Covid, Ghost Cities And Collapse Of Property Prices In West End And City Of London – OpEd
Is this how the world as we know it ends, then — not with a bang, or even a whimper, but with the slow, silent death of shops, pubs, restaurants and live culture?
England’s second Covid lockdown, introduced on November 5 in response to rising infection rates, has, in a crucial pre-Christmas month for business, shut down all shops regarded as “non-essential” — in other words, to name just a few examples, all clothes shops, gift shops and bookshops — as well as pubs and restaurants, with a sense of timing that could lead one to conclude that it was dictated by Amazon and other online retailers for whom Covid has seen their businesses reap unprecedented profits.
The cost of this, in terms of businesses shutting down, and employees laid off, is not yet known, but it seems likely that, as 2021 unfolds, the centres of our cities and towns will be wastelands, reminiscent of the early ‘80s under Margaret Thatcher.
What is more, we don’t even know if the lockdown will end as intended on December 2, at least allowing these shops, pubs and restaurants to take advantage of what, traditionally, has been their busiest time of the year, or if it will continue with, perhaps, just a short window of socialising allowed for Christmas, followed by the resumption of lockdown in the new year.
If this scenario comes to pass, those wastelands look increasingly likely to materialise, with shops, pubs, restaurants, hotels, all shutting down in unprecedented numbers, their lifeless facades joining those of other unfortunate businesses that never even managed to reopen at all, however briefly, over the summer and into autumn — theatres and music venues, for example.
So is there any hope? Well, yes, I think there still is, although I’m not as optimistic as I was during the first lockdown, which lasted from March 23 until “non-essential” shops were allowed to re-open on June 15, and which provided us with our first opportunity to glimpse how we might be able to change society for the better — curtailing our environmentally suicidal culture of over-exploiting finite resources to feed our gluttony (for fossil fuels, for too much meat, for “cheap” clothes produced in toxic global toxic sweat shops, for example), cutting the emissions associated with our hectic over-activity (too many planes, too many lorries, too many cars, the entire cruise ship industry).
As the global tourist industry collapsed overnight, it became apparent that we had all become overly reliant on it — even major cities like London were, in fact, economically lost without millions of tourists over-consuming on a daily basis. And while this looked healthy economically, it was not only environmentally unsustainable; it was also driven by greed — the greed of the property market, with astronomical business rents and astronomical private residential rents, exploiting a hospitality industry of the underpaid and overworked. Obsessed with growth and profit, few people saw how precarious so many people’s lives were until the whole thing ground to a halt.
And while the government, predictably, handed out eye-wateringly huge amounts of money to corporate entities, to prevent their collapse, and introduced a generous furlough scheme for millions of workers who would otherwise have lost their jobs, defaulted on their mortgages or rents and ended up homeless, no one could have foreseen how another major change — the shift to home working, and the end of the insanely overcrowded daily commute — would suddenly puncture the viability of the extortionately expensive property rental market.
A collapsing property market
With the City and the West End still largely empty — of tourists, of foreign students, and of office workers — the overpriced rental market for offices and shops is facing a slow collapse, one that is, frankly, long overdue. A month ago, the Guardian reported that Shaftesbury, “the central London landlord that owns Chinatown and swathes of Soho and Covent Garden” — 16 acres in total — was seeking to “raise £297m from shareholders to boost its finances, pay some debts and make investments once” — if, surely — “the outlook for commercial property improves.”
The company announced in September that it “had received less than half (44%) of rent for the six months to 30 September, and had offered new lease terms to struggling tenants, including rent waivers, shorter leases and monthly, instead of quarterly, rental payments.” This good to hear — especially about rent waivers — but it remains to be seen if this will be enough to keep West End businesses afloat. Even before this second lockdown the West End was a ghost of its former self, with just a fraction of the shoppers and consumers it used to depend on to survive.
The same week, the Guardian also reported that LandSec, “one of Britain’s biggest property companies”, which owns hotels, retail parks and shopping centres, including Bluewater in Kent, said it “intended to sell assets worth around £4bn over four to five years and reinvest the money in new developments” — although whether there will be any buyers remains to be seen.
LandSec “revealed earlier in October that it had managed to collect only a third of rent from its retail tenants five working days after it was due”, and that it expected rents at its regional shopping centres across the country “to drop by between 20% and 25% from their March levels in order for them to become ‘sustainable’ for tenants.”
In contrast, the company was buoyant about having “collected 82% of rental payment from its office tenants”, and said that it “was not forecasting a fall in office rental values”, a position that, to my mind, ignores the fact that many office-based businesses are tied to leases, and may well downsize in droves when the opportunity arises, as their employees continue to work successfully from home.
Residential rents down 14.9% in inner London
In relation to residential rents, companies and individual landlords are also suffering, Shaftesbury explained that, in September, it was “struggling to re-let flats, with a fifth of its 622 residential properties lying empty, after many of their previous occupants, such as international students and young professionals, returned to their home countries at the start of the pandemic.”
And just last week, the Guardian reported that, according to the estate agents Hampton International, “rents in inner London were down by 14.9% year on year as landlords slashed costs to attract tenants – lopping almost £400 off the average monthly rent, which fell from £2,564 in October 2019 to £2,182 last month.” That is a significant cut, but £2,182 a month is still extortionate for a monthly rent. That’s over £26,000 a year just in rent — before council tax and bills — and even if the costs are, for example, shared by a couple, it works out at over £13,000 a year, helping to explain why so many workers are paying over half their wages just on their rent.
Hamptons also explained that rents in the countryside were rising, as some London residents seek to move out of the capital altogether, but while some commentators have referred to this as an “exodus’, the property website Zoopla stated that “the idea of a large-scale move from London is probably an overstatement”, as its data “showed that most Londoners were looking for a rental property within the city.”
These are just glimpses of a collapsing property market in the West End and the City, and I can’t, of course, predict how it’s all going to pan out in 2021 — especially with the Tories seeking to overhaul planning laws to enable unscrupulous developers to transform offices and shops into whatever kind of tiny shoe-box prisons they think they can get away with — but it does seem to me that “peak property greed” has hit a wall, and that genuinely creative solutions are going to need to be found to address the aftermath of a collapsing economic system that had very clearly run its course even before Covid arrived.