The rental market in prime central London has proved resilient this year despite the impact of political uncertainty surrounding Brexit negotiations, according to fresh analysis.
In the first quarter of this year, rents increased by 0.2% for renewals, whilst relets rose by 0.1%, the data from London Central Portfolio (LCP) shows.
The figures also reveal that voids - calculated from the day a property falls vacant to when a new tenant is installed - stand at just 31 days. Occupancy is currently running at 94%.
The tenant mix is primarily international with less than 20% from the UK. Despite fears of a mass exodus following the Brexit vote, citizens of the EU 27 still account for more than 40%.
As far as the landlord profile is concerned, Asia dominates overseas investment, making up 68% of all landlords.
More than 50% of tenants are from the financial sector, and whilst the majority are employed predominantly in the City or Canary Wharf, many want the “PCL experience”.
The second biggest sectors are Professional Services and HNW Students.
The popular areas of Mayfair and Knightsbridge still command the highest rents per annum, with an average of £60.49 sq ft.
Kensington, South Kensington and Marylebone lead the rest at £48.32 sq ft.
Naomi Heaton, CEO of LCP, said: “Despite the multitude of external factors currently crippling the sales market, the rental market is proving to be more stable. Q1 saw rents increase slightly over the quarter for both renewals and re-lets by 0.2% and 0.1% respectively. Annually, renewals are up 0.4%.
“As a rule, rents are correlated to the cost of purchasing a property. With continuing low borrowing costs and prices falling, we would not expect much upward movement. On top of this, landlords remain concerned about Brexit, putting tenants into a strong negotiating position.
“Nevertheless the average length of tenancies is increasing, standing at 455 days in 2018 and the anticipated exodus of citizens from the EU27 following the Brexit vote has not materialised. They currently account for over 40% of the tenant base which is primarily international, with UK tenants making up under 20%.
“Not surprisingly, the financial sector and millennials represent the biggest proportion of tenants. The continuing trend is for renting smaller units as budget conscious tenants prioritise prime locations over size. Consequently one bedroom flats and smaller units return better yields than their larger equivalents. Clever space optimisation and stylish interiors are becoming ever-more demanded.”