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The introduction of the Jubilee line completely transformed South Bank as it linked the area with the West End, the City and Canary Wharf and almost overnight seemed to bring it closer to Central London. Now, the area is seeing large redevelopment in the form of projects such as The Shard building and the refurbishment of two of London’s busiest stations, Waterloo and London Bridge, all of which is expected to attract more people to work in the area.
While rents in the area are now increasing, with prime Grade A offices in South Bank fetching around £43–45 per square foot, they are still nowhere near as extreme as offices in Mayfair, which sees rents at £99 per square foot, and the rest of the West End where rents sit around £55 per square foot. Many businesses are still attracted to the South Bank location for the very reason that rents remain affordable compared to much of the rest of London.
The global real estate investor, Deka Immobilien, which invests internationally, has been aware of the rise in interest in offices in South Bank and recently invested €275 million in Palestra, a commercial office building which is located by Southwark underground station.
Palestra covers a total of 297,000 square feet and is fully let for over 20 years to Transport for London, generating an income of £12 million per annum. This is estimated to return a yield of 5.2% and if the popularity of offices in South Bank continues then return on the investment could rise even further.
Deka Immobiliem, like many investors, has acquired several freeholds within London such as 5 Aldermanbury Square in the City for €290 million. This investment in South Bank highlights how London is evolving and this may be largely attributable to areas which are being redeveloped, becoming suddenly appealing and attractive to more businesses into the area.
Morgan Pryce is a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.