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Rent inflation at the highest level for 14 years, says Zoopla

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Tenants are under increasing financial strain as new figures show average asking rents have jumped to almost £1,000 a year.

Zoopla found that average asking rents now stand at £995 a month, up £88 a month compared to the start of the pandemic.

But the average rent in London is £1,698, up £73 since the start of the pandemic, more than two years ago. It equates to £20,376 for a year’s tenancy.

It is an increase of 11 per cent, the highest rate of growth in 14 years – and represents a strong bounce back from last year when average rents were down by more than 1 per cent.

The average rent in London is £1,698 a month - and this two-bed flat in North West London is for rent for just under that amount at £1,500 a month via New Circle Estate lettings agents

The average rent in London is £1,698 a month – and this two-bed flat in North West London is for rent for just under that amount at £1,500 a month via New Circle Estate lettings agents

The rise has led to a significant increase in the proportion of gross income spent on rent.

This is particularly the case in London where it has risen to a significant 52 per cent for a single earner, a level not seen since March 2020.

It falls to 26 per cent for sharers and means that a new let agreed for an average rent in London will cost more than £20,000 in rent during the next 12 months.

It is evidence of increasing pressure on tenants who are already dealing with the backdrop of the cost of living crisis.

The average rent in Britain now accounts for more than a third of gross income, at 37 per cent, for a single earner.

Around a third of renters live alone, according to the English Housing Survey.

RENTAL GROWTH SINCE MARCH 2020 AS PERCENTAGE OF AVERAGE EARNINGS
avg monthly rent increase
since Mar 2020
as % of avg
monthly earnings
S West £127 5%
Wales £93 4%
E Mids £93 4%
N West £82 3%
Y & H £81 3%
Eastern £95 4%
S East £98 3%
W Mids £78 3%
N East £65 3%
London £73 2%
Scotland £41 2%
UK £88 3%
Source: Zoopla             

There has also been a strong bounce back in rental growth in London from falls of 10 per cent seen last year.

Average annual rental growth in the Capital rose to 15 per cent at the end of the first three months of this year, driven by demand for flats from students, office workers and international demand.

Demand for rental property continues to outpace supply across the country, according to Zoopla.

This is pushing up rents, although the rate of rental growth will slow through the second half of the year, the property website added.

More affordable rents are available in Great Yarmouth, where this two-bed terrace house is for rent for £600 a month via Your Move lettings agents

More affordable rents are available in Great Yarmouth, where this two-bed terrace house is for rent for £600 a month via Your Move lettings agents 

With tenants facing increased pressure on their disposable income, there has been a marked increase in tenants deciding to stay in their rental property for longer.

Typically tenants are staying in their rental properties for an extra five months compared to five years ago, with the average tenancy length up to 75 weeks, from 51 weeks at the start of 2017.

This trend has extended beyond lockdowns when the ability to move was hampered, and Zoopla suggested this indicates that landlords with existing tenants may not be raising rents at the same rate as rental growth.

Rental demand is strongest in Scotland, Wales and London, with demand levels more than 65 per cent above the five-year average.

London’s market is also one of the most constrained when it comes to stock levels, with homes available to rent at just over half the 5-year average, creating the conditions for the sharp rises in rents.

Some parts of Somerset offer more affordable rents, with this two-bed terrace house in Martock for rent for £795 a month via Martin & Co lettings agents

Some parts of Somerset offer more affordable rents, with this two-bed terrace house in Martock for rent for £795 a month via Martin & Co lettings agents

The rental market remains highly localised, with the most affordable rental markets for dual earners located in more rural areas.

These include Great Yarmouth in the East of England, South Somerset in the South West and North East Lincolnshire in Yorkshire & the Humber.

In these markets, average rents account for up to 15 per cent of joint gross income.

In London, Bromley is the most affordable rental market, where average rents account for 19 per cent of joint gross income.

In the North West, Copeland, a local authority on the edge of the Lake District, encompassing the towns of Whitehaven and Cleator Moor is the most affordable rental market.

Gráinne Gilmore, of Zoopla, said: ‘Rental growth is being driven by high rental demand and limited supply, trends that are more pronounced in city centres.

‘The surge of post-pandemic pent-up rental demand will normalise through the coming months however, which means rental growth levels will start to ease.

‘Affordability considerations will also start to put a limit on further rental growth although this may occur at different times depending on location.

‘Rents are likely to continue rising for longer in areas that have the most constrained stock levels – currently London, Scotland and the South West.’

Gareth Atkins, of Foxtons, said: ‘The tenancy renewal numbers we have seen so far in 2022 are unprecedented.

‘Steadily increasing demand, severely limited stock and a swift rise in rental prices are all compelling reasons to renew – and renters are responding.

‘We have seen a 29 per cent rise in renewals year-on-year verses 2021. Renters are also choosing longer tenancies to avoid a market in flux; our deal length for renewals has gone up 9 per cent in 2022, reaching an average tenancy of 15.7 months.’

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Verdion starts on logistics development in Nettetal (DE)

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Verdion has started the development of a new €30m logistics facility on the outskirts of Nettetal near the German-Dutch border and Rhine-Ruhr metropolitan region. The speculative project is part of the value-add strategy of the Verdion European Logistics Fund (VELF) 1, which invests in last-mile logistics and value-add assets in northern and central Europe.

 

On completion in Q2 2023, the new facility at Herrenpfad-Sud 40 will offer 21,560m² of Grade A logistics space in up to four units, with 18,575m² of warehousing with 20 loading bays as well as 950m² of office and mezzanine space.

 

Verdion is targeting a DGNB Gold sustainability certificate for the highly energy-efficient building, which will not be using fossil fuels as a primary energy source and provides charging points for electric vehicles and cycle parking for a carbon-neutral commute. Additionally, the roof and electrical infrastructure will be prepared for solar energy generation. The site itself is located in the established Herrenpfad Sud industrial estate in Nettetal between Monchengladbach and Venlo, directly on the German-Dutch border and within striking distance of Germany’s largest conurbation, the Rhine-Ruhr metropolitan region.

 

Florian Stobe, Head of Investment – Germany at Verdion, said: “Within the framework of Verdion’s sustainability strategy, we determined that rather than modernising and extending the existing building as originally planned, a full-scale redevelopment would better serve this market and meet the fund’s ESG standards. We are already seeing a great deal of interest in the new space, based on its strategic location and the strength of demand for last-mile distribution space for customers in the Rhine-Ruhr metropolitan region. With this strategy in Nettetal and other assets in the VELF 1 fund coming forward, we are creating value at the same time as providing new space in undersupplied markets.”

 

 

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LaSalle and Accumulata to develop Munich’s first hybrid timber office building (GB)

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LaSalle Investment Management, acting in collaboration with ACCUMULATA Real Estate Group, will develop Munich’s first hybrid timber office building. The building is being constructed on behalf of Encore+, LaSalle’s flagship pan-European fund. Situated on Elsenheimerstrasse in the city’s Westend district, the office building will have a floor area of approximately 16,000m². With dismantling of the existing building on site already underway and construction due to begin in the third quarter of this year, the project is scheduled for completion during the first quarter of 2024. Lettings are already being marketed in collaboration with CBRE, the lead estate agent.

 

Designed by the leading Munich-based architectural firm Oliv Architekten, the asset will provide flexible, multifunctional spaces including a ground-floor café/bistro and landscaped roof terrace, as well as various wellness amenities, including a yoga studio and a relaxation lounge. Tenants will also enjoy bicycle parking, electric charging points and a smart underground car parking facility. Furthermore, the building will provide customisable office units and creative collaboration spaces, ensuring the asset is well-positioned for the future.

 

In terms of its environmental credentials, the project meets the highest sustainability standards across all areas, including construction, materials and operations. Having already received a DGNB “Platinum” precertification, the asset will be constructed using concrete reclaimed from the existing building currently situated at this location. All materials used in construction will be documented in a material passport, showing where and how the various components were sourced and installed, ensuring they can be repurposed at the end of their service life. These measures are projected to reduce embodied carbon by up to 25%. Embodied carbon will be low at 366kg CO2e/m², significantly below the RICS Building Carbon Database (offices) average benchmark of 1291kg CO2e/m².

 

The use of timber in the building’s load-bearing structure will ensure that approximately 1,100 tonnes of carbon will remain stored in the building fabric, rather than emitted into the atmosphere. During the course of the asset’s lifespan, emissions associated with the building’s operation will be reduced by 65% in comparison to a typical office building through the integration of a photovoltaic system, efficient heating, cooling and ventilation systems and the use of a ground water heat pump. The building will also harvest and store rainwater, supplying irrigation systems for the benefit of surrounding green areas.

 

David Ironside, Fund Manager of Encore+ at LaSalle Investment Management, commented: “This is an industry-leading and best-in-class project. The first of its kind in Munich, its design in accordance with circular economy principles and resource-conserving operation will serve as a benchmark in sustainable real estate. Located in one of the most sought-after office submarkets in Munich, the property will be extremely well placed to meet the ever-evolving demands of future tenants around sustainability, quality, amenities and infrastructure while providing attractive long-term returns for our investors.”

 

Markus Diegelmann, Managing Partner at ACCUMULATA Real Estate Group, added: “The start of demolition marks an exciting first step in the development of what will be one of the most sustainable office projects in Munich. At ACCUMULATA, we aim to promote the concepts of urban mining and the circular economy within the construction sector and this project is firmly aligned with this objective. By utilising ultra-high-quality and recyclable materials, we are creating an office building that can meet occupiers’ shifting requirements, both in terms of flexible working environments and sustainability standards.”

 

Georg Illichmann, Managing Director at CBRE GmbH, said: “As the first hybrid timber office building to be constructed in Munich, the project achieves all the modern-day requirements tenants demand from office buildings: easy accessibility to public transport, sustainability credentials and working spaces that promote communication, creativity and innovation. The building’s use of timber, unique to the Munich office market, will not only support the building’s sustainability credentials but also the wellbeing of occupiers. At CBRE, we are proud to be leading on the marketing of this unique asset and be involved in ground-breaking project in the German real estate market as the lead estate agent.”

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Cain provides €99.7m for London office development (GB)

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Cain International has agreed an €99.7m (£86m) development loan with BauMont Real Estate Capital  and YardNine for the development of a 95,000ft² highly sustainable, best in class office-scheme at 100 Fetter Lane in central London known as ‘Edenica’. The asset was acquired by BauMont in January 2021 with development partner, YardNine. Located in City Mid-town, in close proximity to Farringdon, the development benefits from easy access to the newly opened Elizabeth Line via Farringdon, as well as City Thameslink and Chancery Lane stations, with a diverse range of cultural, leisure, retail and educational amenities nearby.

 

The asset received planning consent in September 2021 for the delivery of a new 12-storey development, with over 8,000ft² of roof gardens, a new pedestrian route and garden square at ground level, alongside more than 230 cycle spaces. In addition to the light filled workspace the scheme will include a new café and F&B uses.

 

The building, situated at 100 Fetter Lane, has been named ‘Edenica’, a reference to the extensive outdoor spaces which form part of the scheme and adjoin it. The project is targeting the highest environmental standards of BREEAM Outstanding, WiredScore, SmartScore and WELL certifications.  Sustainability, technology and wellbeing are extensively incorporated into the design. This includes voluminous office space with clear heights of over 3 metres, openable windows to enable mixed-mode ventilation, extensive planted terraces to encourage biodiversity and provide significant external breakout spaces, facilities to encourage active modes of travel, and high-performance 100% electric building designed with the Waterman Group to ensure the building uses as little energy as possible and achieves Net Zero carbon emissions in use. Construction work has commenced on site and the scheme is due for completion in Summer 2024. 

 

Tanja Yerolemou-Ennsgraber, Senior Vice President – Real Estate Finance at Cain International, said: “We are excited to partner with an experienced sponsor and developer duo, joining their journey to deliver a best-in class office scheme. The project embraces the needs and desires of the future occupier, being mindful about their experience and bringing it to the fore. BauMont and YardNine have successfully unlocked a fantastic development opportunity and we are pleased to bring our construction financing expertise to the table and see Edenica unfold.” 

 

Damien Pasini, Director at BauMont Real Estate Capital said: “Following the recepit of planning permission last year, securing development financing is another significant milestone for 100 Fetter Lane. We look forward to working with Cain and YardNine to deliver a highly sustainable and innovative workplace in one of Central London’s most vibrant submarkets.”

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