New lease of life: how the Life Science Industry can rejuvenate the London rental market
The London rental market continues to be a challenging environment for landlords. Rental values have reduced by 10%-15%, since Coronavirus hit the headlines in March 2020.
At Fisks London we have not seen an exodus of tenants to the countryside as has been widely reported in the press, so why have rental values fallen?
Due to concerns over the virus there is general lack of enthusiasm among existing tenants to enter the market in order to ‘trade up’ and secure alternative rental property. Therefore there is very little churn in tenancies and consequently our renewal rates are nearing 100%.
Enquiry rates from new rental applicants entering the market have also significantly reduced due to the high numbers of Canary Wharf and City employed professionals working from home, and there are very few enquiries from overseas applicants.
This significant reduction in demand has coincided with an oversupply of property. The immense new-build pipeline in Canary Wharf and its environs, much of which has been purchased for buy-to-let purposes started to complete in early 2020 and new homes continue to enter the rental market. In addition the Airbnb and serviced apartments, markets have all but evaporated, and consequently, landlords who had operated in those markets are now also competing for private tenants under cover of an Assured Shorthold Tenancy.
Reasons for optimism
Despite the challenges, the Canary Wharf rental market has continued to function well, and Fisks London have agreed rental deals every month since April 2020. In fact our transaction levels are only slightly less than in 2019.
The reduced rental values have enticed applicants who have wanted to reside in Canary Wharf but previously had not been able to afford it, this underlines the appeal of Canary Wharf as a City within a City and as the area continues to evolve it is increasingly able to entice applicants away from the traditional London Villages and High Streets.
How the life science industry can help
Aside from the provision of Covid vaccines, the Life Sciences industry could have a direct influence in the increase of rental demand in London and Canary Wharf.
In 2020 life sciences-related firms headquartered in London raised over £2.89bn of capital, 7% more than the Capital raised in 2019.
The demand for space in London from Life Science businesses and the capital invested into them endorses the view that it may prove to be one of the more resilient sectors.
London has four life science-focused clusters emerging: White City, Elephant and Castle, Southbank and Whitechapel, each forming around a research-focused university, hospital or institute, due to the new discoveries being made in these institutions. With exception of the White City development, the other three clusters are all only a short commute to Canary Wharf. Staying in London and close by their institutions enables these firms to be in the best position to recruit the top talent, as well as allowing access to London’s vast financial sector for funding.
“What life sciences has got over other sectors is that it requires physical facilities. From a property point of view, it’s going to be quite resilient to the changes being brought about by Covid”
Sven Bunn of the Barts Sciences Programme Director, Whitechapel.
To paraphrase, people employed in life sciences cannot work from home, they need to live close to the laboratories.
Although the life sciences are unlikely to rival the capitals vast financial services sector any time soon, the influx of employees (typically younger people who will choose to rent) will certainly increase demand within the private rented sector.