London Offices market analysis

Transcription

1 London Offices market analysis Sandra Jones of EGi London Offices considers the prospects for recovery this year So, it s official. Google has signed up for a 1m sq ft prelet at King s Cross and 2013 gets off to a roaring start in the central London letting market. If lettings were to continue at that rate for the rest of the year well, that would be a good story. But 2012 was sluggish from beginning to end and, while the economy may be a little less volatile than it was, the indicators are not yet reassuring not in the UK, nor the eurozone, nor even in China. So for the third year running, we find ourselves asking the same question in January: is the London letting market poised on the brink of recovery, or must we endure another year of waiting patiently? Not so for the investment market. If not a record year, 2012 was up there with the strongest on record. 15.4bn was spent on London investment property in 2012 and that, according to Jones Lang LaSalle, has only been exceeded twice since 1989 in 2006 ( 17.25bn) and 2007 ( 18.75bn). In 2012, three-quarters of the 15.4bn came from overseas buyers and almost twothirds of that was spent in the City market. In other words, the City may have suffered adversity in its financial sector but it has certainly not lost its appeal for investors. For several years, in fact ever since the credit crunch, the West End has been considered to have a more resilient letting market than the City, thanks to its more diverse occupier base. Rents have been propelled to around 100 per sq ft in the heart of the West End, compared with just 57 per sq ft in the City, by businesses eager to secure premises among the shops, restaurants and cultural attractions of the West End. In 2012 though, there was a tangible, if modest, reversal of fortunes. City take-up in 2012 was up on the previous Produced by London Offices 81

2 LONDON OFFICES MARKET ANALYSIS OVERVIEW year, while in the West End it was down on Moreover, in Q4 the City had its strongest take-up for two years. The insurance sector has buoyed the City market in In Q4 alone, Minerva let 281,000 sq ft to JLT in the St Botolph s Building; Miller Insurance took an 84,000 sq ft prelet of 70 Mark Lane, and Gallagher Heath committed to 60,100 sq ft in The Walbrook. By the end of the year about half of the space in 20 Fenchurch Street, EC3, and in 122 Leadenhall Street, EC3, was let or under offer to insurance businesses and yet both these towers are still more than a year from completion. Of course, we are in no doubt that Q will be a good one for the West End letting market, since King s Cross falls within its boundary. But King s Cross is an edge of centre mega scheme, far removed from the core of the West End, where rental values will be more akin to the City core than Mayfair, or even Soho. The question looming over the West End is whether the level of rent reached in the core is sustainable for any but the smallest niche occupiers. Mat Oakely of Savills believes that value for money will be uppermost in the minds of many tenants for some time to come: We expect to see better rental growth in some fringe markets than in some of the core locations as tenants look for austerityfriendly deals. He is not expecting a huge turnaround in the West End but believes that its rents will be underwritten by lack of supply rather than strength of demand: West End demand will be better than last year (but still unexciting) it will be the lack of supply that will bail the landlords out. That lack of supply is what Jones Lang LaSalle refers to as the West End s own built-in protection mechanism. The City meanwhile, as JLL suggests in its latest central London market quarterly, increasingly looks like very good value. That raises the prospect of diversification of the City s occupier base. It already has a strong and growing cluster of tech businesses around Old Street that began organically but now has the added benefit of government policy support. Just to the west of that, where the Crossrail station is being constructed at Farringdon, lies a cluster of advertising agencies. According to the EGi London Offices database, there are 45 advertising agencies in Clerkenwell today and yet in 1995 there were just 16. In that time, the space they occupy has increased fivefold. Google has chosen to locate at King s Cross, a location that is variously claimed as West End, City and Midtown. The geography of London s office market is shifting continuously and it is hard to keep abreast of submarket boundaries. Google is big enough to make its own place and it is inevitable that smaller businesses will cluster in its wake. No-one who uses the Google search engine would doubt the close association between what Google does and what the advertising industry does. King s Cross is one stop from Farringdon. Clerkenwell has a growing cluster of advertising agencies but its building stock is generally small. It is not hard to envisage the arrival of one of the big advertising agencies in the City core. Meanwhile, the financial sector is repairing its tarnished reputation and a cultural change in the City looks likely. Already the lord mayor is talking about the finance industry in a way that would have been hard to imagine a few years ago. Roger Gifford, head of the UK arm of Swedish bank SEB, is the first banker to be lord mayor for eight years. Interviewed by the FT in December, he said that the financial services industry had made ghastly mistakes in recent years, but was reaching towards a newer, healthier capitalism in which the boundaries of acceptable behaviour, rewards and regulation were being redrawn. He said: We are in the middle of a grand readjustment and I m not sure that s a bad thing. The latest confidence survey conducted by CBI-PwC found that financial services companies were feeling more optimistic about business volumes in 2013 but still expect to make job cuts. It makes sense that restructuring leads to job losses in parts of the business. In 2012, volumes were down in banking and securities trading but up in investment management. Dan Burn of JLL is cautiously optimistic for the City. The structural demand is still there driven by lease expiries and breaks, he says and a further round of mergers and acquisitions looks likely, among the mid-tier lawyers and accountants. He also highlights a number of footloose central London requirements from large advertising agencies looking to consolidate from several buildings into one. They are focusing on cost savings, he points out. And moving from the West End to the City is one way to make them. So, can we expect an upturn in lettings in 2013? Probably not, but we could see some interesting shifts in the business geography of London January 2013

3 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 232m2 (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. Availability rates 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 share league table 86 Agents share by market 87 Summary stats 88 Central London Q4 league table 89 City core 90 West End 92 Midtown 94 Docklands 95 City fringe 96 South Bank 97 83

4 LONDON OFFICES MARKET ANALYSIS IN DEPTH INVESTMENT LEAGUE TABLE Q CBRE pipped JLL to the top of the investment league table in Q As in Q3, the two were separated by a narrow margin. This time the agents were each involved in around 25% of the market by value. CBRE acted for the vendor or the purchaser in deals worth 1.59bn, while JLL acted on 1.54bn. These same two firms were also ranked one and two in the Q3 table and CBRE secured the number one slot in that one too. Knight Frank moved up into third place, having advised on 673m in the final quarter of 2012 an 11% market share. It was in fourth place in Q3. Savills also improved its position, moving from fifth to fourth place with an 8% share totalling 490m. H2SO came into the table in fifth place in Q4, with a 6% market share. The collection of data for this league table relies on the goodwill of agents reporting investment transactions. It is based on transactions totalling 3.8bn. According to JLL, the total investment spend in Q4 in central London was 4.18bn. 4.18bn Q4 INVESTMENT SPEND 235m VALUE OF LARGEST TRANSACTION 5 Aldermanbury Square, EC2 LARGEST TRANSACTION To contribute to the investment league table please contact tom.pilkington@estatesgazette.com January 2013 Rank Agent Value* m 1 CBRE 1, % 2 Jones Lang LaSalle 1,541 25% 3 Knight Frank % 4 Savills % 5 H2SO % 6 GM Real Estate % 7 Allsop % 8 DTZ % 9 Pilcher Hershman 100 2% 10 Tudor Toone % Market share * Value of transactions, acting for vendor or purchaser

5 CONSENSUS VIEW OF RENTAL VALUES: CENTRAL LONDON Q The general view of our panel was that central London rental values had been fairly stable between Q3 and Q but there were small movements in the City core and in the core of Mayfair/St James s. Letting volumes were low in Q4 and so the impetus for rental growth was slight, but there was an improvement in take-up in the City core and some major prelettings which probably drove the small rise in rents in the City core. In the West End, although take-up was sluggish in Q4, there is almost continuous pressure on rental values in a tightly defined area in the heart of the market. The City core continues to offer high-quality office space at a substantial 42% discount to Mayfair/St James s and a 20% discount to Soho. It seems likely that this will eventually encourage some relocation decisions. Location point Submarket Rent ( per sq ft) Gresham St/Leadenhall St/Broadgate City core Aldgate City fringe Chancery Lane Midtown Covent Garden Midtown Mayfair/ St James West End Victoria West End Soho West End Paddington West End More London South Bank Canary Wharf Docklands Rent-free (months) Definitions Consensus rental values are based on the average of estimates made by a panel of commentators on the central London office market. The panel was asked to estimate rental value for a hypothetical grade-a unit of 20,000 sq ft, let on a 10-year lease in the specified location. The rental figures have been rounded to the nearest 25p. Consensus Rent panel: CBRE; Cushman & Wakefield; DJ Deloitte; DTZ; Jones Lang LaSalle; Savills; Farebrother (Midtown and South Bank only) 85

6 LONDON OFFICES MARKET ANALYSIS 2012 TABLES Source: EGi London Offices CENTRAL LONDON LETTING AGENTS LEAGUE TABLE 2012 CBRE topped the central London letting agents league table in 2012, having let 2.1m sq ft, which gave it a market share of 21%. It squeezed Jones Lang LaSalle into second place by just 53,000 sq ft. JLL s 2.05m sq ft also translated into a market share of 21%. These two agents continue to dominate the top spots, switching between themselves for first and second place. There was a substantial gap between the volumes achieved by these two and the rest of the table. DTZ came in third once again, with a market share of 14% earned from 1.38m sq ft of lettings. It held that place by a significant margin over the next most active agents. For the third year running, the next three positions were held by the same three agents: Knight Frank in fourth, Savills in fifth and Cushman & Wakefield in sixth, with 9%, 8% and 7% respectively. Their market shares were surprisingly similar to 2011, when Knight Frank and Cushman & Wakefield both had 8% and Savills had 7%. Deloitte Real Estate climbed three places in 2012 from 10th to seventh position and that follows a similar climb of three places between 2010 and So, Deloitte Real Estate has risen from 13th to seventh in just two years. Its market share is now 5% gained from a total of 484,440 sq ft let. H2SO has also made impressive progress in the rankings. It has risen from 15th place in 2011 to eighth place this year, with doubling its market share to 4%. In 2010, H2SO was in 19th place in the table. BNP Paribas Real Estate seems to be suffering the opposite fate, having slipped from eighth in 2010 to Rank Agent Disposals (sq ft) No of deals Market share 2 1 CBRE 2,107, % 1 2 Jones Lang LaSalle 2,054, % 3 3 DTZ 1,381, % 4 4 Knight Frank 862, % 6 5 Savills 792, % 5 6 Cushman & Wakefield 673, % 10 7 Deloitte Real Estate 484, % 15 8 H2SO 446, % 13 9 Farebrother 430, % 7 10 Strutt & Parker 333, % 8 11 Edward Charles & Partners 311, % EA Shaw (now trading as CBRE) 291, % Hatton Real Estate 289, % GVA 279, % Monmouth Dean 276, % na 16 Cherryman 258, % 9 17 BNP Paribas Real Estate 256, % Anton Page 250, % Newton Perkins 190, % Allsop 180, % Richard Susskind & Co 159, % na 22 Hall Kemp 155, % na 23 Ingleby Trice 136, % BDG Sparkes Porter 110, % na 25 Montagu Evans 106, % Walbrook Building: 61,000 sq ft let to Gallagher Heath DISPOSALS OFFICE BREAKDOWN 2012 JONES LANG LASALLE 39% WEST END 63% CITY CBRE 41% WEST END 59% CITY KNIGHT FRANK 68% WEST END 32% CITY SAVILLS 42% WEST END 58% CITY DTZ 49% WEST END 51% CITY ninth in 2011 and 17th in the latest rankings. The agents in positions 10 to 20 in the league table had between 1% and 3% of the market each but generally achieved that share with a far greater number of small transactions. Anton Page for instance, in 18th place, let 250,218 sq ft in 72 separate transactions, virtually the same number of deals as Cushman & Wakefield in sixth place. This creates some interesting contrasts when agents are ranked by number of disposals. The number of transactions in the central London league table is often lower than the number of disposals from each office because the second table includes the wider London offices market area. AGENTS SHARE BY NUMBER OF DISPOSALS 2012 Jones Lang LaSalle earned first place in the ranking by number of disposals, with a total of 172, compared with 143 for second-placed CBRE. Knight Frank took third place with 105, beating Savills and DTZ into fourth and fifth place respectively. JLL and CBRE both completed more deals from their City than their West End offices, but for the next three their West End offices were more productive in Anton Page was the highest ranked small agent, with 84 transactions the second highest total from a City office in 2012, equalling CBRE and only beaten by JLL. Hatton Real Estate was not far behind with 80 transactions from its City office. Monmouth Dean achieved a similar feat in the West End with 71 transactions, which would have put it in joint first place in a ranking of West End offices. Rank Agent City West End 1 Jones Lang LaSalle CBRE Knight Frank Savills DTZ Anton Page Hatton Real Estate = Monmouth Dean = Cushman & Wakefield EA Shaw (now trading as CBRE) Edward Charles & Partners GVA H2SO Richard Susskind & Co Strutt & Parker Deloitte Real Estate Newton Perkins Hanover Green Frost Meadowcroft BNP Paribas Real Estate BDG Sparkes Porter Allsop Ingleby Trice Crossland Otter Hunt Tuckerman No of disposals Source: EGi London Offices January 2013

7 AGENTS SHARE BY MARKET 2012 City core Rank Agent Disposals (sq ft) No. deals Market share 1 Jones Lang LaSalle 1,223, % 2 CBRE 896, % 3 DTZ 720, % 4 Savills 513, % 5 Cushman & Wakefield 453, % The top three positions have remained the same for the third consecutive year and this time JLL was ahead of CBRE by a significant margin of 35% to 25%. West End Rank Agent Disposals (sq ft) No. deals Market share 1 CBRE 589, % 2 Jones Lang LaSalle 490, % 3 H2SO 385, % 4 Knight Frank 354, % 5 Edward Charles & Partners 238, % CBRE took the number one slot for the second year, with a 19% market share, last year it earned first place with 16%. City fringe Rank Agent Disposals (sq ft) No. deals Market share 1 Hatton Real Estate 210, % 2 Anton Page 204, % 3 Richard Susskind & Co 150, % 4 Allsop 135, % 5 Jones Lang LaSalle 109, % Hatton Real Estate and Anton Page vie for ascendancy in this market but Hatton Real Estate took first place in 2012 with a 17% market share. Midtown Rank Agent Disposals (sq ft) No. deals Market share 1 DTZ 341, % 2 Farebrother 307, % 3 CBRE 256, % 4 Jones Lang LaSalle 207, % 5 EA Shaw (now trading as CBRE) 160, % DTZ topped the Midtown table with 26%. Last year it was not in the top five. Farebrother rose from third place in 2011 to second in 2012 with a 23% share of all lettings. South Bank Rank Agent Disposals (sq ft) No. deals Market share 1 EA Shaw (now trading as CBRE) 112, % 2 DTZ 53, % 3 Farebrother 28, % 4 Edward Symmons 25, % 5 Cushman & Wakefield 18, % EA Shaw was top of this table for the third year running with a 41% market share, but that marks the end of its reign since, from now on, it becomes part of CBRE. Docklands Rank Agent Disposals (sq ft) No. deals Market share 1 CBRE 317, % 2 Cherryman 258, % 3 Knight Frank 60, % 4 DTZ 34, % 5 GVA 26, % CBRE and Cherryman dominated. CBRE had around two-thirds of the market. Both acted on the 165,000 sq ft let in Exchange Tower to the Financial Ombudsman in Q3. Lettings at Waterhouse Square were crucial to DTZ securing top spot in Midtown ACQUISITIONS 2012 CBRE earned the number one slot in the league table of acquisitions for the third consecutive year with a market share of 11%, more than twice the 5% share secured by each of the agents ranked second, third and fourth. As in 2011, acquisitions have been distributed far more widely among the London agents than disposals, with more small firms making the top of the tables and smaller market shares for the leading firms. These market shares also reflect a smaller universe because it is less likely that there will be joint instructions. Jones Lang LaSalle was in second place, with 496,772 sq ft, just 11,000 sq ft ahead of Cushman & Wakefield in third. JLL acted on 35 deals, compared with 22 for C&W, showing a gulf in the average size of acquisitions between the two firms. The average size of acquisition for JLL was 14,200 sq ft, compared with 22,000 sq ft and 23,400 sq ft for C&W and CBRE respectively. Savills earned its 5% market share and fifth place with a slightly larger average unit size of 28,440 sq ft. Devono was the highest ranked small firm, taking fifth place with a 4% market share, but the average size of its acquisitions was 4,730 sq ft from a total of 77 transactions. In fact, if this table was ranked by number of acquisitions, Devono would comfortably take first place. Rank Agent Acquisitions (sq ft) No of deals Market share 1 CBRE 1,075, % 2 Jones Lang LaSalle 496, % 3 Cushman & Wakefield 485, % 4 Savills 455, % 5 DeVono 364, % 6 DTZ 335, % 7 Deloitte Real Estate 219, % 8 Knight Frank 199, % 9 Newton Perkins 164, % 10 Edward Charles & Partners 136, % 11 Robert Neils & Co 125, % 12 GVA 104, % 13 Monmouth Dean 94, % 14 Allsop 86, % 15 Tuckerman 80, % 16 Kinney Green 75, % 17 Strutt & Parker 69, % 18 Montagu Evans 68, % 19 Colliers International 66, % 20 BNP Paribas Real Estate 60, % 21 Hatton Real Estate 60, % 22 Farebrother 59, % 23 Gerald Eve 57, % 24 BDG Sparkes Porter 56, % 25 Crossland Otter Hunt 49, % 87

8 LONDON OFFICES MARKET ANALYSIS SUMMARY SUMMARY STATISTICS City core City fringe Docklands Midtown South Bank West End Overall Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 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 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 New/refurb existing Premarketing Secondhand Under construction Total Availability rate % annual average or quarter Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 % 11.63% 11.41% 10.46% 8.66% 6.84% 5.98% 7.54% 8.64% 9.63% 8.81% 7.40% 6.79% 7.44% 7.16% 11.41% 6.57% 5.39% 5.50% 8.44% 7.81% 8.29% Under offer and withdrawn (m sq ft) quarter or quarterly average Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Under offer Withdrawn Average asking prices ( per sq ft) quarter or quarterly average * New leases only Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 New build existing n/a n/a n/a Secondhand grade A Investment sales (m sq ft) annual or quarter total Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Total sq ft No of transactions Construction starts (m sq ft) annual or quarter total Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Total started Prelet Speculative Completed space still available (m sq ft) (completion by full year or part of year) Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 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% 55% 77% 96% 100% 100% 0% 53% 0% 100% 100% 0% 100% 100% 0% 80% 100% 0% 92% 64% 77% KEY TRANSACTIONS ALL MARKETS Market Address Tenant Size (sq ft) Agent City core St Botolph Building, Houndsditch, EC3 Jardine Lloyd Thompson 281,143 CBRE/Jones Lang LaSalle City core Alban Gate, 125 London Wall, EC2 Nabarro 125,541 DTZ/Cushman & Wakefield City core 70 Mark Lane, EC3 Miller Insurance Services 84,001 DTZ/Jones Lang LaSalle West End 82 Baker Street, W1 Publicis 62,986 No disposing agent City core Walbrook Building, Walbrook, EC4 Gallagher Heath 60,978 Jones Lang LaSalle/Knight Frank West End Wimpole Building, 1a Wimpole Street, W1 Coca-Cola Enterprises 59,554 CBRE/Strutt & Parker Midtown Castlewood House, New Oxford Street, WC1 LinkedIn 46,021 Capita Symonds/EA Shaw (now trading as CBRE) City core Citypoint, 1 Ropemaker Street, EC2 Mimecast 40,427 Deloitte Real Estate/DTZ West End 95 Wigmore Street, W1 Lane Clark & Peacock 40,003 CBRE/H2SO City core Broadgate Tower, Bishopsgate, EC2 Hill Dickinson 38,831 Jones Lang LaSalle/Knight Frank City core Angel Lane (Formerly Watermark Place), 90 Upper Thames Street, EC4 M & G Investments 33,988 Deloitte Real Estate West End 50 George Street, W1 Colliers International 32,351 CBRE/Cushman & Wakefield City core 20 Gresham Street, EC2 Lloyds TSB Bank 31,579 AOS Studley/Cushman & Wakefield City fringe 15 Bonhill Street, EC2 Mind Candy 29,886 Allsop City core 20 Fenchurch Street, EC3 Ascot Underwriting 29,429 CBRE/Knight Frank For any data queries, please contact tom.pilkington@estatesgazette.com or call January 2013

9 CENTRAL LONDON LETTING AGENTS LEAGUE TABLE Q Rank Agent Disposals (sq ft) No of deals Market share 1 Jones Lang LaSalle 743, % 2 CBRE 733, % 3 DTZ 366, % 4 Knight Frank 315, % 5 Cushman & Wakefield 283, % 6 Savills 166, % 7 H2SO 127, % 8 Deloitte Real Estate 125, % 9 Strutt & Parker 110, % 10 Richard Susskind & Co 93, % 11 EA Shaw (now trading as CBRE) 92, % 12 Monmouth Dean 88, % 13 Hatton Real Estate 86, % 14 Allsop 83, % 15 Farebrother 60, % 16 Anton Page 57, % 17 Capita Symonds 51, % 18 BNP Paribas Real Estate 43, % 19 Cherryman 43, % 20 Edward Charles & Partners 39, % 21 Michael Elliott 38, % 22 Newton Perkins 37, % 23 Hanover Green 34, % 24 AOS Studley 33, % 25 Kinney Green 25, % 62 Buckingham Gate: 260,000 sq ft now available JLL took first place in the central London ranking for Q4, with a market share of 27%, ahead of CBRE with 26%. There was a wide margin between them and thirdplaced DTZ, which had a 13% market share. The top three slots in the Q4 table have been shared by CBRE, JLL and DTZ for nine of the past 12 quarters. The only other agents to have been in the top three over this period are Knight Frank, Cushman & Wakefield and Savills, which were in fourth, fifth and sixth places in the Q table. Knight Frank secured 11% of the market and Cushman & Wakefield 10%. The same five agents occupied the top five places in the City core table, with JLL at number one with 48%, followed by CBRE with 31%, DTZ with 26%, C&W with 16% and Knight Frank with 13%. On the City fringe, it was the smaller players that took the plaudits. Richard Susskind topped the table with a 25% market share, closely followed by Hatton Real Estate with 23%. EA Shaw took first place in both the Midtown and the South Bank table, a nice way to say goodbye to the business name, as it is now trading as CBRE. CBRE was number one in the West End in Q4 with 32% of the market, comfortably ahead of the rest of the table. Rank Agent Disposals (sq ft) City core No of deals Market share 1 Jones Lang LaSalle 587, % 2 CBRE 377, % 3 DTZ 317, % 4 Cushman & Wakefield 194, % 5 Knight Frank 155, % West End 1 CBRE 249, % 2 H2SO 112, % 3 Jones Lang LaSalle 105, % 4 Knight Frank 97, % 5 Strutt & Parker 76, % City fringe 1 Richard Susskind & Co 90, % 2 Hatton Real Estate 82, % 3 Allsop 72, % 4 Anton Page 41, % 5 Michael Elliott 38, % Midtown 1 EA Shaw (now trading as CBRE) 69, % 2 CBRE 63, % 3 Capita Symonds 46, % 4 Farebrother 45, % 5 Knight Frank 40, % South Bank 1 EA Shaw (now trading as CBRE) 22, % 2 Cushman & Wakefield 10, % 3 Farebrother 7, % 4 Edward Symmons 5, % 5 DTZ 5, % Docklands 1 Cherryman 43, % 2 CBRE 24, % 3 Savills 22, % 4 Knight Frank 22, % 5 Peter Galan & Co 6, % KEY NEW INSTRUCTIONS ALL MARKETS Market Address Grade Size (sq ft) Agent West End Selborne House, 62 Buckingham Gate, SW1 Premarketing 260,000 Knight Frank Southern fringe 1 London Bridge, SE1 Secondhand 168,632 Cushman & Wakefield West End Eagle Place (St James's Gateway), Piccadilly, W1 Secondhand 57,775 CBRE/Strutt & Parker Midtown Red Lion House, 26 Red Lion Square, WC1 Secondhand 56,445 Savills City core City Tower, 40 Basinghall Street, EC2 Secondhand 56,325 Jones Lang LaSalle City core 5 Aldermanbury Square, EC2 Secondhand 47,504 BNP Paribas Real Estate Midtown Shell Mex House, 80 Strand, WC2 Secondhand 40,090 Cushman & Wakefield Southern fringe 25 Lavington Street, SE1 Secondhand 31,300 Anton Page/EA Shaw (now trading as CBRE) Docklands 10 Upper Bank Street, E14 Secondhand 27,083 CBRE/GVA Midtown Manfield House, 1 Southampton Street, WC2 Premarketing 26,800 EA Shaw (now trading as CBRE)/Jones Lang LaSalle City fringe Farringdon Place, 20 Farringdon Road, EC1 Secondhand 26,000 Farebrother City core City Tower, 40 Basinghall Street, EC2 Secondhand 25,000 Cushman & Wakefield/Jones Lang LaSalle Southern fringe Southwark Bridge Road, SE1 Secondhand 24,090 EA Shaw (now trading as CBRE)/Jones Lang LaSalle City core 88 Wood Street, EC2 Secondhand 23,860 Cushman & Wakefield Southern fringe Blue Fin Building, Southwark Street, SE1 Secondhand 22,618 DTZ 89

10 LONDON OFFICES MARKET ANALYSIS IN DEPTH TAKE-UP Take-up (sq ft) Q months 12 months 3 months New/refurb existing 473, Premarketing 84, n/a n/a Secondhand 534, Under construction 53,958 n/a Total 1,146, The City core had a strong end to the year, with 1.1m sq ft let in Q4, an impressive 70% improvement on the previous quarter and the strongest quarterly total since It took the total let in the whole of 2012 to 3.1m sq ft, still below the average of 3.8m sq ft for the period but better than 2011, when 2.95m sq ft was let. One single transaction accounted for 25% of the space let in Q4. This was the letting of 281,000 sq ft in the St Botolph Building, Houndsditch, EC3, to Jardine Lloyd Thompson (JLT). The insurance sector buoyed the City core market once again in Q4. Other substantial lettings in the sector were: 84,000 sq ft prelet to Miller Insurance Services in 70 Mark Lane, EC3, and 60,100 sq ft let to Gallagher Heath in the Walbrook Building, Walbrook, EC4. There was more space prelet in 20 Fenchurch Street, EC3, with Ascot Underwriting committing to 29,500 sq ft. Insurance was not, however, the only sector to generate substantial transactions this quarter. Law firm Nabarro took 125,500 sq ft in Alban Gate, London Wall, EC2, and Hill Dickinson leased 38,800 sq ft in Broadgate Tower, EC2. There was also a significant contribution from the TMT sector, with tech business Mimecast taking 40,400 sq ft in City Point, Ropemaker Street, EC2. The largest transaction from an occupier in the financial sector was 34,000 sq ft let to M&G Investments in 90 Upper Thames Street, EC4. Lloyds TSB took 31,500 sq ft in 20 Gresham Street, EC2. LETTINGS BY SECTOR The insurance sector accounted for 35% of the take-up in Q4, as much as the financial and professional sectors put together they each took 16%. TMT was also significant, with 11% of the total. The dominance of the insurance sector is unsurprising given the scale of the lettings to JLT and Miller. There are more insurance transactions in the pipeline and this sector looks likely to remain a key driver of demand in CITY CORE Cannon Place, Cannon Street, EC4: 389,000 sq ft to let Alban Gate, London Wall, EC2: 125,000 sq ft let to Nabarro 70% INCREASE IN LETTINGS IN Q4 SUPPLY Supply (sq ft) Q months 12 months 3 months New/refurb existing 1,820, Premarketing 3,074, Secondhand 4,251, Under construction 4,117, Total 13,264, Supply fell by another 5% in Q4, taking it to 13.3m sq ft at the end of It has been in gradual decline over the past couple of years and is now 10% below its level of two years ago. There is 1.82m sq ft of new and ready-to-occupy space available today, compared with 2.1m sq ft at the end of Supply is being replenished with new construction but not at a pace that matches take-up. The largest single new building that remains unlet since completion is Cannon Place, Cannon Street, EC4, which was completed in Q All of the other large buildings now have space let or under offer, even if they remain substantially available. The same is true of several large buildings under construction. 20 Fenchurch Street, EC3, and 122 Leadenhall Street, EC3, both have about half their space let or under offer. The largest unit scheduled for completion in 2013 and still entirely available is 217,100 sq ft in Sixty London, EC1, and the only other building over 200,000 sq ft under construction is Moorgate Exchange, 72 Fore Street, EC2, which is 267,550 sq ft but will not be completed until AVAILABILITY Availability rate (%) Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 The availability rate in the City core drifted down to 10.5% by the end of Q4, from 11.3% in Q This is the lowest year-end availability rate since 2008, although it was significantly lower then, at 8.5%. Nevertheless, it demonstrates that the choices available to occupiers are diminishing and this will begin to put pressure on rental growth, particularly as the stock of speculative development is being eroded by prelets. The City core is no longer the submarket with the highest availability rate, that is now South Bank. For information on how to subscribe to London Offices, please contact daniel.clements@estatesgazette.com January 2013

11 ASKING RENTS INVESTMENT Asking rents ( per sq ft) New build (existing) Secondhand 0 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 The average asking rent for newly built space in the City core was per sq ft at the end of Q4, virtually unchanged over the quarter. The highest asking rents remain at per sq ft, which is the level sought in several high-quality buildings, including The Walbrook, EC2, and Cannon Place, EC4. Rents on tower floors can be as high as 65 or 70 per sq ft. The EG Consensus survey put grade A City core rents at per sq ft with 25 months rent-free. CITY CORE Heron Tower, Bishopsgate, EC2: Rents up to 65 or 70 per sq ft on tower floors Q saw 1.38m sq ft of City core building stock change hands in 18 transactions, taking the total for the year to date to 6.84m sq ft which exceeds the total for 2011 by 43%. The largest building sold this quarter was the 350,000 sq ft 100 Old Broad Street, EC2, sold by KanAm Grund Kapitalanlagegesellschaft MBH to Invesco Real Estate backed by sovereign wealth fund China Investment Corporation. The price is reported to be 250m, reflecting a yield of around 6%. The City Corporation sold 20 Finsbury Circus, EC2, for 42.9m to Japanese telecoms company NTT Europe, equating to an initial yield of around 7.9%. The City Corporation will retain the freehold. St Martin s Court, 10 Paternoster Row, EC4, was sold by Legal & General to Oxford Properties Group for 110m. The building is 101,400 sq ft and includes CBRE among its occupiers. 5 Aldermanbury Square, EC2, a 259,100 sq ft multi-let building, was sold by Scottish Widows Investment Partnership and TIAA CREF to Deka Immobilien Investment GmbH for 235m, equating to a yield of 5.5%. CONSTRUCTION COMPLETED SPACE Construction starts with prelets (million sq ft) 1.0 Speculative (sq ft) Prelet (sq ft) Completed space actively marketed (million sq ft) Completed space (sq ft) 0.8 Completed still available (sq ft) Aldersgate Street, EC2: 214,700 sq ft still available Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 There is 4.35m sq ft under construction in the City core plus another 1.25m sq ft in stalled development The Pinnacle, 24 Bishopsgate, EC2. Some 1.6m sq ft has been prelet, leaving 2.75m sq ft of speculative development in progress and being actively marketed, plus The Pinnacle. The largest developments under construction are 122 Leadenhall Street and 20 Fenchurch Street, EC3 both of which are almost half under offer or prelet Moorgate Exchange, EC2, (267,500 sq ft) and Sixty London, EC1, (217,100 sq ft). Some 1.07m sq ft was put under construction during Q4, the majority of which was in Bloomberg Place, Bucklersbury, EC2, which is 880,000 sq ft in total but 500,000 sq ft will be occupied by Bloomberg. The balance of the new construction in Q4 was accounted for by the Royal Bank of Canada Centre, 71 Queen Victoria Street, EC4, which is being refurbished and having a new floor and a new façade added PER SQ FT EGi CONSENSUS RENT 0 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 FUTURE COMPLETIONS Future completions (million sq ft) To complete (sq ft) Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 12 Q3 12 Q4 12 Still available (sq ft) Q2 14 Q3 14 Q

12 LONDON OFFICES MARKET ANALYSIS IN DEPTH TAKE-UP Take-up (sq ft) Q months 12 months 3 months New/refurb existing 86, Premarketing 62,985 n/a n/a n/a Secondhand 303, Under construction 165,151 n/a Total 618, There was 618,500 sq ft let in Q4, a 16% improvement on the previous quarter but still significantly lower than the volume let in the same period in It takes the total for the year to 2.4m sq ft. That is significantly lower than the average annual rate of 3.2m sq ft achieved between 2005 and As we predicted in our last report, 2012 will go on record as a quiet year for the West End market. The largest letting in Q4 was 59,500 sq ft let to Coca- Cola in the Wimpole Building, 1a Wimpole Street, W1, which is currently being refurbished. Coca-Cola is bringing part of its operation into the West End from west London in a move believed to be driven by the competitive recruitment market. The second largest letting of Q4 was to financial and actuarial consultancy Lane Clark and Peacock, which also took a prelet, this time of 40,000 sq ft in 95 Wigmore Street, W1, at a rent reported as per sq ft with 28.5 months rent-free. 95 Wigmore Street is a new development being undertaken by Great Portland Estates and Scottish Widows. It is scheduled for completion in June and this is the first letting in the building. The highest rent believed to have been paid on a substantial unit this quarter was at 10 Portman Square, W1, where British Land is developing 123,250 sq ft for completion in the summer. Saudi Aramco has taken 24,900 sq ft at a rent rumoured to be over 90 per sq ft. There was also a unit of 24,500 sq ft in the same building prelet to Aspect Capital. The most substantial letting to a business in the TMT sector this quarter was 17,275 sq ft in Ashdown House, 123 Victoria Street, SW1, let to accounting software provider Intuit. WEST END 10 Portman Square, W1: 24,900 sq ft prelet to Saudi Aramco and 24,500 sq ft prelet to Aspect Capital Park House, W1: 163,000sq ft completed SUPPLY Supply (sq ft) Q months 12 months 3 months New/refurb existing 869, Premarketing 1,298, Secondhand 2,616, Under construction 765, Total 5,550, There was 5.6m sq ft on the market at the end of Q4 2012, which was unchanged over the quarter. The amount of new space available increased by 86% over the quarter to 870,000 sq ft as developments were completed. There is 1.88m sq ft under construction, of which 310,000 sq ft is prelet and 770,000 sq ft is being actively marketed. Development activity has increased and the amount of development being actively marketed has risen by almost 30% over the past two years. Park House, Park Street, W1, was completed in Q4 2012, which adds 163,000 sq ft of newly completed and ready-to-occupy space to the availability statistics. That makes it the largest single unit of new space available, followed by 139,600 sq ft in 1 Howick Place, SW1, which was also completed in Q4. There is still 103,50 sq ft available in Ashdown House, 123 Victoria Street, SW1, although there have been several lettings during the refurbishment process, and 96,375 sq ft remains in 5 Merchant Square, W2, which was completed in 2010 but is only 62% let. Availability of secondhand space fell a little in Q4, but that follows a prolonged period of decline. The amount available is now 44% lower than two years ago, at 2.6m sq ft. Around 1.2m sq ft of the secondhand space on the market is classified as grade A and the largest unit within that is 36,600 in Carlton House, 11a Regent Street, SW1. AVAILABILITY RATE 12 Availability rate (%) TMT accounted for 22% of take-up in Q4, once again driving demand in this market, albeit in a quiet period. Industrial and manufacturing businesses accounted for 11% of take-up, primarily because of the Coca- Cola letting, and the financial sector for 13%. 2.4m SQ FT LET IN Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 The availability rate was relatively stable, ending the year at 5.5%. It is the lowest rate of any of the sub-markets and highlights the extent of the supply constraint in the West End market. This has remained stable even though some large developments were completed in Q January 2013

13 ASKING RENTS Asking rents ( per sq ft) New build (existing) Secondhand Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 WEST END INVESTMENT There were 25 investment transactions in Q4, totalling 910,000 sq ft, taking the total for the year to 2.55m sq ft in 92 transactions. The largest building sold in the quarter was the 184,720 sq ft Hobart House, 40 Grosvenor Place, SW1, sold by the Grosvenor Estate to the National Pension Service for Korea for 107m. The highest priced transaction was St James s Street, SW1, a building of 124,000 sq ft sold by RREEF to the State Oil Fund of Azerbaijan for 177m. Clarges House, Clarges Street, W1, was sold for 150m. The building is just 33,600 sq ft and was sold at a yield of 4.4% by Warnford Investments to British Land. The average asking rent for newly built space in the West End was per sq ft at the end of Q4. The highest asking rent is still 110 per sq ft in 23 Savile Row, W1, where there is 25,850 sq ft on the market. There is a small unit at 25 Hanover Square, W1, being marketed at 100 per sq ft, but the highest rent for a larger unit is per sq ft at AirW1. The EGi Consensus rent survey put top rents in Mayfair/St James s for a hypothetical 20,000 sq ft grade-a unit on a 10- year lease, at per sq ft, unchanged from the previous quarter and with a rentfree period equivalent to 16 months. 1 Howick Place, SW1: Completed in Q and 139,600 sq ft to let COMPLETED SPACE ACTIVELY MARKETED Completed space actively marketed (million sq ft) Completed space (sq ft) Completed still available (sq ft) CONSTRUCTION 0 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Construction starts with prelets (million sq ft) 0.6 Speculative (sq ft) Prelet (sq ft) FUTURE COMPLETIONS Savile Row, W1: 25,850 sq ft available with an asking rent of 110 per sq ft Future completions (million sq ft) To complete (sq ft) Still available (sq ft) Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q Some 250,000 sq ft of new development started on site in Q4, taking construction starts for the whole of 2012 to 1.21m sq ft. The largest scheme to start in Q4 was the refurbishment of 1 Page Street, SW1, which has already been prelet to Burberry. That leaves 120,000 sq ft of speculative development put under construction in Q4 in four refurbishments 42,600 sq ft in Summit House, Praed Street, W2, and 30,000 sq ft in North Row, W1, another 30,000 sq ft in St James s House, 23 King Street, SW1, and 20,000 sq ft in Trafalgar House, 11 Waterloo Place, SW1. 0 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q PER SQ FT EGi CONSENSUS RENT 93

14 LONDON OFFICES MARKET ANALYSIS IN DEPTH TAKE-UP Take-up (sq ft) Q months 12 months 3 months New/refurb existing 26, Premarketing - n/a n/a n/a Secondhand 209, Under construction - n/a n/a n/a Total 235, MIDTOWN AVAILABILITY RATE Availability rate (%) 11 9 At 236,000 sq ft, take-up dipped again in Q4 and was 13% lower than the previous quarter. That takes the total for the whole of 2012 to 1.09m sq ft, well below the average annual take-up between 2005 and 2011 of 1.6m sq ft. The largest letting of the quarter was 46,000 sq ft in Castlewood House, New Oxford Street, W1, taken by LinkedIn. That was twice the size of the second biggest transaction 23,200 sq ft let to Stewarts in 5 New Street Square, EC4. The largest unit of new space to be let was 12,000 sq ft let to Austin Reed Group in 2 Waterhouse Square, EC1. TMT accounted for 22% of take-up in Q4, with the LinkedIn transaction being the major component. The professional sector accounted for 23% and retail for 15%. SUPPLY Supply (sq ft) Q months 12 months 3 months New/refurb existing 316, Premarketing 925, Secondhand 1,729, Under construction 331, Total 3,303, There was 3.3m sq ft available at the end of Q4 2012, a small decline over the quarter, following a steady decline over the year, which ends with 17% less space available than when it began. More than half the space available is secondhand, but that is also the segment of the market that has decreased at the greatest rate over the past two years. Some 1.7m sq ft is on the market today, of which 1m sq ft is grade A. The supply of new and ready-to-occupy space in Midtown is far more limited. There is around 300,000 sq ft in total and nothing over 63,000 sq ft. Lincoln s Inn Court, 280 High Holborn, WC1, is the largest at 63,000 sq ft, followed by 6 Agar Street, WC2, where there is 57,100 sq ft available, and 1 Kingsway, WC2, with 54,200 sq ft remaining. 2 Waterhouse Square, EC1: 12,000 sq ft let to Austin Reed Chancery Lane, WC2: Derwent London is developing a new building of 96,500 sq ft PER SQ FT EGi CONSENSUS RENT January Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 The availability rate has been drifting downwards in Midtown but remained stable in Q4, ending the year at 6.8%. We would expect this level of availability to encourage development or rental growth or both. ASKING RENTS The average asking rent is per sq ft for new buildings. This seems low for new space and probably reflects the small volume available from which to calculate the average. The highest asking rent in our sample, for a reasonable size of unit is 55 per sq ft for 21,500 sq ft of grade-b space in Bow Street, WC2. The EGi Consensus rent survey found the average view of rental value for space around Chancery Lane was per sq ft with 22 months rent-free. CONSTRUCTION There was one new construction start in Q4 at Chancery Lane, WC2, where Derwent London is developing a new building of 96,500 sq ft. Some 460,000 sq ft is under construction, of which 305,000 sq ft is being actively marketed, but all of it is speculative. Africa House, Kingsway, WC2, is the largest unit of new or refurbished space under construction, with 147,000 sq ft. The other substantial developments are the refurbishment of 92,000 sq ft in New Fetter Place, 8-10 New Fetter Lane, EC4, scheduled for completion in early 2013, and Hines Chichester House, High Holborn, WC1, (63,200 sq ft). In the whole of 2012, 325,000 sq ft was put under construction in Midtown, most of which was in two schemes: Chancery Lane and 10 Bloomsbury Way, New Oxford Street, WC1. INVESTMENT There were some substantial investment sales in Q3, with 660,000 sq ft changing hands in 10 transactions. The largest was Goldman Sachs HQ at Peterborough Court, 133 Fleet Street, EC4, (350,000 sq ft) and Daniel House (44,000 sq ft) sold together for 264m to Cayman Islands-registered Fleet Street Investments II. Aberdeen Asset Management sold Carmelite, 50 Victoria Embankment, EC4, with vacant possession to Orion Capital Managers for 48m. Currently 106,000 sq ft, it is to be redeveloped with 152,000 sq ft of offices. Draco Properties sold the freehold in Seven Dials Warehouse, WC2, (52,000 sq ft) to Allegra European Holdings for 62m a net initial yield of 5.45%.

15 TAKE-UP Take-up (sq ft) Q months 12 months 3 months New/refurb existing n/a n/a Premarketing - n/a n/a n/a Secondhand 75, Under construction - n/a n/a n/a Total 75, There was 75,100 sq ft let in Docklands in Q4, made up of one deal of 22,500 sq ft and 10 small deals of below 10,000 sq ft. The only substantial letting was in 11 Westferry Circus, where Clearstream Banking UK took 22,500 sq ft. The total let during 2012 amounted to 440,000 sq ft, a similar level to 2009 but significantly lower than the annual average in the years from 2005 to 2011, which was 1.34m sq ft. It is characteristic of this market that take-up swings from high to low depending entirely on the incidence of a small number of very large lettings. DOCKLANDS Exchange Tower, Harbour Exchange Square, E14: 7,500 sq ft let to Agilsys The largest unit of secondhand space is 205,350 sq ft available in 30 North Colonnade. Construction was completed in late 2009 and both Fitch Ratings and Algorithmics have taken space in the 333,500 sq ft building. There are also substantial units still available in 5 Churchill Place; 25 Canada Square; 10 Upper Bank Street; 11 Westferry Circus; 40 Canary Wharf and 1 Canada Square. AVAILABILITY RATE Availability rate (%) Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Banking and finance accounted for 30% of take-up but TMT took the biggest share with 37%. There were five lettings to the TMT sector: Agilsys took 7,500 sq ft in Exchange Tower, Harbour Exchange Square; ITC Global Security took 6,800 sq ft in Boatman s House, 2 Selsdon s Way; Broadbean Technology took 6,500 sq ft in 30 Marsh Wall; Telecom2 took 3,200 sq ft in One Canada Square; and Infusion UK took 5,000 sq ft in Exchange Tower. SUPPLY Supply (sq ft) Q months 12 months 3 months New/refurb existing 315, Premarketing 3,600, Secondhand 1,493, Under construction 287, n/a 0.00 Total 5,697, There was 5.7m sq ft available at the end of Q4, of which 3.6m sq ft was being premarketed. Around 1.5m sq ft is secondhand space and only 316,000 sq ft is newly built and ready to occupy. Overall, supply has decreased by 10% over the year, but the amount of new build has fallen by 26%. However, the vast majority of the secondhand space is of grade-a quality, so supply is not truly restricted. 38 PER SQ FT EGi CONSENSUS RENT The availability rate remained broadly stable in Q4, although it has risen over the year. ASKING RENTS The average asking rent for newly built space is 35 per sq ft, although space is marketed at significantly higher asking rents of 45 per sq ft in 1 Canada Square and per sq ft in 30 North Colonnade, both of which are classified as secondhand units but are grade A. The EG Consensus rent survey recorded a rent for grade-a space in Canary Wharf of 38 per sq ft. CONSTRUCTION There were no new construction starts in Q4 and the only building currently under construction is 25 Churchill Place, where Canary Wharf Group is building a 20-storey tower of 541,000 sq ft, of which 247,000 sq ft has already been prelet to the European Medicines Agency. It is due for completion in INVESTMENT There was one investment transaction in Docklands in Q4 of 95,000 sq ft. Over the course of the year there have been three, adding up to 710,000 sq ft. The Q4 investment sale was of 30 Marsh Wall, which was sold to an overseas investor for 13.6m by CBRE Global Investors. 95

16 LONDON OFFICES MARKET ANALYSIS IN DEPTH TAKE-UP Take-up (sq ft) Q months 12 months 3 months New/refurb existing 22, Premarketing - n/a -100 n/a Secondhand 241, Under construction n/a n/a Total 264, A total of 249,000 sq ft was let in Q4, the strongest quarter of 2012, taking the year-end total to 840,000 sq ft. This is well below the average annual rate of take-up recorded on the City fringe between 2005 and 2011 of 1.3m sq ft and no other year dipped below 1.1m sq ft in that time. The largest letting in Q4 was 30,000 sq ft of grade-b space let to Mind Candy in 15 Bonhill Street, EC2. After that, it was 15,000 sq ft let to Wallacespace in Klamath House, Clerkenwell Green, EC1. The TMT sector dominated take-up, accounting for 40% of the space let in a large number of small transactions. The exceptions were the Mind Candy deal and 7Digital, which took 14,000 sq ft in 67 Wilson Street, EC2. The service sector, which made up 13% of the space let, is predominantly recruitment consultants. CITY FRINGE The Johnson Building, Hatton Garden, EC1: 11,200 sq ft let to Grey Advertising AVAILABILITY RATES The availability rate ended 2012 at 6%. It has drifted downwards from 8.5% over the course of the year and this follows a steady decline since 2005, when it reached 16.5%. There is 550,000 sq ft of development scheduled for completion in 2013, which should boost availability unless it is let before completion. It is currently at a level that would normally put rental values under pressure. ASKING RENTS Asking rents ( per sq ft) New build (existing) Secondhand 10 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 The average asking rent for newly built space is 37 per sq ft and for secondhand space. There is a 11,000 sq ft unit of grade-b space available in the old Truman s Brewery, Brick Lane, E1, at 40 per sq ft and 8,500 sq ft in Rosebery Avenue, EC1, at the same asking rent. The EGi Consensus rent survey uses Aldgate as its rental point and it found per sq ft at the end of Q CONSTRUCTION SUPPLY Supply (sq ft) Q months 12 months 3 months New/refurb existing 158, Premarketing 1,436, Secondhand 1,136, Under construction 587, Total 3,318, There is 3.32m sq ft available to let on the City fringe, which is virtually unchanged since Q3 but has fallen by 20% over the course of the year. There is only 160,000 sq ft of newly built and ready-to-occupy space available now, which means very limited choice for occupiers that prefer grade-a space. The largest unit of newly built or refurbished space is 37,000 sq ft in Pinnacle Buildings, 67 Wilson Street, EC2. There is 675,000 sq ft of grade-a secondhand space on the market, including 66 Prescot Street, EC1, where there is 103,000 sq ft, and 61,000 sq ft in Lloyds Chambers, 1 Portsoken Street, E PER SQ FT EGi CONSENSUS RENT An additional 220,000 sq ft was put under construction in Q4, taking the total under construction to around 650,000 sq ft. Most of that space is due to be completed during 2013 and is already being actively marketed. Max Property Group began the refurbishment of the 110,000 sq ft Commodity Quay, East Smithfield, E1 in Q4 as part of its ongoing improvements to St Katharine Docks. It has been reported that the landlord is seeking to attract TMT occupiers to the building, which includes a floating meeting room and a roof garden, as well as restaurant and leisure space. Work also started on The Turnmill, 63 Clerkenwell Road, EC1, in Q4, which will have 58,800 sq ft of offices. INVESTMENT There were 20 investment transactions on the City fringe this quarter, adding up to 530,000 sq ft. Derwent London purchased the freehold interest in 9 Prescot Street, E1, from a private investor for 23m. The entire 100,100 sq ft is let to Co-operative Bank until January Helical Bar has purchased a block of properties that includes 207 and 211 Old Street, EC1, and Empire House, plus a retail parade. The site is a development opportunity and the sale price was 60.75m January 2013

17 TAKE-UP Take-up (sq ft) Q months 12 months 3 months New/refurb existing n/a n/a Premarketing - n/a n/a n/a Secondhand 39, Under construction - n/a n/a n/a Total 39, Only 40,000 sq ft was let on the South Bank in Q4, taking the total for 2012 to just 230,000 sq ft. It is generally a low-volume market, however, and only two years have been at significantly above this level since m sq ft in 2006 and 1.7m sq ft in Apart from those two years, the range has been between 190,000 sq ft and 470,000 sq ft. The largest unit let in Q4 was 10,800 sq ft of grade-b space in Counting House, 53 Tooley Street, SE1, where Smart Voucher will be the occupier. The other transactions ranged between 3,000 and 5,500 sq ft. SOUTH BANK Counting House, 53 Tooley Street, SE1: 10,800 sq ft let to Smart Voucher AVAILABILITY RATE Availability rate (%) Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 The availability rate rose to 11.4% in Q4. The increase is wholly explained by the inclusion of The Shard and the Harlequin Building, both of which were completed in the final quarter of the year. ASKING RENTS Asking rents ( per sq ft) New build (existing) Secondhand 20 SUPPLY Supply (sq ft) Q months 12 months 3 months New/refurb existing 653, , Premarketing 412, Secondhand 639, Under construction 737, Total 2,443, There is 2.4m sq ft available on the South Bank, out of all proportion with the rate of letting activity, but this market operates on two levels the small-unit, often secondary market and the small number of very large developments. In this supply figure is 600,000 sq ft in The Shard, SE1, where construction is now completed; 430,000 sq ft under construction in The Place, 25 London Bridge Street, SE1; 412,000 sq ft in King s Reach Tower, which is being premarketed, and 240,000 in Sea Containers House, 20 Upper Ground, SE1, which is also still undergoing construction works. Of the 653,250 sq ft of new space that is available and ready to occupy, the only significant space apart from The Shard is the Harlequin Building, 65 Southwark Street, SE1, which has 48,500 sq ft to let. 740,000 SQ FT UNDER CONSTRUCTION 10 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Once again, there is no average asking rent calculated for newly built space, but for grade-a secondhand space it is per sq ft. The EGi consensus rent survey produced an average view of rental value for prime space at More London of per sq ft with 22 months rent-free. CONSTRUCTION A total of 23,000 sq ft was put under construction in Q4. That was almost exclusively Union Street, SE1, where Mount Anvil is developing 22,700 sq ft, which is scheduled for completion in There is 740,000 sq ft still under construction in all. Most of that is in The Place, London Bridge Street, SE1, and Sea Containers House, 20 Upper Ground, SE1, which is being developed by Archlane into a hotel overlooking the river with an extension behind to house office and retail space. INVESTMENT There was one investment transaction in Q4, of 90,000 sq ft, which takes the total to have changed hands in 2012 to just 111,000 sq ft. The sale in Q4 was of Minerva House, 5 Montague Close, SE1, sold by Clerical Medical Investment Group and Schroder Real Estate Investment Trust to Great Portland Estates for 60m, reflecting an initial yield of 5.4%. 97