london offices Market analysisq22014

city core

docklands

contentsmidtown

city fringe

leasingFor many it will seem like a fitting swansong H2SO bought by Colliers International last month made a big splash in Q2 and in its final gesture made the biggest re-entry to Londonrsquos leasing

league table Having fallen out of the table in Q1 it made a dramatic return to enter the top 10 in both of our league tables (see investment opposite page) It came back to the leasing fold triumphantly with a string of deals across central London including the 77000 sq ft prelet to Clarksons at Commodity Quay E1 It will be interesting to see how Colliers will fare in our rankings in

league tableslondon offices market analysis

top london leasing agents 2014

1 JLL 873189 59

2 Savills 799674 50

3 CBRE 758342 67

4 DTZ 500020 36

5 Cushman amp Wakefield 483803 29

6 Knight Frank 412056 33

7 H2SO (now trading as Colliers International)

168097 15

8 Hatton Real Estate 119731 25

9 Ingleby Trice 115196 10

10 GM Real Estate 114500 9

11 Tuckerman 111352 16

12 Strutt amp Parker 100225 23

13 BNP Paribas Real Estate 91236 14

14 Farebrother 77479 14

15 Deloitte Real Estate 75988 11

16 Lambert Smith Hampton 66059 1

17 Edward Charles amp Partners 65325 14

18 Newton Perkins 58163 14

19 GVA 54897 10

20 Allsop 52050 11

21 Hanover Green 50392 10

22 BDG Sparkes Porter 49731 12

23 Frost Meadowcroft 43631 9

24 Levy 40861 2

25 Monmouth Dean 40386 15

Rank Agent Disposals (sq ft)

No of deals

Rank Agent Disposals (sq ft)

No of deals

1 Knight Frank 120136 62 Cushman amp Wakefield 74740 43 Savills 33272 14 DTZ 27834 35 McCalmont Woods 16140 1

Rank Agent Disposals (sq ft)

No of deals

1 DTZ 162018 112 JLL 158860 93 CBRE 134739 134 Savills 99915 85 Cushman amp Wakefield 93226 4

Rank Agent Disposals (sq ft)

No of deals

1 DTZ 87170 42= Savills 62469 22= Cushman amp Wakefield 62469 24 CBRE 48356 55 Edward Symmons 25606 7

Rank Agent Disposals (sq ft)

No of deals

1 CBRE 310733 262 JLL 264116 173 Tuckerman 101566 144 Knight Frank 101190 125 Cushman amp Wakefield 95092 11

agents by submarket 2014

docklands

midtown

southern fringe

west end

Rank Agent Disposals (sq ft)

No of deals

1 Savills 411932 222 JLL 399495 293 DTZ 177664 104 CBRE 168349 125 Cushman amp Wakefield 158276 8

Rank Agent Disposals (sq ft)

No of deals

1 Hatton Real Estate 97496 222 Savills 83706 43 Ingleby Trice 81418 34 CBRE 80436 85 H2SO (now trading as Colliers Intrsquol) 80007 2

city core city fringe

wwwestatesgazettecom80 19 July 2014

on the move

delVe deeper into the data with interactiVe maps

largest deals including the 192000 sq ft let to Mizuho Bank at New Ludgate EC4 (with JLL) and (with CBRE) the additional 51000 sq ft to Salesforcecom at the former Heron Tower (see also p73 lsquo6 secondsrsquo)

Of the five firms that lost a position in the table in Q2 four had only just made an appearance in the previous quarter Richard Susskind Crossland Otter Hunt Anton Page and Matthews amp Goodman The last of those was yet another agency involved in MampAs during the quarter it acquired City specialist Chapman Bates in May Will the purchase lead to a table placement in the second half of the year Watch this space

The most surprising name to disappear from our table in Q2 was 2013 start-up and West End specialist Bluebook which was placed 17th last quarter Founding partner Chris Watkin says the tight West End market is making it trickier for all agents to convert viewings to lettings He is sceptical whether the increased amount of secondhand space taken in Q2 is the start of a trend but adds ldquoItrsquos possible some of these deals are the result of tech companies taking more space than they need and then subletting it The nature of their business means they often donrsquot know exactly how much space theyrsquoll actually need when they sign a leaserdquo

Q2 inVestment league table

1 GM Real Estate 1637 27

2 Savills 766 13

3 Knight Frank 702 12

4 DTZ 676 11

5 JLL 581 10

6 H2SO (now trading as Colliers International) 429 7

7 CBRE 327 5

8 Michael Elliott 260 4

9 BNP Paribas Real Estate 201 3

10 Allsop 172 3

Rank Agent Value (poundm)

Market share

League table rankings take account of both sales and purchases and the agent is credited for advising either party Market share is calculated from a total pool that is significantly larger than the investment spend figureDocklANDs city coRe west eND MiDtowN southeRN

fRiNge city fRiNge

download the full Q2 market analysis wwwestatesgazettecomloma

location of sales by Value 2014

27 24 21 16 6 6

81wwwestatesgazettecom19 July 2014

the week practice amp law eg lifethe market

MampA has had a dramatic effect on this quarterrsquos league table including a last hurrah for H2SO Mark Simmons summaries the ups and downs of Q2

Things are equally tight in the City says Malcolm Trice partner at Ingleby Trice the firm that moved the furthest up the EG league table this quarter zooming up 12 places into the top 10 thanks largely to the joint agency instruction (with H2SO and Savills) on the deal to shipping company Clarksons which was signed last month Trice observes ldquoThe market is extremely competitive for small units At the same time well-advised larger tenants are seeing that less choice is available and acting accordingly The area that is tough is the middle ground ndash units in the 10000-25000 sq ft bracketrdquo

Another central London submarket facing supply issues is the Southern Fringe according to Jules Hind partner at Farebrother whose firm dipped slightly in the Q2 rankings to 14th place Even good-quality secondhand space is at a premium ldquoSo [RBSrsquos decision to sublet] Bankside 2 amp 3 SE1 was a blessed relief as it brought more supply to the market but then it was takenrdquo he says All 370000 sq ft is under offer to global advertising agency Omnicom

ldquoThat just keeps happeningrdquo says Hind ldquoAs soon as a big chunk of space approaches the market it goes So supply is only for a very small period of time and then it comes straight off againrdquo

inVestmentCompared to the moving and shaking taking place on the leasing tables in Q2 the investment table by contrast showed fewer changes although H2SO previously off the table pushed its way back into the top 10 thanks largely to Scottish Widows Investment Partnershiprsquos sale of 22 Grosvenor Square W1 to Indiabulls Real Estate for pound155m BNP Paribas Real Estate also re-entered the table on the back of the sale of New Bond Street House W1 to Meyer Bergmann for pound110m

Two firms left the top 10 this quarter Cushman amp Wakefield and Deloitte Real Estate Julian Stocks partner at DRE says that although supply remains tight he expects to see plenty of activity over the coming months ldquoWe are only mid-cycle so not at all near the top of the market and what wersquore seeing at the moment is that rental growth is still patchyrdquo

After a quiet start to the year total spend shot up in Q2 to pound37bn (more than doubling the pound15bn spent in the first quarter) The largest single deal was Canary Wharf Group parent Songbird Estates which sold 10 Upper Bank Street E14 in Docklands to a consortium including China Life Insurance Qatar Holdings and CWG It went for pound795m giving an initial yield of 55 Investment agents suggest that a few more large deals ndash including the pound1bn sale of Canada Square ndash are on the way for the second half of 2014

Q3 as the firm did not make it onto the table in the first half of 2014 The other property consultancy that changed hands in June (from UGL to TGP Consortium) was DTZ a non-mover during Q2 retaining fourth place

There was plenty of movement in the rest of EGrsquos leasing league table this quarter Savills broke into the top three still dominated by JLL and CBRE moving up from eighth position last quarter The firm was joint agent on several of the quarterrsquos

Midway through the year the take-up

figures are looking healthy enough but

perhaps not as high as might have been

hoped Nonetheless availability rates

are still falling and rents rising London

is in need of more offices before

competition for space intensifies in the

next 6-12 monthsCLiCk on the area NaMe to view its Market breakdowN

CLiCk on the tabs beLow for More iN-dePth aNaLysis

u overview Speculative new-build office construction got under way this quarter Is this the start of a sustained supply drive to meet central London demand

u League tabLes Big names swap places at the top of the tables whilst Colliers Internationalrsquos acquisition of H2SO looks all the more shrewd

u submarkets The City Core may have had the highest take-up but it was the West End that was the real star performer this quarter as it near enough matched the Square Mile

south bank

west end

CLiCk for detaiLed

bouNdary MaP

London offices market anaLysis Q22014

the cranes are backSpeculative new-build office construction got under way this quarter Is this the start of a sustained supply drive to meet central London demand Mark Simmons reports

it was fitting that in the quarter when Danish toy brand Lego signed for new offices in central London (25000 sq ft of refurbished space at Kirbi Real Estate Investmentrsquos New Fetter Place EC4) there were positive signs

that London is building again and some of it is speculative

The year got off to a disappointing start with no major new-builds beginning on site in the first three months The appearance of hard hats in Q2 was welcome

The two largest new-builds to start coming out of the ground were Land Securitiesrsquo 276000 sq ft 1 New Street

Square EC4 in Midtown and the Crown Estatersquos 135000 sq ft Quadrant W1 in the West End Also

in Midtown Great Portland Estates started work on its EG BluffErrsquos GuidE

London in 6 secondsldquoTake-up rose ndash as predicted ndash in Q2 to over 3m sq ft Less expected was a burst of letting activity in the West End almost matching that seen in the City each submarket notching up just short of 1m sq ft Prospects for the second half of 2014 are rosy with over 38m sq ft under offer Although construction starts increased in Q2 ndash to 1m sq ft ndash a significant gap with take-up remains As a result total availability across the capital remained virtually unchanged at around 35m sq ftrdquo

138000 sq ft 12-14 New Fetter Lane prelet in its entirety to lawyer Bird amp Bird last year although that will do nothing to ease the supply squeeze There were no major construction starts at all in Q2 in the City core

The decision to press the button on a few schemes in Q2 was met with a muted response from Londonrsquos agency fraternity whose general feeling can be summed up as ldquoone construction start does not a summer makerdquo That reflects a solid but relatively unexciting second quarter Take-up of over 3m sq ft was up 10 on the previous quarter and 5 on the equivalent quarter last year Both the City and the West End notched up deals just short of 1m sq ft

city corE docklandsmidtown city frinGEsouth BankwEst EndanalysiscontEnts

CLiCk on ThE AREA NAME To Go DIRECT To MARKET BREAKDoWN

London OfficesproduCed by

SourCe CommerCiaL SpaCe from 8000 Live inStruCtionS CLiCk here to find out more

city corE docklandsmidtown city frinGEsouth BankwEst EndanalysiscontEnts

CLiCk on ThE AREA NAME To Go DIRECT To MARKET BREAKDoWN

Support vaLuationS with the LateSt ComparabLeS CLiCk here to find out more

For the City that is distinctly unspectacular For the West End it was phenomenal West End take-up was up 74 on the same period last year and at the highest level for four years Esteacutee Lauder which signed a much-talked-about prelet for 140000 sq ft of space at 1 Fitzroy Place bumped up the figures but also pushed the availability rate to a painful 48 echoing a supply problem across London

ldquoI just canrsquot see that there are that many deliverable ndash and the key is deliverable ndash schemes that will start speculativelyrdquo admits a central London agent who prefers not to be named one of the few tipped to go ahead prelet or not in Q3 is helical Barrsquos 273000 sq ft Mitre Square scheme other developments such as Exemplar Propertiesrsquo 290000 sq ft Fruit amp Wool Exchange (pictured) may not start until 2015

Developers are keeping a beady eye on business growth and despite an increase in take-up perhaps require further reassurance that economic recovery really is under way Dan Burn head of City agency at JLL says ldquoThe majority of take-up over the last 18 months has been driven by lease events and consolidation but with many occupiers now considering recruitment and investing in growth we anticipate competition for space returning to the market although I suspect that the real impact of this will be seen in six to 12 monthsrsquo timerdquo

As the typical build time for a new office block is between two and three years some property commentators are suggesting that now is exactly the right time for schemes to

overviewLondon offiCeS market anaLySiS

Q2 CentraL London ConStruCtion StartS (SQ ft)

doCkLAnds

70000

PrELET

140000

(and up on the first quarter) but not exceptional Malcolm Trice partner at Ingleby Trice says ldquoThe fact is that take-up is very strong but itrsquos not rushing awayrdquo

In fact it would have been considerably stronger if MampGrsquos long-anticipated preletting of 323000 sq ft at Generalirsquos 120 Fenchurch Street had not missed the quarter-end Instead it pushed up the amount of space that went under offer during Q2 to 26m sq ft Add that to deals already in legals and a considerable 38m sq ft was under offer across the capital at the end of June

start on site But Jules hind partner at Farebrother points out that the developer pool is smaller than in the last cycle ldquoThis time round a lot of development is being driven by foreign sovereign wealth or cash and developers arenrsquot taking so much of a punt so there arenrsquot those fringy compromise developments [we saw in the last cycle] which has kept things relatively tightrdquo he says

That is good news for landlords who continue to see rents move up and incentives in (see p76 Where to put your money) although less so for occupiers (see p78 occupiers) which may explain why total take-up in Q2 at 32m sq ft was good

midToWn

360000CiTy fringE

190000

city corE docklandsmidtown city frinGEsouth BankwEst EndanalysiscontEnts

CLiCk on ThE AREA NAME To Go DIRECT To MARKET BREAKDoWN

Support vaLuationS with the LateSt ComparabLeS CLiCk here to find out more identify new deveLopment opportunitieS CLiCk here to find out more

Q2 CentraL London ConStruCtion StartS (SQ ft)

ldquoThere is an element of deals going through more quickly ndash the vast majority of what is under offer now will have gone through within a quarterrdquo says Philip Pearce central London executive director at Savills That is likely to include ad agency omnicomrsquos subletting of 370000 sq ft of RBS space at Bankside 2 amp 3 SE1 in the Southern Fringe and 150000 sq ft sublet by JP Morgan to Lloyds Banking Group and EG publisher Reed Elsevier at Alban Gate EC2

The attraction of what is technically secondhand space became apparent in the second quarter over 60 of total take-up (2m sq ft) was in secondhand offices compared with about 50 the previous quarter Despite this the consensus among central London agents is that there is no trend here and that interest will refocus on brand new stock although the geographic location of where deals will land is harder to pinpoint particularly given the cost sensitivity of many occupiers

The largest amount of available development pipeline space is within W1 although that does not necessarily mean most take-up will follow points out Dan Bayley central London managing director at BNP Paribas Real Estate ldquoThere may be more of this kind of stock in the West End but you have to remember that the pricing is much higher [than the City]rdquo he says

Wherever tenants decide to go it is clear that developers are not yet rushing in behind them to create new stock So for the second half of 2014 at least there is more chance of seeing more virtual office space created in Legorsquos headquarters in the City than actually on the ground in central London

Sweet Smell of SucceSS ndash take-up headS weStWith over 2m sq ft under offer at the end of the first quarter an overall rise in take-up in Q2 came as no surprise although the total figure of a tad north of 32m sq ft was not as high as some pundits were expecting more startling was the fact that the close to 1m sq ft taken in the City core was matched by a similar amount taken in the West End ndash despite the latterrsquos availability being around half of the formerrsquos The preletting of 140000 sq ft at Exemplar Aviva investors and kaupthingrsquos 1 fitzroy Place W1 development to Esteacutee Lauder was the largest single West End deal this quarter ndash and one of the biggest in W1 history

preSS the button ndash real conStruction StartSWith no major construction starts in the first three months of 2014 it was a relief that a number of new-builds got under way in the second quarter including Land securitiesrsquo speculative redevelopment of 324000 sq ft at 1 new street square EC4 in midtown This development alone made up about 40 of the 1m sq ft that left the starting blocks in Q2 the majority of which did so speculatively There were no significant starts in the City core

GoinG GoinGhellip (part 1) ndash Space under offer iS updespite an increase in take-up in Q2 the amount of space under offer at the quarter-end actually rose to just short of 38m sq ft Whether this is because as London office agents have been reporting for some time deals are still slow completing or the quantum of active demand is rising may become clearer in the second half of the year

GoinG GoinGhellip (part 2) ndash development pipeline narrowSThe amount of space in the development pipeline to the end of 2016 dropped substantially over the second quarter as several buildings including British Land and oxford Propertiesrsquo 588000 sq ft Cheesegrater EC3 completed At the end of Q2 less speculatively-built offices under construction were available in the City core than in either the West End or ndash wait for it ndash docklands Who knew

may the force be with youone of the quarterrsquos top 10 lettings ndash salesforcersquos additional 50000 sq ft at Heron Tower EC2 ndash caused consternation in the City in an unusual move the proposed eponymous renaming of the gerald ronson-developed skyscraper to reflect the business software solutions providerrsquos 17 occupancy of the building was referred to the City of London Corporation following objections from other tenants An announcement was due as Eg went to press

EG BluffErrsquos GuidELondon in 60 seconds

PrELET

40000

WEsT End

240000

Average rents in all bar one of the London submarkets crept upwards in Q2 with the relatively small market of Paddington being the only one to report a small slip

That has led to rental returns on our hypothetical lease dropping the only market in central London this has happened to Two very contrasting markets saw the highest year-on-year growth with Canary Wharf (18) coming top albeit with a heavy rent free of 30 months and Soho not far behind (12)

And although anecdotal evidence suggests rent-free periods are falling our figures show that overall incentives remained static between the first and second quarters

For an investor eyeing which market to stash their cash two stood head and shoulders above the rest Euston Road and More London which both saw rental returns increase by over 5 quarter on quarter

How much rents rise over the next six months will partly depend on how occupiers respond to the diminishing supply of newly developed space and how much they are prepared to pay for prelets Several off-radar requirements appeared during Q2 and JLLrsquos head of City agency Dan Burn comments ldquoThere are a number of large requirements that are

Where to putrentsLondon offices market anaLysis

your moneyAll but one of Londonrsquos markets ended Q2 in the black with Paddington slipping says Mark Simmons

L

GROVE ROAD

soho

pound132mChANGE oN Q1 12

rENt pound7667 psf

pAddiNGtoN

pound96mChANGE oN Q1 -02

rENt pound5750 psf

viCtoriA

pound119mChANGE oN Q1 29

rENt pound7125 psf

EustoN roAd

pound97mChANGE oN Q1 52

rENt pound5750 psf

CovENt GArdEN

pound117mChANGE oN Q1 19

rENt pound6757 psf

mAyfAirst jAmEs

pound193mChANGE oN Q1 15

rENt pound11042 psf

city core docklandsmidtown city fringesouth bankwest endanalysiscontents

cLick on THE AREA nAME To go DiRECT To MARkET BREAkDoWn

receive a weekLy update on the London office marketcLick here to find out more understand current investment trends across the capitaL cLick here to find out more

quietly reviewing options and with the focus being on larger lsquodeliverablersquo schemes we anticipate a fear factor setting in among tenants as the future supply pipeline is further constrainedrdquo

investors hoping that may translate into significant rental growth may be disappointed ldquoRents are still on an upward curve but we are not seeing drastic increasesrdquo confirms Bluebook co-founder Chris Watkin ldquoi think in the second half of the year they will continue to tick up rather than spike uprdquo

Certain types of space will command higher-than-average rents however and high-quality refurbishments are the ones to watch (see also p78 occupiers) JLLrsquos Burn says ldquoMy gut feeling is that where there is an opportunity for landlords to take back space they will do so so that they can deliver refurbished space into a constrained market and capture the anticipated rental growthrdquo

Farebrother partner Jules Hind agrees and suggests there are certain parts of the capital such as the Southern Fringe where lack of ready-to-occupy space will make refurbishment particularly remunerative ldquoWe tell investors they should look again at stock they have and see how they can reconfigure those buildings it will often enable landlords to see a return in spadesrdquo

Although there is room for further rental growth in the second half of 2014 the same may not be true for yield compression ldquoPrime yields are probably as low as they are going to go ndash i donrsquot see them going any lowerrdquo says former Tishman Speyer managing director Julian Stocks now partner at Deloitte Real Estate However he believes there will be good opportunities for investors in all lot sizes over the coming months not just in large trophy buildings

L

GROVE ROAD

investment barometer0 or below 3 or over

Panel Cushman amp Wakefield Deloitte Real Estate DTZ JLL CBRE Savills Farebrother (Midtown Covent Garden and South Bank only)

CANAry whArf

pound57mChANGE oN Q1 28

rENt pound3808 psf

AldGAtE

pound70mChANGE oN Q1 20

rENt pound4320 psf

morE loNdoN

pound87mChANGE oN Q1 50

rENt pound5279 psf

ChANCEry lANE

pound99mChANGE oN Q1 28

rENt pound5957 psf

GrEshAm st lEAdENhAll st

broAdGAtE

pound96mChANGE oN Q1 24

rENt pound5850 psf

Rent RetuRn on a hypothetical 20000 sq ft letting with a 10-yeaR lease

city core docklandsmidtown city fringesouth bankwest endanalysiscontents

cLick on THE AREA nAME To go DiRECT To MARkET BREAkDoWn

understand current investment trends across the capitaL cLick here to find out more

occupiersGoinG off the rail

in depthLondon offices market anaLysis

More firms are considering good secondhand space if they canrsquot find new offices at the right location or price But there may not be much around writes Mark Simmons

Buy it off the peg or insist it is nothing but couture bespoke tailored and guaranteed to fit When it comes to offices it seems more and more London occupiers are willing to take

space straight off the rail shunning shiny new ndash and generally more expensive ndash space for more modest secondhand accommodation

That prospect is understandably giving letting agents sweaty palms In the second quarter that nightmare started to come true with nearly two-thirds of tenants deciding to sign on the dotted line for secondhand space

This is probably the reason why several agents have been keen to explain away second-quarter take-up as an anomaly

ldquoI donrsquot think any occupier goes out looking for secondhand space at the outset ndash they just go out to tick their boxesrdquo says Jack Tomlin tenant representation partner at Knight Frank For most firms that took space in central London in Q2 previously-occupied offices obviously ticked the right boxes as they accounted for 62 of space taken ndash nearly 2m sq ft Two of the largest deals including 62000 sq ft to finance company Octopus at Holborn Place EC1 in Midtown were in secondhand buildings

But the figures suggest it may be more than just a blip in the data More than 16m sq ft of secondhand space went under offer during Q2 including 370000 sq ft at Bankside 2 amp 3 SE1 in the southern fringe where global ad agency Omnicom is to sublet space from RBS This deal as well as sublettings of about 150000 sq ft of JP Morgan space at Alban Gate EC2 in the City to Lloyds Banking Group and EG owner Reed Elsevier is likely to complete over the summer suggesting that secondhand take-

support vaLuations with the Latest comparabLes cLick here to find out more

city core docklandsmidtown city fringesouth bankwest endanalysiscontents

cLick on THE AREA nAME TO GO dIRECT TO MARKET BREAKdOWn

quietly reviewing options and with the focus being on larger lsquodeliverablersquo schemes we anticipate a fear factor setting in among tenants as the future supply pipeline is further constrainedrdquo

investors hoping that may translate into significant rental growth may be disappointed ldquoRents are still on an upward curve but we are not seeing drastic increasesrdquo confirms Bluebook co-founder Chris Watkin ldquoi think in the second half of the year they will continue to tick up rather than spike uprdquo

Certain types of space will command higher-than-average rents however and high-quality refurbishments are the ones to watch (see also p78 occupiers) JLLrsquos Burn says ldquoMy gut feeling is that where there is an opportunity for landlords to take back space they will do so so that they can deliver refurbished space into a constrained market and capture the anticipated rental growthrdquo

Farebrother partner Jules Hind agrees and suggests there are certain parts of the capital such as the Southern Fringe where lack of ready-to-occupy space will make refurbishment particularly remunerative ldquoWe tell investors they should look again at stock they have and see how they can reconfigure those buildings it will often enable landlords to see a return in spadesrdquo

Although there is room for further rental growth in the second half of 2014 the same may not be true for yield compression ldquoPrime yields are probably as low as they are going to go ndash i donrsquot see them going any lowerrdquo says former Tishman Speyer managing director Julian Stocks now partner at Deloitte Real Estate However he believes there will be good opportunities for investors in all lot sizes over the coming months not just in large trophy buildings

L

GROVE ROAD

investment barometer0 or below 3 or over

Panel Cushman amp Wakefield Deloitte Real Estate DTZ JLL CBRE Savills Farebrother (Midtown Covent Garden and South Bank only)

CANAry whArf

pound57mChANGE oN Q1 28

rENt pound3808 psf

AldGAtE

pound70mChANGE oN Q1 20

rENt pound4320 psf

morE loNdoN

pound87mChANGE oN Q1 50

rENt pound5279 psf

ChANCEry lANE

pound99mChANGE oN Q1 28

rENt pound5957 psf

GrEshAm st lEAdENhAll st

broAdGAtE

pound96mChANGE oN Q1 24

rENt pound5850 psf

Rent RetuRn on a hypothetical 20000 sq ft letting with a 10-yeaR lease

city core docklandsmidtown city fringesouth bankwest endanalysiscontents

cLick on THE AREA nAME To go DiRECT To MARkET BREAkDoWn

understand current investment trends across the capitaL cLick here to find out more

occupiersGoinG off the rail

in depthLondon offices market anaLysis

More firms are considering good secondhand space if they canrsquot find new offices at the right location or price But there may not be much around writes Mark Simmons

Buy it off the peg or insist it is nothing but couture bespoke tailored and guaranteed to fit When it comes to offices it seems more and more London occupiers are willing to take

space straight off the rail shunning shiny new ndash and generally more expensive ndash space for more modest secondhand accommodation

That prospect is understandably giving letting agents sweaty palms In the second quarter that nightmare started to come true with nearly two-thirds of tenants deciding to sign on the dotted line for secondhand space

This is probably the reason why several agents have been keen to explain away second-quarter take-up as an anomaly

ldquoI donrsquot think any occupier goes out looking for secondhand space at the outset ndash they just go out to tick their boxesrdquo says Jack Tomlin tenant representation partner at Knight Frank For most firms that took space in central London in Q2 previously-occupied offices obviously ticked the right boxes as they accounted for 62 of space taken ndash nearly 2m sq ft Two of the largest deals including 62000 sq ft to finance company Octopus at Holborn Place EC1 in Midtown were in secondhand buildings

But the figures suggest it may be more than just a blip in the data More than 16m sq ft of secondhand space went under offer during Q2 including 370000 sq ft at Bankside 2 amp 3 SE1 in the southern fringe where global ad agency Omnicom is to sublet space from RBS This deal as well as sublettings of about 150000 sq ft of JP Morgan space at Alban Gate EC2 in the City to Lloyds Banking Group and EG owner Reed Elsevier is likely to complete over the summer suggesting that secondhand take-

support vaLuations with the Latest comparabLes cLick here to find out more

city core docklandsmidtown city fringesouth bankwest endanalysiscontents

cLick on THE AREA nAME TO GO dIRECT TO MARKET BREAKdOWn

occupiersGoinG off the rail

in depthLondon offices market anaLysis

More firms are considering good secondhand space if they canrsquot find new offices at the right location or price But there may not be much around writes Mark Simmons

Buy it off the peg or insist it is nothing but couture bespoke tailored and guaranteed to fit When it comes to offices it seems more and more London occupiers are willing to take

space straight off the rail shunning shiny new ndash and generally more expensive ndash space for more modest secondhand accommodation

That prospect is understandably giving letting agents sweaty palms In the second quarter that nightmare started to come true with nearly two-thirds of tenants deciding to sign on the dotted line for secondhand space

This is probably the reason why several agents have been keen to explain away second-quarter take-up as an anomaly

ldquoI donrsquot think any occupier goes out looking for secondhand space at the outset ndash they just go out to tick their boxesrdquo says Jack Tomlin tenant representation partner at Knight Frank For most firms that took space in central London in Q2 previously-occupied offices obviously ticked the right boxes as they accounted for 62 of space taken ndash nearly 2m sq ft Two of the largest deals including 62000 sq ft to finance company Octopus at Holborn Place EC1 in Midtown were in secondhand buildings

But the figures suggest it may be more than just a blip in the data More than 16m sq ft of secondhand space went under offer during Q2 including 370000 sq ft at Bankside 2 amp 3 SE1 in the southern fringe where global ad agency Omnicom is to sublet space from RBS This deal as well as sublettings of about 150000 sq ft of JP Morgan space at Alban Gate EC2 in the City to Lloyds Banking Group and EG owner Reed Elsevier is likely to complete over the summer suggesting that secondhand take-

support vaLuations with the Latest comparabLes cLick here to find out more

city core docklandsmidtown city fringesouth bankwest endanalysiscontents

cLick on THE AREA nAME TO GO dIRECT TO MARKET BREAKdOWn

take-up by occupiers

central amp local government

others

retail amp leisure

services

industry amp manufacturing

health amp education

tmt

utilities

transport

propertyinsurance professional

financial

associations

up will be as high in Q3 if not higher than it was in Q2

The reasons for turning to secondhand space are many and varied Public and client image is an important factor says Tomlin ldquoBusinesses are still mindful of not being too flashrdquo he says ldquoThere is a balance to be had between taking more space and not being seen to be too blingrdquo Another is the high capital expenditure associated with brand new offices he adds ldquoSmaller firms in particular have been scarred by fit-out costs in the past so are now more cautiousrdquo

Although pricing is important it isnrsquot just about a top-line rental figure says Mark Lethbridge partner at deloitte Real Estate ldquoThe trend towards secondhand space is a natural function of two things a reduced supply of brand-new stock and the need of occupiers to see value for moneyrdquo he says

While prelets on brand-new space can sometimes offer such value Ben Cullen London occupier representation partner at Cushman amp Wakefield says the trade-off can be an extended period before moving in ldquoOne thing occupiers canrsquot have is too little space to run and grow their businessrdquo he says ldquoThey often want to move within 14 months so canrsquot afford to wait three or four years for a prelet buildingrdquo

The good news for nervous letting agents is that the consensus among property professionals is that the amount of ldquogreyrdquo space in central London appears to be virtually depleted Hard to identify until it comes to the market this surplus-

to-requirements accommodation may never have been occupied The less good news is that there is plenty of good-quality stock ready for immediate occupation Of the nearly 10m sq ft of secondhand space available at the end of Q2 nearly two-thirds ndash about 64m sq ft ndash was classified as grade A

Perhaps a happy compromise for both landlords and tenants will be the creation of more refurbished space which Cullen feels is likely ldquoI think we will see more developers shelve long-term plans for redevelopment and opt to launch a refurbishment instead as they know they can turn a building around in as little as six monthsrdquo he says

n Financial is the biggest sector at 19 of take-up edging TMT (Q1rsquos largest sector) into second place with 18

n Financial TMT and property make up nearly half of all take-up this quarter

n Industry accounted for 10 boosted by Esteacutee Lauderrsquos prelet of 140000 sq ft at Fitzroy Place

new London submarketsTwo things happened in Q2 that could have far-reaching implications for the future of Londonrsquos occupational market Both concern the creation of new London office markets The first was Transport for Londonrsquos decision to ditch discussions on a potential move to ldquogreyrdquo space in the established submarket of docklands in favour of a shiny new office in Stratford The way had already been trailblazed in Q1 when news leaked of the Financial Conduct Authorityrsquos intention to head east to Lend Lease and London amp Continental Railwayrsquos International Quarter The point is with those two prelets totting up to 750000 sq ft whether there is now a critical mass in Stratford that will draw in other tenants and lead to the evolution of central Londonrsquos seventh office submarket

dan Bayley central London managing director at BnP Paribas Real Estate which is a letting agent at Stratford and Kingrsquos Cross where it has itself taken a prelet says most occupiers are comfortable

broaching new frontiers ldquoIn general aside from some financial occupiers most are willing to look at new areasrdquo he says

Another of those new areas came a step closer in Q2 when the St Modwen and Vinci joint venture submitted plans for 135000 sq ft of offices at its proposed new Covent Garden Market scheme in nine Elms Until now the focus has been on residential in this area but the prospect of offices coming out of the ground next year could reshape occupational decisions ldquoSeeing is believingrdquo says Knight Frankrsquos Jack Tomlin ldquoOccupiers are more comfortable when they see infrastructure is in placerdquo While that is already true at Stratford the northern Line extension to nine Elms will take a little longer

Timing is perhaps the crux of the matter as new buildings for general occupation in Stratford and nine Elms are unlikely to arrive until 2017 at the earliest Cushman amp Wakefieldrsquos Ben Cullen observes ldquoFor many occupiers thatrsquos still a long way off when they are struggling to see past 2016rdquo

construction

identify new deveLopment opportunities cLick here to find out more

city core docklandsmidtown city fringesouth bankwest endanalysiscontents

cLick on THE AREA nAME TO GO dIRECT TO MARKET BREAKdOWn

leasingFor many it will seem like a fitting swansong H2SO bought by Colliers International last month made a big splash in Q2 and in its final gesture made the biggest re-entry to Londonrsquos leasing

league table Having fallen out of the table in Q1 it made a dramatic return to enter the top 10 in both of our league tables (see investment opposite page) It came back to the leasing fold triumphantly with a string of deals across central London including the 77000 sq ft prelet to Clarksons at Commodity Quay E1 It will be interesting to see how Colliers will fare in our rankings in

league tableslondon offices market analysis

top london leasing agents 2014

1 JLL 873189 59

2 Savills 799674 50

3 CBRE 758342 67

4 DTZ 500020 36

5 Cushman amp Wakefield 483803 29

6 Knight Frank 412056 33

7 H2SO (now trading as Colliers International)

168097 15

8 Hatton Real Estate 119731 25

9 Ingleby Trice 115196 10

10 GM Real Estate 114500 9

11 Tuckerman 111352 16

12 Strutt amp Parker 100225 23

13 BNP Paribas Real Estate 91236 14

14 Farebrother 77479 14

15 Deloitte Real Estate 75988 11

16 Lambert Smith Hampton 66059 1

17 Edward Charles amp Partners 65325 14

18 Newton Perkins 58163 14

19 GVA 54897 10

20 Allsop 52050 11

21 Hanover Green 50392 10

22 BDG Sparkes Porter 49731 12

23 Frost Meadowcroft 43631 9

24 Levy 40861 2

25 Monmouth Dean 40386 15

Rank Agent Disposals (sq ft)

No of deals

Rank Agent Disposals (sq ft)

No of deals

1 Knight Frank 120136 62 Cushman amp Wakefield 74740 43 Savills 33272 14 DTZ 27834 35 McCalmont Woods 16140 1

Rank Agent Disposals (sq ft)

No of deals

1 DTZ 162018 112 JLL 158860 93 CBRE 134739 134 Savills 99915 85 Cushman amp Wakefield 93226 4

Rank Agent Disposals (sq ft)

No of deals

1 DTZ 87170 42= Savills 62469 22= Cushman amp Wakefield 62469 24 CBRE 48356 55 Edward Symmons 25606 7

Rank Agent Disposals (sq ft)

No of deals

1 CBRE 310733 262 JLL 264116 173 Tuckerman 101566 144 Knight Frank 101190 125 Cushman amp Wakefield 95092 11

agents by submarket 2014

docklands

midtown

southern fringe

west end

Rank Agent Disposals (sq ft)

No of deals

1 Savills 411932 222 JLL 399495 293 DTZ 177664 104 CBRE 168349 125 Cushman amp Wakefield 158276 8

Rank Agent Disposals (sq ft)

No of deals

1 Hatton Real Estate 97496 222 Savills 83706 43 Ingleby Trice 81418 34 CBRE 80436 85 H2SO (now trading as Colliers Intrsquol) 80007 2

city core city fringe

on the moveMampA has had a dramatic effect on this quarterrsquos league table including a last hurrah for H2SO Mark Simmons summaries the ups and downs of Q2

Q3 as the firm did not make it onto the table in the first half of 2014 The other property consultancy that changed hands in June (from UGL to TGP Consortium) was DTZ a non-mover during Q2 retaining fourth place

There was plenty of movement in the rest of EGrsquos leasing league table this quarter Savills broke into the top three still dominated by JLL and CBRE moving up from eighth position last quarter The firm was joint agent on several of the quarterrsquos

CITy CORE DOCKLANDSMIDTOWN CITy FRINGESOuTH BANKWEST ENDANALySISCONTENTS

click on THE aREa namE TO GO DIRECT TO maRkET BREakDOwn

support valuations with the latest comparables click here to find out more

on the movelargest deals including the 192000 sq ft let to mizuho Bank at new Ludgate EC4 (with JLL) and (with CBRE) the additional 51000 sq ft to Salesforcecom at the former Heron Tower (see also p73 lsquo6 secondsrsquo)

Of the five firms that lost a position in the table in Q2 four had only just made an appearance in the previous quarter Richard Susskind Crossland Otter Hunt anton Page and matthews amp Goodman The last of those was yet another agency involved in mampas during the quarter it acquired City specialist Chapman Bates in may will the purchase lead to a table placement in the second half of the year watch this space

The most surprising name to disappear from our table in Q2 was 2013 start-up and west End specialist Bluebook which was placed 17th last quarter Founding partner Chris watkin says the tight west End market is making it trickier for all agents to convert viewings to lettings He is sceptical whether the increased amount of secondhand space taken in Q2 is the start of a trend but adds ldquoItrsquos possible some of these deals are the result of tech companies taking more space than they need and then subletting it The nature of their business means they often donrsquot know exactly how much space theyrsquoll actually need when they sign a leaserdquo

Q2 investment league table

1 GM Real Estate 1637 27

2 Savills 766 13

3 Knight Frank 702 12

4 DTZ 676 11

5 JLL 581 10

6 H2SO (now trading as Colliers International) 429 7

7 CBRE 327 5

8 Michael Elliott 260 4

9 BNP Paribas Real Estate 201 3

10 Allsop 172 3

Rank Agent Value (poundm)

Market share

League table rankings take account of both sales and purchases and the agent is credited for advising either party Market share is calculated from a total pool that is significantly larger than the investment spend figureDocklANDs city coRe west eND MiDtowN southeRN

fRiNge city fRiNge

location of sales by value 2014

27 24 21 16 6 6

Things are equally tight in the City says malcolm Trice partner at Ingleby Trice the firm that moved the furthest up the EG league table this quarter zooming up 12 places into the top 10 thanks largely to the joint agency instruction (with H2SO and Savills) on the deal to shipping company Clarksons which was signed last month Trice observes ldquoThe market is extremely competitive for small units at the same time well-advised larger tenants are seeing that less choice is available and acting accordingly The area that is tough is the middle ground ndash units in the 10000-25000 sq ft bracketrdquo

another central London submarket facing supply issues is the Southern Fringe according to Jules Hind partner at Farebrother whose firm dipped slightly in the Q2 rankings to 14th place Even good-quality secondhand space is at a premium ldquoSo [RBSrsquos decision to sublet] Bankside 2 amp 3 SE1 was a blessed relief as it brought more supply to the market but then it was takenrdquo he says all 370000 sq ft is under offer to global advertising agency Omnicom

ldquoThat just keeps happeningrdquo says Hind ldquoas soon as a big chunk of space approaches the market it goes So supply is only for a very small period of time and then it comes straight off againrdquo

investmentCompared to the moving and shaking taking place on the leasing tables in Q2 the investment table by contrast showed fewer changes although H2SO previously off the table pushed its way back into the top 10 thanks largely to Scottish widows Investment Partnershiprsquos sale of 22 Grosvenor Square w1 to Indiabulls Real Estate for pound155m BnP Paribas Real Estate also re-entered the table on the back of the sale of new Bond Street House w1 to meyer Bergmann for pound110m

Two firms left the top 10 this quarter Cushman amp wakefield and Deloitte Real Estate Julian Stocks partner at DRE says that although supply remains tight he expects to see plenty of activity over the coming months ldquowe are only mid-cycle so not at all near the top of the market and what wersquore seeing at the moment is that rental growth is still patchyrdquo

after a quiet start to the year total spend shot up in Q2 to pound37bn (more than doubling the pound15bn spent in the first quarter) The largest single deal was Canary wharf Group parent Songbird Estates which sold 10 Upper Bank Street E14 in Docklands to a consortium including China Life Insurance Qatar Holdings and CwG It went for pound795m giving an initial yield of 55 Investment agents suggest that a few more large deals ndash including the pound1bn sale of Canada Square ndash are on the way for the second half of 2014

support valuations with the latest comparables click here to find out more

CITy CORE DOCKLANDSMIDTOWN CITy FRINGESOuTH BANKWEST ENDANALySISCONTENTS

click on THE aREa namE TO GO DIRECT TO maRkET BREakDOwn

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Q2 2014summary statisticsCity core City fringe Docklands Midtown South Bank West End Overall

2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2

Take-up (m sq ft) annual or quarter totalNewRefurb existing 119 032 021 024 005 002 021 000 000 021 021 017 017 019 006 064 027 011 266 105 056Premarketing 031 000 000 001 001 000 000 000 000 115 003 003 000 000 000 002 004 004 149 008 006Secondhand 233 085 053 090 047 021 036 037 016 096 063 037 051 026 015 178 096 057 684 354 199Under Construction 066 058 019 014 010 010 000 023 000 027 022 005 071 010 006 021 022 020 199 146 060Total 450 175 093 128 063 033 057 061 016 260 110 062 139 055 027 265 149 092 1298 613 323Availability (m sq ft) annual quarterly average or quarter end

Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2NewRefurb existing 147 157 185 012 011 016 031 034 037 033 034 029 067 068 067 083 080 076 374 385 410Premarketing 283 330 415 131 175 182 359 351 351 330 314 279 109 110 110 117 093 089 1329 1372 1426Secondhand 387 342 340 124 120 114 155 141 132 174 133 121 076 078 093 244 203 192 1160 1017 992Under Construction 406 324 275 070 084 083 029 005 005 060 090 115 099 038 022 112 133 127 776 674 627Total 1222 1152 1216 337 391 395 575 531 525 597 572 543 352 294 292 556 510 484 3639 3449 3455Availability rate annual average or quarter

940 890 941 579 567 571 995 924 882 661 559 516 849 847 915 528 481 476 759 711 717Under offer and withdrawn (m sq ft) quarter or quarterly average

Under offer 058 091 091 013 020 024 010 016 017 023 045 047 016 033 052 033 041 026 153 246 256Withdrawn 008 016 023 015 008 011 001 002 004 005 029 053 004 004 002 013 008 008 045 067 101Average asking prices (pound per sq ft) quarter or quarterly average

New leases only Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 New Build Existing pound4608 pound5416 pound5592 pound3149 ndash ndash pound3493 pound3502 pound3500 pound4264 ndash ndash ndash pound5909 pound5817 pound7460 pound6206 pound5500 pound3829 pound4322 pound3401Second-hand Grade A pound4134 pound4181 pound4228 pound2852 pound2508 pound2488 pound3345 pound3122 pound3120 pound3911 pound4181 pound4106 pound4041 pound3400 pound3425 pound5732 pound6243 pound6273 pound4003 pound3939 pound3940Investment sales (m sq ft) annual or quarter total

Total sq ft 753 214 110 144 041 033 234 166 147 283 077 057 298 054 036 384 058 041 2096 609 424No Transactions 69 28 13 44 11 9 8 5 2 47 14 7 22 3 2 102 28 16 292 89 49Construction starts (m sq ft) annual or quarter total

Total started 142 091 000 071 023 019 000 007 007 076 055 049 027 001 000 148 078 028 464 260 103Pre-let 042 000 000 008 002 000 000 000 000 025 014 014 010 000 000 017 004 004 102 020 018Speculative 100 091 000 063 021 019 000 007 007 051 046 035 017 001 000 131 074 024 362 240 085Completed space still available (m sq ft) (completion by full year or part of year)

Total completed 074 144 120 036 012 012 000 054 054 036 028 023 056 056 056 131 015 013 333 308 278Still available 022 092 073 003 011 011 000 006 006 022 001 001 012 048 007 031 004 004 091 161 102Future completions (m sq ft) for full year or part of year

Delivery date 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016Total to complete 219 186 000 064 041 000 000 000 199 118 040 028 003 025 000 123 067 060 527 358 288Amount still available 077 111 000 045 040 000 000 000 199 059 016 028 003 025 000 095 063 060 279 255 287 still available 35 60 0 70 98 0 0 0 100 50 40 100 100 100 100 77 94 99 53 71 100

CITy CoRE DoCklANDSmIDToWN CITy FRINGESoUTh BANkWEST ENDANAlySISCoNTENTS

cLick on the area name to go direct to market breakdown

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NE

WS

BUILDING REPOR

TS

LEGAL

OCCUPIERS

AVAILABILITY

PLA

NN

ING D

EA

LS

360deg VIEW OF PROPERTY

A unique all-round view of the commercial property market you simply canrsquot get anywhere else

Make informed business decisions with EGi visit wwwestatesgazettecomEGi360

NE

WS

BUILDING REPOR

TS

LEGAL

OCCUPIERS

AVAILABILITY

PLA

NN

ING D

EA

LS

NEW

S

BUILDING REPORTS

LEGAL

OCCUPIERS

AVAILABILITY

PLAN

NIN

G DEALS

A unique all-round view of the commercial propertymarket you simply canrsquot get anywhere else

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in depthLondon offices market anaLysis

A take-up figure of 928000 sq ft is an improvement on that achieved last quarter However with the

background of a stellar year for the City Core in 2013 the figure looks a little underwhelming in comparison The figure also comes in a little under the five-year quarterly average and with that five-year window including take-up figures during a recession it further emphasises the relatively average performance recorded in Q2

There are reasons to be optimistic with intricacies hidden away in the data A deal that will see MampG take 323000 sq ft at 120 Fenchurch Street is due to complete in December and contributes to the 907000 sq ft that was placed under offer in Q2 This is the highest amount placed under offer in any London market since Q1 2008 when almost 13 million sq ft was placed under offer in the City Core That peak came just before the economic downturn and the

CITY COREq22014overview

n Take-up was 33 lower than Q2 2013

n Average deal size was 12902 sq ft compared with 14010 sq ft in Q1 2014

n The financial sector accounted for 35 of take-up in Q2 relative to 36 last quarter

n TMT accounted for 14 up from 3 last quarter

n The insurance sector accounted for 8 down from 15 in the same period last year

take-up

key deaLs

take-up by sector

avaiLabiLity

asking rent

Address Tenant Size (sq ft)

New Ludgate 30 Old Bailey EC4 Mizuho Bank 192929

Salesforce Tower 120 Bishopsgate EC2 Salesforcecom 50536

Finsbury Dials 20 Finsbury Street EC2 Post Office 53293

65 Gresham Street EC2 GVA 49483

111 Old Broad Street EC2 China Construction Bank 36636

0

1

2

3

4

5

6

201420132012201120102009

Sq ft (millions)

n new-build n secondhand

6

9

12

15

14 Q214 Q113 Q413 Q313 Q213 Q112 Q412 Q312 Q212 Q111 Q411 Q311 Q211 Q110 Q410 Q310 Q2

n new-build (existing) n secondhand

under-offer space did not translate into lettings with the subsequent five quarters recording take-up of only 527000 sq ft on average

Further cause for optimism comes in the availability rate for the City Core which has moved out for the second successive quarter and now stands at 941 having dipped to 793 at the end of 2013 The figure has been buoyed by Henderson Global Investorsrsquo 40 Leadenhall Street scheme and WR Berkleyrsquos 52-54 Lime Street both now being actively marketed Both will deliver much-needed new space to the City Core market although WR Berkley is expected to occupy around 80000 sq ft of its 372000 sq ft development

A lack of new stock is a concern for the City Core with no construction starts in Q2 Of the space due to complete this year 65 is already prelet 40 of the stock due to be delivered in 2015 is also prelet A number of high-profile developments including the

30

40

50

60

20142013201220112010

pound psf

Q2

AssociAtions

construction

FinAnciAl

insurAnceindustry amp mAnuFActuring ProFessionAl

tmt

trAnsPort

city core continued

agrave

CLiCk hErE FOr iNTErACTiVE MAP rsaquo CLiCk hErE FOr iNTErACTiVE MAP rsaquo

CLiCk hErE FOr DATA rsaquo

CLiCk hErE FOr DATA rsaquo

CLiCk SChEME FOr ThE FuLL BuiLDiNG rEPOrT rsaquo

support vaLuations with the Latest comparabLes cLick here to find out more

other

ProPerty

services

retAil amp leisure

in depthLondon offices market anaLysis

A take-up figure of 928000 sq ft is an improvement on that achieved last quarter However with the

background of a stellar year for the City Core in 2013 the figure looks a little underwhelming in comparison The figure also comes in a little under the five-year quarterly average and with that five-year window including take-up figures during a recession it further emphasises the relatively average performance recorded in Q2

There are reasons to be optimistic with intricacies hidden away in the data A deal that will see MampG take 323000 sq ft at 120 Fenchurch Street is due to complete in December and contributes to the 907000 sq ft that was placed under offer in Q2 This is the highest amount placed under offer in any London market since Q1 2008 when almost 13 million sq ft was placed under offer in the City Core That peak came just before the economic downturn and the

CITY COREq22014overview

n Take-up was 33 lower than Q2 2013

n Average deal size was 12902 sq ft compared with 14010 sq ft in Q1 2014

n The financial sector accounted for 35 of take-up in Q2 relative to 36 last quarter

n TMT accounted for 14 up from 3 last quarter

n The insurance sector accounted for 8 down from 15 in the same period last year

take-up

key deaLs

take-up by sector

avaiLabiLity

asking rent

Address Tenant Size (sq ft)

New Ludgate 30 Old Bailey EC4 Mizuho Bank 192929

Salesforce Tower 120 Bishopsgate EC2 Salesforcecom 50536

Finsbury Dials 20 Finsbury Street EC2 Post Office 53293

65 Gresham Street EC2 GVA 49483

111 Old Broad Street EC2 China Construction Bank 36636

0

1

2

3

4

5

6

201420132012201120102009

Sq ft (millions)

n new-build n secondhand

6

9

12

15

14 Q214 Q113 Q413 Q313 Q213 Q112 Q412 Q312 Q212 Q111 Q411 Q311 Q211 Q110 Q410 Q310 Q2

n new-build (existing) n secondhand

under-offer space did not translate into lettings with the subsequent five quarters recording take-up of only 527000 sq ft on average

Further cause for optimism comes in the availability rate for the City Core which has moved out for the second successive quarter and now stands at 941 having dipped to 793 at the end of 2013 The figure has been buoyed by Henderson Global Investorsrsquo 40 Leadenhall Street scheme and WR Berkleyrsquos 52-54 Lime Street both now being actively marketed Both will deliver much-needed new space to the City Core market although WR Berkley is expected to occupy around 80000 sq ft of its 372000 sq ft development

A lack of new stock is a concern for the City Core with no construction starts in Q2 Of the space due to complete this year 65 is already prelet 40 of the stock due to be delivered in 2015 is also prelet A number of high-profile developments including the

30

40

50

60

20142013201220112010

pound psf

Q2

AssociAtions

construction

FinAnciAl

insurAnceindustry amp mAnuFActuring ProFessionAl

tmt

trAnsPort

city core continued

agrave

CLiCk hErE FOr iNTErACTiVE MAP rsaquo CLiCk hErE FOr iNTErACTiVE MAP rsaquo

CLiCk hErE FOr DATA rsaquo

CLiCk hErE FOr DATA rsaquo

CLiCk SChEME FOr ThE FuLL BuiLDiNG rEPOrT rsaquo

support vaLuations with the Latest comparabLes cLick here to find out more

other

ProPerty

services

retAil amp leisure

0sq ft put under construction

in q2

928949sq ft Let

1216m sq ft

avaiLabLe

pound5850per sq ft

egi consensus rent

941avaiLabiLity

rate

526msq ft

avaiLabLe and ready to occupy

Leadenhall Building Moorgate Exchange 10 Finsbury Square The Banking Hall and 67 Lombard Street completed this quarter Almost 12 million sq ft was delivered but of that 470000 sq ft is prelet

The effect of the squeeze on new stock is that rents are being pushed upwards with our average new-build asking rent figure now standing at pound5592 per sq ft the highest level recorded since Q3 2008 Elsewhere our consensus rents panel places a hypothetical

n 119 million sq ft completed this quarter

n 61 of the space that completed is still available

n 0 sq ft went under construction this quarter

n 405m sq ft is due to complete before the end of 2015

deveLopment future deveLopment

investment saLesdeveLopment under construction

Address Price (poundm) Size (sq ft)

Alban Gate London Wall EC2 pound300 368000

111 Old broad Street EC2 pound111 107000

1 Poultry EC2 pound110 115000

Procession house 55 Ludgate hill EC4 pound73 90000

107 Leadenhall Street EC3 pound61 124000

0

05

1

15

2

25

201620152014

Sq ft (millions)

0

5

10

15

20

201420132012201120102009

Sq ft (millions)

n prelet n speculative n prelet n speculative

n Supply increased 128 million sq ft quarter-on-quarter

n Premarketed space accounts for 34 of all City Core supply

suppLy

Address Completion date Size speculative (sq ft)

Bloomberg Place Bucklersbury EC4 2015 380000

Angel Court Tower EC2 2015 365000

Leadenhall Building 122 Leadenhall Street EC3 2014 289000

Moorgate Exchange 72 Fore Street EC2 2014 221000

71 Queen Victoria Street EC4 2014 187000

0

05

1

15

2

25

3

201420132012201120102009

Sq ft (millions)

n newrefurb existing n premarketing n secondhand n under construction

20000 sq ft grade-A unit on a 10-year lease in the Gresham Street Leadenhall Street Broadgate area at pound5850 per sq ft with 22 months rent-free which is an increase of 24 quarter-on-quarter

The investment market was active this quarter with just over pound1bn of deals completing The largest of those deals was Blackstonersquos pound300m (58 net initial yield) purchase of the long leasehold of Alban Gate 125 London Wall from the Carlyle Group

headLine figures

city core docklandsmidtown city fringesouth bankwest endanalysiscontents

cLick on THE AREA nAME TO GO DIRECT TO MARkET BREAkDOWn

for any data queries pLease contact tompiLkingtonestatesgazettecom or caLL 020 7911 1775

in depthLondon offices market anaLysis

While the City Core may have had a relatively average quarter in terms of take-up the West End

outperformed Take-up at 919000 sq ft was up 74 up on the same period last year and at the highest level this market has seen since Q2 2010 when a marginally higher figure of 925000 sq ft was recorded The headline in the West End this quarter was the 140000 sq ft preletting of 1 Fitzroy Place by Estee Lauder The deal represents one of the biggest prelets ever seen in this sector and provides a welcome fillip to a market whose five-year quarterly average take-up figure is 678000 sq ft The West End market tends not to be typified by preletting but this quarter it accounted for 26 of take-up with other significant prelets including KPMG signing for 37000 sq ft at 20 Grosvenor Street

The consequence of the high level of letting and preletting is

west endq22014overview

n Take-up increased 74 year-on-year

n The average deal size was 9378 sq ft this quarter up from 6541 sq ft last quarter

n TMT dropped from 17 of the total to 8

n The financial sector accounted for 19 of take-up a decrease from 23 last quarter

take-up

key deaLs

take-up by sector

avaiLabiLity

asking rent

Address Tenant Size (sq ft)

1 Fitzroy Place Mortimer Street W1 Estee Lauder Companies 140443

5 Langham Place W1 The Office Group 66059

10 New Burlington Street W1 Tudor Capital 38276

20 Grosvenor Street W1 KPMG 36909

48 Warwick Street W1 Avanta Business Centres 34487

0

05

1

15

2

25

3

35

H1 201420132012201120102009

Sq ft (millions)

n new-build n secondhand

0

2

4

6

8

10

12

14 Q214 Q113 Q413 Q313 Q213 Q112 Q412 Q312 Q212 Q111 Q411 Q311 Q211 Q110 Q410 Q310 Q2

n new-build (existing) n secondhand

noticed in the availability rate which has dropped to 476 ndash the lowest level since Q1 2008 Of the 48 million sq ft that is being marketed in the West End only 34 is new build or refurbished space ndash and of that 890000 sq ft is yet to go under construction The figure of 34 is the lowest of all of the six markets that this report looks at and is significantly lower than the second-lowest figure which is 50 recorded in Docklands

The total new space to be delivered into this market between now and the end of 2016 is 25 million sq ft and encouragingly 86 of that space is still available Of the space to be delivered there is a focus on Victoria with Land Securities set to deliver 480000 sq ft at Nova in 2016 and a further 190000 sq ft at the Zig Zag Building in early 2015 Completions this quarter totalled 130000 sq ft and included 94000 sq ft at the refurbished 10 New Burlington Street

40

60

80

100

20142013201220112010

pound psf

Q2

ConstruCtion

FinanCial

others

ProPerty

retail amp leisure

serviCes

health amp eduCation

Central amp loCal government

ProFessional

utilities

tmt

transPort

West end continued

agrave

CLiCK hErE FOr iNTErACTivE MAP rsaquo CLiCK hErE FOr iNTErACTivE MAP rsaquo

CLiCK hErE FOr dATA rsaquo

CLiCK hErE FOr dATA rsaquo

CLiCK SChEME FOr ThE FuLL BuiLdiNG rEPOrT rsaquo

understand current investment trends across the capitaL cLick here to find out more

industry amp manuFaCturing

assoCiations

pound7667per sq ft

egi consensus rent

919111 sq ft Let

484m sq ft

avaiLabLe

280000sq ft put under

construction in q2

476 avaiLabiLity

rate

268msq ft

avaiLabLe and ready to occupy

where Tudor Capital took 38000 sq ft at a rent rumoured to be in excess of pound100 per sq ft The focus of development on Victoria means that there are still shortages of space across other submarkets in the West End and as a result second-hand rents continue their upward trajectory as supply becomes increasingly limited The average second-hand asking rent in this market is now pound6273 per sq ft and is approaching the peak of pound6490 per sq ft seen in Q2 2008

n 130000 sq ft completed in Q2

n 44580 sq ft of that completed space is still available

n 25 million sq ft is due to complete before the end of 2016

n 87 of the space under construction is speculative

deveLopment future deveLopment

investment saLesdeveLopment under construction

Address Price (poundm) Size (sq ft)

22 hanover Square W1 pound155 74000

New Bond Street house 1-5 New Bond Street W1 pound110 11000

Marylebone Gardens 35 Marylebone high Street W1 pound75 42000

130 Shaftesbury Avenue W1 pound67 59000

50 Broadway SW1 pound60 50000

0

03

06

09

12

15

201620152014

Sq ft (millions)

0

2

4

6

8

10

201420132012201120102009

Sq ft (millions)

n prelet n speculative n prelet n speculative

n Supply dropped 520000 sq ft quarter-on-quarter

n Premarketed space accounts for 18 of all West End supply

n There is 192 million sq ft of secondhand available space in the West End

suppLy

Address Completion date Size speculative (sq ft)

Nova Terminus Place SW1 2016 480000

Zig Zag Building SW1 2015 190000

16 Babmaes Street SW1 2014 151000

Sceptre house 169-173 regent Street W1 2014 150000

Quadrant 2 regent Street 2015 134000

0

05

1

15

2

201420132012201120102009

Sq ft (millions)

n newrefurb existing n premarketing n secondhand n under construction

Much like the City Core the West End attracted a lot of investment activity with transactions totalling pound723m The largest transaction was the pound155m sale of 22 Hanover Square initially bids of pound130m were sought for the property which was eventually sold by Scottish Widows Investment Partnership to Indiabulls Real Estate JLL currently occupies the building but is due to vacate with residential conversion mooted

headLine figures

city core docklandsmidtown city fringesouth bankwest endanalysiscontents

cLick on THE aREa NaME TO GO DIRECT TO MaRKET BREaKDOWN

for any data queries pLease contact tompiLkingtonestatesgazettecom or caLL 020 7911 1775

in depthLondon offices market anaLysis

Midtown take-up increased 29 on Q1 registering 620000 sq ft TMT was the largest driver of take-up

accounting for 35 with lettings to publisher Euromoney Institutional Investor (two on Bouverie Street totalling 63000 sq ft) fellow publisher Guardian Media Group which took 28000 sq ft at Midland Goods Shed and Warner Brothers which took 20000 sq ft at 200 Grayrsquos Inn Road

Midtown came second only to the City Core in terms of lettings in new-build or refurbished ready-to-occupy space with 173000 sq ft Once again the Euromoney Institutional Investor letting played a part in this with the deal at 6-8 Bouverie Street being in refurbished space Elsewhere Gilead Sciences took 28000 sq ft at 280 High Holborn while Lego took 25000 sq ft in the recently refurbished 8-10 New Fetter Lane

Since the beginning of 2013 with the exception of Q3 Midtown take-up figures have been consistently above the five-year quarterly

midtownq22014overview

n Take-up was up 10 on the same period last year

n 8 of take-up was in under-construction space down from 37 last quarter

n The professional sector increased from 7 last quarter to 9 this quarter

n The TMT sector was the most prevalent accounting for 35 of take-up down from 54 last quarter

n Central and local government has disappeared from the take-up figures this quarter

take-up

key deaLs

take-up by sector

avaiLabiLity

asking rent

Address Tenant Size (sq ft)

33 Holborn EC1 Octopus Investments 61768

6-8 Bouverie Street EC4 Euromoney Institutional Investor 44656

Carmelite Riverside 50 Victoria Embankment EC4 Gibson Dunn amp Crutcher 39084

Kingrsquos Cross Central Midland Goods Shed York Way NW1 Guardian Media Group 28000

280 High Holborn WC1 Gilead Sciences 27891

0

05

1

15

2

25

3

H1 201420132012201120102009

Sq ft (millions)

n new-build n secondhand

4

6

8

10

12

14 Q214 Q113 Q413 Q313 Q213 Q112 Q412 Q312 Q212 Q111 Q411 Q311 Q211 Q110 Q410 Q310 Q2

n new-build (existing) n secondhand

average so the availability rate has fallen from 719 at the beginning of 2013 to 516 at the end of this quarter Of the stock available there is only 287000 sq ft of new or refurbished ready-to-occupy space The most significant construction start of the quarter was at 1 New Street Square where 276000 sq ft will be delivered by mid 2016

The largest investment deal of the quarter was Tishman Speyerrsquos purchase of 33 Holborn for pound311m representing an initial yield of 48

30

40

50

60

20142013201220112010

pound psf

Q2

AssociAtions

construction

FinAnciAl

others

ProPerty retAil amp leisure

heAlth amp educAtion

ProFessionAl

tMt

city core docklandsmidtown city fringesouth bankwest endanalysiscontents

cLick on THE aREa NaME TO GO dIRECT TO MaRkET BREakdOWN

pound5957per sq ft egi

consensus rent

15msq ft avaiLabLe and

ready to occupy

498000 sq ft put under

construction in q2

headLine figures

ClICK HERE fOR INTERACTIVE MAp rsaquo ClICK HERE fOR INTERACTIVE MAp rsaquo

ClICK HERE fOR DATA rsaquo

ClICK HERE fOR DATA rsaquo

ClICK SCHEME fOR THE full BuIlDING REpORT rsaquo

industry amp MAnuFActuring

receive a weekLy update on the London office market cLick here to find out more

services

in depthLondon offices market anaLysis

As is often the case for this market take-up has dropped back following strong figures last quarter

Take-up of 159000 sq ft was recorded in Q2 with the largest deal a 61000 sq ft letting to GDF Suez Energy at 25 Canada Square

Docklands grabbed the headlines for the wrong reasons in Q2 with take-up figures hit by the decisions of the Financial Conduct Authority and Transport for London who both chose to overlook Docklands and take a combined total of 675000 sq ft in Stratford This represents a significant threat to Docklands which trades on the idea that it is the only Central London market that offers rents at a discount Should occupiers determine Stratford as a viable alternative then Docklands might have a battle on its hands

There were only two investment deals in Docklands this quarter but they stand as a reminder that investors still see value in the

docklandsq22014overview

n Take-up increased 76 on the Q1 2013 figure

n But take-up was down 65 on last quarter

n Central and local government which did not feature last quarter accounted for 21 of take-up

n The professional sector which accounted for 46 last quarter only accounted for 8 of take-up this quarter

n Docklands mainstay finance did not feature this quarter

take-up

key deaLs

take-up by sector

avaiLabiLity

asking rent

Address Tenant Size (sq ft)

25 Canada Square E14 GDF Suez Energy 61026

11 Westferry Circus E14 Ministry of Justice 33272

1 Canada Square E14 High Speed Two 16140

40 Bank Street E14 Begbies Traynor 12124

1 Westferry Circus E14 Lycatel Health 8322

0

05

1

115

22

25

H1 2014420132012201120102009

Sq ft (millions)

n new-build n secondhand

4

6

8

10

12

14 Q214 Q113 Q413 Q313 Q213 Q112 Q412 Q312 Q212 Q111 Q411 Q311 Q211 Q110 Q410 Q310 Q2

n new-build (existing) n secondhand

market A consortium comprising China Life Insurance Company Qatar Holdings and Canary Wharf Group purchased 10 Upper Bank Street for pound795m while Morgan Stanley completed the sale-and-leaseback of 25 Cabot Square for pound225m

Construction starts were muted However site preparations are under way at 10 Bank Street where a dam has to be built before construction on the 11m sq ft office development can begin

20

30

40

50

20142013201220112010

pound psf

Q2

Industry amp manufacturIng

tmtProfessIonaltransPort

city core docklandsmidtown city fringesouth bankwest endanalysiscontents

cLick on THE ArEA nAME To Go DIrECT To MArkET BrEAkDoWn

169m sq ft avaiLabLe and

ready to occupy

pound3808per sq ft

egi consensus rent

882 avaiLabiLity

rate

headLine figures

CLiCk HErE For inTErACTivE MAp rsaquo CLiCk HErE For inTErACTivE MAp rsaquo

CLiCk HErE For DATA rsaquo

CLiCk HErE For DATA rsaquo

CLiCk SCHEME For THE FuLL BuiLDinG rEporT rsaquo

for any data queries pLease contact tompiLkingtonestatesgazettecom or caLL 020 7911 1775

utIlItIes

others

health amp educatIon

central amp local government

In depthLondon offIces market anaLysIs

The City Fringe continued its consistent run of lettings registering 329000 sq ft let in Q2 As is

often the case in this market TMT drove take-up accounting for 35 of the total However this quarter it was joined by transport which accounted for 20 The transport element came as a result of Clarksonsrsquo decision to take 77000 sq ft of space at Max Propertyrsquos Commodity Quay which is being refurbished

This market often struggles for new-build or refurbished space but the availability figures received a boost this quarter as Helical Barrsquos The Bower is now included The development will bring 18500 sq ft of new space in addition to 288000 sq ft of refurbished space The Warehouse element began construction this quarter and at 122000 sq ft it represents the largest construction start of Q2 The availability rate has stayed fairly consistent at 571

City fringeq22014overvIew

n At 329000 sq ft take-up was 10000 sq ft above the five-year quarterly average

n The average deal size in the City Fringe was 7841 sq ft

n TMT accounted for 30 down from 34 last quarter

n Transport which did not feature last quarter accounted for 20 of take-up this quarter

take-up

key deaLs

take-up by sector

avaILabILIty

askIng rent

Address Tenant Size (sq ft)

Commodity Quay East Smithfield E1 Clarksons 77436

The Lever Building 85 Clerkenwell Road EC1 Blinkbox Entertainment 30637

66 Prescot Street E1 Bank of Tokyo-Mitsubishi 25705

Lloydrsquos Chambers 1 Portsoken Street E1 BDW Trading 20898

38 Northampton Road EC1 Orangebox 16244

0

03

06

09

12

15

H1 201420132012201120102009

Sq ft (millions)

n new-build n secondhand

4

6

8

10

12

14 Q214 Q113 Q413 Q313 Q213 Q112 Q412 Q312 Q212 Q111 Q411 Q311 Q211 Q110 Q410 Q310 Q2

n new-build (existing) n secondhand

Our consensus rents panel again points to rising rents in this market At the Aldgate price point used for City Fringe the average rent calculated with the input of the panel for a hypothetical 20000 sq ft grade-A unit on a 10-year lease was pound4320 with 23 months rent free which is an increase of 12 on last quarter

The largest investment deal of the quarter was the sale of 99 City Road for pound102m to London amp Regional

10

20

30

40

50

20142013201220112010

pound psf

Q2

city core docklandsmidtown city fringesouth bankwest endanalysiscontents

cLIck on THe AReA nAMe TO gO diReCT TO MARkeT BReAkdOWn

571avaILabILIty

rate

329351 sq ft Let

190000 sq ft put under

constructIon In q2

headLIne fIgures

ConstruCtion

others

retail amp leisure

industry amp ManufaCturing

health amp eduCation

tMt

ProPerty

insuranCe

Professional

CLiCk hERE fOR iNTERACTivE MAP rsaquo CLiCk hERE fOR iNTERACTivE MAP rsaquo

CLiCk hERE fOR DATA rsaquo

CLiCk hERE fOR DATA rsaquo

CLiCk SChEME fOR ThE fuLL BuiLDiNg REPORT rsaquo

finanCial

assoCiations

IdentIfy new deveLopment opportunItIes cLIck here to fInd out more

serviCes

transPort

in depthLondon offices market anaLysis

For the second consecutive quarter this market recorded 22 deals However take-up dipped

slightly from 282000 sq ft to 269000 sq ft Despite the dip the year-to-date take-up figure is 85 above the level that was recorded for the first two quarters of 2013

Take-up on the South Bank was well balanced with TMT accounting for 20 professional accounting for 19 and property 16 The largest letting of the quarter was the 55000 sq ft letting to Howard Kennedy at One London Bridge

The largest completion of the quarter was 240 Blackfriars Road where there is 71516 sq ft available Worryingly there were no construction starts in the Southern fringe this quarter and the pipeline is limited with South Bank Tower ndash which should be completed late in 2015 ndash the only sizable space to be delivered

South bankq22014overview

n The professional sector which did not feature last quarter accounted for 19 of take-up this quarter

n The property sector dropped 30 last quarter to 16 this quarter

take-up

key deaLs

take-up by sector

avaiLabiLity

asking rent

Address Tenant Size (sq ft)

1 London Bridge SE1 Howard Kennedy 54552

240 Blackfriars Road SE1 Ramboll 31204

Blue Fin Building Southwark Street SE1 Totaljobs 29095

Cottons Centre Hays Lane SE1 Network Rail 22804

240 Blackfriars Road SE1 Instant Managed Offices 17388

0

03

06

09

12

15

H1 201420132012201120102009

Sq ft (millions)

n new-build n secondhand

4

6

8

10

12

14 Q214 Q113 Q413 Q313 Q213 Q112 Q412 Q312 Q212 Q111 Q411 Q311 Q211 Q110 Q410 Q310 Q2

n new-build (existing) n secondhand

before the end of 2016 The only consolation is that all of the space to be delivered before the end of 2016 is still available

The South Bank Tower opportunity was not missed by Hermes Real Estate and Canada Pension Plan Investment Board which bought the office and retail elements for pound150m Elsewhere 20 Blackfriars Road was purchased by a joint venture between a subsidiary of IGB and Tower Ray for pound1 while paying off pound65m of debt

10

20

30

40

50

60

70

80

20142013201220112010

pound psf

Q2

city core docklandsmidtown city fringesouth bankwest endanalysiscontents

cLick on THE aREa naME TO GO DIRECT TO MaRKET BREaKDOWn

560000 sq ft construction

compLeted in q2

16m sq ft avaiLabLe and

ready to occupy

pound5279 per sq ft egi

consensus rent

headLine figures

AssociAtions

construction

services

industry amp mAnufActuring

ProfessionAl

CLICK HERE FOR INTERACTIvE MAp rsaquo CLICK HERE FOR INTERACTIvE MAp rsaquo

CLICK HERE FOR dATA rsaquo

CLICK HERE FOR dATA rsaquo

CLICK SCHEME FOR THE FuLL BuILdINg REpORT rsaquo

ProPerty

for any data queries pLease contact tompiLkingtonestatesgazettecom or caLL 020 7911 1775

tmt

others

heAlth amp educAtion

n Q2 take-up is 57 higher than the same period last year

n The average deal size in Q2 was 12161 sq ft

finAnciAl