HOT SPOTS

EXPANDING LONDON… WHERE ARE THE NEXT HOTSPOTS?

LONDON’S ECONOMY CONTINUES TO EXCEL

RELATIVE TO THE REST OF THE UK AND

OTHER GLOBAL CITIES

LONDON HOT SPOTS | JLL | JANUARY 2015 02

EXPANDING LONDON

LIMITED SUPPLY OF OFFICE

ACCOMMODATIONOCCUPIER TRENDS

ECONOMIC GROWTH

LONDON HOT SPOTS | JLL | JANUARY 2015 03

ECONOMIC AND DEMOGRAPHIC

DRIVERS

LONDON HOT SPOTS | JLL | JANUARY 2015 04

RETURNING TO GROWTH

AVERAGE GDP GROWTH – 5 YEARS FROM 2009-13 AND FORECAST 2014-18

AVERAGE GROWTH 2009 – 2013

AVERAGE GROWTH 2014 – 2018

3.5%

3.0%

2.5%

2.0%

1.5%

0.5%

-0.5%

0.0%

1.0%

UNITED KINGDOM GREATER LONDON EUROPEAN UNION WORLD

Source: Oxford Economics

LONDON HOT SPOTS | JLL | JANUARY 2015 05

20047,432,700

20148,524,500

20249,536,800

LONDON’S POPULATION IS EXPANDING BY 1OO,OOO PEOPLE PER YEAR

Source: Oxford Economics

6% 13%GREATER LONDON

UK EXCL. LONDON

UK INCL. LONDON = 7%

LONDON TOTAL POPULATION GROWTH 2014 – 2024

LONDON HOT SPOTS | JLL | JANUARY 2015 06

HOUSING

AND OFFICE SPACE

HOSPITALS

EXPANSION IS INCREASING PRESSURE TO KEEP PACE WITH RISING DEMAND

INFRASTRUCTURE

SCHOOLS

TRANSPORT

THE EXPANSION WILL DRIVE RISING DEMAND FOR:

LONDON HOT SPOTS | JLL | JANUARY 2015 07

TOTAL OFFICE EMPLOYMENT

250,900 PEOPLE TOTAL GROWTH 11%

Source: Oxford Economics

OFFICE EMPLOYMENT IN LONDON TO GROW BY 250,9OO PEOPLE IN FIVE YEARS

REAL ESTATE ACTIVITIESTOTAL CHANGE 21,200 PEOPLE

TOTAL GROWTH 19%

FINANCIAL AND INSURANCETOTAL CHANGE 700 PEOPLE

TOTAL GROWTH 0%

PUBLIC ADMINISTRATIONAND DEFENCE

TOTAL CHANGE -24,800 PEOPLETOTAL GROWTH –12%

PROFESSIONAL, SCIENTIFICAND TECHNICAL

TOTAL CHANGE 125,500 PEOPLETOTAL GROWTH 19%

CHANGE IN OFFICE EMPLOYMENT BY SECTOR 2015–18

INFORMATION AND COMMUNICATIONTOTAL CHANGE 41,600 PEOPLE

TOTAL GROWTH 12%

ADMINISTRATIVE AND SUPPORTTOTAL CHANGE 86,700 PEOPLE

TOTAL GROWTH 17%

LONDON HOT SPOTS | JLL | JANUARY 2015 08

GROWTH IN EMPLOYMENT MEANS MORE OFFICE STOCK WILL BE NEEDED

22MILLION SQ FTOVER 5 YEARS

ADDITIONAL

=1:8 DENSITY

RATIO

1:10 DENSITY RATIO X 25O,OOO STAFF = 27M SQ FT

25O,OOO STAFF (11% INCREASE IN EMPLOYMENT)

LONDON HOT SPOTS | JLL | JANUARY 2015 09

* Note this does not account for a change in density for existing employees, changing working practices or loss of stock to residential.

ADDITIONAL STOCK REQUIRED

22.0M SQ FT OVER NEXT FIVE YEARS

THIS IS EQUIVALENT TO APPROX:

33.0M SQ FT OVER NEXT TEN YEARS

THIS IS EQUIVALENT TO APPROX: VICTORIA SOUTHBANK KING’S CROSS

1xVICTORIA

2xSOUTHBANK

5xKING’S CROSS

LONDON HOT SPOTS | JLL | JANUARY 2015 10

BY 2024 THE POPULATION

OF LONDON IS EXPECTED TO

REACH 9.5MLONDON HOT SPOTS | JLL | SEPTEMBER 2014 11

SOUTH BUCKSDISTRICT

GREENWICHBEXLEY

SLOUGH

WINDSOR &MAIDENHEAD

HAVERING

ISLINGTON

CITY OFLONDON

CAMDEN

CITY OFWESTMINSTER

LEWISHAM

WANDSWORTH

CROYDON BROMLEY

KENSINGTON& CHELSEA

EALING

BRENT

HARROW

BARNET

ENFIELD

WALTHAMFOREST

REDBRIDGE

HOUNSLOW

RICHMOND

KINGSTON

MERTON

SUTTON

HILLINGDON

HAMMERSMITH& FULHAM

TOWERHAMLETS

SOUTHWARK

LAMBETH

HARINGEY

HACKNEY

BARKING &DAGENHAM

NEWHAM

CURRENT POPULATION OF LONDON BOROUGHS

8,000 205,400

205,400 245,900

245,900 271,100

271,100 317,4000

317,4000 373,1000

LOW HIGHPOPULATION

Source: london.gov.uk

LONDON HOT SPOTS | JLL | JANUARY 2015 12

SOUTH BUCKSDISTRICT

SLOUGH

WINDSOR &MAIDENHEAD

HAVERING

BARKING &DAGENHAM

NEWHAMTOWER HAMLETS

ISLINGTON

CITY OFLONDON

CAMDEN

CITY OFWESTMINSTER

LEWISHAM

SOUTHWARK

LAMBETHWANDSWORTH

CROYDON BROMLEY

KENSINGTON& CHELSEA

EALING

BRENT

HARROW

BARNET

ENFIELD

HARINGEY

HACKNEY

WALTHAMFOREST

REDBRIDGE

HOUNSLOW

KINGSTON

MERTON

SUTTON

HILLINGDON

HAMMERSMITH& FULHAM

GREENWICHBEXLEY

RICHMOND

35,000

35,000

29,000

22,000

29,000

24,000

WORKING AGE

POPULATION INCREASE (2014-24)

38.3 41.3

36.2 38.3

35.3 36.2

34.4 35.3

31.1 34.4

LOW HIGHAGE

Source: london.gov.uk

BOROUGHS WITH A LOWER AVERAGE AGE ARE LEADING THE GROWTH

LONDON HOT SPOTS | JLL | JANUARY 2015 13

KEY ECONOMIC

TRENDS

FASTEST GROWTH IN EAST AND

SOUTH LONDON:

TOWER HAMLETS SOUTHWARK

LAMBETH WANDSWORTH

OFFICE STOCK WILL NEED TO RISE TO ACCOMMODATE THIS

OUTLOOK FOR CONTINUED

STRONG RECOVERY

LONDON WILL OUT-PACE

THE REST OF THE COUNTRYECONOMIC AND

POPULATION GROWTH WILL DRIVE A LARGE

INCREASE IN OFFICE EMPLOYMENT

LONDON HOT SPOTS | JLL | JANUARY 2015 14

CENTRAL LONDON MARKET

DYNAMICS

LONDON HOT SPOTS | JLL | SEPTEMBER 2014 15

AS LONDON EVOLVES, THE OFFICE MARKET WILL

CONTINUE TO EXPAND

LONDON HOT SPOTS | JLL | SEPTEMBER 2014 16

14

12

10

8

6

4

2

0

STRONG RECOVERY IN OCCUPIER DEMANDTAKE-UP OF OFFICE SPACE IN CENTRAL LONDON

2013–14 TAKE-UP WELL ABOVE HISTORIC AVERAGE

DEMAND IS BACK TO STRENGTH IN THE CORE MARKET

CITY WEST END DOCKLANDS

MILLIONS SQ FT

20142013

3.4

7.1

11.0 (+54%)

11.3 (+3%)

7.0

3.2

1.1

2012

7.2

2.5

4.2

AVERAGE 9.8 MILLION

2005 2006 2007 2008 2009 2010 2011

LONDON HOT SPOTS | JLL | JANUARY 2015 17

CITY

1M 2M 3M 4M 5M 6MSQ FT

IN MILLIONS

2015

2019

2018

2017

2016

WEST END

1M2M3M4M5M6M

2015

2019

2018

2017

2016

UPCOMING SHORTAGE OF NEW SUPPLY

SPECULATIVE REQUIRES PART PRE-LET

2013-14 TAKE-UP: NEW/PRE-LET

LONDON HOT SPOTS | JLL | JANUARY 2015 18

HISTORY DEMONSTRATES HOW THE CENTRAL LONDON MARKET HAS EVOLVED

FIGURES SHOW GROWTH IN OFFICE STOCK BY DECADE

1980s

1990s

2000s

2010 – 2014

VICTORIA, PADDINGTON, SOUTHBANK

25M

FORECAST 2015 – 2019

ACROSS CENTRAL LONDON

8MACROSS CENTRAL LONDON

17M

ACROSS CENTRAL LONDON

15MKING’S CROSS,

TECH CITY/ SHOREDITCH

9M

LONDON HOT SPOTS | JLL | JANUARY 2015 19

FORECAST GROWTH IN STOCK

WILL NOT MEET LONDON’S NEEDS

ADDITIONAL STOCK REQUIRED

2014 – 2019

22M

8MFORECAST 2015 – 2018

14MSHORTFALL

LONDON HOT SPOTS | JLL | JANUARY 2015 20

OUTLOOK FOR STRONG RENTAL GROWTH AND A TIGHTER SPREAD OF PRIME RENTS

BATTERSEA£35.00£45.00

WATERLOO£52.50£58.00

STRATFORD£33.00

£39.00+

VAUXHALL£42.50£52.50

WEST END CORE

£115.00£130.00

VICTORIA£72.50£87.50

CITY CORE£62.50£75.00

BLOOMSBURY£67.50£82.50

AREACurrent Rent

Forecast 2018 Rent

AREACurrent RentAchievable 2018 Rent

ALDGATE£45.00£53.00

SHOREDITCH£52.50£62.00

KING’S CROSS£67.50£80.00

HAMMERSMITH£50.00£58.50

LONDON HOT SPOTS | JLL | JANUARY 2015 21

HISTORICALLY, NEW DEVELOPMENTS HAVE DRIVEN PRIME RENT UP

NEW SCHEMES REDEFINE THE PRIME RENT IN NON-CORE SUB-MARKETS

10 BROCK STREET

FROM: £55.00 PSF TO: £67.50 PSF

FROM: £68.50 PSF TO: £92.50 PSF

FROM: £65.00 PSF TO: £72.50 PSF

FROM: £47.50 PSF TO: £52.50 PSF

FROM: £40.00 PSF TO: £57.50 PSF

FROM: £32.50 PSF TO: £50.00 PSF

FROM: £36.00 PSF TO: £48.00 PSF

EUSTON/KING’S CROSS

10 PORTMAN SQUARE

NOX

62 BUCKINGHAM GATE

VICTORIA

THE PLACE THE BUCKLEY BUILDING

SOUTHBANK CLERKENWELL

HAMMERSMITH GROVE CHISWICK PARK

HAMMERSMITH CHISWICK

54%11% 44% 33%12%35%23%

LONDON HOT SPOTS | JLL | JANUARY 2015 22

WHERE WILL LONDON EXPAND?

CENTRAL LONDON WILL SEE IN FILL IN RELATIVELY UNDER-DEVELOPED AREAS INCLUDING:

SOUTH OF KING’S CROSS WATERLOO CLERKENWELL ALDGATE

LONDON WILL EXPAND TO NEW MARKETS SUCH AS:

STRATFORD ELEPHANT & CASTLE SURREY QUAYS ROYAL DOCKS

LONDON HOT SPOTS | JLL | JANUARY 2015 23

THE SPEED TO MARKET IS A KEY CONSIDERATION

TEMPLONDON HOT SPOTS | JLL | JANUARY 2015 24

WHAT DO CCUPIERS WANT?

LONDON HOT SPOTS | JLL | SEPTEMBER 2014 25

WAR FOR TALENT AMENITY (LIVE, WORK, PLAY)

TRANSPORT CONNECTIONS

PRODUCTIVITY

PROXIMITY TO CLIENTS/CLUSTERS/COMPETITORS

SUSTAINABILITY AVAILABILITY/DELIVERABILITY

OCCUPANCY COSTS

MANY FACTORS DRIVE OCCUPIER DECISIONS

LONDON HOT SPOTS | JLL | JANUARY 2015 26

OCCUPIERS WILL WEIGH-UP THEIR CHOICES

MANY WILL BE DRAWN INTO THE CENTRE:

ATTRACTING HIGHLY SKILLED STAFF THE DOMINANT DRIVER

LESS COST SENSITIVE

PREPARED TO WAIT FOR THE RIGHT BUILDING

MANY WILL CHOOSE EMERGING LONDON:

LOWER OCCUPANCY COSTS

LARGER FLOOR SPACE REQUIREMENTS

AVAILABILITY OF THE SUITABLE STOCK

SHORTER DELIVERY TIMES

LONDON HOT SPOTS | JLL | JANUARY 2015 27

VARIOUS LOCATIONS

TO

TO

TO

TO

TO

TO

CITY MIDTOWN

VARIOUS LOCATIONS

SOHO

VARIOUS UK LOCATIONS

WESTERN CITY

COVENT GARDEN & SOHO

EUSTON

SOUTHBANK

CANARY WHARF

VARIOUS CITYLOCATIONS

SOUTHBANK

WITH GREATER OPPORTUNITIES, OCCUPIERS ARE MUCH MORE

FOOTLOOSE THAN EVER BEFOREOCCUPIERS WILL MOVE FOR RIGHT PRODUCT

– KEY IS TO COMMENCE SPECULATIVE DEVELOPMENT

LONDON HOT SPOTS | JLL | JANUARY 2015 28

SUBSTANTIAL OCCUPIER

DEMAND

MILLION SQ FT OF LEASE BREAKS AND EXPIRIESIN CENTRAL LONDON, GREATER THAN 50,000 SQ FT BETWEEN 2014 AND 2020

SIGNIFICANT DEMAND EXISTS FOR NEW BUILDS

CORE LONDON DEMAND

EMERGING LONDON DEMAND

17.0

LONDON HOT SPOTS | JLL | JANUARY 2015 29

INFRASTRUCTURE IMPROVEMENTS WIDEN

THE POSSIBILITIES FURTHER AFIELD

LONDON HOT SPOTS | JLL | JANUARY 2015 30

GREENWICH

BEXLEY

BARKING &DAGENHAM

NEWHAMTOWER

HAMLETS

ISLINGTON

CITY OF LONDON

CAMDEN

CITY OFWESTMINSTER

LEWISHAM

SOUTHWARK

LAMBETH

WANDSWORTH

CROYDON

BROMLEY

KENSINGTON & CHELSEA

EALING

BRENT

HARROW

BARNET

ENFIELD

HARINGEY

HACKNEY

WALTHAMFOREST

REDBRIDGE

HOUNSLOW

RICHMOND

RICHMOND

KINGSTON

MERTON

SUTTON

HILLINGDON

HAMMERSMITH& FULHAM

EUSTON

MORNINGTON CRESCENT

HAMMERSMITH

CAMDEN TOWN

LEYTON

BANK

KENTISHTOWN

FINSBURYPARK

CLAPHAMCOMMON

WANDSWORTHROAD

ACTONMAIN LINE

WATERLOO

BRIXTON

WEST CROYDON

LEWISHAM

BIRKBECK

EAST CROYDON

CLOCK HOUSE

EDEN PARK

LADYWELL

HAYES

PADDINGTON

HARLESDEN

WEST EALINGHANWELL

SOUTHALL

LIVERPOOLSTREET

LEYTONSTONEHIGH ROAD

WANSTEADPARK

CUSTOMHOUSE

CANNINGTOWN

STRATFORDHIGH STREET

PUDDINGMILL LANE

WOOLWICHARSENAL

CANARYWHARF

WHITECHAPEL

SHADWELL

CYPRUS

BECKTON

ABBEY ROAD

KENSINGTON(OLYMPIA)

SHEPHERD’SBUSH

CLAPHAMJUNCTION

BATTERSEAPARK

LONDON CITYAIRPORTPONTOON

DOCK

PRINCEREGENT

ROYALALBERT

BECKTONPARK

GALLIONSREACH

KINGGEORGE V

OXFORDCIRCUS

BAKERSTREET

WARWICKAVENUE

ROYALOAK

NORTHACTON

EASTACTON

WESTACTON

ACTONTOWN

ACTONCENTRAL

SOUTHACTON

NORTHEALING

SHEPHERD’SBUSH MARKET

WESTBROMPTON

WILLESDENJUNCTION

EARL’SCOURT

FULHAMBROADWAY

BONDSTREET

STRATFORDINTERNATIONAL

CHARING CROSS

OLD STREETSHOREDITCH

MARYLANDFOREST GATE

MANOR PARK

ILFORD

SEVENKINGS

MARYLEBONE

EALINGBROADWAY

WEMBLEYCENTRAL

NORTHWEMBLEY

HAYES &HARLINGTON

WESTDRAYTON

HEATHROWT’s 1 2 3 4 5

WIMBLEDON CHASE

SOUTH MERTON

MORDEN SOUTH

SUTTON COMMON

CARSHALTON

HACKBRIDGE

MITCHAM EASTFIELDS

LOUGHBOROUGH JUNCTION

TOOTING

ST HELIER

WEST HAMPSTEAD

CRICKLEWOOD

HENDON

MILL HILL BROADWAY

SOUTH BERMONDSEY

DEPTFORD

QUEENSTOWN ROAD

TOTTENHAMCOURT ROAD

PICCADILLYCIRCUS

VICTORIA

VAUXHALLKENNINGTON

CAMBERWELL

LONDONBRIDGE

FORESTHILL

BERMONDSEY

WAPPING

ROTHERHITHE

BROCKLEY

SYDENHAM

ANERLEY

NINE ELMS

STOCKWELL

OVALKING’S ROAD

KING’S CROSSST PANCRAS

DALSTONJUNCTION HACKNEY

WICK

HACKNEY

LEYTONSTONE

SNARESBROOK

WOODFORD

SOUTHWOODFORD

PARSONSGREEN

PUTNEYBRIDGE

WIMBLEDONPARK

EASTPUTNEY

SOUTHFIELDS

ANGEL

CANADAWATER

SURREYQUAYS

PENGEWEST

NEW CROSSGATE

QUEENSROAD

OLD KENTROAD 2

OLD KENTROAD 1

DENMARKHILL

WEST HAM

FENCHURCH STREETTOWER HILLTOWER GATEWAY

GREENWICH

CLAPHAM NORTHCLAPHAM HIGH STREET

CROSSHARBOUR

MUDCHUTE

SOUTH QUAY

CUTTY SARK

ISLAND GARDENS

NORTH GREENWICH

ROYALVICTORIA

EMIRATESGREENWICHPENINSULA

WIMBLEDON

STREATHAM

TULSE HILL

HERNE HILL

CITY THAMESLINK

MITCHAMJUNCTION

ELEPHANT& CASTLE

LONDONBLACKFRIARS

FARRINGDON

RICHMOND

ALEXANDRAPALACE

SEVEN SISTERS

TURNPIKELANE TOTTENHAM

HALE

CRYSTALPALACE

BECKENHAMJUNCTION

WESTWICKHAM

NEWBECKENHAM

LOWERSYDENHAM

CATFORDBRIDGE

PECKHAMRYE

HONOROAK PARK

ELMERS END

STREATHAMHILL

NORWOODJUNCTION

NEW CROSS

TO BROMLEYTOWN CENTRE

KEYUNDERGROUND STATIONCROSSRAIL STATION

OVERGROUND STATION

TRAMLINK STOPDLR STATION

CROSSRAIL 2 STATION

NATIONAL RAILTHAMESLINK

CROSSRAIL ROUTECROSSRAIL 2 ROUTECROSSRAIL 2 OPTION ACROSSRAIL 2 OPTION BOVERGROUND ROUTEEAST LONDON ROUTEJAVELIN ROUTEHS2BAKERLOO EXTENSION

CROSSING THE BOUNDARIES FROM CORE LONDON

PLANNED INFRASTRUCTURE CHANGES

CROSSRAILCOMPLETED

2018

NORTHERN LINE

EXTENSIONESTIMATED

2020

CROSSRAIL 2ESTIMATED

2029

HS2PHASE 1

ESTIMATED 2026

BAKERLOO LINE

EXTENSIONESTIMATED

2040

LONDON HOT SPOTS | JLL | JANUARY 2015 31