Comparisons can be drawn between the South Bank and Midtown. They both offer excellent access to the City and West End; they both offer rents at discounted rates to the City and West End; they are both seeing significant development – King’s Cross Central to the north of Midtown, and Sellar’s schemes on the South Bank as well as the redevelopment of Sea Containers House, the Shell Centre and Elizabeth House, should the latter two ever get under way (see p71).
But behind the similarities, there are some significant differences. For example, the Midtown stock figure is almost twice as high as that of the South Bank (32m sq ft compared to 17m sq ft). According to EGi Research data, South Bank availability rates have tracked 2%-3% below Midtown rates – at least until the completion of the Shard.
In terms of take-up, both markets have seen peaks and troughs, with highs appearing to switch between the markets until 2008. However, since then, there has been a smoothing out, with the South Bank achieving around 80,000 sq ft per quarter and Midtown averaging around 360,000 sq ft per quarter.
EGi’s consensus rents panel (based on the average of estimates from a panel of commentators asked to estimate rental values for a hypothetical 20,000 sq ft grade-A unit) puts rents on the South Bank significantly lower than in Midtown (£54.50 per sq ft with 23 months rent-free on Chancery Lane, compared with £46.50 per sq ft with 22 months rent-free at More London), so with all this in mind, why is the South Bank lagging behind in terms of take-up?
The key difference appears to be Midtown’s ability to attract occupiers from certain sectors. Since 2005, the South Bank has seen government, transport, professional and the TMT sector account for the most take-up in any given year; while in Midtown take-up was dominated by the professional sector (which includes legal) between 2005 and 2007, and then TMT from 2008 to the present, with a blip in 2010 for the financial sector.
While this ability to attract and retain a sector has been a strength for Midtown in the past, firms are increasingly footloose, and attracted to low rents (assuming a good product). It will be interesting to see if this diversity of occupier, alongside an increasing range of stock, begins to work in the favour of the South Bank.
Tom Pilkington
Head of London offices, EGi
