LONDON MARKETS Analysis of the London Office Market

LONDON MARKETS Analysis of the London office market

Winter 2019/2020

geraldeve.com 14.9 £9.3 MILLION SQ FT BILLION

2019 2019 TAKE-UP INVESTMENT

£120 13 PER SQ FT MILLION SQ FT

WEST END UNDER PRIME RENT CONSTRUCTION

£72.50 PER SQ FT 54%

MIDTOWN UNDER PRIME RENT CONSTRUCTION LET

£70 PER SQ FT 4.9%

CITY AVAILABILITY PRIME RENT RATE

2 LONDON MARKETS Q4 2019 EXECUTIVE SUMMARY

Annual rolling take-up by region Office space under construction eighted average lease length signed Source: Gerald Eve Source: Gerald Eve excl. breaks Source: Gerald Eve million sq ft Years 18 46% Available 12.5 16 12.0 14 11.5 12 11.0 10 10.5 8 10.0 6 9.5 4 54% Let 9.0 2 8.5 0 8.0 2017 2019 2016 2018 2015 Q1 2017 Q1 2018 Q1 2019 Q3 2017 Q2 2017 Q3 2019 Q4 2017 Q2 2019 Q3 2018 Q2 2018 Q4 2019 Q4 2018 Q4 2016

City South Bank West End Canary Wharf Midtown

Occupiers demand quality space to attract the best talent London continues to shift from a finance-led city to technology-led Whilst leasing activity picked up in the second half of the year, overall take-up in 2019 was 6% down on 2018. However, In 1985, there were 159,000 media and tech jobs in London, the nature of leasing was encouraging, with lettings driven two-thirds that of finance and banking. In 2017, the levels of less by lease events, as they were in 2018, and more by firms employment across the two sectors was equal, but over the recognising the need to upgrade their space. Quality space is next 10 years, Oxford Economics forecast media and tech now part of occupier’s recruitment and retention strategies, employment to reach 419,000, 17% above finance and banking with significant pre-lets signed by BT (One Braham), Nationwide employment levels. The European Startup Initiative suggests Building Society (Post Building), Diageo (Turner House), and that leaders of tech companies regard London as the best city Apollo Global Management (Soho Place) reflecting this. in Europe to start a tech business.

London office employment is forecast to expand over the High pre-letting activity is keeping availability low next five years The office availability rate fell to 4.9% across central London in Occupier demand will remain robust across central London, 2019. Despite a strong development pipeline, much of the new despite the continued uncertainty over the UK’s future space has been pre-let before completion. The Post Building relationship with the EU. Office-based employment is forecast to (344,000 sq ft), Two Southbank Place (330,000 sq ft),The Brunel expand by 7.1% over the next five years. Transport improvements, Building (244,000 sq ft), and Five Bank Street (708,500 sq ft), such as Crossrail and the proposed extension of the Northern Line, were either fully let, or close to full occupation on completion. will also make central London more accessible to a wider pool of Currently 54% of space to be delivered over the next three talent, supporting occupier growth strategies. years has already been leased.

The rise of flexible workspace is rapidly reshaping London’s Investment activity unlikely to rebound significantly in 2020 office leasing market Investment activity was 38% down in 2019, with Brexit and Across central London, average lease lengths have slipped from election uncertainty having a significant effect. However, 12 years and one month in 2015 to just nine years in 2019. The despite an improved economic outlook, we don’t expect a shift has been attributed to the increasing popularity of flexible substantial rebound in investment in 2020 due to limited willing workspace, which has prompted landlords to offer occupiers sellers. With the UK now focused on trying to agree a trade deal shorter terms. The current trend has also been driven by the before December 2020, some uncertainty is likely to continue, growth of London’s media and tech sector, which places a and increase towards the end of the year. premium on greater lease flexibility.

EXECUTIVE SUMMARY 3 LONDON OFFICE RENTS

London Stadium

Victoria Park

Geffrye Museum ROSS & E ’S C US G TO IN N K Grade A Scala C ON & LERK The British Library GD EN IN W R E £80.00 R L Sadler’s Wells Regent’s Park A L F Grade A R s en h t nt Free 18 mo £72.50

R s en h ITZROVIA t nt F Free 21 mo

LEB Grade A ARY ONE Tower Hamlets M Cemetery Park Old Spitalfields Market £87.50 Brick Lane Market Grade A The Old Truman Brewery R s en h IDTOWN t nt M Barbican Centre £90.00 Free 21 mo BBC R s Grade A en h DDINGTO t nt PA N Free 21 mo The Wallace £72.50 Lincoln’s Collection Grade A Inn Fields ENT GARD Whitechapel Gallery OV EN R s C en h Selfridges t nt Free 24 mo £80.00 St Paul’s Grade A Cathedral Bank of England R s SOHO 30 St Mary Axe e R h nt e nt s Frene 1 mo th t 2Fr on Mansion House ee 21 m £82.50Royal Opera House Grade A Somerset House R R & ST JA e s FAI M n th Y ES t F on A ’S ree 21 m M £92.50

Grade A R e hs The National Gallery nt nt Fre mo National Hyde Park e 21 Tower of London £120.00 Theatre Tate Modern

R s en h t nt Southbank Centre Kensington Palace Free 21 mo

City Hall Tower Bridge Green Park London Eye

St James’s Park THBAN Canary Wharf SOU K

Buckingham Palace

Royal Albert Hall Palace of Westminster Grade A Science Museum Harrods Westminster Abbey £70.00 London South Bank University SB R IGHT RIDG e s N E n th V&A K t n Free 18 mo

Grade A Westminster Cathedral Imperial War Museum

£85.00 VICTORIA Southwark R s Park en h t nt Grade A Free 24 mo £77.00

R s en h t nt Free 21 mo

The Oval

Battersea Power Station

4 LONDON MARKETS Q4 2019 London Stadium

Victoria Park

Geffrye Museum

Scala The British Library

Sadler’s Wells Regent’s Park

REDITC SHO H

Grade A Tower Hamlets Cemetery Park Old Spitalfields Market £72.50 Brick Lane Market The Old Truman Brewery R s Barbican Centre en h t nt Free 24 mo BBC

The Wallace Lincoln’s Collection Inn Fields CITY Whitechapel Gallery Selfridges St Paul’s Cathedral Bank of England 30 StGrade Mary Axe A

Mansion House Royal Opera House £70.00 Somerset House

R s en h t nt Free 24 mo

The National Gallery W anary har National C f Hyde Park Tower of London Theatre Tate Modern Grade A

Southbank Centre Kensington Palace £50.00 City Hall

Tower Bridge R s Green Park en h t nt London Eye Free 24 mo St James’s Park Canary Wharf

Buckingham Palace

Royal Albert Hall Palace of Westminster

Science Museum Harrods Westminster Abbey

London South Bank University

V&A

Westminster Cathedral Imperial War Museum

Southwark Park

The Oval

Battersea Power Station

LONDON OFFICE RENTS 5 CENTRAL LONDON INVESTMENT

Investment activity across central London was initially resilient The fall in currency since the referendum has led to an increase following the referendum in 2016, however since September 2018, in overseas investment, which sought to purchase UK assets at annual transaction volumes have fallen consecutively each quarter a discount. However, capital inflows from China, Hong Kong, to £9.3 billion in Q4 2019, central London’s lowest level of activity and South Korea, have cooled significantly, partly on account since the global financial crisis. of Brexit uncertainty but also due to Chinese capital outflow restrictions imposed by Beijing, and South Korean investors There are a number of factors behind the drop off in activity; either switching attention to continental Europe or focusing on firstly the significant political and economic uncertainty created syndicating purchases already made. by Brexit has led to a growing disconnect between the pricing expectations of buyers and sellers. Secondly, investors are However, the fall in demand from the Far East has opened the increasingly focused on the alternative sectors such as build- door for other overseas investors. In 2019, the US was the most to-rent housing, hotels, and student accommodation. Not only active investor in central London accounting for 28% of all is the income profile of the alternative sector longer, but the purchases. European investors were also active, leading to one occupier base is generally more defensive in nature. At the same notable transaction when Pontegadea (Spanish) acquired the time, average office leases have shortened. recently completed Post Building in Covent Garden for £610 million.

Rolling annual transaction volumes 201 overseas investment by region Sources: Property Data, Gerald Eve Sources: Property Data, Gerald Eve

£ billion 5% German 1% Irish 20 12% Other 28% US 18 16 14

12 13% Middle Eastern 10 8 6 4 17% Far Eastern 24% Euro (other) 2 0 Q1 2017 Q1 2019 Q1 2015 Q1 2016 Q1 2018 Q3 2017 Q2 2017 Q3 2019 Q3 2015 Q4 2017 Q3 2016 Q2 2019 Q3 2018 Q2 2015 Q2 2016 Q2 2018 Q4 2019 Q4 2015 Q4 2016 Q4 2018 Despite a slight decline in Asian buyers, foreign investment Canary Wharf Southbank continued to be the main source of demand accounting for City West End 70% of transactions in 2019. With limited capital growth forecast in the short and medium term, overseas investors have increasingly targeted longer 201 transaction volumes by market income in central London. Since 2015, the proportion of office Sources: Property Data, Gerald Eve purchases with more than 16 years remaining on the lease has increased significantly each year, and in 2019 almost half of £ billion overseas transactions have involved long income. 3.0 This demand has also been reflected in the net initial yield 2.5 profile, with the average transacted yield for an office with less than 10 years of income remaining increasing over the last two 2.0 years to 5.1%, whilst the average transacted yield for an office with more than 16 years remaining has fallen to 3.6%. 1.5

1.0

0.5

0 City Soho Victori a Fitzrovia Midtown & Euston Mayfair & St James's Southbank Shoreditch Paddington King's Cros s Marylebone Clerkenwell Farringdon & Canary Whar f Knightsbridge Covent Garden

6 LONDON MARKETS Q4 2019 Over the next two years we’re expecting little or selective capital eighted lease length at transaction date growth across central London and where there is growth, it will from overseas investors be driven by increases in rental values. By 2022, our relationship Sources: Property Data, Gerald Eve with the EU should offer more certainty and we expect some yield hardening to return, boosting overall total returns. % 100 90 Central London office investment forecast 80 Sources: MSCI, Gerald Eve 70 60 % 50 9 40 8 30 7 20 6 10 5 0 4 2013 2014 2015 2016 2017 2018 2019 3 2 Longer than 16 years 1 Less than 16 years 0 -1 UK investors became increasingly active in the second half of 2017 2018 2019 2020 2021 2022 2019. Although the largest UK purchase was a core, low-risk transaction as Lazari Investments purchased 23 Savile Row Income return in Mayfair for £277 million at a 4.2% yield, many of the deals Capital growth involving UK buyers were more opportunistic in nature, Total return reflecting confidence in London’s future and its occupier market fundamentals. Notably Orion Capital Managers bought Despite the improved economic outlook, we don’t expect a 81 Newgate Street in the City for £210 million, which is set to substantial shift in investment trends in 2020. With the UK now be vacant in 2021, and Henderson Park and Dukelease bought focused on trying to agree a trade deal before December 2020, Ibex House for £121 million and intend to refurbish each floor uncertainty is likely to continue, and increase towards the end as they become available. of the year.

The slight fall in overall investment demand over the last 18 months Bond yields are also expected to increase in 2020, which will has started to impact pricing and at the larger end of the market. reduce the spread between risk-free rates and property yields, Here the drop-off has been the most pronounced, with evidence of making property investment less attractive, but with limited some yield softening. The average transaction yield which peaked stock available and strong investor demand, pricing is likely to in 2017 at 4.14%, has risen over the last two years and was 4.5% in be stable. December 2019.

eighted average transaction yield Sources: Property Data, Gerald Eve

Years 5.2 Contact Lloyd Davies 5.0 Mobile +44 (0)7767 311254 [email protected] 4.8

4.6

4.4

4.2

4.0 2013 2014 2015 2016 2017 2018 2019 8 LONDON MARKETS Q2 2019 Edgware Road

Paddington PADDINGTON

Contact Patrick Ryan Lancaster Gate Hyde Park Mobile +44 (0)7792 078397 [email protected]

£80.00 68% Gerald Eve’s investment analytics* Prime Rent Media & Tech take-up Strong Weak

6.1% 355,000 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 5.5% £220,500,000 15 2 14 12 Tenant Space Investment *see inside back for details

Leasing activity was subdued during the second half of 2019, The speculative construction of what will be Paddington’s with only 42,000 sq ft taken, leaving both quarters well below the largest office building began in 2019. Paddington Square will five-year average. Media and technology occupiers were the most total 355,000 sq ft and is scheduled to complete in 2022. Sellar active, with Vodafone taking 20,000 sq ft at 1 Kingdom Street. Property is building the £825 million scheme on behalf of Great Western Developments. Elsewhere, Invesco Real Estate With low occupier demand, the availability rate has risen over and YardNine recently began their redevelopment and the course of 2019, from 4.9% in December 2018 to 6.1% in extension of 50 Eastbourne Terrace after buying the building in December 2019, the third highest across central London. 2018, with the new scheme likely to total 75,000 sq ft. Another As Crossrail nears completion, occupiers will continue to be 170,000 sq ft office building is being openly marketed in drawn to the market, and with no development completions Paddington (2 Merchant Square). over the next two years, we expect the availability rate to fall during 2020. However, one particular risk comes from the Paddington had only one significant investment transaction serviced office sector. WeWork leases nearly 10% of all office in 2019, when Marks & Spencer’s headquarters at Waterside stock in Paddington, one of the highest concentrations in House, 35 North Wharf Road, was bought by Brockton Everlast London, meaning the potential retrenchment of the serviced in April 2019 for £220.5 million (4.8% yield). office firm could severely impact the availability rate.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 300 450 600 100

400 250 500 90 350 80 200 300 400

250 70 150 300 200 60 100 150 200 50 100 50 100 40 50

0 0 0 30 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2022 2020 Q1 2017 Q1 2017 Q1 2018 Q1 2019 Q1 2019 Q3 2017 Q3 2017 Q1 2018 Q2 2017 Q2 2017 Q3 2019 Q3 2019 Q4 2017 Q4 2017 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2019 Q4 2019 Q4 2018 Q4 2018

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

Brunel Building, LONDON MARKETS 9 1 & 2 Canalside Walk Baker Street Marylebone

Edgware Road

MARYLEBONE The Wallace Collection

Cavendish Square Portman Square

Contact Bond Street Rhodri Phillips Marble Arch Mobile +44 (0)7768 615296 [email protected]

£90.00 66% Gerald Eve’s investment analytics* Prime Rent Finance & Banking take-up Strong Weak

2.5% 155,000 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 22.3% £65,400,000 5 15 3 4 Tenant Space Investment *see inside back for details

A combination of strong occupier demand and a lack of Regent House, 36 George Street (43,000 sq ft) is also set to construction completions has brought about a further drop in complete in Q3 this year after construction began on the Marylebone’s availability rate to 2.5% in December 2019, the mixed-use scheme during 2018, as well as Howard de Walden’s lowest across central London. The limited options available to 24 Portland Place (21,000 sq ft). Both of which are currently occupiers could start to constrain demand moving forwards, available. The next significant start is likely to be Derwent’s with only five buildings currently able to accommodate a tenant 19–35 Baker Street, which will deliver 206,000 sq ft in 2022. requirement for 20,000 sq ft or above in Marylebone. To ease the pressure the Howard De Waldon Estate have New space which has been brought to the market has been commenced work to refurbish 21,000 sq ft at 2 Cavendish popular, notably International private equity firm Bridgepoint Square, being advised by Gerald Eve, and will deliver in Q2 2020. pre-let the entire 83,000 sq ft of office space at Marble Arch Place in Q3, which was the market’s largest letting since 2011. Investment activity has been low in 2019 with only £65 million Marble Arch Place will become Bridgepoint’s new global transacted. The largest sale completed in March, when Aprirose headquarters upon completion of the scheme later this year. REI bought 129-137 Marylebone Road from the Arcadia Group for £48 million. Elsewhere, Edinburgh Woollen Mill bought 94-96 Wigmore Street in August for its own occupation, paying £17.4 million.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 300 400 450 110

350 400 100 250 350 300 90 200 300 250 80 250 150 200 70 200 150 60 100 150 100 50 100 50 50 50 40

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

10 LONDON MARKETS Q4 2019 Oxford Circus Bond Street MAYFAIR & Piccadilly Circus ST JAMES’S Hyde Park Corner

Hyde Park

Green Park

Contact St James’s Park Patrick Ryan Mobile +44 (0)7792 078397 [email protected]

£120.00 31% Gerald Eve’s investment analytics* Prime Rent Finance & Banking take-up Strong Weak

5.1% 308,000 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 6.7% £874,400,000 7 5 11 14 Tenant Space Investment *see inside back for details

Occupier demand for space has remained strong in Mayfair & However, despite this, the overall availability rate remained flat St James’s, with take-up exceeding the five-year average in in 2019 at 5.1%, due to a shortage of available large floor plates. As both Q3 and Q4. The most significant deal during the second a result, larger occupiers or expanding firms might need to seek half of the year took place at 21 St James’s Square, one of space elsewhere, for example Apollo Global Management recently London’s most prestigious addresses. Private equity firm pre-let 83,000 sq ft at 1 Soho Place and will relocate in 2022, and Cinven completed on 51,000 sq ft of newly renovated space Lazari are under offer at 20 Manchester Square (70,000 sq ft), citing across the first to sixth floors. Cinven signed a 15-year lease, a shortage of available options in Mayfair & St James’s. paying a rent of £120 per sq ft. 2020 will see the delivery of 308,000 sq ft across 5 schemes. Serviced office firms have continued to locate here, notably However, 44% of this space has already been leased, and much Knotel took 16,000 sq ft at 130 Jermyn Street earlier in the year, of the remaining space is expected to be let before completion, and as a result, the availability rate for smaller buildings (below meaning a sharp rise in the availability rate is not expected. 10,000 sq ft) has risen significantly. Investor sentiment remained strong with the transaction volume totalling £874 million in 2019, a 10% increase on the previous year. One significant sale in August was 23 Savile Row, which was acquired by Lazari Investments for £277 million, reflecting a yield of 4.14%.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 400 1,600 600 130

350 1,400 120 500 110 300 1,200 100 400 250 1,000 90 200 800 300 80

150 600 70 200 60 100 400 50 100 50 200 40 0 0 0 30 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2022 2020 Q1 2017 Q1 2017 Q1 2018 Q1 2019 Q1 2019 Q3 2017 Q1 2018 Q3 2017 Q2 2017 Q2 2017 Q3 2019 Q3 2019 Q4 2017 Q2 2019 Q4 2017 Q3 2018 Q2 2019 Q3 2018 Q2 2018 Q2 2018 Q4 2019 Q4 2019 Q4 2018 Q4 2018

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

LONDON MARKETS 11 Hyde Park Green Park

Victoria KNIGHTSBRIDGE Sloane Square

Contact Sophie O’Sullivan Mobile +44 (0)7880 454161 [email protected]

£85.00 34% Gerald Eve’s investment analytics* Prime Rent Retail take-up Strong Weak

3.7% 85,000 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 33.8% £2,300,000 1 12 7 11 Tenant Space Investment *see inside back for details

Occupier demand for space has remained robust in Knightsbridge Despite the above-average leasing activity in recent months, with take-up exceeding the five-year average in three of the the near completion of two schemes has led to a slight rise four quarters in 2019. During the second half of the year, the in the availability rate from 3.3% in June to 3.7% in December take-up volume totalled 439,000 sq ft, which is the highest half 2019. The first is Hooper’s Court, which is part of Chelsfield year volume since 2015. Partners mixed-use redevelopment close to the station, and began construction on a speculative basis in January 2018, The two largest lettings were signed by Lockheed Martin, an delivering 67,000 sq ft of office space. The second development American global aerospace company, which took 18,000 sq ft is also part of a mixed-use scheme close to the station, 55–93 at 40 Grosvenor Place, and Maybourne Hotel Group, which Knightsbridge, and will deliver 33,000 sq ft of office space. Both took 19,000 sq ft at 27 Knightsbridge, from landlords Motcomb developments are currently available and will complete in the Estates, advised by Gerald Eve. second half of this year.

Investment activity continues to be limited in Knightsbridge, and only one sale recorded throughout 2019. KMK Developments’ £2.3 million purchase of 41 Cheval Place in June, was sold be receivers after the previous owner went into administration.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 80 250 90 100

80 70 90 200 70 60 80 60 50 150 50 70 40 40 60 30 100 30 50 20 50 20 40 10 10

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

12 LONDON MARKETS Q4 2019 Green Park

Hyde Park Green Park Hyde Park

estminster

Palace of Westminster St James’s Park VICTORIA Victoria

Contact Rhodri Phillips Pimlico Mobile +44 (0)7768 615296 [email protected]

£77.00 33% Gerald Eve’s investment analytics* Prime Rent Corporate take-up Strong Weak

3.5% 116,000 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 15.7% £384,500,000 11 6 6 5 Tenant Space Investment *see inside back for details

Victoria remains an attractive market to occupiers with firms set to complete before 2022, so a significant rise in the from a variety of industries, and from other parts of London, availability rate is not expected. relocating here. As a result, take-up has exceeded the five-year average in four of the last five quarters. Landsec began construction at Nova East in October, after securing planning permission for the 136,000 sq ft building The largest deal in the second half of the year was signed by earlier in the year. It is being built on a speculative basis business and technology consultants, Baringa Partners, which with delivery expected in 2022. Elsewhere, Landsec recently took 37,000 sq ft at 62 Buckingham Gate, paying a rent of announced its intention to redevelop and extend Portland £76 per sq ft, whilst Global Switch took 22,000 sq ft at Nova North, House, which would add around 100,000 sq ft to the existing paying £73 per sq ft. building. It lodged a planning application in 2019 and construction is expected to begin in early 2020. Charterhouse Capital, advised by Gerald Eve, acquired 31,000 sq ft over the top floor of Belgrave House. Investment activity totalled £384 million in 2019 with Integrity International securing the largest transaction when they bought Due to the strong occupier demand, the availability rate has 55 Broadway for £123 million. Elsewhere the government reduced accordingly, falling from 4.7% in June 2019, to 3.5% by purchased 21 Dartmouth Street for £89 million, and Quadrum the end of the year. Currently there are no major developments Global purchased 11 Belgrave Road for £72 million.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 450 1,000 700 90

400 900 600 80 350 800 700 500 300 70 600 250 400 500 60 200 300 400 150 50 300 200 100 200 100 40 50 100 0 0 0 30 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2022 2020 Q1 2017 Q1 2017 Q1 2018 Q1 2019 Q1 2019 Q3 2017 Q3 2017 Q1 2018 Q2 2017 Q2 2017 Q3 2019 Q3 2019 Q4 2017 Q4 2017 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2019 Q4 2019 Q4 2018 Q4 2018

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

LONDON MARKETS 13 LONDON MARKETS 14 Tottenham Court Road

Oxford Circus Soho Square Gardens

SOHO

Golden Square

Piccadilly Circus Leicester Square Contact Sophie O’Sullivan Mobile +44 (0)7880 454161 [email protected]

£92.50 60% Gerald Eve’s investment analytics* Prime Rent Retail take-up Strong Weak

2.3% 413,250 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 23.1% £110,350,000 2 4 2 12 Tenant Space Investment *see inside back for details

Occupier demand for new space remains strong in Soho, with There are currently five schemes under construction, including 329,000 sq ft leased in the second half of 2019. The largest deal Soho Estates’ Ilona Rose House, a mixed-use scheme on Charing over this period was signed by drinks company Diageo, which Cross Road, which began construction on a speculative basis in pre-let 105,000 sq ft at 14-18 Great Marlborough Street, the 2017, and will deliver 163,000 sq ft towards the end of 2020. former home of Turner Broadcasting. Diageo is consolidating from 200,000 sq ft in Park Royal and will occupy its new office Elsewhere, Derwent London commenced construction of in 2021 following the building’s refurbishment. One Soho Place on a speculative basis in 2019 Soho’s largest speculative start in more than 10 years. The 209,000 sq ft office Elsewhere, serviced office provider, The Office Group, took the scheme, is expected to complete in 2022, and is 95% pre-let entire Liberty Regent House (36,000 sq ft), whilst OGCI Climate with deals from G Research and Apollo. Investments took 10,000 sq ft at 25 Argyll Street. Investment activity has been relatively subdued with limited Due to the high leasing activity, the market’s availability rate options available to purchase. The largest purchase came from has fallen from 3.3% in June to 2.3% in December, making it the Royal London, which bought 25 Soho Square for £75 million. second tightest market for office space after Fitzrovia. The speed of the sale highlights the demand for investment opportunities in this location as the building was only placed on the market one month prior to its sale in May 2019.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 300 400 350 110

350 100 250 300 300 90 250 200 250 80 200 150 200 70 150 150 60 100 100 100 50 50 50 50 40

0 0 0 30 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2022 2020 Q1 2017 Q1 2018 Q1 2017 Q1 2019 Q3 2017 Q1 2019 Q2 2017 Q3 2017 Q1 2018 Q3 2019 Q2 2017 Q4 2017 Q2 2019 Q3 2018 Q3 2019 Q4 2017 Q2 2018 Q2 2019 Q3 2018 Q4 2019 Q2 2018 Q4 2018 Q4 2019 Q4 2018

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

Liberty Regent House, LONDON MARKETS 15 222 Regent Street University College London

Russell Square Great Ormond Street Hospital

RIBA

FITZROVIA Goodge Street British Museum

Wigmore Hall Holborn Contact Rhodri Phillips Oxford Circus Tottenham Court Road Mobile +44 (0)7768 615296 [email protected]

£87.50 41% Gerald Eve’s investment analytics* Prime Rent Serviced offices take-up Strong Weak

2.2% 411,000 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 15.9% £241,930,000 4 1 1 3 Tenant Space Investment *see inside back for details

Fitzrovia remains one of the best performing submarkets. There are two major schemes currently under construction. Leasing activity was strong throughout 2019, particularly in the Derwent’s 80 Charlotte Street, which at 321,000 sq ft is one of second half of the year with take-up totalling 356,000 sq ft. the West End’s largest development projects, will deliver in 2020, and is already fully let. The other is Oxford House on the Serviced office firms were the most active in the market, north side of Oxford Street (80,000 sq ft), which is expected to accounting for 41% of deals over the last six months. Notably complete in 2021. The Office Group agreed to lease all 47,000 sq ft of 131-151 Great Titchfield Street, whilst Fora took 35,000 sq ft at 22 Berners Street. Fitzrovia remains a key target for investors. 55 Newman Street Elsewhere advertising company WPP took 44,000 sq ft at 22-24 was sold by the Leeu Collection for £70 million, whilst a private Percy Street, paying a rent of £74 per sq ft and US gaming company family acquired 66-67 Newman Street for £29.5 million. 2019’s Take Two took the entire 39,000 sq ft at 30 Cleveland Street. largest deal occurred in March, when Westbrook Partners acquired 60 Charlotte Street for £80.8 million. The high level of leasing activity has driven down the availability rate to 2.2%, the lowest across central London. With limited available space coming through from the development pipeline, the availability rate is expected to remain low, keeping an upward pressure on prime rents.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 250 450 400 100

400 350 90 200 350 300 80 300 150 250 250 70 200 200 60 100 150 150 50 100 50 100 40 50 50

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

16 LONDON MARKETS Q4 2019 Lincoln’s Inn Fields

Covent Garden COVENT GARDEN Leicester Square

River Thames Charing Cross Contact Sophie O’Sullivan Mobile +44 (0)7880 454161 Embankment [email protected]

£82.50 51% Gerald Eve’s investment analytics* Prime Rent Finance & Banking take-up Strong Weak

6.3% 361,500 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 13.4% £897,000,000 12 14 13 10 Tenant Space Investment *see inside back for details

Leasing activity has remained subdued across Covent Garden Investment activity was strong in 2019, with £900 million of with take-up below the five-year average for the ninth transactions. However, this was largely due to the £600 million consecutive quarter recorded in December. The Nationwide sale of the Post Building in Q4 to PonteGadea Inmobiliaria. Whilst Building Society secured the largest letting, taking 89,000 sq ft this transaction was very much a core play, other investors have at The Post Building, to host its digital and technology hub. been targeting value-add investments in Covent Garden recently, This delivery takes the building of 263,000 sq ft to full indicating confidence in the submarket’s location and its occupier occupancy, having only recently been delivered, highlighting market fundamentals. For example in May, Clearbell’s value-add the demand for high quality new space. fund teamed up with three investors from Finland, France and the U.S. to buy 65 Kingsway for £59 million. However, whilst large, high-quality buildings have performed well, vacancies in smaller (sub-20,000 sq ft) buildings have risen significantly in recent years pushing the overall availability rate to 6.3%. This is the likely result of the increased presence of serviced office firms in the market, which has lured smaller firms that might previously have signed traditional leases elsewhere. WeWork and Regus have each taken sizeable spaces in Covent Garden in recent years.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 350 1,200 500 100 450 300 1,000 90 400 250 350 80 800 300 200 70 600 250 150 60 200 400 100 150 50 100 50 200 40 50 0 0 0 30 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2022 2020 Q1 2017 Q1 2017 Q1 2018 Q1 2019 Q1 2019 Q3 2017 Q3 2017 Q1 2018 Q2 2017 Q2 2017 Q3 2019 Q3 2019 Q4 2017 Q4 2017 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2019 Q4 2019 Q4 2018 Q4 2018

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

LONDON MARKETS 17 King’s Cross

Euston

MIDTOWN Russell Square Farringdon Holborn Museum of London Chancery Lane

Contact Amy Bryant Picadilly Circus Mobile +44 (0)7551 172931 Leicester Square [email protected] Blackfriars

£72.50 42% Gerald Eve’s investment analytics* Prime Rent Serviced Offices take-up Strong Weak

4.2% 486,000 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 8.8% £964,200,000 13 9 8 7 Tenant Space Investment *see inside back for details

Leasing activity remained subdued throughout 2019, with take- However, there is little availability coming through the development up in each quarter falling below the five-year average. Serviced pipeline as the significant deliveries in 2020; 66 Shoe Lane; and office firms were the most active occupier and accounted for Procession House, are all fully let. The next major delivery will be 42% of lettings in the second half of the year. Knotel signed 1 Stonecutter Court, which will deliver 150,000 sq ft in 2022. the largest lease when it agreed to take 42,000 sq ft at 110 High Holborn, paying a rent of £61 per sq ft, whilst WeWork signed Investment activity has been strong in 2019 with £964 million one of its last big deals in London, taking 28,000 sq ft at transacted. In September, a consortium affiliated with Hong 52 Bedford Row. King’s Wing Tai Properties completed its acquisition of Salisbury Square House for £222 million, whilst Turkish private equity firm Midtown’s availability rate has remained relatively stable, rising Esas acquired 15 Fetter Lane from British Steel Pension Trustees slightly to 4.2% from 4.1% in 2019. However, there are a couple for £92.6 million in April. of large occupiers vacating the market which could impact this. Notably Freshfields Bruckhaus Deringer recently signed a large Two of Holborn’s other largest deals in 2019 were purchases by pre-let deal at 100 Bishopsgate in the City and will be leaving its coworking firms. The Office Group, bought Chancery House from current headquarters at 65 Fleet Street. the Canada Pension Plan Investment Board for £114.5 million, whilst Uncommon purchased Templar House for £80 million.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 600 1,200 1,200 80 75 500 1,000 1,000 70 65 400 800 800 60 300 600 600 55 50 200 400 400 45 40 100 200 200 35 0 0 0 30 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2022 2020 Q1 2017 Q1 2017 Q1 2018 Q1 2019 Q1 2019 Q3 2017 Q3 2017 Q1 2018 Q2 2017 Q2 2017 Q3 2019 Q3 2019 Q4 2017 Q4 2017 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2019 Q4 2019 Q4 2018 Q4 2018

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

18 LONDON MARKETS Q4 2019 Camden Road

KING’S CROSS Mornington Crescent & EUSTON King’s Cross

Euston

Contact Rhodri Phillips Mobile +44 (0)7768 615296 [email protected]

£80.00 50% Gerald Eve’s investment analytics* Prime Rent Associations take-up Strong Weak

3.2% 2,174,755 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 75.3% £132,750,000 8 10 5 9 Tenant Space Investment *see inside back for details

Leasing activity picked up during the second half of 2019, with Construction has begun on Lazari’s ‘The Lantern’, which will both quarters exceeding the five-year average. Such robust deliver 156,000 sq ft of space in 2021. In the longer term, demand has allowed the availability rate to consistently return development might start to shift to the western end of the to very low levels, despite a wave of new deliveries hitting the market around Euston, where regeneration is likely as the HS2 market, and was recorded at 3.2% in December. project gets underway.

The availability rate is likely to remain at relatively low levels Investment activity was limited across the submarket with only over the next few years, as the only significant buildings that are £133 million transacted across 2019. Stenprop’s sale of Euston under construction are either fully pre-let or currently under offer. House, advised by Gerald Eve, was the markets standout 11 Canal Reach, 21 Canal Reach and P2, which total a combined transaction. French investor Eurazeo, in partnership with Arax 660,000 sq ft, have started construction following Facebook’s Properties, acquired the building for £95 million. pre-let last year. Elsewhere in the market, MBU Capital bought 17-37 William Road However, if Google decide to vacate some of its other buildings for £22.8 million, whilst Almero Holdings bought 140-146 Camden upon completion of its 1 million sq ft ‘landscraper’ scheme in 2022, Street for £15 million. this could see availability rise significantly.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 800 350 1,400 90

700 300 1,200 80 600 250 1,000 70 500 200 800 400 60 150 600 300 50 100 400 200 40 100 50 200

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

LONDON MARKETS 19 FARRINGDON Old Street & CLERKENWELL

Barbican

Farringdon

Contact Amy Bryant Chancery Lane Mobile +44 (0)7551 172931 [email protected]

£72.50 40% Gerald Eve’s investment analytics* Prime Rent Media & Tech take-up Strong Weak

6.7% 1,778,796 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 12.9% £458,630,000 10 11 12 1 Tenant Space Investment *see inside back for details

Leasing activity picked up in the second half of the year, with take- As Crossrail nears completion, the number of developments up in Q4 exceeding the five-year average. Farringdon & Clerkenwell in the market has increased. However, with demand for new attracts firms from a variety of industries, but particularly those space high, most of this space is let before completion. Notably within the media & technology sector, which was the most Borrowdale Nominees’ 17 Charterhouse Street (160,000 sq ft), active in the second half of 2019, accounting for 40% of all deals. which was fully pre-let to Anglo American ahead of its commencement in 2018. The market’s popularity with media & technology firms is supporting a wider ecosystem of occupier demand linked to the Investors are becoming increasingly interested in the market sector. For example, PitchBook, which provides market data for as an investment opportunity due to the strength of occupier venture capital firms, became the latest firm to take refurbished demand, quality of new buildings, and the near completion of space at Saffron House, Kirby Street, leasing 14,000 sq ft. Crossrail in 2021. As a result there were a number of significant sales in 2019, including Brookfield’s £169 million purchase of Serviced office firms were also active, with Knotel taking 25 Farringdon Street, and Derwent London’s sale of the Buckley 13.000 sq ft at 18-20 Farringdon Lane, whilst The Office Group Building to clients of CBRE Global Investors for £103 million. also completed its renovation of York House, Pentonville Road. The serviced office provider bought the building for its own occupation in 2016.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 900 1,600 1,200 90

800 1,400 1,000 80 700 1,200 600 800 70 1,000 500 800 600 60 400 600 300 400 50 400 200 200 40 100 200

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

20 LONDON MARKETS Q4 2019 Old Street

Shoreditch High Street SHOREDITCH Brick Lane Market hitechapel Old Spitalfields Market

Liverpool Street Contact Jessica Nutt Mobile +44(0)7788 367209 [email protected]

£72.50 75% Gerald Eve’s investment analytics* Prime Rent Media & Tech take-up Strong Weak

4.8% 645,000 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 17.9% £459,900,000 3 8 10 15 Tenant Space Investment *see inside back for details

Occupier demand continues to be strong across Shoreditch with The high level of pre-letting activity means that currently 72% 646,000 sq ft leased during the second half of 2019. The media of space to be delivered in Shoreditch over the next three and technology sector continue to be the most active sector years has already been leased, with most of the remaining and accounted for 75% of leasing activity over this period. space expected to be taken before completion. As a result, the availability rate for the market has remained low at 4.8%, and BT secured the largest deal when it agreed to relocate its is not expected to rise significantly over the next few years. headquarters to One Braham. The telecoms company signed a pre-let agreement to take the entire building (328,000 sq ft), Investment volumes have remained robust across Shoreditch having sold its existing headquarters for £210 million. with £460 million transacted in 2019, far exceeding the previous two years. Investment volumes have been supported Aldgate Developments’, One Braham, began construction in by sustained international interest in the market’s best 2017, and was one of the largest speculative schemes to start in buildings and domestic investors continuing to take on riskier, London following the referendum. It is set to deliver in 2020 and value-add investments. Notably, Swiss Life bought 15-16 BT will occupy the space a year later. Bonhill Street for £113 million, reflecting a yield of 5.1%, and Brockton Everlast bought 69-77 Paul Street for £105 million, reflecting a yield of 4.2%.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 500 700 500 80 450 450 600 70 400 400 60 350 500 350 300 300 50 400 250 250 40 300 200 200 30 150 200 150 20 100 100 100 50 50 10 0 0 0 0 2011 2017 2013 2021 2012 2019 2015 2016 2018 2014 2010 2022 2020 Q1 2017 Q1 2017 Q1 2018 Q1 2019 Q1 2019 Q3 2017 Q3 2017 Q1 2018 Q2 2017 Q2 2017 Q3 2019 Q3 2019 Q4 2017 Q4 2017 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2019 Q4 2019 Q4 2018 Q4 2018

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

LONDON MARKETS 21 Farringdon

Liverpool Street

CITY

Cannon Street

Contact Fergus Jagger Mobile +44 (0)7787 558756 [email protected]

£70.00 43% Gerald Eve’s investment analytics* Prime Rent Finance & Banking take-up Strong Weak

4.8% 4,257,460 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 21.4% £2,540,400,000 6 7 9 8 Tenant Space Investment *see inside back for details

Occupier demand for new space remained strong with The largest scheme currently under construction is 22 Bishopsgate 2.9 million sq ft leased in the second half of the year. The finance (1.3 million sq ft), which is due to complete later this year, and and banking sector continued to be the main driver of activity already 65% leased. Other large schemes underway include and accounted for 43% of lettings since June including Monzo British Land’s 100 Liverpool Street (435,000 sq ft), which is 60% taking 115,000 sq ft at 5 Appold Street. leased, and Landsec’s 21 Moorfields (564,000 sq ft), which begun construction in June 2018 following the pre-let to Deutsche Bank. The market’s availability rate fell throughout 2019 to 4.8% from 5.2% 12 months earlier. The high level of pre-letting activity means The investment market was subdued in 2019 with only £2.5 billion that despite the significant levels of development construction, transacted across the City. Few major sales have occurred since the market is not expected to suffer from oversupply. Notably the autumn of 2018, due to restrictions on the amount of capital both The Scalpel (406,000 sq ft), and 70 St Mary Axe (315,000 sq ft), Chinese investors are allowed to invest abroad, whilst South which delivered in late 2018 and early 2019, are both around Korean demand has also cooled in recent months. two-thirds full. More recently was the delivery of 100 Bishopsgate (904,000 sq ft), which was 90% leased on completion.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 1,800 6,000 4,000 80

1,600 3,500 75 5,000 1,400 70 3,000 65 1,200 4,000 2,500 60 1,000 3,000 2,000 55 800 1,500 50 600 2,000 45 1,000 400 40 1,000 200 500 35 0 0 0 30 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2022 2020 Q1 2017 Q1 2017 Q1 2018 Q1 2019 Q1 2019 Q3 2017 Q3 2017 Q1 2018 Q2 2017 Q2 2017 Q3 2019 Q3 2019 Q4 2017 Q4 2017 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2019 Q4 2019 Q4 2018 Q4 2018

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

22 LONDON MARKETS Q4 2019 Twentytwo, 22 Bishopsgate LONDON MARKETS 23 Embankment Tate Modern Oxo Tower

London Bridge aterloo SOUTHBANK

Elephant and Castle

Contact Fergus Jagger Mobile +44 (0)7787 558756 [email protected]

£70.00 41% Gerald Eve’s investment analytics* Prime Rent Media & Tech take-up Strong Weak

2.9% 493,082 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 11.7% £538,530,000 14 13 4 5 Tenant Space Investment *see inside back for details

Leasing activity was subdued in 2019 with each quarter below There are a couple of major developments in the pipeline. the five-year average. The media and technology sector was the The most notable of these is New Elizabeth House. The scheme, most active accounting for 41% of deals in the second half of acquired by Slovakian developer HB Reavis in 2017, recently the year. Notably Japanese game developer, Square Enix, took gained unanimous consent from Lambeth Council, and will 24,000 sq ft at 240 Blackfriars Road, which was the largest deal deliver 945,000 sq ft of office space in 2023. over this period. Investment activity was strong in 2019, with £538 million A lack of available space may have prevented further occupier transacted across the year, with the sale of ITV’s Television activity, with the availability rate falling to 2.9% by the end of Centre the most significant. Mitsubishi Estates and development 2019, one of the lowest in central London. manager Co-re acquired to building for £146 million.

There are a number of developments currently under construction which will help ease the supply strain, namely 10-18 Union Street (74,000 sq ft), and 40 Blackfriars Road (42,000 sq ft). The first phase of the Bankside Yard redevelopment scheme has also started, which will deliver 41,000 sq ft of new space in 2021. The Shell Centre (300,000 sq ft) will also be delivered this year, however this is fully pre-let.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 600 900 1,000 80

800 900 75 500 700 800 70 700 65 400 600 600 60 500 300 500 55 400 400 50 200 300 300 45 200 200 40 100 100 100 35 0 0 0 30 2011 2017 2013 2021 2012 2019 2015 2016 2018 2014 2010 2022 2020 Q1 2017 Q1 2017 Q1 2018 Q1 2019 Q1 2019 Q3 2017 Q3 2017 Q1 2018 Q2 2017 Q2 2017 Q3 2019 Q3 2019 Q4 2017 Q4 2017 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2019 Q4 2019 Q4 2018 Q4 2018

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

24 LONDON MARKETS Q4 2019 East India

Blackwall Poplar

CANARY WHARF Canary harf

Contact Jessica Nutt South uay Mobile +44(0)7788 367209 [email protected]

£50.00 61% Gerald Eve’s investment analytics* Prime Rent Serviced Offices take-up Strong Weak

9.7% 1,046,170 sq ft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Availability Rate Under Construction Tenant demand Lease length Availability rate Rental outlook 30.2% £1,425,000,000 9 3 15 13 Tenant Space Investment *see inside back for details

Despite the high availability rate, and potential risks which 20 Water Street , together with neighbouring 15 Water Street, Brexit could bring to a market which is heavily invested in a 178,000 sq ft mixed-use building, form the first phase of financial services, 2019 was a strong year for Canary Wharf. The Canary Wharf‘s Wood Wharf scheme, where offices are being annual leasing volume exceeded 1 million sq ft for the first time aimed at the media and technology sector, in order to try and since 2016, helped by some significant deals, and near arrival of diversify the area’s occupier base. Crossrail will help boost the future demand for this location. The investment volume in 2019 was the highest in a decade Serviced offices accounted for 61% of deals during the second at £1.4 billion. This was largely due to Citigroup’s £1.1 billion quarter of the year. Notably WeWork agreed a deal to take over purchase of its own headquarters at 25 Canada. Elsewhere the European Medicines Agency’s 285,000 sq ft lease at 25 Churchill Cindat Capital Management bought 30 South Colonnade for Place in July, ahead of the EU agency’s departure to Amsterdam. £135 million, whilst Macquarie Group bought 17 Columbus Courtyard for £110 million. Canary Wharf currently has one of the largest development pipelines across central London. Five Bank Street (690,000 sq ft), which is already 91% pre-let, will complete this year. The Canary Wharf Group’ 20 Water Street (240,000 sq ft), which was being built on a speculative basis and is still available, will also complete this year.

Demand Supply Development Quarterly take-up and ﬁve year average Availability by grade Pipeline and prime rent Source: Gerald Eve Source: Gerald Eve Source: Gerald Eve

000s sq ft 000s sq ft 000s sq ft £ sq ft 450 2,500 1,200 55 400 1,000 350 2,000 50

300 800 1,500 45 250 600 200 1,000 40 150 400 100 500 35 200 50

Take-up New Completed Five year average Refurbished Under construction let Unrefurbished Under construction available Prime rent (RHS)

LONDON MARKETS 25 CENTRAL LONDON RENT REVIEWS

Since we last reviewed London’s rent review landscape in the Summer, the general election has seen a stable government put in place bringing greater clarity over the prospects for Brexit. Whilst it is too soon to know how this will flow through to rental changes, we have identified some rental movement since we last reported and particularly noted some reduction in the length of rent free periods being granted on new leases.

However the rent free periods being granted still remain, by The frequency of references to arbitrations and experts appears historical standards, long and this continues to limit the scope to be stable with applications being a common occurrence for uplifts at the first rent review in many locations. Looking to but only a small proportion of appointments run to an award the next few years, whether or not these reduce materially will or determination. Appointments are, at least in most cases, have a major impact on the prospects for rent review increases. being made reasonably quickly by the RICS, although private appointments directly by the parties are commonplace giving However the impact of rent free periods is significantly reduced the parties control over who the dispute is to be resolved by. if a property is the subject of a second review. Before allowing for the impact of obsolescence, it is on these second reviews where the greatest uplifts can be identified. For there to be a

second review, a lease longer than 10 years is clearly needed and such long lease terms are more commonly found on larger properties. Larger properties involve longer fitting out periods and so perversely it continues to be larger, older, properties

where the biggest increases at rent review can be found. December 2014 headline rent December 2019 headline rent December 2019 Rent free months Net effective rent Predicted uplift first rent review Predicted uplift second rent review

The prospects for rent reviews over the next couple of years Paddington £57.50 £80.00 21 £68.00 18% 33% needs to be seen in the context of rapid rental growth in many Marylebone £85.00 £90.00 21 £76.50 0% 1% areas of central London 2014-2016. Unless we see growth over Mayfair & St James's £115.00 £120.00 21 £102.00 0% 0% the next two to three years that meets or exceeds this historic growth, rent review increases are likely to be reducing going Knightsbridge £90.00 £85.00 24 £70.13 0% 0% forwards. However with the supply of new offices remaining Victoria £75.00 £77.00 21 £65.45 0% 0% very tight, the prospects for rental growth remain strong. Soho £90.00 £92.50 21 £78.63 0% 0% Fitzrovia £69.50 £87.50 21 £74.38 7% 20% Relatively large uplifts are still being seen where particular Covent Garden £77.50 £82.50 21 £70.13 0% 1% circumstances merit it; trophy floors have seen greater than Midtown £62.50 £72.50 24 £59.81 0% 13% average rental uplifts, particularly where roof terraces are provided. King's Cross & Euston £70.00 £80.00 18 £70.00 0% 12% As landlords search for rental growth, so technical arguments Farringdon £52.50 £72.50 21 £61.63 17% 47% are being explored to try and support such growth. Fitting out & Clerkenwell periods continue to be a focus in an effort to minimise the Shoreditch £50.00 £72.50 24 £59.81 20% 41% inducement element of a rent free period and the term over City £62.50 £70.00 24 £57.80 0% 9% which the rent free should be analysed remains contentious. Southbank £56.00 £70.00 18 £61.25 9% 28% The impact on the valuation of a break clause is also a topical Canary Wharf £42.50 £50.00 24 £41.25 0% 25% issue; indeed simply whether or not a break clause is to be assumed for rent review purposes can be contentious. All too London Average £70.37 £80.03 22 £67.70 5% 15% often the lease drafting is surprisingly unclear on the treatment of breaks for rent review purposes.

By contrast, the impact of environmental characteristics still remains surprisingly limited. So far we have seen little, if any, demonstrable impact on rental value from this, notwithstanding the wider focus on issues relating to climate change, although arguably it is simply wrapped up within the overall allowances Contact made for obsolescence. Tony Guthrie Mobile +44 (0)7717 225600 [email protected]

26 LONDON MARKETS Q4 2019 GERALD EVE IN THE MARKET

41 Devonshire Place, Marylebone 30 St Mary Axe, City The vacant Marylebone freehold was sold for £8.6 million to a On behalf of Swiss Re, Gerald Eve secured a trio of new occupiers family office. who have taken over 25,000 sq ft across 3 floors.

Belgrave House, 76 Buckingham Palace Road, Victoria Smithson Tower, 25 St James’s Street, Mayfair & St James's Acting on behalf of Charterhouse Capital, Gerald Eve acquired the Acting on behalf of Tishman Speyer, Gerald Eve successfully leased top (6th) floor of 30,600 sq ft. three further floors totaling 11,000 sq ft, achieving premium rents between £120 – 160 per sq ft.

Gerald Eve’s investment analytics 1 Each market is given a rank based on four variables. The lower rank means this market is more attractive to Strong Weak investors compared to other markets. 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 2 The market which exceeded its average occupier take-up over the last six months by the largest margin is ranked 1st, the market with the lowest margin is 15th. Tenant Demand Lease length Availability rate Rental outlook The market with the longest weighted average lease # # # # 3 length signed over the last six months is ranked 1st, the 2 3 4 5 shortest is 15th. 4 The market with the lowest availability rate is ranked 1st, the highest is 15th.

5 The market with the greatest forecast rental growth over the next three years is ranked 1st, the least is 15th.

GERALD EVE IN THE MARKET 27 LONDON OFFICES

Agency & Investment Lease Consultancy Research

Lloyd Davies Tony Guthrie Alex Dunn Partner Partner Associate Tel. +44 (0)20 7333 6242 Tel. +44 (0)20 3486 3456 Tel. +44(0)203 486 3495 Mobile +44 (0)7767 311254 Mobile +44 (0)7717 225 600 Mobile +44 (0)7917 587230 [email protected] [email protected] [email protected]

Fergus Jagger Graham Foster Partner Partner Tel. +44 (0)20 7653 6831 Tel. +44 (0)20 7653 6832 Mobile +44 (0)7787 558756 Mobile +44 (0)7774 823663 [email protected] [email protected]

Rhodri Phillips Malcolm Hull Partner Partner Tel. +44 (0)20 3486 3451 Tel. +44 (0)20 3486 3458 Mobile +44 (0)7768 615296 Mobile +44 (0)7768 154324 [email protected] [email protected]

Patrick Ryan Jenny Rodericks Partner Partner Tel. +44 (0)20 7333 6368 Tel. +44 (0)20 7653 6857 Mobile +44 (0)7792 078397 Mobile +44 (0)7775 697645 [email protected] [email protected]

Disclaimer & copyright London Markets is a short summary and is not intended to be definitive advice. No responsibility can be accepted for loss or damage caused by reliance on it. © All rights reserved The reproduction of the whole or part of this publication is strictly prohibited without permission from Gerald Eve LLP.

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