LONDON MARKETS the Definitive Guide to London’S Office Markets

LONDON MARKETS The definitive guide to London’s office markets

Summer 2019

geraldeve.com 3.6 MILLION SQ FT 4.9%

Q2 2019 AVAILABILITY TAKE-UP RATE

£115 PER SQ FT 30%

WEST END GRADE A PRIME RENT AVAILABILITY

£72.50 11.3 PER SQ FT MILLION SQ FT

MIDTOWN UNDER PRIME RENT CONSTRUCTION

£68.50 PER SQ FT 18.9% CITY TENANT PRIME RENT SPACE

2 LONDON MARKETS EXECUTIVE SUMMARY

Quarterly take-up by region Availability rate by market Source: Gerald Eve Source: Gerald Eve

Million sq ft % 5.0 10 4.5 9 4.0 8 3.5 7 3.0 6 2.5 5 2.0 4 1.5 3 1.0 2 0.5 1 0 0 City Soho Q1 2017 Q1 2019 Q1 2018 Q3 2017 London Q2 2017 Q4 2017 Q3 2016 Q2 2019 Q3 2018 Victoria Q2 2016 Q2 2018 Q4 2016 Q4 2018 Fitzrovia Midtown Southbank Shoreditch Paddington Marylebone Canary Wharf Knightsbridge

Canary Wharf Southbank Covent Garden East Five year average Mayfair & St James’s West King’s Cross & Euston Farringdon & Clerkenwell

Occupier confidence remains despite slow start to the year Premiums paid on larger floor plates due to limited grade A availability Following a slow start to the year, leasing activity picked up during the second quarter, where 3.6 million sq ft was taken, The high volume of leasing activity, as well as some conversion which is in line with the five year average. of office stock to other uses, has led to a fall in the availability rate to 4.9%. In 2019, the availability rate fell in 9 of our 15 markets, Despite the uncertainty surrounding Brexit, and the threat of and as a result, occupiers are having to pay a premium on larger a “no-deal” scenario increasing, the finance & banking sector floor plates where available. displayed its confidence in the London market and accounted for 29% of acquisitions over the last six months. Notably the The development pipeline will help ease the supply squeeze with European Bank for Reconstruction and Development signed a 11.4 million sq ft currently under construction. However 43% of pre-let to take 365,000 sq ft at 5 Bank Street in Canary Wharf, this space has already been let, and the majority of the remaining whilst in the City, Brewin Dolphin & Co took 114,000 sq ft at 25 available space is expected to be taken as the developments Cannon Street. The demand from this sector has overwhelmingly move nearer to completion. A large increase in London’s been driven by lease events, however the Fintech sector is availability rate is therefore unlikely. increasingly becoming an area of growth for financial service firms across London. Development pipeline Media & Technology occupiers have also been active and continue Source: Gerald Eve to be one of the main drivers of occupier demand across the capital, accounting for 19% of deals in 2019 so far. The largest deal Million sq ft from this sector was by G-Research, which signed the first pre-let 8 at One Soho Place, taking 103,000 sq ft. Derwent’s development 7 only began construction in Q1 2019, highlighting the strong occupier demand for new space. The ability to recruit and retain 6 the best talent has led to occupiers targeting high quality office 5 space and over the last 12 months, 48% of lettings were for new 4 space, compared to the five year average of 39%. 3 Serviced office providers accounted for 14% of activity in the first 2 half of the year, with WeWork particularly active taking 255,000 sq 1 ft across the capital. The increase in offering from serviced office 0 providers has lured smaller firms that might previously have signed 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2020 conventional deals elsewhere, and as a result, the availability rate 2009 for smaller offices has gradually increased since 2015. Completed Under construction let Under construction available EXECUTIVE SUMMARY 3 REPURPOSING RETAIL – OXFORD STREET

500,000 270 15,000 pedestrians through buses per hour taxi pick up/set downs Oxford Circus per day per day

10 of top 24 60 million History TfL’s pedestrian collision Estimated increase Debenhams – 1870 hot spots are on in footfall per annum John Lewis – 1864 t Oxford Stree with opening of House of Fraser – 1879 Elizabeth Line Selfridges – 1909 Marks & Spencer – 1930

4 LONDON MARKETS Potential impact on value The retail and casual dining sector is under pressure, with news of store closures and CVAs getting strong publicity. Retaining current rental income is difficult with many tenants demanding that landlords accommodate additional flexible payment plans or reductions. With a lack of new operators ready to occupy any vacant units, landlord options are somewhat limited. Such a negative outlook has placed retail at the bottom of most investor wish lists, although the release of surplus retail space, particularly on upper floors, could present opportunities for alternative uses.

Value as single-let Value of re-geared retail block retail – with offices OFFICES £85 per sq ft + 4.25% £1,870 psf

5th 5th5th 5tht tt t 4th ALL4th4th RETAIL 4tht tt RETAIL t 3rd £253rd3rd per sq ft 3rd £70 per sq ft 2nd 2nd2nd 2nd + 3.00% 1st 1st1st+ 3.25% 1stt tt t Ground GroundGround£720 psf Ground £2,200 psf Basement BasementBasement Basementt tt t

326% 20% 53% increase in online reduction in increase in CVAs in 2018 transactions since 2008 floorspace expected by West End retailers in the next decade TO LET

16% -6.0% 2.6% of all transactions Average annual capital office availability rate are now online value decline for high in Marylebone street retail over the next three years

REPURPOSING RETAIL – OXFORD STREET 5 LIFE SCIENCES IN LONDON

Key life sciences locations across London

The Francis Crick Institute, Imperial College London’s Campus, The Cube, King’s Cross & Euston White City East London Bringing together 1,500 scientists and Co-locating researchers, businesses and A post-incubator scientific research & support staff, with a focus on finding new higher education partners on a 25-acre development facility in Dagenham, ways to treat, diagnose and prevent a site, White City Place is fast becoming East London. range of illnesses. the centre of the emerging life science cluster in West London.

6 LONDON MARKETS London has a long history as a centre for In early 2019, the British Library signed a development agreement with Stanhope plc and Mitsui Fudosan UK Ltd to advancement in medicine and biology and develop plans to build a 100,000 sq ft extension to the Grade I together with Oxford and Cambridge, forms listed building. The agreement is the next stage in the Library’s the Golden Triangle, a global hub for life plans to develop its 2.8 acre site to the north of the Library at sciences. The Mayor of London has given his St Pancras, next door to the Francis Crick Institute, which will house a new headquarters for the national institute for data support to different sectors working together science and artificial intelligence, The Alan Turing Institute. to solve healthcare challenges, including exploring the safe use of health data for This development will be facilitated by the construction of research, supporting increased investment to extensive commercial space for organisations and companies seeking to locate in the heart of the Knowledge Quarter, an area allow innovative life sciences firms to grow, supported by MedCity and at the intersection of learning, data and enabling new life science developments to science and biomedical research. expand across London. There are also new plans proposing the creation of a thriving life Advances in medicine and global demographic trends point sciences centre at the heart of Whitechapel. The presence of a to an overall expansion of the life sciences industry. Global life sciences cluster would be a powerful incentive for attracting healthcare expenditure is expected to have increased by 24% new start-ups and other innovative and dynamic enterprises to between 2015 and 2020. At the same time, the pace of change the area. driven by technology, big data and personalised therapies creates unprecedented opportunities in life sciences. Post-Brexit, the life science sector is set to become increasingly The strength of these fundamentals implies increasing more important to economic growth in the UK leading to a demand for life sciences space. greater demand for space. At the end of 2018, GammaDelta Therapeutics became the latest life sciences company to take With a unique ecosystem combining a rich network of world- space at White City Place, joining pharmaceutical giant Novartis, class universities, renowned research centres, healthcare which recently announced plans to locate their UK headquarters providers, medical charities, innovative small businesses to the site. and global industry players, London is highly attractive for investment in life sciences. London’s life sciences sector now GammaDelta Therapeutics will be taking approximately has over 1,300 companies, employs over 60,000 and has an 12,000 sq ft of office and lab space, joining fellow innovators annual turnover of £14.4 bn. This covers biotech R&D, Autolus and Synthace in White City Place and OpenCell, healthcare, medical and optical equipment and Rebelbio, and Blenheim Chalcot. Other tenants at White City pharmaceutical manufacture. Place include the Yoox Net-a-Porter technology centre and the pioneering tech ‘scale-ups’ Attention Seekers and Arts Alliance Media.

With a unique ecosystem combining a rich network of world-class universities, renowned research centres, healthcare providers, medical charities, innovative small businesses and global industry players, London is highly attractive for investment in life sciences.

LIFE SCIENCES IN LONDON 7 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 £85.00 Brick Lane Market Grade A The Old Truman Brewery R s en h IDTOWN t nt M Barbican Centre £87.50 Free 24 mo BBC R e s Grade A n th DDINGTO t F n PA N ree 24 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 £80.00Royal 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 £90.00

Grade A R e hs The National Gallery nt nt Fre mo National Hyde Park e 21 Tower of London £115.00 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 £67.50 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 £75.00

R s en h t nt Free 24 mo

The Oval

Battersea Power Station

8 LONDON MARKETS 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 £68.50 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 9 CENTRAL LONDON INVESTMENT

The uncertainty surrounding Brexit has had a There has also been a drop in demand from overseas investors, which have previously been dominant in the London office negative impact on the investment market, market since the referendum in 2016. Overseas investors, with investors delaying decisions until the UK’s particularly from the Far East, have been sensitive to periods relationship with the EU becomes clearer. As a of uncertainty. However, pricing concerns are also playing an result, investment fell significantly in the first important role in holding back investment. half of the year with both Q1 and Q2 below the The occupational market remains strong with high demand for five year average. new space. This combined with a lack of good quality grade A space should lead to continued grade A rental growth in both With Brexit delayed until October, investment activity is the West End and the City, albeit not as strong as previous expected to increase slightly in Q3, although overall volumes in years. However, this growth will be offset by negative yield 2019 are expected to be low. Those that are looking to buy have movements over the forecast period, leading to a slight decline moved away from core assets due to the lack of potential rental in capital values in 2019 and 2020. growth, and instead are targeting value-add opportunities. In July, the Bank of England’s Financial Stability Report The largest transaction of the year occurred in Canary Wharf highlighted a potential risk to the commercial property market, where Citigroup purchased its headquarters, 25 Canada Square, suggesting that in a no-deal Brexit scenario, net outflows from for £1.1 billion. Citigroup has been in the building for 19 years open-ended property funds could be almost as large as after and also occupies 33 Canada Square next door. The latter will the EU referendum vote in 2016. Over the past six months, house staff while the tower is refurbished. The work is to start heightened uncertainty has seen average net outflows of early next year to create a state-of-the-art interior, and include around £100m, compared to average net inflows in 2018 of an open-plan layout for all staff, as is the case in the bank’s New £20m. If a Brexit deal is secured, outflows are likely to reduce. York headquarters, which Citigroup also bought recently. However, in the event of a no-deal, heavier outflows than have been seen over the past six months can’t be ruled out. The recent hesitancy in the London investment market is largely coming from vendors, and as a result there is little stock available to buy. The transactions that did take place in H1 2019, were mostly down to investors under some pressure to sell. There has also been a notable increase in off-market transactions, with vendors reluctant to market their assets due to a lack of confidence. Contact Lloyd Davies Mobile +44 (0)7767 311254 [email protected]

Central London Central London Net ﬂows into O ce forecasts O ce investment volumes open-ended property funds Sources: Gerald Eve, MSCI Sources: Property Data, Gerald Eve Sources: Investor Association, Capital Economics

% £ billion £ million per month EU referendum 10 6 600

8 5 300

6 4 0 4 3 -300 2 2 -600 0 -900 -2 1

-4 0 -1200 2017 2013 2019 2015 2016 2018 2014 2017 2021 2019 2016 2018 2020 Q1 2017 Q1 2019 Q1 2016 Q1 2018 Q3 2017 Q2 2017 Q4 2017 Q3 2016 Q2 2019 Q3 2018 Q2 2016 Q2 2018 Q4 2016 Q4 2018

Capital growth Canary Wharf West End Monthly total Six month average Income return City Five year average Total return Southbank

10 LONDON MARKETS Edgware Road

Paddington PADDINGTON

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

£80.00 65% 12 month take-up by grade Prime Rent Corporate take-up Grade A Grade B Grade C 4.4% 194,000 sq ft 56% 44% Availability Rate Under Construction

7.6% 29,000 sq ft Tenant Space Under Offer

Despite the lack of leasing activity in Q2 2019, occupiers The positive momentum in the leasing market, with four continue to be drawn to Paddington from other parts of of the last five quarters exceeding the five year average, is London, attracted by the quality of its new developments, encouraging developers. Sellar Property Group will soon begin improvements to the public realm and the upcoming arrival of the construction of Paddington Square (355,000 sq ft) on a Crossrail, boosting the market’s connections with Heathrow speculative basis, which will become Paddington’s largest office Airport and other parts of London. building upon delivery in H1 2022.

Recent developments in the market have proved particularly Invesco is also expected to start its redevelopment and popular, namely the Brunel Building where the entire 238,000 sq ft extension of 50 Eastbourne Terrace following its recent was committed to ahead of its completion in Q3 this year. acquisition of the property, with the new scheme likely to Sony Pictures and the FA Premier League signed significant deliver 95,000 sq ft. pre-lets at the Brunel Building, relocating from Soho and Marylebone respectively. As a result, the availability rate has In the longer term, British Land have begun a consultation dropped to 4.4%, which is close to its historical low. process on its plans for the final stage of the Paddington Central campus. Five Kingdom Street will include 440,000 sq ft of offices as well as extensive community, leisure and cultural development.

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 90

400 250 500 80 350

200 300 400 70

250 150 300 60 200

100 150 200 50

100 50 100 40 50

0 0 0 30 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2020 2009 Q1 2017 Q1 2017 Q1 2019 Q1 2019 Q1 2018 Q1 2018 Q3 2017 Q3 2017 Q2 2017 Q2 2017 Q4 2017 Q4 2017 Q3 2016 Q3 2016 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2016 Q4 2016 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 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]

£87.50 37% 12 month take-up by grade Prime Rent Finance & Banking take-up 7% Grade A Grade B Grade C 2.6% 185,000 sq ft 44% Availability Rate Under Construction 49% 27.9% 78,000 sq ft Tenant Space Under Offer

After a sluggish Q1, leasing activity bounced back in the There remains a strong demand for high quality office space second quarter with 102,000 sq ft taken, 11% above the five within the submarket, evidenced by Portman Estate’s 1–9 year average. The most significant deal was signed by Union Seymour Street (55,000 sq ft), the largest delivery in 2018, Bancaire Privee, which took all 15,900 sq ft at the recently which was fully let upon completion. refurbished Seymour Mews House. This occupier activity will encourage developers, with a number The increase in take-up combined with a lack of deliveries of schemes expecting to complete next year. The largest is brought about a drop in Marylebone’s availability rate over Almacantar’s 5 Marble Arch Place, delivering 91,000 sq ft of the last 12 months to 2.6%, the second lowest across central Grade A office space. Native Land and Portman Estate’s 136 London. Over the last five years, the market has actually lost George Street (43,000 sq ft), is also set to complete by Q3 2020 space with around 200,000 sq ft delivered since 2015, whilst after construction began on the mixed-use scheme during 2018. over 250,000 sq ft has been lost to demolitions or conversions. The Howard de Walden Estate will also deliver 18,500 sq ft of refurbished office space at 2 Cavendish Square over the next Vacancies will remain low throughout the remainder 6-12 months with Gerald Eve appointed on leasing. of 2019 given the lack of development, and as a result, occupiers looking for larger lot sizes will find it increasingly difficult. However, this could change in 2020 as a few large developments near 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 300 400 450 100

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

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

12 LONDON MARKETS Marble Arch Oxford Circus Bond Street

Piccadilly Circus MAYFAIR & ST JAMES’S Hyde Park Corner

Hyde Park

Green Park

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

£115.00 40% 5% 12 month take-up by grade Prime Rent Finance & Banking take-up Grade A 38% Grade B 5.1% 446,000 sq ft Grade C Availability Rate Under Construction 57% 5.6% 335,000 sq ft Tenant Space Under Offer

Occupier demand has remained strong in Mayfair & St James’s, The availability rate is predicted to rise over the next 12 months with take-up volume exceeding 500,000 sq ft in the first half with a number of schemes currently under construction. Over of the year. Demand has been particularly strong in bigger, the next 12 months, 446,000 sq ft will be delivered, including newer buildings, with the market’s recent deliveries having all the markets largest construction since 2010, 18-19 Hanover performed well. Square (130,000 sq ft). The building is scheduled to complete in 2020 and recently signed its first tenants, Kohlberg Kravis The finance & banking sector continues to dominate the market, Roberts and Glencore, leaving just one floor available. and in the first half of the year accounted for 40% of deals; Cinven Partners took 51,000 sq ft at 21 St James’s Square, Shore Great Portland Estates commenced construction on 65 Davies Capital Stockbrokers leased 14,000 sq ft at 57 St James’s Street, Street which will deliver 65,000 sq ft in Q3 2020. Grosvenor and Triton Investment Advisers took 18,250 sq ft at The Crown Estates have also announced plans to redevelop a two-acre site Estate’s new build scheme, The Marq, which completed in May. which will increase the height and density of buildings opposite Claridge’s on Brook Street. Due to the high level of leasing activity, the availability rate has fallen to 5.1%. The market has also lost space in recent years through conversions to other uses, particularly residential. However as high-end residential prices have cooled, this should be less relevant going forward.

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 2020 2009 Q1 2017 Q1 2017 Q1 2019 Q1 2019 Q1 2018 Q1 2018 Q3 2017 Q3 2017 Q2 2017 Q2 2017 Q4 2017 Q3 2016 Q2 2019 Q4 2017 Q3 2016 Q3 2018 Q2 2019 Q3 2018 Q2 2018 Q2 2018 Q4 2016 Q4 2016 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 Hyde Park Green Park

Victoria KNIGHTSBRIDGE Sloane Square

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

£85.00 66% 12 month take-up by grade Prime Rent Corporate take-up 15% Grade A 37% Grade B 3.3% 85,000 sq ft Grade C Availability Rate Under Construction

48% 33.2% 33,000 sq ft Tenant Space Under Offer

Leasing activity has been relatively subdued over the last There’s been a lack of office development over the last 18 months with falling demand from the private banks and five years, however, new high-quality space is on the way; investment houses that traditionally drive demand here. Chelsfield Partners LLP have begun development of The However a number of lettings in Q2 2019 drove the leasing Knightsbridge Estate, which will deliver a much needed 67,000 volume to 74,000 sq ft, the market’s highest in three years. sq ft of new high-quality space to the market, within a wider Motcomb Estates, advised by Gerald Eve, has leased 19,000 mixed-use scheme. sq ft to Maybourne Hotels Group at 27 Knightsbridge, whilst Liberty Commodities took 39,000 sq ft at 40 Grosvenor Place. Adhara Property Holdings have also begun construction on another mixed-use scheme; 55–91 Knightsbridge, which will The increase in leasing activity resulted in a further fall in the deliver 18,000 sq ft of new office space in 2020. availability rate from 4.5% in December to 3.3% in June 2019. A loss of office stock to luxury residential development has also Despite the lack of recent leasing activity, Knightsbridge’s low been responsible with a small demolition occurring in Q1 2019. availability and its prestigious location means properties here still command high 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 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)

14 LONDON MARKETS Green Park

Hyde Park Green Park Hyde Park

Westminster

Palace of Westminster St James’s Park VICTORIA Victoria

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

£75.00 80% 12 month take-up by grade Prime Rent Associations take-up 15% Grade A 39% Grade B 4.7% 116,000 sq ft Grade C Availability Rate Under Construction

46% 27.8% 181,000 sq ft Tenant Space Under Offer

Recent improvements to Victoria’s retail and leisure offering, Victoria has become a key target for serviced office providers combined with the availability of high-quality office space, have seeking to expand in London over the past couple of years, persuaded a larger pool of occupiers to consider taking space with notable lettings to The Office Group (84 Eccleston Square); here. This is reflected in the fact that of the 1.6 million sq ft of London Executive Office (Nova); Spaces (25 Wilton Road); and new office space delivered over the last five years, less than 5% WeWork (123 Buckingham Palace Road). remains available. Landsec, a major owner in Victoria, also chose Victoria as the 406,000 sq ft was leased in the first half of the year, notably The destination for its own venture into the co-working market, taking House of Commons took 96,000 sq ft at the recently refurbished 36,000 sq ft at 123 Victoria Street (under the Myo brand) in Q1 2019. 64 Victoria Street, and 52,000 sq ft at 21 Dartmouth Street. There will be no new space coming to the market until 2022 when Due to the strong demand for space from occupiers, the Northacre’s 10 Broadway (116,000 sq ft) completes. However availability rate has fallen significantly, from 7% in December Landsec announced plans in Q1 2019 to develop another office 2018 to 4.7% in June 2019. However, whilst the overall availability building at Nova, to be known as Nova East, and submitted a rate has fallen, vacancies for offices smaller than 20,000 sq ft planning application for the 136,500 sq ft office building. Also has increased significantly as SMEs and start-ups increasingly GAW Capital Partners plans to create an additional 103,000 sq ft gravitate towards serviced offices. at 123-151 Buckingham Palace Road by Q1 2022.

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 2020 2009 Q1 2017 Q1 2017 Q1 2019 Q1 2019 Q1 2018 Q1 2018 Q3 2017 Q3 2017 Q2 2017 Q2 2017 Q4 2017 Q4 2017 Q3 2016 Q3 2016 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2016 Q4 2016 Q4 2018 Q4 2018

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

LONDON MARKETS 15 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]

£90.00 60% 2% 12 month take-up by grade Prime Rent Media & Tech take-up Grade A Grade B 3.3% 226,000 sq ft 40% Grade C Availability Rate Under Construction 58%

30.5% 194,000 sq ft Tenant Space Under Offer

Leasing activity has been strong in Soho, supported by The recent high level of leasing activity has led to a fall in infrastructure improvements, particularly along the eastern end the office availability rate to 3.3%, one of the lowest across of Oxford Street where Crossrail will arrive in 2021. In the first central London. However, there are a number of developments half of 2019, leasing volume totalled 214,00 sq ft, exceeding the currently under construction which will ease the supply five year average. squeeze. Over the next 18 months, 201,000 sq ft will be delivered across six schemes. Notably Soho Estates’ Ilona Rose The media and technology sector continues to dominate House will deliver 163,000 sq ft in 2020, the majority of which is the market and accounted for 60% of deals over the last six currently available. months. Notably G-Research signed the first pre-let at One Soho Place, taking 103,000 sq ft. Derwent’s development only Landsec will shortly commence speculative development of began construction in Q1 2019, highlighting the strong occupier 1 Sherwood Street (behind the Piccadilly Lights) to deliver demand for new space in the market with Apollo Global 107,000 sq ft by Q2 2022. Management understood to be negotiating on the remainder.

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 180 400 350 110

160 350 300 100 140 300 90 250 120 250 80 100 200 200 70 80 150 150 60 60 100 40 100 50 50 20 50 40

0 0 0 30 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2020 2009 Q1 2017 Q1 2017 Q1 2019 Q1 2018 Q1 2019 Q1 2018 Q3 2017 Q2 2017 Q3 2017 Q2 2017 Q4 2017 Q3 2016 Q2 2019 Q3 2018 Q4 2017 Q2 2018 Q3 2016 Q2 2019 Q3 2018 Q4 2016 Q2 2018 Q4 2018 Q4 2016 Q4 2018

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

16 LONDON MARKETS 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]

£85.00 54% 4% 12 month take-up by grade Prime Rent Corporate take-up Grade A Grade B Grade C 2.5% 411,000 sq ft 46% 50% Availability Rate Under Construction

18.6% 116,000 sq ft Tenant Space Under Offer

Occupier sentiment remains positive in Fitzrovia with leasing Fitzrovia has seen a number of serviced office providers locate activity totalling 349,000 sq ft in the first half of the year and in the market, namely Regus and Fora have each taken 25,000 exceeding the five year average. The arrival of Crossrail at sq ft in the past two years. Spaces took 16,000 sq ft at 307-317 Tottenham Court Road will continue to lure in more occupiers. Euston Road at the end of 2018, and The Wing have recently The high level of leasing activity has led to a further fall in the taken 11,000 sq ft at 14-16 Great Portland Street in Q1 2019. availability rate to 2.5%, making Fitzrovia the most restricted in terms of availability. Whilst Derwent’s 80 Charlotte Street (321,000 sq ft) is fully let (allowing for future options), there are other schemes currently Over the last 12 months, buildings of different sizes have under construction which will deliver new space to the market. performed differently. Recent activity has largely been driven Great Portland Estates’ 1 Newman Street will deliver 80,000 sq by several large occupiers taking big chunks of space. However, ft in Q4 2020. the availability rate in smaller offices, below 20,000 sq ft, has increased significantly, due to the migration of SME’s and start- ups towards serviced offices.

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 250 500 800 100 450 700 90 200 400 600 350 80 150 300 500 70 250 400 60 100 200 300 150 50 200 50 100 40 50 100 0 0 0 30 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2020 2009 Q1 2017 Q1 2017 Q1 2019 Q1 2019 Q1 2018 Q1 2018 Q3 2017 Q3 2017 Q2 2017 Q2 2017 Q4 2017 Q4 2017 Q3 2016 Q3 2016 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2016 Q4 2016 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 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]

£80.00 26% 6% 12 month take-up by grade Prime Rent Media & Tech take-up Grade A 40% Grade B 4.6% 225,500 sq ft Grade C Availability Rate Under Construction 54% 14.4% 182,000 sq ft Tenant Space Under Offer

Leasing activity remained subdued in Covent Garden with both The Post Building, which at 263,000 sq ft was the market’s quarters in 2019 falling below the five year average. The media largest development in a decade, is nearly 100% let upon and technology sector continued to be the main driver behind completion with McKinsey & Co (relocating from Mayfair & occupier demand and accounted for 26% of lettings in the first St James’s) also pre-letting space. The remaining space in the half of the year. Notably data company ComplyAdvantage took building has now let in Q3 2019, highlighting the demand for 21,000 sq ft at 90 Long Acre, whilst a number of companies took good quality space in this location. sub 10,000 sq ft including Love Productions Ltd at 15 Macklin Street, and Invenica at Berkshire House on High Holborn. Across all sizes, the availability rate remains at a historical low level of 4.1%. However, like other markets in central London, Encouragingly, many firms are moving to Covent Garden from buildings smaller than 20,000 sq ft have seen a rise in their other submarkets or expanding into new offices, with new or availability rate as a result of increased competition from refurbished space especially popular, and in Q1 2019, insurer serviced office providers. In recent years, WeWork and Regus Rothesay Life took 49,000 sq ft at the recently completed Post have each taken significant space in Covent Garden. Building, relocating from the City.

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 350 800 500 100 450 300 700 90 400 600 250 350 80 500 300 200 70 400 250 150 60 300 200 100 150 50 200 100 50 40 100 50 0 0 0 30 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2020 2009 Q1 2017 Q1 2017 Q1 2019 Q1 2019 Q1 2018 Q1 2018 Q3 2017 Q3 2017 Q2 2017 Q2 2017 Q4 2017 Q4 2017 Q3 2016 Q3 2016 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2016 Q4 2016 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 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 56% 3% 12 month take-up by grade Prime Rent Professional Services take-up Grade A 35% Grade B 4.1% 373,000 sq ft Grade C Availability Rate Under Construction 62%

7.5% 288,000 sq ft Tenant Space Under Offer

Midtown has been one of the most active markets in central Despite the strong occupier demand and tight supply of new/ London over the last couple of years, and a further 383,000 sq ft refurbished space, the overall availability rate has increased was leased in the first half of 2019. The market’s close proximity over the last six months to 4.1%. This could increase further to the Crossrail station at Farringdon, has also helped it lure with the delivery of a number of developments currently occupiers from other parts of London. Almost all of the new under construction, combined with a couple of large occupiers space from recent development completions have been fully relocating to other London markets. Freshfields Bruckhaus let, many before completion, highlighting the high occupier Deringer recently signed a large pre-let deal at 100 Bishopsgate in demand for new space. the City, and will be leaving its current headquarters at 65 Fleet Street in 2021. Also The Competition & Markets Authority will be Professional services have been the most active business sector vacating Victoria House (80,000 sq ft) to move to Canary Wharf. in 2019 so far, and in particular the legal sector. Law Business Research acquired 41,000 sq ft at Meridian House, 34-35 The next major development commencing in Midtown is likely Farringdon Street, whilst Haynes and Boone took 13,000 sq ft to be Ivanhoe Cambridge and Greycoat’s 1 Stonecutter Court, at 1 New Fetter Lane. which received planning permission for a 239,000 sq ft office redevelopment scheme in Q1 2019. The developer is considering whether to refurbish the existing building (150,000 sq ft) or develop the consented new scheme, with a decision likely by Q4 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 600 1,400 1,200 80 75 500 1,200 1,000 70 1,000 65 400 800 60 800 300 600 55 600 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 2020 2009 Q1 2017 Q1 2017 Q1 2019 Q1 2019 Q1 2018 Q1 2018 Q3 2017 Q3 2017 Q2 2017 Q2 2017 Q4 2017 Q4 2017 Q3 2016 Q3 2016 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2016 Q4 2016 Q4 2018 Q4 2018

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

LONDON MARKETS 19 Camden Road

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

Euston

Contact Patrick Ryan Mobile +44 (0)7792 078397 [email protected]

£80.00 86% 3% 12 month take-up by grade Prime Rent Media & Tech take-up 9% Grade A Grade B 3.5% 1,244,000 sq ft Grade C Availability Rate Under Construction

67.0% 75,000 sq ft 88% Tenant Space Under Offer

King’s Cross & Euston continues to be one of the most sought- As a result of the high leasing activity, the overall availability rate after markets across central London. In the first half of the year, remains one of the lowest across central London at 3.5%, with leasing activity totalled 398,000 sq ft, with Sony Music signing almost no grade A space remaining. This isn’t likely to change the largest deal, pre-letting 125,000 sq ft at S1 Handyside. The over the next 18 months as all the significant buildings that will company will join sports manufacturer Nike, which pre-let 68,000 complete during that time are fully pre-let or under offer. sq ft in 2018, when the building completes in 2021. In 2021, more space could become available with the completion The market has been dominated in recent years by a number of Lazari’s The Lantern, 75 Hampstead Road, delivering 147,000 sq of large pre-lets, and significantly all of the buildings that have ft of new space, all of which is currently available. been delivered since 2014 are fully occupied, with the media and technology sector the main occupier. Havas Media, Universal Other schemes within the King’s Cross Central development are Music, and Facebook have taken large amounts of space, and in likely to begin soon. In the longer term, development might start particular Google, which has taken more than 1.6 million sq ft in to shift to the western end of the submarket around Euston, recent years. where regeneration is likely as the HS2 project gets underway.

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)

20 LONDON MARKETS FARRINGDON Old Street & CLERKENWELL

Barbican

Farringdon

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

£72.50 33% 12 month take-up by grade Prime Rent Media & Tech take-up 8% Grade A Grade B 43% 5.4% 1,708,000 sq ft Grade C Availability Rate Under Construction 49% 11.4% 409,000 sq ft Tenant Space Under Offer

Farringdon and Clerkenwell continues to attract a high level of Many of the larger lettings over the last 18 months have taken occupier demand with 542,000 sq ft leased in the first half of 2019. place near Farringdon Station, which is set to be one of the busiest stations in Europe when Crossrail arrives in 2020. The market attracts firms from a variety of industries but Occupiers are realising the benefits of Farringdon’s future particularly those within the media and technology sector connectivity, with reduced commuter times and larger capacity where demand has proved resilient post-referendum. So far, trains, and this has led to heightened demand and rental growth this sector has been the most active and accounted for 33% of in this market. deals with football magazine WSC taking 15,000 sq ft Petersham House, and Incubeta taking 11,000 sq ft at The Tower - A number of development completions in the first half of the The Bower, 207-211 Old Street. year led to an increase in the overall availability rate from 3.1% in December to 5.4% in June. The availability rate will likely remain Firms within the education sector have also taken space in high, compared to other London markets, as the area continues the market. Three notable deals so far in 2019 were by the to be a development hot-spot with 1.3 million sq ft currently Open Society, which leased 29,000 sq ft at Herbal House; the under construction. However, 33% of this space has already University of Chicago Booth School of Business, which leased been leased and, with more pre-letting activity expected, a 43,000 sq ft at 1 Bartholomew Close; and UCL Mechanical significant rise in the availability rate is unlikely. Engineering, which leased 12,000 sq ft at 44 Wicklow Street.

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 1,400 1,000 80

800 900 75 1,200 700 800 70 1,000 700 65 600 600 60 500 800 500 55 400 600 400 50 300 400 300 45 200 200 40 200 100 100 35 0 0 0 30 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2020 2009 Q1 2017 Q1 2017 Q1 2019 Q1 2019 Q1 2018 Q1 2018 Q3 2017 Q3 2017 Q2 2017 Q2 2017 Q4 2017 Q4 2017 Q3 2016 Q3 2016 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2016 Q4 2016 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 Old Street

Shoreditch High Street

Brick Lane Market SHOREDITCH Whitechapel Old Spitalfields Market

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

£72.50 45% 12 month take-up by grade Prime Rent Media & Tech take-up 7% 24% Grade A Grade B 6.7% 681,000 sq ft Grade C Availability Rate Under Construction

69% 23.5% 147,000 sq ft Tenant Space Under Offer

Occupier sentiment continues to be positive in Shoreditch despite The atmosphere around Shoreditch High Street continues to a lower level of leasing activity so far in 2019. 260,000 sq ft has be a draw. For example, serviced office provider Fora recently been taken in the first half of the year, with both quarters below acquired a second Shoreditch location; taking 33,000 sq ft the five-year average. The second half of the year looks more at Arnold, 21-33 Great Eastern Street in one of the market’s encouraging however, with 147,000 sq ft currently under offer. largest deals so far this year. The area to the south of Shoreditch, around Aldgate and Whitechapel, is also becoming Larger floorplates are in limited supply and thus, Shoreditch has increasingly popular to occupiers, driven by the near arrival of become the natural home for SMEs and start-ups in London the Whitechapel Crossrail station in 2020 and the significant and has been a particular beneficiary of the clustering effect. investment into development in this area. This was reflected in 2019 with the media and technology sector accounting for 45% of deals. Notably Usborne Publishing The overall availability rate has risen recently and could Limited took 25,000 sq ft at 1 Frying Pan Alley. increase further with a number of schemes currently under construction. A few smaller schemes have also started construction on a speculative basis recently, which is indicative of developer confidence in the Shoreditch market.

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 350 700 500 80 450 300 600 70 400 60 250 500 350 300 50 200 400 250 40 150 300 200 30 100 200 150 20 100 50 100 50 10 0 0 0 0 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2020 2009 Q1 2017 Q1 2017 Q1 2019 Q1 2019 Q1 2018 Q1 2018 Q3 2017 Q3 2017 Q2 2017 Q2 2017 Q4 2017 Q4 2017 Q3 2016 Q3 2016 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2016 Q4 2016 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 Farringdon

Liverpool Street

CITY

Cannon Street

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

£68.50 34% 2% 12 month take-up by grade Prime Rent Finance & Banking take-up Grade A Grade B 48% Grade C 4.6% 4,037,000 sq ft 50% Availability Rate Under Construction

20.0% 1,121,000 sq ft Tenant Space Under Offer

The high levels of leasing activity we’ve seen in recent years Elsewhere Smith & Williamson agreed to take 87,000 sq ft at in the City has continued in 2019 despite the political and Gresham St Paul’s, 40 Gresham Street, a new development economic uncertainty surrounding Brexit. The leasing volume due to complete Q3 2020 and only a few minutes’ walk from totalled 2.2 million sq ft in the first half of the year, with both its current home at 25 Moorgate, in 2022. In addition, Quilter quarters exceeding the five year average. This looks set to signed for 94,000 sq ft at Senator House, EC4. continue in the second half of the year with a further 1.1 million sq ft currently under offer. WeWork continue to be a substantial occupier in the City. In H1 2019, they have acquired 46,000 sq ft at 133 Houndsditch, The City continues to attract occupiers from the finance and 50,000 sq ft at 2 Minster Court, 30,000 sq ft in 12 Moorgate and banking sector, which have accounted for 34% of deals so far 30,000 sq ft in Dixon House, 1 Lloyd’s Avenue. this year. Brewin Dolphin & Co signed the largest deal, taking 114,000 sq ft at 25 Cannon Street. The lease will be for 15 years As a result of this strong occupier demand, the availability rate and is expected to commence in August 2021 with relocation to has fallen from 5.3% in December to 4.6% in June. This could the new premises happening in July 2022. increase over the next few years with 4 million sq ft of new space currently under construction. However, 30% of this space has already been leased, and with pre-letting activity expected to continue, the impact of these developments once completed is unlikely to cause a significant increase in 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 1,600 6,000 4,000 75

1,400 3,500 70 5,000 65 1,200 3,000 4,000 60 1,000 2,500 55 800 3,000 2,000 50 600 1,500 2,000 45 400 1,000 40 1,000 200 500 35

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

LONDON MARKETS 23 Embankment Tate Modern Oxo Tower

London Bridge Waterloo

SOUTHBANK

Elephant and Castle

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

£67.50 25% 3% 12 month take-up by grade Prime Rent Serviced Offices take-up Grade A Grade B 3.5% 416,000 sq ft 44% Grade C Availability Rate Under Construction 53%

13.4% 325,000 sq ft Tenant Space Under Offer

Leasing activity across Southbank has been slightly subdued in Elsewhere in the market, retailer The Body Shop signed for the 2019, with 410,000 sq ft taken, and both quarters below the five 24,000 sq ft at 155 Tooley Street, where the company will move year average. However, the second half of the year looks set to its head office in Q3 2019. The move marks the company’s return perform better with a further 325,000 sq ft currently under offer. to the submarket, and London Bridge specifically, where it was located before moving to Croydon in 2016. Serviced office providers continue to hold a strong presence in the market and have been the main driver of occupier demand The availability rate in Southbank increased slightly to 3.5% over in 2019, accounting for 25% of all deals in the first half of the the last 6 months. Whilst this is still relatively low compared to year. Notably Sustainable Workspaces took 33,000 sq ft at other London markets, its unlikely to rise much further in the 25 Lavington Street. next two years with 72% of development space currently under construction already leased. WeWork, which currently occupies over 550,000 sq ft across Southbank, opened its largest London location at Two Southbank Place earlier this year, and in June announced that HSBC had signed on for 1,135 desks, likely more than 100,000 sq ft. The deal indicates the shifting type of occupier for serviced offices away from just small businesses, to larger companies.

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 9,000 1,000 75

8,000 900 70 500 7,000 800 65 700 400 6,000 60 600 5,000 55 300 500 4,000 50 400 200 3,000 45 300 2,000 200 40 100 1,000 100 35 0 0 0 30 2011 2017 2013 2012 2021 2019 2015 2016 2018 2014 2010 2020 2009 Q1 2017 Q1 2017 Q1 2019 Q1 2019 Q1 2018 Q1 2018 Q3 2017 Q3 2017 Q2 2017 Q2 2017 Q4 2017 Q4 2017 Q3 2016 Q3 2016 Q2 2019 Q2 2019 Q3 2018 Q3 2018 Q2 2018 Q2 2018 Q4 2016 Q4 2016 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 East India

Blackwall Poplar

CANARY WHARF Canary Wharf

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

£50.00 70% 3% 12 month take-up by grade Prime Rent Finance & Banking take-up Grade A 42% Grade B 9.9% 356,000 sq ft Grade C Availability Rate Under Construction 58%

31.2% 633,000 sq ft Tenant Space Under Offer

Occupier activity increased dramatically in the second quarter WeWork agreed to take over the European Medicines Agency’s of the year with the volume of take-up reaching 413,000 sq ft. 266,000 sq ft lease at 25 Churchill Place in July 2019, ahead of This level of activity looks set to continue in the second half of the EU agency’s departure to Amsterdam. the year, with 633,000 sq ft currently under offer. Following the success of Five Bank Street, which is 91% occupied Firms are moving to Canary Wharf from other parts of London prior to completion later this year, The Canary Wharf Group have or expanding into new space. Notably in Q2 2019 the European begun developing 20 Water Street, a 240,000 sq ft speculative Bank for Reconstruction & Development (EBRD) signed a office building, which will complete in Q3 2020. Together with 365,000 sq ft pre-let at Five Bank Street, moving from One neighbouring 15 Water Street, a 178,000 sq ft building fully let Exchange Square in the City. Société Générale will also move to Ennismore, TOG & NoCo and due to complete Q2 2021, it staff from the City when it occupies 280,000 sq ft at the same forms part of the mixed-use Wood Wharf scheme, with offices building later this year, after having pre-let the space in 2014. largely aimed at the media and technology sector. Elsewhere, Blackstone is set to complete its refurbishment of Cargo, Serviced office providers have also begun to target Canary 25 North Colonnade (340,000 sq ft in Q4 2020) next year. Wharf having previously been drawn to more central locations, and in Q1 Spaces leased 71,000 sq ft at 25 Cabot Square. Also

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 2,500 1,600 55

1,400 500 2,000 50 1,200 400 1,500 1,000 45 300 800 1,000 600 40 200 400 500 35 100 200

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

Subject to the not insignificant challenges of political uncertainty and Brexit, rental growth can for many locations reasonably be forecast for the next few years given the restricted development pipeline. However this expected growth is, we consider, unlikely to see any material pick-up in the increases being experienced at rent review in most locations.

The current position for rent reviews is shown in the table. Rents vary quite widely even within the individual locations we Notwithstanding the identified growth, the evidence continues are reporting on and any particular rent review can therefore to show a cooling in the uplifts being experienced compared differ from this general analysis. A good example of this is with previous editions. That cooling reflects the sharply rising the market for ‘trophy floors’, usually being the top floor in a rents being experienced five years ago, and it is that historic building with outside space. The rents being achieved for such rental growth that will mitigate the impact of such increases floors have generally grown faster over the last five years than as can be reasonably forecast for the next two to three years. the rents for more typical floors, so as a result uplifts at rent Rental growth over the last five years must also be seen in the review are higher for such space than those being experienced context of increasing rent free periods over the same timeframe, for non-trophy floors. which show no real sign of contracting. The treatment of these rent frees at rent review continues to have a significant impact on rent review settlements.

Many leases now contain break clauses and such leases often include an additional period of rent free if the break clause June 2014 headline rent June 2019 headline rent June 2019 Rent free months Implied net effective rent Predicted uplift first review Predicted uplift second review is not exercised by the tenant. The treatment of these break clauses, with their associated rent frees or penalties, and indeed Paddington £57.50 £80.00 21 £68.00 18% 33% whether or not the break clause is deemed to be included in the Marylebone £82.50 £87.50 24 £72.20 0% 0% hypothetical lease, is an issue we see being routinely debated. Mayfair & £107.50 £115.00 21 £97.80 0% 2% The drafting of rent review clauses does not yet appear to have St James's developed to allow for this trend, and is an issue that parties Knightsbridge £90.00 £85.00 24 £70.10 0% 0% entering into a new lease would be wise to consider. Victoria £70.00 £75.00 24 £61.90 0% 4% Soho £85.00 £90.00 21 £76.50 0% 4% The impact of rent free periods means that larger increases Fitzrovia £67.00 £85.00 24 £70.10 5% 17% are generally found on bigger buildings, and/or prime Covent Garden £70.00 £80.00 21 £68.00 0% 9% buildings experiencing their second rent review. The valuation Midtown £57.50 £72.50 24 £59.80 4% 22% assumptions in both these cases work to minimise the impact King's Cross of the market rent free periods and the effect of this can, for & Euston £62.50 £80.00 18 £70.00 12% 26% second rent reviews, be seen in the right hand column in the Farringdon table. These are, in percentage terms, well ahead of those & Clerkenwell £44.00 £72.50 21 £61.60 40% 57% predicted for the first rent review in a lease. Shoreditch £45.00 £72.50 24 £59.80 33% 58% City £60.00 £68.50 24 £56.50 0% 12% Southbank £52.50 £67.50 18 £59.10 13% 31% Canary Wharf £40.00 £50.00 24 £41.30 3% 39% 30% 60% 30% 60% 60% 20% 50% 60% London Average £66.07 £78.73 22 £66.18 9% 21% 20% 50% 50% 10% 40% 50% 10% 40% 40% 0% 30% 40% 0% 30%King’s Cross 30% King’s Cross & Euston 20% 30% & Euston 20% 20% 40% 30% 10% 20% 40% 10% 30%20% 10% 30% 20% 20% 0% 10% 30% 0% 20%10% Farringdon 0% 20% Farringdon 0%& Clerkenwell 10% 10% 10% Shoreditch 20% & Clerkenwell 40% 10% 10%0% Shoreditch 10% 40% 0% 0% Fitzrovia 0% 10% 0% 20% 30% 0% FitzroviaMarylebone Midtown20% 30% Marylebone0% Midtown 0% Paddington 10% 10% 20% 10% 10% 10% 20% Paddington 40% 10% 0% 0% 10% 40% 0% Soho 0% 0% City 10% 30% Soho 10%0% City 0% 30% Covent Contact 10% Covent Garden 0% Canary 0% 20% Canary Garden 20% Wharf Tony Guthrie 0% Mayfair & Wharf Mayfair & St James’s 10% St James’s 10% Mobile +44 (0)7717 225600 10% 0% 0% 10% Southbank 80%[email protected] 0% 10% Southbank 80% 10% 0% Knightsbridge 70% Knightsbridge 0% 70% 0% Victoria 60% Victoria 60% Predicted uplift first review 50% 50% Predicted uplift second review 40% 40% 30% 30% 20% 20% 26 LONDON MARKETS 10% Predicted uplift 10% Predicted uplift Uplift if effect of rent free periods disregarded 0% Uplift if effect of rent free periods disregarded 0% City Soho City Victori a Soho Fitzrovia Midtown Victori a Shoreditch Southbank Fitzrovia Midtown Paddington Marylebone Shoreditch Southbank Canary Wharf Knightsbridg e Paddington Marylebone Covent Garden Canary Wharf Knightsbridg e Covent Garden Mayfair / St James’s King's Cross & Euston Mayfair / St James’s Farringdon & Clerkenwel l King's Cross & Euston Farringdon & Clerkenwel l GERALD EVE IN THE MARKET

27 Knightsbridge, SW1 30 St Mary Axe, EC3 On behalf of Motcomb Estates Gerald Eve have leased 20,000 sq ft Acting on behalf of Swiss Re we have let Level 12 of 30 St Mary Axe to Maybourne Hotels. The luxury hotels group, owner of Claridge's, to RFIB. The Connaught and The Berkeley, will occupy the newly refurbished 6th, 4th and lower ground floors on a 10 year lease.

One Angel Lane, EC4 Euston House, NW1 Acting on behalf of Nomura we have let the 7th and part 8th floors On behalf of Stenprop we sold Euston House, NW1 to a joint of One Angel Lane to Mastercard. venture between French-listed Eurazeo and London-based Arax Properties for £95 million.

1 Berners Street, W1 82 Dean Street, W1 On behalf of Inspired Gaming, Gerald Eve have sublet 7,000 sq ft On behalf of Byron Burger, Gerald Eve have recently advised on over the 5th & 2nd floors of 1 Berners Street, W1 to marketing firm acquiring the 3rd floor (c.4,000 sq ft) at 82 Dean Street, W1 at a rent WeAreRoast. of £75.00 per sq ft.

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.

08/19 geraldeve.com