London’s serviced apartments market is thriving, with 8,000 apartments now in the centre of the capital. Rents have grown by 25 per cent in the space of just one year, now averaging £1,214 per week, new research from CBRE shows. Rents for a three bedroom apartment in Kensington & Chelsea are as high as £2,959 per week.
Most serviced apartments are concentrated in the West End, the City and Canary Wharf, although new schemes are emerging as far afield as Ilford. Demand for this type of accommodation is usually driven by either leisure or corporate needs. Occupancy rates of serviced apartments have soared to 90 per cent, which is higher than average overall occupancy rates and shows the strength in demand for this type of residency.
London’s serviced apartment market is small in comparison with its global counterparts, but has been growing steadily since 2008. Brits are quickly developing a taste for the serviced apartment lifestyle, as domestic demand is higher here than anywhere else in Europe, with over a third of tenants coming from within the UK.
Jennet Siebrits, Head of Residential Research at CBRE, comments:
“Preferences are changing for tenants, travellers and workers alike, as more look for a home from home rather than a luxury hotel. Factors such as more space, self-catering and lower rates than hotels are playing a large part in the boom of the serviced apartment market in London. It is fast becoming a preferred option for investors too, as rents and yields for well-located developments have performed well over 2012. Our research suggests Canary Wharf remains a strong investment opportunity, with yields in excess of seven per cent expected for 2013.
“There is a large shortfall in the overnight accommodation sector. As rents continue to increase, there is further economic preference by operators to offer units as serviced apartments over hotel accommodation, as operational costs are lower and returns are subsequently higher. This suggests a huge potential for growth and we expect to see an even larger demand for buildings, sites and operations from local and international operators.”
