London Central Portfolio witnessed a diverse tenant base in 2021, with 41% of new tenants from outside the EU and UK, in comparison to 22% in 2020. According to the LCP’s latest Prime London Letting Report, this demonstrates the enduring attraction of London as a global city as strict international travel restrictions ease. The percentage of tenants from the Asia-Pacific region nearly tripled, at 15% of all new tenancies for the year.
Marylebone saw a further increase in popularity in 2021 with over 30% of prospective tenants registering for properties in the area compared with 21% in 2020. Notting Hill also witnessed an increase in demand with applicants doubling to 14% in 2021. Growing demand for both areas reflect today’s tenants desire for a short commute, close proximity to the Royal Parks and a lively high street.
Agreed rents on new tenancies improved throughout 2021 due to increased demand and competition as tenants returned to prime London. Q4 2021 witnessed an average 11.07% increase on preceding lease levels, correcting the deep discounts that were granted during the same period in 2020.
Whether landlords saw increases on rents in 2021 generally depended on if their previous lease had been agreed pre or during the pandemic (March 2020). Average rents in 2021 were 7.57% higher than leases agreed between March to December 2020. However, they were 8.37% below rents agreed pre-pandemic i.e. prior to March 2020. By Q4 2021, data showed the first positive increase on leases agreed before the pandemic, at 2.48%.
As the UK entered another lockdown in Q1 2021, savvy tenants negotiated discounts on their renewals. However, increased demand throughout the whole of 2021 saw recovering rents and reduced discounts granted on renewals. For the first time since Q1 2020, landlords negotiated increases on renewals in Q4 2021, averaging 1.0%.
The time taken to let a vacant property has reduced significantly over the course of 2021. The average number of days a property stood vacant in Q4 2021 was 37.6, 49.2% less than the peak of 74.0 in Q4 2020, approaching the pre-pandemic average again of 27.3 days.
Andrew Weir, CEO of London Central Portfolio, said: “2021 proved to be a year of extremes within the prime London rental market. Uncertainty over lockdowns and travel restrictions caused cycles of reduced demand and oversupply followed by periods of the exact reverse. The prime London rental market has undoubtedly recovered significantly in the latter half of 2021. The late summer and autumn period witnessed what felt like two years’ worth of new tenants arriving at the same time.
“Our report illustrates a return towards a pre pandemic rental market. It is evident that London remains a key destination of choice for young people looking to further their education and careers. Prime London is well placed to meet the demands brought to the fore by the pandemic with a short commute to work, close proximity to a buzzing high street and access to outdoor park space being high on the priority list for this new generation of tenants. The activity witnessed during the latter part of 2021 indicates that 2022 could well see a return to the historic seasonality experienced in the central London rental market.”
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