London commercial property has entered its first technical recession in over 20 years. Latest figures from March confirm that the rental income market fell in six consecutive months, satisfying the official definition of two back-to-back quarters of contraction.
Although fewer properties have been changing hands since the beginning of the financial crisis, and properties have been valued lower, rental income tends not to be affected so badly in recessions because tenants sign up to relatively long leases. Tenants therefore have limited scope to request lower rates from their landlords.
However, changing terms have meant the commercial property economy is more able to fall into recession. Shorter contracts mean that clients can negotiate new terms more easily than they would have been able to in the last recession, when leases often lasted for 20 years. With high rent rises in recent times, tenants are now in a position to request concessions.