Read below our Q1 lettings report highlighting more modest rental growth on re-lets and record tenancy lengths in the PCL rental market.
LCP Private Office issues its review of the Prime Central London lettings market in Q1 2025, highlighting more modest rental growth on re-lets and record tenancy lengths in the PCL rental market.
Average agreed rents on re-lets within our rental portfolio increased by 1.72% in Q1 2025, more modest growth than seen in the final quarter of 2024. Values have been stabilising gradually over the last three years since the post-Covid spike in 2022, when growth reached 19.46%. Despite a slower rate of growth, rents in PCL are now 23.6% higher that they were in 2019, the last ‘normal’ year pre-Covid.
Rents agreed on renewals have also been stabilising, reflecting the levelling out of the rental market after a period of unprecedented demand and unsustainable high rents. Renewals in Q1 2025 saw average growth of 5.67%, a slight increase on the previous quarter but less than the same period last year, when they increased 7.27%.
The average length of tenancy reached an all-time high of 36.1 months in Q1 2025 – the longest on LCP’s records, reflecting the continued supply and demand imbalance in PCL. Limited stock available has encouraged tenants to extend their leases rather than re-entering the highly competitive rental market.
The time taken to let a vacant property was 21.4 days in Q1, the longest time we have seen since the first quarter of 2024, though still below the pre-pandemic average of c.28 days. Q1 is a seasonally quieter period in the rental market, so we expect to see vacant periods reducing over the course of year, as we did in 2024.
Tenants from the EU continued to make up the highest proportion of new tenants in Q1 at 47%, whereas UK tenants were down 13% compared to Q4 2024. North and South American tenants remained consistent with the previous quarter, however there were no new tenants from the Middle East, who usually represent a similar proportion.
We saw a decrease in tenants in the Banking and Finance sectors in Q1, down 24% compared to Q4 2024. Tenants working in professional services were up to 18% from 7% in the previous quarter and tenants in retail services increased by 18%. Students continued to represent a significant proportion of new move-ins at 24%.
Our report shows signs of further stabilising in the rental market with more modest growth seen in rents agreed on re-lets. Landlords are still seeing consistent rent increases on renewals, as more tenants are choosing to remain where they are at a higher rent, rather than risk entering the highly competitive and undersupplied market.
Some landlords may be considering selling up due to economic and regulatory challenges, which could place further strain on the private rented sector and push rents up higher. My advice however to current and prospective clients is to hold out where possible, as long overdue capital appreciation could be around the corner. With the global economic outlook in a state of flux, demand for UK property could increase, as a safe haven asset class which currently presents more security over other, more volatile, investments.
The lack of clarity in the rental market, whilst it remains unclear when the Renters Rights’ Bill will take effect, is causing uncertainty for both landlords and tenants.
Rest assured, LCP is prepared for the changes that the new legislation will introduce and we are here to support. If you have any queries or concerns, please do not hesitate to reach out.
Read our blog on the Renters Rights’ Bill for more information on the legislation.
Get in touch to discuss your rental property and how we can help you find high-quality and reliable tenants.
