London Markets

Analysis of the London office market Summer 2018

International Property Consultants 8 Tak e Re 201 e-u Prim nt 2 p n (pe Q w r to s d q i f t M ) 3.4 £110 £70.00 £68.50 MILLION SQ FT W ) t e f s C t q i t) E s ty f n er P q d (p rim r s Prime Rent e Rent (pe

Ava nt Sp de A ilab ena ace ra ilit T G y 12.9 30% 5.2% 23% MILLION SQ FT

Q 2 ty A 2 ili va te 018 Availab ilability Ra

H1 2018 key deals Key schemes under construction

Sumitomo Mitsui Banking Corporation 22 Bishopsgate 161,000 sq ft 1,275,000 sq ft (1,275,000 available space) City AXA Real Estate Investment Managers (UK) Ltd

Google 100 Bishopsgate 122,705 sq ft 907,400 sq ft (159,000 sq ft available space) King’s Cross & Euston Brookfield Europe Holding Ltd

Bryan Cave Leighton Paisner Five Bank Street 120,889 sq ft 715,000 sq ft (435,000 sq ft available space) City Canary Wharf Group Plc

Mimecast 100 Liverpool Street 113,467 sq ft 515,000 sq ft (249,000 sq ft available space) City British Land Company Plc

Publicis Media 128-142 Praed Street 212,000 sq ft 360,000 sq ft (360,000 sq ft available space) White City Sellar Property Group

www.geraldeve.com EXECUTIVE SUMMARY

Quarterly take-up by region Quarterly availability by quality Source: Gerald Eve Source: Gerald Eve

Million sq ft Million sq ft 5.0 14 4.5 12 4.0 3.5 10 3.0 8 2.5 6 2.0

1.5 4 1.0 2 0.5 0 0 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

Canary Wharf East West Southbank Five year average Unrefurbished Refurbished New

Occupiers continue to commit to the capital despite Development completions lead to an increase in availability economic uncertainty Overall availability increased by 5% in the first half of the year, with Occupier sentiment remains positive across central London, with an availability rate of 5.2% recorded at the end of June. 7 million sq ft taken in the first half of the year, an 11% increase on the same period in 2017. Despite the uncertainty in the economy as Whilst the divestment of tenant space continues to be a major part the UK moves closer towards Brexit, high leasing activity is expected of the market, currently accounting for 23% of total availability, it to continue with a record 3.9 million sq ft currently under offer. was the completion of a number of development schemes over the last six months which caused the slight rise. The amount of Once again, the media and technology sector were the main available new space increased by 15% over this period. drivers of occupier demand, and accounted for 26% of all deals. Notably Google took a further 123,000 sq ft in King’s Cross & Although there is a further 2.8 million sq ft of new space set to be Euston, whilst cyber security and data management company, delivered in the second half of the year, 64% of this has already Mimecast, took 114,000 sq ft in the City. Elsewhere Sony been let. Also with the strong occupier demand for new, higher Pictures signed a 77,000 sq ft pre-let at Derwent London’s quality floorplates, most of the remaining space is likely to be let Brunel Building in Paddington. on completion. Therefore the overall availability rate is unlikely to increase further. The high level of leasing activity seen from this sector over recent years is reflective of the changing nature of occupier employment Development pipeline within the capital, with Oxford Economics forecasting positive Source: Gerald Eve employment growth in this sector over the next five years.

Million sq ft Professional service firms have also been active, and in particular the 7 legal sector with the recently merged Bryan Cave Leighton Paisner 6 taking 121,000 sq ft as their new headquarters in the City, and Sidley Austin also committing to the City by taking 101,000 sq ft. 5

4 The growth of serviced offices across the capital continued, and in particular Spaces, which took 247,000 sq ft across four buildings 3 in the first half of the year. The demand for serviced office space continues to be high, and an increasing vacancy rate for smaller 2 offices in London is a growing concern for traditional landlords, 1 which will need to offer more flexibility and more agreeable terms in order to remain attractive to certain occupiers. 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Completed Under Construction Available Under Construction Let

3 LONDON OFFICE RENTS

London Stadium ross & C Eus g’s to in n K Grade A Victoria Park £80.00

£60.00 Geffrye Museum Grade B R e s nt th on & Clerk Fr on gd en ee 18 m Scala in w rr e a ll The British Library F Grade A Sadler’s Wells Regent’s Park £65.00

Fitzrovia £55.00 ylebon Mar e Grade B Grade A R e hs Grade A nt nt £82.50 Free 21 mo £85.00 Tower Hamlets Cemetery Park Old Spitalfields Market £60.00 Brick Lane Market £65.00 Midtown Grade B The Old Truman Brewery R Grade B e s Grade A ddingto n th Barbican Centre Pa n R t F on e hs ree 24 m nt nt Fre mo BBC t Ga e 21 ven rden £70.00 Grade A Co £72.50 Grade A The Wallace £55.00 Lincoln’s Collection Inn Fields Grade B £77.50 R Whitechapel Gallery e s £55.00 Selfridges oho n th S t Fr on Grade B ee 24 m St Paul’s £65.00 Cathedral Bank of England R s en th Grade A 30 St Mary Axe t Fr on Grade B ee 21 m R e s Mansion House n Royal Opera Housth e £90.00 t F on ree 21 m Somerset House ir & St Jam fa es ay ’s £70.00 M Grade A Grade B R s The National Gallery en th t F on National Tower of London Hyde Park £110.00 ree 8 m Theatre 1 Tate Modern £87.50 Southbank Centre Kensington Palace Grade B R s City Hall en th t F on Tower Bridge ree 21 m Green Park London Eye hba Sout nk St James’s Park Canary Wharf Grade A Buckingham Palace Royal Albert Hall Palace of Westminster £65.00 Science Museum Harrods Westminster Abbey

ightsbridg £45.00 London South Bank University Kn e Grade B V&A Grade A R e hs nt nt Fr Imperialo War Museum £90.00 Westminster Cathedral ee 18 m Victoria

£67.50 Grade A Southwark Grade B Park R s en th £75.00 t Fr on ee 21 m £55.00 Grade B R e hs nt nt Free 21 mo R e hs nt nt Free 24 mo

The Oval

Battersea Power Station

www.geraldeve.com London Stadium

Victoria Park

Geffrye Museum

Scala The British Library Sadler’s Wells Regent’s Park redit Sho ch

Grade A £70.00

£50.00 Tower Hamlets Cemetery Park Grade B Old Spitalfields Market Brick Lane Market R s en h t F nt ree 24 mo The Old Truman Brewery

Barbican Centre

BBC City

The Wallace Grade A Lincoln’s Collection Inn Fields Whitechapel Gallery Selfridges £68.50 St Paul’s Cathedral Bank of England £60.0030 St Mary Axe

Mansion House Grade B Royal Opera House R e hs ary Wha Somerset House nt nt an rf Free 24 mo C Grade A

The National Gallery £50.00 National Hyde Park Tower of London Theatre Tate Modern £37.00 Grade B Southbank Centre Kensington Palace R s en th t F on City Hall ree 24 m Tower Bridge Green Park London Eye

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 Ten year term See inside back cover for definitions Battersea Power Station

5 CENTRAL LONDON INVESTMENT

Prime London offices remain in high demand with investment volumes exceeding £6 billion in the first half of the year. Far Eastern investors continue to be the main driver, drawn to London by the offering of strong income returns and long lease profiles.

The majority of the larger deals Outside of the City, investment activity remains subdued, partly fell in the City, where over due to limited stock, with only £1.8 billion transacted in the £3 billion was transacted in first half of the year. In the West End, Aviva Investors sold Q2 alone. Notably British Land 20 Soho Square, W1, for £117m, to a private European investor. and GIC sold their 5 Broadgate The 66,000 sq ft Soho office was redeveloped by Aviva in 2016 development to a subsidiary of and let in its entirety to Palantair Technologies UK for its Hong Kong investor, CK Asset UK headquarters. Holdings, formerly known as Cheung Kong, for £1bn, which UK investors have also been active, and in Midtown, Labtech reflects a net initial yield of 3.95%. Investments acquired 90 High Holborn for £200 million at a yield British Land and its then joint of 4.6%, with the aim of creating a co-working hub at the building. Contact venture partner committed to Likewise, Seaforth Land purchased CAA House, Kingsway, for Lloyd Davies Mobile +44 (0)7767 311254 the development of 5 Broadgate £165 million at a 4% yield. [email protected] in 2012 to house UBS’s global investment banking business. However, beyond the headline deals, trading has been fairly quiet. The building, which was completed in 2015, generated a total The reduction in the number of transactions partly reflects an property return of 18% per annum for British Land, and was a aversion to risk in the light of worsening fundamentals and concern significant catalyst for the further development of Broadgate over the impact of Brexit on both occupier demand and liquidity. now underway. Notably, the average vacancy rate of buildings that have traded over the last 12 months was just 3%, reflecting the current investor Elsewhere, Singaporean listed investor, Ho Bee Land, completed preference for prime, well-let buildings. The value add deals that its £650m acquisition of AXA Investment Managers 600,000 sq ft have been prevalent in recent years are still in demand where there development, Ropemaker Place. Ho Bee, one of Singapore’s most is an opportunity for strong income growth, but are now receiving prolific overseas property investors, went under offer in May for a additional scrutiny with an appropriate discount being applied for risk. net initial yield of around 4.68%. This is reflected in our forecasts below, where amid a lack of capital Blackstone agreed to sell 20 Old Bailey to a Korean investor, growth, income return will once again be the main driver behind Mirae Asset Daewoo for £341m, securing the City of London total returns. Our base case continues to be for a general softening asset at a net initial yield of 4%. of office yields in the latter part of 2018, brought on by reduced economic certainty.

Central London investment volumes Central London forecasts Sources: Property Data, Gerald Eve Sources: MSCI, Gerald Eve

£ billion % 6 8.0 7.0 5 6.0 5.0 4 4.0 3 3.0 2.0 2 1.0 0 1 -1.0 0 -2.0 2017 2018 2019 2020 2021 2022 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

City West End Capital growth Total return Midtown 5 year average Income return

www.geraldeve.com Edgware Road

Paddington PADDINGTON

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

£72.50 62% 3 Prime Rent Media & Technology take-up Underground Stations

5.9% 775,000 sq ft 0 Availability Rate Under Construction Michelin Star Restaurants

37.0% 213,000 sq ft 33 Tenant Space Under Offer Pubs

Paddington has enjoyed a strong half year with leasing volumes The high levels of leasing activity have led to a decrease in overall reaching 159,000 sq ft, a 66% increase on the last six months availability, with the availability rate falling from 10.7% to 5.9% of 2017. The largest deal came when Sony Pictures signed a over the last six months. 77,000 sq ft pre-let at Derwent London’s Brunel Building. Sony will occupy floors 10 to 13, as well as part of floor 9, High vacancy rates in the immediate aftermath of the global on a 15-year lease. The development will complete in Q2 2019 financial crisis restricted development in the market, however and will total 243,000 sq ft. the success of 4 Kingdom Street, which completed in 2017 and is now fully let, has meant that speculative construction activity At Paddington Central, British Land announced that a further is beginning to increase in Paddington. The first scheme to be 15,000 sq ft will be taken by its flexible office brand, Storey. delivered will be the Brunel Building, followed by British Land’s Storey is now operational across its London campuses and 5 Kingdom Street (220,000 sq ft) in 2020, and Sellar Property’s with 88,000 sq ft let or under offer, its occupancy rate is 77%. Paddington Square (360,000 sq ft) in 2021. Specifically at Paddington Central, Storey is fully let to occupiers including international mobile network operator Ice Group, telecommunications infrastructure company BAI Communications UK, and packaging manufacturer KP Group.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 140 450 600 80

400 75 120 500 350 70 100 65 300 400 60 80 250 300 55 60 200 50 150 200 40 45 100 40 20 100 50 35 0 0 0 30 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

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

Source: Gerald Eve

7 Baker Street

Edgware Road MARYLEBONE The Wallace Collection

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

£85.00 34% 5 Prime Rent Finance & Banking take-up Underground Stations

3.3% 95,000 sq ft 4 Availability Rate Under Construction Michelin Star Restaurants

22.6% 148,000 sq ft 55 Tenant Space Under Offer Pubs

Over 200,000 sq ft was leased in the first half of 2018, with the Although Marylebone’s availability rate remains the second lowest majority falling in the first quarter. Over this period there were of our submarkets, the delivery of new office space increased the only two deals above 10,000 sq ft. Namely; serviced office firm availability rate to 3.3%. There is now currently 379,000 sq ft of I2 Offices, taking 21,000 sq ft at 33 Cavendish Sq, and Iridium space available to let in the market, 28% of which is grade A quality. Assets Limited which took 15,000 sq ft at 22-25 Portman Close. Looking ahead, there are a number of buildings in the pipeline in The demand for high quality space has been evidenced by the Marylebone. The next scheme to be delivered will be Almacantar’s speed in which developments have been let, notably Portman 1 Marble Arch Place (100,000 sq ft), which is expected to complete Estate’s 1-9 Seymour Street (55,000 sq ft) which completed in Q1 in the first half of 2020. The next significant new start is likely to be 2018 and is fully committed with 3 floors let and 2 floors under offer. 19–35 Baker Street, which willadd a further 258,000 sq ft of office This high level of leasing activity is set to continue in the second half stock to the market. of the year, with currently 148,000 sq ft under offer, the majority of which is for new or recently refurbished space.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 200 400 450 95

180 400 90 160 350 300 140 85 300 120 250 80 100 200 200 75 80 150 60 70 100 40 100 65 20 50 0 0 0 60 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

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

Source: Gerald Eve www.geraldeve.com Oxford Circus MAYFAIR & Bond Street

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]

£110.00 44% 6 Prime Rent Serviced Offices take-up Underground Stations

4.9% 280,000 sq ft 24 Availability Rate Under Construction Michelin Star Restaurants

14.9% 258,000 sq ft 76 Tenant Space Under Offer Pubs

Following a subdued second half to 2017, leasing activity has picked Despite the increase in letting activity, a number of development up in 2018 with 264,000 sq ft taken in Q1, and 321,000 sq ft in Q2, completions has seen the overall availability rate increase slightly both of which exceeded the five year average. to 4.9%. However this is expected to fall over the coming quarters as demand for high quality space remains strong, There have been a number of larger deals signed, namely serviced evidenced by KKR pre-letting 57,000 sq ft at Great Portman office provider LEO’s decision to take 32,000 sq ft on a 15-year lease Estates’ 18-20 Hanover Square. at Park House. The building is now fully let with LEO occupying the top two floors, seven and eight, creating a new luxury space to meet Additionally the top 3 floors in the tower building within Tishman customer demand for high quality office space in Mayfair. Speyer’s first phase of the newly delivered Smithson Plaza scheme in St James’s have been placed under offer upon delivery, at record Elsewhere, J O Hambro Capital Management took 20,000 sq ft at level rents. Gerald Eve are advising Tishman Speyer. 1 St James’s Market, whilst Barings Real Estate secured a trio of lettings at their recently refurbished 8 Waterloo Place, which is now fully let. The deals include Apollo Tyres, which agreed a 10 year lease for 5,000 sq ft for a rent equivalent to £104.00 per sq ft.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 400 1200 600 130

350 1000 500 120 300 800 400 110 250

200 600 300 100

150 400 200 90 100 200 100 80 50

0 0 0 70 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

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

Source: Gerald Eve

9 Hyde Park Green Park

Victoria KNIGHTSBRIDGE Sloane Square

Contact Sophie Daw Mobile +44 (0)7880 454161 [email protected]

£90.00 36% 2 Prime Rent Professional Services take-up Underground Stations

5.7% 67,000 sq ft 6 Availability Rate Under Construction Michelin Star Restaurants

18.3% 25,000 sq ft 32 Tenant Space Under Offer Pubs

Office take-up remains subdued in 2018 with only 22,000 sq ft over the last 10 years; 127–135 Sloane Street (78,000 sq ft) in taken in the first half of the year. The market has now had three 2016, and 50 Sloane Avenue (22,500 sq ft) completed in 2017, the consecutive quarters below the five year average, largely down lack of high quality space will maintain prime rents at £90 per sq ft, to a lack of available high quality stock. despite the weakening demand.

All the deals signed were for less than 6,000 sq ft; notable However, new high quality space is on the way; Chelsfield Partners lettings include Volpi Capital which agreed to take 3,000 sq ft LLP have begun development of The Knightsbridge Estate, which at 207 Sloane Street, and Catalina Holdings also took 3,000 sq ft will deliver a much needed 67,000 sq ft of new high quality space to at Montpelier House on Brompton Road. the market, within a wider mixed use scheme. In addition, Motcomb Estates, advised by Gerald Eve, will also deliver 45,000 sq ft of Whilst overall availability has increased over the last 12 months, grade A space with the refurbishment of 27 Knightsbridge, which this is largely due to an increase in refurbished and unrefurbished will help ease the supply squeeze for grade A office stock. stock following a few tenant defections, whilst there is no prime grade A office space available. With only two schemes delivered

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 100 250 90 95

90 80 90

80 200 70 85 70 60 80 60 150 50 75 50 40 70 40 100 30 65 30 20 50 20 60 10 10 55 0 0 0 50 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

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

Source: Gerald Eve www.geraldeve.com Green Park

Hyde Park Green Park Hyde Park

Westminster

Palace of Westminster VICTORIA St James’s Park Victoria

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

£75.00 26% 5 Prime Rent Associations take-up Underground Stations

5.4% 169,000 sq ft 2 Availability Rate Under Construction Michelin Star Restaurants

21.3% 84,000 sq ft 76 Tenant Space Under Offer Pubs

Occupier sentiment remains positive in Victoria as leasing volumes The delivery of several large schemes in late 2016 and early reached 540,000 sq ft in the first half of the year, a 10% increase 2017 significantly increased the overall availability in the market, on the previous 6 months. particularly for new high quality space, and as a result, prime rental values declined throughout 2017. However, as the majority The recent completion of a number of schemes and their of the space has now been absorbed, positive rental growth is surrounding infrastructure has transformed the market into one expected once again over the next three years. of London’s most dynamic submarkets, and as a result occupier demand for good quality space is high. This was evidenced by Following the recent completion of London & Oriental’s a flurry of lettings at the recently completed Nova North totalling Buckingham Green scheme delivering 55,000 sq ft, there are 143,000 sq ft, including engineering firm Atkins, which took few new development starts expected in the near term, however 66,000 sq ft. Elsewhere in the market, three floors in the Peak there are a number of refurbishment projects underway, notably have been let, notably Vivo Energy acquired the fifth floor from at 64 Victoria Street. The 186,000 sq ft office building was home Guggenheim Partners, advised by Gerald Eve. to Westminster City Council until the middle of 2017, when the renovation began, and is scheduled to complete in 2019.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 450 800 700 85

400 700 600 80 350 600 500 75 300 500 250 400 70 400 200 300 65 300 150 200 60 200 100 100 55 50 100

0 0 0 50 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

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

Source: Gerald Eve

11 Tottenham Court Road

Oxford Circus Soho Square Gardens SOHO

Golden Square

Piccadilly Circus Leicester Square Contact Sophie Dickens Mobile +44 (0)7763 206550 [email protected]

£90.00 32% 4 Prime Rent Serviced Offices take-up Underground Stations

4.0% 38,000 sq ft 3 Availability Rate Under Construction Michelin Star Restaurants

25.7% 67,000 sq ft 83 Tenant Space Under Offer Pubs

Take-up volumes totalled 183,000 sq ft in the first half of the The construction of Crossrail is enabling regeneration and the year, with Q2 exceeding the five year average for only the second delivery of new mixed-use schemes, especially around Tottenham time in 18 months. Court Road, while improving retail and restaurant options are helping to lure firms to the Broadwick Street area, notably Soho is a long-established entertainment district and home to a OakNorth Bank in 2018, which agreed to take 9,000 sq ft at cluster of traditional and new media companies, and this sector 57 Broadwick Street. continues to be active in the market with software company Zuora taking 10,000 sq ft at 1 Dean Street for £90 per sq ft. A number of development completions towards the end of 2017, and at the beginning of 2018, brought an additional 100,000 sq ft of The serviced office sector were the most active, accounting for new space to the market, leading to an overall increase in availability. 32% of take-up with Fora Space Limited taking 36,000 sq ft at However the high leasing activity has reduced this as we’ve 33 Broadwick Street. moved through 2018.

Looking forward, Global Holdings’ 21 Soho Square will complete in September, delivering 22,500 sq ft of grade A space, whilst Soho Estates’ Ilona Rose House development on the west side of Charing Cross Road, will deliver 138,000 sq ft of office space in Q4 2020.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 160 400 350 95

140 350 300 90

120 300 250 85 100 250 200 80 80 200 150 75 60 150 100 70 40 100

20 50 50 65

0 0 0 60 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

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

Source: Gerald Eve www.geraldeve.com University College London

Russell Square Great Ormond Street Hospital FITZROVIA RIBA Goodge Street British Museum

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

£82.50 50% 5 Prime Rent Corporate take-up Underground Stations

3.8% 332,000 sq ft 5 Availability Rate Under Construction Michelin Star Restaurants

26.1% 71,000 sq ft 59 Tenant Space Under Offer Pubs

Leasing activity has been largely subdued in Fitzrovia as Q2 2018 With a limited pipeline, the lack of new space will continue to recorded the third consecutive quarter of below average take-up. restrict larger deals and the availability rate has fallen to 3.8%. Only 165,000 sq ft has been leased so far in 2018, with a lack of 80 Charlotte Street is the only building currently under construction, good quality space restricting larger deals. and although that won’t complete until 2019, it is already 96% let or under offer. Retail occupier New Look, were expected to vacate However, occupier sentiment remains strong in the market, and the space at 45 Mortimer Street, but cancelled its move to King’s Cross arrival of Crossrail at Tottenham Court Road from the end of 2018, in January, thus reducing availability further. in addition to the retail improvements at the eastern end of Oxford Street, will help to increase occupier demand for new space. This lack of availability, particularly of high quality stock, will keep an upward pressure and lead to positive rental value growth over This demand was exemplified by Great Portland Estates the next three years. announcement that it has fully let all of its 37,400 sq ft development at 55 Wells Street, including the letting to marketing company Williams Lea Tag, which acquired 19,300 sq ft.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 450 500 800 90

400 700 85 350 400 600 80 300 300 500 75 250 400 70 200 200 300 65 150 200 60 100 100 50 100 55

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

Source: Gerald Eve

13 Lincoln’s Inn Fields

COVENT GARDEN Covent Garden Leicester Square

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

£77.50 37% 6 Prime Rent Professional Services take-up Underground Stations

3.8% 303,000 sq ft 1 Availability Rate Under Construction Michelin Star Restaurants

18.4% 90,000 sq ft 79 Tenant Space Under Offer Pubs

Take-up levels have been relatively subdued in Covent Garden, It is also the destination of one of the largest speculative and in Q2, the volume of leasing was below the five year average developments, with the Post Building set to complete later this year. for the third consecutive quarter. Brockton Capital’s scheme will bring 263,000 sq ft of new space to the market, although 126,000 sq ft has already been pre-let by US 220,000 sq ft has been leased in the first half of 2018, although management consulting firm McKinsey & Company. this was largely composed of smaller lettings, with only a handful of deals above 10,000 sq ft. Serviced office provider, Regus, took The near completion of the Post Building, alongside the deliveries 31,000 sq ft across four floors at 60-62 St Martins Lane, paying of Lazari Investments’ 262-267 High Holborn (40,000 sq ft), £47.50 per sq ft. Hogarth Worldwide will pay £69 per sq ft to take and AXA and Morgan Capital Partners’ 182-184 High Holborn 13,000 sq ft at Shaftesbury House, whilst media & technology firm (40,000 sq ft), have increased the overall availability rate for the Twitch took 11,000 sq ft at 1 New Oxford Street. submarket to 3.8%.

Despite the recent drop in letting volumes, Covent Garden has been one of London’s best performing submarkets since the EU referendum, with several significant deals taking place here amid strong demand from firms in the creative sector.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 700 600 500 85

450 80 600 500 400 75 500 400 350 70

400 300 65 300 300 250 60 200 200 55 200 150 50 100 100 100 45

0 0 0 40 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

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

Source: Gerald Eve www.geraldeve.com King’s Cross

Euston

MIDTOWN Farringdon

Museum of London Chancery Lane

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

£70.00 37% 7 Prime Rent Serviced Offices take-up Underground Stations

4.2% 84,000 sq ft 0 Availability Rate Under Construction Michelin Star Restaurants

20.6% 425,000 sq ft 73 Tenant Space Under Offer Pubs

Occupiers continue to be drawn to Midtown with Q2 recording its fifth The second half of the year is likely to be equally strong in terms of consecutive quarter of above average take-up, with 771,000 sq ft lettings, with currently 425,000 sq ft under offer across the market. signed in 2018 alone. The recent high level of leasing activity, where over 1.3 million sq ft of office space has been taken over the last 12 months, has led to Serviced office providers were particularly active and accounted a sharp decrease in the availability rate to 4.2%, down from 5.6% for 37% of take-up, notably WeWork which took 131,500 sq ft in December 2017. This is despite a wave of deliveries hitting the at Aviation House, Kingsway. The media and technology sector market in 2018, with all major deliveries pre-let well in advance were also active in the first half of the year. with media agency, of completion. the7stars, taking 23,000 sq ft at Bush House. Elsewhere Boult Wade Tennant took 17,000 sq ft at 8 Salsbury Square. As the availability rate has fallen, prime rents have increased to £70 per sq ft in 2018, which could force some tenants to consider moving further east, such as AECOM, which moved from Holborn to Aldgate recently.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 600 1400 1200 75

500 1200 1000 70

1000 65 400 800 800 60 300 600 600 55 200 400 400 50

100 200 200 45

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

Source: Gerald Eve

15 KING’S CROSS Mornington Crescent

& EUSTON King’s Cross

Euston

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

£80.00 94% 6 Prime Rent Media & Technology take-up Underground Stations

2.7% 236,000 sq ft 0 Availability Rate Under Construction Michelin Star Restaurants

31.5% 230,000 sq ft 58 Tenant Space Under Offer Pubs

Leasing activity has so far totalled 203,000 sq ft in 2018, with the Demand for space in the area remains high, and is evidenced by majority of deals falling in the first quarter of the year. the fact that all of the major schemes to have delivered since 2014 have been fully let, keeping the availability rate as low as 2.7%. Through recent developments and infrastructure improvements, the The availability rate is likely to remain at a relatively low level over market has been transformed into one of the most desirable areas the next few years, as the only significant buildings that are either in the capital. Whilst King’s Cross & Euston has always attracted currently under construction or expected to start are fully pre-let or a diverse range of tenants, media and technology firms continue under offer. Notably, the largest development in the submarket’s to dominate the market. This again has been evidenced in 2018 history, Google’s 870,000 sq ft Landscraper project, has been with significant deals for Google, which signed a 123,000 sq ft entirely taken by the media and technology firm. assignment from NewLook at Handyside Street, and Facebook’s giant 611,000 sq ft pre-let at King’s Cross Central development As a result to the lack of available space, prime rents are expected in Q3 2018. to continue to grow over the next three years as occupier competition for the best space intensifies. Serviced office firms have also been attracted to the area, in Q1 Be Offices Limited signed a 10,300 sq ft lease at Evergreen House on Euston Road. The office provider has agreed to pay £58 per sq ft on a 10 year lease.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 350 300 400 85

80 300 250 350 75 250 300 200 70

200 250 65 150 150 200 60 100 55 100 150 50 50 50 100 45

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

Source: Gerald Eve www.geraldeve.com FARRINGDON & CLERKENWELL Old Street

Barbican

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

£65.00 43% 5 Prime Rent Media & Technology take-up Underground Stations

6.3% 775,000 sq ft 2 Availability Rate Under Construction Michelin Star Restaurants

13.1% 294,000 sq ft 116 Tenant Space Under Offer Pubs

After a strong 2017, where each quarter exceeded the five year Serviced offices continued to expand in the market with office average, leasing activity in 2018 has been subdued in Farringdon & provider, Spaces taking 50,000 sq ft in the same building. Clerkenwell, with only 500,000 sq ft taken in the first half of the year. A number of development completions in the first half of the year, including Helical Bar’s The Bower, and Great Portland The media and technology sector continues to be the main Estates’ Spectrum, delivered 387,000 sq ft of new office space driver of occupier demand and accounted for 43% of leasing to the market. Although 63% of this space was already let on activity in 2018 so far. Notably digital advertising company The completion, the overall availability and in particular new high Trade Desk, signed for 55,000 sq ft at Ashby Capital and Helical quality space, increased over the last six months, and recorded Bar’s One Bartholomew development. The Trade Desk have an availability rate of 6.3%, up from 4.2% 12 months ago. taken the top three floors, including the tenth-floor terrace at the 12-storey, 215,000 sq ft office, which will complete in the The availability rate is likely to increase further, with currently second half of the year. 775,000 sq ft set to be delivered over the next 18 months, 62% of which is currently still available.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 600 1400 800 70

1200 65 500 60 1000 600 55 400 80 50 300 50 400 45

60 40 200 35 40 200 30 100 20 25 0 0 0 20 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017

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

Source: Gerald Eve

17 Shoreditch High Street SHOREDITCH Brick Lane Market

Whitechapel Old Spitalfields Market

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

£70.00 51% 4 Prime Rent Media & Technology take-up Underground Stations

3.2% 433,000 sq ft 3 Availability Rate Under Construction Michelin Star Restaurants

22% 47,000 sq ft 66 Tenant Space Under Offer Pubs

Occupier activity remained robust with 482,000 sq ft leased during the This fall in availability came despite the delivery of four developments, first half of the year, with a further 47,000 sq ft currently under offer. including M&G’s London Fruit & Wool Exchange (275,000 sq ft), and Rocket Investments’ Atlas Building (82,000 sq ft), both of which The media and tech sector continued to be drawn to the region, and were fully let on completion. accounted for 51% of activity. Notably Made.com took 22,000 sq ft at 5-7 Singer Street, paying £55 per sq ft. The largest deal of the Whilst the market currently has a further 438,000 sq ft under year so far occurred when serviced office provider, Spaces took construction, 46% of this space has also been leased, with the rest 40,000 sq ft at Epworth House. likely to be taken by the time of delivery. As a result, the availability rate is unlikely to increase over the next 18 months and lead to an The volume of leasing activity seen in the first half of the year increase in prime rents. has resulted in a 16% drop in overall availability, most of which is unrefurbished space, leaving the market with an availability British Land have recently received planning consent for the rate of 3.2%, one of the lowest across central London. development at Blossom Street, Spitalfields, which plans to deliver a much-needed 347,000 sq ft to the market by 2021 at the earliest.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 450 600 500 80

400 450 500 70 350 400 350 300 400 60 300 250 300 250 50 200 200 150 200 40 150 100 100 100 30 50 50 0 0 0 20 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

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

Source: Gerald Eve www.geraldeve.com Farringdon

Liverpool Street CITY

Cannon Street

Contact Steve Johns Mobile +44 (0)7833 401249 [email protected]

£68.50 29% 14 Prime Rent Professional Services take-up Underground Stations

5.5% 4,425,000 sq ft 4 Availability Rate Under Construction Michelin Star Restaurants

27% 1,725,000 sq ft 179 Tenant Space Under Offer Pubs

Occupier sentiment continues to be positive in the City, with over The importance of the finance and banking sector to the market 2.2 million sq ft taken during the first half of the year. was highlighted when Sumitomo Mitsui Banking Corporation agreed to lease 161,000 sq ft at British Land’s 100 Liverpool Street Professional service firms have been the most active in 2018, and in redevelopment at Broadgate. This letting is the most recent in a particular the legal sector. As well as Bryan Cave Leighton Paisner, series of commitments from a range of occupiers at Broadgate, which took 121,000 sq ft of office space at Governors House, including cyber security and data management company Mimecast, Sidley Austin signed for 101,000 sq ft at 70 St Mary’s Axe. Bryan which is taking 79,000 sq ft at 1 Finsbury Avenue. Cave Leighton Paisner, agreed to take the space at Governors House to use as their new headquarters, following their merger at Despite a number of development completions over the last the beginning of the year. 18 months, the demand for new high quality space has led to a flurry of pre-letting activity, and as a result the impact on overall Although the City has done well in diversifying its tenant base in availability has been limited. In fact, the availability rate has fallen recent years, Brexit remains a risk with financial services still a big to 5.5%, down from 6.2% at the end of December. driver of demand. The City is home to 50% of all financial services firms occupying 10,000 sq ft or more across central London, while over half of the lettings above 100,000 sq ft in the last 10 years were by firms in this sector.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

Million sq ft Million sq ft Million sq ft £ per sq ft 1.6 6 4.0 75

3.5 1.4 5 70 3.0 1.2 65 4 2.5 0.8 60 3 2.0 0.6 55 1.5 2 0.4 50 1.0 1 0.2 0.5 45

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

Source: Gerald Eve

19 Oxo Tower Embankment Tate Modern

London Bridge Waterloo SOUTHBANK

Elephant and Castle

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

£65.00 62% 7 Prime Rent Professional Services take-up Underground Stations

4.1% 624,000 sq ft 1 Availability Rate Under Construction Michelin Star Restaurants

20.0% 211,000 sq ft 129 Tenant Space Under Offer Pubs

Following a subdued second half to 2017, leasing volumes bounced The overall availability rate increased to 4.1% in Q2 2018, and back in 2018 with 576,000 sq ft taken over the last six months. could increase further with a number of scheme completions are expected over the next 18 months including the redevelopment Professional services were the most active occupiers in acquiring space, of the Shell Centre. and property company CBRE signed the largest deal, pre-letting 79,000 sq ft at HB Reavis’ Cooper & Southwark development. The development of both One and Two Southbank Place, which will total more than 582,000 sq ft, will also complete, although both are Elsewhere in the market, Civica took space at Hermes Investment fully let, the first to Shell International and the latter to WeWork. Management and Canada Pension Plan Investment Board’s (CPPIB) South Bank Central. Civica will take 15,000 sq ft of office Over the long term, the regeneration efforts and transport space on the eighth floor of South Bank Central’s Vivo building on improvements in the market are likely to boost the appeal of areas a 15-year lease. like Elephant and Castle, Battersea, and Vauxhall, which could provide competition.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 600 900 1000 70

800 65 500 700 800 60 400 600 600 55 500 300 50 400 400 45 200 300 40 200 200 100 100 35

0 0 0 30 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

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

Source: Gerald Eve www.geraldeve.com East India

Poplar Blackwall CANARY WHARF Canary Wharf

Contact Steve Johns South Quay Mobile +44 (0)7833 401249 [email protected]

£50.00 53% 1 Prime Rent Serviced Offices take-up Underground Stations

10.7% 1,269,000 sq ft 0 Availability Rate Under Construction Michelin Star Restaurants

36.9% 567,000 sq ft 25 Tenant Space Under Offer Pubs

Office fundamentals in Canary Wharf have weakened recently due The uncertainty surrounding Brexit remains a key threat to the to a combination of subdued leasing activity and rising availability. market, due to the dominance of the finance & banking sector in the market. Some of the banks have signalled their intent Take-up volumes reached 203,000 sq ft in the first half of the year, to relocate jobs and sublease at least some space, while the with both quarters falling well below the five year average. Serviced European Banking Authority and the European Medicines Agency office provider, The Office Group, secured the largest letting of the will move to Paris and Amsterdam respectively. year so far, taking 45,000 sq ft at 15 Water Street on a 20 year lease. However despite the subdued start to the year, leasing volumes Despite the weakening fundamentals, development activity has could pick up in H2 2018, with currently 567,000 sq ft under offer. increased. Five Bank Street (715,000 sq ft) will complete early next year, with 280,000 sq ft pre-let to Société Générale already. Canary A combination of weak demand, and also a release of secondhand Wharf Group’s mixed-use scheme at Wood Wharf, is also under space back to the market, has led to an increase in the overall construction, which will target the media & technology sector, in an availability rate to 10.7%. Tenant space is currently at 37%, as a attempt to diversify occupier employment in the market. number of banks are trying to offload surplus space. The Financial Conduct Authority will vacate 300,000 sq ft at 25 North Colonnade later this year in a move to Stratford.

Demand Supply Development Quarterly take-up and five year average Availability by grade Development pipeline and prime rent

000s sq ft 000s sq ft 000s sq ft £ per sq ft 600 2000 1600 55

1750 1400 500 50 1500 1200 400 1250 1000 45 300 1000 800

750 600 40 200 500 400 35 100 250 200

0 0 0 30 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017

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

Source: Gerald Eve

21 CENTRAL LONDON RENT REVIEWS

In the current environment, rent reviews are becoming much more hard fought. We predict the greatest rental uplift in markets away from the primary London core markets, in locations where occupiers, notably media and technology occupiers, have sought-out good quality space at more affordable rents.

Rent reviews are of course not just about where rental levels

are today but rather how today’s rents compare with those set (usually) five years earlier. Further, the relationship between Summer 2013 headline rent Summer 2018 headline rent Rent free months Implied net rent effective Predicted uplift these rents has to allow for the Paddington £57.50 £72.50 21 £61.60 7% impact of rent free periods. Marylebone £82.50 £85.00 21 £72.30 0% Mayfair & St James’s £105.00 £110.00 21 £93.50 0% The table opposite shows, based on the general tone of Knightsbridge £72.50 £90.00 21 £76.50 6% Contact rents reported in this guide, Tony Guthrie Victoria £70.00 £75.00 21 £63.80 0% average increases in rents that Mobile +44 (0)7717 225 600 Soho £75.00 £90.00 18 £78.80 5% [email protected] can be expected today at rent review for grade A offices. Fitzrovia £67.00 £82.50 24 £68.10 2% Also shown are the average increases that might be expected in Covent Garden £61.50 £77.50 21 £65.90 7% Summer 2019 allowing for rental growth over the coming year and Midtown £55.00 £70.00 24 £57.80 5% adopting the rental levels that existed in Summer 2014 as the base King’s Cross & Euston £55.00 £80.00 18 £70.00 27% line from which projected increases have been calculated. Farringdon & Clerkenwell £42.50 £65.00 21 £55.30 30% As can be seen, the areas where material increases are most Shoreditch £35.00 £70.00 24 £57.80 65% likely to be found are away from the primary cores: around the City £55.00 £68.50 24 £56.50 3% edge of the traditional City core where the ‘tech’ industries have had such a material impact, and the locations outside the West Southbank £47.50 £65.00 18 £56.90 20% End core which have benefited from occupiers seeking good Canary Wharf £37.50 £50.00 24 £41.30 10% quality buildings but at more affordable rents. London Average £61.23 £76.73 21 £65.07 12%

This analysis looks at situations where the transaction five years ago was a letting of a grade A office. Where it was a rent review, these Predicted uplifts at future rent reviews increases are likely to be greater as the passing rent will be a net Source: Property Data, Gerald Eve effective rent (so an ‘average’ allowing for the headline rent and rent % free) but the building will be older which will moderate the increase. 70

60 The trends we are seeing in rent review practices, as the scale of uplifts generally reduces, is of rent reviews becoming more 50 hard fought with an increasing number being referred to 40 arbitration or equivalent. In multi-let buildings landlords are seeing the benefit from being tactical in trying to create evidence 30 to set a precedent; generally pro-active asset management is again becoming more important if rents are to be grown. 20 There are also factors driving rents today which were less 10 prevalent five years ago: floors at the top of a building or with 0 terraces are today often seeing a pronounced difference in rents l s den City from other floors in the building and where these circumstances ovia Soho editch Victoria Fitzr exist this may offer opportunity at rent review. Midtown Shor Southbank Paddington Marylebone oss & Euston Canary Wharf Knightsbridg e Covent Gar s Cr Mayfair & St James’ King’ Farringdon & Clerkenwel Summer 2018 Summer 2019

www.geraldeve.com GERALD EVE IN THE MARKET

Angel Court, City The Peak, 5 Wilton Road, Victoria We have negotiated terms for a new lease on 60,000 sq ft in the We have successfully advised Guggenheim Partners in disposing former JP Morgan tower at 1 Angel Court EC2 which has been of the 5th floor offices of 11,000 sq ft to Vivo Energy. substantially rebuilt by Mitsui Fudosan and Stanhope.

Bath and Cayton, Farringdon & Clerkenwell Smithson Plaza, 25 St James’s Street, St James’s We have successfully completed the sale of Bath & Cayton, EC1 Acting on behalf of Tishman Speyer, we recently launched the 1st phase (7-9 Bath Street & 4-12 Cayton Street) on behalf of City, of the extensively refurbished Smithson Plaza and have promptly placed University of London. the top 3 floors of 11,000 sq ft in the tower building under offer. We will be launching an additional 20,000 sq ft to market during Q4.

DEFINITIONS

Quality Prime headline rents New: Floor in a newly-developed or newly-refurbished building, The rent being paid which does not take account of concessions including sub-let space in new buildings which have not been such as rent free periods. The references to both headline rents and previously occupied. Refurbished: A floor which has been incentives in this report are a reflection of the best office space in comprehensively refurbished and is of good specification, that submarket which is taken on an assumed ten year term. floorplate efficiency and image, but is in a building which is not new or been comprehensively refurbished. Unrefurbished: Tenant space Poorer quality space, usually offered for occupation ‘as is’. Reference to ‘tenant space’ includes office space that is actively marketed and is available either as a sub-let or an assignment of an existing lease. ‘Grey space’ that is not actively marketed is not covered in this report.

23 LONDON OFFICES

Agency & Investment Lease Consultancy

Lloyd Davies Tony Guthrie Partner Partner Tel. +44 (0)20 7333 6242 Tel. +44 (0)20 3486 3456 Mobile +44 (0)7767 311254 Mobile +44 (0)7717 225 600 [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]

Steve Johns Research Partner Tel. +44 (0)20 7653 6858 Alex Dunn Mobile +44 (0)7833 401249 Associate [email protected] Tel. +44(0)203 486 3495 Mobile +44 (0)7917 587230 Rhodri Phillips [email protected] Partner Tel. +44 (0)20 3486 3451 Mobile +44 (0)7768 615296 [email protected]

Patrick Ryan Partner Tel. +44 (0)20 7333 6368 Mobile +44 (0)7792 078397 [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.

08/18 www.geraldeve.com