BUSINESS BRIEFING CENTRAL LONDON MOVERS & SHAKERS

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1 BUSINESS BRIEFING CENTRAL LONDON MOVERS & SHAKERS RELOCATION TRENDS 2013 A LONDON MARKETS RESEARCH PUBLICATION MARCH 2014 INTRODUCTION A combination of dwindling supply levels and rising rents in some submarkets of Central London, alongside emerging areas providing quality, affordable space, is resulting in occupiers becoming more footloose in their choice of location. Cushman & Wakefield analysed location patterns in Central London in 2013 to identify key relocation trends associated with various sectors and submarkets. OVERVIEW The analysis focused on transactions in excess of 10,000 sq ft and a total t of 8.3 million sq ft was analysed in 244 transactions across Central London. Of these 16 deals were located in the City & Docklands and the remaining 79 in the West End. Serviced offices, new operations or companies new to Central London accounted for 16% of transactions by number 1.1 million sq ft in 40 deals. Of this space, C&W estimated that 70% was leased by companies moving into Central London from further afield. The largest example of a company moving into Central London was Amazon, who leased 213,000 sq ft in Sixty London. Others included Tableau Software relocating from Richmond upon Thames to Southbank and Kaspersky from Oxford to Paddington. Cushman & Wakefield, LLP 43-4 Portman Square London W1A 3BG

2 MOVERS & SHAKERS NET ABSORPTION There were signs that occupiers are now starting to expand and take increasing volumes of space. Companies, already based in Central London, were 33% relocating from a total t of.4 million sq ft and had committed to 7.2 million sq ft. This equated to positive net absorption of 1.8 million sq ft or growth in floorspace occupied of 33%. INCREASE IN TOTAL NET ABSORPTION IN 2013 FLOORSPACE OCCUPIED CENTRAL CITY & WEST END QUARTER LONDON DOCKLANDS 2013 Q1 672, , ,000 Q2 318, ,000 47,000 Q3 633, ,000 41,000 Q4 19, ,000 36,000 TOTAL 1,782,000 23,000 1,47,000 SUBMARKET ANALYSIS 2 MOVES FROM WEST END TO CITY & DOCKLANDS WHERE ARE OCCUPIERS MOVING FROM? Excluding new companies and serviced offices, more than half of all occupiers moved some or all of their operation out of their existing submarket. Of 107 occupiers who relocated, 4 were based in the West End and 3 were in the City & Docklands. The remaining 97 remained in their existing submarket. The shift from West to East is very much in evidence, which is primarily due to rising rents and a shortage of suitable stock across the West End submarkets. Around half of the West End occupiers, who relocated submarket, moved to one of the City & Docklands submarkets, compared with five relocations in the opposite direction. MOVES FROM CITY & DOCKLANDS TO WEST END Soho & Covent Garden accounted td for the largest number of outmovers, followed by Clerkenwell & Shoreditch. This was mainly due to a lack of large supply in these submarkets. The most recent high profile outmover from Soho & Covent Garden was Facebook. The company committed to relocating from its office in Seven Dials to 10 Brock Street in Euston. On the other hand, Victoria (1/9) and Southbank (2/6) saw the lowest level of outmovers. 2

3 MOVERS & SHAKERS OCCUPIER LOYALTY In terms of occupiers loyalty to their submarkets, Mayfair & St James s occupiers showed the greatest loyalty, with 60% (9/1 transactions) of all Mayfair & St James s s leasing transactions originating from companies already located in the submarket, followed by Victoria (7% or 8/14 transactions) and the City Core (% or 43/78 transactions). WHERE ARE OCCUPIERS MOVING TO? In absolute number, the City Core (28/78), followed by Southbank (19/24) saw the greatest influx of occupiers. The latter is benefiting from regeneration, which is providing an increasing supply of quality space at a relatively low rent. It clearly shows that Southbank has seen a much higher proportion of transactions originating from outside the area than the City Core. Other submarkets that also benefited from high proportions of market activity from companies moving from elsewhere include North of Oxford Street & Fiztrovia and King s Cross. MOST LOYAL OCCUPIERS 1: MAYFAIR & ST JAMES s 2: VICTORIA 3: CITY CORE NET BALANCE At submarket level taking into account the number of companies who moved out and those that moved into a submarket the City Core had the greatest net positive balance (17) followed by Southbank (13). The highest net outflow occurred in Soho & Covent Garden (-7) and Mayfair & St James s (-7), followed by Clerkenwell & Shoreditch (-6). SECTOR BREAKDOWN Of all sectors, Media and Tech companies showed the greatest willingness to move location by number, with 36 relocations. A further 9 Media and Tech companies moved into Central London or were new operations. TAKE UP TRENDS BY SUBMARKET IN-MOVERS AND OUT-MOVERS BY SUBMARKET 100% 80% 60% 40% 20% 0% Canary Wharf & Docklands (11) City Core (78) Outer Core (11) Aldgate & Whitechapel (10) Clerkenwell & Shoreditch (14) Southbank (24) Midtown (16) Soho & Covent Garden (12) Mayfair & St James's (1) Victoria (14) Bloomsbury (4) North of Oxford Street (4) Fitzrovia () Kensington (1) Hammersmith () Paddington (6) Companies relocating within existing village Companies moving from other villages Euston & Marylebone (8) King's Cross () er of transactions Numb Paddington Victoria Kensington Aldgate & Whitechapel Southbank Kinghtsbridge Ca anary Wharf & Docklands Bloomsbury North of Oxford Street Hammersmith King's Cross Euston & Marylebone Outer Core Fitzrovia City Core Midtown Mayfair & St James's Clerkenwell & Shoreditch Soho & Covent Garden New operations Companies moving to other villages Companies moving from other villages 3

4 Of these companies, over half relocated from the traditional media hubs of Soho & Covent Garden and Fitzrovia to emerging locations such as Southbank, Clerkenwell, and Euston. The most obvious examples of this trend were News UK and Ogilvy & Mather moving to Southbank, Saatchi & Saatchi relocating to Clerkenwell, and Facebook and Entertainment One relocating to Euston. Interestingly, Media & Tech companies in the City Core were most likely to remain in that location. These were typically more B2B technology organisations who wished to stay close to their customer base. MEDIA & TECH RELOCATION TRENDS 13% 1% 36% The Retail sector (70% relocating by number), followed by Professional services companies (2%), also showed a low level of loyalty to their existing location. One of the highest profile example was the 200,000 sq ft relocation of KPMG from Salisbury Square in the City Core to 30 North Colonnade in Canary Wharf. Relocated to new New operation Remained in existing On the other hand, the Insurance and manufacturing sectors displayed a high level of loyalty to their existing submarket 69% and 64% by proportion respectively. Insurance companies, almost without exception, remained faithful to EC3. The Banking & Financial services sector demonstrated a high degree of loyalty, with around 60% of companies remaining in the same submarket. Banking & Financial services companies originally located in the City Core and Mayfair were loyal to their existing locations, although Financial services companies based elsewhere had a greater propensity to relocate. For example, Duff & Phelps consolidated its London office from Canary Wharf into the Shard, Southbank while Klesch & Co relocated from Wigmore Street to 16 Palace Street, Victoria. TAKE UP PATTERNS BY SECTOR NET BALANCE (IN-MOVERS MINUS OUT-MOVERS) 100% 90% 80% 70% 60% 0% 40% 30% 20% 10% 0% Companies relocating within existing village New Operation Companies relocating to another village Number of transactions Check these figures different from previous version and also don t tally with inmovers and out movers chart eg KX & Covent Garden ayfair & St James's well & Shoreditch Hammersmith Fitzrovia Midtown Kinghtsbridge Bloomsbury Kensington Stratford ton & Marylebone King's Cross h of Oxford Street Wharf & Docklands Paddington ate & Whitechapel Victoria Outer Core Southbank City Core Soho M Clerkenw Eus North Canary W Aldga 4

5 Half of lawyers (8/16) relocated outside their existing location. Despite relocations between submarkets, legal occupiers remained faithful to their core market of West End or City. There was only one shift from West to East which was Boodle Hatfield. They committed to relocating from their West End offices in Mayfair into 240 Blackfriars, Southbank. SIZE BAND ANALYSIS There was no discerning trend in terms of the influence that size has on relocation patterns, particularly in transactions over 0,000 sq ft. The determining factor seems to relate to the sector and the nature of day to day business. The large Legal, Insurance, and Financial companies were wedded to their existing location which was typically the City Core, while Media & Tech companies all chose an alternative location to find the quality and size of office required. There was some evidence, however, that the likelihood of an occupier relocating to another submarket increased in smaller transactions (below 0,000 sq ft). MAYFAIR SOUTHBANK 2013 RELOCATION TRENDS NORTH OF OXFORD STREET & FITZROVIA RECORDED HIGHEST % OF IN-MOVERS CITY CORE RECORDED HIGHEST NUMBER OF IN- MOVERS AND HIGHEST NET BALANCE KING S CROSS SAW LARGEST IN-MOVER- GOOGLE- INTO A SUBMARKET MAYFAIR & ST JAMES S SAW GREATEST OCUPIER LOYALTY FOLLOWED BY VICTORIA SOHO & COVENT GARDEN SAW HIGHEST NUMBER OF OUT-MOVERS 80% OF SOUTHBANK TRANSACTIONS ORIGINATED FROM OUTSIDE THE SUBMARKET

6 2012 vs 2013 TRENDS C&W also analysed the relocation trends of all transactions over 0,000 sq 9% ft for 2012 and 2013 to compare patterns year on year. In 2012, there were 23 transactions in excess of 0,000 sq ft across Central London, totalling 2.1 million sq ft. Reflecting the upturn in the leasing market, 2013 take up levels reached 4 million sq ft in 29 transactions over 0,000 sq ft. INCREASE IN NET ABSORPTION NET ABSORPTION In 2013, net absorption in transactions over 0,000 sq ft stood at 1.26 million sq ft, approximately double the absorption rate recorded in 2012 (646,000 sq ft). The increase suggests that expansion is an increasing driver of large scale transactions and reflects the more positive sentiment evident in the occupier market. Another trend that was evident was that larger occupiers have used their relocation to consolidate from multiple buildings into one. In 2012, consolidation was evident in 30% of transactions but by 2013 this increased to just under 0%. INCREASE IN RELOCATONS The comparison between 2012 and 2013 showed that relocation between villages increased across Central London. This was witnessed by an increase in both the number and proportion of relocations year on year. In 2012, 8/23 (3%) of companies moved submarket while this increased to 13/29 (4%) in EXPANSION & CONSOLIDATION INCREASINGLY EVIDENT In both 2012 and 2013, the City Core saw the greatest influx of new occupiers which reflected the relatively higher availability of large scale units in the area. Midtown went from seeing the second highest number of in-movers in 2012 (net balance: +1) to the highest number of out-movers in 2013 (net balance: - 2). The number of companies that moved from West End submarkets to ones in the East was steady year on year, with two and three relocations from the West End to the City & Docklands in 2012 and 2013 respectively. SECTOR BREAKDOWN The sector breakdown in 2013 was largely the same as that seen in 2012, with the Media & Tech sector the most footloose. There were seven relocations from the Media & Tech sector in 2013, up from two in ANNUAL TRENDS 1,400,000 1,200,000 1,000, , , , , Proportion Relocating (%) (RHS) Net Absorption (LHS) 0% 4% 40% 3% 30% 2% 20% 1% 10% % 0% 6

7 MOVERS & SHAKERS 2013 SUMMARY More than half of all occupiers moved some or all of their operation to a new submarket The proportion of relocations increased in 2013 compared to 2012 The shift from West to East was evident Soho & Covent Garden accounted for the largest number of out-movers The City Core saw the greatest number of in-movers Emerging g submarkets also saw high numbers of in-movers Mayfair & St James s occupiers showed the greatest loyalty of any submarket Strong loyalty was also evident from occupiers in the City Core The City Core had the largest net positive balance of occupiers space, followed by Southbank Professional services and Media & Tech companies were the most likely to relocate Insurance companies were most loyal to their existing submarkets Net absorption in transactions totalled 1.8 million sq ft in 2013 For more information, contact: Elaine Rossall Partner Head of London Markets Research T (020) elaine.rossall@eur.cushwake.com Richard Valentine Selsey Senior Research Analyst T (020) richard.valentine-selsey@eur.cushwake.com Azar Laghaei Research Analyst T (020) azar.leghaei@eur.cushwake.com Cushman & Wakefield (C&W) is known the world-over as an industry knowledge leader. Through the delivery of timely, accurate, high-quality research reports on the leading trends, markets around the world and business issues of the day, we aim to assist our clients in making property decisions that meet their objectives and enhance their competitive position. In addition to producing regular reports such as global rankings and local quarterly updates available on a regular basis, C&W also provides customized studies to meet specific information needs of owners, occupiers and investors. C&W is the world s largest privately-held commercial real estate services firm. Founded in 1917, it has 230 offices in 60 countries and more than 13,000 employees. The firm represents a diverse customer base ranging from small businesses to Fortune 00 companies. It offers a complete range of services within five primary disciplines: Transaction Services, including tenant and landlord representation in office, industrial and retail real estate; Capital Markets, including property sales, investment management, investment banking, debt and equity financing; Client Solutions, including integrated real estate strategies for large corporations and property owners, Consulting Services, including business and real estate consulting; and Valuation & Advisory, including appraisals, highest and best use analysis, dispute resolution and litigation support, along with specialized expertise in various industry sectors. A recognized leader in global real estate research, the firm publishes a broad array of proprietary reports available on its online Knowledge Centre at: This report has been prepared solely for information purposes. It does not purport to be a complete description of the markets or developments contained in this material. The information on which this report is based has been obtained from sources we believe to be reliable, but we have not independently verified such information and we do not guarantee that the information is accurate or complete. Published by Corporate Communications Cushman & Wakefield, Inc. All rights reserved. Cushman & Wakefield, LLP 43-4 Portman Square London W1A 3BG 7