However, it appears as though green shoots are appearing in the prime central lettings market, according to the latest quarterly analysis from London Central Portfolio.
According to LCP data, the EU represented the largest share of new tenants in Q3 2021 at 36%. As travel restrictions started to lift, prime London became less reliant on UK renters. 20% of new tenants in Q3 2021 were from the UK in comparison with 42% in Q3 2020. Ongoing travel restrictions resulted in a smaller proportion of new tenants from Asia-Pacific.
As professionals started to return to the office post 'freedom day' in the UK on 19th July, tenants from the accounting, banking and financial industries represented the highest number of new move-ins at 41%. In the prior year, this figure was 19% which evidences the return of London as a global city of employment. HNW students were strongly represented at 26%.
Marylebone was the ‘hotspot’ during Q3 2021 with nearly 40% of enquiries for properties in this area. Tenants now prefer close access to green open spaces in addition to restaurants, shops and a short daily commute. Marylebone, with its central location, proximity to Royal Parks and thriving High Street delivers this balance.
One-bedroom properties were in particularly high demand during Q3 2021. Over 50% of enquiries were for these smaller apartments. This trend is a result of professionals returning to the city as offices re-open and a greater desire of tenants to have their own space. Properties with three or more bedrooms attracted the least interest.
Video viewings were heavily relied upon during the pandemic. Whilst useful for initial screening, there is no substitute for physically inspecting a property. As tenants returned to prime London the number of physical viewings conducted during Q3 2021 returned to pre-pandemic levels, 1.3% more than Q3 2019 and 184% higher than Q3 2020.
Agreed rents on re-lets in Q3 2021 continued to improve as the influx of tenants to prime London meant that prospective renters had less negotiating power. Changes in rent from preceding lease levels averaged 0.0%. However, whether landlords saw decreases or increases on rents generally depended on whether their previous lease had been agreed pre or during the pandemic.
Andrew Weir, CEO of London Central Portfolio, comments: "LCP reports significant improvements in the lettings market for prime London in Q3 2021. Increased void periods and reduced rental income plagued the market over the last 18 months due to the global pandemic.
"However, the recent positive results signal a turning point and the return of London as a global destination of choice for employment and education. LCP received nearly triple the number of enquiries for properties in its letting portfolio in Q3 2021 compared with the same quarter last year.
"Our lettings results demonstrate that when people are permitted to travel, London is high on their priority list. The City of London remains a huge draw for those within the financial industries, representing 41% of new tenants. Despite continued travel restrictions in South East Asia, HNW students still made up over a quarter of all new tenancies.
"The nature of a residential rental portfolio is that market changes take time to filter through, as existing tenancies run their natural course. During Q3 2021, rates significantly improved on all key metrics including rent levels agreed on both new tenancies and re-lets. Overall, we saw unprecedented demand for small one and two-bedroom apartments presented to a high standard and positioned within areas that offer a short walk to green open spaces, amenities and employment hubs."
