There can be little doubt that our great capital’s central business, residential and leisure districts are in a strangely healthy state, despite job cuts in the City. Unlike previous recessions, when London suffered a larger fall in GDP, greater increases in unemployment and bigger drops in house prices than the rest of the UK, the opposite has been true this time – even though the London-dominated financial sector was at the epicentre of the crisis.
Yet for once this is not a simple London/commuter belt versus the rest of the UK story. It is a central London versus everywhere else story.
As an excellent research note from Vicky Redwood of Capital Economics on this subject points out, while London is doing better than the rest of the UK, the real star is central London, which accounts for just 1.7m residents. Large chunks of our capital are performing poorly.
Take retail: central London shop rents are up 15 per cent since 2007 – but in the rest of London they have tumbled, as they have across Britain. Local Data Company figures reveal a shop vacancy rate of 12.7 per cent in London, poor but healthier than the 18.5 per cent seen in Wales, the Midlands and North. But Colliers data cited by Capital Economics suggests the Central London shop vacancy rate is a fantastically low two per cent.
So while greater London overall is suffering – as can be seen by boarded up shops in secondary and tertiary shopping areas in outer boroughs and deprived areas – it is still doing better than the UK overall – central London (and outposts such as Westfield Stratford) are booming. UK consumers are spending 10 per cent less in restaurants and pubs than at the height of the bubble; footfall in stores has collapsed even more sharply (though there has been a surge in online shopping) – but that is clearly not true in central London.
Or take the housing market. The buoyant prices everybody talks about only really exist in prime central London, where they are now an astonishing 30 per cent higher than pre-recession in nominal terms, buoyed by foreign cash (the pound is down, so homes haven’t gone up as much in foreign currency terms). But in non-prime central London, prices are just five per cent above their previous peak, while prices in Outer London are only just about back to where they were and often remain lower (and these areas have suffered substantial real term declines).
London’s openness is a central reason for its resilience. Partly because of the cheaper pound, spending by visitors to the UK has surged 40 per cent since 2005, even though visits are up 10 per cent. UK residents have slashed their foreign holidays by 25 per cent, which means more are staying put, in many cases going to London. Knight Frank says that 59 per cent of prime residential lets over the past year have gone to international tenants, while close to 70 per cent of central London shops and offices sold in the last year were to foreign buyers. Development Securities says that the proportion of the City’s office stock owned by foreigners has risen from a quarter in the mid 1990s to 52 per cent today.
Central London is a wonderful aberration – but don’t be fooled into thinking it is representative of all of London, let alone the whole country.
Follow me on Twitter: @allisterheath