However, these are not normal times and the rental market as a whole in the capital has taken a kicking as it attempts, like we all have, to adapt to the pandemic.
The latest report from London Central Portfolio analyses the performance of rental units in LCP’s managed portfolio in prime London.
New tenants in 2020 by region (%)
Travel restrictions resulted in a smaller proportion of new tenants arriving from the Middle East and Asia-Pacific. The EU represented the largest share of new tenancies. The high proportion of UK tenants highlights the increasing affordability of prime London rents and a desire to live in Central London.
New tenancies by country in EU 27 (%)
Italian and French nationals represented the largest proportion of new EU tenancies in LCP’s portfolio for the year, at 26.8% and 19.5% respectively. Despite the pandemic and uncertainty over Brexit, London is still viewed as a global city of choice, an employment and cultural hub.
Avg vacant period between tenancies (days)
The time taken to let a vacant property increased in Q4 reaching a new peak of 76.8 days. Stock not let in the traditionally buoyant September, due to Covid-19, remained available in the winter months increasing vacancy periods in Q4.
Avg length of tenancy (months)
Average length of tenancies increased as tenants were less inclined to move during the pandemic. They also remained "sticky" due to the high quality of LCP's rental properties and refurbishments encouraging tenants to stay put.
Achieved annual rents per square foot (£)
Rents achieved in 2020 were 10.4% below the 6-year average. This was a result of reduced demand from overseas tenants unable to enter the UK and an increase in available stock coming across from the short-term let market.
Profile of new tenants, 2020 vs 2019
In line with previous years, the majority of new tenants in 2020 were under the age of 30. 90% of tenants were under the age of 40 compared with 82% in 2019, illustrating a continuing trend of young adults heading to the capital.
Avg change in agreed rents on renewals (%)
Historically, tenancy renewals are subject to yearly rental increases. In 2020, LCP focussed on retaining tenants in a challenging environment thus preventing void periods. On average, rents dropped by just 1% on renewals compared with a 11.48% reduction in rents on new tenancies.
New tenancies, historic vs 2020
Spring 2020 saw fewer new tenancies than the historical average due to the impact of the pandemic. There was a brief recovery once the property market reopened in early summer but this was followed by a slower September due to the fall in overseas students.
Andrew Weir, CEO of LCP, comments: "Notwithstanding the pressures of a global pandemic and Brexit negotiations, London remained attractive to EU nationals who made up 43% of new tenancies. Italy and France led the way representing 46.3% of these tenancies. Happy to capitalise on the lack of overseas demand, a large proportion of UK tenants (35%) moved to prime London attracted by widely advertised rent reductions, as landlords competed within a depleted pool of tenants.
"The impact of travel restrictions, on a market predominantly reliant on overseas students and young professionals, has been reduced demand, surplus of stock and longer void periods. Existing tenants have stayed in situ where the property is of a high standard and diligently managed. They have broadly been comfortable with paying passing rents during a time when new tenants have been able to negotiate significant discounts. This highlights the importance of tenant retention during periods of increased competition where prime London in 2020 was labelled as a renter's market. The strength of covenant for those tenants within LCP's managed portfolio has resulted in zero defaults in 2020.
"Looking to the future, landlords and buy-to-let investors should take reassurance that once the vaccine has rolled out and travel restrictions are lifted, London will again experience an influx of overseas tenants waiting in the wings to continue their metropolitan life that they have missed over the last year."
