Office market commentary
The London Office Market
Southbank's reputation as a business centre has been strengthened significantly by successful commercial developments such as More London and Bankside 1/2/3. This has resulted in a rapidly improving working environment along the entire Southbank with enhanced and increasingly varied retail, leisure, and entertainment facilities. Limited competition is anticipated to help mitigate the imbalance between supply and demand, reducing letting risk and acting as a catalyst for rental growth.
A Positive Outlook
All market indicators suggest that the Central London office market is well on the road to recovery. Increasing demand and diminishing supply is resulting in revived market confidence amongst occupiers and investors alike. The supply squeeze combined with an extremely tight pipeline of Grade 'A' offices, presents a strong case for significant rental growth over the next 3-4 years.
Central London Availability - Q4 2010
Source: CB Richard Ellis
POSITIONING OF ONE BLACKFRIARS
The site occupies a prominent position on Blackfriars Road near Blackfriars Station and with views over the Thames onto St Paul's Cathedral. A high quality iconic redevelopment close to the River and enjoying panoramic views of London will attract West End and City occupiers prepared to pay a premium for such a unique product.
Rising Rents
Since the bottom of the rental cycle in summer 2009, rents remained flat until the end of the year with all sub-markets experiencing rental growth in the first quarter of 2010. Spurred by the imbalance between supply and demand, forecasts paint a positive picture with prime rents expected to reach £130.00 per sq ft in West End's Mayfair by 2013 and in excess of £70.00 per sq ft in the City.
Prime Rents - Q4 2010
Source: CB Richard Ellis
City Prime Rents - 1985 - 2015
Source: CB Richard Ellis
Attractive Investment Characteristics
Having moved out from 3.50% at their prime in the summer of 2007, current prime office yields have recovered to 4.00% in the West End and 5.50% in the City. London's attractiveness as a global centre has seen investors return to the market in significant numbers; overseas buyers are still dominant as Sterling's weakness provides a competitive advantage. Both UK and overseas investors continue to be drawn to London due to its relative stability, transparency and liquidity, in comparison to other markets.
Central London Prime Yields (%) - Q4 2010
Source: CB Richard Ellis
Constrained Development Pipeline
Over the next three years, levels of development completions of new Grade 'A' stock are expected to fall significantly to less than 1.3 million sq ft in 2011 - only a quarter of the 10-year average of 5.2 million sq ft per annum. This lack of new stock is expected to result in increased pre-let activity as occupiers compete to secure the diminishing supply of new space.
Central London Developments - 1985 - 2013
Source: CB Richard Ellis