OLYMPIC-SAVVY TENANTS OFFERING LONGER TERM CONTRACTS

Hurford Salvi Carr has seen a significant increase in the number of tenants offering to secure properties now for longer than the usual 12 month contract term. These offers are being made by foresighted tenants who are promoting themselves as a long term stable tenant for the landlord willing to pay a top market rent for up to three years at today’s strong and stable prices.

We are finding that the real reason tenants are willing to commit to such a lengthy period is because they wish to establish a security of tenure at a central London property not just now but also during next year’s Olympic Games. They fear they may be priced out of their rented home and forced to pay heavily premiumed short term accommodation rates if their landlord chooses a lucrative short term letting during the Games.

Some landlords are delighted to be offered such stability for their investment properties, particularly as rents have risen up to 20% in central London in the last 12 months according to our company research. Such a contract would safeguard the landlord’s income against any correction in the market place between now and 2014.

Other landlords are not convinced and are insisting on a shorter contract term which would allow them to get the property back in July 2012 if needed. The lure of a once in a life time premium rent from a supporter or corporate sponsor is too tempting to sign away.

Angela Kelly, Manager of Hurford Salvi Carr’s City Lettings office says. “Our advice to landlords is to keep your options open. You do not need to turn down that two year contract, but make sure you have a break clause so that you can review your options in the market place nearer the time. Not all landlords have the constitution for the level of risk involved in letting on a temporary basis and not all properties are suited to short lets. An unfurnished property will not attract a short term tenant unless some investment is made in furnishings and electrical goods. A tenant using a property on a temporary basis does not generally treat the property as they would their own home so that wear and tear is more significant. The actual premium achieved during the Games is yet to be seen, but we can learn from market trends in previous host cities.”

Demand during the Games is likely to extend to more than the immediate area around the Olympic Park for two reasons: one is that not all events will be in this location; the tennis will be played at Wimbledon, canoe slalom at Lee Valley Park in Hertfordshire and the Marathon shall finish at the Mall. The second reason is that visitors to the capital will want to experience London life when they are not watching the event.

Our advice to any landlord seeking a short term tenant does, however, carry a health warning. Landlords must expect an immediate drop in rents after the Games are over. An army of investment landlords who have waved goodbye to their short term tenants will be in the market again for a long term tenant immediately afterwards, effectively saturating the market with an oversupply of stock. This will result in a drop in long term rents as once homeless tenants find themselves with a wealth of choice on the market and the associated purchasing power that this brings.

Two examples of longer contract terms are a one bedroom flat on Hatton Garden, EC1 let for £430 per week, moments from Farringdon Station which is undergoing huge redevelopment. A three year contract has been agreed with a corporate tenant but the landlord has negotiated a break clause at 12 months. The second example is a two bedroom penthouse in Ironmonger Row, EC1 which has just recently been let for £500 per week. The tenants wanted a fixed contract term of 18 months but we have negotiated a 12 month mutual break clause in order to allow the landlord to serve notice on the tenant if desired just ahead of the Games.




For further information please contact Angela Kelly at Hurford Salvi Carr on 020 7490 1122 or angela.kelly@h-s-c.co.uk