Unreal City Rents

The City of London leasing market appears to enjoy insulation from inflation. Going back seemingly decades, prime rents in the City have hovered either side of £50 psf. Recent escalation into the £70s is not in itself reason to think that it is currently overpriced. In fact, in real terms City rents offer considerably better value than in 2007, when rents of £65 psf would buy you £85 psf in today’s money. Looked at over a small window around the 2008 inflection, we find a 78% correlation in GDP and rent with each 1% loss in GDP, elicited a 5% fall in rent.