The closure of many offices and shops, reduced tourism and a greater reliance on public transport has meant that London has been disproportionately impacted by COVID-19. Whilst activity levels remain low, we fully anticipate that London will be reinvigorated as the world returns to normal.
London set to grow
Cities are powerhouses that can help drive national economies and London is no different. Generating around 24% of the UK’s GDP, it has an economy bigger than that of Sweden and Austria and is the largest city in Europe. Urbanisation has been a powerful long-term trend across the globe, with more than half the world’s population now living in urban areas. Despite COVID-19, we fully expect the attraction of large urban centres to continue. Recent population forecasts suggest that, despite the impact of the pandemic and the UK’s exit from the EU, London’s population will continue to grow. More importantly for our real estate markets, its workforce is forecast to expand from around 6.0 million people today, potentially to 7.5 million by 2050. Such expansion will support London’s occupational markets and likely require significant growth in the provision of office space.
An attractive destination for international capital
Central London has one of the world’s largest commercial real estate markets, with around 440 million sq ft of office and retail property attracting a deep and diverse mix of occupiers and property investors, many from overseas. London’s markets are also highly liquid and remain one of the leading global destinations for real estate investment. Its combination of relative value, strong legal system, time zone advantages, international connectivity and a welcoming attitude to global businesses has resulted in London being the number one city for cross border office investment for seven out of the last ten years as measured by Real Capital Analytics.
Leading centre of innovation
In order for cities to remain relevant they need to innovate. Knight Frank recently ranked London as the global number one innovation-led city based on a number of metrics including the strength of its universities, academic research and biomedical research funding. In their view, it will be these innovation-led locations which will attract and retain the population and wealth necessary for resilient, well-performing real estate markets. We would agree. London has a long history of reinvention and innovation, and we anticipate that as confidence returns, London’s economy will bounce back and its magnetism as a global cultural and business centre will be undiminished.