In March 2012 Savills and Rightmove jointly prepared a comprehensive review of the prospects for the private rental sector titled Rental Britain. This explored the historic and prospective growth of the sector, rents and their affordability and the need for investment. It also looked at the profile of the prime market.

Prime family rental markets are largely confined to London and the South East and in just 14% of all local authorities rents for properties with four or more bedrooms average more than £24,000 per annum (£2,000 per calendar month).

All are located in London or its immediate commuting hinterland, with the exception of Poole, Castle Morpeth and the high value Cheshire markets (within the local authority of Macclesfield).

Prime Central London rental levels reflect the dominance of tenants employed in the financial and business services sector and demand from international tenants (some 45% of demand is from North American and Western Europe tenants), and are of a different order compared to the rest of the market.

Average asking rents for properties of four or more bedrooms in the Central London boroughs of Kensington and Chelsea and Westminster average £130,200 (£10,850 pcm) and £118,500 (£9,875 pcm) per annum respectively. In neighbouring boroughs of Camden and Hammersmith and Fulham, where the tenant base is more diverse, equivalent figures would be £73,000 (£6,080 pcm) and £64,300 per annum (£5,360 pcm).

Outside of London, the highest value prime market is Elmbridge, in suburban Surrey, where the average annual rent for a property of four or more bedrooms is £58,300 (£4,850 pcm).

These average rental figures give a hint as to the variation between property types and location. Increasingly, those rents are being looked at on a £ per sq ft basis in a similar manner to the sales market.

Our research suggests that across Central London prime residential rents average just over £60 per sq ft. This is just 23% below the average rent for prime offices in the West End at £78 per sq ft.

However, the average residential figure varies significantly from £91 per sq ft in the top 25% to £41 per sq ft in the bottom 25%. In part that reflects a premium for scale, with properties in the top quartile some 92% bigger than those in the bottom quartile.

These higher rental values for larger houses, together with the uplift in capital values from putting such properties into residential use, have underpinned the conversion of such buildings back to residential use.

Taken from
Spotlight: Prime Rental Markets Q2 2012