PRIME LONDON Q2 LETTINGS REPORT 2021
13th July 2021
London Central Portfolio (LCP) issues its Q2 2021 lettings report illustrating a gradual shift away from a ‘renter’s market’, with greater tenant demand and reducing discounts.
Properties available for let has trended down over the past 12 months. Reflecting greater demand, there are 35% fewer flats available than at the peak in June 2020. This has led to a reduction in the time taken to let properties and helped reduce the rental discounts demanded on re-lets.
A key indicator of rental demand is the number of enquiries received for each property. With the easing of restrictions, Q2 2021 witnessed significant growth in interest from renters. In June, the average property received double the online enquiries compared to a year ago.
In Q2 2021 new rental applicants were less selective in their search within prime London. Nearly 40% of applicants were happy to move to any neighbourhood compared with only 6% in Q1. Increased demand has resulted in applicants prioritising pricing over specific locations. For prospective tenants who did specify, Marylebone remained the most popular choice.
Increased demand has meant properties for rent have remained on the market for a shorter time. At 50.4 days, the time taken to let a vacant property in Q2 2021 was 20.8% faster than in Q1 2021 and 31.9% quicker than the peak of 74.0 days in Q4 2020. The levels remain above the pre-pandemic historical average of 27.3 days but are forecast to continue decreasing.
Agreed rents on re-lets in Q2 2021 improved from Q1 2021, with an average discount of 9.2% in comparison to 13.1%. Increased rental demand has created a more competitive market reducing the discounts that were previously being negotiated. Further, June saw average discounts of 6.55%, the lowest rate since the beginning of the pandemic.
Historically, tenants paid increases on passing rents when renewing for another year. In Q3 and Q4 2020, savvy tenants negotiated discounts. More recently, with reduced available stock and less leverage, tenants have been renewing at near passing levels. June witnessed the first month since the start of the pandemic where on average, no discounts were granted on renewals.
Andrew Weir, CEO of London Central Portfolio, comments on the market
The prime London rental market has benefitted from a broadly improving environment as witnessed throughout Q2 2021. Whilst total ‘normality’ has not yet been achieved, there is a clear rebalancing process underway that can be seen from the data on our managed portfolio.
Q2 continued to see shorter void periods with increased tenant demand. We are already beginning to see an increase in enquiries for tenancies with August start dates, as companies plan for the return to the office in one form or another as well as students looking to continue their studies. We anticipate these factors will contribute to a continuing downward trend in vacant periods between tenancies during Q3. This increased activity has inevitably affected the agreed rent levels for renewals which saw no discounts in June. We experienced an average discount of 9.2% for re-lets in Q2 improved from 13.1% in Q1. With the quantity of stock available for let reducing, tenants now prioritise competitive pricing over location with an open-minded approach to specific locations within prime London.
The lettings market is often a leading indicator of the direction of travel for the London property market and where capital will undoubtedly follow. London remains an extremely attractive destination for many individuals for residency, education, business and leisure. Our Q2 lettings results are particularly encouraging given that international travel restrictions were still substantially in place.
For UK and overseas property investors and homebuyers seeking exclusive prime London real estate, LCP provides superior access to buying opportunities as well as meticulous project management and creative design solutions, to suit all aspirations and budgets. Using sophisticated financial modelling with a detailed appraisal of every proposed opportunity, LCP will negotiate and secure each property for the best price and as part of its end-to-end service, offer an efficient letting & management service so landlords can enjoy a seamless, hands-off investment.
Data: London Central Portfolio Limited conducts regular audits of all assets under management. This data has been used to produce the information contained in this report. Disclaimer: This report is published for general information and should not be relied upon in any way. No responsibility can be accepted by London Central Portfolio Limited for any loss or damage resulting from any use of the contents of this report. Any forward-looking statement involves known and unknown risks, which could differ materially from those expressed or implied.