On June 24, 2016, the day after Britain voted to leave the EU, I remember asking myself: was the UK economy about to slide into recession?

That day, it was easy to imagine a difficult year ahead for the Central London office market, with banks laying off staff and moving jobs abroad; resulting in falls for rents across the city. One year and three months later, this dire forecast has not happened — nor is everything rosy. The situation today is nuanced, surprising and a testament to London’s adaptability as an economy.

Fifteen months later, there has been no recession. In 2016, UK GDP increased by 1.8 per cent, with growth stronger in the second half of the year. The picture is slightly darker in 2017 — on an annualised basis GDP grew by 1.2 per cent in the second quarter of 2017.

That is a slowdown, but it is not a recession. Moreover, the number of people with jobs in the UK is at a record high, while the unemployment rate is at its lowest level for 40 years at just 4.3 per cent.

Rather than foreign businesses pulling out of London, there has been expansion by a range of firms, particularly in the technology sector. Amazon and Facebook are recruiting in London.

Apple plans to build a new 500,000 square feet headquarters at the Battersea Power Station, while Google has begun construction of a new 1 million square feet building at King’s Cross. The UK’s information and communication sector has created over 138,000 jobs since last year’s referendum, according to the Office for National Statistics.

Nor has there been a mass exodus of banking jobs. There have been reports of banks establishing new hubs in the EU, with Frankfurt particularly popular, but largely this has involved increasing the regulatory status of an existing local office in Europe. Indeed, some banks like Wells Fargo and HSBC have acquired new offices in London since the referendum.

Job losses

During last year’s referendum, there were forecasts predicting up to 100,000 financial sector jobs could be lost due to Brexit. However, a recent study by Reuters indicated that just 10,000 jobs in the UK might be lost in a worst-case scenario.

The office space vacated as a result of 10,000 job losses would equate to less than 0.5 per cent of Central London’s office stock. This would be a manageable amount of space for the market to absorb.

In 2018 and 2019, Oxford Economics are forecasting over 85,000 new jobs will be created in London across all industries, which should outweigh the financial sector redundancies.

This picture of a resilient London weathering Brexit is reflected in conditions in the office market. Yes, supply has increased — from a vacancy rate of 6.2 per cent (calculated by dividing vacant office space by total stock) in the second quarter of 2016 to 7.1 per cent in the second quarter of 2017.

However, to set this in context, the 10-year average for the vacancy rate is 7.2 per cent. At the height of the Global Financial Crisis in mid-2009, the vacancy rate drew close to 11 per cent.

Office space

Turning to demand for offices, the second quarter of 2017 saw 3.2 million square feet of offices rented by firms in Central London, compared to a 10-year average figure of 3.1 million square feet. This is 34 per cent higher than the 2.4 million square feet acquired in the second quarter of 2016, demonstrating London’s rebound from the shock of the Brexit vote last year.

Within the market, there is significant variation between one district and the next, with locations popular with tech firms outperforming. In the year to the second quarter of 2017, technology firms in London rented 3.3 million square feet of office space, up from 2.7 million square feet in the year to the second quarter of 2016.

Office rents in the Shoreditch district, often viewed as the buckle in London’s tech belt, increased by over 5 per cent in Q2 2017.

In contrast, Mayfair — a district popular with hedge funds and private equity firms — has seen rents fall by 13 per cent since the vote for Brexit. Within London, there is something of a tech and finance divide within the office market.

However, on a citywide, level London is on the right side of this trend. Tech overtook finance as the largest source of office demand in London in 2011, and has held that title every year since.

When judging London’s economy and office market, one must remember that Brexit is a road bump — the technology revolution is a game changer.

The writer is Chief Economist at London headquartered Knight Frank.