With many students actively searching in the capital, others are happy to agree on a tenancy quickly based on a video call, compared to the higher levels of paperwork, due diligence and rigidity around cost faced by companies looking to relocate staff.
There was only ever going to be one winner in this particular race.
John Humphris, head of relocation and corporate services at Knight Frank, says: “Companies are often left feeling frustrated because they are a step behind students, who are able to take tenancies much more quickly. The situation has become more acute as corporate demand has returned to its pre-pandemic level.”
This particular milestone was reached in September, as the below chart shows. Corporate enquiries come from companies of all sizes looking to relocate staff to the UK across a range of sectors including finance, tech and energy and the recent uptick is largely due to the relaxation of international travel rules in the UK. It means companies are having to widen search areas, look at alternative accommodation or, in some cases, delay moves until next year, according to Sacha Hawkins, head of the relocation agent team and diplomatic desk at Knight Frank.
Sacha adds: “Tenants who were previously looking in Marylebone are now searching in areas slightly further out like Belsize Park. The requirement for a walk to work has become a walk to a tube station.”
Apartments to rent around London’s two main financial districts are in even tighter supply, a trend we have previously explored. It is all happening against the backdrop of high levels of activity in the London lettings market. The number of tenancies started in September was the highest figure in ten years. Meanwhile, the number of market evaluation appraisals, a leading indicator of supply, has fallen by a quarter since the start of this year.
Supply has dropped as the flow of short-let properties onto the long-let market has dried up as staycation rules have been relaxed. In other cases, would-be landlords sold to capitalise on surging demand in the sales market due to the stamp duty holiday.
The result has been to push rental values higher. Average rental values rose on a quarterly basis by the largest amount in a decade in prime central (+2.8%) and prime outer London (+2.6%) in September. In addition to widening search areas, companies are having to put workers in serviced apartments on a short-let basis as a temporary fix. Such accommodation has a premium of around 50% compared to the long-let market, says Sacha.
Sacha explains: “Companies are not generally willing to get into a bidding war for a property, even if they need to find a short-let that is at a higher price on a temporary basis. Alternatively, workers are moving into hotels, many of which have their own corporate rates.”
Things may get easier for companies over the next several months as student demand recedes.
John says: “There will be a slowdown between now and January as the Universities are up and running. There is a window of opportunity for companies to act.”
He adds that the imbalance presents developers with an opportunity: “We might see more new-build stock pivot towards the lettings market to meet such strong demand.”, he concludes.
