Midtown, Soho & Southbank London Office Market Update Q2 2010

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1 EA Shaw 9 12 Bow Street Covent Garden London WC2E 7AB +44 () eashaw.com Midtown, Soho & Southbank London Office Market Update Q2 21 London property

2 In brief Office markets continue to tighten Midtown 1, 8, sq ft 21, sq ft Vacancy rate: WC1 5.4% / WC2 9.1% 346, sq ft WC1 4./WC2 5. psf Southbank 699, sq ft 662, sq ft Vacancy rate: 4.7% 142, sq ft Grade A 32.5/ Trophy 37.5 psf Soho 51, sq ft 29, sq ft Vacancy rate: Total 19% / Grade A 7% 83, sq ft 4. psf Holborn and City Fringes 1,492, sq ft 41, sq ft 96, sq ft 4. psf The availability rates decreased in Q2 creating increased upward pressure on rents on top quality space. Limited speculative development/refurbishment activity will result in shortages of high quality stock in late 21/211. A slow Q3 is anticipated with renewed activity in Q4. Availability decreased by 1% in the second quarter. As a result the vacancy rate dropped to 7.1% from 7.8% in Q1. Supply has fallen for three consecutive quarters from its recent peak in Q3 29 when it was 2.2 million and the vacancy rate was 8.6%. Take-up was 32% higher Take-up in Southbank increased 22% compared to Q1 and was more than twice the amount achieved in Q2 29. Availability decreased by 7% in the second quarter reducing the vacancy rate down to 4.7%. Headline rents for Availability decreased by 11% in the second quarter with the stabilisation of the market. Take-up fell to 83, sq ft from 117, sq ft in Q1. We see upward pressure rents and reducing rent free periods. This area of midtown is slower to recover with only a small decrease in availability of 4% over the quarter. Take up of 96, sq ft is below previous quarters but an encouraging amount of space, 252, sq ft, is under offer. than Q1 21 and 419, sq ft is under offer. Headline rents in WC1 remained stable this quarter as the markets slowed during the election period. However letting incentives are continuing to reduce. We expect a quiet summer with a return to a more normal market in September. Tavis House, Tavistock Square 57, TBC Age UK 1 Southampton Row 42, 45. Carpmaels & Ransford, Sodexo Ltd Brettenham House, 1 Lancaster Place 14, 42.5 Thomas Cook Retail Ltd Grade A office space remained at 32.5 per sq ft. Dominican Court, Hatfields 35, 33. Acxiom Blue Fin Building, 11 Southwark St 15, 39. Telstra Woolyard, 54 Bermondsey Street 13, 3. Various Great Chapel Street 15, St Patrick s International College Again like the whole of Midtown, limited amount of speculative development will result in a shortage in the future. 1 Tudor Street 1, 4. Fox-Davies Capital

3 Midtown Availability Millions ft² Office availability in WC1 and WC2* New/Refurb 2nd Hand Availability decreased by 1% to 1.8 million sq ft compared with 2.1 million sq ft in Q1. This is the third consecutive quarter of declining availability having fallen from its peak at 2.2 million sq ft. It is anticipated that availability will reduce further as the year advances with a shortage of new or refurbished stock. Availability is dominated by the 375, sq ft Central St. Giles scheme although 13, sq ft is under offer to subsidiary companies of WPP. In WC1, availability decreased to 76, sq ft (5.4% vacancy rate) from 879, sq ft in Q1 whilst in WC2 availability decreased to 1.6 million sq ft. (9.1% vacancy rate) from 1.13 million sq ft in Q1. The overall Midtown vacancy rate has decreased to 7.1% from 7.8% in Q1. Total available office space represents 17 months supply at the long run average rate of take-up. New additions to supply included 4 Bloomsbury Square, WC1 (15, sq ft) and Grays Inn Road, WC1 (15, sq ft). Office take-up ft² Office take up in WC1 and WC2* 8 WC1 WC2 Average Take-up increased by 32% to 346, sq ft from 263, sq ft in Q1. This is an increase of 41% from the level achieved 12-months earlier when take-up amounted to 246, sq ft. A further 419, sq ft is under offer. In WC1 21,sq ft was let in 38 transactions and in WC2 136, sq ft was let in 45 transactions. Since 1989 take-up of Midtown office space has averaged 343, sq ft per quarter and 1.4 million sq ft per annum. Development pipeline Construction in WC1 and WC2* The development pipeline of available buildings under construction or in the course of refurbishment has decreased to 21, sq ft of space in Q2 from 29, sq ft in Q1. The availability of new Grade A space is particularly restricted. The only major scheme remaining in the development pipeline is 1 Kingsway (14, sq ft) being developed by UK & European but not available until 211. We anticipate the pipeline to increase over the next 12 months with a number of larger schemes under review including Africa House, Kingsway, WC2 and 6 Agar Street, WC2. Office rents Midtown Grade A office rents* Headline rents in Covent Garden remained static this quarter at 5. per sq ft. However this level is under pressure as quoting rents on a number of buildings have been set in the mid/high 5 s per sq ft. Headline rents for the best quality accommodation in Holborn increased to 4. per sq ft from 37.5 per sq ft in Q1. The letting of 11 Fetter Lane will show a further increase from this level in Q3. New requirements New requirements in midtown* In Q2 the number of new requirements registered by potential occupiers fell from the very high levels seen in Q1. Between Q2 and Q1 the number of new requirements registered by potential occupiers decreased by 54%. Applicant numbers also reflected a decrease of 44% on the number registered twelve months earlier in Q2 29. This was anticipated due to the election and landlords being more robust regarding future lease events. 5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ft² WC1 WC2 per ft² Covent Garden Holborn 2 Jun 1 Jun 2 Jun 3 Jun 4 Jun 5 Jun 6 Jun 7 Jun 8 Jun 9 Jun 1 * Source : EA Shaw & Focus * Source : EA Shaw

4 Southbank Availability Millions ft² Office availability in Southbank*.8 New/Refurb nd Hand Availability decreased this quarter by 7% to 699, sq ft from 755, sq ft in Q1. The vacancy rate is currently 4.7% having decreased from 5.% in Q1. The vacancy rate remains the lowest across EA Shaw s specialist markets. However, availability is 27% higher than 12 months earlier. Most of the availability continues to be made up of relatively small offices. There are only three buildings where more than 25, sq ft is available to occupy within 6 months. New additions to supply in Q2 included 2 More London Riverside (24, sq ft) and Sea Containers House, 2 Upper Ground (18, sq ft). Availability levels remain at a low level however this will increase in 211/212 as a number of larger buildings in the London Bridge area are released to the market. Office take-up Office take up in Southbank* Take-up in Q2 increased for a second consecutive quarter. It rose by 22% to 142, sq ft in 46 transactions from 117, sq ft in 37 transactions in Q1. Q2 s take-up is more than twice the level achieved 12-months earlier when just 68, sq ft was let. A further 14, sq ft is currently under offer. Since 22 take-up of Southbank office space has averaged 261, sq ft per quarter and an average 4 transactions per quarter have been completed at 6,5 sq ft per transaction. Average annual take-up is 1.1 million sq ft. Take-up each quarter has been below the long run average level since the end of 27 and is likely to continue to be restricted in the coming quarters due to the limited number of large properties immediately available. Development pipeline Construction in SE1* The pipeline of developments and refurbishments in the course of construction has increased to 662, sq ft from 48, sq ft in Q1. The owners of The Shard of Glass have bought Transport for London out of its 191, sq ft pre-lease agreement thereby increasing the amount of available space in the development from 395, sq ft to 586, sq ft. In addition the Friars Bridge Court (64, sq ft) scheme at Blackfriars Road which is available from Q2 211 has been included in this quarter s figures. Office rents Southbank Grade A office rents* The number of new requirements registered by potential occupiers decreased by 25% between Q2 and Q1. But applicant numbers reflected an increase of 5% on the number registered twelve months earlier in Q2 29. New requirements New requirements in Southbank* Headline rents for new Grade A space increased to 32.5 per sq ft from 3. per sq ft at the start of this year. Rents have remained at 32.5 per sq ft in Q2 21. As ever Trophy buildings and those with river views command a premium to this level and are close to 4 per sq ft. Rents for good quality refurbishments remain in the region of 25. per sq ft. Rents on the Southbank remain 24% lower than at the top of the market between Q1 28 and Q3 28 when they reached 42.5 per sq ft for Grade A offices. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ft² 4 SE1 Average ft² per ft² 2 1 Jun 1 Jun 2 Jun 3 Jun 4 Jun 5 Jun 6 Jun 7 Jun 8 Jun 9 Jun 1 * Source : EA Shaw & Focus * Source : EA Shaw

5 Soho Availability ft² Office availability in Soho* 8 2nd Hand New/Refurb Availability this quarter decreased by 11% to 51, sq ft from 574, sq ft in Q1. Newly refurbished space accounts for 194, sq ft or 38% of the total supply and 7.2% of total office stock. Of the recently completed refurbishments 3, sq ft remains available at 1 Hills Place, and 11, sq ft remains available at 49-5 Great Marlborough Street out of 17, sq ft as 2,5 sq ft has recently gone under offer. The total Soho vacancy rate has decreased to 19% from 21% in Q1. The only building currently under construction or in the course of refurbishment is 25 Great Pulteney Street where 29, sq ft is currently available. Office take-up ft² Office take up in Soho* 4 WC1 Average Take-up in Soho decreased by 29% to 83, sq ft in 59 transactions from 117, sq ft in 8 transactions in Q1. This quarter s take-up is 35% more than the level achieved 12 months earlier in Q2 29 when it amounted to 61, sq ft. A further 65, sq ft of space is already under offer. The average quarterly level of take-up prevailing since the start of 22 currently stands at 18, sq ft. Average annual take-up is 432, sq ft. Office rents per ft² Soho Grade A office rents* Headline rents for the best accommodation in Soho around the main squares have remained static at 4. per sq ft, however remain under great pressure due to the shortage of top quality space. We continue to expect a recovery in rental levels during the later part of the year. 3 Jun 1 Jun 2 Jun 3 Jun 4 Jun 5 Jun 6 Jun 7 Jun 8 Jun 9 Jun 1 Holborn & City Fringes Round up Millions ft² Office availability and take-up in Holborn & City Fringes*.8 Refurb.7 2nd Hand Availability decreased by 4% to 1.49 million sq ft compared with 1.55 million sq ft in Q1. In the last 12 months availability has decreased by 3%. Additions to supply included Lincoln Place, 5 Farringdon Road, EC1 (33, sq ft), 119 Farringdon Road, EC1 (17, sq ft) and 4 Hatton Garden, EC1 (14,5 sq ft). Take up decreased by 38% to 96, sq ft in 41 deals from 153, sq ft in 42 deals in Q1. This is some 39% lower than the levels of 12-months earlier in Q2 29 when take-up amounted to 157, sq ft. On a positive note a further 252, sq ft of space is under offer. Development activity in the City Fringe remains very limited. In Q2 the development pipeline decreased to 41, sq ft from 98, sq ft in Q1, with little sign yet of any increasing activity. * Source : EA Shaw & Focus * Source : EA Shaw

6 Team Definitions Contact The total Midtown office market comprises 23.7 million sq ft making it the third largest office market in the UK after the City and the West End. Holborn & City Fringes encompasses those parts of the City fringe office market in EC1 & EC4 to the west of Farringdon Rd, Ludgate Circus and New Bridge St. Soho is defined by the following postcode sectors W1B 3 & 5; W1D 1-7; W1F & W1F 7-9. Agency Charles Killen [email protected] Rupert Cowling [email protected] The Southbank SE1 office market comprises an estimated 15 million sq ft making it the seventh largest office centre in the UK. Available space is capable of occupation within 6 months. Development pipeline is space under construction or refurbishment but not available within 6 months. Once under offer, space is no longer available. Professional Niall Sheridan [email protected] Investment Niall Gallagher [email protected] Regulated by RICS A list of partners is available at eashaw.com