17 August 2018
Space shortage dampens London South Bank office take-up

A continued shortage of high quality office space across London’s South Bank markets is dampening occupier take-up.  In our latest South Bank Market Update, we report that a total of 188,948 sq ft was leased in the second quarter of this year. This was in line with the first quarter but was 32% down on the long-term quarterly average.

Rupert Cowling of Union Street Partners commented: “There is a healthy level of underlying demand across South Bank locations but not a great deal of choice if you want new or freshly refurbished space – especially if your requirement is for 15,000 sq ft or above.  As a consequence of this situation, take-up for the whole of the first half of this year was around half the corresponding level in H1 2017.  By the end of June, total office availability across the South Bank stood at 799,099 sq ft which equates to a vacancy rate of 3.8%. However, only 21% of this space is either new or recently refurbished – this represents a six-year low.  Total supply remains below the long-term average of 1m sq ft and with only about 53,000 sq ft of new space completing in Q3, it looks unlikely that this situation is going to change in the immediate future”.

The Investment market was similarly muted with only £67m of transactions taking place in Q2. USP Investment Partner, Alastair Hilton, commented: “Whilst constrained supply meant turnover was down for the second consecutive quarter, this doesn’t paint the full picture. There has been significant carry over which will surface in the Q3 stats plus appetite remains extremely robust, so we expect to see some interesting transactions concluded as we move through the year.  The diversity and breadth of buyer has begun to filter into much broader locations as they seek better returns. For example, we are currently seeing a flurry of activity in the area immediately south of Brixton.”

In the South Bank retail & leisure sector, the past month has seen HB Reavis unveil its plans for the redevelopment of Elizabeth House next to Waterloo Station. The retail element of the project has been substantially increased from what was originally envisaged to around 100,000 sq ft.  USP Retail & Leisure Partner, Matt Martin comments: “HB Reavis’s plans are a strong endorsement of the potential for good quality South Bank shopping and leisure. The scheme is adjacent to LCR’s 130,000 sq ft Waterloo Retail project on which we are advising and which is due for completion in 2021.  The recent leasing of the Leake Street arches next to Waterloo Station has already shown the diversity of demand in the location, and these future projects can create the critical mass necessary for a major hub of retail and leisure which will also provide the high quality of public space which the area needs.”