London has long been held up as an example of soaring property prices. Even compared to megacities like New York and Paris, high rents and land prices have been a bone of contention since the city was founded. Yet the simple answer has been that it has always been a business hub and when you attract international trade, you attract international prices. But has the soaring cost or property started to have an adverse effect? Is London pricing itself out of the property market?
Business closures
Photo by Jay Wennington on Unsplash
While large companies may be able to afford to rent, recent trends have shown that those servicing them can not. The biggest hits have been seen in the retail and entertainment industry. A list of London restaurant closures for this year alone bears features some big casualties, with classic Roux bistro La Gavroche shutting up shop and other chefs such as Marcus Wareing closing ventures at the end of last year.
Yet it is not just food that has seen this trend. Several high-clientele casinos have also closed their doors. The Crockford Club, also in Mayfair, shut up shop last year citing a lack of custom. Yet it held out longer than some of its adversaries, such as the Clermont and The Ritz.
Other factors
Blaming property prices alone may be harsh. Several other factors could have contributed to many business closures in London such as the pressure for home entertainment. A recent trend for top-class chefs cooking in people’s homes, taking their ingredients and equipment with them, is one. Freed from the crippling overheads required when operating a London restaurant, it is easy to see why many chefs may make this change.
However, the casino industry, in online sectors, has seemed to buck this trend. Their switch to digital operations has only bolstered the sector, seeing increased footfall in actual casinos as people get to grips with games in the comfort of their homes. Special offers such as a free spins bonus have helped growth in both areas, enticing people into casinos instead of keeping them away. It may be that only the highest-end casinos in the capital have felt the pinch, with all the ones in question being in prime real estate areas such as Mayfair.
Financial markets are also down and global instability in the Middle East and Russia could account for the lack of high end disposable income in the city. These areas have typically been a main source of spending and income. With tourists from these areas gone, the traditional business model may not be there.
Property prices
London property prices have started to drop, at least in the residential sector. In the most expensive boroughs, this was seen to fall dramatically with the prices in the City of London falling over 27%.
What this does indicate is that the high earners of the City of London may be moving out. With them gone, the demand for these luxury dining options and entertainment is starting to vanish. This could be a sign of things to come in London, or it may simply be one more chapter before the city bounces back like it has always done.
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