A chronic lack of supply in South Bank and fierce occupier demand is driving unprecedented rental growth across the market.
South Bank remains Central London's tightest market, with Availability at 2.8% across SE1, SE11, SE17 and SW8.
A considerable proportion of the market's available office space is at one building, The Shard, without which the Availability at London Bridge falls from 6.9% to 1%, and South Bank overall to 1.5%.
The lack of supply is both restricting Take-up (down 10% on the 1st Quarter to 202,893 sq ft) and applying upward pressure to headline rents.
There were a number of standout transactions in the 2nd Quarter, notably Technology company RedAnt paying a headline rent of £64.00 per sq ft at 240 Blackfriars Road, SE1, providing evidence of a shift in rental tone across the market. In the 2nd Quarter, 35% of transactions were completed at £45.00 per sq ft or above, underlining the rental growth achieved since 2012 when average rents for Secondhand Grade A, New and Refurbished stock did not exceed £30.00 per sq ft. South Bank remains a compelling proposition for both UK and Overseas Investors. Investment turnover totalled £181 million in the 2nd Quarter, slightly up on the 1st Quarter, with TIAA Henderson’s £90 million off-market acquisition of 169 Union Street, SE1, the largest single deal in the period. There is an increased appetite amongst UK funds, underlining the stability of the market in terms of delivering mid-term returns.
Jules Hind, Leasing & Development Partner at Union Street Partners, said: "We warned at the start of the year that paucity of stock would prevent Take-up reaching the levels of 2013 and 2014, and this is bearing out. Having said that, there has been no drop off in demand, and some of the rents achieved in this quarter across the whole spectrum of office stock, dispels the misperception that this is a discount market. We believe these rental levels are sustainable, given the modest development pipeline, and little sign that occupier confidence will abate.”
Alastair Hilton, Investment Partner at Union Street Partners, said: “Appetite from UK and Overseas investors remains robust and continues to strengthen, however, South Bank remains a challenging market to acquire in. It is a relatively small market, comprising around 20 million sq ft of office stock, and therefore liquidity is compromised, particularly as a significant amount of stock is held by non-Real Estate owners. We see the current pattern continuing: a churn of transactions at the lower level, and a handful of big-ticket acquisitions, with competition remaining fierce.”BACK TO NEWS