London South Bank Office & Retail Markets Q4 2013
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The London South Bank Office & Retail Markets Q4 2013 A different view of South Bank More Depth, More Insight A member of Discover South Bank On pages 6 to 9, we outline the exciting change in Farebrother’s South Bank research, breaking down and digging further into Bankside Central London’s most London Bridge Waterloo dynamic market. Borough West Bermondsey Vauxhall BURGESS PARK VAUXHALL PARK Oval KENNINGTON PARK y rcial Wa Nay Comme St. Gilles Road Havil St Way Commercial Elmington St Medlar St Inside this edition... Farebrother is an established Practice of Real Estate consultants and Chartered Surveyors. The Practice’s services include Commentary 1 Corporate Real Estate, Leasing, Sales, Development, Management, Lease Advisory, Business Rates, Valuation and Investment advice. The Transformation Farebrother’s core market is Central London, specialising in of London’s South Bank 4 Midtown and South Bank office and retail markets. A Different View of South Bank 6 Farebrother’s extensive research is aimed at providing a short, sharp insight Stock 10 into what are two of the most dynamic commercial property markets in the World. This quarterly report reviews the overall performance of the Leasing, Take-up 12 Investment and Retail markets and is published alongside Farebrother’s Availability 14 Investment Reports, produced in partnership with IPD, together providing a comprehensive analysis of Midtown and Southbank markets. Future Supply 16 Investment 18 Retail 22 Definitions South Bank - SE1 Take-up - completed transactions where offices Construction start - development where the are let or sold to an occupier main contract has commenced, normally - office accommodation, excluding offices Stock excluding demolition or stripping out under construction New - brand new buildings or buildings developed behind a retained façade Construction completion - development where - net internal area, unless otherwise Floorspace the main contract has reached practical stated - buildings which have undergone Refurbished completion a major refurbishment Available - office space available for immediate Hidden Supply - space which is not currently occupation - previously occupied Secondhand Grade A on the open market, but likely to come available higher quality space with features such - available offices as a in the near future Availability Rate air-conditioning or raised floors proportion of total stock Long-Term - average calculated since the - previously occupied Secondhand Grade B 1st Quarter 2005 lower quality space with features such as central heating or perimeter trunking The London South Bank Office & Retail Markets Q4 2013 Commentary South Bank’s record year of Take-up and Investment turnover is expected to continue into 2014, but concerns over sustaining mid-long term growth persist South Bank has had an exceptional year of Take-up following With the Occupier demand still high, rents of £45.00 to £50.00 numerous high profile lettings throughout the year reaching a psf are being achieved more frequently, particularly in New, total Annual Take-up of 1.64m sq ft in (164) deals; levels not Refurbished and Secondhand Grade A Supply. The highest seen since 2007. reported rent achieved in 2013 was £55.00 psf at 1 London Bridge. There is currently circa 160,000 sq ft under offer in The South Bank market continues to go from strength to South Bank so strong levels of Take-up are expected to strength, and shows no signs of weakening, at least not in the continue through 2014. short-term. The 3rd Quarter was dramatically highlighted by two major deals, the letting of the entire 430,167 sq ft at The Place Availability fell 12% on the 3rd Quarter 2013 from 1.42m sq ft to to News UK and Ogilvy & Mather’s letting of 226,343 sq ft at 1.25m sq ft lowering the Availability Rate from 7.2% to 6.4%, Sea Containers, Upper Ground. however, Supply increased marginally on the year by 5%. It is worth mentioning that without the 514,342 sq ft available at The Take-up in the 4th Quarter 2013 totalled 337,416 sq ft, and Shard, South Bank’s Availability Rate would in fact be a very low though down on an exceptional 3rd Quarter, was 59% higher 3.8%. than the five-year quarterly average (212,259 sq ft) rounding off a standout year for South Bank. New and Refurbished buildings account for 66% of current Availability making it a very top-heavy market which traditionally Unlike the 3rd Quarter, the largest letting in the 4th Quarter was has a good churn of secondary space. just 30,000 sq ft and in line with the current trend for South Bank; demonstrating remarkable strength with a high volume of mid-sized transactions completed by a range of Occupiers taking space in a variety of both New, Refurbished and Julian Hind Secondhand buildings. This reinforces the rise of this vibrant Head of Leasing, market. Sales & Development New and Refurbished space accounted for 62% of lettings in 2013, levels last seen in 2007 when PWC Pre-let the entire 376,000 sq ft in 7 More London and Southwark Council Pre-let 185,000 sq ft at 160 Tooley Street. South Bank’s Take-up has been predominantly Secondhand until recently since the completion of The Shard in the 3rd Quarter 2012. Prior to this there was a lack of any New or Refurbished Availability in South Bank. The London South Bank Office & Retail Markets Q4 2013 The hugely exciting and visionary ‘Garden Bridge’ project designed by Thomas Heatherwick will provide further impetus to South Bank Secondhand Grade A space is currently at the lowest level UK Investors represented 99% of the 4th Quarters turnover, on record (58,757 sq ft). Reinforcing the view that Occupiers however, 2013 was driven in equal measure by Overseas and consider South Bank as a credible and cost-effective Central UK Investors, which sets South Bank apart from the other London location, pulled into focus by high-quality New Central London markets. With the impending sale of More buildings which can command high rents. This in turn is London in the 1st Quarter 2014 for £1.7bn, the record will be putting pressure on the supply of good quality Secondhand superseded once more, reinforcing South Bank’s emergence Grade A space which continues to let well. as one of the key Central London markets. While we expect the market to enjoy a prosperous 2014, the Investment activity in the 4th Quarter 2013 reached £615m in paucity of New stock coming on to the market combined with nine transactions, making it a record quarter and rounding off the lack of mid-long term pipeline is a concern and will a record year with an Annual Investment turnover of £1.3bn. potentially hinder the current growth. This is four times higher than the five-year Annual average of £347m. We are delighted to publish for the very first time, a new detailed and in-depth set of research, breaking the South Bank down into five constituent and diverse parts. Farebrother research has changed to meet the challenges and diversity of Central London’s most exciting market. In the 4th Quarter 2013 Thomas Heatherwick’s proposed ‘Garden Bridge’ received Treasury backing, pushing this visionary idea a step closer to becoming a reality and providing further impetus to both the Midtown and South Bank Office and Retail markets 2 farebrother.com The London South Bank Office & Retail Markets Q4 2013 Q4 13 Overview % change on Q3 13 Total Availability 1.25m sq ft -12% Availability Rate 6.4% -0.8% pt Availability - New & Refurbished 830,206 sq ft -14% Availability - Secondhand 423,479 sq ft -7% Speculative Construction 407,382 sq ft -6% Take-up 337,416 sq ft -61% Investment £615m +259% 2013 % change on 2012 Annual Take-up 1.64m sq ft +123% Annual Investment £1.3bn +280% farebrother.com 3 The London South Bank Office & Retail Markets Q4 2013 The transformation of London’s South Bank Over the last twenty years, South Bank has established itself as Over the last fifteen years South Bank has been the focus of one of Central London’s most dynamic commercial and cultural some of the largest regeneration projects in Central London, hubs, offering a unique mix of new large scale office gathering momentum when More London completed. This developments right alongside trendy warehouse conversions, multi-building campus development spread over 13 acres museums, galleries and a large residential population. attracted big names into the area, adding to South Bank’s already diverse Occupier mix. Over 150 million passengers pass through Waterloo and London Bridge annually. South Bank includes some of the most visited This combined with the opening of the Jubilee Line extension in attractions in the UK, including The Southbank Centre which 1999 has proved to be the catalyst for an influx of tenants such attracts over 22 million visitors each year and Tate Modern as, PWC, RBS and the GLA to South Bank. Occupiers have which sees 5.3 million visitors a year. This combined with a relocated from London’s traditional cores in search of a higher number of independent retailers, food markets and fine quality working environment without the need to compromise on restaurants make South Bank an attractive and vibrant Central build quality. South Bank, which can provide large amounts of London market over seven days, not just an office location. cost effective New and Refurbished space, has recently benefitted from the supply constrained markets in the rest of South Bank, which was once derided as London’s ‘back-office’ Central London. playing host to a majority Occupier base of Associations, Charities and QUANGO’s, is now a popular destination for an impressive list of blue-chip companies who are headquartered there.