Rents in Prime London areas have been rising above inflation rates for the past 18 months, according to global real estate services provider Savills.
“After several years of steady, if unexciting growth, the prime central London market has experienced its most dramatic quarterly improvement for some years,” said Jane Ingram, Head of Lettings at Savills.
She noted that tenants are staying put, as “limited development supply and steady corporate demand are all squeezing prices.”
“Unless stock comes into the letting market from the sales market, these factors look likely to dominate for the remainder of the year.”
According to Savills, Prime London rates climbed 10 percent in the past 12 months, four percent above the 2007 peak.
Meanwhile, rents in the Prime Central London areas rose 7.5 percent from a year ago, lower than the annual growth rate in all Prime London average.
For the second quarter, rents in Prime Central London edged up 3.8 percent compared with 1.8 percent in all Prime London, suggesting that this area will fast regain its peak.
Prime Central London’s lower end market, which saw an average weekly rent of £1,250, rose four percent in Q2 and 6.4 percent above their peak, while rents of London’s ultra prime properties surged 3.6 percent in Q2 but remained eight percent below the peak.
“A number of different factors are now driving the market,” said Yolande Barnes, Head of Savills Residential Research. “A boost in demand from international and corporate tenants is driving values in central locations, but rental growth is underpinned by strong and growing demand from would-be buyers unable to access home ownership. Constrained stock levels are creating competition and an upward pressure on rents.”
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