CITY FLOOR REVIEW. A floor-by-floor analysis of the City office market Q

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1 CITY FLOOR REVIEW A floor-by-floor analysis of the City office market Q1 214

2 FIRST QUARTER REVIEW THE QUARTER IN NUMBERS 931 recorded requirements for City office space during Q1, up 12% on Q ,6 sq ft under offer at the end of Q1, within 144 floors 588 floors currently marketed as available in the City, totalling 5.1 million sq ft 25% reduction in the number of available floors in the City between Q4 213 and Q1 214 Demand for City office space remains robust across all floorplate size categories All floor size categories have enjoyed an increase in demand relative to supply during Q1, particularly offices with the smallest floorplates, which now have almost three requirements chasing each available floor The amount of space under offer is almost a million sq ft for the second quarter running as occupiers continue to commit to taking space Several large deals have been agreed during Q1 as a result of major HQ relocations and the supply of available floors has reduced considerably as space has not been returned to the market The amount of future supply being delivered through the development pipeline is very thin for this year and next Prime rents rise further to 6. per sq ft SUPPLY OF FLOORS IN THE CITY Number of available floors floors in the development pipeline due to be delivered to the market in ,383,66 sq ft 1,495,265 sq ft 895,869 sq ft 1.6 requirements per avaiable floor in the City, an increase from 1.1 in Q requirements per available floor sized between 1,-2, sq ft in the City 319,862 sq ft EC1 EC2 EC3 EC4 6. /sq ft prime rents in the City rise in Q1

3 REQUIREMENTS AND SUPPLY We recorded 931 active requirements for City office space during Q1, 75% of which was for space under 7, sq ft in size. The profile of current available floors is not well matched with demand however, and for offices with the smallest floorplates there were almost three requirements chasing each available floor. Whilst the number of recorded requirements for office space in the City has risen, so has the amount of space placed under offer during Q1. Headline grabbing deals include Mizuho taking 193, sq ft at 2 New Ludgate in EC4, ING taking 13, sq ft at 8- Moorgate, Lloyds Banking Group taking, sq ft at Alban Gate in EC2 and Octopus taking around, sq ft at Sainsbury s HQ in EC1. Other large requirements to watch out for are Crédit Agricole and Hermes who have both started to consider new HQ locations. Through combining the supply of available floors with the number of active requirements in the market, we are able to provide an indication of relative supply and demand levels for each size category of floor plates. The increased number of requirements and the sharp fall in availability during Q1 has increased demand across the spectrum. However, as detailed below, there are clear differences when the assessment is made by the size of floorplate. ACTIVE REQUIREMENTS PER AVAILABLE FLOOR BY FLOORSIZE CATEGORY Number of requirements per available floor HOT FLOORPLATES Offices with the smallest floorplates sized between 1,-2, sq ft were the most in-demand during Q1, with almost three requirements chasing each available floor in the City. Whilst the number of requirements for such space increased marginally during the quarter, it was the reduction in supply which has caused this imbalance WARM FLOORPLATES As the size of the floorplates increase, the number of requirements chasing each floor reduces. The small-to medium sized floors between 2,1-7, enjoyed a quarterly increase in the number of requirements per floor and remain in-demand markets Requirements Q1 214 Total COLD FLOORPLATES Both the number of recorded requirements for space over, sq ft in size and the commensurate supply of such floors in Q1 were largely comparable to Q Following the agreement of some headline deals in Q1, it was the reduction in supply of the largest floorplates which forced the number of requirements per available floor to rise, but they remain less in demand relative to offices with smaller floorplates. Q1 214 Q Q4 213 Floor size category (sq ft) 1, -2, 2,1-4, 4,1-7, 7,1-,,1-2, 2,+ Source: Gerald Eve

4 Q1 214 SUPPLY The total supply of available office space within postcodes EC1, EC2, EC3 and EC4 totalled 5.1 million sq ft over 588 individual floors, which is a substantial reduction on Q Here we detail our findings on the supply of floors by each postcode, indicating the number of available floors for each floor size category as well as the respective quality of each available floor. EC1 There is a shortage of new space across EC1, and a distinct lack of available floors with medium to large floorplates. ANGEL Floor size (sq ft) 1,-2, 2,1-4, 4,1-7, 7,1-,,1-2, 2, ,12 sq ft 59,613 sq ft 55,33 sq ft 75,232 sq ft EC1 GOSWELL ROAD OLD STREET OLD STREET 6,7 sq ft 8 EC1 2 Number of 7 available floors 6 3 CLERKENWELL ROAD HAC 57,6 sq ft CHANCERY LANE A HOLBORN ST BARTHOLOMEW S HOSPITAL LONDON WALL EC2 FARRINGDON ROAD ST PAUL S Floor size (sq ft) FLEET STREET ST PAUL S 1,-2, 2,1-4, EC4 MANSION HOUSE 4,1-7, 7,1-,,1-2, 2,1+ 47,838 sq ft MILLENIUM BRIDGE RIVER THAMES 55,85 sq ft 9 395,855 sq ft 199,856 sq ft 8 EC4 2 New Refurbished Unrefurbished Postcode boundary City boundary Number of 7 available floors ,8 sq ft 49,7 sq ft EC4 There are over 2 new floors available between 4,1 and 7, sq ft in size, the majority of which are housed at Kirkbi Real Estate Investment s New Fetter Place development. Source: Gerald Eve

5 Floor size (sq ft) 1,-2, 2,1-4, 4,1-7, 7,1-,,1-2, 2,1+ 33,695 sq ft GREAT EASTERN STREET SHOREDITCH HIGH ST 1,49,174 sq ft 32,668 sq ft 8 9 EC ,543 sq ft Number of 7 available 3 floors 6 3,438 sq ft 76,88 sq ft EC2 EC2 is relatively well supplied with new floors, most notably with larger floorplates between,1-2, sq ft in size, given availability at the Heron Tower and Finsbury Circus House. SPITALFIELDS LONDON WALL EC3 Floor size (sq ft) EC3 EC3 has a shortage of new floors between 2,1-4, sq ft and relative to the total floorspace available, has a high percentage of unrefurbished floors being marketed. 1,-2, 2,1-4, LOWER THAMES STREET 4,1-7, 7,1-,,1-2, RIVER THAMES ST KATHERINE DOCKS 2,1+ 158,6 sq ft 9 RIVER THAMES EC3 8 2 Number of 7 available 3 floors 6 66,831 sq ft 41,22 sq ft 654,5 sq ft 351,127 sq ft 223,594 sq ft

6 FUTURE SUPPLY The chart below indicates, by floor size category, the number of floors which are expected to be added to total supply over the medium term. FLOORS IN DEVELOPMENT PIPELINE BY FLOOR SIZE CATEGORY Number of floors to be added to future supply 9 8 Source: Gerald Eve ,+ sq ft,1 2, sq ft 7,1, sq ft 4,1 7, sq ft 2,1 4, sq ft 1, 2, sq ft Q The short term development pipeline in the City is currently very thin, with only 36 floors (the majority of which are medium sized) due to be added in Q With only 36 floors due to be delivered in 215 we do not expect a material improvement in supply levels, with limited space to satisfy an expected increase in furture demand. There are no floors with the largest floorplates over 2, sq ft due to be delivered in 215, which will present a challenge for large occupiers seeking new premises. Statistically the development pipeline improves dramatically in 216. However, downward pressure is already being exerted on the 216 pipeline with the likes of Mizuho pre-committing to 193, sq ft at 1 New Ludgate. Whilst the pipeline looks thin, there are of course a number of schemes with planning permission which could be started and delivered in 217. ASIA HOUSE, LIME STREET, EC3 This Beltane Asset Management scheme will deliver seven floors totalling approximately 19, sq ft and is scheduled for completion in Q VICTORIA EMBANKMENT, EC4 This Kier Property-owned building is undergoing extensive refurbishment and will deliver eight office floors totalling approximately 47, sq ft in 215. WHITE COLLAR FACTORY, EC1 This Derwent London scheme will deliver almost 268, sq ft of offices over 31 floors, 15 of which are between,1-2, sq ft in size. 52 LIME STREET, EC3 WR Berkeley have started construction on their new EC3 HQ dubbed The Scapel where they are expected to occupy 25% of the office space.

7 DEFINITIONS Availability Floorspace over 1, sq ft in size and available to move into within six months which may or may not be vacant but which is actively marketed by an appointed agent. We monitor availability in central London at an individual floor level as well as by the total volume of space. Each floor is assigned a floor size category and is graded for quality. The availability data covered in this report represents buildings within the postcodes EC1, EC2, EC3 and EC4, as depicted in the map. The floor area in sq ft adopted throughout is the net internal area. Availability is accurate two weeks prior to the end of the quarter. Floors which are under offer but are yet to complete are not included in our analysis. Newly available space Space on the open market (including developments) which are within 6 months of completion. This includes units of secondhand space which are undergoing refurbishment. Requirement Named entities with appointed agents and a declared requirement for office accommodation which the named entity wishes to satisfy in the foreseeable future. Our requirements data covers all of the postcodes EC1, EC2, EC3 and EC4, unless otherwise stated. If the requirement has a preferred size range, the average size of the requirement is used. Given requirements often include a range of targeted geographies, we have included the requirement for each of the sub-markets when analysing individual sub-markets, but, when calculating overall City requirements, duplicates are removed. Prime headline rents The rent being paid which may not take account of concessions such as rent free periods or other incentives. We have adopted the best achieved methodology and where there is no evidence; rents are recorded on the basis of the best hypothetical transaction which could be achieved at the end of that quarter. Our definition of a prime transaction covers a, sq ft office in a low rise, grade A building signed on a ten year lease. Incentives This refers to the concessions offered by a landlord to a tenant as part of the negotiation process. Incentives usually adopt the form of rent free periods, but can also be in the form of capital contributions or the fit-out of the building. Floor quality New: Floor in a newly-developed or newly-refurbished building, including sub-let space in new buildings which have not been previously occupied. Refurbished: A floor which has been comprehensively refurbished and is of good specification, floorplate efficiency and image, but is in a building which is not new or been comprehensively refurbished. Unrefurbished: Poorer quality space, usually offered for occupation as is. Under offer Space which a prospective occupier has agreed in principle to occupy, but is most likely to not as yet be under any legal or contractual obligation to do so. Take-up Occupational transactions including offices let or sold to an occupier, developments pre-let or pre-sold to an occupier or an owner occupier purchase of a freehold or long leasehold. Quality of choice This is a subjective measure holistically assessing the appropriateness of current availability to modern office requirements. Whilst our figures may represent a large number of floors available in particular size categories or postcode geographies, the floorplate efficiencies or amenities on offer within this supply may not meet all the expectations of modern office tenants and the quality of choice would be lower. Floor / Floorplate As well as the total volume of space being marketed as available, we also monitor the number of floors which account for this total volume. We monitor whether it is a full floor or part floor which is being marketed, although for our statistics, we treat an individuallymarketed part floor as one floor. If a floor is capable of subdivision to accommodate two suites, but can likewise be occupied together, we use the total floor plate for that floor. Future supply This is essentially a review of development due to be delivered to the market and does not include space bought to the market in the future due to lease expiries or the natural churn of stock. We cover those floors over sq ft in size which are being developed and are due to be delivered to the market.

8 CONTACTS Gerald Eve s London office team provides specialist advice across the spectrum including agency, investment, lease consultancy, rating, valuation, planning and development and project management. To find out more about us and what we could do for you please visit our website at or contact the following people direct: CITY Simon Prichard Head of City Office Tel. +44 () Mobile +44() sprichard@geraldeve.com Fergus Jagger Office Agency Tel. +44 () Mobile +44 () fjagger@geraldeve.com Andrew Mears National Investment Tel. +44 () Mobile +44 () amears@geraldeve.com WEST END Lloyd Davies Head of West End Agency Tel. +44 () Mobile +44 () ldavies@geraldeve.com Paul Pride Office Agency Tel. +44 () Mobile +44 () ppride@geraldeve.com Graham Foster Lease Consultancy Tel. +44 () Mobile +44 () gfoster@geraldeve.com PLANNING & DEVELOPMENT Hugh Bullock Head of Planning and Development Tel. +44 () Mobile +44 () hbullock@geraldeve.com Lisa Webb Planning Tel. +44 () Mobile +44 () lwebb@geraldeve.com Jeremy Randall Planning Tel. +44 () Mobile +44 () jrandall@geraldeve.com GERALD EVE S UK OFFICE NETWORK London (City) 46 Bow Lane London EC4M 9DL Tel. +44 () London (West End) 72 Welbeck Street London W1G AY Tel. +44 () Birmingham Bank House 8 Cherry Street Birmingham B2 5AL Tel. +44 () Cardiff 32 Windsor Place Cardiff CF3BZ Tel. +44 () Glasgow 1 West George Street Glasgow G2 2HG Tel. +44 () Leeds 1 York Place Leeds LS1 2DR Tel. +44 () Manchester No1 Marsden Street Manchester M2 1HW Tel. +44 () Milton Keynes Avebury House Avebury Boulevard Milton Keynes MK9 1AU Tel. +44 () West Malling 35 Kings Hill Avenue West Malling Kent ME19 4DN Tel. +44 () For more information on any of the facts and figures in this publication, please contact: Steve Sharman Tel. +44 () Disclaimer & copyright This brochure is a short summary and is not intended to be definitive advice. No responsibility can be accepted for loss or damage caused by reliance on it. All rights reserved The reproduction of the whole or part of this publication is strictly prohibited without permission from Gerald Eve LLP. 4/14