22 April 2014
Union Street Partners: Occupier demand in South Bank remains strong after best Q1 for nine years

Office demand in South Bank shows no sign of abating, with Take-up for the first quarter of 2014 32% above the five year quarterly average, according to research unveiled this morning by Union Street Partners, the new 50:50 joint venture be­tween Farebrother and Tuckerman which was launched last week (11th April).

The research, which is the first to be unveiled under the banner of Union Street Partners, shows that lettings totalled 345,000 sq ft in Q1, the best first quarter for nine years.

The first quarter was buoyed by the completion of a number of deals at The Shard, SE1, totalling 107,000 sq ft, as well as three separate transactions at Cottons Centre, Cottons Lane, SE1, where only 25,000 sq ft now remains available and 1 London Bridge, SE1, where deals involving HCA Hospitals, Grainger Trust Plc, and nscglobal totalled 34,848 sq ft.

Earlier this year, Farebrother revamped its market analysis of the South Bank, by redefining the area into five distinct submarkets of London Bridge, Bankside, Waterloo, Borough West and Bermondsey, which Union Street Partners will now adopt in its coverage and analysis of the market. From Q2 2014, Union Street Partners will publish data across a much wider area to include Elephant & Castle, Vauxhall, Nine Elms and Battersea Power Station encompassing the SE11, SE17 and SW8 postcodes.

Union Street Partners report that leasing activity remains concentrated in the London Bridge and Bankside sub-markets, where 57% of South Bank’s total office stock is located. In Q1, 71% of space let in South Bank was in these sub-markets, with Bermondsey accounting for an additional 19%.

Despite a thriving occupancy market, Union Street Partners sounds a warning that lack of supply may frustrate the growth of the South Bank business district southwards, away from the river frontage. Availability at the end of the first quarter stands at 7.0%, but with almost 200,000 sq ft under offer, and The Shard constituting a large proportion of the market’s available space, lack of supply may restrict Take-up over the course of 2014.

Mark Fisher, Partner at Union Street Partners, added:
“It has been a tremendous first quarter for South Bank, with momentum continuing after a bumper year in 2013.

“The majority of activity is concentrated on the river, but we should see fringe locations like Bermondsey and Borough West begin to mature over the course of the year, and given the exciting development pipeline in Elephant & Castle, Vauxhall, Nine Elms and Battersea Power Station, expect higher levels of activity across the SE11, SE17 and SW8 postcodes moving forward.”

Julian Hind, Partner at Union Street Partners, commented:
“South Bank is Central London’s most diverse and dynamic market, but does remain unbalanced. Away from London Bridge and Bankside there is a paucity of Grade A office stock, which means there is a risk that these phenomenal Take-up figures are not sustainable in the long-term.

“With this in mind, it will be fascinating to see how Waterloo evolves. A number of significant developments have stalled over the past twelve months, but we feel if the right stock were to be delivered in this area we would see huge demand, with occupiers certain to be attracted by Waterloo’s connectivity and inherent vibrancy.”

St Martins record £1.7 billion purchase of More London in January made Q1 2014 a record quarter for investment in South Bank with transactions totalling £1.86 billion.

Whilst analysis of Investment transactions over the past three years shows a dominance by UK investors, accounting for 1.8 billion, 69%, of the total £2.2 billion invested in that period, the landmark deal at More London, reinforces once more the Overseas Investor appetite for South Bank.

Alastair Hilton, Partner, Union Street Partners, commented:
“If you remove the St Martins deal, this hasn’t been a strong quarter for investment at £163m, however, that is a reflection of liquidity conditions rather than demand.

“There is huge appetite for stock in South Bank, and we think over the course of this year we will see more Overseas buy­ers entering the market, alongside the UK property companies and funds which have been active here for some time.”