Prime London Lettings Report: February 2021
Prime central London lettings index: 142.5
Prime outer London sales index: 151.8
2 minutes to read
To understand why rental values in prime London markets have fallen over the last year, the chart below encapsulates what is taking place.
Demand from international students and corporate tenants has fallen, which is underlined by the fact passenger numbers through Heathrow are down by between 80% and 90%.
Meanwhile, a high level of short-let properties transferring to the long-let market has driven supply higher, which explains why market valuation appraisals are up by two-thirds on last year. Successive lockdowns have forced owners of short-let Airbnb-type properties to change their strategy.
With a third national lockdown still in place, there has been no change to this status quo. However, there are early signs that the trend may only have a number of months left to run.
On the supply side, the UK government has said that “staycations” may be allowed from the middle of next month. This will eventually reduce the quantity of stock on the long-let market although there is a certain amount already in the system that will take a period of time to unwind as tenancy agreements expire.
While the timetable for the relaxation of quarantine rules for international arrivals is less clear, the pace of the UK’s vaccination programme is driving demand among international tenants.
“The picture we are getting is of increasing optimism for the spring and particularly the summer,” said John Humphris, head of relocation and corporate services at Knight Frank. “Many corporates have plans that were put on hold and they are now considering re-activating them, with the tech and media companies leading the way. There are some question marks over the impact of new Covid-19 variants but the success of the UK’s vaccine rollout has been a strong boost for sentiment in the rest of the world.”
Meanwhile, the number of tenancies started in the first two months of this year was 5% higher than last year as tenants take advantage of falling rents, a trend we have analysed in Canary Wharf and prime central London.