rental market

Residential rents in Midtown, City and Docklands began to fall at the end of 2007, initially in response to the increased supply of rental units and more recently, in addition to supply side factors, as a reaction to the fragility of the London labour market. While the sales market may have turned a corner in the first half of 2009, there was no such respite for the rental market – not at least in terms of rental levels.





The rental market has become highly competitive across central London in response to the supply and demand balance increasingly favouring the tenant. In effect, there has been a contraction in the demand side London-wide and that has put pressure on prices in all markets. Tenants have been the winners, with some in the position
to trade up, in terms of location and/or quality of unit. Midtown, City and Docklands has actually benefited from this process, drawing in tenants from other less favoured locations in its penumbra.





Landlords are accepting rents below their initial asking rents in order to reduce voids. In some cases landlords’ own financing costs have been reduced along with the Official Bank Rate, softening the impact of reduced rents and encouraging landlords to accept lower offers. When renewing their leases, some tenants have asked for break
clauses to be included in new tenancies, to allow greater flexibility to move quickly if they are able to secure a purchase.






As a result, rents fell by 7% on average across Midtown, City and Docklands in the first half of 2009. This was in addition to a reduction of 9% in 2008 (Figure 3). Hence, rent levels at the end of the first half of 2009 were at 84% of the December 2007 peak. In terms of rental income landlords might expect to achieve, the typical weekly rent for a two-bedroom flat has fallen from £505 per week to £430 per week
over 18 months to the end of June 2009, while for a one-bedroom flat weekly rents have fallen from £385 to £325 per week.