An upbeat report on the booming private rental market in Prime Central London has been released by investment consultancy London Central Portfolio.
It says average length of tenancies reached a new high of 25.8 months in Q2 2022, steadily increasing since the onset of Covid-19. Tenants are extending their current tenancies, deterred by rising rents and limited stock on the market.
The time taken to let a vacant property reduced significantly in the second quarter of this year. The average number of days a property stood vacant was 11.3 days, the lowest seen since March 2014. Again this is largely due to a lack of available stock and a surge in demand.
For renters nearing the end of their tenancies, renewing at an increased rent has been more favourable than going back into the market. With strong market conditions, landlords successfully negotiated renewal increases averaging over 4.0 in Q2 this year.
Meanwhile the ongoing revival of the rental market since Covid restrictions eased in the UK has continued to result in agreed rents on new tenancies increasing. This amounted to 13 per cent in Q2 2022 with London Central Portfolio noting that prospective tenants had little negotiating power given the current demand and supply imbalance, often facing bidding wars.
Tenants from the banking and financial industries represented the most new move-ins at 50 per cent, which LCP says can be attributed to professionals in the City and Canary Wharf requiring a Central London property to overnight their two to three days spent in the office. The usual influx of high-net-worth students are expected this month and into the autumn.
Andrew Weir, chief executive of London Central Portfolio, says: “The current supply and demand imbalance has resulted in tenants ‘locking in’ longer leases with average length of tenancies now reaching its highest level at 25.8 months. Our tenant mix has seen a 50 per cent increase in UK tenants since 2018, suggesting more demand for part time city living as homeowners relocated to the country during the pandemic.
“Our data reports a positive picture for the PCL buy to let investor with a low sterling exchange rate, pricing well below the 2015 peak and capital values beginning to increase across Central London. PCL is still at a low point in the historic cycle and remains a good opportunity for investors.”
