London’s South Bank market delivered the highest yields and income return of any of the central London office sectors during 2011, according to new research.
IPD’s and Farebrother’s first annual South Bank investment report reveals that yields on the South Bank were 5.4%, 100 basis points higher than the West End market.
Income return on the South Bank was 5.7%, outperforming all other central London markets, which averaged 4.8%, with the West End delivering 4.7% and City offices 5.1%.
In 2011, South Bank offices returned 12.8%, dropping back from 19.2% in 2010. This was higher than Midtown, the West End and The City, which generated an average return of 12.7%.
Alastair Hilton, head of investment at Farebrother, said: “The total value of investment transactions on the South Bank increased by 33%, from £401.2m in 2010 to £531.8m in 2011, but a lack of opportunities, competing residential values and general illiquidity in funding is holding the market back.
“Key asset performance drivers such as South Bank’s low availability rate and restricted development pipeline remain.”
Greg Mansell, senior research manager at IPD, said: “Investors moving into the South Bank are often UK-based, priced out of the conventional centre but with a little more local knowledge and discretion. Such Investors can enjoy income returns in line with the UK office average sourced from low-risk occupiers – a key attribute when considering the ever-increasing emphasis on income risk and return in the current climate.”
daniel.cunningham@estatesgazette.com
