Member Article

South Bank sees double digit returns

The opening of London’s Shard has led to double digit returns for South Bank investors.

The Shard is the tallest building in Western Europe and transforms the London skyline. At 1,016ft the vertical city is home to offices, restaurants, the 5-star Shangri-La hotel, rental apartments and London’s highest viewing gallery which offers 360° views of the city.

Since plans for the building were unveiled in 2000, the South Bank area has become an area of prime investment and a rival to the city, midtown and west end markets.

According to global real estate agents IPD, (formally Investment Property Databank) returns in the South Bank market reached 12.8% last year making South Bank offices the second highest performing area of property in the UK last year.

Returns in the South Bank have been rocky over the past 12 years. In 2000 when the Shard concept was announced, returns in South Bank were the highest ever at 25.4% but by the time the design was finalised two years later the rental values had fallen by 11.2%.

The 2007 financial crisis put the development in doubt at the same time as South Bank values peak 50% above the 2000 levels. When construction began in 2009 South Bank rent fell by 16.3% but by 2011 the values had recovered by 20%.

It is thought that the influx of foreign investors using nearby offices in the area to flee political unrest abroad has pushed the South Bank returns up to double figures.

Greg Mansell, Senior Research Manager at IPD said, “Investors are still shying away from peripheral office markets but the investment performance of South Bank, particularly London Bridge, Southwark and Waterloo, is highly comparable to Central London. High profile developments such as The Shard will continue to solidify South Bank’s status as a core London market.

“Occupiers view the South Bank as a cheaper alternative to central London and despite obvious comparisons to the City occupier market, the rent differential between the West End and South Bank makes for an attractive case for occupiers, particularly TMT firms, to look to the South for value whilst avoiding stigma of moving to a fringe location.”

This was posted in Bdaily's Members' News section by Francesca Dent .