Rental demand in the UK is being reshaped significantly by several emerging long term trends arising from Covid-19. The ongoing effects of the pandemic, after three lockdowns in 2020, have altered the equilibrium state of lettings behaviour as tenants continue to expand housing criteria in the face of systemic changes to the property market. On the one hand, the rise of London’s outer boroughs and commuter towns relative to inner boroughs has been spurred by a reconfiguration of housing priorities by consumers: greenery, outdoor and working space have factored highly here. On the other hand, investment in Placemaking, responsiveness to buyer needs, plus progress on sustainability and wellness principles, is enabling quality developments to attract house buyers and tenants who initially moved further out from central hubs to new environments.
Government figures show that over 18 million people in the UK have received a Covid-19 vaccine dose, a third of UK adults, and more than half of UK employers are planning to recruit staff in the next three months. This impetus has galvanised both buyers and tenants into action, with opportunists taking advantage of recent rental falls in central London whilst commuter belt growth expands. Although average rents in prime central London fell 13 per cent between 2020 and January 2021, the number of tenancies starting last month was 19 per cent ahead of London’s five-year averages, according to Knight Frank. This is a continuation of momentum which saw the average house rented 30 per cent faster in the fourth quarter of 2020 than a year prior, according to Zoopla.
This buoyant rental market is being capitalised by savvy buyers recognising the potential for investment in quality developments to attract tenants. Developers are focusing on the Placemaking strategy by incorporating social and environmental principles, health and wellbeing facilities, as well as having excellent connectivity. Such developments are poised to capture significant capital gains over the medium and long term whilst maintaining healthy yields. Savills’ World Cities Prime Residential Index recorded an average capital value increase of 0.8 per cent for 2020 despite difficult conditions and predicts 1.6 per cent growth for 2021. Even as prime rents fell 1 per cent in 2020 on average across the index, yields held steady at 3.1 per cent slightly down from 3.2 per cent in 2019, demonstrating substantial resilience.
Placemaking, as described by Savills, is the art of creating a distinctive sense of place to capture people to a location and to ensure their repeated return. A multi-faceted planning approach to design and manage public spaces, it takes into account the local community’s assets to create public spaces that promote people’s well being.