History never repeats itself exactly, but we often experience echoes of history where the characters are the same, even if the actors change. It is therefore often helpful to draw parallels to previous market cycles as a way to help us understand what may be happening now. For the London office market, we think we need look no further than the run-up to 2007.
There are three major players in today’s real estate world that seem to us disturbingly similar to the three major players involved in the CMBS debacle only a decade earlier. First, serviced office providers such as WeWork, cast as the part of the very highly leveraged property owner; second, the London property developer, in the supporting role as the international investment bank; and third, the yield-obsessed investor as…well…the yield-obsessed investor.