Central London has never seen so many development opportunities in play at one time as in 2019. There is 6.7 million sq ft of space currently available – the equivalent of 22 per cent of the total development stock traded collectively across the Canary Wharf, the City, Midtown, South Bank and West End markets in the last 10 years (31 million sq ft).

With more development opportunities being marketed than ever before, a number of high profile sites that have already traded have attracted fierce competition from both UK and overseas investors. Nowhere has this been more obvious than in South Bank, where deals have included:

• Guy’s and St Thomas’ Charity choosing to partner with Stanhope and The Baupost Group on a major 5.5 acre (2.2 hectare) development opportunity at Royal Street, London SE1. 

• LandSec’s £87.1 million purchase of 25 Lavington Street, consisting of two office buildings and up to 128,000 sq ft of space, to complement its already burgeoning development pipeline on the South Bank.

• M&G Real Estate acquiring The Financial Times London headquarters at One Southwark Bridge from Pearson for £115 million, 28 per cent above the asking price.

Ongoing sales in the area include the former ITV HQ at Upper Ground, Colechurch House next to London Bridge and the soon to be vacant Blackfriars Crown Court.

Fundamentally, the central London market as a whole is in good shape. Take-up of new office space has also been operating at record levels with 2017 and 2018 together marking the best ever two-year period on record.

With this backdrop, South Bank has the most constricted supply of good quality office space across the whole of London, with a vacancy rate of 3.2 per cent – notably lower than the City (5.2 per cent) and West End (3.9 per cent).

The truly mixed-use composition of South Bank and its spread of office occupiers and business sectors continues to attract strong demand. This has seen rents increase by 25 per cent in the last five years and, with Grade A space in the area now marketed at over £60 per sq ft, as rents homogenise across central London, development has become an attractive option with the added potential to pre-let ahead of completion.

A rise in commercial values, coupled with more stringent affordable housing requirements, has led to central London offices in emerging markets such as South Bank, Shoreditch and Aldgate overtaking residential as the highest value land use.

With this reversal, we can expect to see landowners re-appraising land values which may in turn lead to further site sales in 2019, particularly in Zone 2 hotspots including Whitechapel, Canada Water and areas around White City.

While South Bank has taken the lion’s share of activity in recent months, appetite for London’s development opportunities transcends this sub-market alone. The long-term nature of development allows investors to take a more sanguine view of current uncertainty. What’s more, the opportunity to secure a prime site is rare and is often retained as a grandfather asset once developed.

Further information

Read more: City Investment Watch