Commercial Property Values in South London
Commercial Property valuations have fared better in the capital than elsewhere in the country over the course of the last decade or so. Whilst many regions of the country faced economic gloom following the years of the credit crunch, with many high streets suffering, London as a whole fared a lot better. According to the government's own statistics the retail sector showed a particular difference. On average retail headline rental figures in England and Wales fell by no less than six per cent in the twelve months prior to January 2011, but figures for London showed a six per cent increase in value. It should be said that the average rise was highest in inner London, but the suburbs also saw a better performance in retail property growth than elsewhere in the country. Because South London encompasses some sections of inner London as well as more suburban areas, it saw both intense growth and more modest increases depending on the particular location. Therefore, when looking into commercial property values in South London, it is always important to consider the exact neighbourhood because variations can be pronounced even within boroughs.
The London Borough of Lambeth
This part of South London makes a good case study because, like its near neighbour Southwark, it has some prime locations near to Westminster on the South bank of the Thames. It also encompasses the lively commercial centre of Brixton, linked to the rest of the capital by numerous rail lines and an underground station. It also has some residential areas which have seen little growth with commercial property values in recent years. According to a 2013 report put together for the local authority in the borough by BNP Paribas Real Estate, the commercial property markets in the borough are inherently cyclical.
The report states that commercial values across the borough did fall during the recession which followed the global economic crisis somewhat, but that they subsequently recovered to some degree, depending on the location. It says that both rent levels and yields remain highly sensitive, even in areas where growth has been strongest - places like Vauxhall and Waterloo. Nonetheless, redevelopment projects that come before the authority's planning department in these two areas of the Lambeth are valued very high indeed. Projects to build new office blocks as well as storage and distribution buildings are valued at an average of £14 million. The average value of mixed development projects in the two prime areas is around the £24 million mark.
In the report's opinion, over the course of the four years leading up to 2013, yields for commercial property in Lambeth as a whole increased. Because new tenants might need to be found, and change commercial space usage permission might need to be sought as a result, BNP Paribas' opinion was that despite higher potential yields, the capital value of commercial space in the borough was slightly arrested. However, the report goes on to conclude that as the British economy goes on to recover, increased capital values of commercial land - even outside the borough's hotspots - can be expected.
At the furthest extreme of South London, Croydon has also seen a similar story to Lambeth in the last ten years or so. In terms of office space, government figures state that self-contained office suites that are over 1,000 square metres in size were valued at no less than £200 per square metre in 2011. Croydon's office rentals might not be as high as other parts of the capital, such as Docklands or Hammersmith, where the corresponding costs would be £400 and £375 per square metre respectively. However, as of 2011, they were significantly higher than places like Southampton, Norwich, Liverpool and Sheffield. Indeed, the growth of Croydon's office rental prices was not far from that which central London saw, at around 15 per cent.
In the industrial market, Corydon's rental prices outstripped many more parts of the capital. Looking at small industrial units and workshop spaces - something which South London has plenty of - Croydon led the way. Smaller and starter units that are something between 50 and 200 square metres were priced at an average £120 per square metre in this part of South London - more than Reading, Oxford and Cambridge and significantly higher than other similar places to the north and east of the capital, such as Romford and Enfield. The reasons for this at the extreme South London are many, but good communications - via both the road and rail networks - are probably chief amongst them.
Although it is without doubt that it is Central London which has driven the capital's growth in commercial property values in recent years, South London has followed in turn, with only a few exceptions. Whilst the economic climate in Britain appears to be steering away from negative growth, commercial property values to the south of the river look set to rise.