Luxury rentals boom in Central London
Mon 05 Jul 2010
Luxury rentals are seeing a boom in Central London despite the uncertainty and challenges faced by the economy. Over the past two months, the volume of properties being let at rents over 1,000 per week has risen by 53% on the same period last year. The summer months, being the time of year when most families relocating to London will choose to move, are traditionally always the prime market for high-end rental properties, however, this year has seen a notable increase in not only the volume of prospective tenants registering to rent at the top end, but also the budgets they are looking to spend on their accommodation. Indeed we have seen an increase of 17% in the average budget at the top end of the market (1,000 per week and above) compared to this time last year.The profiles of tenants renting these luxury properties remain diverse; though as we might expect, the majority are still corporate tenancies rather than private individuals. Londons traditional strengths of Banking and Legal are once again expanding operations and although recruitment in other fields remains weak, treating key employees well is an important means of ensuring a productive, incentivised workforce; as such accommodation has again become high on the priority list as a part of employee benefit schemes. Indeed, over the past two months we have seen high-end relocation requirements from a variety of industries and sectors including oil, fashion, medicine & IT, as well as a number of embassies. A recent luxury apartment in Knightsbridge was successfully let for two years straight at 3,800 per week to a large computer games company relocating a family into London, whilst another traditional family house on Moore Street in Chelsea secured the director of an American bank as a tenant, achieving an impressive 2,900 per week in rent. Some luxury properties have seen a substantial increase in the rents they achieved last year; a beautiful family house in Holland Park let at 2,950 per week last year was successfully let recently at 3,250 per week to a private individual working in the banking sector. Despite the uncertainty in the economy, the length of time to which tenants at the top end of the market are willing to commit also seems to be increasing, with the average initial term of the tenancy having increased to 20 months compared with 17 months in 2009. Over the first half of this year, many existing tenants have been forced to move as their landlords have chosen to terminate the tenancy in favour of putting the property onto the improving sales market or remarketing due to the fact that it had been underlet the previous year in a less active market. This has meant that the value of securing long-term tenancies appears to have been felt across all levels of the lettings market. Interestingly, luxury short lets are also seeing a market renaissance with some recent tenants paying up to 10,000 per week for the convenience of renting high-spec properties in the most desirable addresses for shorter periods of time.
Investment into buy-to-let property has fallen significantly over the past two years as access to mortgages for investment property has remained difficult to obtain. However, with such increased activity in corporate relocation at the top end of the market, as well as the continued strong demand from would-be first time buyers in the lower and mid-market, it seems likely that confidence amongst the landlord community will continue to grow and if finance availability starts to improve, we could see a welcome resurgence of new buy-to-let landlords into the lettings market.