Western Europe: Corporate Occupier Conditions

Transcription

1 EMEA Corporate Occupier Conditions - Q Western Europe: Corporate Occupier Conditions Taking Stock

2 2 On Point EMEA Corporate Occupier Conditions Q Introduction Welcome to the Q edition of EMEA Corporate Occupier Conditions. A return to uncertainty or a temporary pause? As Europe sets-off on its summer holidays, chilly economic headwinds are generating more cautious behaviour from corporate occupiers in the regions real estate markets. Demand and confidence has been tempered by mounting concerns over the handling of the sovereign debt crises in Europe and the US, and increasing doubts about the pace of future global economic expansion. Corporate occupiers are re-applying the brakes to capital investment projects and hiring plans until there is greater certainty over near-to-medium term economic conditions. Some are going further, embarking on a new round of headcount reductions. Most notable here have been recent announcements from Cisco, Microsoft, Research in Motion, and HSBC. Furthermore the latter has also announced its intention to close operations in 20 countries around the world. No surprise therefore that the EU Confidence Index has turned downwards after a sustained period of steady uplifts. The contrast with the corporate surveys of the early spring could not be greater. These had pointed towards headcount increases, market expansion and significant M&A activity as just some of the drivers of increased real estate activity. Clearly these are on hold and have led to more subdued activity levels in the markets. The key question of course is the extent to which this is a temporary pause or a more sustained rethink of growth strategies and trajectories amid powerful economic uncertainty. Time will tell. But what is clear is that the path to recovery has a few more twists and turns to pass through. Corporate Real Estate (CRE) teams will need to be mindful of this and primed to respond to sudden changes of direction or approach. Introspection prevails Alongside rising uncertainty is a growing introspection from corporate occupiers. This takes two clear forms: First, the internal corporate real estate (CRE) function within many corporate occupiers continues to be rethought and remodelled to drive stronger business engagement and deliver greater strategic value to the decision making of the wider business. Secondly, the CRE function is actively investigating the opportunity to transform the existing workplace. This is driven by the twin aims of supporting cost avoidance initiatives whilst simultaneously raising the efficiency and productivity of the real estate portfolio. The reduction in corporate capital expenditure levels might serve to halt progress here over the short-term, but longer-term workplace programmes will be a key feature of CRE strategies. Growing evidence of evolution Finally, there has been strong evidence of the further evolution of the CRE outsourcing market in EMEA over the last few months. A growing number of EMEA domiciled corporations are coming to market for (often global) real estate solutions to complex, mixed office and industrial portfolios. These typically first generation outsourcers are not merely seeking support for transactional activity, but rather are engaging with service providers to drive transformation in CRE team structure, strategy and delivery. They are seeking support in addressing the challenges of decentralisation; of poor real estate metrics and monitoring; and of implementing coherent and strong portfolio strategies. Transformation is also evident amongst the more established EMEA market, with second and third generation outsourcers also renewing or re-tendering in the market, a trend which has, in part, been fuelled by churn amongst senior CRE leaders. Vincent Lottefier Chief Executive Officer EMEA Corporate Solutions

3 On Point EMEA Corporate Occupier Conditions Q EMEA Corporate Occupier Market Conditions: Summary Exhibit 1: A weaker economic outlook characterised by strong variation Worsening uncertainty about the Eurozone debt crisis and the potential risks have softened the short term economic outlook. Wide national economic variations persist. Germany, the Nordics and increasingly France continue to perform well. In contrast the situation in countries such as Greece, Portugal, Ireland, Italy and Spain remains tense. The UK and France sit in the midst of these two groups, with growth of around 1-2% in The outlook for the European economies will be dominated by mounting concerns surrounding sovereign debt contagion from the Eurozone periphery, with new tensions being felt in Italy and Spain % Ireland Spain Hungary Italy UK France Netherlands Belgium Czech Republic Finland Germany Poland Russia Sweden Exhibit 2: Corporate confidence takes a knock Economic Sentiment (LHS) Retail Trade Confidence Service Sector Confidence Industrial Confidence After a sustained period of gradual upward progression, The European Commission Confidence Indicator turned downwards in July as corporate confidence took a hit in light of the economic pressures outlined above. as continued its upward progression Recent weeks have also brought a number of large-scale global headcount reductions in both the technology and banking and finance sectors. From a real estate market perspective, most occupiers are taking stock of the situation with capital expenditure, expansion plans and real estate strategies being put on hold. Exhibit 3: Overall activity levels stable but CEE improving more markedly than Western Europe Q take-up was 2.7 million sq m up 2% q-on-q and 4% on a year ago. It is also 8% higher than the 10 year average. Our expectations for 2011 are for an unspectacular year with volumes forecast to be around the same level as seen in Take-up volumes were slightly stronger in CEE (up 8% q-on-q and 24% y-on-y) with Western Europe being essentially unchanged. CEE volumes were driven by improving demand in Moscow, but significantly Warsaw and Prague have also shown encouraging activity so far over Activity in Germany is strong but modest in the core markets of London and Paris. Exhibit 4: A subdued outlook with growing introspection amongst occupiers 14,000 12,000 10,000 8,000 6,000 4,000 2, m² Take-Up Central & Eastern Europe 10-year average (last 10 y) Take-Up Western Europe 4,000 3,000 2,000 1, m² 000 m² 0 0 2Q01 2Q02 2Q03 2Q04 2Q05 2Q06 2Q07 2Q08 2Q09 2Q10 2Q11 CEE Western Europe 12 Month Rolling (RHA) Our expectations for 2011 are for an unspectacular year with volumes forecast to be around the same level as seen in The future outlook for the occupier market is contingent upon how quickly the sovereign debt crisis can be resolved. 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Market churn, generated by responses to lease events, will underpin the bulk of occupier activity over the remainder of this year. It should be noted that such events do often enable alternative real estate and portfolio strategies to be realised however. Germany, the Nordics and the core markets of London and Paris are expected to witness expansionary demand although the scale of such demand which ultimately materialises in the markets may reduce given the issues outlined above.

4 4 On Point EMEA Corporate Occupier Conditions Q Exhibit 5: Vacancy rates moved marginally downwards but remain in double-digits The European vacancy rate moved downwards, falling by a mere 10 bps to 10.2%. The rate has remained in double digits since Q Prime space remains limited in many markets and has driven rental stabilisation or growth. Much available supply is second-hand space released by occupiers who have been upgrading or right-sizing their portfolios. Occupiers seeking to dispose of surplus space are therefore facing challenging market conditions. Vacancy Rates Q % 10 15% 5 10% 0 5% 12.1% 10.3% 20.6% 13.5% 6.0% 7.0% 6.8% 11.2% 17.1% 14.3% 9.3% 9.3% 8.5% 7.9% 10.5% 8.8% 11.9% 6.0% 11.4% 10-12% 10.2% 9% 6.6% 20.6% 10.9% 23% 15.1% 10.3% 12.6% 17.2% 12.5% 8.4% 16.8% 3-4% 5% 14% Johannesburg Casablanca 10% 6-7% 10 % 10.5% 44% Exhibit 6: The development pipeline has been moderated across most of the region Completions (millions sq m) Vacancy rate (%) New completions have decreased further q-on-q with only c670,000 sq m of office space completed across the region 50% below the 12 long-term average Completions in the Moscow market dropped below 100,000 sq m; in London only 8,000 sq m of new space was added and in nearly all European markets completion volumes are well below the long-term average. For the full year, we expect about 3.9 million sq m of office space to complete (including pre-lets) the lowest volume in more than a decade. Exhibit 7: Western European Red, Amber, Green Matrix (RAG) Our RAG charts provide a sense of 5 year forward looking market conditions Based on a combination of prime econometric rental forecasts and local market sentiment we identify whether markets are landlord favourable (red), tenant favourable (green) or balanced (amber). For mature Western European markets future conditions are mixed but, owing to shortages of quality supply, conditions have hardened markedly towards landlords in most markets. Amsterdam Frankfurt London City Milan Paris Core and niche financial centres such as London, Paris and Zurich, have turned strongly in favour of the landlord. Zurich Landlord Favourable Market Balanced Market Tenant Favourable Market Exhibit 9: CEE and MEA sub-region Red, Amber, Green Matrix (RAG) Bucharest Moscow Warsaw Cairo Dubai Istanbul Landlord Favourable Market 2011 Balanced Market Tenant Favourable Market In the CEE sub-region, prime rental increases have been marked q- on-q and this has led to markets such as Moscow and Warsaw turning further in favour of the landlord. This is very much a function of supply. Despite having reasonably large development pipelines, developers do not tend to build large volumes of space at international quality putting such space at a premium, particularly given improving demand. Markets such as Dubai and Abu Dhabi are over-supplied and as such underlying conditions are firmly in favour of the occupier. In North Africa, recent political turmoil has led to a softening of market conditions although fundamentals suggest that strong rental growth will return as soon as a semblance of operating normality returns.

5 On Point EMEA Corporate Occupier Conditions Q Exhibit 9: EMEA Office Occupier Clock Landlord s Market Tenant s Market Rental Growth Slowing Rents Falling London City, Oslo Rental Growth Slowing Rents Falling London West End Moscow, Zurich Cairo Casablanca, Tel Aviv Algiers Düsseldorf, Geneva, Lyon, Stuttgart Munich, Stockholm Warsaw, Berlin, Cologne, Gothenburg, Hamburg, Helsinki, Paris Copenhagen Istanbul, St. Petersburg, Malmo, Manchester, Western Corridor Rental Growth Accelerating Rents Bottoming Out Abu Dhabi Dubai Athens, Lisbon Barcelona, Leeds, Madrid, Belgrade, Doha Brussels, Dublin, Edinburgh, Luxembourg, Jeddah, Riyadh Amsterdam, Eindhoven, Rotterdam, The Hague, Utrecht, Bucharest, Budapest, Sofia, Zagreb, Rome, Tri-City Birmingham, Bristol, Cardiff, Frankfurt, Glasgow, Milan, Bratislava, Kiev, Krakow, Prague, Johannesburg, Tunis Rents Rising Decline Slowing Western Europe Central and Eastern Europe Middle East & Africa 38 of the 66 markets plotted on the latest EMEA Office Property Clock occupy positions at or beyond 6 o clock, reflecting the likelihood of growth in prime rents before the end of the year. Cairo continues to occupy the 3 o clock position but expectations are that when demand returns to the market it will move quickly around the clock and back firmly into rental growth as supply is now even more limited post revolution. It should be noted that a number of new markets are contained in both the above clock and the wider report. We are pleased to now report on the Bristol, Cardiff, Belgrade, Bratislava and Sofia markets.

6 6 On Point EMEA Corporate Occupier Conditions Q WESTERN EUROPE: Corporate Occupier Conditions Economic growth has been very mixed in Europe so far this year, with stronger than expected activity in the Eurozone s core economies in Q1, seemingly stalling in Q2. There remains significant divergence between the dynamic export-driven economies of Germany and the Nordics, where 2011 growth is expected to be in excess of 3.0%, and the Eurozone s southern periphery (Greece, Spain, Portugal and Italy) where combined growth is likely to be less than 0.5% per annum in The UK and France sit in the midst of these two groups, with growth of around 1-2% in The outlook for the European economies will be dominated by mounting concerns surrounding sovereign debt contagion from the Eurozone periphery, with new tensions now being felt in Italy and Spain. Demand for office space across Europe was unspectacular in Q2 with circa 2.7 million sq m of take-up recorded. This was a volume 2% higher than Q1 and 4% higher than Q This level of activity was however high relative to the long-term average (up 8%). Expectations for annual take-up at the year end are moderate with total volumes being similar to those witnessed over In line with sound economic conditions and performance, the German office markets (with the exception of Düsseldorf which had a strong Q1) exhibited further increases in demand and take-up. Volumes in London and Paris remained modest, with volumes in London City so far this year significantly down on 2010 performance. Vacancy rates moved only marginally q-on-q. European vacancy rates continued their downward trend but fell by a mere 10bps to 10.2%. Rates have now been at double-digit levels since Q It should be noted that prime space in many markets, notably London and Paris, still remains limited and this has driven rental stabilisation or growth as well as presenting a real challenge to corporate occupiers. Much of the supply in the markets is second-hand space released by those occupiers who have upgraded or right-sized over recent times. This second hand space continues to trade at a significant discount to prime. Prime rents across Europe continued their modest growth. The European Office Index grew by 2.1% q-on-q but was highly influenced by double digit rental growth in select CEE markets. In Western Europe, rental costs rose sharpest in Lyon (+8%) but increases of more than 2.5% q-on-q were seen in Munich, Stockholm and London s West End. The difficult debt situation of governments and households and significant austerity measures continues to drag rents in markets such as Madrird, Barcelona and Dublin, where rents declined further. The widening differential in rental performance across Western Europe is clearly evident in the latest Jones Lang LaSalle Office Occupier Clock below. Exhibit 10: Western Europe Office Occupier Clock London City, Oslo London West End Zurich Rental Growth Slowing Rents Falling Düsseldorf, Geneva, Lyon, Stuttgart Rental Growth Accelerating Rents Bottoming Out Munich, Stockholm Berlin, Cologne, Gothenburg, Hamburg, Helsinki, Paris Copenhagen Malmo, Manchester, Western Corridor Athens, Lisbon Barcelona, Leeds, Madrid Brussels, Dublin, Edinburgh, Luxembourg Amsterdam, Eindhoven, Rotterdam, The Hague, Utrecht Rome Birmingham, Bristol, Cardiff, Frankfurt, Glasgow, Milan

7 On Point EMEA Corporate Occupier Conditions Q Amsterdam Cost: 335 / sq m Competition:44,400 sq m Choice: 17.3% The amount of competition in the market increased q-on-q by 81%, but this was about average and as a result there was little meaningful decrease in choice. This environment of subdued occupier demand and stable supply is expected to persist with moves driven by cost containment rather than any expansion. The only movement in supply has been witnessed in the very best space where there has been a slight reduction in choice. The market is still characterised by a large amount of oversupply, particularly in more peripheral areas where choice is inflated by less suitable accommodation and a lack of alternative uses. In the medium term this could reduce as the municipality is actively encouraging hotel conversion outside of the City core. There has been no movement in prime rents or secondary rents, although incentives could increase later this year as the market encourages absorption. Athens Cost: 270 / sq m Competition: n/a Choice: 15.1% The Greek economy is in the middle of a deep recession. Business confidence is low and although the bailout approved in July 2011 of 109-billion will give Greece more breathing room, it does not eliminate the probability of going through deeper debt restructuring in the future. GDP contracted by 4.4% in 2010 according to Global Insight and the latest forecasts suggest only marginal improvements, ranging between -3.5% and -3.9% (IMF) this year. Unemployment has also surged to 15.8% (April 2011) compared to 11.9% (April 2010).These trends continue to impact the office market with vacancy rates reaching 15.1%, up from 12.5% at the equivalent period last year. Occupational costs continued to fall and, compared to pre crisis levels, are approximately 41% lower with the best space commanding 270 per sq m per annum. Occupier activity has increased in the north of Athens, with corporate occupiers relocating on the basis of cost reduction. Antwerp Cost: 145 / sq m Competition: 16,200 sq m Choice: 11.8% Occupier activity remains subdued with leasing volumes for H down 24%, when compared to the equivalent period of There are, however, some large scale requirements pending that we expect to transact in the second half of the year. Despite a relatively low level of activity, the vacancy rate actually fell to 11.8% from 12.9% in the previous quarter. While some choice was absorbed, we have also seen some reallocation of vacant space to other uses as well as the temporary removal of supply which is now undergoing refurbishment. The prime rent in the CBD increased by 6.6% to reach 145 per sq m this quarter. Rents remained stable in all other districts, reaching 136 per sq m in the Ring district as a whole should see some limited rental growth, driven primarily by supply shortages for certain types of space, especially in the South of Antwerp and particularly for units over 2,000 sq m. Barcelona Cost: 225 / sq m Competition: 74,560 sq m Choice:13.5% Take up volumes in Q2 reached 74,560 sq m, up 14% q-on-q and 43% up from the equivalent quarter last year. Improvements in demand were driven by attractive incentives as owners are faced with rising vacancy rates and therefore opting to implement more attractive rental policies. On the supply side, vacancy rates have remained fairly stable over the year and were up only 10 bps q-on-q. No speculative development is due to come onto the market over H Indeed, over the next two years projects will be limited with the majority of developments are due to complete in In line with the trend over the last three years, rental levels declined over Q2 by an average of 1.4%. Prime rents are expected to continue to decline very slightly before stabilising at the end of the year.

8 8 On Point EMEA Corporate Occupier Conditions Q Berlin Cost: 252 / sq m Competition:149,700 sq m Choice: 8.8% The occupational market has become more competitive with deal volumes at a 10-year high at 282,000 sq m and 39% above total take-up in Activity was driven by the East sub-market where Mercedes Benz AG took a 26,000 sq m unit. This positive tone is expected to continue into the second half of the year with more expansionary activity in evidence. As a consequence of increased competition, choice reduced with a lack of new completions further exacerbating this pressure. The cost of space increased q-on-q with further rental increases expected this year, driven by the strength of competition, rather than just a lack of choice. This change in the market dynamic is also being felt in incentives, with landlords less likely to grant deals at the levels seen over recent quarters. The majority of deals in the market were completed at rents of between 10 and 15 per sq m per calendar month. Secondary rents remained unchanged q-on-q. Bristol Cost: 328 / sq m Competition: 7,600 sq m Choice: 12.3% Occupier demand remains relatively subdued with leasing volumes down 49% compared to the previous quarter. Looking ahead, we expect annual take-up in Bristol city centre to be below the five-year average of 52,000 sq m in The volume of Grade A supply in Bristol city centre continues to be eroded but is offset by a steady stream of second hand space which remains unattractive to occupiers. We are unlikely to see any new speculative starts in the short term as developers continue to exercise caution, which has been further fuelled by AXA s decision to shelve its 7,500 sq m Bristol requirement. Prime rents remained stable at 328 per sq m. Incentives remain generous in the city centre at up to 18 months on a five year term and up to 36 months on 10 years, although this is deal specific. With Grade A supply continuing to fall, we expect incentives to move in over the next 12 months. Birmingham Cost: 340 / sq m Competition: 14,700 sq m Choice:20.0% Choice in the market increased over Q2, with vacancy rates reaching record highs of 20%. This was driven solely by the release of Grade B space, with some occupiers releasing space back onto the market and taking the opportunity to upgrade. Occupiers seeking Grade A space face more limited choice, with Grade A vacancy rates falling to just 3.8% due to little change in the development pipeline. As no speculative completions are scheduled for this year, we expect even modest levels of take-up to begin to absorb supply. Occupier demand increased significantly over Q2, up 55% y-on-y. Activity was boosted by a number of large deals including the 3,900 sq m deal to the Ministry of Justice and the 2,700 sq m deal to Deutsche Bank. Going forward we expect the public sector, which was still active over Q2, to be a net disposer of space nationally. Cost remained stable with prime rents at 340 per sq m at the end of Q2. Incentives remain generous at around 36 months based on a 10 year term. Brussels Cost: 310 / sq m Competition:63,000 sq m Choice: 11.2% Occupier activity remains relatively subdued with just 63,000 sq m of take-up during Q2. Completions totalled 25,900 sq m in Q2 of which 15,700 sq m was built speculatively, the only speculative delivery of H1. The limited level of speculative completions combined with the low level of take-up activity this quarter kept the overall vacancy rate stable at 11.2%. Looking ahead, development activity remains limited with an estimated 136,000 sq m due to be completed over the whole 2011, of which only 34,700 sq m is speculative will see a further 110,000 sq m complete, of which around 76,000 sq m is speculative. This is very low when compared to the 10 year average level of 365,000 sq m. Over the medium term, vacancy rates are forecast to gradually decline as demand begins to improve. Rental conditions remained stable at 310 sq m in the Leopold district while they range from 165 sq m in the Periphery to 230 sq m in the city. The weighted average rent for the total Brussels market remained flat at around 173 per sq m.

9 On Point EMEA Corporate Occupier Conditions Q Cardiff Cost: 250 / sq m Competition: 25,400 sq m Choice: 12.3% Q witnessed continued caution in the Cardiff occupier market. That said city centre take-up reached over 25,000 sq m in Q2, up considerably compared with the previous quarter. Total take-up reached 35,700 sq m, which is only 10% short of last years total and likely to result in 2011 take-up returning to long term average levels. This encouraging level of take-up was boosted by the 20,000 sq m city centre pre-let to Admiral Insurance and the 4,600 sq m deal to the Listening Company, which together accounted for around 65% of take-up in H Activity was driven primarily by the Business Services and Financial Services sectors, with a notable lack of public sector activity. Supply in the Cardiff office market was almost unchanged over the quarter. There remains a shortage of Grade A office space, which could lead to increased pre-letting activity going forwards. No speculative completions are scheduled in 2011 which should result in a reduction of Grade A supply in the short term. Prime city centre headline rents have remained unchanged over the past year at 250 per sq m. Out-of-town rents were also unchanged at 183 per sq m. Copenhagen Cost: 241 / sq m Competition: n/a Choice:7.9% The occupational market continued to improve significantly with further signs of active leasing over Q2. The energy company DONG occupied over 20,000 sq m of space in and out of the City area, while engineering and consultancy firms occupied a number of the mid-sized buildings. Occupier preference for Grade A space drove the overall vacancy rate down by 120 bps to 7.9% q-on-q the lowest rate since Q Speculative development still remains absent and there are no new schemes under construction or anticipated with banks not minded to lend. A release of space from the TMT sector is anticipated due to Nokia s cost saving measures in their R&D departments, with approximately 30,000 sq m of space to be made available over the next couple of years. Prime rents have risen by 2.9% to DKK 1,800 and will continue upwards as the erosion of Grade A space is maintained over the short term. Secondary rents were up 2.3% q-on-q, standing at DKK 1,125 a reflection of rising demand in secondary locations. Cologne Cost: 258 / sq m Competition: 89,300 sq m Choice:8.7% Occupier activity over H1 was 175,000 sq m a level double that of the same period in Two large deals drove these volumes - RheinEnergie AG began construction on a 45,000 sq m owneroccupier project and LANXESS Deutschland GmbH signed a deal for 38,000 sq m in maxcologne, which is undergoing a complete refurbishment. The fact that neither of these two large deals was for current office space further illustrates the limited choice of highquality, contiguous space. Projects currently under construction will bring some relief to this situation, with almost 50,000 sq m of space still available. This volume is far from sufficient to meet the strong demand for high-quality space. Some searches for office space have even been postponed because of this constrained choice. Despite this dynamic, overall vacancy remains high, inflated by outdated properties, while top quality space at 1/5th of total vacant stock is extremely low. The prime rent remained stable over H1, but in several submarkets prices increased. Dublin Cost: 355 / sq m Competition: 35,800 sq m Choice:20.6% Overall supply fell for the third consecutive quarter with vacancy rates of 20.6% at the end of Q2, compared with 23% at the start of the year. Choice will continue to reduce as the development pipeline remains sparse with nothing scheduled to complete speculatively until Large occupiers seeking units in excess of 10,000 sq m will be faced with a steadily diminishing range of choice, with just a handful of buildings within the City centre capable of satisfying such requirements. Building on a strong Q1, take-up increased further over Q2 and was up 25% compared to the same period last year. Occupiers continued to focus on suburban and cityedge locations which accounted for around 65% of take-up. The majority of activity was driven by companies expanding or by new entries to the market which accounted for 35% and 29% of total take-up respectively. With c 26,000 sq m of deals expected over Q3, total take-up for 2011 is anticipated to reach around 140,000 sq m 14% up on 2010 but still below the 5 year average.

10 10 On Point EMEA Corporate Occupier Conditions Q Dusseldorf Cost: 282 / sq m Competition: 72,000 sq m Choice:12.0% Occupier activity was modest over H1 at 184,000 sq m. This was 25% down on last year but in line with long-term averages. There was more competition in larger deals (over 1,000 sq m) with the VivaKi group carrying out the biggest letting in the Le Quartier Central project at c.11,800 sq m. Düsseldorf city accounted for around 85% of total take-up. We expect more competition this year driven by an expanding economy. Choice reduced due to moderate deliveries of new stock and the reasonable rate of deals but remains high overall. Going forward the completion volume in 2011 will be at its lowest level for the past five years. Prime rents have increased twice within the last 12 months. We expect a further increase to per sq m per calendar month by year end. The weighted average rent also increased y-on-y and is now per sq m per calendar month. The majority of deals are between 10 and 15 per sq m per calendar month. Eindhoven Cost: 185 / sq m Competition: 23,600 sq m Choice:12.0% There was a significant reduction in choice over the second quarter with vacancy rates dropping from 15% to 12%. This was driven partly by occupier activity with Bosch taking a significant unit from a former Phillips location comprising around 15,000 sq m. The other driver for this reduction was the withdrawal of around 25,000 sq m from the market as the owners preferred to wait until the market strengthened in their favour before pursuing a disposal. This was in the Strijp district. Occupier confidence remained unchanged, however, and the expectation that this will be a subdued year in terms of competition continues despite half year volumes being 80% up on H and encouraging signs from knowledge based sectors elsewhere in Europe. Prime rental conditions remained stable but a recent deal to KPMG has tested valuations although this is not seen as an upward trend. Edinburgh Cost: 328 / sq m Competition: 14,700 sq m Choice: 7.0% Supply fell further over Q2 as space was absorbed through take-up activity. Occupiers, such as Franklin Templeton, have also begun to re-occupy their surplus space. Overall vacancy rates fell to 7.0%, with Grade A supply remaining stable at 3.5%. Looking at the development pipeline there were no new speculative starts over Q2, but there does remain around 19,000 sq m of space under construction speculatively, although this is not scheduled to complete until We therefore anticipate choice to fall further over the coming months, as existing space is gradually absorbed. Occupier activity increased 27% y-on-y, boosted by the 6,000 sq m deal to Amazon at Waverly Gate. This took half year volumes to 31,000 sq m which is effectively in line with the level of activity seen over H We have also witnessed some expansionary activity particularly within the financial services sector. While we expect to see increased activity over H2 2010, growth will remain limited with deals driven largely by lease events. Prime rents remained stable q-on-q at 328 per sq m, with incentives still generous at around months achievable on a 10 year term. Frankfurt Cost: 396 / sq m Competition:140,400 sq m Choice:14.3% The market experienced a strong increase in competition over Q2 and more activity by volume has been witnessed this year despite last year being dominated by the huge ECB deal. At 21%, deals in the 2,500 sq m - 5,000 sq m category were particularly active but there were also two big deals above 20,000 sq m the 24,000 sq m letting by BaFin in the Mertonviertel and the 20,000 sq m owneroccupier deal to begin construction of Fraport AG at the airport. Additions of new supply were low while occupier demand was strong. This led to a decrease in choice by around 100,000 sq m over the quarter - although overall supply remains high. Prime rents remained stable q-on-q although upward pressure is growing. Rents in secondary areas were stable at 210 per sq m and incentives remained unchanged.

11 On Point EMEA Corporate Occupier Conditions Q Geneva Cost: 786 / sq m Competition: n/a Choice: 0.9% Demand for prime office space remains high in the Geneva office market particularly from financial institutions, wealth managers and associated service providers as well as international organisations such as the Red Cross and the United Nations. With supply at very low levels, and often in off-cbd locations, prime rents continue to increase. Office vacancy rates in the city centre are at levels of sub 1% and limited plots for construction plus a tedious planning process will limit future supply in the CBD. New space is predominantly constructed south of the CBD and around the airport. The most notable project is the SOVALP a large scale development that will provide some 100,000 sq m once completed in Competition for space remains high and finding suitable space solutions, especially for larger unit sizes, can be challenging for occupiers. Given positive economic prospects for the region and a lack of new supply, rents are expected to rise further. Prime rents currently stand at CHF 960 / sq m per annum and office space overlooking Lake Geneva is usually trading at a premium to this. Office space is more widely available and trading at a discount (e.g. CHF600 in the airport area) but is often of lower quality and lacks vital access to amenities. Gothenburg Cost: 246 / sq m Competition: 16,870 sq m Choice: 8.7% The occupational market showed less intensity in Q with volumes at around 17,000 sq m, half of the previous quarter s exceptionally strong level. Business services dominated the sectors with over 30% of total take-up while the public sector who dominated last quarter again saw strong demand of around 25% of total demand. Current supply remained stable with a total vacancy rate of 8.7% in existing stock. No new speculative office space has been added to the market during the quarter. In 2010, development projects completed over 50,000 square meters of new office space in Gothenburg, which is the highest level since early For 2011, we expect to see around 25,000 square meters of new space completed by the end of the year with an upturn in supply due to pick up again in Prime rents are expected to increase in the central submarkets CDB and other Inner city. A continued increase is predicted for the remainder of the year, albeit at a slow pace. In more fringe submarkets and secondary premises the rent levels are stable. Glasgow Cost: 328 / sq m Competition: 6,300 sq m Choice: 10.5% Occupier activity fell slightly over Q2 but there remains a healthy level of activity in the market. Choice was relatively stable over Q2, with overall vacancy rates remaining at 10.5%. Grade A supply remains far more constrained as reflected by a corresponding vacancy rate of just 3.3%. The development pipeline market continues to be constrained, primarily due to the lack of funding opportunities but a number of developers have commenced preletting campaigns. With nothing under construction in the City centre and no speculative starts anticipated in the coming year, we expect further tightening of Grade A supply. There remains a significant amount of Grade B supply in the City centre which is expected to keep rates inflated over the coming year. Prime rents continued their upward trend in Q2, up by 1.8% to 296 per sq m. While rent free periods remain generous at between months, we have seen the level of incentives tighten for the best space. We expect incentives to harden further and prime rents to rise slowly. Hamburg Cost: 276 / sq m Competition: 109,100 sq m Choice: 9.3% Companies were more active in Hamburg with more competition emerging from expansionary demand. Corporate occupiers are also reaching decisions more quickly as the country s economic confidence grows. Over the second quarter most activity was seen in small deals and across a variety of sectors the only notable absentee being the Public Sector. In terms of choice, two developments were completed in Q2: Ericus Kontor (18,000 sq m) in HafenCity and Passat Haus (6,100 sq m) in the City Centre. Total completion volumes reached 82,000 sq m in H1, with 150,000 sq m expected in H2 including the new building for Spiegel Verlag in HafenCity. Choice fell slightly in the second quarter but options will become more plentiful later this year. The strengthening occupational market drove an increase in cost - both prime and average rents increased and incentives moved in favour of the landlord by one month.

12 12 On Point EMEA Corporate Occupier Conditions Q Helsinki Cost: 294 / sq m Competition: n/a Choice: 10.3% Occupier demand showed signs of recovery over H The most active demand remains focused on the CBD where offices of sq m are preferred. Other established office areas supplying Grade A offices also face relatively good demand, particularly new developments which are still attractive in the eyes of the occupiers. Offices with B or C ratings outside the CBD continue to struggle despite lower asking prices and generous incentives. Consequently, owners are increasingly moving towards redevelopment options. Occupiers awareness of sustainability issues is also becoming of clear importance when selecting premises. Vacancy still remains relatively high although rates in Helsinki dropped 40bps q-on-q to 10.3%. The development pipeline of new office space has continued to grow with over 30,000 sq m of new let table space entering the market over H1. Prime rents in the CBD rose 2% q-on-q. Tenant incentives in the CBD are almost nonexistent and outside the CBD are typically from two to three months for Grade A premises in comparison to six months previously. Lisbon Cost: 228 / sq m Competition: 16,200 sq m Choice:12.1% Occupier activity improved slightly over Q2 with volumes up 22% q- on-q but down when compared to the equivalent period in The majority of activity was concentrated in zone 6. We expect occupier activity for the next 12 months to remain broadly stable, with recovery remaining relatively slow. Prime rents remained stable at 228 per sq m, and have been so since the end of Incentives for the city overall were also stable with around three to six months rent free achievable on a three to five year lease. Rental levels in secondary locations were also relatively stable, although incentives here have shown signs of increasing. The second quarter of the year saw just 12,460 sq m of new completions enter the market. Despite this relatively low level of completions, the overall vacancy rate increased slightly from 12.0% to 12.1%. The majority of supply is concentrated in Zone 6, which houses around 38% of currently available supply. Looking ahead the development pipeline remains relatively constrained with just 17,100 sq m due to complete speculatively over the remainder of the year. Leeds Cost: 310 / sq m Competition: 14,700 sq m Choice:10.7% Q brought a significant improvement in occupier activity, albeit from a low base. Half-year take-up was 19,500 sq m which is 15% below the five year average. Whilst occupiers remain cautious there are a number of new requirements for office space within Leeds city centre seeking 1,000 2,000 sq m. Supply continued to decline over Q2, with vacancy rates falling to 10.7% overall and 5.6% for Grade A space. The development pipeline remains constrained, with just 3,800 sq m of new office space currently under construction speculatively. If several existing requirements translate into deals before the end of the year then any new sizeable requirements will be faced with a steadily diminishing range of choice. Prime rents were stable q-on-q at 310 per sq m. Incentives remain stable but generous, with around 30 months rent free achievable on a 10 year term. Despite impending supply shortages, we could see slight additional softening rents over 2011 if replacement demand does not materialise. London City Cost: 646 / sq m Competition: 63,700 sq m Choice: 6.9% Q2 was relatively quiet with 63,700 sq m transacted across 59 deals, a 7% decrease on last quarter and 46% behind the quarterly average. However a significant amount of space remained under offer which should transact during H2. Requirement volumes increased 24% as a number of media occupiers launched tentative requirements seeking in excess of 10,000 sq m. Occupier demand is now 17% ahead of the 10 year average. Total supply decreased 6% to reflect a vacancy rate of 6.9% overall and 3.9% for Grade A supply. Speculative construction increased 55% to end the quarter at 280,000 sq m driven by the commencement of 60 London, EC1 and The Place, SE1. We have seen increases in refurbishments over the quarter with three notable schemes totalling 29,000 sq m commencing. Although there has been an increase in development activity, we don t expect a meaningful quantum coming to the market over the next two to three years. Prime rents remained stable for the third consecutive quarter with rent-free periods, assuming a 10-year term at 22 months. With supply constrained and demand increasing, we anticipate further rental growth this year.

13 On Point EMEA Corporate Occupier Conditions Q London West End Cost: 1132 sq m Competition: 77,500 sq m Choice: 4.6% Just over 77,000 sq m was let across 53 deals in Q2 - a 29% increase q-on-q. This was driven by the likes of Google completing their 14,600 sq m acquisition at Central Saint Giles and Double Negative taking a pre-let on 8,000 sq m at 160 Great Portland Street. Over the year to date take-up volumes were down 24% on the equivalent period last year. Total supply fell 12% to 381,000 sq m while Grade A supply fell 10% to 186,000 sq m. Overall vacancy rates fell from 5.2% to 4.6% and Grade A from 2.6% to 2.3%. Vacancy rates are now at their lowest levels since After a 31% increase last quarter, speculative construction decreased 5% due to the completion of 11 Baker Street and the pre-let of 160 Great Portland Street. Only one scheme commenced construction in Q2 (25 Soho Square,W1) compared with four last quarter. Prime rents increased 2.7% while rent-free periods remained at 16 months, assuming a 10-year lease. We expect rents to increase further over the remainder of the year given the low availability of quality supply. Lyon Cost: 270 / sq m Competition: 71,310 sq m Choice: 6.8% Occupier activity over H increased 4% compared with 2010, with Q2 being far more active that Q1. Deals have been focussed on Inner Lyon which has attracted 75% of activity, driven by the Part-Dieu sector (+53%) and Tonkin Saint Clair sector (+250%). There has also been more demand for medium sized office units (500-2,000 sq m). Choice was broadly stable at 6.8%, however the distribution of supply is very unequal with supply tight in the 6th district, Part-Dieu, Presqu Ile Confluence or Vaise and Plateau Nord. Other districts offer a significant proportion of quality premises such as the 7th and 8th districts. Going forward choice will remain challenging with 60% of space under construction already prelet. This relative scarcity of new build has led to increased competition and increased costs - in Part-Dieu rents have risen to 270 per sq m and in Presqu Ile Confluence to 260 per sq m. Second-hand rental values are mixed. Incentives have remained at 6-9 months assuming a 6-9 year lease. Luxembourg Cost: 456 / sq m Competition: 47,600 sq m Choice: 6.6% Occupier activity for H reached 73,000 sq m a 53% increase on the same period in This reflects a return to preboom levels. We have seen increased activity from the Banking & Finance sector which was responsible for the largest transaction of the quarter with around 8,700 sq m taken by Pictet Bank. Around 21,500 sq m of office space completed over Q2, of which only 9,700 sq m was delivered speculatively. The low level of speculative completions, combined with the increase in take-up activity resulted in a downward shift in the overall vacancy rate to 6.6%. The lack of new supply entering the market will drive vacancy rates down further over the remainder of the year. Rents remained stable across all submarkets q-on-q, peaking at 456 per sq m in the CBD. We expect the prime rent to remain relatively flat over 2011, however incentives have begun to tighten. Given the declining levels of supply we expect to see further upward pressure on prime rents to commence from the end of Madrid Cost: 318 / sq m Competition: 87,840 sq m Choice:10.3% Leasing volumes improved over Q2 and although large scale demand remains scarce, it too has improved q-on-q. Almost 40% of the existing demand is focused on the CBD with similar levels in the periphery and only 4% in secondary areas. Corporate occupiers are still putting off decisions to obtain advantageous rental conditions or renegotiations in their current locations. Office vacancy increased slightly overall at 10.3%. Due to the widespread lack of transactions, choice increased particularly in the peripheral areas. However in the CBD and satellite areas supply remained relatively stable and even dropped slightly, with vacancy standing at 8% in the central area. Total vacancy for offices and high-tech buildings has also dropped somewhat due to the temporary withdrawal of secondary products in need of complete overhauls and the lack of handovers. Prime rents continued to decline in the second quarter, down 0.9% to 318 per sq m. In the satellite area rental levels have remained stable over six consecutive quarters.

14 14 On Point EMEA Corporate Occupier Conditions Q Malmö Cost: 230 / sq m Competition: 24,360 sq m Choice: 6.9% Increased occupier activity saw take-up reach almost 25,000 sq m. H has seen significantly high demand with current take-up volumes greater than the total volume for the two preceding years. Weighed against total office stock Malmö occupier activity is the strongest in Sweden, exceeding both Gothenburg and Stockholm. The Public service sector was the most active representing a third of total take-up by volume. One of the largest deals during the quarter was Regional Office s signing of 3,600 sq m in Western Harbour. On the supply side there were no significant projects completing in Q2 and only around 23,400 sq m is due to complete in However there is almost 80,000 sq m in ongoing projects of which 46,000 sq m is due to complete in The large amount of future supply in the region will increase the use of rent rebates in new developments during The trend with a high share of speculative new supply is still strong in the region; especially in Western Harbour where over 80% of ongoing project volume remains unsigned. Prime rents remained stable at SEK 2,100 per sq m. Milan Cost: 520 / sq m Competition: 93,000 sq m Choice: 9.3% Activity over H increased 57% compared to the equivalent period last year. Activity continued to be driven by consolidation with occupiers increasingly looking to maximize space efficiency. Prime rents remained unchanged at 520 per sq m. The Milanofiori area saw an increase in rents, as a result of improved access to the metro. There remains continued appeal for Centre and Semi-centre locations, with the result that we expect to see some rental growth in these areas over the next 12 months. We also expect costs to increase in the Repubblica-Garibaldi zone which will witness the completion of the Porta Nuova development. In the Periphery and Hinterland, rents remain under downward pressure and incentives are still rising. The overall vacancy rate remained stable at 9.3%. The development pipeline remains constrained with just 35,000 sq m of new starts in Q2. Speculative starts remain rare and many projects which are still awaiting planning consent are unlikely to start without a significant pre-let. Manchester Cost: 340 / sq m Competition: 16,300 sq m Choice: 13.0% Occupier choice increased over Q2, driven by the release of second hand Grade B supply rather than any new completions. Grade A supply continued to fall, reflecting a vacancy rate of just 2.3%, compared with the average of 4.3% for the UK major regional centres. The development pipeline remains switched off with nothing currently under construction speculatively in Manchester City Centre. As a result occupiers seeking good quality space in the City Centre, are likely to be faced with a steadily diminishing range of options. Despite a slow start to 2011, occupier activity picked up over Q2 but it continues to fall short of average levels. Activity is being generated from a variety of sectors, but the majority of demand emanates from the Services and Professional Services sectors. Prime rents remain unchanged with landlords continuing to offer up to 30 months rent free based on a ten year term. Looking ahead, the lack of Grade A supply could lead to further upward pressure on prime rents, particularly if a return to pre-letting activity is witnessed. Munich Cost: 360 / sq m Competition: 229,300 sq m Choice:10.5% Occupiers are reaching decisions more quickly with a growing number now seeking expansion space. This was reflected in increased activity with more deals and a large volume of take-up being witnessed than at any time since There has been a particularly strong increase in deals being completed above 2,500 sq m. In terms of choice, only a quarter of the expected 2011 completion volume of 200,000 sq m has been delivered over H1. This, combined with strong demand, has caused a slight decline in choice which is now expected to remain stable for the rest of the year. Completion volumes will decrease significantly in the coming year. Within the Altstadtring there are currently only four buildings with available space of 3,000 sq m or more. The prime rent increased over Q2 and is likely to increase further. Incentives have been reigned in as landlords become more optimistic about demand. Rents in secondary areas were stable.

15 On Point EMEA Corporate Occupier Conditions Q Oslo Cost: 463 / sq m Competition: n/a Choice: 8.5% Occupational demand is healthy and volumes of signed contracts in the second quarter remain unchanged. The largest contract in the quarter was EDB Ergo group taking 33,000 sq m in Fornebu. The public sector, one of the most active occupiers, drove a significant proportion of leasing volumes and, as employment levels are forecast to rise, domestic demand for extra space is expected to increase going forward. Choice increased by 50 bps to 8.5% in the second quarter. Only 60,000 sq m of space is expected to complete in 2011 however record volumes of up to 300,000 sq m will be released to the market in The vast majority of both volumes have tenants (Statoil, DnB, Aker, and Statkraft being the largest), and the vacancy effect of the released space will not be felt until Prime rents have increased to NOK 3,600 per sq m, up from NOK 3,500 in Q With a growing occupier demand for high standard prime space, rents are expected to continue their upward trend. Paris La Defense Cost: 550 / sq m Competition: n/a Choice: 5.4% There was a slight rise in occupier activity in La Défense with takeup reaching 59,100 sq m by the end of June, a 6% improvement compared with the first half of Improvements were also seen at the La Défense periphery. There is a very unequal distribution of supply across Paris and areas like Paris 5/6/7 or Paris 3/4/10/11 are showing shortages with vacancy rates of 3.6% with the CBD at 5% and La Défense at 5.4% - a reduction from 6.1% at the end of March and more consistent with Choice remains plentiful in other disctricts, especially surrounding La Défense (18.3%). In several sectors we note a rise in office costs since the start of the year. These sectors (Paris 5/6/7, La Défense, Southern inner suburb, Paris 18/19/20) show limited quality supply. Costs for occupiers seeking space in La Defence have increased from 530 per sq m to 550 per sq m a 4% increase and costs in the second hand market are around 455 per sq, a 17% discount to prime. Paris CBD Cost: 750 / sq m Competition: 96,200 sq m Choice: 5% Although leasing volume in Ile de France over H are 4% up on 2010 the pace of take-up has declined over the course of the year. Paris and the inner suburbs drove 85% of these volumes. Outperforming submarkets (for H1) included Paris 5/6/7 (+50%), Paris 3/4/10/11 (+39%), the Central Business District (+6%) and Paris Centre West. There is a very unequal distribution of supply and areas like Paris 5/6/7 or Paris 3/4/10/11 are showing shortages with vacancy rates of 3.6% or Paris 18/19/20 with a vacancy rate of 3%. Paris CBD remains a sought after area for companies and has maintained a good level of activity since the beginning of the year. This market is essentially fuelled by small and mid-size transactions with only one large occupier-sale since the beginning of the year. Supply is becoming more scarce with vacancy rates declining to 5%. The immediate supply is low for prime or new buildings. The lack of supply could impact the market activity before year end. Due to the shortage of prime product, rents have remained stable and there were no changes in rent frees. Negotiation conditions vary according to landlords. Rome Cost: 420 / sq m Competition: 65,100 sq m Choice:6.0% Occupier activity increased slightly over Q2 totaling around 65,000 sq m. The majority of activity was concentrated in the Eastern area of Rome, with around 35,000 sq m of take-up in the Tiburtina submarket alone. There was also a significant amount of activity within the Southern areas thanks to two deals in excess of 5,000 sq m to Saipem and l Espresso. In contrast Central areas saw a fall in the level of activity, accounting for less than 20% of take-up in Q2. The Manufacturing sector accounted for around 60% of activity in the second quarter, while demand from the Public Administration sector has continued to fall. Over the first half of the year, around 80% of take-up was for Grade B space. There is very limited new or Grade A supply in the market with a relatively low level of completions over the last few years. Overall vacancy rates remained stable at 6.0% over the quarter. Prime rents and incentives remained stable at 420 per sq m with around 11 months rent free based on a six to twelve year lease.

16 16 On Point EMEA Corporate Occupier Conditions Q Rotterdam Cost: 195 / sq m Competition: 44,200 sq m Choice:15.5% Occupier take-up was up 85% q-on-q. This was driven by a 16,000 sq m acquisition by a company from the educational sector (for office use) as well as an additional two 6,000 sq m deals. The public sector within Rotterdam is still reasonably active and providing an element of competition, but this is driven by a need for cost reduction rather than expansion. The amount of choice was unchanged at 15.5% as more space was added to the market offsetting the absorption from occupiers. The amount under construction also increased which will increase future options and there are more ambitious longer term plans for development. Rental conditions were unchanged with prime rents at 195 per sq m and no change to incentives. There may be some movement in small, top quality units at around 200 per sq m this year, but the overall situation will remain flat despite official forecasts factoring in a small increase. Stuttgart Cost: 216 / sq m Competition: 81,400 sq m Choice:7.0% Q saw a continuation of the strong demand for space from corporate occupiers, although the lack of suitable premises is hampering the satisfaction of requirements. Take-up volumes over H1 were around 119,000 sq m, 88% ahead of H and although the market remains dominated by activity from smaller occupiers a number of larger requirements in excess of 5,000 sq m were satisfied. This strengthening in occupier activity has led to a reduction in the amount of choice for occupiers and also drove the cost of space up slightly to per sq m per calendar month. The majority of lease contracts remain between and per sq m per calendar month. Incentives have remained stable q-onq. Options for occupiers are expected to remain thin this year with only 20,000 sq m of space having completed so far this year. Over H2 a further 80,000 sq m will be delivered but only a fifth of this is speculative. Stockholm Cost: 448 / sq m Competition: 107,500 sq m Choice:11.1% Leasing volumes of 107,000 sq m were recorded in Q2. While activity was down q-on-q, take up for H was up 80% on the equivalent period last year. The CBD saw vacancy rates fall to an historic low of 4.2% was the last time Stockholm CBD saw rates lower than 5%. This has been driven by low volumes of new speculative office space entering the market. In contrast, many peripheral submarkets have experienced rising vacancy rates in H as average deal sizes declined to approximately 850 sq m, as occupiers focus on space efficiency rather than expansion. Prime rents increased from SEK 4,000 per sq m to SEK 4,100 in Q2 with lower landlord incentives placing further upward pressure on costs. All submarkets witnessed an increase in rents. Rental growth is expected to continue with forecasts adjusted to reach SEK 4,300 per sq m at the end of Secondary rents declined by SEK 100 to SEK1, 900 in Q2. The Hague Cost: 210 / sq m Competition:11,500sqm Choice: 10.2% Choice was more or less stable with only a modest uptick in vacancy rates overall and no meaningful changes at the submarket level. However choice is expected to increase further with more releases of space expected from the government, although no firm timing can yet be ascertained. Competition in the market has been modest although it should be noted that the half year total of 30,500 sq m was a huge improvement on H which recorded only 4,900 sq m. Rental conditions have been stable at 210 per sq m for some time now and no change was evident in the secondary market either. There is an expectation that prices could soften, depending on the amount of supply that emerges from the public sector. Incentives widened over Q2 in response to this, moving from between 9 and 15 months rent-free on a five year lease to between 9 and 18 months.

17 On Point EMEA Corporate Occupier Conditions Q Utrecht Cost: 220 / sq m Competition: 14,000 sq m Choice:13.3% The amount of choice increased slightly in Q2. Competition was light at around 14,000 sq m let over Q2. Expectations for 2011 are for a flat leasing market with few significant occupational requirements of any scale and no growth sector increasing competition. There has been an increase in the amount under construction. The majority of this is already pre-let and is focussed on the City Centre. There are plans for more development starts, which would add some more choice to the market but as occupiers relocate there will also be more second hand options. Prime rents decreased by 2.2% q-on-q to 220 per sq m. This was led by a decrease in the Maliebaan area whereas rents were broadly stable elsewhere. The only other exception was the Papendorp district where the rents fell by 10 per sq m over the quarter. Western Corridor Zurich Cost: 766 / sq m Competition: n / a Choice: 2.2% Strong demand for office space in recent quarters has led to rising rents and low levels of availability in the market. Supply of new Grade A office space is, however, increasing with Zurich North and West showing increased levels of choice. Many occupiers are currently actively relocating to this new, modern space from their inner city locations. One highlight of the market is the new Prime Tower, a 130m high office tower development that will offer room for approximately 2,000 employees and upon opening will be the tallest office building in Switzerland. With new, modern Grade A supply in the market competition is easing and with occupiers relocating from the CBD to new development areas, choice in the CBD is actually increasing. Overall occupation costs in the Zurich market remain high. Prime rents paid at the moment are at around CHF 935 / sq m per annum and are expected to increase further over the remainder of 2011 though at a declining pace of growth. Cost: 311 / sq m Competition: 15,700 sq m Choice:14.2% Q2 witnessed a marked uplift in active named occupier demand, with c.300,000 sq m of requirements, an increase of 45% compared with the previous quarter. However, this has failed to translate into deals over Q2, with leasing volumes down 61% year-on-year. Occupier confidence remains relatively weak and deals are taking longer to complete. There are a significant number of deals in solicitor s hands and, with growing active demand, we expect this to translate into more activity over H Overall supply fell in Q2, to reflect a vacancy rate of 14.2%. While some space has been reabsorbed through leasing activity, a number of buildings have also been withdrawn through a change from office to residential uses. Grade A supply fell to its lowest level since 2008, reflecting a vacancy rate of 5.9%. There is currently around 26,000 sq m of space under construction speculatively, although none of this is scheduled to complete in Prime rents increased marginally, driven by further upward pressure in Chiswick. Incentives were stable at 30 months rent free on a 10 year lease in the Thames Valley and 24 months in West London.

18 18 On Point EMEA Corporate Occupier Conditions Q Western European Corporate Occupier Markets at a glance Competition (Take-up as a % of stock) Choice (% Vacancy Rate) Costs (Rents EUR / sq m / pa) Market Q month outlook Q month outlook Prime, Q month outlook WE Amsterdam Antwerp Athens n/a Barcelona Berlin Birmingham Bristol Brussels Cardiff Copenhagen n/a Dublin Dusseldorf Edinburgh Eindhoven Frankfurt Geneva n/a n/a Glasgow Gothenburg Hamburg Helsinki n/a Leeds Lisbon London City London West End Luxembourg Lyon Madrid Malmö Manchester Milan Munich Oslo n/a Paris CBD Paris La Defense Rome Rotterdam Stockholm Stuttgart The Hague Utrecht Western Corridor Zurich n/a n/a

19 Business Contact: Corporate Solutions Vincent Lottefier Chief Executive Officer EMEA Corporate Solutions Paris vincent.lottefier@eu.jll.com Report Contacts: Research Dr Lee Elliott Director EMEA Research London +44 (0) lee.elliott@eu.jll.com Tom Carroll Associate Director EMEA Research London +44 (0) tom.carroll@eu.jll.com Acknowledgements: We gratefully acknowledge the help and assistance of the following Jones Lang LaSalle alliance partner firms in the preparation of some of this material: Akershus Eiendom AS, Athens Economics and Sadolin & Albæk. EMEA Corporate Occupier Conditions August 2011 OnPoint reports from Jones Lang LaSalle include quarterly and annual highlights of real estate activity, performance and specialised surveys and forecasts that uncover emerging trends. COPYRIGHT JONES LANG LASALLE IP, INC All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.