The Prime Central London rental market saw modest growth and record tenancy lengths in the second quarter, as tenants opted to renew rather than risk re-entering a competitive market, according to new data from LCP Private Office.
Average agreed rents on re-lets in LCP’s portfolio rose by just 0.59% in Q2 – the lowest quarterly increase since a slight market dip in Q3 2024.
The figures align with broader market trends; Zoopla reported in June that UK rental growth has slowed to its lowest level in four years. Despite the recent cooling, average rents remain 26% higher than before the pandemic.
Renewals, however, continued to command more substantial increases. Rents agreed on renewed tenancies were up 5.64% in Q2 – broadly in line with the past two quarters.
CONTINUED UNDERSUPPLY
LCP attributed the difference to continued undersupply in Prime Central London, prompting tenants to pay above inflation to avoid the risks of moving in a competitive market.
Tenants are also staying longer. The average tenancy in the year to date has reached 36.4 months – more than double the 2015 average of 16.7 months and the longest duration recorded by the agency to date.
Liam Monaghan, Managing Director at LCP Private Office, says: “Rental values on re-lets have continued to stabilise over Q2, following the downward trajectory of rents since the post-pandemic spike.
“Landlords are continuing to benefit from more favourable rent increases on renewals, as tenants are willing to pay more to stay put, rather than risking re-entering the competitive rental market.”
CHANGING TENANT DEMOGRAPHICS
Letting times also held steady. The average time to secure a tenant for a vacant property dropped slightly from Q1 to 24.82 days – still below the 28-day pre-Covid average, although longer than in the demand-driven 2022–23 period.
The agency also saw a shift in tenant demographics in Q2. Renters from the Asia-Pacific region accounted for 32% of new lets, up from just 7% in Q1, reflecting the seasonal return of high-net-worth students and young professionals to Central London.
UK and EU tenants each made up 24%, with European representation falling 23% quarter-on-quarter.
Professionals in finance and professional services made up a larger share of tenants in Q2, with finance rising to 20% (from 12% in Q1) and professional services up 14%.
The proportion of tech and creative sector tenants remained flat. LCP expects student demand to rise further in Q3 as the academic year approaches.
RENTERS’ RIGHTS BILL WARNING
Looking ahead, Monaghan warns that regulatory uncertainty remains a concern for landlords.
“The Renters’ Rights Bill is facing further delays in the parliamentary process and is not expected to become law until autumn at the earliest,” he says.
“Naturally, some landlords have concerns and are keen to understand exactly what action needs to be taken to remain compliant before the Bill comes into effect.”
