New Duke of Westminster, New London Property Cycle

The early death on Tuesday of Gerald Grosvenor, the Sixth Duke of Westminster, unexpectedly made his 25-year-old son Hugh the richest man born in the U.K., according to Forbes’ rankings. But the Seventh Duke may be inheriting one of the world’s largest private property empires—centered on London’s West End but extending to San Francisco and Hong Kong—at a far less fortunate time than his father.

Gerald Grosvenor came into the duchy of Westminster when his father died in February 1979. That month U.K. 10-year gilts were yielding 14%, close to their all-time high but only just ahead of the annual inflation rate. This was during the so-called “Winter of Discontent” marked by widespread public-sector strikes as the government tried to implement austerity measures linked to a 1976 bailout by the International Monetary Fund. London had lost about a fifth of its population over the previous four decades as city-dwellers fled to the countryside.

The Sixth Duke may have thought his job was to manage decline. Instead, falling bond yields, globalization and a return to city living fostered a long, strong recovery in London property, which still accounts for 56% of the economic interests held by the duchy-controlled Grosvenor Group. The company recorded net assets of £4.4 billion at the end of 2015—quadruple the 1998 level.

But some of these forces appear to have reversed. Taxation was weighing on central London house prices even before Brexit threatened London’s status as a global destination for capital and workers. CBRE reckons the vote knocked 6.1% off the value of City of London offices in July (though only a quarter of Grosvenor’s portfolio is in offices). Above all, 10-year gilts now yield about 0.5%—an all-time low.

Gerald Grosvenor was well aware he was riding one of the great bull markets; his stewards never tired of calling an end to the boom. His son may find the wind in his face.

Write to Stephen Wilmot at stephen.wilmot[a]wsj.com