Bloomberg: Rents Crashing in London to 1991 Levels

Did you actually read the article? It is discussing Canary Wharf - hardly what most people think of as London. Canary Wharf is comparable to the financial build-up in Jersey City ... but far less convenient to where most people live. Canary Wharf is where all of the financial companies went about 10 - 15 years ago and honestly, it sucks. There is nothing but banks out there, no nightlife, its far/inconvenient. Banks needed space for their massive trading desks and other personnel so they moved there (if you know London, the city is an old Roman city with very narrow streets and significant green space - hence very little ability to develop in the city proper ... unless you go UP and highrises are not allowed in most places. But they are in places like Canary Wharf. The area was bound to overdevelop, per its own natural limiting factors.

One thing to also note: Canary Wharf was only ever the big banks, the hedge funds always clustered around Mayfair which is convenient, posh, lovely. If those rents go down - and I am sure they will somewhat but not to 1991 levels - then that would be a very bad sign.

Canary Wharf, London, Manhattan....it doesn't matter. The bottom line is Rents are going down, down, down...YES!!!

Hey Julia,
Love the Mantra.
I agree, RE is heading down but, not at the speed I had anticipated. Makes you second guess the long term game plan. Do I grab something now that is mildly depressed and take advantage of the amazingly low fixed interest rate or do I hold fast and continue the hunt banking of the notion that another 15-20+% is still going to be shaved off the ask. I am of the belief that the moment inflation takes hold(and it will) intrest rates are going to climb at a fast runaway pace. Sure you can always refi when rates come down in 2525. Remember the song 'in the year 2525', maybe they were singing about real estate!

Say it ain't so, scoots...

Bloomberg: "Rents across the West End [which includes Mayfair] fell by 29% from £120 per square foot at the end of 2007 to £85 per square foot at the end of 2008," he said.

Hedgies closing shop.

http://www.propertyinvesting.net/cgi-script/csNews/csNews.cgi?database=default.db16170&command=viewonex

So how do you guys explain Sydney? Isn't that market also similar to Manhattan???

Rents still rising amid the gloom

THE economic slowdown may have put a brake on rising home rental costs in parts of Sydney, but average rental costs are still rising, and are continuing to run ahead of both wage and cost of living increases.

In the March quarter the average rent across Sydney was $390 a week, up by $5, according to the Department of Housing's quarterly rental report released today.

There were rises in country areas. The rent for a three-bedroom house in Cessnock rose by 13.6 per cent. Rent for two-bedroom unit rents rose by 11.1 per cent in Wagga Wagga and 13.6 per cent in Wollongong.

http://www.brisbanetimes.com.au/national/rents-still-rising-amid-the-gloom-20090515-b636.html

Rents fail to fall as S.L. County vacancy rates rise

Apartment vacancy rates in Salt Lake County more than doubled from the first quarter of 2009 compared to the same period last year, according to a report released Thursday.

The CB Richard Ellis Apartment Report tracked rental rates for 140 apartment complexes with more than 100 units in Salt Lake County. Combined, they have 29,556 units.

http://www.deseretnews.com/article/705300699/Rents-fail-to-fall-as-SL-County-vacancy-rates-rise.html

Rents continue upward climb

The recession has done little to cool rises in the price of rental accommodation, but it has mitigated a shortage of supply in the Helsinki region.

The steady rise in the cost of renting a flat or house in Finland seems to be all but inexorable. The price of rental accommodation has increased nationwide over the last year by five per cent, clearly outstripping the general rise in the cost of living. Over the same period, price level differences between municipalities have grown, according to a report released by Statistics Finland (SF) on 7 May.

Prices have risen the most quickly in the capital region, where rents were already the country’s highest. A non-subsidised, 30-square-metre, one-room flat in Helsinki cost renters an average of almost 14 euros per square metre, whereas in Oulu the same flat could be rented for just over half that price.

http://www.helsinkitimes.fi/htimes/domestic-news/general/6247-rents-continue-upward-climb.html

yeah but rents continue to implode here in NYC which is what matters.

not to menetion sydney, slc and helsinki are basically 3rd world compared to NYC and london..no offense

I was in London in 2000 and was very disappointed. The city is not that great. Dubai it isn't.

Ahem, you comparing London to Dubai? Okay.

What I love about London - it is above anything, a city of villages. You forget that you are in a capital city, because all the residential areas are built on a very human scale.

Sydney is harly third world. Have you ever been there? But Australia's economy was not tied to finance to the degree NYC and London were...in fact Australia is one of the few first world countries to hold up relatively well during this. So no its not comparable.

Also, I go to Canary Wharf for work at least four times a year - and I always say its like Jersey City also, so good analogy. Maybe Secacus.

My fav. neighborhood in London, Chelsea, right off Kings Road, closer to Sloane Square. The retail has gone all mall-like (as with anywhere high rent) but ah, nothing to beat walking down the Thames or strolling along Kings Road and popping in for a bite to eat at a local patisserie.

If you're close enough to Sloane Sq. tube, you're within easy reach of South Ken, the glories of the park, museums, a short ride to Belgravia, Oxf. High St.

Don't know what we'd do without you, alpine. The perfect foil.

As much as I disliked George Bush, I have to admit that the comedy shows just aren't what they used to be now. Sarah Palin helped for a while. But now, nothing.

Don't go away, alpine!

falco...i'm just as confused...i'm seeing alcove studios (renovated) under $400k...should i buy or rent..

julia,

You're not confused. You know what to do. I have confidence in you.

> My fav. neighborhood in London, Chelsea, right off Kings Road, closer to Sloane Square.

I can tell you for fact 1-bedrooms right there even with the recent rally in the pound are comparable in price now to the Upper East.

:) My real estate porn in Chelsea extends only to townhouses. My dream Chelsea pad would be a low, wide townhouse with a 60' yard (London houses have surprisingly big gardens). Red brick, with a parking garage in the back. Townhouses in Chelsea are now cheaper than ones on UWS. They also tend to be in better condition as most of them have long been converted back to single family (if they were ever cut up).

Canary Wharf / Battery park City.....

go look up "Olympia & York"

ah yes, Chelsea on the Kings Road. Lived there for a spell myself, great stuff.

"They also tend to be in better condition as most of them have long been converted back to single family"

Not in my experience. The invetory in London is in dreadfully poor shape.

btw, Canary Wharf is more comparable to Miami than Manhattan. Awful place.

I saw the Bloomberg story about 1991 rents the other day and here's what struck me about it: no matter which market you're talking about, nobody has been saying that ANYPLACE would see commercial rents fall as low as 1991 levels.

You know, everybody weighs in this stuff, the analysts, the rating agencies, yadda yadda...so we see all the reports, which say things like, rents will drop to 2002 or 2003 levels...or they discuss other types of data like loan delinquences, but still they use year comparisons, so they say maybe delinquencies will rise to levels last seen in 1998 or 1999.

And so on. All the data crunchers throw out their year comparisons.

But until this article from Bloomberg, I never saw anybody say any of the numbers would get as low as 1991.

I'm jus sayin.....that's what makes it significant. It's not about whether it discusses London or Sydney or Los Angeles....it's about the severity of the downturn.

Oh and also, these 1991 rents in London are not PROJECTED numbers, they're actual numbers.

Ew, I can't believe someone just said that Dubai is better than London. Gross.

I'll just slide down my YSL sunnies and pretend I didn't read that.

scoots - you're talking about Canary Wharf in the 80's, when you'd have to take the never-working light rail there (I worked at Reuters, a pioneer in that area). They built the Victoria Line that goes right through Canary Wharf.

Sorry.

So is Manhattan like US stocks and should go to 1997 levels...or is it like oil and emerging market stocks and should stick at 2003-2004 levels....Isn't it obviously the former?

Fewer hedge funds, many small banking boutiques, down to earth bonuses...That feels more like the 1990s... And not even a hell hole... 8-10x price to rent...your hairdresser can now afford to buy a one bed. This is the future, and it ain't that bad, just affordable.

By the way who here thinks they know where the hell commercial rents are going in Manhattan? There is at least one empty storefront on every block of Madison from the 60s to the 90s.

$400k studio with say $1000 maintenance...you can rent it for say $2000? 3% yield? With Manhattan munis (for a direct comparison) are much higher yielding...why would you consider it.

Shouldn't you want at least a 5% yield...offer $240k...

"They built the Victoria Line that goes right through Canary Wharf."

Yes, and it still takes an hour to get there. What's your point?

"I worked at Reuters, a pioneer in that area"

Didn't realize Reuters had a big data mapping practice. A pioneer of Canary Wharf? That's like celebrating the founder of lint.

Like Rhino, I would also be curious to hear what people think about commercial rents right now.

I didn't know about so any empty spaces on Madison, I rarely go there. But I see empty (formerly leased)storefronts downtown too, in Soho and elsewhere.

Even my corner bodega where I live, way uptown, has just closed.

A PIONEER at Canary Wharf!! Did you hear that? A PIONEER!!

What's that saying about being the tallest midget?

"Yes, and it still takes an hour to get there. What's your point?"

No it does not. I stay at the St. martin's lane in Soho and door to door it takes me 30 minutes max. Same thing for when I stay over closer to where the V-line crosses oxford, or even farther west. An hour? From where. No where most business travelers stay in london.

And from Soho I have to transfer.

"Canary Wharf is comparable to the financial build-up in Jersey City ... but far less convenient to where most people live. "

No, its not. Jersey City is backoffice. The big firms moved their MAIN offices to Canary Wharf.

Its the equivalent of the World Financial Center... which folks also said companies would never move to. Same developer.

If you are going to quibble that much, its not WTC either - because that was built to get firms to move BACK downtown. Companies were never HQed in the Docklands in London. So its more like JC in that its a greenfield development of a business district. Actually, La Defense in Paris is the best analogy. But if you want something in NYC, there is nothing exactly like it - though JC is closer from getting someone to understand how how out of the way and yet new it is. WTC is actually very convenient by several subway lines - something Canary Wharf certainly is not.

Thats not a meaningful point. Doesn't matter who was there, JC is a horrible comparison in terms of the value of current neighborhood.

Its not out of the way because it has BECOME the way. Front office vs. back office. It is the destination for company HQ... whereas Jersey City is a places whose only benefit is cheap.

Hell, Rockefeller Center was a greenfield development of a business district... but that just show the flawed analogy.

JC is if you can't afford... CW is what folks try and afford.

"CW is what folks try and afford."

Not anymore. See the original article in TOP.

Hmm... sounds just like all the other city centers.... keep demonstrating the point.

"Its the equivalent of the World Financial Center... which folks also said companies would never move to. Same developer."

no one took me up on "go look up "Olympia & York"". You wanna know how bad things can get? You can't be a real bear unless you know their story.

I worked for most of a year in the Docklands/Isle of Dogs in the mid-90s. My company had bought the building for pennies on the pound after the collapse (not sure if O&Y had owned it -- it was a smaller building). What 30yrs is referring to was a truly phenomenal implosion of real estate values in a highly marginal area, that had been the seat of the empire on which the sun never sets, then for a couple of generations was total nothingness.

I was glad I opted not to take a company apartment, also in the Isle of Dogs, but to find my own place in Marylebone (< half hour commute by tube/DLR). I was especially glad not to live in the Docklands following my fifth day of work, when the IRA blew up my office building (with me in it).

And that's why I'll never again work late on a Friday.

Plus I really loved living in Marylebone.

The Isle of Dogs, which includes Canary Wharf, is truly comparable to Jersey City, but much worse in that it has far fewer residents, and in that it has very little of its original self, and finally in that it's basically a series of islands (I think created by extensive channeling), and so cut off from everything around it. In other words, a giant-scale office park.

come on, canary wharf is the equivalent of mid-town Manhattan in London. almost all the top banks are based there. what a heresy to call it jersey city? it's day and night.

But that's ALL that's there. It's a hive for worker drones.

> no one took me up on "go look up "Olympia & York"". You wanna know how bad things can get? You can't
> be a real bear unless you know their story.

I read Too Big to Fail.

You're talking about the richest guy in the world at one point, went completely bust... mainly because he cross-collateralized.

"come on, canary wharf is the equivalent of mid-town Manhattan in London. almost all the top banks are based there. what a heresy to call it jersey city? it's day and night."

Ironically, as I alluded to earlier, Midtown was also "doomed to fail" because it was too far from downtown.

nyc10022, your allusion is inapt, because by the time midtown was being developed for commercial/office space, the premier residential district had long before moved from lower Manhattan to ... midtown. Plus there were lots of adjacent low-income residences to the west that were ripe for teardown. The Isle of Dogs is wholly removed from any such area, even the newly trendy East London neighborhoods that are analogues to the East Village and Williamsburgh. It's Brasilia without the dramatic architecture. Hives.

All true, and all making it even less like Jersey City...

"I was in London in 2000 and was very disappointed. The city is not that great. Dubai it isn't."

Lots of credibility there... this is the guy who lives in New Jersey, and has decided to move to DC.

Not exactly a good judge of great cities...

alanhart, i hope you were physically unscathed. mentally, having your office building blown up by the IRA has got to leave a bit of damage.

do we have any brits on? i'd always heard there was a fair amount of scorn for the area. i'll be in london in a few weeks, maybe i'll trudge my sorry self out there to see what it's like.

The Isle of Dogs is truly grim. For decades it's where they put to problem families because the transport links were so poor and it was difficult to get out. The Canary Wharf development didn't provide work for them and local unemployment (and resentment) remains high. The facilities that were developed where a long way outside their means.

Upshot is that Canary Wharf is ok for a visit (it's basically an expensive shopping mall) but I wouldn't wander off it unless you know where to go and not to go. The Isle of Dogs is has a thin veneer of expensive riverside condos and an unreconstructed core that is still a sink estate. I used to live in those condos on and off from the mid 90's to 2005. The rent on the condos looks about the same as I was paying in the late 90's which is quite a drop from where it has been.

Interesting note on the Reuters building at Canary Wharf. After the IRA blew up part of Canary Wharf a newspaper ran an article with photos and a map saying if the IRA really wanted to paralyze the banking system that was the building they should have blown up (although it no longer does at the time that data center handled the majority of the global forex transactions).

aboutready, thanks -- physically unharmed by the IRA.

freelance, the IRA lorry bomb wasn't in Canary Wharf, which is and was too heavily protected for it to have happened there. It was in nearby but lower-key South Quay, and I don't think there were any financial services companies there at the time.