Over Q1 2011, we have. Market cools in the capital. London Offices market analysis. London Offices

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1 London Offices market analysis Market cools in the capital Despite more positive sentiment, a cooling in leasing activity during the first quarter of 2011 points to a degree of caution in the occupier markets for the year ahead, writes EGi London Offices Nina Booty Over Q1 2011, we have seen a cooling in leasing activity as a number of large requirements, predominantly driven by lease events, were satisfied during This also indicates a certain degree of caution in the occupier markets for the year ahead, although market sentiment remains relatively positive. There are still some large requirements left to be filled, with occupiers actively searching for the best quality space. An example of these is Aon, with the preferred option of taking space at 122 Leadenhall Street, EC3, for its 200,000 sq ft requirement, as reported in February. If this deal materialises it would become the first prelet for the Cheesegrater. The rent is likely to be around per sq ft, and the company is expected to go under offer in the coming months. Internet giant Google had upscaled its search for space from 150,000 sq ft to 400,000 sq ft,as reported in March, and King s Cross became its preferred option for an owner occupier deal. However, news came shortly after revealing that Google changed its course of action and went under offer at Central Saint Giles, WC2, on the remaining 160,000 sq ft. This deal will place Google together with other media occupiers which took space in the building over the last two quarters. That Central Saint Giles will soon become fully let is a good example of the attractiveness of highquality new-build space and good occupier demand in Midtown. Another Q1 requirement was posted by the Bank of England, which is looking for 100,000 sq ft in the City in order to be able to absorb the Prudential regulatory arm of the former FSA, currently in Canary Wharf. News on London office construction The first quarter of the year has seen several big and important changes in the pipeline for London offices. Two major development starts in the City occurred. The much talked about Leadenhall Building, EC3, dubbed the Cheesegrater, due to its tapering 47 storey frame, as well as 20 Fenchurch Street, EC3, both commenced construction in January. Produced by London Offices

2 London offices market analysis Work on the Leadenhall Building, which comprises a total of 588,000 sq ft of office space, was halted in August 2008 when British Land encountered financial difficulties during the credit crunch. Last year it started preparing grounds again and sought a development partner to secure finance and share risks. The search resulted in a joint venture with Oxford Properties. In a very similar way, the Walkie Talkie plans got reactivated, and a joint venture with Canary Wharf Group was formed in Q4, allowing the project to finally get under way. Both City skyscrapers are expected to complete in Another major development story in Q1 is that Heron International has completed its 46-storey Heron tower the tallest building in the City of London. The building completed as scheduled in March, and provides 440,000 sq ft of office space, along with a restaurant and sky bar on levels A unique feature of this scheme is that it will have the largest privately owned aquarium situated in the tower s reception area. Alongside Cannon Place, which is scheduled to finish in June, these buildings are the only two office towers completing this year and in fact over the next couple of years. With regard to lettings, Heron Tower has secured two office prelets so far. The second occurred in this quarter, with serviced office operator Landmark taking 36,500 sq ft. The rent paid on this space is reportedly per sq ft. Several other occupiers are currently considering taking space in the building, including Chicago Trading Company, Symantec and Korean bank KDB. Finally, another piece of good development news is that Arab Investments has managed to raise the funding it lacked to cover the construction of its 1m sq ft, 64-storey Pinnacle Tower. The new funds amount to 1bn, of which around half comes from its own equity funds and the remainder comes from HSBC. Completion is scheduled for 2013, and construction is up to the sixth floor. Is debt availability for property investment shrinking? With regard to finance for property, recent research by several large property agents, including Savills, CB Richard Ellis and Jones Lang LaSalle, shows that the availability of new debt to UK commercial property investors is shrinking because of economic uncertainty and new banking regulations. This is not only the case in the UK but the whole of Europe. Over the longer term, the availability of debt will be constricted by regulatory changes, with Basel III seeing bank lenders increase the amount of capital they must retain on their balance sheets. Although this will restrict the amount of debt available, affect lending margins and reduce competition for lending, on a positive note it will work as a safeguard against excessively risky lending to the real estate sector, as witnessed before the recent economic downturn. The Basel III rule will, however, not restrict insurance companies from acting as lenders, hence Legal & General has recently announced it has started preparing a strategy of how to fill the gap that banks will leave for lending to commercial property. Outlook The first quarter of 2011 has seen a slowdown in leasing activity and occupational demand. Central London take up amounts to 2.3m sq ft, which is just over half of the space let in Q4. Not many large deals occurred, with only one letting of more than 100,000 sq ft materialising when NBC Universal took 112,000 sq ft at Central Saint Giles, WC2. It is worth noting though, that the final two quarters of 2010 as well as its first quarter were exceptionally strong, witnessing some immense owneroccupier deals. The VAT increase in Q1, public spending cuts, a rise in the rate of inflation and the threatening interest rate rise, plus the increase of empty office property rates thresholds will curb the economic recovery in the near and medium term. Despite this, there are several positives we can take from the current market. London offices, and in particular prime stock, continues to attract domestic and overseas investors with some key investment deals materialising. Furthermore, some large occupier deals are waiting to complete, to Google, as mentioned earlier, among others. Prime rents and yields show signs of stabilising in Q1, after substantial yield compression in For central London prime office rents, the expectation is to remain on an upward trend in the next couple of years as availability levels drop. Another positive factor that would impact on the office sector in the long run is the chancellor s recently announced budget growth plan, which entails corporate tax decrease by Finally, another positive piece of news is that the office development pipeline is pressing ahead, with cranes springing up to build iconic towers in order to meet the forecasted supply squeeze and prime rent rises in the current and following years. In summary, Q appears to be the beginning of a year that is likely to meet a challenging environment and a mix of positive and negative influences. what london offices monitors Markets City core EC1A, EC2M, EC2N, EC2R, EC2Y, EC2V, EC2A (only Finsbury Pavement, Finsbury Square, Appold Street and Chiswell Street), EC3, EC4 (excluding EC4A and EC4Y) City fringe EC1M, EC1N (excluding postcode sector 2), EC1R, EC1V, EC1Y, EC2A (excluding Finsbury Pavement, Finsbury Square, Appold Street and Chiswell Street), E1 South Bank SE1 postcode sectors 0, 1, 2 and 9 Docklands E14 Midtown EC4A and EC4Y, EC1N (postcode sector 2), WC1, WC2 (excluding Leicester Square) West End W1, SW1, NW1 sectors 2 (Euston Road only), 3, 5 and 6, Leicester Square (WC2) and W2 sectors 1, 2 and 6 Additional markets South Central Remainder of SE1 and all of SE11 North Central Remainder of NW1 and N1, N7 and E8 West Central Remainder of W2 and all of W6, W8, W14, SW3, SW5, SW6, SW7 and SW10 Data Building stock Any office building over 93m 2 (1,000 sq ft) in City Core, West End, Midtown, Docklands, City Fringe and South Bank and over 465m 2 (5,000 sq ft) in North Central, West Central and South Central Availability Any unit above 93m 2 (1,000 sq ft) in buildings subject to the above stock thresholds Take up Any unit above 232m 2 (2,500 sq ft) subject to stock thresholds Planning Any project over 232m 2 (2,500 sq ft) subject to stock thresholds Definitions Quarters For data collation reasons, our quarters run from the first of the month to the last day of the third month: ie, 1 January to 31 March; 1 April to 30 June; 1 July to 30 September and 1 October to 31 December. Some data in this report is given in half-years for space reasons. Agency league tables The total space disposed by each agent adds up to more than total take up. This is because space in joint agency deals has been attributed to all agents involved. The market share is each agent s share of take up, not the total of all agents. The tables include all completed deals over 93m 2 (1,000 sq ft) within our boundaries, including prelets and excluding space under offer, lease renewals, restructures, management agreements or investment sales. s Total building stock figures divided by vacant space which is actively being marketed. Neither figure includes space under construction or yet to commence construction. Availability and take-up New/refurb (existing) is a combined total of newly constructed and refurbished space; Premarketing is any space marketed which is yet to commence construction; Secondhand is any space which has previously been occupied; Under Construction is a combined total of refurbishment and redevelopment projects currently under construction. Space under offer is included. Investment properties are not included. Average asking prices An average of asking prices by grade of space by market. Only space available on new leases with a quoting rent is collated. Space under offer has been included. Please note that Secondhand Grade A space is previously occupied units with airconditioning and one or more of raised floors, underfloor trunking or perimeter trunking. Investment sales Subject to stock thresholds, a total of space sold as freehold, long leasehold or virtual freehold, both for investment and for owner occupation. Construction starts with prelets A total of space commencing refurbishment or redevelopment by quarter with a total of that space prelet. This includes space not on the market. Completed space actively marketed Simply a total of completed refurbishments and redevelopments being actively marketed by quarter. Includes space let but never occupied. Completions with space available A total of all office space currently under construction by completion date with how much is still available. This includes space not on the market. Contents: Agents league table 59 Summary stats 60 Agents share by market 61 City core 62 West End 64 Midtown 66 Docklands 67 City fringe 68 South Bank 69

3 Source: EGi London Offices Central London letting agents league table - Q JLL remains on top Jones Lang LaSalle remains in top place for the first quarter of 2011, disposing of 415,744 sq ft and completing 40 transactions, which equates to a 14% market share. The top place in the table can largely be accredited to acting on the largest deal of the quarter, which saw NBC Universal taking 112,000 sq ft at Central Saint Giles. Cushman & Wakefield acted as joint agent on the deal, and climbed one place to take fourth this quarter with a 9% market share. DTZ climbed up one spot to take second place with a 12% market share, the majority of its deals deriving from One New Change, EC4 where it acted as joint agent with Savills. It was closely followed by CB Richard Ellis, which also took a 12% market share, representing 351,323 sq ft over 52 transactions. Savills also climbed up a place to take fifth spot after completing 15 transactions and achieving a 7% market share with 214,120 sq ft. Strutt & Parker climbed up the ranks to take sixth place with a 6% market share over 30 deals, the largest being at St James Gate, SW1, with 31, 711 sq ft being disposed. EA Shaw and GVA climb into top 10 EA Shaw and GVA have taken eighth and ninth places, climbing nine and five places respectively, both with a 4% market share. EA Shaw acted on 31 transactions overall, the largest being 22 Long Acre, WC2, with 29,082 sq ft being let in a transaction joint with JLL. King Sturge slips three places to take 10th place, acting on 20 deals and gaining a 4% market share. Rank Agent Sum of Size (Sq Ft) No of deals Market share 1 Jones Lang LaSalle 415, % 2 DTZ 380, % 3 CB Richard Ellis 351, % 4 Cushman & Wakefield 262, % 5 Savills 214, % 6 Strutt & Parker 173, % 7 Knight Frank 170, % 8 EA Shaw 137, % 9 GVA 130, % 10 King Sturge 125, % 11 Richard Susskind & Co 97, % 12 Monmouth Dean 81, % 13 Drivers Jonas Deloitte 80, % 14 Frost Meadowcroft 63, % 15 Ingleby Trice 62, % 16 Lambert Smith Hampton 61, % 17 Farebrother 60, % 18 Anton Page 58, % 19 Allsop 58, % 20 Kinney Green 55, % 21 BNP Paribas Real Estate 54, % 22 Montagu Evans 53, % 23 Tuckerman 52, % 24 Colliers International 51, % 25 D E & J Levy 50, % 60 Gracechurch Street, EC3: Fund manager KGAL buys this 120,500 sq ft building for 115m disposals done - office breakdown Q CB richard ellis 44% 55% City DTZ 64% 36% City Jones Lang Lasalle 72% 27% City Strutt & Parker 40% 60% City cushman & wakefield 49% 51% City Agent share by number of disposals - Q This analysis details the top agents by number of disposals done and has been split out to reveal, where applicable, which office and therefore which market is more active. CB Richard Ellis tops the table again with a total of 52 deals. Turning its own trend of previous quarters, it was more active in the West End with 56% of its deals completed there. The agent starts the year with a 10-deal lead over second placed DTZ, which completed 42 deals, while Jones Lang LaSalle came in third place with 40 deals. Both these agents were more active in the City, with 64% and 73% of their deals completed there respectively. Single-office agent E A Shaw secured fourth place with 31 deals, overtaking Richard Susskind, which this quarter secured seventh place completing 21 deals. Strutt & Parker fared better in the West End, completing 30 deals and securing fifth place, while newcomer, single-office West End agent Monmouth Dean finished in sixth place with 28 deals. Also more active in the West End was Cushman & Wakefield, which completed three times as many deals here than in the City, a total of 21, securing a shared seventh place. King Sturge and Knight Frank are also sharing, with 20 deals each, they finished in ninth place, Knight Frank being more active in the West End, while King Sturge completed 80% of its deals in the City. On the whole, at the end of the first quarter the City has a 67-deal lead over the West End. The exact split is 299 to 232. Rank Agent No of disposals City 1 CB Richard Ellis DTZ Jones Lang LaSalle EA Shaw Strutt & Parker Monmouth Dean Cushman & Wakefield Richard Susskind & Co Knight Frank King Sturge Colliers International = Anton Page Limited = Drivers Jonas Deloitte = Hatton Real Estate Langham Estate Management BDG London Savills = GVA = Frost Meadowcroft = Allsop = Capita Symonds = Crossland Otter Hunt = Ingleby Trice = Pearl & Coutts = BNP Paribas Real Estate West End Source: EGi London Offices To download an electronic version of this report, or to access the archive of previous reports, go to

4 London offices market analysis summary statistics City core City fringe Docklands Midtown South Bank West End Overall Take-up (m sq ft) annual or quarter total New/refurb existing Premarketing Secondhand Under Construction Total Availability (m sq ft) annual quarterly average or quarter end New/refurb existing Premarketing Secondhand Under construction Total % annual average or quarter % 12.55% 11.03% 11.00% 13.26% 10.79% 9.52% 8.64% 8.63% 7.04% 9.70% 10.48% 9.63% 6.16% 7.88% 6.53% 9.49% 9.40% 7.44% 9.97% 9.70% 8.53% Under offer and withdrawn (m sq ft) quarter or quarterly average Under offer Withdrawn Average asking prices ( per sq ft) quarter or quarterly average New leases only New build existing #N/A #N/A Secondhand Grade A Investment sales (m sq ft) annual or quarter total Total sq ft No of transactions Construction starts (m sq ft) annual or quarter total Total started Prelet Speculative Completed space still available (m sq ft) (completion by full year or part of year) Total completed Still available Future completions (m sq ft) for full year or part of year Delivery date Total to complete Amount still available % still available 100% 100% 100% 100% 100% 0% 100% 100% 0% 100% 100% 100% 0% 100% 0% 100% 100% 100% 100% 100% 100% Key transactions all markets Market Address Tenant Size (sq ft) Agent Midtown Central Saint Giles, 1-13 St Giles High Street, WC2 NBC Universal 112,000 Cushman & Wakefield / Jones Lang LaSalle City core One New Change, EC4 Friends Provident 48,691 DTZ / Savills Midtown New Court, Carey Street, WC2 Undisclosed letting 45,772 Farebrother West End 35 Marylebone High Street, W1 Undisclosed letting 43,576 Lambert Smith Hampton City core One New Change, EC4 Chicago Mercantile Exchange 39,614 DTZ / Savills City fringe The Collection, Commercial Street, E1 Undisclosed letting 38,000 GVA West End 123 Buckingham Palace Road, SW1 Google UK 37,442 CB Richard Ellis / Knight Frank City core Heron Tower, Bishopsgate, EC2 Landmark 36,478 CB Richard Ellis / Cushman & Wakefield City core One New Change, EC4 Sumitomo Mitsui Banking Corporation 34,558 DTZ / Savills City fringe Oxeye, St John Street, EC1 Undisclosed letting 32,635 DTZ / GVA West End St James Gate, Cockspur Street, SW1 Federative Republic of Brazil (The) 31,711 Strutt & Parker Midtown 22 Long Acre, WC2 Serviced Office Group 29,082 EA Shaw / Peter Galan & Co / Jones Lang LaSalle West End One Hanover Street, 1-2 Hanover Street, W1 Apple Computer 26,007 D E & J Levy / Jones Lang LaSalle Southern fringe Riverside House, 2a Southwark Bridge Road, SE1 Instant Offices 23,194 Knight Frank City core Senator House, 85 Queen Victoria Street, EC4 Moneygram International 20,983 Drivers Jonas Deloitte / Jones Lang LaSalle For any data queries, please contact hannah.gardiner@estatesgazette.com or call

5 Agents market share by market Q City core Rank Agent Disposals (sq ft) No. deals Market share 1 DTZ 229, % 2 CB Richard Ellis 214, % 3 Savills 182, % 4 Jones Lang LaSalle 174, % 5 King Sturge 89, % DTZ claimed the top position this quarter, while Jones Lang LaSalle dropped from top to fourth place. CB Richard Ellis came in second ahead of Savills despite completing the highest number of deals. King Sturge completes the City core line up with a 10% market share. Midtown Rank Agent Disposals (sq ft) No. deals Market share 1 Jones Lang LaSalle 175, % 2 Cushman & Wakefield 127, % 3 EA Shaw 78, % 4 Farebrother 56, % 5 Monmouth Dean 39, % Jones Lang LaSalle remained in top spot, with a 44% market share. Slipping two places to fourth was Farebrother, while Cushman & Wakefield and EA Shaw ranked second and third respectively with both rising two places from the end of Monmouth Dean was in fifth with a 10% market share, having not made the table at the end of the last quarter. Docklands Rank Agent Disposals (sq ft) No. deals Market share 1 Knight Frank 8, % 2 DTZ 8, % 3 Cherryman 2, % 4 Jones Lang LaSalle 2, % 5 sbh Page & Read 1, % A quiet quarter in Docklands saw DTZ and Knight Frank sharing top spot through a joint deal at 3 Harbour Exchange. Cherryman, which was not in the table at the end of 2010, was in third place on the back of a 2,476 sq ft deal, appearing above Jones Lang LaSalle and sbh Page & Read. 22 Long Acre, WC2: 29,100 sq ft let to Serviced Office Group 85 Queen Victoria Street, EC4: Moneygram International takes 21,000 sq ft City fringe Rank Agent Disposals (sq ft) No. deals Market share 1 GVA 95, % 2 Richard Susskind & Co 93, % 3 Anton Page 49, % 4 Hatton Real Estate 38, % 5 DTZ 36, % GVA, which did not feature in the top five at the end of 2010, topped the table this quarter, 1% ahead of Richard Susskind & Co, despite 14 fewer deals. Anton Page and Hatton Real Estate took third and fourth place respectively, while DTZ rose from outside of the table into fifth spot. West End Rank Agent Disposals (sq ft) No. deals Market share 1 CB Richard Ellis 123, % 2 Strutt & Parker 104, % 3 Knight Frank 87, % 4 DTZ 74, % 5 Cushman & Wakefield 56, % CB Richard Ellis climbed from second place in Q to top the table at the end of this quarter, while DTZ dropped from first to fourth. Strutt & Parker, which did not feature last time around, secured second place with a 12% market share. Knight Frank and Cushman & Wakefield remained in third and fifth place respectively. South Bank Rank Agent Disposals (sq ft) No. deals Market share 1 EA Shaw 39, % 2 Knight Frank 23, % 3 Edward Symmons 16, % 4 Cushman & Wakefield 12, % 5 Thompson Yates 12, % EA Shaw, with a strong market share, remained in top spot, where it finished Knight Frank climbed up from outside of the table to take second place from Edward Symmons, which dropped to third. Cushman & Wakefield and Thompson Yates finished fourth and fifth respectively, each with a 10% market share. key new instructions all markets Market Address Grade Size (Sq Ft) Agent City core Nomura House, 1 St Martin's-le-grand, EC1 Secondhand 142,946 Drivers Jonas Deloitte Midtown New Fetter Lane, EC4 Premarketing 136,230 Knight Frank City core Royal London House, Finsbury Square, EC2 Premarketing 125,000 CB Richard Ellis City core 100 Cheapside, EC2 Premarketing 110,998 CB Richard Ellis City fringe 66 Prescot Street, E1 Secondhand 103,302 Jones Lang LaSalle Midtown Lonsdale Chambers, Chancery Lane, WC2 Premarketing 91,925 CB Richard Ellis Docklands One Canada Square, E14 Secondhand 87,483 CB Richard Ellis / Jones Lang LaSalle City Fringe The Turnmill, 63 Clerkenwell Road, EC1 Premarketing 80,000 CB Richard Ellis City core Scotia House, Finsbury Square, EC2 Secondhand 72,265 DTZ Southern fringe Hays Lane House, 1 Hays Lane, SE1 Secondhand 66,870 Cushman & Wakefield City fringe Farringdon Place, 20 Farringdon Road, EC1 Secondhand 65,640 Farebrother / Richard Susskind & Co / King Sturge City core Finsbury Court, Finsbury Pavement, EC2 Secondhand 61,202 Jones Lang LaSalle City core Allianz Cornhill House, 27 Leadenhall Street, EC3 Secondhand 53,303 Jones Lang LaSalle Southern fringe 65 Southwark Street, SE1 Premarketing 45,440 Farebrother / Jones Lang LaSalle Midtown Princes House, Kingsway, WC2 Secondhand 42,204 DTZ To download an electronic version of this report, or to access the archive of previous reports, go to

6 London offices market analysis Take-up New/refurb existing 271, Premarketing - n/a n/a Secondhand 575, Under construction 36,478 n/a n/a Total 883, Take-up in the City core amounted to almost 883,500 sq ft, down by 25% on Q4 and 51% on this time last year. Unlike in the previous two quarters, where premarketed space accounted for the largest letting proportions of the quarter, with immense prelets by UBS and Bloomberg taking place, this time around there were no lettings of premarketed stock. New build stock accounted for the majority of Q1 lettings, up by 81% on Q4, and secondhand take-up increased by 9%. As in the previous quarter, there were no lettings of stock under construction. Despite the drop on Q4 take-up levels, performance in the City core, with close to 900,000 sq ft being transacted in Q1, was not overly weak. The largest transaction of the quarter was of secondhand stock, and came at Thames Court, Upper Thames Street, EC4, where Royal Bank of Canada Trust Corporation took 50,000 sq ft. Terms of the deal remain confidential. The second largest transaction of the quarter was of new-build stock, and it took place at the mixed office and shopping centre scheme One New Change, EC4. Friends Provident took nearly 49,000 sq ft on a 15-year lease, on the part second floor. This is the third and largest letting at One New Change which occurred this quarter. Chicago Mercantile Exchange has taken nearly 40,000 on the part fourth floor, paying a rent of per sq ft, and Sumitomo Mitsui Bank took 34,500 sq ft on the part second floor, on confidential terms. Just under one-third of the total office space remains available at this highly sought after City scheme, which completed last quarter. The volume of space placed under offer increased in Q1, with a total of 448,000 sq ft receiving interest, up by 8% on Q4. The largest potential deal is at Senator House, 85 Queen Victoria Street, EC4, where the entire fourth floor comprising 21,230 sq ft has gone under offer. The quoting rent on this floor is per sq ft. city core Nomura House, EC1: 143,000 sq ft comes onto the market 1 Southampton Row, WC1: 100 Cheapside, EC2: 111,000 sq ft is being premarketed 40 Holborn Viaduct, EC1: Delancey purchases the long leasehold for more than 90 million has increased most, up by 45% whereas new-build supply increased by 6%. Supply of secondhand stock increased only marginally, up by 2% on Q4, however it was down by 5% on this time last year. The largest single addition of available space is being marketed at Cannon Street, EC4, where the entire building comprising 37,100 sq ft has been available since March. This building has just recently gone under refurbishment and is expected to complete in Q The volume of space withdrawn increased slightly from 72,000 sq ft in Q4 to 75,600 sq ft in Q1, spread across 12 properties. 11 Devonshire Square, EC2, has seen the largest retraction of space, where the entire building comprising 27,700 sq ft is no longer available. Aon, the current tenant in this building has decided to re-occupy the space. 15% The availability rate in the City core has increased marginally, from 10.7% in Q4 to 11% this quarter. This is due to the decrease in take-up seen this quarter, and slight increases in supply of new-build and secondhand space, which form the physical stock. In this quarter nearly 621,000 sq ft completed, of which 38% remains available. For 2011 as a whole, there is a further 390,000 sq ft scheduled to complete, all of which remains available. Hence, take-up will need to keep improving if the availability rate is to be contained. Supply 70 per sq ft New build (existing) Secondhand Supply (sq ft) Q months 12 months 3 months New/refurb existing 2,214, Premarketing 4,914, Secondhand 4,242, Under construction 2,987, Total 14,359, Supply in the City core dropped again this quarter, down by 3% on Q4, and by 7% on this time last year. With the exception of premarketed stock, which fell by 24%, all grades saw a rise. Under-construction stock Q1 CHEESGRATER AND WALKIE TALKIE, EC3, GET UNDER WAY To download an electronic version of this report, or to access the archive of previous reports, go to

7 Average asking rents for new-build stock increased to per sq ft this quarter, up by 4.25 on the per sq ft of Q4. Unlike in the last quarter, the current level of average asking rents on new-build stock is very much reflecting on the prime rental levels in the City, which in Q1 stood at per sq ft. Average secondhand asking rents stabilised at per sq ft in Q1. The top secondhand asking rent in the City core showed a level of 55 per sq ft at 20 Gresham Street, EC2. Construction Construction starts with prelets 1.5 sq ft (m) Speculative Prelet city core The Heron Tower, EC2: 36,500 sq ft let to Landmark 1 Southampton Row, WC1: Investment The number of City core investment transactions increased by one in Q1, with eight sales taking place. The largest sale of the quarter took place at 20 Gresham Street, EC2, where Axa Real Estate Investment Managers purchased a freehold interest from the vendor Hermes Real Estate Investment Managers, paying 200m for this 241,000 sq ft office asset. Elsewhere, at 60 Gracechurch Street, EC3, Evans Randall has sold this block of offices to German closed-ended fund manager KGAL for 115m, reflecting a yield of 5.45%. Evans Randall sounded out five investors over the off-market deal late last year after receiving a number of unsolicited approaches for the building. The deal is KGAL s first major office investment in London since 2009 and the majority of this 120,500 sq ft office building is let to Allianz Group. Completed space actively marketed Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Completed space actively marketed 1.5 sq ft (m) Completed Still available After no construction starts in the last quarter, 1.36m sq ft got under way in Q1. Two very large construction starts took place in the City as British Land s Leadenhall Building, EC3, aka the Cheesegrater and Land Securities 20 Fenchurch Street, EC3, known as the Walkie Talkie got under way in January. Once completed they will offer nearly 590,000 sq ft of business space each. Both towers, which are competing for occupiers, are scheduled to complete in 2014, when respective developers are hoping to meet the prime office space supply squeeze. A total of 621,000 sq ft in the City core completed this quarter, a significant increase from 340,800 sq ft last quarter. The majority of the space which completed in Q1 is attributable to one new scheme that is the largest and most important completion, not only for the City but also for the whole of the London office market. Heron Tower, EC2 the tallest building in the City of London which offers 440,000 sq ft of office space. Heron Tower has secured two office prelets so far, however it has been reported that several occupiers are in line to take space here. Chicago Trading Company, security software provider Symantec and Korean bank KDB among others, are all considering taking one or two floors in the tower. The second largest completion came at New Court, 1-10 St Swithin s Lane, EC4, where 181,000 of office space, which included refurbishment and an extension was delivered to the market. One New Change, EC4: 39,600 sq ft let to Chicago Mercantile Exchange 36,500 sq ft LET TO LANDMARK AT HERON TOWER, EC Q Q Q Q Q Q Q Q Q Completions with available space Completions with available space To complete Still available 1.5 sq ft (m) Q2 11 Q311 Q4 11 Q1 12 Q2 12 Q3 12 Q412 Q1 13 Q2 13 Q4 13 Q1 14 Q3 14 For information on how to subscribe to London Offices, please contact Daniel.Clements@estatesgazette.com

8 London offices market analysis Take-up New/refurb existing 48, Premarketing - n/a n/a n/a Secondhand 574, Under construction 9, n/a n/a Total 633, West End take up has decreased slightly, down by 5% on last quarter, and 22% on this time last year. However, the amount of top transactions coming from the West End this quarter is higher. Around 633,000 sq ft was disposed of in Q1, of which three transaction were ranked in the top 15 London market lettings, compared to one transaction on the list last quarter. Quarterly take up growth was negative for new-build stock, down by nearly 22%, while secondhand stock declined by some 4%. As in the last several quarters, there were no prelets in the West End. The largest transaction came at 35 Marylebone High Street, W1, where the entire building comprising 43,600 was let on confidential terms. The second largest letting took place at 123 Buckingham Palace Road, SW1, where internet giant Google took 37,500 sq ft on the part first floor. Terms of the deal remain confidential. Another noteworthy transaction came at 105 St James Gate, Cockspur Street SW1, where Federative Republic of Brazil bought a freehold interest in this building for occupation, totalling 32,000 sq ft, at a price of 24m. Worth mentioning is that all three of the largest transactions mentioned were of secondhand grade A stock. Nearly 313,100 sq ft remains under offer, a 41% drop from 534,000 sq ft last quarter. This, together with a sound take up level, indicates a solid level of interest in this market, which followed by the lower levels of supply will hopefully lead to a healthy level of take up over the coming quarters. Supply Supply (sq ft) Q months 12 months 3 months New/refurb existing 586, Premarketing 1,042, Secondhand 4,092, Under construction 1,001, Total 6,723, One Hanover Street, W1: 26,000 let to Apple 1 Computer Southampton Row, WC1: Cockspur Street, 40 SW1: Holborn 31,700 Viaduct, sq ft let EC1: to The Delancey Federative purchases Republic the of long Brazil leasehold for more than 90 million 21,000 sq ft of secondhand stock was brought to the market. Space is available across the first and second floors, and there are opportunities for redevelopment and refurbishment. Elsewhere, at Ely House, 37 Dover Street, W1, the part first to sixth floors totalling 14,100 sq ft of secondhand space is now available to let. Fleming Family & Partners, which currently occupies the entire building, has put the majority of its space on the market, while remaining in occupation of the lower ground and part first floors. The amount of space withdrawn this quarter has risen substantially, from 60,300 sq ft in Q4 to 143,400 sq ft. This is spread across 33 properties, with the largest retraction at 55 Baker Street, W1, where 22,000 sq ft was withdrawn. 12% The recent quarter s decline in supply and solid levels of take-up have pushed down the availability rate even further. It dropped from 8.3% in Q4 to 7.4% this quarter. However, when compared to the first half of last year, this is an even more considerable decline as the availability rate was then exceeding 10%. After no completions in Q4, around 26,000 sq ft of office space finished construction in the first quarter. The largest building completed came at Jermyn Street, SW1, where 11,700 sq ft of office space was delivered to the market. The entire building remains available. There is 482,200 sq ft remaining to complete by the end of this year, of which all of the space remains available. Thus, take up will need to improve if the availability rate is to be contained at the current level. The volume of supply has continued to drop, down by 8% on Q4 and 19% on this time last year. All grades of space declined except stock under construction, which rose by 20% on Q4. The drop in supply was highest for premarketed stock, down by 17%. Newbuild and secondhand stock saw a decrease of 6% and 12% respectively. On this time last year the biggest decline was recorded in new-build stock availability, down by 49%. The largest new addition of available space came at 64 Kemp House, Berwick Street, SW1 where 37,500 sq ft LET TO GOOGLE AT 123 BUCKINGHAM PALACE ROAD, SW1 For information on how to subscribe to London Offices, please contact Daniel.Clements@estatesgazette.com

9 100 per sq ft New build (existing) Secondhand residential units contained within a 25-storey tower. British Land is developing this large mixed-use scheme, where the office component is expected to complete in late The second largest scheme is One Howick Place, SW1, where developers Doughty Hanson & Co and Terrace Hill Group will build their joint venture office and residential scheme, comprising 135,000 sq ft of offices. Works are scheduled to complete in autumn Elsewhere, another noteworthy construction start came at Hanover Court, 5 Hanover Place, W1, where 52,400 sq ft of offices is now under way. 20 The average asking rent for new-build stock decreased to per sq ft in Q1, down by 3.50 on Q4. This is the second consecutive quarter where the average asking rents for new-build stock have declined. Nevertheless, the drops over the last two quarters are not a good indicator of the trend as prime rents on new-build space in this market have generally been on the rise. Our averages are lowered partially as there were no new asking rents on newbuild space added in Q1, whereas lettings and withdrawals have been taking place. Top asking rents on new-build stock in the West End market currently show a level of per sq ft, which is in line with the current level of prime rents in this market. Secondhand asking rents increased by 25 pence in Q1, and are currently quoting per sq ft. The highest newly added asking rent of good quality secondhand stock was per sq ft, being released at the fifth floor at 70 Conduit Street, W1. On the contrary, the lowest new asking rent was released on the part seventh floor, at Communications Building, 48 Leicester Square, WC2, quoting per sq ft. Construction 35 Marylebone High Street, W1: 43,600 sq ft let to an 1 undisclosed Southampton tenant Row, WC1: 123 Buckingham Palace Road, SW1: 37,500 sq ft let to Google Investment Investment sales increased from 19 transactions in Q4 to 21 transactions this quarter. This demonstrates the continuing investment interest in the West End market. The largest transaction came at Belgrave House, 76 Buckingham Palace Road, SW1, where Henderson Global Investors sold its 50% stake of the long leasehold interest to US pension fund Teachers, at a price of 108m, reflecting a yield of 6%. The majority of this building is let to internet giant Google, with leases expiring in 2015 and The second largest transaction was the sale of the 105,200 sq ft Telstar, Eastbourne Terrace, W2. Henderson Global Investors also sold this building, to a private Jersey company, at a price of 96.8m, reflecting a net initial yield of 5.1%. The property, which is let to Rio Tinto European Holdings until 2026, was bought by Henderson in September 2009 at a price of 74.5m. Completed Space actively marketed Completed space actively marketed 1.0 sq ft (m) Completed Still available Construction starts with prelets sq ft (m) Speculative Prelet Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Construction starts in Q1 amounted to 621,000 sq ft, up from 357,400 sq ft in Q4. All of this space currently remains available and comprises a total of six schemes, of which two are very large. The largest scheme that got under way is at Regent s Place, Hampstead Road, NW1, which comprises 406,200 sq ft of office space, 20,200 sq ft of retail and sq ft (m) ,000 sq ft UNDER WAY IN THE WEST END 0 Q Q Q Q Q Q Q Q Q Completion with available space Completions with available space To complete Still available 1.2 sq ft (m) Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 For information on how to subscribe to London Offices, please contact Daniel.Clements@estatesgazette.com

10 London offices market analysis Take-up New/refurb existing 142, Premarketing - n/a n/a n/a Secondhand 198, Under construction n/a Total 341, midtown 105,300 sq ft at 8-10 New Fetter Lane, EC4. The building has recently gone under way and the marketing of this space will continue later this year. 12% Take-up has fallen this quarter, with a total of 341,300 sq ft being let, down by 35% on last quarter. However, the largest Q1 London office letting came here, at the newly built Central Saint Giles, WC2, where NBC Universal took 112,500 sq ft across the ground to part third floors, on a 15-year lease. Elsewhere, at New Court, Carey Street, WC2, an undisclosed tenant took 46,000 sq ft across the fourth and fifth floors on a short-term lease. This space was occupied earlier by the Department for Work and Pensions, which has relocated due to government spending cuts. Midtown continues to experience a buoyant amount of interest, as evidenced by the 657,000 sq ft of space placed under offer, a considerable rise from 400,300 sq ft in Q4. The largest potential deal is at Plumtree Court, EC4, where Goldman Sachs has agreed to purchase the entire building, totalling 341,500 sq ft, for its own occupation at a price of 94m. Supply Supply (sq ft) Q months 12 months 3 months New/refurb existing 440, Premarketing 807, Secondhand 2,620, Under construction 375, Total 4,243, The total supply of available space remained stable in Q1. New-build and secondhand stock both declined, down by 12% and 6% respectively, while premarketed space and stock under construction increased. Supply of stock under construction increased most, up by 132%, whereas premarketed space rose slightly by 2%. The largest new availability came at New Fetter Lane, EC4, where the entire proposed building totalling 136,000 sq ft is now available. The site has got a planning permission for redevelopment and extension, and completion is expected in The volume of space withdrawn increased substantially this quarter, from 34,700 sq ft to 179,500 sq ft spread across 12 properties. The largest space to be withdrawn was the entire building amounting to New Fetter Lane, EC4: 136,200 sq ft is now being 1 premarketed Southampton Row, WC1: Central Saint Giles, WC2: 112,000 sq ft let to NBC 40 Universal Holborn Viaduct, EC1: Delancey purchases the long leasehold for more than 90 million 112,000 sq ft LET TO NBC UNIVERSAL AT CENTRAL SAINT GILES, WC2 For information on how to subscribe to London Offices, please contact Daniel.Clements@estatesgazette.com The availability rate in Midtown continued to fall in Q1 and now stands at 9.63%, down from 10.3% last quarter. This is the third consecutive quarter that we have seen a drop in this market, which in this quarter can be attributed to the decrease in supply of existing stock. After a strong bounce back last year, and stabilising in the last quarter, the average asking rents for new build stock dropped in Q1, down by 75 pence to 49 per sq ft. There was a slight drop in average asking rents for secondhand stock as well, down by 25 pence to per sq ft, following increases over the previous two quarters. Construction Two buildings got under way this quarter, totalling 119,000 sq ft. The largest of these is Chichester House, , High Holborn, WC1, where around 100,000 sq ft of new business space is being built. The second building is at 40-43, Fleet Street, EC4, where 19,000 sq ft of offices are undergoing refurbishment. After a total of 78,200 sq ft that was delivered to the market in Q4, the first quarter of the year saw no new office completions. Two smaller office completions totalling 45,300 sq ft are scheduled to complete in Q2. investment Investment activity in Midtown continued to be strong in Q1 with 13 transactions completing, up from 10 last quarter. Several large deals took place, making the investment level much higher in total monetary value terms. The largest investment transaction came at 110 Fetter Lane, EC4, where Legal & General purchased the building from Delancey and Invista Real Estate, at a price of 305m, reflecting a 4.5% yield. Elsewhere, at River Court, 120 Fleet Street, EC4, Chinese Estates purchased the freehold for 280m, reflecting a 5.25% yield.

11 Take-Up New/refurb existing - n/a n/a Premarketing - n/a n/a n/a Secondhand 8, Under construction - n/a n/a n/a Total 8, Take-up has fallen dramatically on last quarter, with only 8,400 sq ft of secondhand space being let. This fall was largely due to the exceptionally large deal last quarter on 1,050,000 sq ft at 25 Bank Street, sold to JP Morgan for owner occupation. Take-up is 98% lower than this time last year. The 8,400 sq ft of secondhand space let was in one deal at 3 Harbour Exchange Square, let to IT solutions provider Capital Support. The amount of space currently under offer stands at 22,000 sq ft, comprised solely of the entire 50th floor of One Canada Square, under offer to an undisclosed party. Supply New/refurb existing 418, Premarketing 5,394, Secondhand 1,263, Under construction 612, Total 7,689, Supply increased by less than 1% this quarter, a rise of 56,000 sq ft. This increase was due to a 5% increase in the supply of secondhand space. The supply of all other grades of space remained unchanged on last quarter. With no new completions scheduled for 2011, this trend is set to continue. The largest new availability came at One Canada Square, where 87,500 sq ft of secondhand space is now on the market, on floors formerly let to Bear Stearns International. The amount of space withdrawn was 53,200 sq ft, comprising two floors of 10 Upper Bank Street, withdrawn due the existing lease being too short, expiring in September This space came onto the market last quarter, and will be available again in docklands 3 Harbour Exchange Square, E14: 8,400 sq ft let to Capital 1 Support Southampton Row, WC1: One Canada Square, E14: 87,500 sq ft comes onto the 40 market Holborn Viaduct, EC1: Delancey purchases the long leasehold for more than 90 million 98% DROP IN TAKE-UP IN DOCKLANDS Availability Rate 12% Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q1 11 The availability rate increased only slightly on last quarter, from 6.7% to 7.0%. This small rise follows four consecutive quarters of falling availability rates. With no new construction completions due for 2011, it is unlikely we will see any substantial rise in availability rates in the near future. However, there is a substantial amount of space being premarketed in Docklands, comprising 5.4m sq ft of the total 7.7m of supply, which has the potential to significantly affect the availability rate in the long term. Asking Rents for new-build stock were per sq ft, a decrease of 2 on last quarter, which is the first significant fall in rates since Q For good quality secondhand space it was per sq ft, a rise of around 75p, which continues its steady growth of the previous two quarters. Construction Once again, there were no new construction starts or completions in Docklands. Furthermore, no starts or completions are due for There is only one completion due for 2012, on 5,800 sq ft at Commercial Road. The largest building under construction is Riverside South, which will provide 1.9m sq ft, and is due for completion in Investment As in Q4, there was only one investment transaction this quarter. This was 1,100 sq ft at Cochrane House, Admiral s Way, E14 as a long leasehold to an undisclosed occupier. With few investment opportunities in Docklands, investors are being forced to look elsewhere in London, including Songbird Estates, the biggest shareholder in Canary Wharf Group, which is seeking investment opportunities in the City, funded by the proceeds of the sale of 25 Bank Street last quarter. 1.2m sq ft at 25 Canada Square will be made available as a freehold investment in early Q2, sold by owners Propinvest and Derek Quinlan. To download an electronic version of this report, or to access the archive of previous reports, go to

12 London offices market analysis Take-Up New/refurb existing 101, Premarketing - n/a n/a n/a Secondhand 247, Under construction n/a Total 349, City fringe Asking Rents 60 per sq ft 50 New build (existing) Secondhand City fringe take up continued to increase in the first quarter, up by 6% on Q4. This is almost entirely due to a vast improvement in lettings of new-build stock, which went up by 13 times on Q4. Lettings of secondhand space and stock under construction dropped, however, down by 22% and 100%. Yet again, there were no prelets this quarter. The largest letting was of secondhand stock at Taylor House, 88 Rosebery Avenue, EC1, where City University took space on the lower ground floor, on a 20-year lease, comprising 49,000 sq ft. The amount of under-offer space increased to 225,500 sq ft, up from 92,900 sq ft last quarter. The largest potential deal is at Farringdon Place, 20 Farringdon Road, EC1, where 65,600 sq ft is currently under offer. Once this deal completes, this building will be fully let. Supply New/refurb existing 274, Premarketing 2,020, Secondhand 1,829, Under construction 145, Total 4,269, After three successive quarters of decline, supply in the City fringe has stabilised in Q1. The marginal rise in total supply of less than 0.5% was due to a 33% rise in under-construction stock, while new-build stock declined by 29%. Premarketed and secondhand stock rose only slightly, up by 2% and 3% respectively. The largest new availability came at 66 Prescot Street, EC1, where the entire building comprising 103,300 sq ft of secondhand space is now available to let. The total volume of space withdrawn from the market has gone up to 96,000 sq ft from 63,800 sq ft last quarter. The largest retraction of space came at Brunning House, 100 Whitechapel Road, EC1, where the entire building comprising 51,700 sq ft was withdrawn. Availability Rates s declined for the seventh consecutive quarter and now stand at 9.5%, down from 9.8% last quarter. The limited supply of physical stock coming on to the market, together with an increase in takeup, in particular a substantial rise in lettings of newbuild stock in Q1, have caused availability rates to drop further St John Street, EC1: 32,600 sq ft let to an 1 undisclosed Southampton tenant Row, WC1: 66 Prescot Street: 103,000 sq ft available to let 40 Holborn Viaduct, EC1: Delancey purchases the long leasehold for more than 90 million 103,300 sq ft AVAILABLE TO LET AT 66 PRESCOT STREET, E Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 11 Q1 11 remained stable this quarter. There was no change in the asking rent of 15 per sq ft for newbuild space, as once again, no new asking rents on new-build stock were added. As with last quarter, the only asking rent for space of this grade is at Eden House, 5-14 Bishops Square, E1, where the lower ground floor is being marketed. Average asking rents for good quality secondhand stock decreased for the second successive quarter to 23 per sq ft, down by 1 per sq ft on Q4. Although two of the asking rents added in Q1 were at the level of and per sq ft, the averages were lowered due to a mere 1 per sq ft rent being quoted for a one year sublease at Commodity Quay, East Smithfield, E1. Construction After the Angel Building, EC1, finished construction in the last quarter, Q1 saw only one new small completion. At Turnmill Street, EC1, a total of 12,300 sq ft was delivered to the market, of which all of the space remains available. No new schemes got under way for the fourth quarter in a row. If take-up continues to rise, the 239,100 sq ft due to complete by the end of 2011 should be well absorbed, especially considering the lack of good quality stock coming onto the market in the City fringe. Investment The City fringe saw seven transactions take place in Q1, totalling 228,000 sq ft, down from nine investment sales in Q4. The largest investment deal came at Farringdon Place, 20 Farringdon Road, EC1, where Brooklands Group sold the long leasehold interest in this property to LaSalle Investment Management at a price of 60m, reflecting a 6% yield. For information on how to subscribe to London Offices, please contact Daniel.Clements@estatesgazette.com

13 Take-up New/refurb existing 9, Premarketing - n/a n/a n/a Secondhand 84, Under construction - n/a n/a n/a Total 94, There has been an 84% increase in take-up on last quarter, with 94,600 sq ft being let. This was largely caused by a 96% increase in take-up of secondhand space, and to a lesser extent a 24% increase in newbuild take-up. The largest deal of secondhand space was 23,000 sq ft at Riverside House, 2a Southwark Bridge Road, let to Instant Offices. There were only two transactions of new/refurbished space, totalling 9,900 sq ft, including 4,900 sq ft at 4 More London, let to an undisclosed tenant. Under-offer space totalled 62,700 sq ft in Q1, an increase of 15,000 sq ft on last quarter. This comprised 14 potential deals, the largest of which was 14,700 sq ft at Minerva House, 5 Montague Street. south bank Riverside House, SE1: 23,200 sq ft let to Instant Offices s rose slightly on last quarter, from 5.9% up to 6.5%. Despite a substantial rise in take-up this quarter, the increase in supply of good quality secondhand space led to a rise in the availability rate. This follows a fall in availability rates in the previous two quarters. However, the rate is still well below its peak of 9.5% in Q per sq ft New build (existing) Secondhand Supply New/refurb existing 49, Premarketing 902, Secondhand 698, Under construction 597, Total 2,248, Supply rose 10% on last quarter, largely due to a rise in secondhand and premarketed space. The largest new availability of secondhand space was 67,000 sq ft at 1 Hay s Lane, SE1, while for premarketed space the largest was 45,500 sq ft at 65 Southwark Street. The only availability withdrawn from the market was 6,600 sq ft on part third floor of Minerva House, 5 Montague Street. Supply of new/refurbished space totalled 49,500 sq ft, down 23% on last quarter due to the letting of 4,900 sq ft at 4 More London, and 5,100 sq ft at Chancel Street, SE1. With no construction completions scheduled for 2011, there is unlikely to be an increase in the supply of new build stock. 10% Hays Lane, SE1: 66,900 sq ft now available to let 84% INCREASE IN TAKE-UP ON THE SOUTH BANK for good quality secondhand stock are per sq ft in Q4, up more than 1 on last quarter. This rise is part of a steady recovery since Q1 2010, when asking rents stood at 23.50, its lowest of the recession. There were no quoted asking rents for new-build stock this quarter, so the best comparison is the Q asking rent of per sq ft. Average asking rents for the South Bank are likely to increase in the near future, with a quoting rent for the Shard expected to be released soon. Construction There was one new construction start in Q1, at London Bridge Place, 25 London Bridge Street, which will provide 353,100 sq ft of office space. Demolition works began in March 2010, and Mace was awarded the construction contract in July. This speculative development is due for completion in Construction continues to proceed rapidly at the Shard of Glass, which is due for completion in May Investment As in the previous quarter, there was limited investment activity in Q1. The only deal was 41,000 sq ft at 76-80a Southwark Street, sold for 18.7m, representing a 7.6% yield. The purchaser was DTZ Investment Management, which bought it on behalf of Strathclyde County Council Pension Fund. For information on how to subscribe to London Offices, please contact Daniel.Clements@estatesgazette.com