Farebrother Key Contacts. The London Southbank. Office & Retail Market. Sampson & Ludgate House. farebrother.com

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1 Advised by Farebrother, Great Portland Estates has Pre-let the entire 142,500 sq ft development at New Fetter Lane, EC4, to Bird & Bird A member of Farebrother Key Contacts Office & Retail Market The London Southbank Office & Retail Market Q Farebrother 27 Bream s Buildings London EC4A 1DZ For further information please call Alistair Subba Row Senior Partner, Investment asubbarow@farebrother.com Alastair Hilton Investment ahilton@farebrother.com farebrother.com Follow us on Sampson & Ludgate House Carlyle Real Estate Advisors LLP will deliver 35,000 sq ft of new public open spaces, 25,000 sq ft of retail and 18,500 sq ft for cultural use at Sampson & Ludgate House by the end of This new public square in the heart of the development will link Blackfriars Road to the new station entrance. Working in Partnership Julian Hind Office Leasing & Residential Sales & Development jhind@farebrother.com Charlie Thompson Office Leasing, Sales & Development cthompson@farebrother.com Other Research available Malcolm Brackley Lease Advisory, Valuation mbrackley@farebrother.com Jeff Norris Business Rates jnorris@farebrother.com The London Midtown Office & Retail Market Q New Fetter Lane EC4 London Midtown Office & Retail Market Quarterly Reports Farebrother IPD London Midtown & Southbank Investment Reports Andrew Glover Property Management aglover@farebrother.com Josephine de Castro Retail Leasing, Sales & Development jdecastro@farebrother.com This research is available in PDF format. Please lcave@farebrother.com to receive a copy. This publication has been carefully prepared and it is intended for general guidance only. No responsibility is accepted by Farebrother for any errors or omissions. The information contained herein should not be relied upon to replace professional advice on specific matters and is not, in whole or in part, to be published, reproduced or referred to without prior approval. Information may be subject to revisions in subsequent editions Farebrother. All rights reserved. A member of Julian Chappell Corporate Real Estate jchappell@farebrother.com Victoria Shreeves Research vshreeves@farebrother.com Designed and Produced by Sears Davies searsdavies.com

2 The London Southbank Office & Retail Market Q Discover Southbank... Bankside Borough Elephant & Castle London Bridge Southwark Waterloo Commentary The Southbank office market continued to grow in the 2nd Quarter of 2013 with total Take-up reaching 237,000 sq ft, performing well above the five year quarterly average despite just 35,000 sq ft of New and Refurbished stock being let. The 24% rise in Take-up on the 1st Quarter 2013 was solely down to strong Take-up of Secondhand space. Vauxhall BURGESS PARK VAUXHALL PARK Oval KENNINGTON PARK rcia Comme ercial Comm l Way Way r St Medla Inside this edition... Commentary 1 Take-up 4 Availability 7 Future Supply 8 Investment 10 Retail 12 Farebrother is an established Practice of Real Estate consultants and Chartered Surveyors. The Practice s services include Corporate Real Estate, Leasing, Sales, Development, Management, Lease Advisory, Business Rates, Valuation and Investment advice. Farebrother s core market is Central London, specialising in Midtown and Southbank office and retail markets. Farebrother s extensive research is aimed at providing a short, sharp insight into what are two of the most dynamic commercial property markets in the World. This quarterly report reviews the overall performance of the Leasing, Investment and Retail markets and is published alongside Farebrother s Investment Reports, produced in partnership with IPD, together providing a comprehensive analysis of Midtown and Southbank markets. Take-up of New space remained stable with just 28,000 sq ft let including a transaction of 17,500 sq ft on part of the 14th floor at The Shard, to financial occupier Duff & Phelps. Southbank is starting to attract a more diverse Occupier base as more New high quality space is being delivered, and a general market wide regeneration through improved public realm. In the 2nd Quarter 2013 Occupiers from Financial and Banking sectors accounted for 20% of total Take-up, a sector which accounted for only 4% of total Take-up in the last three years. 778,000 sq ft of New space recently let and under offer Definitions Southbank - SE1 Stock - office accommodation, excluding offices under construction Floorspace - net internal area, unless otherwise stated Available - office space available for immediate occupation Availability Rate - available offices as a proportion of total stock Take-up - completed transactions where offices are let or sold to an occupier New - brand new buildings or buildings developed behind a retained façade Refurbished - buildings which have undergone a major refurbishment Secondhand Grade A - previously occupied higher quality space with features such air-conditioning or raised floors Secondhand Grade B - previously occupied lower quality space with features such as central heating or perimeter trunking Construction start - development where the main contract has commenced, normally excluding demolition or stripping out Construction completion - development where the main contract has reached practical completion Hidden Supply - space which is not currently on the open market, but likely to come available in the near future Long-Term - average calculated since the 1st Quarter 2005 Julian Hind Head of Leasing, Sales & Development

3 B L A A C C K K F R S R R O A D G The London Southbank Office & Retail Market Q The London Southbank Office & Retail Market Q With the early announcement in the 3rd Quarter that Rupert Murdoch s News International is taking the entire 429,000 sq ft at The Place, 25 London Bridge Street, plus a handful of other high profile corporates in negotiation on a further 320,000 sq ft of space, it is expected that the excellent Take-up in the 2nd Quarter will be dwarfed in the 3rd Quarter. Big name parties looking at the Southbank include Puma, Boodle Hatfield, Yahoo and Ogilvy and Mather. Secondhand space equated to 85% of Take-up in the Southbank office market in the 2nd Quarter further demonstrating the twin-track market and the consistent healthy churn of smaller units. An increase of 140% of Secondhand Grade A Take-up in the 2nd Quarter suggests Occupiers are continuing to seek better value for money in Central London. High quality developments, such as the More London complex and Blue Fin Building, 110 Southwark Street, are now seeing churn with some subletting taking place. Office Supply remained stable in the 2nd Quarter with just a 7% decrease in Availability due to this strong Take-up of Secondhand Grade A space. New and Refurbished space was expected to significantly increase in the 2nd Quarter with the delivery of 788,000 sq ft at The Place, The Crane Building, 1 London Bridge and Cottons Centre, however, delays have meant all four schemes have slipped into the 3rd Quarter. With the addition of Refurbished space at 200 Great Dover Street, a total of 822,600 sq ft will now be completed in 3rd Quarter 2013 but with only 393,600 sq ft not already let. Q2 13 Overview % change on Q1 13 Total Availability 1.21 million sq ft -7% Availability Rate 6.4% -0.5% pt Availability - 653,000 sq ft -6% New & Refurbished Availability - 554,000 sq ft -8% Secondhand Speculative 1.5 million sq ft 0% Construction Take-up 237,206 sq ft +24% Investment 226 million -23% Regeneration plans for London Bridge Station as well as London Borough of Southwark s master plan for Blackfriars Road will give a significant boost to economic development in the area, stimulating the office market further. Plans to transform the Blackfriars Mile adding infrastructure and public realm are already underway with eighteen development projects in the pipeline set to deliver over the next five years, including 240 Blackfriars Road, home to United Business Media who took a pre-let of 103,000 sq ft in 2012 and South Bank Tower, both already under construction, delivering a total 339,000 sq ft in 2nd Quarter 2014 and 2nd Quarter 2015 respectively. The completion of these mixed-use schemes will see 75,000 sq ft of New retail becoming available, driving retailers to compete for the best space. R I London Eye V TEMPLE E R Royal Festival Hall T H Hayward Gallery National Theatre BFI IMAX WATERLOO A M LAMBETH NORTH WATERLOO EAST E S Oxo Tower Old Vic Theatre 1 Blackfriars Road Sea Containers Houses King s Reach D RR O FF M A T S Paris Gardens Young Vic Theatre W E B T H E C U T B E R S T W A T E R L O O R O A D E E RR TT S R E E T E T E T 20 Blackfriars Road Christ Church 64 Blackfriars Road BLACKFRIARSARS SOUTHWARK 1 Valentine Place B L A C K F F R R I I A A R R S S R R O O A A D St George s e Circus Palestra House Ludgate & Sampson House 240 Blackfriars Road Wedge House Blackfriars Road BLACKFRIARS Friars Primary School Hill House Erlang House S O U T H W A R K U N I O N S T R E E T B O R O U G H R O A D R E A T H Friars House T Neo Bankside S U F F O L K S T R Tate Modern Jerwood Gallery E E T Millennium Bridge Shakespeare s Globe BOROUGH CANNON STREET The Golden Hinde LONDON BRIDGE Borough Market The Shard Investment activity in the 2nd Quarter reached 226m in ten transactions, six of which were over 20m, which although is 23% down on the 1st Quarter 2013 year-to-date turnover is well ahead of the long-term annual average of 354m. The majority Investor profile for the 2nd Quarter was UK, which is not uncommon for the Southbank market as UK Institutions and UK Property Companies have been historically active in this market. Improvements to new and emerging hubs, such as, the Blackfriars Road area, continue to change Occupiers perception of Southbank. With this, we expect increased occupational activity driving further Investor interest. Regeneration plans will give a significant boost to economic development in the area Imperial War Museum In 2nd Quarter 2013 London Borough of Southwark revealed their plans to regenerate Blackfriars Road, which falls within the Bankside, Borough and London Bridge opportunity area identified in the London Plan, The Mayor of London s 2020 vision for the capital. L O N D O N R O A D ELEPHANT AND CASTLE Blackfriars Road Key draws of the area Source: Allies & Morrison. 2 farebrother.com farebrother.com 3

4 The London Southbank Office & Retail Market Q The London Southbank Office & Retail Market Q Take-up Total Take-up in the 2nd Quarter 2013 reached 237,000 sq ft, an increase of 24% on the 1st Quarter 2013 and 31% higher than the last five years quarterly average of 180,000 sq ft. It was the highest quarterly Take-up since the 3rd Quarter 2011, excluding pre-lets. Selected office lettings on Southbank Occupier Address Sq ft Grade Reported Rent psf London Serviced Offices Ltd 2-6 Boundary Row 34,078 Secondhand Grade B 9.25 Freehold Bond Dickinson LLP 4 More London Riverside 20,901 Secondhand Grade A Duff & Phelps The Shard, 32 London Bridge Street 17,500 New Conf. In the 2nd Quarter 2013 a total of 28,000 sq ft of New space was let in four transactions, including a second deal at Sellar Property Group and Qatari Investment Authority s The Shard, to Duff & Phelps who have taken 17,500 sq ft on part of the 14th floor. The US Investment Banking firm currently has offices in Canary Wharf and the West End. Take-up of Refurbished space was very low, due primarily to the lack of Supply of Refurbished products. There was one transaction of 7,330 sq ft at The Harlequin Building, 65 Southwark Street to Maris Interiors. Secondhand Take-up increased by 35% on the 1st Quarter 2013 to total 202,000 sq ft; 83,000 sq ft of Secondhand Grade A space and 119,000 sq ft of Secondhand Grade B. The largest transaction of the Quarter was the Freehold purchase with vacant possession of Secondhand Grade B, 2-6 Boundary Row. Farebrother advised Threadneedle on the 34,078 sq ft sale to London Serviced Offices Ltd which achieved 9.25m. The second largest transaction of the Quarter was Bond Dickinsons acquisition of 20,901 sq ft of Secondhand Grade A space at 4 More London Riverside. The law firm agreed a 13 year term with a tenant only break in the 5th year and a mutual break in the 10th year with 14 months rent free at a rent of psf. Tableau Software Blue Fin Building, 110 Southwark Street 12,241 Secondhand Grade A Risk Advisory Group 3 More London Riverside 11,694 Secondhand Grade A Wexas Travel Dorset House, Stamford Street 8,991 Secondhand Grade B Lend Lease Europe Hannibal House, Elephant & Castle 8,236 Secondhand Grade B UK Power Networks Hannibal House, Elephant & Castle 8,236 Secondhand Grade B Maris Interiors LLP The Harlequin Building, 65 Southwark Street 7,330 Refurbished Panalpina World Transport 45 Curlew Street 6,567 Secondhand Grade B South West Trains Friars Bridge Court, Blackfriars Road 6,024 Secondhand Grade B Bullet Investments Ltd 4 More London 6,000 Secondhand Grade A Muscular Dystrophy Campaign Ltd Great Suffolk Street 5,533 New Secondhand Grade A Take-up increased by 140% on the 1st Quarter 2013 Fig.1 Quarterly Office Take-up s sq ft The 17,500 sq ft letting to Duff & Phelps was the second reported deal at Sellar Property Group and Qatari Investment Authority s The Shard, London Bridge Quarter Pre-lets New Refurbished Secondhand Grade A Secondhand Grade B 4 farebrother.com farebrother.com 5

5 The London Southbank Office & Retail Market Q The London Southbank Office & Retail Market Q Availability Total Take-up increased by 24% on the 1st Quarter 2013 driven by Take-up of Secondhand Grade A space Other notable transactions this Quarter included lettings of Secondhand Grade A space at The Blue Fin Building, 110 Southwark Street to Tableau Software who took 12,241 sq ft on a 10 year term with a break in the 5th year paying psf. Risk Advisory Group took 11,694 sq ft at 3 More London, Tooley Street also paying psf. These lettings demonstrate that demand is still strong for good quality, well located Secondhand space. Secondhand Take-up rose 35% on the 2nd Quarter 2013 to total 202,000 sq ft. The largest Take-up of this grade of space and the second largest transaction of the Quarter was to Bond Dickinson who took 20,901 sq ft of Secondhand Grade A space at 4 More London Riverside from Lawrence Graham LLP. This increased level of Secondhand letting activity will continue as demand increases. More Occupiers view the Southbank market as a credible and cost-effective Central London location, pulled into focus by high-quality New buildings and infrastructure improvements, putting pressure on a restricted Secondhand market. Overall Availability at the end of the 2nd Quarter 2013 in the Southbank market fell by 7% on the 1st Quarter 2013, falling from 1.29m sq ft to 1.20m sq ft, which equates to a decrease in the Availability Rate from 6.9% to 6.4%. The decrease was primarily due to a 140% rise in Secondhand Grade A Take-up. Secondhand Grade B Availability decreased marginally by 2% from 472,000 sq ft at the beginning of 2013 to 463,000 sq ft in the 2nd Quarter Although Secondhand Grade B Take-up was also up on the 1st Quarter by 4% the transactions were predominantly in the healthy churn range of 1,000 5,000 sq ft and the space let has been replaced with new stock. The Availability of New and Refurbished space fell 6% in the 2nd Quarter 2013 due to 35,000 sq ft of lettings at The Shard, 1 Valentine Place and The Harlequin Building, 65 Southwark Street. The anticipated completion of a number of schemes in the 2nd Quarter was delayed resulting in the Availability Rate falling, when we anticipated this rising. Overall Availability in the 3rd Quarter will rise due to the completion of 822,600 sq ft in on-site developments, albeit that 429,000 sq ft is now let to News International. There will need to be an acceleration of Take-up of this New stock to drive the Availability Rate for the next few quarters down. We do anticipate this and although the Availability Rate will potentially climb towards 10%, that will quickly fall back down to pre Shard levels, by the end of 2013 and early A twin-track Southbank market will continue with New and Refurbished Availability increasing and then falling back as stock is taken-up, whereas Secondhand Availability will remain relatively low despite strong churn. 30% fall in Secondhand Grade A Supply due to strong Take-up, although overall Availability remains stable Fig.2 Quarterly Office Availability % 6.4% million sq ft % % New Refurbished Secondhand Grade A Secondhand Grade B Availability Rate farebrother.com 7

6 The London Southbank Office & Retail Market Q The London Southbank Office & Retail Market Q Future Supply There is currently 1.5m sq ft of space Under Construction, 822,600 sq ft of which is due to complete in the 3rd Quarter After an exceptional end to 2012 in terms of delivery of New space, the first half of 2013 has got off to a slow start with just 10,518 sq ft completing at Union Developments residential and office development, Grange Gardens, Grange Walk. There were no completions in the 2nd Quarter due to 788,000 sq ft of anticipated completions slipping into the 3rd Quarter. Sellar Property Group and Qatari Investment Authority s already delayed scheme at The Place, 25 London Bridge Street, and Dorrington s The Crane Building at 22 Lavington Street, will now complete in 3rd Quarter 2013, delivering a total of 479,000 sq ft of New space, however, the early announcement in the 3rd Quarter that News International will take the entire building at The Place will result in only 50,000 sq ft of New Availability being delivered. A total of 345,600 sq ft of Refurbished space is expected in the 3rd Quarter with the delivery of St Martins 1 London Bridge and Cottons Centre and Dorrington s 200 Great Dover Street. This Refurbished Availability will offer the Occupier a cheaper alternative to London Bridge Quarter. There are no speculative developments due to complete during the 4th Quarter 2013 and 1st Quarter 2014, meaning Archlane s Refurbishment and extension of the iconic Sea Containers on Upper Ground delivering a Mondrian Hotel alongside 298,000 sq ft of New office space will be the first completion in Canary Wharf Group and Qatari Diars plans to redevelop the Shell Centre campus in Waterloo was approved in the 2nd Quarter. The existing 1960s tower will be retained with eight buildings, ranging in height from 5 to 37 storeys built around it, one of which will house 245,000 sq ft of office space and trading floors for Shell. There will also be 80,000 sq ft of retail, restaurants and cafes along with 877 affordable homes. The earliest completion is the 1st Quarter Fig.3 Future Supply on Southbank s sq ft Delayed completions lead to 822,600 sq ft of New and Refurbished supply due in the 3rd Quarter 2013, of which only 393,600 sq ft will be immediately available With such a busy development pipeline the level of New and Refurbished Availability will continue to rise, unless Take-up of this grade increases rapidly. With more stock due in the 3rd Quarter 2013, Southbank s Availability will potentially rise over 10%. There is new significant focus on the proposed redevelopment of Elizabeth House on York Road by Waterloo Station after the scheme was not called in by the Secretary of State following the grant of Planning Permission by LB Lambeth in the 4th Quarter The owners, Chelsfield and London & Regional Properties, will develop a North and a South Building of 29 and 10 storeys respectively, providing 142 homes and 741,000 sq ft of office accommodation. The development will currently not start speculatively without a Pre-let Q2 Delivered Space Q3 Q4 Q1 Q2 Q3 Q Scheduled Completions Hidden Supply 1. The Place, 25 London Bridge Street 429,000 sq ft (Sellar Property Group / Qatari Investment Authority) 2. 1 London Bridge 168,000 sq ft (St Martin s Property) 3. Cottons Centre, Hays Lane 139,000 sq ft (St Martin s Property) 4. The Crane Building, 22 Lavington Street 50,000 sq ft (Dorrington) The London Southbank Office & Retail Market Q Great Dover Street 36,000 sq ft (Dorrington) 8 farebrother.com farebrother.com 9

7 The London Southbank Office & Retail Market Q The London Southbank Office & Retail Market Q Investment Alastair Hilton Investment turnover for the Quarter is down by 23%, however, year to date is well ahead of the long-term annual average of 354m Southbank Investment activity will always be limited by the actual size of the market which is circa 18.7m sq ft. As a result, we tend to see considerable volatility in turnover figures, however the general trend for the year, looks encouraging. This shouldn t come as any great surprise, as the weight of capital in the Central London market begins to seek further diversification and head for those areas where strategic value is more tangible. This means lower entry prices and at present Southbank can still offer this. The 2nd Quarter 2013 achieved a turnover of 226m which was 23% down on the 1st Quarter 2013, in ten transactions, six of these were over 20m including Rose Court, 2-10 Southwark Bridge Road, which was purchased by Far Eastern Investors for 67.2m, 42 Southwark Bridge Road which was purchased by M&G Investments for 35.9m and 61 Southwark Street, which was purchased by Scottish Widows Investment Partnership for 27m. By way of comparison, the 1st Quarter 2013 achieved a turnover of 294m in seven transactions, however, the sale of Palestra dominated the Quarter achieving 223m. The majority Investor profile for the 2nd Quarter was UK, which is not uncommon for the Southbank market. UK Institutions and UK Property Companies have been historically active in this market and therefore there is some latent familiarity. We expect further UK Investor activity as they move away from the more populated mainstream markets, where competition from Overseas Investors, is pricing out the UK Investor. Occupationally, Take-up within Southbank is increasing with a number of transactions in the pipeline. News International s 3rd Quarter letting of The Place, 25 London Bridge Street and Ogilvy and Mather s potential move to Sea Containers on Upper Ground are not just significant occupational transactions, but they also reflect Southbank s improving amenity, with employer s perception of the general area having markedly changed. With this, we expect increased occupational activity particularly when considering these new and emerging hubs, such as the Blackfriars Road area. Whilst the above will drive further Investor interest, in particular UK Investors, there are recent signs that the Overseas Investor is becoming more alive to the opportunities that Southbank offers and with this they are pricing out this sector. The largest transaction of the 2nd Quarter 2013 was Ho Bee Investments purchase of 157,406 sq ft of offices at Rose Court, 2-10 Southwark Bridge Road for 67.2m from Scottish Widows Investment Partnership and Orchard Street. Selected Investment Transactions on Southbank Address Sq ft Vendor Purchaser Reported Price m Rose Court, 2-10 Southwark Bridge Road 157,406 Scottish Widows Investment Ho Bee Investments Partnership and Orchard Street Dorset House, Stamford Street 87,248 Private German Investor Longulf Southwark Bridge Road 96,714 Land Securities M&G Investments Southwark Street 67,040 Dorrington Scottish Widows Investment Partnership and Scottish Widows Unit Funds Hercules House, Hercules Road 112,956 Receivers PPHE Hotel Group Lambeth High Street 45,622 The Royal Pharmaceutical Society Real Estate Resolutions Ltd Boundary Row 34,078 Threadneedle London Serviced 9.25 Office Group Ltd 10 farebrother.com

8 The London Southbank Office & Retail Market Q The London Southbank Office & Retail Market Q Retail Bringing Blackfriars Road to life Josephine de Castro The regeneration of Blackfriars Road is underway as London Borough of Southwark seek to transform it into a boulevard of high quality developments marking the Blackfriars Mile from Blackfriars Bridge at one end to Elephant & Castle at the other. Eighteen development projects are in the pipeline planned for completion from the beginning of 2013 until 2018, including 240 Blackfriars Road and South Bank Tower which are both already under construction. The focus for office regeneration around Blackfriars Road is shared by the retail and leisure markets as developments will create 1,500 new homes and in excess of 10,000 jobs along with enhancing public realm, giving the entire area a refreshed identity and providing a lively and vibrant place people will want to live, work and visit. Alongside high end residential, new hotels and a large student population, Southbank now needs major retail development. A total of 75,000 sq ft of new retail space is proposed in either the mixed-use schemes already under construction or in the pipeline. Blackfriars Road will continue to promote a diverse mix of self-employment and small enterprises that serve the local community. The proposed improvements to Blackfriars Road will also attract more retailers, cafes and restaurants as more people will be living and working in the immediate area. The markets and café culture already mainly centered on the Southbank Arts Centre and Borough Market will be encouraged along Blackfriars Road and the surrounding areas. Nearby streets such as The Cut are already seeing benefits from recently undergoing improvements to now offer a mixture of retail options. As more retailers move to the area it is hoped the increased thoroughfare will flow up and down Blackfriars Road and filter out to surrounding streets increasing activity and strengthening the appeal of the area to visitors and to a wider range of occupiers. Blackfriars Road 75,000 sq ft of new retail space expected Regeneration to provide 10,000 jobs and 1,500 homes Street view from Upper Ground of proposed retail element at South Bank Tower along new pedestrian route. Bankside Large offices and hub for arts and cultural facilities Proposed retail in the arches and tunnels surrounding London Bridge Station Borough Retail improvements around Borough High Street The development opportunities are throughout the area but Blackfriars Road and Bankside will benefit from the most changes 12 farebrother.com Source: London Borough of Southwark