Yesterday we welcomed some of our friends aboard the Union Street Partners bus for a tour of London’s South Bank.
South Bank, once Central London’s forgotten hinterland, has enjoyed a meteoric rise over recent years, culminating in a stellar 2014 when 1.6 million sq ft was let – roughly double the long-term average.
Activity has been driven by the tech and media sectors, with the diverse mix of retail, culture and entertainment drawing in occupiers with a predominantly young workforce. Over the past three years some of Central London’s largest leasing transactions have involved Media and Advertising, Marketing & PR occupiers in South Bank; most notably News UK’s decision to take 430,000 sq ft at The Place in 2013, Ogilvy & Mather’s move to Sea Containers the same year (226,000 sq ft) and then Omnicom taking 368,000 sq ft at Bankside 2 & 3 on Southwark Street.
However, as we predicted last year, momentum is beginning to stall as development struggles to keep pace with demand. Take-up in Q1 2015 was 225,415 sq ft, significantly below the five-year quarterly average, which we believe will set the tone for rest of this year – we expect the South Bank Availability Rate to drop below 3% by the close of this Quarter.
It has to be remembered that the South Bank is a relatively immature office market. It currently encompasses just 22m sq ft, less than a third of the size of the City, with around two thirds of that stock concentrated at London Bridge and Bankside. The unbalance of the market is perhaps best illustrated by the fact that the vast majority of available Grade A office space is located in one building, The Shard.
South Bank is still, therefore, in its infancy as an office location. If the profile of the market has grown up around one transport hub – London Bridge – the next stage of its growth will be around another – Waterloo. This location can support large scale office development, and the protracted Shell Centre and Elizabeth House can serve as catalysts.
Moving further West, the ongoing development at Battersea and Nine Elms is extending South Bank further, with the Northern Line extension set to knit this area closer to Central London.
As well as expanding along the riverfront, the South Bank market extends far deeper, towards and including Elephant & Castle with areas such as Borough and Bermondsey already proving to be popular locations for start-up businesses.
With the market constantly evolving, there may be a few extra stops on next year’s tour – and a higher fare!