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LONDON-Top South Bank rental values have now reached £45 ($62.55) per sf and Cluttons is forecasting that this will be the peak in the current rental cycle. The firm’s latest South Bank research report highlights weakening demand, increasing supply and a more cautious approach by occupiers, and forecasts that this combination will lead to top rental values falling slightly over the next 12 months.

Total available office space on the South Bank grew over the last four months to 291,026 sf, of which 27% is grade A stock. And another 538,000 sf is currently under construction. At the same time, 2.85 million sf of office space has planning consent and over 860,800 sf is at the planning application stage.

Melanie Bayliff, research analyst in Cluttons’ Central London business team says the statistics were not all bad news for the district: ‘The large amount of development activity and large floorplates available at reasonable rents will ensure that the South Bank is chosen over many other central London locations. Our view is that take-up will continue to grow.’ But she adds: ‘It is unlikely that there will be any increase in top rental values in the near future due to the market becoming overheated and ongoing US concerns.

Two very substantial office projects south of the river have already been announced this year. Clerical Medical Investment Group and Delancey Estates are working up a 750,000 sf office building for the site of Becket House on Lambeth Palace Road and York House on Westminster Bridge Road, SE1. And Sainsbury’s has unveiled plans for the redevelopment of its Stamford Street headquarters. The project, due to be completed by 2004, will create 376,600 sf of office space over 19 floors, with a Sainsbury’s store planned for the ground floor.

Two significant pre-lets were highlighted in the research. Ernst & Young has taken 383,992 sf at CIT’s More London development, and the Financial Times has signed up for 162,702 sf at Riverside House in Southwark.

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