www.costar.co.uk CoStar UK Investment Bulletin

Quarterly Update Q1 2013

Marianne Fitzpatrick Mark Stansfield +44 141 354 0822, [email protected] +44 207 7009 2989, [email protected] Q1 2013 UK Investment Trends

CoStar Investment Research has recorded a busy start to 2013, with a total of £8.83bn transacted in 445 deals; up 24% from Q1 2012 figures (£6.7bn), though down 14% on the more fervent levels of activity seen in Q4 2012 (£10.3bn). For more information please contact the CoStar Investment Team.

£3.2bn was spent on offices in Q1, accounting for more than one third of total investment. However, Investment by Sector (£bn) this figure marks a 25% decrease on the high levels 4.0

witnessed in Q4 2012, and the weakest quarter for 3.5 office investment since Q3 2011. )

bn 3.0

(£ Shopping Centres saw over £1bn of expenditure in 2.5 the first three months of the year, continuing on 2.0 from the upward trend seen in Q4 2012. Shopping 1.5

centre investment was up 76% on a quiet Q1 2012. 1.0 Expenditure Expenditure 0.5 Alternative sectors such as healthcare, hotels and 0.0 service stations were also popular in the first three Industrial Mixed Office Retail Other months of 2013, seeing £2.2bn of investment Q1 2013 598.8 249.7 3,209.0 2,385.1 2,345.4 overall. Q1 2012 564.7 114.2 3,480.9 1,632.2 865.2

Sales of multi-regional portfolios witnessed Regional Investment (£bn) Q1 13 something of a renaissance in the first three months Q1 12 of 2013, with £3.4bn of activity across the UK; up 4.5 80% on both Q1 2012 and Q1 2011 figures. (See 4.0 overleaf for some key portfolio transactions). 3.5 Investors are starting to look beyond London. 3.0 Although Greater London again commanded the 2.5 most attention from investors, with around £3.2bn of 2.0 expenditure, this was down sharply from both Q4 2012 (£5.2bn) and Q1 2012 (£4.1bn). The 1.5 percentage of UK investment destined for London 1.0 fell below 50% for the first time in more than a year. 0.5

0.0 Regional investment picked up in Q1 following a subdued 2012. Manchester recorded a particularly strong quarter with around £162m of completed deals by the end of March (up 68% Y-o-Y).

Foreign investors continue to focus their Top Foreign Investors acquirements on London office properties, spending Spain more than double in this sector than UK-based Hong Kong Australia 2% investors (£1.9bn against £618m respectively). The 4% 1% top three portfolio transactions by price were also Japan all acquired by foreign investors (see overleaf for 4% USA details). Germany 24% 9% UK-based property companies were the most active investors overall, spending just over £2bn, Kuwait predominantly across the retail and office sectors. 10% Malaysia 18% A noticeable trend in Q1 was the high level of UAE disinvestment by UK corporate sellers disposing of 16% key assets or entering into sale & leaseback France agreements, raising £1.56bn in the process. 12%

Source: CoStar * Completed, verified and non-confidential deals only

Every effort had been made to ensure the accuracy of the information held within this report. The publisher cannot accept liability for any loss / damage which may arise as a result of any error or omission of any data. Any data reproduced from this analysis must be accredited to CoStar. www.costar.co.uk CoStar UK Investment Bulletin Q1 2013 Yield Update

Mark Stansfield +44 207 7009 2989, [email protected] UK Property Yields

CoStar’s investment research team recorded 250 yield observations in Q1 2013. The quarter was notable for an acceleration in yield decompression, particularly in the office and industrial sectors.

% Average Initial Yields by Sector Q1 2013 Update – Average yields surpass 2009 peak 11

10 • The average all property yield moved out by a further 60 basis points to 8.5% in Q1 2013, following decompression 9

of 20 basis points in Q4. The all-property yield level is now 8 above the 2009 peak. 7 • The large outward shift in Q1 can be put down to several 6 factors: a) increased investment in regions outside of London as investors search for yield, b) a sharp 40% drop 5 in investment in the core central London markets, c) more 4 realistic pricing for weaker assets. 3

• The industrial sector experienced the greatest outward

Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 yield movement, climbing 90 basis points to 10%. This is Q108 above the 9.6% high seen in Q2 2009. All Property Office Retail Industrial

• Office yields also rose sharply in Q1, jumping 80 basis Greater London vs. Rest of UK points to average 8.8%. Yield decompression was Initial Yield Basis Point Spread 10 400 recorded in London as well as in the rest of the UK, although there were pockets of yield compression at the 9 350 8 prime end. 300 7 • Retail yields stabilised at 7.7% after an increase in Q4. 6 250 5 200 • The spread between yields in London and the rest of the 4 150 UK widened yet further in Q1, to 340 basis points (see 3 100 chart). 2 1 50 • The Q1 2013 yield histogram shows that the highest 0 0 frequency trading bracket was 6-7%, in contrast to Q4

2012 when the 5-6% yield bracket was more popular.

Q107 Q108 Q109 Q110 Q111 Q112 Q113 Difference (basis points) UK ex. Gt. Lon. Gt. London

Initial Yield Histogram Q1 2013 All Property Yield Heat Map Number of deals per yield bracket 40 12.5 11.5 35 10.5 30 9.5 25 8.5 20 7.5 15 6.5

10 5.5

5 4.5

0 3.5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 0 UK Office UK Retail UK Industrial Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13

Source: CoStar Note: The hotter the colour the more frequent the transactions at that level.

Every effort had been made to ensure the accuracy of the information held within this report. The publisher cannot accept liability for any loss / damage which may arise as a result of any error or omission of any data. Any data reproduced from this analysis must be accredited to CoStar. www.costar.co.uk CoStar UK Investment Bulletin

Investment Agents League Table Q1 2013

Grant Lonsdale +44 141 354 0646, [email protected]

Q1 2013 (Q4 Acquisition Agent Value £m AGENTS ACQUISITIONS 2012) CBRE remain the most active agent for acquisitions in 1 (1) CBRE 1,155.3 Q1. 2 (9) Strutt & Parker 774.2 Market highlights include: • Gingko Tree Investment and Frasia Properties’ £472m 3 (-) Bidwells 500.9 acquisition of Ropemaker Place, London (Strutt & Parker) 4 (2) 465.8 • M3 Capital Partners and Extra MSA Group’s purchase of 5 (6) GVA 308.2 nine Welcome Break motorway service stations for £295m (GVA) 6 (3) Jones Lang LaSalle 269.4 • Deka’s £223m acquisition of Palestra, London SE1 7 (-) HP Four 255.5 (CBRE & Savills) 8 (-) Jackson Criss 195.3 • The £180m purchase of 1-19 Victoria Street, London SW1 by Mitsubishi Estate Co (Savills) 9 (-) GM Real Estate 175.1 • Northwood Investors’ £110m acquisition of 20 10 (-) Colliers International 163.9 Gracechurch Street, London EC3 (GM Real Estate) 11 (13) H2SO 154.1 • London Metric’s £60.5m acquisition of a Primark distribution centre in Thrapston, Northamptonshire 12 (5) DTZ 100.6 (Cushman & Wakefield) 13 (8) Cushman & Wakefield 99.5 • Chiswick Tower, London bought by Hermes for £56.5m 14 (11) 75.7 (BNP Paribas Real Estate) 15 (4) BNP Paribas Real Estate 71.6

Q1 2013 (Q4 Vendor Agent Value £m 2012) AGENTS SALES Jones Lang LaSalle top the sales table once again. 1 (1) Jones Lang LaSalle 1,795.9 Sales of note include: 2 (3) CBRE 1,195.4 • Royal Bank of Scotland’s £620m sale of 42 Marriott 3 (6) DTZ 776.7 Hotels, UK wide (Jones Lang LaSalle) 4 (-) Morgan Williams 519.2 • Legal & General’s sale of Midsummer Place Shopping Centre, Milton Keynes for £250.5m 5 (5) Cushman & Wakefield 515.6 (Cushman & Wakefield) 6 (-) BNP Paribas Real Estate 370.9 • Grosvenor’s £246m sale of three shopping centres in Grimsby, Inverness and Burton-on-Trent (CBRE) 7 (4) Knight Frank 252.3 • The Fix UK Portfolio of trade parks, sold by Legal & 8 (11) Strutt & Parker 200.5 General for £115.9m (Jones Lang LaSalle)

9 (2) Savills 187.8 • Aviva Investors’ disposal of the Saturn Portfolio of retail warehouses for £92.4m (Wilkinson Williams) 10 (-) Montagu Evans 164.7 • The sale of Thales UK headquarters in Crawley for WHR Property 11 (-) 143.6 £81.25m (DTZ) Consultants • One Grafton Street, London W1, sold by Hines for 12 (9) H2SO 127.9 £80m (Knight Frank) 13 (10) Wilkinson Williams 92.4 • The £46m sale of Waverleygate, Edinburgh by Highcross (Montagu Evans) 14 (-) Colliers International 86.0

15 (-) Tudor Toone 69.9

Methodology: All agents active in the UK investment market are invited to participate in CoStar’s league rankings. Participants submit a s chedule of investment transactions subject to any confidentiality restrictions. All deals submitted for inclusion are independently verified by our Research Team. Agents are ranked by the total value of their acquisitions and disposals over a given period. www.costar.co.uk CoStar UK Investment Bulletin

Quarterly Update Q1 2013

Iain Smyth +44 141 354 0629, [email protected]

Q1 2013

Leading Investment Transactions Based on Deals from January 2013 to March 2013

Spire Healthcare Portfolio, UK Wide Marriot t Portfolio, UK Wide Tesco Property Finance 6 Portfolio

Price: £700,000,000 Price: £620,000,000 Price: £490,000,000 Size: 12 Hospitals Size: 42 Hotels Yield: 4.70% Date: January 2013 Date: February 2013 Size: 4 Completed Stores, 3 Purchaser: Malaysia EPF, Och-Ziff, Purchaser: Abu Dhabi Investment Developments Moor Park Capital Authority Date: February 2013 Vendor: Spire Healthcare Vendor: Royal Bank of Scotland Purchaser: Tesco Property Group Finance 6 Vendor: Tesco Dorney Ltd

Ropemaker Place, London 5 Canada Square, Canary Wharf, London Principal Hayley Hotels Portfolio, UK

Price: £472,000,000 Price: £383,000,000 Price: £360,000,000 Yield: 5.00% Yield: 4.97% Size: 23 Hotels Size (sq ft): 592,926 Size (sq ft): 536,338 Date: February 2013 Date: March 2013 Date: January 2013 Purchaser: Starwood Capital Purchaser: Gingko Tree Purchaser: St Martins Property Vendor: Lloyds, Principal Investment, Frasia Corporation Hayley Group Properties Vendor: Evans Randall Holdings Vendor:

Midsummer Place SC, Milton Keynes Grosvenor Shopping Centre Fund One Angel Square, Manchester

Price: £250,500,000 Price: £246,000,000 Price: £142,000,000 (49% stake) Yield: 5.01% Size: 3 Shopping Centres Yield: 6.00% Size (sq ft): 420,000 Date: March 2013 Size (sq ft): 327,645 Date: March 2013 Purchaser: F&C REIT Date: February 2013 Purchaser: Properties plc Vendor: Grosvenor Shopping Purchaser: Gingko Tree Investment, Vendor: Legal & General Centre Fund RREEF Real Estate Property Vendor: Co-Operative Group

Source: CoStar Completed, verified and non-confidential deals only

Every effort had been made to ensure the accuracy of the information held within this report. The publisher cannot accept liability for any loss / damage which may arise as a result of any error or omission of any data. Any data reproduced from this analysis must be accredited to CoStar.