22 January 2016
New wave of development required to sustain South Bank growth

South Bank remains Central London’s most over-subscribed market and with a limited number of refurbished buildings coming to the market in the immediate future, this will not change.

Availability in the South Bank is at an historic low of just 551,000 sq ft across the market. This figure is buoyed by the 183,500 sq ft available in The Shard at the end of 2015, and without which, the Availability Rate in South Bank would have been 1.7%. This has since been reduced further by the 35,000 sq ft Shard letting to Matchesfashion.com who become the 26th office occupier on Levels 7 and 8.

The level of Supply due to come through in 2016 is not sufficient to meet occupier demand. Although South Bank’s long-term prospects will be helped by both of the major schemes at Waterloo (Shell Centre and Elizabeth House), the 88,100 sq ft due to be delivered in the first half of the year will not support the level of Take-up seen in 2014 and 2013.

Take-up in the 4th Quarter of 2015 totalled 219,150 sq ft, a significant decrease on the 3rd Quarter (37%) and almost a third down on the five-year average. Take-up for the whole of 2015 was just above 1m sq ft (1,076,345 sq ft), which reflects the levels seen in 2011 and 2012, prior to the stellar returns in 2013 and 2014, when Take-up exceeded 1.5m sq ft.

The purchase of the Blue Fin Building, 110 Southwark Street, SE1, by Oxford Properties and Temasek for £415m, made up the majority of the investment turnover for South Bank in the 4th Quarter, which totalled £646m.This constitutes 55% of the 2015 total turnover of £1.165bn which in turn is a significant decrease of 54% on the previous years  total.

Simon Smith, Leasing & Development Partner at Union Street Partners, said:

“The occupational market remains very strong across Central London, but there simply isn’t the supply to meet demand. This is most acute in South Bank, where the changes in supply in the first half of 2016 will only accentuate the difficulties that tenants are suffering in making occupational choices.

“The potential for development at Waterloo is well-documented, and we will see a transformation of that area over the coming years. However, in the shorter-term, we should see fringe locations such as Bermondsey mature as office locations, particularly for the DAMIT sectors, providing developers can deliver the right space, quickly. This will be further enhanced by the delivery of the next phase of the London Bridge Station development, when the new entrance on St Thomas Street opens.”

Alastair Hilton, Investment Partner at Union Street Partners, said:

“Whilst the Turnover figures are down, on the previous year, the picture is distorted by More London which accounted for £1.7bn in 2014. It is clear from the work that we undertake that Investor sentiment remains strong, as evidenced by the continuing rise in capital values. With an Investment audience, that is becoming more diverse, South Bank’s continuing challenge is its lack of liquidity.”

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