Samir Salya discusses the rise of micro-apartments in London

Proving that the old adage ‘location, location, location’ is still the over riding factor for property buyers, tenants in London are turning more to micro-apartments. Research shows that the market in prime central London is experiencing an increased demand for tiny apartments as long as they are in the correct location. The research was analysed by London Central Portfolio (LCP) and found that smaller is fine with tenants who want to be central and near their job or university.

Rental market fragmenting

The real estate sales market is increasingly fragmenting and luxury properties are suffering. This is a clear reaction to the instability brought on by changes in tax and the ongoing uncertainty surrounding Brexit. In a similar way, the rental market is fragmenting by size and price.

During the last year, around 42% of the properties let in central London have been either one-bedroom apartments or studios. These stats show that tenants are prioritising transport links and lifestyle over size of property units.

Families moving out of the centre

Demand is slower in central London for large rental properties. This suggests that families are increasingly considering options that aren’t central, and therefore offer better value and more space.

The Chief Executive Officer at LCP says: “From a rental market perspective, a dynamic which was notable during the credit crunch is again apparent as corporates cut their housing budgets. Tenants are now looking for more affordable options, choosing central locations and an easy commute.”

Global trend

This shift is a reinforcement of the burgeoning trend for a certain type of buyer to look out for high spec micro-apartments. They are particularly concerned with intelligently optimised space. Families are tending to move out more to the suburbs, as they can expect to find larger homes and possibly outside space.

All of the rental sectors in the central London have seen an increase in rent discounts due to landlord uncertainty and too much stock, this is notably lower when it comes to smaller units. While studio and one-bedroom units have rental discounts between 5.2 and 6.2%, larger properties have discounts of up to 11.2%.

Easier to find

Micro-apartments are also easier to find for tenants. It takes around 42% longer on average to market a three-bed house than a studio unit. Newly refurbished one bed units are showing the strongest rental increases, and are now posting rents that go above the five-yearly projection. The average rent increase for high end, newly refurbed, small units has increased by 6.9% when compared with a 1.9% for old stock.

So, while tenants are clearly looking for smaller units, they also want affordable prices and high-quality properties. Amenities and transport links need to be on their doorstep and matter much more than square footage.

About Samir Salya

Samir Salya is the Chairman of Reign Holdings, and is involved in UK and UAE real estate and construction. Samir holds over 20 years’ experience in executive management, business expansion, performance improvement, sales and marketing