A new London Central Portfolio (LCP) report reflecting on rental trends in 2020 reveals that almost 50% of new tenants in prime London locations were from the European Union. .
Number of new tenants by region in 2020 (%)
LCP data has outlined the home base of new tenants moving into London real estate in 2020. Travel restrictions during the pandemic have reduced the proportion of tenants from the Middle East and Asia Pacific, with the largest share of new tenants coming from the EU. The high proportion of UK tenants highlights the increasing affordability of rent in prime London locations and the growing desire to live in central London.
Number of new tenants by country in EU 27 (%)
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This data was also used to match new tenancies in 2020 from the 27 EU countries. Italians and French made up the largest proportion of new EU tenants in LCP’s portfolio this year, at 26.8% and 19.5% respectively. Despite the disruption caused by Brexit and the pandemic, the desire to live in London appears to be as strong as ever, as the city continues to assert itself as a hub of employment and culture.
Average vacancy period between tenants (days)
The average length of vacancy between tenants in 2020 fluctuated throughout the year, peaking at an average of 76.8 days in the final month of the year. Inventory that was not released during the “traditionally strong” period of September due to the pandemic remained available through the winter, and vacancy periods increased in the fourth quarter. Longer vacancy periods may also reflect increased sanitation efforts on the part of landlords, who are advised to deep clean their properties weekly and between tenants, ensuring that properties are properly disinfected. The vacancy period has been extended to allow sufficient time to confirm the availability.
Average length of stay (months)
The average length of tenancy increased throughout 2020 as tenants were less likely to relocate during the pandemic. During the spring lockdown, the UK government advised people not to move because of the increased risk of spreading the coronavirus while traveling. Average tenancy length also remained “strong” in 2020, as “the high quality and renovations of LCP’s rental properties encouraged tenant retention.”
New tenant profiles, 2020 and 2019
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New residents in 2020 were overwhelmingly young, between the ages of 18 and 29, with 90% of all residents under the age of 40. The data confirms the continued trend of young people heading towards capital cities in search of employment opportunities, and perhaps similar trends as well. This reflects the increasing number of elderly people and families choosing to move away from urban centers to minimize the risk of infection during the pandemic.
New tenants, past and 2020
In spring 2020, the number of new tenants was lower than the historical average due to the pandemic, but there was a temporary recovery when the real estate market reopened in early summer. After that, growth slowed in September due to a decrease in the number of international students.
Andrew Weir, CEO of LCP, commented on the market trends in 2020:
“Despite the pressures of the global pandemic and Brexit negotiations, London remained attractive to EU nationals, who accounted for 43% of new tenants. Italy and France led the way with 46.3% of these tenants. The majority of UK tenants (35%) were attracted by the widely advertised rent reductions as landlords took advantage of the lack of overseas demand and competed within the depleted tenant pool. Moved to London.
“The impact of travel restrictions on a market that relies primarily on international students and young professionals has resulted in reduced demand, overstocks and extended gaps. New tenants remain in place with significant value. In the days when they were able to bargain, they have generally been reluctant to pay reasonable rents. This highlights the importance of tenant retention during times of intense stress. The strength of our contracts for tenants within LCP’s managed portfolio resulted in zero defaults in 2020.
“Looking to the future, landlords and rental investors believe that once vaccines are rolled out and travel restrictions are lifted, London will once again see an influx of overseas tenants waiting to continue living in the metropolis. You should be relieved that that’s what you missed out on last year. ”
