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Home , 100 Bishopsgate, 22 Bishopsgate, 30 St Mary Axe, Gerald Eve, The Office Group, Wood Wharf

MARKETS

Analysis of the London office market Winter 2018/2019

Internationalwww.geraldeve.com Property Consultants LET

4.5 £110 £70.00 £68.50 million sq ft per sq ft per sq ft per sq ft Q4 18 West End Midtown City Take-up Prime Rent Prime Rent Prime Rent

12.7 31% 5.0% 22% million sq ft Q4 18 Grade A Availability Tenant Availability Availability Rate Space

H2 2018 key deals Key schemes under construction

Facebook 22 592,000 sq ft 1,275,000 sq ft (85% available) King’s Cross & Euston AXA IM Real Assets / Lipton Rogers Developments

WeWork 159,000 sq ft 904,000 sq ft (11% available) Paddington Brookfield Europe Holding Ltd

Jane Street Europe Ltd KGX1 King’s Boulevard 145,000 sq ft 870,000 sq ft (fully let) City Google

McCann Worldgroup HQ, 5 Bank Street 138,000 sq ft 690,000 sq ft (62% available) City Group Plc

BGC Partners 100 Street 130,000 sq ft 435,000 sq ft (63% available) Canary Wharf / GIC

www.geraldeve.com www.geraldeve.com KEY THEMES AND OUTLOOK

Central London 12-month rolling take-up 2018 take-up by business sector Source: Source: Gerald Eve

Million sq ft 6% 18 17% Associations Serviced Offices 16 11% Corporate 14

12 3% Retail 10

8 13% Finance & Banking 6 19% 3% 4 Professional Services Insurance 2

0

28% Media & Tech Q4 2015 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018

Canary Wharf East West Southbank

LET

Occupier sentiment continues to be strong Flight to quality increases second hand availability Despite the uncertainty and political fallout surrounding Brexit, The ability to recruit and retain the best talent has led to occupiers London occupiers have been more acquisitive than at any point targeting higher quality office space. Throughout 2018, 51% of over the last decade. 8.8 million sq ft was leased across London in lettings were for new, grade A space, compared to the five year the second half of the year, a 25% increase on H1. Leasing activity average of 39%. As a result, there is a lack of available grade A was particularly strong in Q4, with 4.5 million sq ft taken, the highest space, prompting an increase in pre-letting activity, but also a 24% quarterly volume recorded since before the global financial crisis. increase in second hand availability.

Media & Technology driving demand Increasing focus on fintech Media & Technology occupiers have once again been the main The finance & banking sector accounted for 13% of lettings in driver of occupier demand, and accounted for 28% of lettings over 2018, with the majority of activity continuing to be located in the the last 12 months. The increasing level of demand from this sector East, with 52% of deals signed in the City. The demand from this reflects the changing nature of occupier employment, which looks sector has overwhelmingly been driven by lease events in the past, set to continue despite the Government’s proposed new Digital however the fintech sector is increasingly becoming an area of Services Tax. focus for financial service firms across London.

Serviced office expansion to continue Transport and infrastructure help drive rents Serviced offices had their most acquisitive year in 2018, and Improved transport and infrastructure has already had an impact on accounted for 17% of central London lettings. Serviced office lettings a number of our London submarkets in recent years, notably rental increased by 19% over the last 12 months, demonstrating the values in Fitzrovia, Paddington and Farringdon & Clerkenwell. We sector’s growing confidence in the market’s fundamentals. Currently expect this to continue with the construction around HS2 at Euston, serviced offices occupy around 4% of London office stock, and but also when the benefits are seen from , further rental we expect this to double over the next decade. WeWork added an growth is anticipated. extra 600,000 sq ft last year, which makes them the second largest occupier of space in London, behind the government.

3 LONDON OFFICE RENTS

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

£65.00 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 F Grade A Sadler’s Wells Regent’s Park £70.00

Fitzrovia £55.00 ylebon Mar e Grade B Grade A R e hs Grade A nt nt £82.50 Free 21 mo £85.00 Hamlets Cemetery Park Old Spitalfields Market £60.00 Brick Lane Market £67.50 Midtown Grade B The Old Truman Brewery R Grade B e s Grade A ddingto n th Pa n R t F on e hs ree 24 m nt nt Fre mo BBC t Ga e 24 ven rden £70.00 Grade A Co £77.50 Grade A The Wallace £55.00 Lincoln’s Collection Inn Fields Grade B £77.50 R Whitechapel Gallery e s £55.00 oho n th S t Fr on Grade B ee 24 m St Paul’s R £65.00 Cathedral e s n th Grade A Grade B 30 t Fr on ee 21 m R e s Mansion House n Royal Opera Housth e £90.00 t F on ree 21 m ir & St Jam fa es ay ’s £70.00 M Grade A Grade B R s The en th t F on National Hyde Park £110.00 ree 1 m Theatre 2 £87.50 Southbank Centre Grade B R s City Hall en th t F on Tower ree 24 m hba Sout nk St James’s Park Canary Wharf Grade A £65.00 Science Museum

ightsbridg £47.50 London South Bank University Kn e Grade B V&A Grade A R e hs nt nt Fr Imperialo War Museum £85.00 ee 18 m Victoria

£67.50 Grade A Southwark Grade B Park R e hs £75.00 nt nt Fre mo e 24 £55.00 Grade B R e hs nt nt Free 24 mo

The Oval

Battersea Power Station

www.geraldeve.com

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 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 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

Southwark Park

The Oval Ten year term See inside back cover for definitions

5 CENTRAL LONDON INVESTMENT

Investor demand for prime office buildings pushed transaction volumes to £13 billion in 2018, the capital’s highest volume in four years. Overseas investors, lured by the fall in sterling, a slight softening in yields, and long-term faith in London, were overwhelmingly responsible for this pattern.

The largest transactions over the last 12 months have taken place With an easing of demand over the next couple of years, London in the City. Notably in the second half of the year, the National office performance will continue to be driven by income return, which Pension Service of Korea (NPS) agreed to buy Plumtree Court, we forecast will be 3.9% a year on average over the next five years. the new London headquarters of US investment bank Goldman Sachs, for £1.16bn, reflecting a net initial yield of 4%. This followed By the end of 2020, capital values will have fallen by 2%, due to a GIC’s and British Land’s sale of 5 to CK Asset Holdings, combination of yield softening, and also a lack of strong positive for £1bn earlier in the year. Prime, long-let assets such as these, rental growth. However this is expected to reverse from 2021 continue to be the focus of investor attention. leading to a greater total return performance.

Overseas investors were also active in the West End with DEKA Despite the reduced investment performance forecasts over the Immobilien’s purchase of 10 Bressenden Place for £460m in next two years, central London offices will remain attractive due to September, reflecting a NIY of 4.6%. the strong performance of the occupier market, as well as attractive looking yields and bond spreads compared to what is on offer in However, beyond the headline deals, trading has been fairly quiet, other European cities. particularly in the final quarter of the year, due to a combination of low stock volumes, worsening fundamentals and concern over the impact of Brexit on both occupier demand and liquidity. The value- add deals that are still in demand, where there is an opportunity for strong income growth, but further yield compression is unlikely.

As a result, 2019 total investment volumes are expected to be Contact slightly lower than the last couple of years. Market uncertainty will Lloyd Davies remain high and transactions will slow as Brexit approaches and Mobile +44 (0)7767 311254 investors hold off on decision making, as we saw in 2016, until the [email protected] political and economic environment becomes clearer.

European office prime net initial Central London annual yield and bond spreads investment volumes Central London forecasts Sources: Property Data, MSCI, Sources: Property Data, Gerald Eve Sources: MSCI, Gerald Eve Gerald Eve

£ billion % % 16 8.0 5.0

14 7.0 4.5 6.0 4.0 12 5.0 3.5 10 4.0 3.0 8 3.0 2.5

6 2.0 2.0 1.0 1.5 4 0 1.0 2 -1.0 0.5 0 -2.0 0 g M yon dam L Paris 2007 2008 2009 2010 2011 2012 2013 2014 2016 2017 2018 2017 2022 2018 2019 2020 2021 Milan Berlin 2015 Dublin celona Madrid Munich London Hambur Bar Dusseldorf Stockholm Frankfurt/ Amster

Q1 Q3 Income return Total return Prime office net initial yield Q2 Q4 Capital growth Spread over 10 year bonds

www.geraldeve.com Edgware Road

Paddington PADDINGTON

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

£77.50 49% 3 Prime Rent Serviced Offices take-up Underground Stations

4.9% 460,500 sq ft 0 Availability Rate Under Construction Michelin Star Restaurants

26.2% 187,206 sq ft 33 Tenant Space Under Offer Pubs

Paddington enjoyed its most successful year in 2018, with take- There were also a couple of lettings at the recently refurbished, up volumes reaching 540,000 sq ft, the highest annual volume The Point, highlighting the demand for grade A office space in the of activity for the submarket on record. The majority of leasing submarket. The Press Association took 17,000 sq ft across the third activity occurred in the second half of the year, with both quarters and part of the ninth floor, whilst A2 Dominion let 12,000 sq ft on the exceeding the five year average. remaining part of the ninth.

Serviced offices were the most active in H2 2018, and accounted Development activity is increasing in Paddington, with three for 49% of all deals, which was largely driven by WeWork’s sublet of schemes currently under construction. The first to deliver will be 159,000 sq ft across seven floors at 5 Merchant Square from M&S. the Brunel Building, followed by 5 Kingdom Street in 2021, and Paddington Square. Paddington Square is the largest development Another notable deal was the Premier League signing a 39,000 sq ft with 355,000 sq ft of office space likely to be delivered in 2022. pre-let at Derwent’s Brunel Building. This was in addition to Hellman and Friedman which took 20,500 sq ft across the top two floors The high level of leasing activity over the last 12 months has led meaning the property is now 64% pre-let. The 243,000 sq ft office to a significant decrease in the availability rate, which has led to scheme occupies a prime location, and is set to complete in H1 2019. a rise in prime rents to £77.50 per sq ft. Whilst Paddington has always benefitted from excellent transport links to Heathrow and the Thames Valley, the near arrival of Crossrail will increase the submarket’s connectivity further, and could encourage more firms to relocate here. As a result, we expect to see more positive rental growth over the next few years.

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

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

Source: Gerald Eve

7

Edgware Road MARYLEBONE The

Cavendish Square Portman Square

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

£85.00 42% 5 Prime Rent Professional Services take-up Underground Stations

2.8% 103,000 sq ft 4 Availability Rate Under Construction Michelin Star Restaurants

24.8% 21,183 sq ft 54 Tenant Space Under Offer Pubs

Whilst Marylebone is characterised by 18th century buildings and With a lack of good quality available space, new schemes are in Cavendish and Portman Squares, recent development activity has high demand, highlighted by the development of 1–9 Seymour helped boost demand. As a result, 475,000 sq ft was let during Street (55,000 sq ft), which completed in April 2018 and became 2018, the submarkets highest annual leasing volume since 2012. fully let within a few months.

Professional service firms were the most active business sector in In the pipeline, there are two buildings under construction; the H2 2018, and accounted for 42% of all deals. This included CBRE’s largest is Almacantar’s 1 Place (100,000 sq ft), which decision to sign a 43,000 sq ft pre-let expansion at Henrietta is expected to deliver in the first half of 2020; whilst Regent House, House. This is expected to complete in 2020. George Street (56,000 sq ft) is also set to complete next year. The competition for this new space, will help keep rents elevated Availability continues to be low and on a net basis, Marylebone over the next 12 months. has actually lost space over the past five years, with the amount of space demolished or converted to other uses outweighing the amount of space added through construction. As a result, the overall availability rate remains one of the lowest across central London at 2.8%.

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 300 400 450 95

350 400 250 90 350 300 85 200 300 250 250 80 150 200 200 75 150 100 150 70 100 100 50 65 50 50

0 0 0 60 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 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 &

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 38% 6 Prime Rent Finance & Banking take-up Underground Stations

6.1% 231,000 sq ft 24 Availability Rate Under Construction Michelin Star Restaurants

8.3% 152,153 sq ft 82 Tenant Space Under Offer Pubs

Leasing activity remained strong throughout 2018, with over Elsewhere, investment managers Lansdowne Partners signed an 1.1 million sq ft taken, and with each quarter exceeding the five year 18,000 sq ft pre-let at 25 Berkeley Square, which is currently being average. This was the largest annual volume of space leased since refurbished by Lazari, and Cerberus Capital Management took 2007 and demonstrates that high occupier demand for Mayfair & 21,000 sq ft across the first four floors at 5 Saville Row. St James’s remains. This level of leasing activity looks set to continue in 2019 with over 150,000 sq ft of space currently under offer. Due to tight planning restrictions, new office developments rarely add significant amounts of new space in the submarket. The finance and banking sector was the most active in the second However the construction of 18–20 Hanover Square, which started half of the year, and accounted for 38% of the deals. Notably Houlihan on site as part of the Crossrail project, will deliver 163,000 sq ft Lokey took 44,000 sq ft at 1 Curzon Street. Having grown their of new high quality space next year, 65% of which is currently business through a number of acquisitions, the Los Angeles-based available. The completion of this scheme, along with other projects firm signed a lease on the third and fourth floors and expects to move such as 65 Davies Street (65,000 sq ft) will add some much needed in during the first quarter of 2019. grade A office space to the locality and could lead to an increase in prime rents as occupiers compete.

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 1600 600 130

350 1400 500 120 300 1200 400 110 250 1000

200 800 300 100

150 600 200 90 100 400 100 80 50 200

0 0 0 70 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 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

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

£85.00 52% 2 Prime Rent Professional Services take-up Underground Stations

4.5% 67,000 sq ft 6 Availability Rate Under Construction Michelin Star Restaurants

32.2% 8,771 sq ft 32 Tenant Space Under Offer Pubs

Leasing activity remained subdued throughout 2018 with take-up However, new high quality space is on the way; Chelsfield Partners volumes totalling only 64,000 sq ft, a 45% decrease on 2017. The LLP have begun development of The Knightsbridge Estate, which professional service sector was the most active in the second half will deliver a much needed 67,000 sq ft of new high quality space to of the year, and accounted for 52% of all lettings. Notably real the market, within a wider mixed use scheme. In addition, Motcomb estate investment firm, Round Hill Capital took 11,400 sq ft at Estates, advised by Gerald Eve, will also deliver 30,000 sq ft of 1 Knightsbridge on an assignment. grade A space with the refurbishment of 27 Knightsbridge, which will help ease the supply squeeze for grade A office stock. Elsewhere, Exor Investments took 4,000 sq ft at 28 Headfort Place, whilst CapitalRise Finance Ltd and YX Capital Partners took Despite the lack of recent leasing activity, Knightsbridge’s low space at 18 Coulson Street and 21 Knightsbridge respectively. availability and its prestigious location means properties here can still command high rents. Availability remains low in the market and with only two schemes delivered over the last 10 years; 127–135 (78,000 sq ft) in 2016, and 50 Sloane Avenue (22,500 sq ft) completed in 2017, there is limited grade A space 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 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 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 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 64% 5 Prime Rent Serviced Offices take-up Underground Stations

7.0% 169,000 sq ft 2 Availability Rate Under Construction Michelin Star Restaurants

25.1% 116,689 sq ft 76 Tenant Space Under Offer Pubs

Following a slow down during the summer months, leasing activity Despite the recent drop in demand, prime rental growth is expected picked up at the end of the year, with 262,000 sq ft taken in Q4. to continue over the next few years as near-term fundamentals will be supported by a lack of further new construction. However, despite this increase in demand, a sharp rise in tenant space has resulted in an availability rate of 7%, the second highest Following the recent completion of London & Oriental’s Buckingham across central London. However this should begin to recede as more Green scheme (55,000 sq ft), and Quadrum’s 21 Dartmouth firms relocate to Victoria, with currently 117,000 sq ft under offer. Street in Q1 2019 (53,000 sq ft), there are few new development starts expected in the near term. However there are a number of Firms from a variety of industries, across central London, are refurbishment projects coming through, notably 64 Victoria Street, moving to Victoria, attracted by the new developments that have which will deliver 100,000 sq ft in Q1 2019. been delivered, and improved infrastructure. In particular, the market is attracting demand from serviced office firms looking to bring start-ups into the area, and in H2 2018, serviced offices were the most active sector accounting for 64% of deals, with Regus IWG’s 80,500 sq ft at 25 Wilton Road, the most significant.

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 1000 700 85

400 900 600 80 350 800 700 500 75 300 600 250 400 70 500 200 300 65 400 150 300 200 60 100 200 100 55 50 100 0 0 0 50 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018

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

Source: Gerald Eve

11

Oxford Circus Soho Square Gardens SOHO

Golden Square

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

£90.00 33% 4 Prime Rent Media & Technology take-up Underground Stations

4.6% 163,250 sq ft 3 Availability Rate Under Construction Michelin Star Restaurants

31.3% 88,629 sq ft 91 Tenant Space Under Offer Pubs

Occupier sentiment in Soho continues to be positive with leasing recently lost some occupiers to other parts of London, notably; activity exceeding the five year average in both the final two Framestore, COS and Turner Broadcasting have left the submarket quarters of 2018. Across the year, 371,000 sq ft was leased, for Midtown and the City, respectively, while Sony Pictures agreed a which represents a 25% increase on 2017. deal to move to Paddington in April 2018. As a result the availability rate for the market has increased slightly. Occupier demand has held up better in Soho than in other parts of central London since the referendum, supported by the market’s Currently there is only one notable scheme under construction, enduring popularity with firms from the media and technology ’ Ilona Rose House, which will deliver 163,000 sq ft in sector. In H2 2018, this sector accounted for 33% of total take-up, 2020. However following recent development successes such as including Mubi UK leasing 9,000 sq ft at 7 Newburgh Street; and 30 Broadwick Street, and 1 Dean Street, it is expected that most, Total Media taking 8,000 sq ft at 7-12 Noel Street. Elsewhere, if not all of this scheme will be let before completion. The next WeWork continued to take space, adding 21,300 sq ft at 21 Soho significant scheme in the pipeline is ’s Soho Place, Square in Q4. which will bring 209,000 sq ft of new space to the market in 2022.

Continued infrastructure improvements and more upmarket retail With strong demand for this new, high quality space, we expect and leisure options, particularly along the eastern end of Oxford to see a gradual increase in prime headline rents over the next few Street, where Crossrail will arrive, have also helped keep the market years, keeping Soho as one of the most expensive office locations attractive to occupiers. However despite this, the market has in London.

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 160 400 350 100

140 350 300 95

120 300 90 250 100 250 85 200 80 200 80 150 60 150 75 100 40 100 70

20 50 50 65

0 0 0 60 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 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

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

£82.50 25% 5 Prime Rent Serviced Offices take-up Underground Stations

3.1% 412,000 sq ft 5 Availability Rate Under Construction Michelin Star Restaurants

20.4% 57,601 sq ft 57 Tenant Space Under Offer Pubs

Despite a slow start to 2018, amplified by the lack of availability, Whilst the overall availability rate has fallen to 3.1% in Fitzrovia, leasing activity picked up in the final two quarters of the year where the increased presence of serviced office firms has led to a rise 267,000 sq ft was leased, a 61% increase on the first half of the year. in availability for smaller units, as firms looking for less space are migrating towards serviced offices instead of traditional leases. During this period, serviced office firms were the most active and However the local amenities plus the benefits of Crossrail at accounted for 25% of all deals. Notably Knotel took 23,000 sq ft Tottenham Court Road, mean that demand for new, larger lot sizes at 101 New Cavendish Street. The New York serviced office remains strong. This is demonstrated by 80 Charlotte Street, one provider, has taken the fourth floor of the building, on a new 10-year of the largest developments in the West End, which is now fully let lease. In addition, WELPUT announced that the British Olympic despite being 12 months from completion. Association (BOA) and the British Paralympic Association (BPA) have taken 11,000 sq ft on a 10-year lease, taking the building to With only Great Portman Estates’ One Newman Street (80,000 sq ft) in full occupancy. the pipeline, and the refurbishment of 30 Cleveland Street (39,000 sq ft), as well as retailer New Look’s decision to cancel its move to King’s Cross, thus retaining its head office at 45 Mortimer Street, overall availability is expected to fall further over the next 12 months leading to a rise in the prime headline rent to £85 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 250 500 800 90

450 700 85 200 400 600 80 350 500 75 150 300 250 400 70

100 200 300 65 150 200 60 50 100 50 100 55 0 0 0 50 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018

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

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

£77.50 40% 6 Prime Rent Professional Services take-up Underground Stations

4.2% 509,000 sq ft 1 Availability Rate Under Construction Michelin Star Restaurants

16.7% 135,323 sq ft 86 Tenant Space Under Offer Pubs

Since the EU referendum in June 2016, Covent Garden has been However, whilst larger, newer buildings have recorded strong demand one of London’s best performing submarkets with several significant recently, the availability of smaller buildings has been rising since lettings taking place amid strong demand from firms in the media mid-2016. One possible cause could be the increasing presence of and technology sector. However, during 2018 leasing activity eased serviced office firms in the submarket, which has lured smaller firms off, with only 479,000 sq ft leased across the year, 47% less than in that might previously have signed traditional leases elsewhere (a trend 2017. which is replicated across much of London). The likes of WeWork and Regus have both taken sizeable spaces in Covent Garden Professional service firms were the most active during the second recently, WeWork leased 131,500 sq ft at 125–133 Kingsway and half of the year representing 40% of lettings. This included law firm Regus took 31,000 SF at 60–62 St Martin’s Lane in 2018. Harbottle & Lewis, taking 30,000 sq ft at 7 Savoy Court.

The largest deal over this period was signed by Rothsay Life. The insurance firm signed a 49,000 sq ft pre-let at The Post Building, a move would triple its London footprint as they currently occupy 14,000 sq ft at the Leadenhall Building. The Post Building, which is one of Covent Garden’s largest speculative developments, completes in Q1 2019, and is now 70% let, highlighting the market’s draw for new high quality space. Elsewhere, Google took an extra 20,000 sq ft at Central St Giles in Q4.

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 350 800 500 85 450 300 700 80 400 600 250 350 75 500 300 200 70 400 250 150 65 300 200 100 150 60 200 100 50 55 100 50 0 0 0 50 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 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 Russel Square Farringdon Holborn

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

£70.00 25% 7 Prime Rent Serviced Offices take-up Underground Stations

3.7% 102,000 sq ft 0 Availability Rate Under Construction Michelin Star Restaurants

13.3% 261,648 sq ft 76 Tenant Space Under Offer Pubs

Leasing activity continued to be strong in Midtown throughout Whilst Midtown has traditionally been associated with the legal 2018, with each quarter exceeding the five year average and over profession, in recent years a more diverse range of occupiers has 1.6 million sq ft of space taken. This is a 54% increase on 2017. been attracted to the submarket. Over the last six months a number of serviced offices have signed deals, including The largest deal in the second half of the year was signed by (40,000 sq ft), and Office Space In Town (38,000 sq ft) at Summit Digital, which is returning to Athene Place in 2020, having House and 22 Tudor Street respectively. Elsewhere Gartner signed terms for 100,000 sq ft. Athene Place was acquired (53,000 sq ft), and The Health Foundation (26,000 sq ft), took by Henderson Park and Endurance Land and Deloitte, which space at 8 Salisbury Square. previously occupied the entire building, will relocate its digital side of the business to the building. The combination of strong demand and a slowdown in new deliveries has resulted in a fall in the availability rate to 3.7% from 5.6% 12 months ago. There is currently 102,000 sq ft under construction across three schemes, namely AXA’s One Smart Place, Mayfair Capital’s 16-20 Red Lion Street, and Lenta’s Thanet House, 231 Strand.

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

0 0 0 40 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018

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 96% 6 Prime Rent Media & Technology take-up Underground Stations

2.3% 383,000 sq ft 0 Availability Rate Under Construction Michelin Star Restaurants

44.7% 30,109 sq ft 60 Tenant Space Under Offer Pubs

Leasing volumes fell just short of 1 million sq ft across 2018, which is Whilst there is high demand for new, grade A space, the market King’s Cross & Euston’s best year since 2014 in terms of take-up. This has seen an increase of tenant space released back to the market, was largely a result of Facebook’s 592,000 sq ft pre-let across three which has increased the availability rate slightly. buildings around Canal Reach. This was London’s second-largest office letting in the past decade and further builds on the market’s However, despite a number of upcoming refurbishments; including reputation as a destination for creatively-led businesses along with Wellcome Trust’s 210 Euston Road (61,000 sq ft); and Lazari’s Google, Universal Music, and media multinational Havas. Facebook Stephenson House (147,000 sq ft); the availability rate is likely to are expected to occupy its new space on completion in 2021. remain at relatively low levels over the next few years, as the majority of schemes currently under construction or expected to start The high demand for new, high quality space in this market has imminently are either fully pre-let or under offer. As a result, we expect led to a flurry of pre-letting activity, and all new deliveries have to see further prime rental growth over the next few years. performed extremely well. Such robust demand has meant that the overall availability rate remains the lowest across all of the central London markets despite the volume of new deliveries in the region.

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 800 300 400 85

700 350 80 250 75 600 300 200 70 500 250 65 400 150 200 60 300 150 100 55 200 100 50 50 100 50 45

0 0 0 40 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 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 & CLERKENWELL Old Street

Barbican

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

£70.00 45% 5 Prime Rent Media & Technology take-up Underground Stations

3.1% 547,292 sq ft 2 Availability Rate Under Construction Michelin Star Restaurants

12.6% 182,085 sq ft 116 Tenant Space Under Offer Pubs

Farringdon & Clerkenwell enjoyed a strong second half of the year Following the LinkedIn deal, The Ray was fully let on completion, with take-up volumes reaching 1.3 million sq ft. The submarket’s highlighting the high demand for new space in the market. This is growing appeal to creative firms, combined with the upcoming arrival also the case for 17 Charterhouse Street (160,000 sq ft), which will of Crossrail at Farringdon station, and a host of recent refurbishments, be delivered in 2020 but already fully pre-let by Anglo American. is a real draw to occupiers in search of larger lot sizes. The high level of leasing activity, as well as the demolition of a The media and technology sector was the main driver of leasing couple of large, empty buildings, namely 150 Holborn and 17 activity and accounted for 45% of all deals. Notably Ticketmaster Charterhouse Street, has reduced the overall availability rate to took 63,000 sq ft at 34-36 St John Street, Live Nation took 3.1%. This is likely to remain low in the near term, with Crossrail’s 59,000 sq ft at the Farmiloe Building, 34 St John Street, The Trade imminent arrival likely to lure more firms to this increasingly popular Desk took 54,000 sq ft at 1 Bartholomew Close, and social media part of London. company LinkedIn took 50,000 sq ft at The Ray, 119 Farringdon Road.

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 900 1400 1000 80

800 900 1200 70 700 800 1000 700 600 60 600 500 800 500 50 400 600 400 300 40 400 300 200 200 200 30 100 100 0 0 0 20 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018

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 52% 4 Prime Rent Media & Technology take-up Underground Stations

3.6% 433,000 sq ft 3 Availability Rate Under Construction Michelin Star Restaurants

30.2% 40,617 sq ft 57 Tenant Space Under Offer Pubs

Shoreditch ended the year positively with leasing activity reaching The robust levels of demand have led to a fall in availability across 251,000 sq ft, exceeding the five year average. This raised the annual the year, from 5.7% to 3.6% in December 2018. During this period take-up volume to over 880,000 sq ft, a 10% increase on 2017. there was 445,000 sq ft of development completions, however 80% of this space was let on completion so the amount of new space Media and technology occupiers were the most active in the released to the market was limited. second half of the year and accounted for 52% of all deals. Notably there were two deals at 100 Leman Street; firstly Exponential-E Currently there is 438,000 sq of new space under construction which Ltd took 65,000 sq ft across six floors; and Forward 3D Ltd took will be delivered over the next two years. Notably ’ 25,000 sq ft. Elsewhere in the market, serviced offices continued Cityside House will complete later this year, will add 75,000 sq ft of to increase their presence with Fora taking 37,000 sq ft at 35-41 new space to the market. In 2020, Cain International’s The Hewett Folgate Street. (70,000 sq ft), and The Bard (137,000 sq ft), will be delivered although these are now fully let.

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 350 600 500 80 450 300 500 70 400 250 350 400 60 300 200 300 250 50 150 200 200 40 100 150 100 50 100 30 50 0 0 0 20 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 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 25% 14 Prime Rent Finance & Banking take-up Underground Stations

5.3% 4,100,000 sq ft 4 Availability Rate Under Construction Michelin Star Restaurants

22.5% 844,069 sq ft 179 Tenant Space Under Offer Pubs

The City has performed well over the last 12 months with leasing A combination of robust rental growth, and high pre-letting activity, activity totalling 4.7 million sq ft, a 24% increase on 2017. Net has led to increased developer confidence and a high volume of absorption has been stronger here than in most London submarkets, construction starts since 2015. Indeed, 2019 is set to be a big with high pre-letting activity preventing a spike in the overall availability year for deliveries, with over 1.4 million sq ft of office space set to rate despite significant development activity. Notably Hiscox, Beazley complete over the next 12 months, more than any other submarket. and AXA agreed the first pre-lets at , the City’s largest scheme under construction, and in Q4 McCann Worldgroup Overall there is currently 4.1 million sq ft under construction across announced plans to relocate 11 of its agencies to a single site by 13 schemes, with 31 % of the space already leased. In 2019, the taking 138,000 sq ft at 135 Bishopsgate. largest scheme to complete will be 100 Bishopsgate (914,000 sq ft), although due to an increasing demand for high quality office Encouragingly, firms are also moving here from other submarkets, space, only 11% of this space remains available. Other notable boosting net absorption. schemes which will deliver this year include 135 Bishopsgate (62% available), 51 (100% available), and Premier Place (100% available). 22 Bishopsgate (1.275 million sq ft) will deliver in 2020, with 85% of space currently available.

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

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

0 0 0 40 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018

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

Source: Gerald Eve

19 Embankment Tate Modern

London Bridge Waterloo SOUTHBANK

Elephant and Castle

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

£65.00 33% 7 Prime Rent Serviced Offices take-up Underground Stations

3.0% 341,800 sq ft 1 Availability Rate Under Construction Michelin Star Restaurants

14.1% 110,395 sq ft 129 Tenant Space Under Offer Pubs

Southbank leasing activity reached 1.1 million sq ft in 2018 with The majority of development activity under construction is surrounding Q4 exceeding the five year average. Serviced offices continued to the redevelopment of the . Vertical construction completed increase their presence in the region and accounted for 33% of on the 273,000 sq ft One Southbank Place in August 2018, and take-up over the last six months. Notably WeWork agreed to lease the 290,000 sq ft Two Southbank should complete at the beginning eight floors at Kennedy Wilson’s Friars Bridge Court, totalling just over of 2020. One Southbank Place will hold the headquarters for Shell 85,000 sq ft. Elsewhere media and technology company, Cloudflare International’s downstream business once fit out is complete later took 34,000 sq ft on the 6th floor on Road. this year. Two Southbank has been leased in its entirety to WeWork in a 20-year deal. The two buildings are part of Braeburn Estates’ The recent rise in lettings has led to an overall decrease in the 1.5-million sq ft redevelopment of 5.5 acres adjacent to London availability rate, which has fallen to 3% from 4.1% over the last Waterloo station. 6 months. With limited available space in the development pipeline, a substantial rise in availability is not likely in the near term, and therefore prime rents should remain flat.

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

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

800 900 65 500 700 800 60 700 400 600 600 55 500 300 500 50 400 400 45 200 300 300 40 200 200 100 100 100 35 0 0 0 30 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 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 49% 1 Prime Rent Professional Services take-up Underground Stations

13.1% 1,209,140 sq ft 0 Availability Rate Under Construction Michelin Star Restaurants

32.5% 196,687 sq ft 33 Tenant Space Under Offer Pubs

Canary Wharf’s office market has weakened over the past Canary Wharf will however be supported to an extent, due to having; couple of years, following a strong 2014–16, when firms such as a broader tenant base than in the past; lower rents than other central Deutsche Bank, KPMG, EY and the Government Property Unit London submarkets; and by Crossrail’s arrival boosting connectivity (GPU) moved staff here from other parts of London. While there and making the area more attractive to occupiers. have been some successes in 2018, such as The Office Group taking a combined 126,000 sq ft at 1 and 15 Construction activity has picked up in Docklands recently, with the Water Street, , and BGC Partners taking 130,000 sq ft completion of the 690,000 sq ft HQ, 5 Bank Street development at 5 Churchill Place, overall leasing activity has slowed and net scheduled to complete in 2019. The is also absorption has turned negative. pressing ahead with the preparations for the second phase of its huge mixed-use scheme at Wood Wharf in 2019, which is set to Space has also been released to the market at 15 include more than 300,000 sq ft offices that are largely aimed at the and . The delivery of new schemes such as One media & technology sector. Bank Street, could also lead availability to rise further over the next couple of years.

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

000s sq ft 000s sq ft Million sq ft £ per sq ft 600 2500 1600 55

1400 500 2000 50 1200 400 1500 1000 45 300 800 1000 600 40 200 400 500 35 100 200

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

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

There is little if any rental growth currently being seen across central London and five years ago, when passing rents were set, rents were rising sharply. It is therefore perhaps no surprise to see that our statistical analysis identifies that in many areas rent reviews are unlikely to see material uplifts. However, this isn’t the experience we are seeing in the market: why?

1. The effect of rent free periods The right hand column in the map looks at the uplifts that would occur if there were no rent free periods being granted. As can be seen, the uplifts become material in every area of central London. On buildings let on leases of longer than 10 years, the effect on a rent review of rent free periods is much reduced on the second rent December 2013 headline rent December 2018 headline rent December 2018 months Rent free Implied net rent effective uplift Predicted ofUplift if effect periods free rent disregarded Mayfair review. So older buildings (let on longer leases) may well see larger £105.00 £110.00 24 £90.80 0% 5% & St James's increases at rent review than newer properties. Soho £85.00 £90.00 21 £76.50 0% 6% 2. The effect of fitting-out periods. Victoria £70.00 £75.00 24 £61.90 0% 7% When a rent free period is analysed, in most cases the time required Covent Garden £65.00 £77.50 21 £65.90 1% 19% to fit out the property is deducted from the rent free period. That fit Paddington £57.50 £77.50 21 £65.90 15% 35% out period is longer for larger properties than it is for smaller ones. Knightsbridge £80.00 £85.00 24 £70.10 0% 6% Generally total rent free periods for large buildings don’t increase King's Cross (if at all) in line with the additional time to fit out. So larger buildings £60.00 £80.00 18 £70.00 17% 33% & Euston can see greater increases at rent review than smaller ones. Fitzrovia £67.00 £82.50 24 £68.10 2% 23% In conclusion, it’s counter intuitive, but the properties where the Marylebone £82.50 £85.00 24 £70.10 0% 3% largest uplifts are likely to be seen are larger demises facing their Midtown £55.00 £70.00 24 £57.80 5% 27% second or later rent review in the lease. City £57.50 £68.50 24 £56.50 0% 19% Farringdon Legal update £42.50 £70.00 21 £59.50 40% 65% & Clerkenwell An ever increasing number of rent reviews go to a third party settlement. Because it’s commonplace, the formality of this process Shoreditch £40.00 £70.00 24 £57.80 45% 75% is easily overlooked. Perhaps it is timely therefore to be reminded that Canary Wharf £37.50 £50.00 24 £41.30 10% 33% once agreed, a statement of agreed facts is binding and generally Southbank £47.50 £65.00 18 £56.90 20% 37% can’t be undone (see Great Dunmow Estates v ). London Average £63.47 £77.07 22 £64.61 10% 26%

70%

60% 30% 60% 50% Contact 20% 50% Tony Guthrie 40% 10% 40% Mobile +44 (0)7717 225600 30% 0% 30% [email protected] Kings Cross 20% & Euston 20% 20% 10% 30% 20% 10% 10% 0% 20% 0% Shoreditch 10% 10% 0% Farringdon 10% 0% 0% Midtown & Clerkenwell 80% Fitzrovia Marylebone 30% 0% 10% 70% 10% 10% Paddington 20% 0% 60% 0% 0% 30% City 10% 10% Soho Covent 50% Garden 20% 0% 0% 40% Canary Mayfair & 10% Wharf St James’ 30% 10% 0% Southbank 20% 0% 10% Predicted uplift Knightsbridge 10% Uplift if effect of rent free periods disregarded 0% 0% Victoria Predicted uplift City

Uplift if effect of rent free periods disregarded Soho Victori a Fitzrovia Midtown Shoreditch Southbank Paddington Marylebone Canary Wharf Knightsbridg e Covent Garden Mayfair / St James’s King's Cross & Euston Farringdon & Clerkenwel l www.geraldeve.com GERALD EVE IN THE MARKET

London Stadium We have been involved in some45 of the highest profile sales and lettings agreed in London over Victoria Park the last 12 months, both for the landlord and the tenant.

Geffrye Museum

Scala The British Library

Sadler’s Wells Regent’s Park 1 37 20 3 38 10 6 41 22 Tower Hamlets Cemetery Park 47 Old Spitalfields Market Brick Lane Market

19 31 The Old Truman Brewery 9 Barbican Centre 29 13 BBC 8 30 14 7 17 33 The Wallace Lincoln’s 28 42 Collection 32 4 Inn Fields 36 Whitechapel Gallery Selfridges 26 27 43 46 St Paul’s Cathedral 11Bank of England 2 16 23 Mansion House 39Royal Opera House 21 Somerset House 49 48

The National Gallery National Hyde Park Tower of London Theatre Tate Modern 18 Southbank Centre 35 Kensington Palace 12 City Hall Tower Bridge Green Park 44 London Eye St James’s Park 5 Canary Wharf

Buckingham Palace Royal Albert Hall Palace of Westminster 34

Science Museum Harrods Westminster Abbey

London South Bank University

V&A

We15stminster40 Cathedral Imperial War Museum

Southwark Park 24 Landlord / vendor Tenant / purchaser 1 Euston House 12 105 Piccadilly (x4 deals) 26 4 Moorgate 39 17 Slingsby Place 2 30 St Mary Axe 13 55 Baker Street 27 Angel Court, 1 Angel Court 40 The Peak, 5 Wilton Road 3 Bath & Cayton, 7-9 Bath Street & 14 51 Welbeck Street 28 5 Aldermanbury Square 41 174 -180 Old Street

4-12 Cayton Street 15 The Peak, 5 Wilton Road 29The Oval 10 Crown Place 42 10 Eastbourne Terrace 4 14 Devonshire Square 16 20 North Audley Street (x2 deals) 30 155 Bishopsgate 43 15 Stratford Place Battersea Power Station (x2 deals) 17 110 High Holborn (x2 deals) 31 54 Hatton Garden 44 Talbert House, 52 Borough High Street 5 150 Waterloo Road 18 Smithson Tower, 25 St James's Street 32 Bureau, 90 Fetter Lane 45 122-128 Arlington Road, NW1 6 219 St John Street (x2 deals) 33 Floor East, Chancery House, 46 158-159 Drury Lane 7 34-36 Bedford Square 19 100 Gray's Inn Road 53-64 Chancery Lane 47 16-20 Boston Place 8 37 Bedford Square 21 314-320 Gray's Inn Road (sale) 34 31-33 Tanner Street 48 15 Abchurch Lane 9 Whittington House, 29 Alfred Place 22 77 Grosvenor Street 35 Palace House, 3 Cathedral Street 49 The Building, 25 Walbrook 10 Lynton House, 7-12 Tavistock Square 23 350 Euston Road 36 1 Aldermanbury Square (x2 deals) 24 64 North Row 37 Podium Building, 1 Eversholt St 11 107 25 55,56 & 57 Eccleston Square 38 222 Euston Rd

Euston House Stenprop, advised by Gerald Eve, has sold Euston House, NW1 to a joint venture between French-listed Eurazeo and London-based Arax Properties for £95 million. The price reflects a net initial yield of 4.64%. Situated opposite Euston station, the 113,000 sq ft multi let office building is home to occupiers including Siemens, Learning Tree and i2 Offices. building was originally the home of London, Midland and Scottish Railways. Lloyd Davies, partner at Gerald Eve who oversaw the sale, said:

Launched in September 2018, Gerald Eve coordinated interest from 86 parties. The campaign sale concludes Stenprop’s transition out of their London offices to focus on multi-let industrial. Euston continues to be an area of focus for the Gerald Eve team and one we believe will continue to outperform the market in the coming years.

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.

01/19 www.geraldeve.com