LONDON MARKETS Analysis of the London office market Summer 2018 International Property Consultants 8 Tak me Re 201 e-u Pri 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 ddington n th Barbican Centre Pa R s t F on en h ree 24 m t 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%.