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Central London Real Estate Market Outlook
Presentation to Investment CommitteeCity of London
Peter DamesickEMEA Chief Economist, CBRE
9 May 2012
CB Richard Ellis | Page 2
Agenda
� Economic background and prospects
� Retail property market trends in Central London
� City office demand, supply and rental outlook
� Transport and market evolution
CB Richard Ellis | Page 3
Economies moving at different speeds
GDP, % change yoy
-10%
-5%
0%
5%
10%
15%
00 Q
1
01 Q
1
02 Q
1
03 Q
1
04 Q
1
05 Q
1
06 Q
1
07 Q
1
08 Q
1
09 Q
1
10 Q
1
11 Q
1
Western Europe Asia-Pacific
United States China
CB Richard Ellis | Page 4
Changing economic sentiment
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Jan-11
Feb-11
Mar-11
Apr-11
Ma-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
Euro zone
US
UK
How forecasts for GDP growth in 2012 have changed
Source: Consensus Economics
GDP Growth (%pa)
CB Richard Ellis | Page 5
UK Recession Comparison
Source: CBRE, Macrobond
Cumulative % fall in output from peak
-8
-7
-6
-5
-4
-3
-2
-1
00 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Cumulative % fall in GDP
1979 - 1983 1990 - 1993 2008 - Present Great Depression (1929-1933)
Quarters
CB Richard Ellis | Page 6
London to outperform UK
UK vs. London, real GDP growth
Source: Oxford Economics
-6
-4
-2
0
2
4
6
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
UK London
Forecast
% pa
CB Richard Ellis | Page 7
London pulling away from New York again
640
660
680
700
720
740
760
780
800
820
Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12
London New York Hong Kong
Source: Global Financial Centres Index 11, March 2012, Z/Yen
Rating score
Global Financial Centres index scores
CB Richard Ellis | Page 8
FORECAST
400,000
500,000
600,000
700,000
800,000
900,000
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Central London: Finance and Business Services Employment
Source: CBRE and Oxford Economics
Employment
CB Richard Ellis | Page 9
All Property and Central London Sectors: Capital Growth
50
60
70
80
90
100
110Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
All Property Cen London Offices Cen London Shops
Index, July 2007 = 100
Source: IPD Monthly Index
+39%
+17%
+35%
CB Richard Ellis | Page 10
UK Retail: Prime Rent Index
Prime Central London shops outpace rest of UK retail
Source: CB Richard Ellis Rent and Yield Monitor
90
100
110
120
130
140
150
160
170
180
Q1 2
00
0
Q1 2
00
1
Q1 2
00
2
Q1 2
00
3
Q1 2
00
4
Q1 2
00
5
Q1 2
00
6
Q1 2
00
7
Q1 2
00
8
Q1 2
00
9
Q1 2
01
0
Q1 2
01
1
Q1 2
01
2
Ind
ex (
10
0 =
Q1
20
00
)
All Shops Central London All Shopping Centres
All Shops, Central London Shops, Shopping Centres
CB Richard Ellis | Page 11
UK Retail: Average Prime Yields
Prime London shops return to 2007 yield levels
Source: CBRE Rent and Yield Monitor
4
5
6
7
8
Q4
200
0
Q4
200
1
Q4
200
2
Q4
200
3
Q4
200
4
Q4
200
5
Q4
200
6
Q4
200
7
Q4
200
8
Q4
200
9
Q4
201
0
Q4
201
1
%All Shops All Shopping Centres Central London Shops
CB Richard Ellis | Page 12
£50.00
Central London Office Markets
£92.50
£55.00
£42.50
£38.50
Prime Rents, Q1 2012
CB Richard Ellis | Page 13
City office demand weaker in 2011
Quarterly office take-up
Million sq ft Million sq ftMillion sq ft
West EndCity
Source: CBRE
0.0
0.5
1.0
1.5
2.0
2.5
Q1 2
00
2
Q3 2
00
2
Q1 2
00
3
Q3 2
00
3
Q1 2
00
4
Q3 2
00
4
Q1 2
00
5
Q3 2
00
5
Q1 2
00
6
Q3 2
00
6
Q1 2
00
7
Q3 2
00
7
Q1 2
00
8
Q3 2
00
8
Q1 2
00
9
Q3 2
00
9
Q1 2
01
0
Q3 2
01
0
Q1 2
01
1
Q3 2
01
1
Q1 2
01
2
Secondhand New Completed Pre-let
10-year average:1.1m sq ft
0.0
0.5
1.0
1.5
2.0
2.5
Q1 2
002
Q3 2
002
Q1 2
003
Q3 2
003
Q1 2
004
Q3 2
004
Q1 2
005
Q3 2
005
Q1 2
006
Q3 2
006
Q1 2
007
Q3 2
007
Q1 2
008
Q3 2
008
Q1 2
009
Q3 2
009
Q1 2
010
Q3 2
010
Q1 2
011
Q3 2
011
Q1 2
012
Secondhand New Completed Pre-let
10-year average: 1.1m sq ft
CB Richard Ellis | Page 14
0.0
5.0
10.0
15.0
20.0
25.0
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Mar-2012
City West End
Availability on the rise
Office availability, end year rates
Office availability as % stock
Source: CBRE
CB Richard Ellis | Page 15
City Office Developments
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
mill
ion s
q f
t
Completed Projected Long term average
1985 - 2016
Source: CBRE
Long term average:1.9 m sq ft pa
CB Richard Ellis | Page 16
FORECAST
20
30
40
50
60
70
80
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
£ p
er
sq f
t
City Prime Office Rents: 1986 – 2016
Source: CBRE
CB Richard Ellis | Page 17
Central London Office Investment Transactions
£6.1b
n
£5.8bn £9.5b
n
£13.4b
n
£15.8b
n
£17.6b
n
£7.6b
n
£7.0b
n
£9.8bnAnnual
Volume:£8.4bn
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2002 Q
1
2002 Q
3
2003 Q
1
2003 Q
3
2004 Q
1
2004 Q
3
2005 Q
1
2005 Q
3
2006 Q
1
2006 Q
3
2007 Q
1
2007 Q
3
2008 Q
1
2008 Q
3
2009 Q
1
2009 Q
3
2010 Q
1
2010 Q
3
2011 Q
1
2011 Q
3
2012 Q
1
£ b
illion
Overseas Purchasers
Domestic Purchasers
Source: CBRE
£3.7bn
CB Richard Ellis | Page 18
North America
€ 11.5 bn
Asia
€ 3.0 bn
Australia
€ 0.5 bn
Middle East
€ 3.0 bn
London got 31% of global investment into Europe in 2011
Source: CBRE, Property Data, KTI
Cross-Regional CRE Investment in Europe, 2011
London €5.8 bn
Paris €1.1 bn
St Petersburg €1.0bn
Moscow €0.8 bn
Munich €0.5 bn
CB Richard Ellis | Page 19
Which city in Europe is most attractive for investment?
0 5 10 15 20 25 30 35 40
Frankfurt
Madrid
Stockholm
Hamburg
Dublin
Berlin
Munich,
Paris
Warsaw
London
% Respondents
(n = 290)
Source: CBRE European Investor Intentions Survey, February 2012
Real Estate Investor Intentions 2012
CB Richard Ellis | Page 20
Central London Prime Office Yields (%)
3
3.5
4
4.5
5
5.5
6
6.5
7
Q1
20
02
Q3
20
02
Q1
20
03
Q3
20
03
Q1
20
04
Q3
20
04
Q1
20
05
Q3
20
05
Q1
20
06
Q3
20
06
Q1
20
07
Q3
20
07
Q1
20
08
Q3
20
08
Q1
20
09
Q3
20
09
Q1
20
10
Q3
20
10
Q1
20
11
Q3
20
11
Q1
20
12
%
West End City
West End
10-year
average:
4.76%
City 10-year
average:
5.59%
Source: CBRE
CB Richard Ellis | Page 21
London Bridge:
1.3m sq ft
Victoria: 2.5 - 3m sq ft
King’s Cross: 8m sq ft
Waterloo: 3 - 4m sq ft
The next wave of developmentMixed use development
CB Richard Ellis | Page 22
Crossrail and Thameslink Programme
� Redevelopment of Blackfriars and improvement to Farringdon and London Bridge stations
� Farringdon: new transport interchange
� Connectivity creates development potential
Central London Real Estate Market Outlook
Presentation to Investment CommitteeCity of London
Peter DamesickEMEA Chief Economist, CBRE
9 May 2012
