F.S.Bellelli — City of London

City of London (Image source: Wikipedia)

The City of London is an iconic location for office space

Located in central London, the City is the primary business district of London.
The city has special administrative status. It is considered a separate “city” within London.
As a result, the City enjoys regulatory independence.
The City has a surface of only \(2.9km^2\). Hence, new real-estate developments often take the form of high-rise buildings.
In 2016, the City only had 9,400 residents, but over 500,000 persons regularly commuting for work.

The City of London is a global financial district. However, only 9% of its office space is directly occupied by the financial and insurance industry.
The legal industry occupies almost a third of all office space. Many international law firms have their headquarter in the “Magic Circle” in the City of London.
Media and Tech businesses occupy 34% of office space. For instance, Amazon UK has its headquarters here. Several publishing and newspaper companies also have their offices in the City (famously on Fleet street). This category also includes a large number fintech companies.
In the past, business and retail services had a strong presence in the City, but they have now moved to the West End.

The pandemic has shaken London City’s office market.

In 2021 vacancy rate was historically high. Almost 10% of all office property is not currently occupied.
As the pandemic unfolded, many companies decided to cut their office space.
This demand shock weighted negatively on office rental prices.

A large proportion of City’s workers are still working from home.
Remote working increased demand for residential space in London and pushed home prices upward.

The UK was hit hard by the pandemic, but the worst seems to have passed
London has a high vaccination rate. More than 80% of the population has received at least the first dose of vaccination and more than 60% already received their second dose.
The hight vaccination rate protected the population during the latest surge of the Delta variant. Unlike previous surges, the number of hospitalisation and deaths rose only moderately following the boom in cases.

COVID restriction in the UK have been almost completely lifted.
However, mobility data shows a slow return to offices for the moment.
Physical presence in the City will probably increase more sharply when the latest COVID surge ebbs away.
To some extent, teleworking and alternative working arrangement will probably remain in place even after the end of the pandemic. This could reduce the demand for large office spaces.

Despite Brexit and COVID-19, the City has solid growth prospects and the City is unlikely to lose its position as financial and business hub.
London remains an attractive place for international corporations and finance. It offers easy access to skilled workforce, a supportive government, good infrastructures, easy access to customer base, and the opportunity to enter in the local network of businesses and tech clusters.
London population is expected to reach 10 million by 2040. Much of this population will come from international immigration.
In its latest forecast, the IMF predicts the British economy will grow at 5% rate in 2021 and 2022 and almost 2% until 2025.
Given the uniqueness of the location and the limited supply, prospects for the office market in the City are positive in the long run.