In this month's Europe Watch we turn the spotlight on London, a city which, despite being a global financial centre, has gone from strength to strength since the Global Financial Crisis. London has benefitted from growth across a variety of sectors, from professional and technical to media and other creative industries – all of which require office space from which to operate. The trend among large organisations to take space in central city locations, while not exclusive to London, has certainly been evident here. Now, with the global economy looking on a firmer footing and the UK economy enjoying a period of above trend growth, employment growth in London has been rapid, the leasing market continues to improve and prime rents have increased with the expectation that there is more to come.
Admittedly, yields are low by historic standards, but broadly justifiable given low government bond yields and the strength of the occupier market. The biggest threat to London now is that it becomes a victim of its own success. For the office market this would be allowing the new development cycle to get out of hand. For the wider economy it is the risk that the city becomes a place unaffordable to live and do business in. Neither is an imminent danger.
Source : CBRE Global Investors