17 October 2014
LACK OF SUPPLY STYMIES SOUTH BANK’S GROWTH PROSPECTS

Union Street Partners warns low 3rd Quarter Office Take-up is symptomatic of supply squeeze

London’s South Bank’s meteoric rise as London’s fastest growing market is in danger of stalling with The Shard providing the only Grade A office space for occupiers looking to relocate to the area.

According to new research from Union Street Partners, the 50:50 joint venture between Farebrother and Tuckerman specialising in the South Bank market, less than 179,000 sq ft office space was let in the 3rd Quarter of 2014, representing the lowest quarter Take-up for six quarters.

While the pending 370,000 sq ft Omnicom letting at Bankside 2 and 3, SE1 - and a further 288,000 sq ft under offer across the market - should ensure a strong end to the year, the lack of supply beyond The Shard is likely to put the brakes on what has over the last two years been an unprecedented booming market.

The only office letting over 10,000 sq ft in the 3rd Quarter was Alternative Networks leasing 24,000 sq ft at 240 Blackfriars Road, SE1, with the other stand-out letting of the quarter being Tiffany & Co. taking 8,000 sq ft at The Shard.

Julian Hind, Partner, Union Street Partners, said:

"It’s no surprise that a serious lack of supply would ultimately curb leasing activity, and what we have seen this quarter, perhaps for the first time, is those fears being realised. Without any imminent new stock coming on the market, South Bank’s boom is unsustainable and once all the space currently under offer lets and The Shard reaches full occupation, availability levels will plummet to less than 2.5%."

"The development pipeline for the next 12 months is relatively sparse, and there is a vacuum before major schemes such as South Bank Tower and, further down the line, the Shell Centre, arrive on the market. This will have a considerable impact on rents, which could be driven upwards to new highs."

Mark Fisher, Partner, Union Street Partners, said:

"The South Bank presents a compelling offer to occupiers and there is clearly the demand to base their business here, but we’re rapidly reaching a critical point where this appetite cannot be satisfied. In addition to the lack of Grade A space, there remains a lack of mid-tier space coming through the pipeline."

Investment turnover in the 3rd Quarter 2014 at £75m was considerably down (-73%) on the 2nd Quarter which delivered £283m in terms of value. Nine of the 13 transactions during the 3rd Quarter were under £5m.

Alastair Hilton, Partner, Union Street Partners, said:

"This is a timely reminder of how illiquid the South Bank market is and this is set against considerable demand emanating from all the sectors that are active across Central London. The occupational market supports the performance driven Investor, but opportunities will continue to be limited, unless they start to be created."

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