Article written and provided by Jo Eccles, Managing Director at Eccord, for Beacon Gainer, private wealth advisory services group.
There has been much speculation about the rental market over the past months. Whilst some tenants have left London to move back in with parents, move out for more space or return to home countries, many still remain.
Life still goes on and tenant (and buyer) demand in London continues to be driven by life events including couples moving in together, families expanding and needing more space, divorce, downsizing and – particularly at the super prime level – those needing a two or three year tenancy while they undertake large refurbishments of their own homes nearby. We have also rented to a number of tenants who have sold their existing home and are renting while they look to buy a new one.
At the lower end of the market (£550 – £750 p/week), many tenants are actively shopping around for a ‘sideways move’ where they can achieve bigger space or a better location for the same money they are currently paying. This part of the market has always been more price sensitive and transient, as moves are smaller with less upheaval.
The mid-market (£1,000 – £3,500 p/week) in prime central London e.g. Knightsbridge and Mayfair is less active. These areas are heavily dependent on international and discretionary tenants who simply aren’t in London at the moment.
Landlords in these locations and price bracket are having to accept heavy discounts of up to 15% – 20% in some cases to try to attract the thin supply of tenants. We do expect demand to return when international travel resumes, so are advising our landlords to accept reduced rents on a 6 – 12 month basis to ride out this period.
Where tenants are already in place, many are renewing but on a shorter term 6 – 8 month basis to give them flexibility. Landlords are accepting discounts to encourage existing tenants to renew, as this is typically more cost effective versus remarketing the property and facing a likely void period, reduced rent and the risk of an untried or tested new tenant.
The best in class family houses are still renting as there is little stock, but the emphasis is very much on ‘best in class’ – tenants are only being tempted by immaculate properties in the best locations.
At the super prime level (£10,000 p/w upwards), demand is being driven primarily by divorce and refurbishments. Our acquisition team recently found and secured a £40,000 per month house in Knightsbridge for a post-divorce private equity partner, and our property management team have just replaced a tenant in an £80,000 per month Belgravia house we manage where the new tenant is refurbishing their home nearby.
The two biggest impacts on rental market activity in London have been 1) the Brexit vote back in 2016 which promptly halted the majority of inbound corporate relocations and 2) Covid restrictions on international travel. As we emerge from both of these, we do expect the appeal of London as a destination to return for professionals, families and corporates.
We also believe that there will be a return to London offices and there are reports of a surge in demand from companies recruiting administrative staff, ahead of offices re-opening this summer.
With regards to the long-term appetite from landlords, many are sitting and waiting for the budget on 3rd March and any potential tax change announcements, before they reassess their yields and property holdings.
For 15 years Eccord have been trusted by private clients, family offices and international companies to provide residential property search, acquisition, relocation and management services. Our award-winning team since has successfully acquired 350 properties and manages a portfolio of more than £1.5bn of rental properties and private homes.
T: +44 (0)20 7244 4485
E: enquire@eccord.com
