rents are now a remarkable 20% below their Q4 2019 level, according to data by CBRE.

Berlin’s prime office rental market has stayed relatively stable after an initial relative spike in values in early 2020 before the impacts of the pandemic were felt. It has since suffered a mild decline from mid-2020 to mid-2021, followed by a tentative recovery throughout the rest of the year. Paris, on the other hand, has not seen its rents fall year-on-year throughout the pandemic for any of the quarters for which data was available. CBRE data indicate that in Q4 2021, prime office rentals were 5.7% higher than in Q4 2019 across Île-de-France.

It is worth noting that the long-term duration of many office leases may have tempered some of the effects of the pandemic on office rents, so its full impact is perhaps not yet entirely evident.

[1] Hammond G. (4 February 2022). London’s West End set of ‘uninterrupted’ growth, says Shaftesbury. Financial Times. Retrieved from: https://www.ft.com/content/c032166d-84fc-407d-b65f-45324123f209

The Omicron variant brought a new drop in retail store visits[1] in late 2021 and early 2022, but the longer-term trend is perhaps more interesting than the impact of the new variant. In London, New York (Manhattan), Paris and Berlin, store visits have stayed below their pre-pandemic level despite the lifting of restrictions. However, in Hong Kong they had returned to normal levels of activity before Omicron hit, its partial lockdown means that store visits have plunged since.

Visits to London and Paris-Île de France stores have quickly recovered from the Omicron wave but have remained below their pre-pandemic baseline in the last two years, even at times when restrictions were lifted. Notwithstanding the Ukraine crisis, there may be better days ahead for London’s retail sector, particularly stores catering to tourists, as travel restrictions for vaccinated incoming passengers have just been lifted. Although some visitors still face restrictions when they return home.  A sustained higher rate of internet sales (27% nationally in January 2022, compared to 20% in January 2020) – part of a trend that predates the pandemic – suggests a return to pre-Covid norms in terms of store visits is highly unlikely.[2]

Visits to stores in Berlin had recovered closer to pre-pandemic levels before Omicron hit, thus seeing less of a drop than Paris or London.  Manhattan has seen the greatest dip in store visits, but this is probably partly due to its centrality in New York and reliance on commuters and visitors. Other boroughs in the city have been less affected.

[1] This data doesn’t include supermarkets and pharmacies

[2] ONS. (18 February 2022). Retail Sales Index time series (DRSI). Retrieved from: https://www.ons.gov.uk/businessindustryandtrade/retailindustry/datasets/retailsales

City centres in New York, London and Paris have seen a bigger decrease in retail visits than surrounding neighbourhoods, compared to their pre-pandemic baseline. This shows the continued impact of remote working and depressed visitor numbers on city centres. It follows that the drop in retail visits was greater in areas where workers and international visitors represent a bigger share of footfall – this was especially the case in the City of London (550,000 jobs and 8,000 residents, whereas the much larger City of Paris, as bounded by the Périphérique, has 1.8m jobs and 2.2m residents)[1].

Data for Berlin and Hong Kong is only available at a city-wide level.

[1] City of London. (4 February 2020). City statistics briefing. Retrieved from: https://www.cityoflondon.gov.uk/supporting-businesses/economic-research/research-publications/city-statistics-briefing. INSEE. Dossier complet, Commune de Paris. Retrieved from: https://www.insee.fr/fr/statistiques/2011101?geo=COM-75056#chiffre-cle-5

None of our cities are currently at near pre-pandemic levels of workplace visits. The combined impact of the Christmas break and the Omicron variant on in-person working saw a large drop in workplace trips in Q4 2021.

Manhattan was still experiencing 37% fewer visits than the equivalent average week before Covid, compare this with Staten Island, a suburban borough of New York City, which was at 20% below pre-Covid levels.

In Paris-Île de France, which had been enjoying the strongest recovery of our European cities, visits dropped from 14% lower than the pre-pandemic average to 43% lower in the space of a week. In all cities, this dip was, to a degree, reversed within two weeks, although Paris’ recovery has been most consistent.

Hong Kong experienced the same decline but far less deeply, followed by a later, truly precipitous decline from exactly pre-pandemic levels in mid-January to almost 50% lower at the start of February, which coincided with Chinese New Year.

London now sits in fourth place after recovering from the Omicron crash. The growth in office visits appears to be slowing as of mid-February 2022.

Whilst it is difficult to disentangle the effects of the winter break from that of the Omicron variant, amid the enormous volatility across our selection of world cities, it is clear that Hong Kong’s ‘Zero-Covid’ strategy, which had successfully maintained office working closest to pre-pandemic levels of any of our cities throughout 2020 and 2021, is no longer a guarantee of normality in the face of the new variant.

Visits to train and Tube stations (which we use as a proxy for ridership) dipped following the impact of Omicron and renewed advice to work from home. Longer term trends show London and Manhattan seeing a slower recovery in ridership than Paris or Berlin. Hong Kong’s lockdown means ridership is sharply down in the city although numbers may have been affected by New Year holidays as well.

London’s particularly slow recovery in public transport ridership may be due to a sluggish reduction in remote working and a slower return of foreign visitors. It risks continued trouble for Transport for London with its high dependency on fare income.

Manhattan figures are likely to be lower than the New York City average, as it encompasses the city’s central business district.

Pret a Manger transaction data provides us with a slightly less scientific proxy indicator for return to office-based working across our city selection.

London’s suburbs continue to show the strongest performance, though the combination of the Christmas holidays and the Omicron variant at the end of December plunged sales to under 60% of pre-pandemic figures (defined here as January 2020). London’s West End also saw a stronger recovery than the City, and both Downtown and Midtown New York. London’s airport sales have begun to recover, breaking 80% of pre-pandemic numbers.

Hong Kong’s belated exposure to the Omicron variant is also evident. Despite incomplete data, the city’s sales have crashed throughout January and February, whilst all other cities have recovered, and has fallen below New York’s figures, which had been consistently the lowest across our sample.

Congestion fell in London, Paris, Berlin and New York as Omicron hit, but prior to this TomTom reported higher levels of congestion than before the pandemic in all four cities. Given the high economic and environmental costs of traffic congestion, this trend will be of particular concern to policymakers.

Demand for air travel tells the story of the late stages of the pandemic at an international level.

New York City has stayed on top since our last update, a full 35 percentage points closer to its pre-pandemic numbers than any other city, according to the most recent data available. It experienced a big rise between September and October of 2021 of 21 points as borders reopened to most travellers, though the Omicron variant has quelled the usually buoyant Christmas travel season from the city in December with numbers showing a modest decline.

Paris and London saw sharp falls from November to December 2021 as strict travel curbs were re-imposed. London’s Southend Airport even shut for several months due to a lack of demand. In addition to reduced visitor numbers, new evidence suggests that London has lost some of its visitor spending to other cities in the EU following the UK’s move to scrap VAT refunds for goods bought by international visitors in UK shops.[1]

Berlin’s travellers had already reduced their demand a month earlier, likely resulting from an early spike in infections among Germany’s relatively large proportion of unvaccinated citizens.

Air passenger traffic in Hong Kong remains remarkably close to zero, as strict quarantine requirements for travel from most countries remain in effect. In recent months, (for which aviation data has not yet been released), the city has tightened its travel restrictions, banning flights from major Western and Asian tourist and business destinations until April 2022. Even before this, international business travel had been severely restricted, causing uncertainty about the city’s future as a global business hub.

It is too early to know what the recovery from Omicron looks like for international travel. The position has been complicated further by the conflict in Ukraine which may hit both travel from some markets (such as the US) as well as fuel prices paid by airlines.

Heathrow airport has stated that January and February passenger numbers were almost a quarter lower than expected and that they do not expect passenger numbers to recover to pre-pandemic levels before 2025 or 2026.[2] This supports Greater London Authority analysis predicting that international visitor numbers will remain depressed until late 2023 at the earliest.[3] In early 2021, NYC & Company (the city’s official marketing and tourism organisation) predicted that tourism in New York City would not exceed pre-pandemic levels until 2024, while Tourism Economics, a consultancy, predicts that visitor spending would not reach pre-pandemic levels until 2025.[4]

[1] Thomas D. (7 March 2022). UK falling behind EU rivals on tourist spending after duty changes. Financial Times. Retrieved from: https://www.ft.com/content/446dfa43-a7f1-4885-91f4-49ffb21f34e5?segmentId=776b81d7-dd92-c731-e669-99cdd37d3a96

[2] BBC News. (23 February 2022). Heathrow passenger numbers lowest for 50 years. Retrieved from: https://www.bbc.co.uk/news/business-60490742

[3] GLA. (January 2022). London Tourism Forecast January 2022. Retrieved from: https://data.london.gov.uk/dataset/london-tourism-forecasts

[4] Office of the New York State Comptroller. (April 2021). The Tourism Industry in New York City. Reigniting the Return. Retrieved from: https://www.osc.state.ny.us/reports/osdc/tourism-industry-new-york-city

For our world city survey, New York has by far the highest cost of living[1] when rents are included; less so when they are factored out. For nearly all cities and all measures, there has been an increase in the cost living in 2021 compared to New York. With rent included, London is in second place to New York just above Hong Kong but Paris moves into second position when rents are excluded.  Berlin is the least expensive by both measures.

Central banks are predicting much higher global inflation in 2022, partly driven by steep rises in oil and gas prices and shortages of raw materials. In the UK, the Bank of England expects inflation to reach 7% in Spring 2022, before moderating in subsequent quarters.[2] However, war in Ukraine has already led to further increases in fossil fuel prices. Trade embargos are likely to lead prices to rise further. As a result, Eurozone inflation is expected to increase by 3.9% in 2022, compared to previous 2.5% estimates, in what would be the highest full-year inflation rate in Eurozone history.[3]

[1]The dataset uses a mix of sources – some of it crowdsourced from websites of supermarkets, taxi company websites, governmental institutions; and some of it from twice per year established monitors. It should therefore be treated with some degree of caution. Note that these figures do not take into account adjustments for purchasing power parity.

[2] Bank of England. (3 February 2022). Will inflation in the UK keep rising? Retrieved from: https://www.bankofengland.co.uk/knowledgebank/will-inflation-in-the-uk-keep-rising

[3] Oxford Economics. (25 February 2022). Weekly Economic Briefing | Eurozone. Retrieved from: https://resources.oxfordeconomics.com/hubfs/Content%20Hub%20RBs/Eurozone%20War%20in%20Ukraine%20will%20hit%20Europe%E2%80%99s%20economy.pdf

London and Paris followed a similar pattern in their crime rates, with deep reductions as lockdown measures were imposed. At the last count, London’s crime figures were stabilising, relative to previous years.

Paris’s crime rates vary between the city proper and its banlieues (suburbs). Since the pandemic, the City of Paris has seen a more significant fall in crime rates than the rest of Île de France, which could reflect the spatially unequal distribution of wealth and deprivation in the region.

Hong Kong’s early and stringent lockdowns combined with extensive anti-government protests[1] resulted in an increase in recorded crimes from the start of January 2020, peaking at 145% of pre-pandemic figures in June of that year, before falling to a low of 74% in December. Since summer 2021, crime in the city has steadily reduced.

[1] https://www.google.com/amp/s/mobile.reuters.com/article/amp/idUSKBN236080

When looking at new homes completed[1] per thousand residents, New York City has trailed Berlin, London and Hong Kong for most of the last decade.

In London, housebuilding has rebounded from the slump of 2020 which affected all cities other than Hong Kong, with 40,361 homes completed. Data compiled by the Greater London Authority suggests that 2019-2020 was the first time since 2004 that the rate of growth in the number of homes in London had outpaced growth in population and jobs.[2] Although, until Census results are released in the UK, population trends remain uncertain.

Although Hong Kong has not yet released its annual figures, Q3 2021 saw almost three times the number of homes completed as in Q3 2020, as the city’s house-building efforts in the public and private sector ramped up in the face of a pressing housing crisis.

[1] Paris only publishes permissions granted and new starts – hence there is no data included for Paris in our analysis. We use new EPC registrations to estimate new homes built in London, as GLA Economics analysis has suggested that data from the Department for Levelling Up, Housing, and Communities significantly undercounts the number of new build homes in the capital. GLA. (October 2021). Housing in London 2021. Retrieved from: https://www.london.gov.uk/sites/default/files/housing_in_london_2021_v2.pdf

[2] GLA. (October 2021). Housing in London 2021. Retrieved from: https://www.london.gov.uk/sites/default/files/housing_in_london_2021_v2.pdf

Since our previous survey, there has been a marked decline in the occupancy rate of London’s AirBnB as travel restrictions were introduced in at the end of 2021 and the Omicron variant led to people choosing to reduce their social activity. New York City saw a slump in occupancy levels too, again showing the impact of the Omicron variant on international and domestic travel.

Hong Kong continues to lag behind every other city due to its increasingly strict travel restrictions and has continued to hover around the 10% mark, although it has experienced a minor recovery since November 2021. This no doubt results from Hong Kong’s strict quarantine requirements for international travellers, required to maintain the city’s ‘Zero-Covid’ strategy and eventually enable open travel with mainland China, alongside fears of political repression.

Restaurant bookings have been badly hit by the Omicron wave in London, Berlin and New York, but have been recovering into February of this year. Although nearly a quarter down on pre-Covid levels, London is outperforming both New York and Berlin which are down by more than 40% and 50% respectively. (Data for Hong Kong and Paris is not included). The lifting of travel restrictions and a return to city centre activities may help restaurant demand to recover, but the hospitality sector will still be suffering from two very difficult years for some time to come.

There have been spikes in PM2.5 pollution in Paris, Berlin and London, with London registering the highest monthly PM2.5 reading for over a year and higher than that for other cities.[1]

Although average levels of air pollution have tended to reduce in all cities since 2019, it is hard to point to a single reason for this – weather patterns play a role as these impact on the build-up of locally emitted pollutants. Initiatives to discourage the most polluting vehicles and to encourage active travel will have contributed to improve air quality.

Despite this progress, there is still a long way to go to reduce air pollution – in both London and Paris, air pollution levels in January 2022 led public health authorities to recommend avoiding outdoor exercise.

[1] Note this data is in monthly averages, so daily meter readings can peak at higher levels. Particulate matter primarily come from combustion – major sources include fireplaces, petrol or diesel car engines, and coal- or natural gas-fired power plants.