New research from Knight Frank shows that office rent levels have proved more resilient in recent years in comparison to previous downturns and recoveries.
The study indexed City of London office rents at 100 for the pre-downturn peaks recorded in Q4 1989, Q3 2001, and Q4 2007. This showed that rents in the most recent downturn found a floor and moved into recovery far sooner than during the early 1990s and early 2000s downturns.
Also, the current recovery is proving to be far more enduring than that seen after the early 2000s downturn. Indeed that market cycle lasted just six years, with the arrival of the Global Financial Crisis in late 2007. However, today we are over seven years on from the market peak for rents, and growth is still occurring, and expected to continue.
Bradley Baker, Central London Tenant Representation Partner at Knight Frank, commented: “These figures demonstrate that the City office market has proved far more resilient in recent years than anyone would have imagined back in 2007 when the financial crisis began. One of the keys to the City’s success has been its’ significant diversification away from an over-dependence on the financial sector in the past and instead embracing and attracting technology and media firms such as Saatchi & Saatchi, Amazon, Hachette and Uber.
Unlike previous downturns, the current recovery began within two years of the initial crash and has been sustained for over 5 years. This compares favourably to the 2001/3 and 1989/91 crashes which took over 3 & 4 years respectively to post a recovery, and even then they were short lived.”