The second half of 2009 saw the balance of power between landlords and tenants in tenancy negotiations tip marginally towards the landlord for the first time in 18
months. Throughout 2008 and the first half of 2009 tenants had been able to negotiate lower rents due to the imbalance between supply and demand, as sellers became “accidental landlords” and developers opted for the London rental market when unable to secure sales due to the lack of mortgage finance. In the second half of 2009, however, supply became more restricted and it was no longer possible for tenants to secure better terms, either on new leases or renewals.
There were a number of inter-related factors behind this change:
• Increased demand for rental property, reflecting in turn an improvement in the central London employment market in the second half of 2009.
• Relocation agents representing corporate tenants became more active.
• Enhanced demand from students at the start of the new educational year in September 2009, when demand for rental property reaches its annual peak.
• A higher rate of renewals in situ which reduced the level of remarketing of rental stock.
There was limited evidence that “accidental landlords” were withdrawing from the rental market to place their property on the sales market in the light of improved confidence and higher prices.
As a result of this shifting balance, residential rents in Midtown, City and Docklands increased by 5% in the second half of 2009 (Figure 3). The typical rent for a two bedroom flat increased by £20 per week to £450 per week and for a one bedroom flat by £15 per week to £340 per week. It is notable, however, that the pressure for rental increases was concentrated in the 3rd Quarter from July to September and that the market stabilised once more in the 4th Quarter. In spite of increases, the rental option continues to offer very good value to tenants, especially in new major developments near Canary Wharf such as Pan Peninsula and The Landmark with very high quality finishes and where there are additional amenities and facilities on site. In December 2009 we were marketing one bedroom flats in these new developments from £325 per week.