GLOBAL CITIES SURVEY – Office recovery shows London making economic progress against New York and Hong Kong but Ukraine uncertainty looms
Prior to Russia’s invasion of Ukraine, the economic recovery of London and other key European capitals was outpacing global rivals, according to new analysis commissioned by property trade body London Property Alliance.
In the Alliance’s latest quarterly Global Cities Survey, which tracks a range of economic indicators across London, New York, Paris, Berlin and Hong Kong, the return of workers to their offices as restrictions eased was seeing a bounce back in Europe. The commercial property sector, an important economic indicator, saw a recovery in office rents, particularly among prices for high quality space. Some landowners reported rent collections had also improved, including Shaftesbury, which had reported that nearly 90% of tenants paid their rent on time at the end of 2021.
Whilst London initially suffered more than some other global cities when the pandemic hit more than two years ago, this latest data shows the capital outperforms international competitors following a quick bounce back from Omicron in early 2022. London is now ahead on economic outputs, office take-up and employment, although the city has slipped into fourth place when analysing office visits.
- Office rents: In a flight to quality, prices for high grade space are now in positive territory compared to Q4 2019 in London (West End), Paris-Île de France and Berlin. But City of London, New York (Midtown) and Hong Kong rents still lag behind.
- Office vacancy: Manhattan (New York City) saw empty office space rates surpass 20% in Q4 2021. In contrast Central London’s office vacancy rate fell in the second half of last year, ending at 7.9%.
- Office visits: The data reveals that despite an overall bounce back, in-person working saw a large drop in workplace trips in Q4 2021 across all cities, largely due to the Christmas break and the spread of the Omicron variant. London’s ‘return to the office’ appeared to slow as of mid-February and the city now sits in fourth place as it emerged from Omicron.
- Unemployment: London’s rate decreased from 5.6% to 5.2%, despite the end of the furlough scheme in September 2021 and the onset of the Omicron variant. New York’s is just over 8%, higher than in 2019 but still below the 18% at the peak of the pandemic in mid-2020.#
Hong Kong, however, has been struggling under the impact of its ongoing partial lockdown, strict travel restrictions, and a suspected increase in emigration. Meanwhile unemployment in New York remains stubbornly high, potentially reflecting its lack of furlough scheme during the pandemic.
The report, which covers the period for October-December last year, plus the first two months of 2022 (for some measures) still shows significant challenges for London, which along with, New York (especially Manhattan) is seeing a slower recovery in retail visits and public transport usage than Paris and Berlin. Although the Omicron variant hit retail and restaurant visits, public transport use, and visitor numbers in all five cities hard.
The analysis shows that other global cities are exhibiting similar patterns of economic recovery, with the exception of Hong Kong. Being one of the only global cities that has not opened up to international travel, the Asian financial city’s ‘dynamic zero Covid’ strategy is now evidently taking its toll despite its major advantage to Hong Kong’s economic output in the early course of the pandemic.
Alexander Jan, Chief Economic Advisor to London Property Alliance and co-author of the survey, said: “London seems to have demonstrated a smoother transition from ‘pandemic’ to ‘endemic’, although the full impact of changes in travel, working and shopping habits remain unclear. Its slower pick-up in public transport use is of particular concern given the reliance on workers and visitors in the retail, hospitality and leisure sectors
“The picture is further complicated by the crisis in Ukraine, with falls in consumer and investor confidence likely to send some recent economic gains into reverse. However, the Government still has levers at its disposal which could help nurture the green shoots of recovery we have seen, such as agreeing a funding settlement for London’s transport network and a long overdue reform of business rates.”
Key findings:
- With respect to economic output, over the last two quarters of 2021, the London economy performed well against its competitors – especially Hong Kong which experienced a 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) indicates a similar downward trend. New York continued to experience a higher unemployment rate than in other cities – this perhaps demonstrates the use of an expanded employment insurance system, rather than a comprehensive furlough scheme that kept employees in their jobs.
- Based on Google indicators of mobility, the Omicron variant hit retail and restaurant visits. Furthermore, none of our cities are currently at pre-pandemic levels of workplace activity. Manhattan was still seeing 37% fewer visits than in January 2020, a much lower rate than New
- York’s more suburban areas. When we collected our data, London was sitting in fourth place out of five. 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 percentage points closer to its pre-pandemic numbers than any other city in our survey. Paris and London saw sharp declines 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. Air passenger traffic in Hong Kong remains remarkably close to zero, as strict quarantine requirements for nearly all travellers remain in place.
Charles Begley, Chief Executive of London Property Alliance said: “Data presented in the latest Global Cities Survey is encouraging for London. Strong performance in commercial properties, office take-up and retail activities, particularly in central London, is undoubtedly a vote of confidence.
“Our fight for talent, investment and visitors is global, it is therefore vital to look beyond the UK to compare London’s performance against other global cities. The Global Cities Survey serves to highlight how the capital’s competitive strengths rate globally and where lessons can be learnt to help further consolidate the London’s critical role in supporting the UK economy and inform policy making.”
For further information please contact London Property Alliance’s Communications Manager, Timothy Chan timothy.chan@cwpa.org.uk
Notes to Editor:
About the London Property Alliance Global Cities Survey
The Global Cities Survey launched by London Property Alliance (LPA) with research undertaken by Centre for London, provides an analysis of the latest data available across a range of 19 economic and societal indices for London, New York, Paris, Berlin and Hong Kong. These include amongst others, employment rates, public transport usage, office vacancies and rents, station and retail visits, the cost of living, air passenger demand and new home completions. The survey will be available for download on Tuesday 15 March at: https://www.londonpropertyalliance.com/global-cities-survey-2022/
About the London Property Alliance
London Property Alliance brings together the Westminster Property Association (WPA) and the City Property Association (CPA). The Alliance provides a unified voice for the leading owners, developers, investors and professional advisors of real estate across Central London. Visit: https://www.londonpropertyalliance.com/
About Centre for London
Centre for London is London’s dedicated think tank. The Centre undertakes research and organises events aimed at developing new solutions to the capital’s critical challenges. Centre for London is a registered charity and politically independent, advocating for a fair and prosperous global city. Visit:
