LCP Private Office issues its Q2 2024 lettings report highlighting sustained demand in the PCL rental market.

There were further signs of PCL rental values stabilising in Q2 2024, as agreed rents on re-lets increased by 4.76%, up slightly from 4.0% in the previous quarter but considerably down on the 21.8% increase seen in Q3 last year. Rental value change over the last 12 months remains considerably higher than pre-pandemic levels, with agreed rents on re-lets at 10.58% against the 2019 12 month average of -0.7%.

Rents on renewals increased by 8.3% in Q2 2024, marginally up on the previous quarter but at a significantly higher growth rate than pre-pandemic, when renewals increased by 0.7% in 2019. This is reflective of increased competition and a continued undersupply in the PCL rental market, which has encouraged many tenants to pay in excess of inflation to retain their tenancy.

This trend is reflected in the average length of tenancy data, which shows increases year on year from 2022, with the average tenancy length reaching 32.8 months for the year to date. Whilst rents are increasing, it is still challenging for tenants to find cheaper accommodation on the open market.

The time taken to let a vacant property was significantly down in Q2 to just 10.5 days, which balanced a weak first quarter with a 43.9 day average. Since their peak in 2021, vacant periods have stabilised to similar levels seen pre-pandemic, now only 0.8 days above the 27.6 day average in 2019.

There was a diverse range of occupations amongst our new tenants in Q2. We saw more students returning to the market (18%), which we expect to continue into Q3. Individuals working in finance and professional services continued to represent a significant proportion of new move-ins (41%), whilst there was an even split of creative and tech workers at 14% each.

We have seen the usual increase in HNW students and young professionals from Asia-Pacific returning to Central London over Q2. The proportion of UK tenants was down considerably from 60% in Q2 2023 to 24% in Q2 this year, which demonstrates an influx of other nationalities into Central London, a market historically dominated by foreign tenants.

Liam Monaghan, Managing Director of LCP Private Office, comments on the market

The rental market in Prime Central London is continuing to remain robust as we see strong demand through consistent rent increases and shortened vacant periods.  We are expecting to see further upside as we head into the usually busy summer and autumn period, with more students arriving into London to start their University terms.

Our report shows that rental values, particularly for new lets, are beginning to stabilise from the unprecedented levels reached in the aftermath of the pandemic, but are still in excess of recent inflation figures seen across other sectors. We expect prime rents to continue to increase over 2024, but at a much steadier rate of growth.

Landlords and owners will still need to consider pricing carefully, so not to fall into a trap looking for over the top rents, as some will have been set in a much busier time. As interest rates begin to fall during the start of the Labour Government, more tenants will look to become buyers and reduce competition. It is therefore important to have well-presented stock and be reactive to market movements.

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