"London is still seen as a premier location to send staff. There is a critical mass of talent already here that pulls people in, as well as the appeal of the language and time zone"
- John Humphris - Knight Frank
The UK remains an attractive destination for overseas workers despite a recent bout of disappointing economic news.
GDP, retail sales and employment data have all fallen short of expectations in recent weeks, and the latest GfK sentiment survey essentially suggested some consumers are adopting the brace position ahead of the autumn Budget.
However, despite the uncertain backdrop, demand from the corporate relocation sector in London and the surrounding area has held firm.
The number of enquiries in the first seven months of this year from companies looking to send staff to the UK was 8.5% higher than the same period last year, Knight Frank data shows.
Corporate relocations to the UK are typically from the energy, finance, professional services, legal and tech sectors.
Tenant demand will have been helped by the fact that tech giants, including Meta, Apple, and Amazon, recently posted strong financial results for reasons that include previous cost-cutting measures and the AI boom.
Meanwhile, in the legal sector, a number of US law firms have expanded their London presence as a strategic European hub for mergers and acquisitions activity.
“London is still seen as a premier location to send staff,” said John Humphris, head of relocation and corporate services at Knight Frank. “There is a critical mass of talent already here that pulls people in, as well as the appeal of the language and time zone.”
The rental market will also be supported by growing demand from international students, according to UCAS figures. There was a 2.2% increase in the number of overseas students in the last 12 months, it reported. The largest group is from China (10% increase) and the US (+14%).
Meanwhile, demand hasn’t been particularly dented by new rules for non-doms, which are “not particularly relevant” for the corporate relocation market, according to John.
A more pressing issue for all tenants is that rental value growth is starting to rise again, primarily due to tighter supply.
Average rents in prime central London rose 1.7% in the year to July, which was the strongest increase in a year. In prime outer London, a rise of 1.8% was the strongest since last October.
More landlords are exploring a sale due to the tougher regulatory environment. In addition to the prospect of stricter energy efficiency rules, the Renters' Rights Bill could make it more onerous to regain possession of a property and raise the risk of void periods.
The number of new lettings instructions in the year to July was 9% lower than the previous 12-month period in London, Knight Frank data shows.
Not all landlords are achieving their desired asking price, which means some are currently bouncing between the lettings and sales markets, as we explored here.
However, healthy demand and tighter supply mean we expect rental value growth to keep climbing through the rest of this year.
