20 January 2015

South Bank enjoyed a stellar end to 2014, with Take-up and demand for office accommodation continuing to be driven by the advertising and media sector, according to new research by Union Street Partners.

The standout transaction of the 4th Quarter saw advertising group Omnicom take a total of 368,000 sq ft at Bankside 2 and 3, SE1, which as well as being one of Central London’s largest deals of 2014, continues a long-term trend of large corporate advertising and media occupiers satisfying major requirements by locating in the South Bank.

Analysis by Union Street Partners, the 50:50 joint venture established by Farebrother and Tuckerman covering SE1, SE11, SE17 and SW8, shows that alongside the Omnicom transaction, South Bank continues to attract companies from across the DAMIT sector with notable transactions in the 4th Quarter involving Lonely Planet [12,000 sq ft] and marketing group Aegis [15,500 sq ft].

Buoyed by a strong end to the year, Take-up for 2014 reached 1.61m sq ft, which is approximately double the long-term average, and the third highest annual total recorded.

However, with total Availability plummeting to just 726,000 sq ft, the lowest level on record, Union Street Partners warns that the level of Take-up seen over the past two years is not sustainable in 2015 and beyond. With only two buildings, The Shard and South Bank Tower, capable of accommodating requirements in the 50,000 to 100,000 sq ft bracket, Union Street Partners predicts that the market will be characterised by a high volume of small transactions, as SMEs increasingly cluster around the mature corporates that have either expanded in or moved to the South Bank.

Investment in South Bank totalled £2.51 bn in 2014, following the record £1.7 bn acquisition of More London by St Martins. The previous record turnover was posted in 2013 at a level of £1.307 bn.  Union Street Partners report that Investor appetite remains extremely strong in South Bank, however, the volume of transactions in 2015 will once again be dictated by availability of opportunity.

Jules Hind, Partner at Union Street Partners, said:

“In 2015 we will reach a tipping point in South Bank, with demand outstripping supply. Despite there currently being 110,000 sq ft under offer across the market, we predict a significant regression in annual Take-up, conceivably 50% lower than we have seen in the past year."

“We will, however, continue to see high volume of leasing activity in the 1,000 - 5,000 sq ft range, as demand from young, entrepreneurial businesses shows no sign of abating, particularly as the area’s renaissance continues and we see a more diverse and vibrant retail offer emerge.”

Mark Fisher, Partner at Union Street Partners, said:

“We see the South Bank market now extending far beyond SE1, encompassing SE11, SE17 and SW8. With London Bridge and Bankside at close to saturation point, and office development at Waterloo stalling, attention turns to Vauxhall and Nine Elms where there will soon be the critical mass of Grade A office stock to satisfy demand.”

Alastair Hilton, Partner at Union Street Partners, added:

“Despite the exceptional investment volumes over the past two years, South Bank still remains a challenging market for investors. The markets size at circa 21m sq ft, presents an obvious challenge for an ever broadening investor audience.’’