THE LONDON SOUTH BANK OFFICE & RETAIL MARKETS Q1 2016

Transcription

1 THE LONDON SOUTH BANK OFFICE & RETAIL MARKETS Q1 216

2 DISCOVER SOUTH BANK WATERLOO BANKSIDE BOROUGH WEST LONDON BRIDGE BERMONDSEY ELEPHANT & CASTLE CAMBERWELL KENNINGTON VAUXHALL NINE ELMS BATTERSEA WANDSWORTH UNION STREET PARTNERS IS A JOINT VENTURE BETWEEN FAREBROTHER AND TUCKERMAN. IT PROVIDES A SPECIFIC AND BESPOKE REAL ESTATE SERVICE FOR THE SOUTH BANK, A MARKET WHICH HAS UNDERGONE AN UNPRECEDENTED TRANSFORMATION AND WHICH IS NOW FIRMLY ESTABLISHED AS ONE OF CENTRAL LONDON'S MOST IMPORTANT BUSINESS DISTRICTS. THE PRACTICE'S SERVICES INCLUDE OFFICE AND RETAIL LEASING, SALES AND DEVELOPMENT, LEASE ADVISORY, BUSINESS RATES, VALUATION AND INVESTMENT ADVICE. UNION STREET PARTNERS EXTENSIVE RESEARCH IS AIMED AT PROVIDING A SHORT, SHARP INSIGHT INTO THE LONDON SOUTH BANK MARKET. THIS QUARTERLY REPORT REVIEWS THE OVERALL PERFORMANCE OF THE LEASING, DEVELOPMENT AND INVESTMENT MARKETS AND IS PUBLISHED ALONGSIDE UNION STREET PARTNERS CENTRE OF LONDON REPORTS, PRODUCED IN PARTNERSHIP WITH FAREBROTHER. THESE PROVIDE A COMPREHENSIVE AND UNIQUE ANALYSIS OF THE EVOLUTION OF LONDON S CENTRAL CORE ON THE NORTH-SOUTH AXIS FROM THE NORTHERN BORDER OF MIDTOWN AT KING S CROSS THROUGH THE SOUTH BANK. CONTACT LIZZIE CAVE FOR MORE DETAILS LC@UNIONSTREETPARTNERS.CO.UK DEFINITIONS Front Cover The largest Take-up transaction of the quarter was the 43,193 sq ft letting during construction to Zoopla at Columbia Threadneedle Investment s Courage Yard refurbishment, due to complete in the 2nd Quarter 216. South Bank - SE1, SE11, SE17, SW8 Stock - office accommodation, excluding offices under construction Floorspace - net internal area, unless otherwise stated Available - office space available for immediate occupation Availability Rate - available offices as a proportion of total stock Take-up - completed transactions where offices are let or sold to an occupier New - brand new buildings or buildings developed behind a retained façade Refurbished - buildings which have undergone a major refurbishment Secondhand Grade A - previously occupied higher quality space with features such as air-conditioning or raised floors Secondhand Grade B - previously occupied lower quality space with features such as central heating or perimeter trunking Construction start - development where the main contract has commenced, normally excluding demolition or stripping out Construction completion - development where the main contract has reached practical completion Hidden Supply - space which is not currently on the open market, but likely to come available in the near future Long-Term - average calculated since the 1st Quarter 25 DAMIT - Design; Advertising, Marketing & PR; Media; Internet; and Technology & Telecoms

3 The London South Bank Office & Retail Markets Q COMMENTARY NEW WAVE OF DEVELOPMENT REQUIRED TO SUSTAIN SOUTH BANK GROWTH 1ST QUARTER HEADLINES: South Bank Take-up at was strong at 236,946 sq ft, up 8% on the previous quarter The Availability Rate has moved marginally from 2.6% to 2.7% No new space was delivered to the market Less than 1, sq ft of new space is expected to come through in the 2nd Quarter 216 as the Supply Pipeline remains dry The long-term pipeline is looking healthier, particularly in the west with Battersea, Nine Elms and Vauxhall all showing good levels of ongoing construction Investment transactions only totalled 94m but this was more indicative of the lack of liquidity than lack of demand The development of Leake Street Arches, Southbank Place and the potential re-development of the Waterloo International Terminal will change the retail & leisure landscape in and around Waterloo South Bank is changing. We have had huge amounts of new stock in the last three years clearly improving the quality in the locations close to the River in the Bankside and London Bridge submarkets. Transport infrastructure is also improving at Waterloo and London Bridge, two of Central London s major stations, resulting in nearby land owners and developers improving not just the office accommodation but looking at alternative uses whether it be residential or retail and leisure uses. The Union Street Partners research boundary has, for some time, monitored stock in SW8 to account for the changes in Battersea and Nine Elms, SE11 to take account of the extensive development in and around Vauxhall and to the south in SE17 as the work in and around Elephant & Castle, one of the biggest urban developments in Central London, emerges. But investors and occupiers are now looking further afield whether it be for value, for a blank canvas or for large scale development. Locations such as Greenwich, Lewisham, Surrey Quays, Deptford, Brixton and Clapham are now being framed within the South Bank market rather than forming part of a larger South London market. This change is hugely exciting and one that we are monitoring closely as the wider South Bank continues to attract the attention of those keen to venture deeper into the market. Part of the appeal of South Bank is the reaction of existing occupiers and investors who, having spent time immersed in the market, have a genuine desire to remain and to grow there. In the 1st Quarter 216, this was demonstrated in both the occupational and investment markets. Zoopla, having found a home only recently in the Harlequin Building, 65 Southwark Street, SE1, completed on a letting during construction from Columbia Threadneedle Investment at their rebranded and refurbished One Courage Yard, SE1. Similarly the largest investment transaction in the 1st Quarter 216 was a sale by Marcol to existing South Bank owners and developers GMS Estates at Bridge House, 4 Borough High Street, SE1, for 27.25m. In both cases the knowledge of South Bank has undoubtedly been instrumental in the decisions taken and the confidence in the South Bank has shone through in these 1st Quarter deals. IN THIS EDITION Commentary 1 House View 3 Take-up 4 Availability 6 Future Supply 8 Investment 1 Retail & Leisure 12

4 The London South Bank Office & Retail Markets Q TOTAL 574,744 sq ft +4% TAKE-UP 236,946 sq ft +8% NEW & REFURBISHED (SE1) 199,441 sq ft -19% INVESTMENT 94 m -85% SECONDHAND (SE1) 38,884 sq ft +21% SPECULATIVE CONSTRUCTION 1.66m sq ft +185% RATE 2.7 % +.1% pts

5 The London South Bank Office & Retail Markets Q HOUSE VIEW RESILIENT TAKE-UP DESPITE SUB 3% RATE In times of low supply, the levels of Take-up tend to fall as occupiers are forced to seek opportunities elsewhere or regear their leases and remain in existing premises. In the 1st Quarter of 216, this has not been the case. With the Availability Rate stabilising at 2.7%, Take-up has been relatively strong, reaching 236,946 sq ft in 41 separate transactions. This churn of deals has been particularly noticeable in the smaller size category with 68% of all deals being below 5, sq ft. SHORT-TERM SUPPLY IS TOO LOW In the first half of 216, less than 1, sq ft of future supply pipeline will be delivered into the South Bank market. This is a pitiful amount and does nothing to alleviate the pressure on occupiers to find new space in this market. Tenants such as Zoopla are finding that the only way to get the right, new accommodation is to enter into the Pre-let or the letting during construction market to ensure that their future demand is adequately met in a market that they wish to remain in. Zoopla, moving from Southwark Street to Shad Thames, is a typical home grown occupier expanding into another South Bank location. THE STRENGTH AND DIVERSITY OF INVESTOR INTEREST CONTINUES TO PUSH INVESTORS FURTHER AFIELD Bankside has been the key component of the South Bank investment market for a number of years. Its early attraction was the strategic value it offered, however, as it matures, its pricing has become more aligned with other developed markets. As expected therefore, Investors seeking this strategic value are pushing into areas beyond. Whilst SE17, SE11 and SW8 are recipients of this we also see value further afield, in SE8 (Deptford) and SE14 (South Bermondsey/Millwall).These areas are well set up, to support considerable mixed-use activity in the long-term, underpinned by their improving infrastructure. Turnover is down but we see no reason for any particular concern. Investor appetite remains strong and is yet again being constrained by what is available. This needs to be balanced against some natural caution that may appear over current pricing, as we are at unprecedented levels. SE11 VAUXHALL SOON TO BE A FULLY FLEDGED PART OF CENTRAL LONDON MARKET We have been advising for some time on the potential and attractiveness of Vauxhall as a Central London office location. With the US Embassy and also the commencement of schemes at New Covent Garden by VINCI St. Modwen, the 5/5 joint venture with its partner the Covent Garden Market Authority, and the McLaren Property Ltd / Citygrove mixed-use development at New Bondway, occupiers will be keen to take advantage of the growing interest in this area. Further to the west, in the SW8 market, we fully expect corporate occupiers announce major moves to Battersea Power Station and anticipate that the first phases of development will potentially be fully let before the space actually becomes available. Occupiers need to move quickly.

6 The London South Bank Office & Retail Markets Q TAKE-UP TOTAL TAKE-UP 236,946 sq ft +8% Five-year Quarterly Average 38,787 sq ft STRONG TAKE-UP DESPITE SUB 3% RATE ACROSS A RANGE OF STOCK QUALITY TAKE-UP NEW & REFURBISHED (SE1) 127,842 sq ft TAKE-UP SECONDHAND (SE1) 17,99 sq ft +39% Five-year Quarterly Average 113,494 sq ft -2% Five-year Quarterly Average 17,3 sq ft TABLE.1 SELECTED Q1 16 OFFICE LETTINGS IN SOUTH BANK Occupier Address Sq ft Grade Reported Rent psf Zoopla One Courage Yard, SE1 43,149 Refurbished Conf. Matchesfashion Ltd The Shard, 32 London Bridge Street, SE1 35,451 New 55. Undisclosed Cottons Centre, Hays Lane, SE1 14,716 Refurbished 57.5 Glass & Glazing Federation Newspaper House, 4 Rushworth Street, SE1 12,16 Secondhand Grade B 4.5m Freehold Purchase Shutterstock The Counting House, Tooley Street, SE1 1,93 Secondhand Grade B Assignment Area Squared Ltd The Counting House, Tooley Street, SE1 9,93 Refurbished 48.5 Jellyfish Group Ltd The Shard, 32 London Bridge Street, SE1 9,17 New 9. The London Community Rehabilitation Company Ltd Hannibal House, Elephant & Castle, SE1 8,149 Secondhand Grade B 24.3 Core Five LLP 23 Blackfriars Road, SE1 7,39 Secondhand Grade A 49.5 Teaching Personnel Ltd 24 Southwark Bridge Road, SE1 6,594 Secondhand Grade A Conf. FDA Ebbark House, Borough High Street, SE1 5,76 Secondhand Grade B 5.9m Freehold Purchase Mentzendorff & Company Ltd Woolyard, Bermondsey Street, SE1 5,439 Secondhand Grade A 57.5 Undisclosed 4 Maguire Street, SE1 5, Refurbished 49.5

7 The London South Bank Office & Retail Markets Q FIG.1 QUARTERLY TAKE-UP BY GRADE 1. million sq ft.75.5 SOUTH BANK CHURN KEEPS DRIVING TAKE-UP FORWARDS Pre-lets New Refurbished Secondhand Grade A Secondhand Grade B 216 Despite the lowest levels of Availability ever seen in South Bank, there was still a very healthy level of Take-up in the 1st Quarter of 216 at 236,946 sq ft. This was 8% higher than the previous quarter. Take-up is still down on the long-term trend at 23% below the five-year average, but these past figures are heavily influenced by the large-scale waves of development such as The London Bridge Quarter. FIG.2 NAMED SE1 TAKE-UP BY SECTOR IN Q1 16 Q % 38% 22,39 sq ft Named Take-up Q1 16 Undisclosed (33,361 sq ft) D A M I T Total Take-up: 235,751 sq ft % Sector DAMIT Design Advertising, Marketing & PR Media Internet Technology & Telecoms Banking, Finance & Insurance Charities & Associations Corporate Education Government Legal Professional Services Retail & Leisure Other FIG. 3 NAMED SE1 TAKE-UP BY SECTOR 3 YEARS ROLLING The largest transaction of the quarter was the letting during construction by Columbia Threadneedle Investments to Zoopla at One Courage Yard, SE1. The building has been comprehensively refurbished and rebranded from the previous Tower Bridge Piazza by TP Bennett architects. Zoopla took the 43,193 sq ft of space during construction to expand into from their current South Bank home at The Harlequin Building, 65 Southwark Street, SE1. The slow progress of Take-up within The Shard, continued with only two further lettings during the 1st Quarter. Retailer Matchesfashion Ltd took 35,451 sq ft of offices on the 7th and 8th floors and digital marketers Jellyfish Group Ltd took 9,17 sq ft on the 22nd floor and at the end of the 1st Quarter, 138,74 sq ft remained to be let within the building. A total of 41 separate transactions made up the total Take-up within South Bank which was up on the 33 deals that took place in the 4th Quarter 215. The make-up of the Take-up demonstrates that the South Bank market is more than an iconic building or indeed the high profile larger transactions. 28 of the 41 deals or 68% are below 5, sq ft and over half of all transactions are below 3, sq ft. the churn of South Bank occupiers continues unabated despite the lowest levels of Availability throughout the whole of Central London. 3 Years to Q1 16 % Sector 54% 47% D A M I T DAMIT Design Advertising, Marketing & PR Media Internet Technology & Telecoms 3,92,921 sq ft Named Take-up 3 Year rolling Undisclosed (37,958 sq ft) Banking, Finance & Insurance Charities & Associations Corporate Education Government Legal Professional Services Retail & Leisure Other Total 3 Year rolling: 4,273,879 sq ft

8 The London South Bank Office & Retail Markets Q TOTAL 574,744 sq ft NEW & REFURBISHED (SE1) 199,441sq ft +4% Five-year Quarterly Average 1.9m sq ft -19% Five-year Quarterly Average 41,18 sq ft RATE 2.7% SECONDHAND (SE1) 38,884 sq ft +.1% pts Five-year Quarterly Average 4.9% +21% Five-year Quarterly Average 515,838 sq ft 13% 2% BANKSIDE 67% FIG.4 QUARTERLY OFFICE BY SUBMARKET 12% 31% 24% LONDON BRIDGE 57% 22% WATERLOO 78% 18% 4% BERMONDSEY 63% 15% 7% 17% 23% BOROUGH WEST SE17 83% 77% 4% 25% 44% SW8 52% New Refurbished Secondhand Grade A Secondhand Grade B 75% SE11

9 The London South Bank Office & Retail Markets Q FIG.5 QUARTERLY SE1 OFFICE BY GRADE million sq ft THE OF SOUTH BANK OFFICES RISES FOR FIRST TIME IN SIX QUARTERS - BUT ONLY JUST! New Refurbished Secondhand Grade A Secondhand Grade B In the 1st Quarter 216, availability of office accommodation throughout South Bank rose by 4% on the 4th Quarter 215 after five consecutive falling quarters of Availability. However, this equates to a total increase in stock of only 23,659 sq ft. The reason for this increase can almost be wholly attributed to the delivery of 62,425 sq ft at 1-2 Paris Gardens, SE1, to the market on behalf of Overcourt. The space, formerly part of the IPC Media printing and distribution centre, is within a vacant and non refurbished former warehouse building being marketed by Union Street Partners. Without this Secondhand space coming onto the market, the overall Availability Rate would have continued its downward trend. The lack of completions coming to the market in the 1st Quarter, along with a strong quarter of Take-up has demonstrated the resilience of the South Bank market. With future lettings at The Shard and the influx of only a small amount of new space expected in the 2nd Quarter, the Availability Rate will continue to come under pressure and we fully anticipate this fall to continue until later into 216. The interesting dynamic within South Bank, albeit expected, is the 19% reduction in New & Refurbished space but a 2% increase in Secondhand Availability. We have talked for some time about a lack of Availability in SE11 but in the 1st Quarter, 15,25 sq ft of self-contained offices came to the market at Spring House, Graphite Square and Vauxhall Walk. This space, also being marketed by Union Street Partners, is for short-term leases but is a major boost to Availability outside of the core SE1 office areas. TABLE.2 CENTRAL LONDON SUPPLY COMPARED Grade (sq ft) South Bank Midtown West End City New & Refurbished 23,66 632,41 475,687 75,353 Secondhand Grade A 221, , ,475 2,14,397 Secondhand Grade B 122, ,181 1,1,339 1,112,99 Total (All) 574,744 1,477,1 2,162,51 3,877,659 Stock 21,279,286 41,6,949 71,524,26 65,964,329 Availability Rate (%) 2.7% 3.6% 3.% 5.9%

10 The London South Bank Office & Retail Markets Q FUTURE SUPPLY TOTAL SPECULATIVE SPECULATIVE 1.66m 96,69 CONSTRUCTION DUE IN Q2 16 UNDER CONSTRUCTION sq ft sq ft +185% SPECULATIVE SPECULATIVE SPECULATIVE CONSTRUCTION DUE IN Q3 16 CONSTRUCTION CONSTRUCTION DUE DUEIN INQ2 Q ,53 96,69 47,51 sq ft sq sqftft SE11 OFFICE SUPPLY WILL BE BOOSTED DURING THE NEXT THREE YEARS AS HUNDREDS OF THOUSANDS OF SQUARE FOOTAGE IS DELIVERED SELECTED CONSTRUCTION STARTS IN THE 1ST QUARTER Two South Bank Place, 2-8 York Road, SE1 297,678 sq ft Almacantar Q New Bondway, Bondway, SW8 4, sq ft DAMAC Properties Q Blackfriars Road, SE1 48,1 sq ft Derwent London Q Long Lane, SE1 22,5 sq ft Columbia Threadneedle Investments Q4 16 Pimlico Vauxhall 2 BURGESS PARK VAUXHALL PARK Oval KENNINGTON PARK

11 The London South Bank Office & Retail Markets Q There were no completions in the 1st Quarter 216, not a statistic needed in a market with already very low levels of supply. Once you add in the limited completions expected in the 2nd Quarter, with only 88,19 sq ft to be brought to the market at The Cottons Centre, Hays Lane, SE1, for St Martins Holdings, and a small 8,5 sq ft being refurbished by Venaglass at Harling House, Great Suffolk Street, SE1, it is clear that the shortage of supply will continue to apply pressure to the Availability Rate in the first half of 216. FIG.6 FUTURE SUPPLY IN SOUTH BANK m sq ft 45% OF ALL SPECULATIVE SPACE CURRENTLY UNDER CONSTRUCTION IS OUTSIDE OF SE1 SE11 (VAUXHALL / KENNINGTON) AND SW8 (NINE ELMS) 46% OF SPECULATIVE SPACE CURRENTLY UNDER CONSTRUCTION IS OUTSIDE OF SE1 IN SE11 (VAUXHALL / KENNINGTON) AND SW8 (NINE ELMS) Supply due in the second half of 216 looks better, however, with 41,98 sq ft planned for completion at schemes currently under construction. The vast majority will be delivered in the 3rd Quarter at Hermes Real Estate and CPPIB s 224,784 sq ft South Bank Central, Stamford Street, SE1, with the remaining supply in eight separate schemes. A number of schemes got underway in SE1 during the 1st Quarter at Harling House, Great Suffolk Street (8,5 sq ft), 1 Long Lane (22,5 sq ft), and 4 Blackfriars Road (48,1 sq ft) which may deliver speculative space to the open market or alternatively form part of The Hoxton Hotel s mixed-use development. The lack of SE1 starts is worrying, however, and is continuing to restrict the quantities of space that occupiers are demanding. The complex development of the 57 acre site at New Covent Garden Market, with its many phases and stages, has continued to progress under VINCI St. Modwen, the 5/5 joint venture with its partner the Covent Garden Market Authority. With the commitment in place, the whole scheme is expected to generate 3, new homes, 1, sq ft of retail, leisure and new community facilities, as well as 135, sq ft of office space. The delivery timetable of a scheme this size is always going to be difficult to adhere to but we anticipate the office element could be completed by the end of 217. The final scheme in SE11 that really kick-started in the 1st Quarter, was the mixed-use New Bondway scheme at Bondway, SE11. The joint development between McLaren Property Ltd and Citygrove will deliver 45 new homes within a brand new building towering m. The scheme will also include leisure facilities, retail units and approximately 4, sq ft of office accommodation and is expected to complete in late 218 at the earliest Q2 Q3 Q4 215 Q1 Q2 Q3 Q4 216 Q1 Q2 Q3 Q4 217 Q1 Q2 Q3 Q4 218 Let Completed Under Construction Hidden Supply

12 The London South Bank Office & Retail Markets Q INVESTMENT Q1 16 INVESTMENT TURNOVER 94m -85% Five-year Quarterly Average 298m LIQUIDITY CONTINUES TO HOLD BACK POTENTIAL SOUTH BANK INVESTORS TABLE.3 SELECTED Q1 16 INVESTMENT TRANSACTIONS IN MIDTOWN Address Sq ft Vendor Purchaser Reported Price m Bridge House, 4 Borough High Street, SE1 34,432 Marcol GMS Estates Great Suffolk Street, SE1 3,5 Columbia Threadneedle Investments Private Investor 15.5 Rramah House, Bermondsey Street, SE1 15,714 Hermes Investment Management Canada Life Tanner Street, SE1 13,171 Cole Brothers Ltd Legal & General Group plc 1 75 Bermondsey Street, SE1 11,429 Hermes Investment Management Barts Charity 9.85 Newspaper House, 4 Rushworth Street, SE1 12,16 Derby Terrace Ltd Glass & Glazing Federation Ayers Street, SE1 6,92 Private Investor Henderson Global Investors 5 Ebbark House, Borough High Street, SE1 5,32 Private Investor FDA Great Guildford Street, SE1 3,275 Curb Records Electrical Fire Safety First 2.88 FIG.8 INVESTOR TYPE BY VALUE IN Q1 216 FIG.9 INVESTOR TYPE BY VALUE (3 YEARS ROLLING) % Investor Type % % Investor Type % 13% 31 UK Fund 27 UK Private / Other 29 UK Property Company 24 UK Fund 9 UK Private / Other 14 UK Property Company 87% 13 Owner Occupier Overseas European Overseas Middle Eastern Overseas Far Eastern Overseas Other 5% 3% 47% 3 Owner Occupier Overseas European 36 Overseas Middle Eastern 1 Overseas Far Eastern 4 Overseas Other Total Turnover in Q m 94m UK vs. m Overseas Total Turnover 3 years to Q bn 2.38bn UK vs. 2.4bn Overseas

13 The London South Bank Office & Retail Markets Q FIG.7 ANNUAL SE1 INVESTMENT TURNOVER BY SUBMARKET m 25 Annual Turnover m ,37 2,59 1, There was a relatively even distribution of investor type with 87% of the quarter s turnover accounted for by Funds, Property Companies and Private Investors with 29.25m, 27.25m and 25.3m of transactions respectively. The Owner Occupier sector accounted for three deals, at 13.2% or 12.4m by value Eight Year Annual Average - 82m Eight Year Annual Average (Excluding More London) - 68m Bankside London Bridge Waterloo Borough West Bermondsey SOUTH BANK INVESTMENT IN THE 1ST QUARTER 216 WAS AN ALL UK EVENT 216 YTD Vendor type was more heavily weighted to Funds and Property Companies, with 39.4m and 32.3m respectively, accounting for 76% of the turnover. Owner Occupiers and Private Investors accounted for 12.8m and 9.5m respectively or 17% and 13%. This demonstrates the consistent interest in the South Bank from UK Investors who tend to opt for smaller lot sizes, whilst Overseas Investors generally favour the larger, prime assets, of which a number have already traded in the South Bank this cycle. Notable transactions for the quarter include the sale of Bridge House, 4 Borough High Street, SE1, by Marcol to GMS Estates. The 34,432 sq ft, part period and part 197s multi let office, sold for 27.25m equating to 791 per sq ft, and a very low net initial yield of 4.34%. It was the largest transaction of the quarter and demonstrates strength in demand for reversionary multi-let assets with asset management opportunities. The sale of 17,5 sq ft 53 Great Suffolk Street, SE1, by Columbia Threadneedle to a Private Investor for 15.5m ( 885 per sq ft) was also notable. The property was sold Vacant Possession with planning, to extend to circa 3,5 sq ft. Again, this demonstrates that there is good appetite for development risk. Investment in the South Bank reached 94.3m in the 1st Quarter 216, a decrease of 85% on the 4th Quarter 4 215, ( 646m) and a decrease of 44% on the 1st Quarter of 215 ( 169m). This is a modest start to the year with nine transactions completing at a relatively low average lot size of 1.4m. By comparison, turnover in the 4th Quarter was spread across ten transactions with an average lot size of 64.7m. However with a number of the transactions in the 1st Quarter of 216 receiving significant interest, we attribute the relatively low turnover to deal availability, not demand. The purchase of Tanner Street, SE1, is a good example of the narrowing pricing gap between residential and commercial values. Legal & General bought the asset from a Private Investor for 1m reflecting 759 per sq ft as a vacant asset. The building was initially marketed in 214 as a 34 unit residential scheme. In summary, whilst Investment turnover is considerably down, the market is performing well, with no shortage of buyers. The level of turnover is a direct reflection of what is available to buy. A key indicator as to a markets performance is its current pricing regime ( per sq ft) which is now consistently achieving 8 per sq ft plus. 1% of the 1st Quarter disposals were undertaken by UK Investors, comprising of three UK Funds, two UK Property Companies, two Private Investors and two Owner Occupiers. This contrasts with the three-year average, where 36% of disposals have been undertaken by UK Investors. 1% of purchasers were UK Investors, made up of five UK Funds, one UK Property Company, one Private Investor and two Owner Occupiers. Again this contrasts with a three-year average where 5% of South Bank acquisitions have been by UK entities and the remaining half by Overseas Investors.

14 The London South Bank Office & Retail Markets Q RETAIL & LEISURE The development of Southbank Place, Leake Street Arches and the potential redevelopment of the Waterloo International Terminal (WIT) will improve the public realm and the connections in and around Waterloo Station The development of Southbank Place, Leake Street Arches and the potential redevelopment of the Waterloo International Terminal (WIT) will improve the public realm and the connections in and around Waterloo Station Nobody thinks of Waterloo as a prime retail and leisure location. The current offering primarily serves the station and its immediate environment, whether on the station concourse, on Waterloo Road or the cluster of restaurants adjacent to the River by the London Eye and the South Bank Centre. Physically there is a real disconnect between these areas. However, with a number of mixed-use and retail lead schemes underway or planned, this is due to change. The development of Southbank Place, Leak Street Arches and a potential redevelopment of the former Waterloo International Terminal (WIT) will greatly improve the public realm connections and retail offering in and around Waterloo Station. Work has already started on Southbank Place with the majority of the demolition process now completed. Arranged over seven new buildings, in addition to the retained Shell Tower, the mixed-use scheme will comprise high end residential, 57,616 sq ft of offices (part of which is Pre-let) and 48, sq ft of retail and Leisure. The scheme, being undertaken by Braeburn Estates, is due to open in phases with a final completion in 219. Almacanter bought two of the buildings, Southbank Place One and Two, which are to be the first to open in the 1st and 2nd Quarters of 218 respectively. Retail and Leisure space is spread across the seven buildings and unit sizes range from just under 1, sq ft to over 9,5 sq ft. The developers are targeting a range of uses, from a convenience store fronting York Road, through to restaurants overlooking Jubilee Park and the River. At the south end of York Road opposite County Hall is Leake Street, often referred to as Banksy tunnel as it is one of the few locations that people are legally allowed to graffiti in the UK. Already a cultural location, being home to the Vaults, a multifaceted events space, as well as the House of Vans skateboard park and events space, London & Continental Railways (LCR) has full planning consent to convert a series of arches into a new restaurant and bar quarter. The development will comprise a total of 24,2 sq ft and will be arranged over eight separate units within the arches ranging from 1,7 sq ft to 4,4 sq ft. Construction work is due to start in June 216, with a planned opening date of January 217. Independent operators are being targeted to complement the existing cultural landscapes and two thirds of the space is now under offer with offers received on the remainder. Perhaps the biggest game changer to the retail landscape in the area, however, is a potential redevelopment of the space below the platforms of the former Waterloo International Terminal. The platforms themselves will be brought back into use in two years time for domestic services, raising the projected footfall to in excess of 5, people per day and providing the catalyst for a proposal of up to three floors of new mixed retail and leisure space of potentially up to 13, sq ft. A planning application is being submitted in May 216 and if the plans come to fruition, intended completion is 219. The shopping centre will be designed to serve not only customers of the busiest station in London but also the wider Waterloo area and beyond. Situated below the platforms of the former Waterloo International Eurostar Terminal Proposal for three floors comprising c. 13, sq ft of mixed-use retail and leisure space Full application to be submitted May 216 Intended completion due 218/219

15 The London South Bank Office & Retail Markets Q THE WATERLOO RETAIL & LEISURE LANDSCAPE IS CHANGING WATERLOO BRIDGE SOUTHWARK IMAX ROUNDABOUT JUBILEE GARDENS WATERLOO EAST SOUTHBANK PLACE (SHELL CENTRE) VICTORY ARCH SOUTH BANK ELIZABETH HOUSE WIT WATERLOO LEAKE STREET WESTMINSTER BRIDGE LEAKE STREET ARCHES REDEVELOPMENT LOWER MARSH

16 CAN WE HELP YOU? SIMON SMITH Leasing & Development M SS@UNIONSTREETPARTNERS.CO.UK RUPERT COWLING Leasing & Development M RC@UNIONSTREETPARTNERS.CO.UK GUY BOWRING Leasing & Development M GB@UNIONSTREETPARTNERS.CO.UK VINCENT CHEUNG Leasing & Development M VC@UNIONSTREETPARTNERS.CO.UK JULES HIND Leasing & Development M JH@UNIONSTREETPARTNERS.CO.UK NEIL DAVIES Leasing & Development M ND@UNIONSTREETPARTNERS.CO.UK MARK ANSTEY Leasing & Development M MA@UNIONSTREETPARTNERS.CO.UK ALISTAIR SUBBA ROW Leasing & Development M ASR@UNIONSTREETPARTNERS.CO.UK UNION STREET PARTNERS ONE AMERICA STREET LONDON SE1 NE T TEAM@UNIONSTREETPARTNERS.CO.UK UNIONSTREETPARTNERS.CO.UK Union Street Partners is a joint venture company between Farebrother and Tuckerman. It provides a specific and bespoke Real Estate service for the South Bank, a market which has undergone an unprecedented transformation and which is now firmly established as one of Central London s most important business districts. The Practice s services include Office and Retail Leasing & Development, Lease Advisory, Business Rates, Valuation and Investment advice. WORKING IN PARTNERSHIP MARK FISHER Investment M MF@UNIONSTREETPARTNERS.CO.UK ALEX LEWIS Lease Advisory, Valuation, Rating M AL@UNIONSTREETPARTNERS.CO.UK ALASTAIR HILTON Investment M AH@UNIONSTREETPARTNERS.CO.UK MALCOLM BRACKLEY Lease Advisory, Valuation, Rating M MB@UNIONSTREETPARTNERS.CO.UK This publication has been carefully prepared and it is intended for general guidance only. No responsibility is accepted by Union Street Partners for any errors or omissions. The information contained herein should not be relied upon to replace professional advice on specific matters and is not, in whole or in part, to be published, reproduced or referred to without prior approval. Information may be subject to revisions in subsequent editions. 216 Union Street Partners. All rights reserved. This research is available in PDF format. Please lc@unionstreetpartners.co.uk to receive a copy Designed and Produced by Sears Davies searsdavies.com