London Property Alliance Chief Economic Advisor Alexander Jan examines London and New York’s recovery since the pandemic.
After a recent trip to London, veteran New York Post real estate journalist Steve Cuozzo wrote that London was “clobbering the Big Apple” with its regeneration and infrastructure delivery. And get this – he even marvelled at the “swift progress” of our major developments and the “relatively smooth and rancor-free” approval processes, compared with New York’s tortuous zoning system.
This was perhaps all the more remarkable given that much commentary and analysis gives the impression that London – battered by Brexit, Covid, runaway inflation, interest rate hikes and a housing and productivity crisis – is fighting for its future on the global stage. Are critics right to be pessimistic about London’s prospects or is Mr Cuozzo right?
For starters, it is worth recognising some big differences. New York’s $1 trillion (£800 billion) economy is approximately 40% bigger than London’s. It enjoys higher productivity growth underpinned by the size of its financial services industry. The recent earnings season reminded us just how much more quickly the Big Apple’s banking sector is growing.
And as a more densely populated city, approximately three times more people live within a short distance of Lower Manhattan compared to central London. This boosts so called agglomeration effects and makes it easier for people to access jobs. New York’s system of local real estate taxes is held up by many commentators as being more dynamic and accountable compared to the centralised system run by the Treasury over here rather than by London government.
So it may come as a bit of a surprise to many that on many measures, London is outperforming or holding its own against its East Coast rival. The latest clutch of data from the London Property Alliance’s Global Cities Survey put together with think tank Centre for London shows just that. You think our offices are empty? At over 22%, Manhattan’s office vacancy rate is getting on for three times that of central London. The Big Apple’s rate has nearly doubled since 2020. In London’s West End, “best in in class” office space availability is in the low single digits reflecting buoyant demand. Rents for the best quality most sustainable spaces have been growing at 10.6% lately with the equivalent figure for the City of London 6.9%. This compares to just 1.4% in Manhattan’s Midtown office district. New York’s weak return to the office continues to cause big headaches for its transit authority too. Subway use is just 70% of pre-Covid levels a full 14 percentage points lower than the Tube. This has triggered a fares’ increase across their system as well as extra taxes to help shore up the MTA’s finances.
On wider measures of such as unemployment and jobs growth, London is holding its own. Jobless rates for this summer were 5.1% here compared to 5.4% in New York. Employment in London is 1.7% above the corresponding period pre-Covid. For New York the figure is just 0.5%.
But it is not all plain sailing. New York’s economy is currently growing at perhaps twice the rate of London’s. Job openings – a powerful indicator of employer confidence – is 10.3% higher over there compared to early 2020 while London’s is tracking 7.5% lower. And as we all know, the UK is suffering from stubbornly higher levels of inflation which threatens to further constrain growth and consumer confidence.
But despite major challenges, London’s infrastructure, built environment and labour market performance provide grounds for optimism. The remarkable capacity of the city to reinvent itself and keep going despite major shocks is a tribute to the people who live and work here and lead it.
However, New York City is doing everything to bounce back. It is being offered unprecedented supported by its state and national government to invest whilst London still feels as though it is out of favour with Westminster. Our capital may be outperforming on many metrics now, but given half a chance, New York will eat London’s lunch at the first opportunity it gets.
You can find Alex’s article on the Evening Standard website here.