Global powerhouse: how London measures up to rival cities in 2022

London’s Covid recovery compares well to other cities but the economy will be tested by war in Ukraine

Today, Tuesday 15 March, sees the launch of the London Property Alliance’s latest global cities survey. With research provided by the Centre for London think tank, this quarterly review compares London with Berlin, Hong Kong, New York and Paris: four of the key competing global economic powerhouses.

The report covers a combination of the final quarter of 2021 and (where available) the first two months of 2022. It assesses everything from how urban economies are performing through to levels of mobility associated with retail and employment, as well as airport demand, office vacancy rates, crime and housing, to paint an accurate economic picture.

‘Marching ahead’

Before the war in Ukraine and the ensuing economic fallout, recovery from Covid was the biggest challenge facing growth in our cities; in particular the Omicron variant. The report shows that in general terms, London, Paris and Berlin are ahead, outpacing New York and Hong Kong on a range of indicators.

London is now marching ahead on economic outputs, office space takeup and employment growth. Its economy grew by more than 1% in the last quarter of 2021 while Hong Kong saw a staggering reduction of more than 8% over the same period. And London now has the second lowest rate of unemployment for our city selection. Perhaps counter-intuitively Hong Kong’s rate is the lowest overall, driven in part by increased emigration and perhaps people withdrawing from the labour market more generally.

With respect to real estate, Grade A space is now in positive growth territory for European cities, with increases strongest in London’s West End and City markets. This contrasts radically with New York’s Midtown and Hong Kong, both of which have endured at least three quarters of consecutive negative growth. The recovery of prices in the City of London will be particularly welcome as it indicates a show of confidence in a part of the central London market that commentators are concerned about – given anticipated lasting changes to working habits that risk harming existing real estate business models.

But it is also clear we are not out of the woods yet. Both London and New York are struggling with a return to the office with Greater London a full 30% below pre-pandemic benchmarks and Manhattan down a full 37%.

Omicron generated a fall in retail and restaurant visits across the piece in Q4 2021. But all cities have seen firm recovery in the first part of 2022, except for Hong Kong – a result of its radical “zero Covid” approach which has also seen its airport numbers collapse to just 3% of 2019 levels. In contrast, New York air passenger demand has shown strong signs of recovery; aviation is now a full 35 percentage points closer to its pre-pandemic level than for any other city surveyed.

Meanwhile on the subway and buses, with its high level of farebox dependency (one of the highest in the advanced world) Transport for London’s (TfL) finances have been put under enormous pressure. The UK government has still not concluded a lasting financial settlement for the agency. This threatens the long-term viability of the public transport system and signals a very odd way to go about “levelling up”; a flagship policy ostensibly to even out inequality in the UK by encouraging growth in the regions.

Contrast the approach taken in London with that for Paris and even New York. Not only has central government revenue support been forthcoming for their authorities, but major capital renewal and expansion programmes are being drawn up to prepare their systems for the next two decades and beyond.

Inevitably, this quarter’s survey doesn’t even begin to capture the economic implications of the Ukrainian outrage. The disruption to financial, insurance, commodity and travel markets is only just starting to be understood.

With its remarkable physical infrastructure soon to be boosted by the opening of Crossrail, and as a major centre of commerce governed by the rule of law, we can but hope that London – and her sister cities in western democracies – are sufficiently resilient to weather this latest global storm.

This article was first published on React News on 15 March 2022.

Global powerhouse: how London measures up to rival cities in 2022