market momentum builds - jll · q1q1 q1q1 q1 q1 £95.00 £95.00 £97.50 £57.00 £55.00 £57.00...

The Central London Market Q1 2013

Take-up in the first quarter amounted to 2.5 million sq ft, the highest quarterly total since the end of 2010 and a 28% increase on the figure for Q1 2012. However, this figure does include the 863,000 sq ft forward sale to Google at King’s Cross. There are a number of signs that activity will build later this year. The amount of space under offer at quarter end stood at 1.9 million sq ft, the highest since Q3 2011, while active underlying demand increased by 13.6% over the three months. Some £2.6 billion of stock was traded over the first quarter, down20% compared to Q1 2012. This reflects an increasing supplyshortage, with both demand from overseas investors andcompetition for sites remaining intense.

Market momentum builds

2

Summary of statistics

Sub £10m £10-£50m £80m+ Sub £40m £40-£125m £125m+ 4.00% 4.25% 5.00% 5.00% 5.25% 5.25%

Sizes in 000 sq ft

Units of 5,400 sq ft and aboveTake-Up

TOTALS Grade A

Off-planUnder construction

New completedSecond hand (incl. refurbished)

100,000+ 50,000 - 99,999

10,000 - 49,999Sub 10,000

Banking & FinanceProfessional Services

Service IndustriesManufacturing Industries

Public Admin. & InstitutionsOther

Net Absorption

TOTALS

Prime Rents & Rent Free

Prime RentRent Free (months)

Net Effective

Demand (As at 31 March 2013)

TOTALS100,000+

50,000 - 99,999 10,000 - 49,999

Sub 10,000Banking & Finance

Professional ServicesService Industries

Manufacturing IndustriesPublic Admin. & Institutions

Other

Supply (As at 31 March 2013)

Total Current SupplyVACANCY RATE (% of total stock)

100,000+ 50,000 - 99,999

10,000 - 49,999Sub 10,000

Speculative Development(As at 31 March 2013)

TOTALS2013201420152016

Capital Transactions£millions

TOTALSUK Purchasers

Overseas PurchasersProperty Companies

InstitutionsPrivates & Other Investors

Prime Yield (As at 31 March 2013)

West End City Docklands Central London 2012 2013 2012 2013 2012 2013 2012 2013 Q1 Q1 Q1 Q1

2,521 1,364 4,160 1,069 475 54 7,156 2,486 1,730 1,305 3,120 802 228 54 5,078 2,160 20 863 190 159 0 0 209 1,022 491 11 219 249 0 0 711 259 237 111 692 56 97 33 1,025 200 1,773 379 3,059 605 378 21 5,210 1,005 127 863 673 127 165 0 965 990 256 69 681 198 75 0 1,012 267 1,426 327 1,922 485 203 33 3,551 845 713 104 884 259 32 21 1,628 384 13% 6% 13% 24% 10% 0% 11% 14% 7% 4% 22% 10% 1% 0% 17% 6% 52% 79% 51% 50% 21% 88% 51% 67% 10% 2% 5% 12% 0% 0% 8% 6% 14% 7% 7% 1% 68% 0% 10% 5% 5% 1% 1% 3% 0% 12% 3% 2%

2012 2013 2012 2013 2012 2013 2012 2013 Q1 Q1 Q1 Q1 382 -203 -476 -328 27 0 -67 -531 2012 2012 2013 2012 2012 2013 2012 2012 2013 Q1 Q1 Q1 Q1 Q1 Q1 £95.00 £95.00 £97.50 £57.00 £55.00 £57.00 £38.50 £38.50 £38.50 16 16 16 24 24 24 £82.33 £82.33 £86.93 £47.02 £44.00 £47.02

Total Active Potential Total Active Potential Total Active Potential Total Active Potential 5,302 3,078 2,224 9,565 5,508 4,057 1,825 837 987 13,004 9,223 3,781 2,190 1,000 1,190 4,000 1,952 2,047 1,342 420 922 6,191 4,470 1,720 1,327 875 452 2,000 992 1,007 350 285 65 2,002 1,185 817 1,580 1,072 508 3,015 2,058 957 132 132 0 4,144 2,990 1,154 204 131 73 551 505 46 0 0 0 666 576 90 5% 6% 4% 26% 19% 36% 54% 17% 43% 23% 18% 30% 15% 19% 10% 26% 35% 12% 19% 76% 0% 22% 29% 14% 61% 57% 65% 43% 39% 49% 19% 2% 57% 42% 41% 45% 15% 11% 21% 2% 2% 0% 5% 5% 0% 8% 7% 10% 4% 6% 1% 3% 3% 2% 3% 0% 0% 4% 5% 2% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Total Grade A Grade B Total Grade A Grade B Total Grade A Grade B Total Grade A Grade B 3,730 2,835 775 7,979 5,930 1,819 1,343 1,280 63 13,052 10,044 2,658 4.1% 3.1% 0.9% 7.4% 5.5% 1.7% 6.6% 6.3% 0.3% 5.9% 4.6% 1.2% 470 470 0 2,846 2,846 0 573 573 0 3,889 3,889 0 673 533 71 772 712 60 305 305 0 1,750 1,550 130 1,852 1,332 483 3,387 1,867 1,378 403 360 44 5,643 3,559 1,905 734 499 222 975 505 381 61 41 19 1770 1046 622 Total 100,000 + 50,000 Total 100,000 + 50,000 Total 100,000 + 50,000 Total 100,000 + 50,000 -99,999 -99,999 -99,999 -99,999 2,733 1,785 712 4,457 3,856 550 285 272 0 7,475 5,913 1,262 1,135 697 322 2,105 1,657 398 285 272 0 3,525 2,626 720 930 420 390 2,352 2,199 152 0 0 0 3,282 2,619 542 188 188 0 0 0 0 0 0 0 188 188 0 480 480 0 0 0 0 0 0 0 480 480 0

2012 2013 2012 2013 2012 2013 2012 2013 Q1 Q1 Q1 Q1

5,895 953 9,026 1,146 498 512 15,420 2,611 2,126 290 1,682 265 117 47 3,926 602 3,769 663 7,344 881 340 465 11,453 2,009 1,741 288 1,366 194 90 430 3,197 911 1,532 48 5,701 663 27 82 7,261 793 2,622 618 1,959 233 340 0 4,921 734

Summary of statistics

On Point • Central London Market • First Quarter 2013 3

The Economy for London BulletinApril 2013After an upbeat start to the year, global sentiment has weakened over recent weeks. On the positive side, financial markets are still buoyant and the US recovery remains on track. A fiscal sequester implying substantial spending cuts remains in place in the US, but has not yet discouraged the upturn in private sector activity. Emerging markets also seem to be gathering steam, notwithstanding lingering worries of overheating in China’s property sector.

As ever, the biggest global concerns originate in Europe. Italy’s post-election uncertainty has not been resolved and threatens fiscal progress there. But these risks have been overshadowed more recently by the €10 billion bail-out in Cyprus. The immediate crisis there tested Eurozone unity to the limit, briefly raising the possibility of the first ejection from the single currency. The final deal then inflicted heavy losses on uninsured deposit and bond holders, setting worrying precedents for future packages. Not surprisingly, these developments have reversed some of the last year’s steady improvement in financial confidence across the Eurozone fringe.

The recent news has been slightly more positive in the UK. After a contraction at the end of last year, the first quarter of 2013 showed a return to growth. This meant that the triple dip recession was avoided and came as a pleasant surprise after a mixed bag of monthly data for the quarter. But it has not all been positive. The Chancellor’s latest Budget rejected any calls for more short-term fiscal stimulus. The loss of the UK’s triple A rating weeks before did not bring any change of heart and the package involved a few small injections of Government support plus more cuts to welfare and spending.

At the same time, the Office for Budgetary Responsibility released its latest forecasts for UK growth. These showed a significant downgrade to short-term prospects since last autumn, with GDP expected to rise by just 0.6% in the current year (down from 1.2% in the autumn).

This is consistent with the latest GDP result and an outlook of steady, but slow, improvement in the UK this year. But improvement will be fragile and in the current uneasy global climate, the risks will also remain on the downside.

Estimates suggest that London remains ahead of the national trend, particularly on jobs, but activity has slowed in the latest measures. Business sentiment has mirrored the UK pattern over most of the last 12 months, with the latest Lloyds-TSB PMI release giving no hint of any early pick-up. Oxford Economics estimate that the capital’s economy grew by just over 1% last year, compared with a flat UK performance. In 2013, the gap is smaller with the capital stabilising against a slightly better UK picture, but the Central London economy in particular is set to maintain a clear performance lead over the medium term.

The Central London Market

Market Indicators (QoQ) West End City Docklands

Take-up F A F

Supply E A A Overall Vacancy Rate E A A

Grade A Vacancy Rate A A A

Occupier Demand A A F

Prime Rent F E E

Under Construction F F F

Investment Volumes A A F

“The first quarter of 2013 showed a return to growth.”

Chart GDP growth forecasts comparedSource: Jones Lang LaSalle

% of

fore

casts

2012 2013-16

5

4

3

2

1

0

-1

-0.3% -0.5% 0.6%

2.1% 2.0% 2.6%Inner London

Rest of UK

UK


% of

fore

casts

2012 2013-16

5

4

3

2

1

0

-1

-0.3% -0.5% 0.6%


Rest of UK

UK


% of

fore

casts

2012 2013-16

5

4

3

2

1

0

-1

-0.3% -0.5% 0.6%


Rest of UK

UK

GDP Growth of Forecasts Compared Source: TBC

% of

fore

casts

2015-1720142013

4

3

2

1

0 Central London

Greater London

UK

Occupier Take-up and Net AbsorptionThe first quarter has seen some very encouraging signs in London’s office market. While it might be too early to announce that a full recovery is under way, the statistics do suggest that momentum will continue to build over the coming months. Firstly, January to March saw some 2.5 million sq ft let, the highest quarterly total since the end of 2010 and a 28% increase on the figure for Q1 2012.

Admittedly a significant chunk of this is the 863,000 sq ft presale to Google at King’s Cross, and when this is taken out of the figures the total is much less impressive. Nevertheless, the year-to-date figure, at 7.9 million sq ft, is the highest for 18 months, albeit still marginally below the 10-year average of 9.3 million sq ft.

Our prognosis of gradual improvement is based more on deals yet to take place. The amount of space under offer at quarter end stood at 1.9 million sq ft, the highest since Q3 2011 and an 11.2% improvement on the situation at the end of 2012.

Companies remain slow to commit to decisions in an economically uncertain climate, particularly as risks have been intensified by the problems in Cyprus and tensions in East Asia, and deals are taking longer to close than is typical. Nevertheless this figure still suggests that leasing volumes will rise over the remainder of 2013. The TMT sector accounted for almost half of all take-up, at 47%, up from 24% in 2012, although this figure is distorted by the size of the Google deal. Interestingly, there seems to be some pick up from finance & banking, which took around 344,900 sq ft over the three months, the highest since Q1 2011 – although still around half the longer-term average for the sector. The Google deal also distorts the statistics on the size of space let, meaning that units over 200,000 sq ft accounted for 35% of take-up over the quarter. Looking at the data, it can be seen that smaller deals comprise a disproportionate amount of the total. Indeed, only 5% of the non-Google take-up was in units of 100,000 sq ft – this represents a single deal, the 116,300 sq ft pre-let to Liberty Mutual at 20 Fenchurch Street. Meanwhile, over a third (37%) of space let was in units of between 10,000 sq ft and 25,000 sq ft.

Central London: Net Absorption 2004-2013 Q1Source: Jones Lang LaSalle

Net

abs

orpt

ion

m s

q ft

10

8

6

4

2

0

-2

-4

-62013(YoY)201220112010200920082007200620052004

Docklands

City

West End

Central London: Demand and Supply Balance 2013 Q1Source: Jones Lang LaSalle

Total

size

m sq

ft

Size Band (sq ft)

5-1000010-5000050-100000100000 +

109876543210

17 10

30

23

114

20235

1

Total Existing Supply

Speculative Construction

Active Demand

244

19 1477



Net a

bsor

ption

m sq

ft

10

8

6

4

2

0

-2

-4

-62011201020092008200720062005200420032002

Docklands

City

West End

yoy


Total

size

m sq

ft

Size Band (sq ft)

5-10,00010-50,00050-100,000100,000 +

109876543210

1115

16

26113

10

341

0



Active Demand

296

209 92


Total

size

m sq

ft

Size Band (sq ft)

5-10,00010-50,00050-100,000100,000 +

109876543210

1115

16

26113

10

341

0



Active Demand

296

209 92


Total

size

m sq

ft

Size Band (sq ft)

5-10,00010-50,00050-100,000100,000 +

109876543210

1115

16

26113

10

341

0



Active Demand

296

209 92


Net a

bsor

ption

m sq

ft

10

8

6

4

2

0

-2

-4

-62011201020092008200720062005200420032002

Docklands

City

West End

yoy


Net a

bsor

ption

m sq

ft

10

8

6

4

2

0

-2

-4

-62011201020092008200720062005200420032002

Docklands

City

West End

yoy

“The amount of space under offer at quarter end stood at 1.9 million sq ft, the highest since Q3 2011.”

4 On Point • Central London Market • First Quarter 2013

This is perhaps unsurprising – this end of the market has always been less affected by cyclical changes in business confidence and the economic fundamentals. The lack of larger deals is once again a reflection of the reluctance to make major commitments at a time of economic uncertainty.

Occupier Demand Overall demand in Central London stood at 11.9 million sq ft at the end of Q1, down 11.1% on the year-end figure. This drop is mainly the result of the Google requirement being satisfied, and as a consequence the TMT sector’s share of demand has fallen from 34% to 29% – although this remains extremely high compared to the historic average of 17%. Indeed, the Google deal underlines that London is rapidly becoming a major hub for the tech industries, and that their share of the market is likely to remain high for the foreseeable future.

Nevertheless, banking & finance (23%) and professional services(22%) still account for the majority of the remainder of demand.These proportions are closer to the long-term average, althoughhave to be put into the context of a lower total. Economic forecasts continue to suggest that activity in the banking & finance sectors will remain subdued in the short to medium term.

Meanwhile, the figures for active demand also point to increasing activity later in the year. While the total rose slightly over the quarter, by 1.3% to 6.9 million sq ft, closer analysis reveals a more dramatic picture. When adjusted for the Google deal, the underlying demand for space increased by 13.6% over the quarter, the result of a number of potential requirements becoming active. This is not just the result of buoyant demand from the TMT sector. Known requirements from the manufacturing and public sectors doubled over the quarter, admittedly from a very low base, to 494,000 sq ft and 333,500 sq ft respectively – while for professional services they increased by 29% to 1.9 million sq ft. In contrast to the profile of deals done, almost half (49.4%) of requirements are for space of over 50,000 sq ft, with around quarter for over 100,000 sq ft. This suggests that there should be more take-up at the higher size bands later in 2013.

Potential demand slipped back to 5 million sq ft, a 23.9% fall onthe year-end figure, although this appears mainly to be the result ofrequirements moving to an active status.

Central London: Vacancy Rates 2004-2013 Q1 Source: Jones Lang LaSalle

avail

abilit

y (%

) of o

vera

ll stoc

k

Docklands

City

West End

Mar-13Dec-12Sep-12Jun-12Mar-12Dec-11Sep-11Jun-11Mar-11Dec-10Sep-10Jun-10Mar-10Dec-09Sep-09Jun-09Mar-09Dec-08Sep-08Jun-08Mar-08Dec-07Sep-07Jun-07Mar-07Dec-06Sep-06Jun-06Mar-06Dec-05Sep-05Jun-05Mar-05Dec-04Sep-04Jun-04Mar-04

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

Mar 1

2

Mar 1

3

16%

14%

12%

10%

8%

6%

4%

2%

0% Docklands

City

West End

Central London: Vacancy Rates 2002-2011 Q2Source: Jones Lang LaSalle

avail

abilit

y (%

) of o

vera

ll stoc

k

0

2

4

6

8

10

12

14

16

18

Docklands

City

West End


June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

18%

16%

14%

12%

10%

8%

6%

4%

2%

0% Docklands

City

West End


avail

abilit

y (%

) of o

vera

ll stoc

k

0

2

4

6

8

10

12

14

16

18

Docklands

City

West End


June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

1118%

16%

14%

12%

10%

8%

6%

4%

2%

0% Docklands

City

West End


avail

abilit

y (%

) of o

vera

ll stoc

k

0

2

4

6

8

10

12

14

16

18

Docklands

City

West End


June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

18%

16%

14%

12%

10%

8%

6%

4%

2%

0% Docklands

City

West End

Existing Supply & the Development PipelineOverall supply at the end of Q1 stood at 13.1 million sq ft, down 2.5% quarter-on-quarter but up 12.1% year-on-year. Despite the jump over the year, the total still remains below the long-term average of circa 14.9 million sq ft, and this will reduce as the space under offer moves to completion.

The increase in supply mostly reflects a gradual increase in new build supply over the year. Construction began on some 1.5 million sq ft of new space, the highest total since Q1 2012 and the second highest figure since early 2008.

Significant schemes include the 316,400 sq ft Aldgate Tower, E1, due for completion in Q4 2014, Aldwych Quarter, WC2, where 295,000 sq ft is scheduled to complete in Q2 2014, and Victoria Circle, SW1, where a joint venture between Land Securities and the Canada Pension Plan Investment Board will provide 480,000 sq ft. Overall vacancy rates fell from 6.1% to 5.9%.

“When adjusted for the Google deal, the underlying demand for space rose by 13.6% over the quarter.”




Central London: Prime Headline Rents: 2004 to 2013 Q1 Source: Jones Lang LaSalle

£ per

sq ft

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

Mar 1

2

Mar 1

3

£120.00

£100.00

£80.00

£60.00

£40.00

£20.00

£0.00 Docklands

City

West End

Central London: Prime Headline Rents: 2002 to 2011 Q2Source: Jones Lang LaSalle

£ per

sq ft

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

£120.00

£100.00

£80.00

£60.00

£40.00

£20.00

£0.00 Docklands

City

West End


£ per

sq ft

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

£120.00

£100.00

£80.00

£60.00

£40.00

£20.00

£0.00 Docklands

City

West End


£ per

sq ft

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

£120.00

£100.00

£80.00

£60.00

£40.00

£20.00

£0.00 Docklands

City

West End

Central London: Prime Yields and the Cost of Money 2004-2013 Q1 Source: Jones Lang LaSalle/Datastream

%

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

Mar 1

2

Mar 1

3

8%

6%

4%

2%

0% LIBOR

5 Year Swap

City

West EndCentral London: Prime Yields and the Cost of Money 2002-2011 Q2Source: Jones Lang LaSalle/Datastream

%

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

8%

6%

4%

2%

0% LIBOR

5 Year Swap

City

West End

Central London: Prime Yields and the Cost of Money 2002-2011 Q2Source: Jones Lang LaSalle/Datastream

%

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

8%

6%

4%

2%

0% LIBOR

5 Year Swap

City

West End


%

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

118%

6%

4%

2%

0% LIBOR

5 Year Swap

City

West End


%

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

8%

6%

4%

2%

0% LIBOR

5 Year Swap

City

West End

Rents and Rental ExpectationsPrime rents in the West End increased for the first time in seven quarters, from £95.00 per sq ft to £97.50 per sq ft. In the City, prime rents remained at £57.00, having risen from £55.00 after seven static quarters during the final three months of 2012. Rent-free periods remained constant in both markets – 16 months in the West End and 24 months in the City (for 10 year term or equivalent).

For smaller space in super-prime locations, there is clear evidence of higher rents being achieved on particular deals. Over the quarter, there have been two transactions at £105.00 per sq ft for sub 10,000 sq ft space in Mayfair. Prime rents in both markets should rise gradually over the course of the year as demand increases against the backdrop of constrained supply, particularly for Grade A space in prime locations.

Investment Volumes and Yield Movements Some £2.6 billion of stock was traded over the first quarter of 2013,down 38% on Q4 2012 and 20% on Q1 2012. This is perhapsunsurprising given the record volumes achieved throughout last year– the highest since the financial crisis and the third highest on recordafter 2006 and 2007. This pace was clearly not sustainable.

Indeed, the fall in investment volumes is more a result of lack of supply rather than a weakening in demand. The appetite of overseas investors in particular remains strong, buoyed by the cheaper pound, and appears to have been unaffected by the downgrade and recent alterations to economic performance. The sheer level of transactions over the past means that there is little stock currently available in the market. Investors are likely to increasingly focus on ‘prime secondary’ stock – strong covenants in non-core locations – or active management opportunities.


British buyers are in an even smaller minority than in recentquarters, with their share falling to just 23%, compared to 34%in the final quarter of 2012. This is partly because the overseas interest has become even more international. Buyers are still funded mainly by equity, with debt a minor feature of the market. Asian buyers, particularly Malaysians, also remain prominent.

The problems in Cyprus have led to a further increase in the number of European high net worth individuals seeking opportunities in London. This will intensify if the Eurozone problems re-emerge, while instability in East Asia could add further to capital flows from that region. Meanwhile, the recent sharp fall in the price of gold has underlined the attractions of well-let commercial property.

Meanwhile, the Bank of Japan’s aggressive monetary easing policies are likely to further reduce bond yields internationally. This will make prime commercial property a more attractive prospect. It also provides scope for further yield compression over the next year.

TMT Digest – HighlightsThis is a summary of our TMT Digest published in March. The research team produces sector digests on a regular basis, and more can be found at www.joneslanglasalle.co.uk/research.

Although Central London office take-up from the TMT sector has overtaken the traditionally dominant banking and finance sector, it is unclear whether this is a genuine structural shift. For every Google or start-up, there is a technology mammoth that is challenged and potentially down-sizing.

What might be more telling over the long term is the continuing interplay and blur of technology and media firms and the associated changing space needs. There will be ongoing pressure to consolidate fragmented portfolios, particularly in the media sector, over the long term.

For the moment TMT accounts for the largest share of take-up and demand for Central London offices, with the legal and banking & finance sectors in abeyance. The majority of existing requirements are from companies seeking expansion space, although lease expires are important at smaller size bands.

Despite a lack of good quality supply and increasing rents, Soho, Noho and Covent Garden have maintained their status as the preferred sub markets for advertising and media companies. These clusters offer close proximity to both clients and similarly minded individuals. Meanwhile King’s Cross, Farringdon, Old Street, Clerkenwell and Shoreditch are increasingly drawing in big names looking to exploit synergies with the innovative start-ups that have located there. These sub markets are now witnessing constrained supply and increasing rents.

Central London Market


Occupier Take-Up and Net AbsorptionQ1 recorded the highest volume of letting activity since June 2000. Almost 1.4 million sq ft was let (in 32 transactions) with the most significant transaction to Google who will owner- occupy 863,000 sq ft of space at King’s Cross, N1. Excluding the Google transaction, in excess of 500,000 sq ft was let with the majority (86%) of activity sub 50,000 sq ft.Take-up was dominated by the TMT sector which accounted for 71% of total leasing. There is a further 526,000 sq ft under offer, 24% higher than Q1 2012. Some significant leasing transactions, other than Google include: Haymarket Financial (10,765 sq ft), Eagle Place SW1 at £95 per sq ft and Creston Plc (44,771 sq ft), 10 Great Pulteney Street W1 at £47 per sq ft.

Occupier DemandOverall demand is 5.3 million sq ft, a 13% decrease since last quarter as Google’s requirement shifted to satisfied – however this is 5% higher than the equivalent period last year. Requirements are being driven by the TMT (31%) and Service (30%) sectors.Active demand amounts to 3.1 million sq ft, with 61% of active requirements greater than 50,000 sq ft. Notable active requirements include; Omnicom (100,000 – 300,000 sq ft), Ogilvy and Mather (180,000 – 200,000 sq ft) and Saatchi and Saatchi (140,000 – 160,000 sq ft).

Existing Supply and the Development Pipeline

Total supply decreased marginally to 3.7 million sq ft – having been hovering around this level since Q2 2012. 76% of total supply is Grade A of which 26% is between 10,000 and 25,000 sq ft. There is a further 2.7 million sq ft of speculative development under construction, the highest volume since Q1 2008. Together, 14 buildings could offer more than 100,000 sq ft, however only Park House, 5 Howick Place and 1 John Adam Street are available immediately, the remaining buildings are under construction and due to complete over the next three years. Overall vacancy has remained unchanged at 4.1%, significantly lower than the long term average of 5.4%.

“Q1 recorded the highest volume of letting activity since June 2000.”

The West End Office Market

West End: Take-Up 2004-2013 Q1Source: Jones Lang LaSalle

m sq

ft

2013 Q1201220112010200920082007200620052004

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New


m sq

ft

2011201020092008200720062005200420032002

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New


m sq

ft

2011201020092008200720062005200420032002

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New


m sq

ft

2011201020092008200720062005200420032002

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New


m sq

ft

2011201020092008200720062005200420032002

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New

West End: Demand 2004-2013 Q1 Source: Jones Lang LaSalle

m sq

ft

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

Mar 1

2

Mar 1

3

8

7

6

5

4

3

2

1

0

Potential

Active

Rolling 12 Month Take-Up

moved dec 11 manually on rolling 12 month...West End: Demand 2002-2011 Q2Source: Jones Lang LaSalle

m sq

ft

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

12

10

8

6

4

2

0

Potential

Active


West End: Demand 2002-2011 Q2Source: Jones Lang LaSalle

m sq

ft

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

12

10

8

6

4

2

0

Potential

Active



m sq

ft

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

12

10

8

6

4

2

0

Potential

Active



Grade A vacancy marginally fell to 3.1%, in-line with the long term average of 3.0%. A total of 783,785 sq ft commenced construction during the quarter, the highest volume since Q1 2008. Building starts include: Victoria Circle, SW1 a joint venture between Land Securities and Canada Pension Plan Investment Board which will provide 480,000 sq ft across two buildings; British Columbia House, SW1 (20,783 sq ft); 1&2 Stephen Street – Phase 2, W1 (63,002 sq ft) and Fitzroy Place, W1 (220,000 sq ft).

Rents

Prime rents rose for the first time in seven quarters from £95.00 per sq ft to £97.50 per sq ft. Rent free periods, assuming a 10 year term, are at 16 months.There have been several sub 10,000 sq ft transactions that have achieved over £100.00 per sq ft including; Angelo, Gordon & Co (5,312 sq ft) at 23 Savile Row, W1 at £105.00 per sq ft and Angola LNG (7,600 sq ft) at 5 Hanover Square, W1 at £105.00 per sq ft.

Investment Volumes and YieldsJust over £953 million was traded in 25 transactions, 30% below the equivalent period last year and 21% lower than the long term average. Reduced levels of turnover can be attributed solely to constrained levels of supply, at present there remains an acute shortage of openly marketed assets.Overseas investment continues to dominate in the West End, with 70% of purchasers being foreign in origin.29% of overall investment was in the £25–£50 million price band; there were two transactions over £100 million, both to foreign investors (representing 31% of total investment).The largest transaction was 151 Buckingham Palace Road, SW1, purchased by the Malaysian investor Lembaga Tabung Haji for £205 million, reflecting an initial yield of 6.58%.Prime yields for sub £10 million lot sizes remained stable at 4.00%, unchanged since Q3 2010. Prime yields are 4.25% for lot sizes of £10 million to £80 million, and at 4.50% for over £80 million.

West End: Vacancy Rates 2004-2013 Q1 Source: Jones Lang LaSalle

avail

abilit

y (%)

of ov

erall s

tock

Grade A

Overall

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

Mar 1

2

Mar 1

3

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%

West End: Vacancy Rates 2002-2011 Q2Source: Jones Lang LaSalle

avail

abilit

y (%)

of ov

erall s

tock

Grade A

Overall

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%


avail

abilit

y (%)

of ov

erall s

tock

Grade A

Overall

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%

West End: Prime Headline Rents and Net Effective Rents 2004-2013 Q1 Source: Jones Lang LaSalle

£ per

sq ft

Prime

Net Effective

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

Mar 1

2

Mar 1

3

£120.00

£100.00

£80.00

£60.00

£40.00

£20.00

£0.00

West End: Prime Headline Rents and Net Effective Rents 2002-2011 Q2Source: Jones Lang LaSalle

£ per

sq ft

Prime

Net Effective

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

£120.00

£100.00

£80.00

£60.00

£40.00

£20.00

£0.00

West End: Prime Headline Rents and Net Effective Rents 2002-2011 Q2Source: Jones Lang LaSalle

£ per

sq ft

Prime

Net Effective

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

£120.00

£100.00

£80.00

£60.00

£40.00

£20.00

£0.00

West End: Investment Purchases 2004-2013 Q1 Source: Jones Lang LaSalle

£ billi

on

£7

£6

£5

£4

£3

£2

£1

£02013 Q1201220112010200920082007200620052004

Others

Institutions

Property CompaniesWest End: Investment Purchases 2002-2011 Q2Source: Jones Lang LaSalle

£ billi

on

£7

£6

£5

£4

£3

£2

£1

£02011201020092008200720062005200420032002

Others

Institutions

Property Companies

West End: Investment Purchases 2002-2011 Q2Source: Jones Lang LaSalle

£ billi

on

£7

£6

£5

£4

£3

£2

£1

£02011201020092008200720062005200420032002

Others

Institutions

Property Companies


£ billi

on

£7

£6

£5

£4

£3

£2

£1

£02011201020092008200720062005200420032002

Others

Institutions

Property Companies


The City Office Market

Occupier Take-up and Net AbsorptionLeasing activity was somewhat slower in Q1, with a total of 1.1 million sq ft let in 65 transactions, a 14% drop Q-o-Q and around 17% below the ten-year quarterly average. The underlying picture is brighter from a shorter historic perspective, with Q1 occupational market activity exceeding the two-year quarterly average by 9%, and take-up for Q1 32% higher than the equivalent period last year. Service and Banking & Finance sectors accounted for the largest shares of take-up, comprising 34% and 24% respectively. TMT’s share of total take-up rose to 16% this quarter, up from 5% in Q4; the insurance sector continued to boost demand in the City, taking 18% of the total space let.Not surprisingly, the best quality space was in highest demand, with Grade A making up 78% of take-up. Of the five largest deals, four were pre-lets, including the most notable deal of the quarter, the pre-let to Liberty Mutual subsidiaries – Liberty Syndicates and Liberty Mutual, at 20 Fenchurch Street, EC3, totalling 116,300 sq ft.

Occupier DemandThere was 9.6 million sq ft of registered demand (active and potential) at the end of Q1 2013, of which nearly 60% was active. Total outstanding demand is broadly similar to the last quarter, with a 3% drop Q-o-Q.The largest proportion of active demand in Q1 came from the Service and Professional Services sectors, corresponding to 39% and 35% respectively. Notable requirements included: Thomson Reuters (250,000–750,000 sq ft), and M&G (250,000-350,000 sq ft).There was 1.3 million sq ft under offer at the end of Q1, a 10% rise Q-o-Q, indicating that a number of deals are expected to complete in the second quarter.

Existing Supply and the Development PipelineTotal supply has decreased by a small margin (3%) since the end of 2012, to stand at just under 8 million sq ft.The vast majority of space available, 5.9 million sq ft, is Grade A, accounting for a 74% share of the total.There is a further 4.4 million sq ft of speculative development under construction (of which of nearly 538,000 sq ft is currently under offer).Overall vacancy fell by 10 basis points to 7.4%, below the long-term average of 7.9%Grade A vacancy also declined, down by 20 basis points to 5.5%, however it still exceeds the long-term average of 4.6%

Off Plan

Under Construction

Second hand

New2013 Q1201220112010200920082007200620052004

City: Take-Up 2004-2013 Q1 Source: Jones Lang LaSalle

m sq

ft

8

6

4

2

0


m sq

ft

2011201020092008200720062005200420032002

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New


m sq

ft

2011201020092008200720062005200420032002

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New


m sq

ft

2011201020092008200720062005200420032002

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New


m sq

ft

2011201020092008200720062005200420032002

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New

City: Demand 2004-2013 Q1 Source: Jones Lang LaSalle

m sq

ft

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

Mar 1

2

Mar 1

3

14

12

10

8

6

4

2

0

Potential

Active


City: Demand 2002-2011 Q2Source: Jones Lang LaSalle

m sq

ft

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

18

16

14

12

10

8

6

4

2

0

Potential

Active



m sq

ft

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

18

16

14

12

10

8

6

4

2

0

Potential

Active



m sq

ft

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

18

16

14

12

10

8

6

4

2

0

Potential

Active


City: Vacancy Rates 2004-2013 Q1 Source: Jones Lang LaSalle

avail

abilit

y (%

) of o

vera

ll stoc

k

Grade A

Overall

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

Mar 1

2

Mar 1

3

14%

12%

10%

8%

6%

4%

2%

0%


avail

abilit

y (%)

of ov

erall s

tock

Grade A

Overall

Mar 0

2

Mar 0

3

Mar 0

4

Mar 0

5

Mar 0

6

Man 0

7

Man 0

8

Mar 0

9

Mar 1

0

Mar 1

1

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%


avail

abilit

y (%)

of ov

erall s

tock

Grade A

Overall

Mar 0

2

Mar 0

3

Mar 0

4

Mar 0

5

Mar 0

6

Man 0

7

Man 0

8

Mar 0

9

Mar 1

0

Mar 1

1

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%


Q1 saw the highest level of construction for three quarters (711,500 sq ft), with work starting at Aldgate Tower, E1 (316,400 sq ft), the four-building Aldwych Quarter, WC2 (295,000 sq ft) and 100 Cheapside, EC2 (100,000 sq ft). All are due for completion in mid to late 2014.This quarter saw one substantial completion; 63 St Mary Axe, EC3, bringing 83,000 sq ft of new office space to the market.

RentsCity prime headline rents stabilised at £57 per sq ft over the quarter, having risen during the final quarter of 2013 after two years at £55 per sq ft.Towers achieve higher premiums, typically in the range of £60 per sq ft, and there is sporadic market evidence that premium rents in excess of £70 per sq ft can be achieved.Rent free periods, assuming a 10 year term, remained at 24 months. We anticipate there will be some further prime rental growth as the year progresses.

Investment Volumes and YieldsAround £1.1 billion was traded in 30 transactions in Q1, which is 52% down Q-o-Q.Demand remains extremely buoyant, with the figures reflecting a severe lack of good quality product following the final three quarters of 2012, which saw the strongest investment volumes since 2007.Overseas investment continues to dominate the City market with 77% of purchasers being foreign in origin. The majority of transactions were in lots of over £100 million, mainly due to the sale of Ropemaker Place, EC1, by British Land to an international consortium represented by Axa Real Estate Investment Managers, for £472 million, reflecting 5.0% NIY.In addition, a 50% share of 20 Gracechurch Street, EC3 was acquired for £105 million by Northwood Investors from Atlas Capital Group at an initial yield of circa 5.25%.Prime yields for sub £40 million lot sizes compressed by 25 basis points to stand at 5.00% in Q1, evidencing a robust demand for prime product.Yields for “super prime” product are likely to strengthen further throughout 2013, driven by both a thinning product supply and the continued influx of overseas capital into Central London.For lot sizes above £40 million, prime yields remained at 5.25%, but these remain under pressure.

City: Prime Headline and Net Effective Rents2004-2013 Q1 Source: Jones Lang LaSalle

£ per

sq ft

Net Effective

Prime

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

Mar 1

2

Mar 1

3

£70.00

£60.00

£50.00

£40.00

£30.00

£20.00

£10.00

£0.00

City: Prime Headline and Net Effective Rents2002-2011 Q2Source: Jones Lang LaSalle

£ per

sq ft

Net Effective

Prime

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11£70.00

£60.00

£50.00

£40.00

£30.00

£20.00

£10.00

£0.00

City: Prime Headline and Net Effective Rents2002-2011 Q2Source: Jones Lang LaSalle

£ per

sq ft

Net Effective

Prime

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

£70.00

£60.00

£50.00

£40.00

£30.00

£20.00

£10.00

£0.00

City: Investment Purchases 2004-2013 Q1 Source: Jones Lang LaSalle

£ billi

on

£12

£10

£8

£6

£4

£2

£0

Others

Institutions

Property Companies2013 Q1201220112010200920082007200620052004


£ billi

on

£7

£6

£5

£4

£3

£2

£1

£02011201020092008200720062005200420032002

Others

Institutions

Property Companies


£ billi

on

£7

£6

£5

£4

£3

£2

£1

£02011201020092008200720062005200420032002

Others

Institutions

Property Companies


£ billi

on

£7

£6

£5

£4

£3

£2

£1

£02011201020092008200720062005200420032002

Others

Institutions

Property Companies


Occupier Take-up and Net AbsorptionAround 53,700 sq ft was let in Docklands in Q1 across four transactions. Although leasing activity in Docklands has been sluggish over the past two quarters, Q1 volumes are actually 33% higher quarter-on-quarter.The largest transaction occurred at One Stratford Place, E20, where Network Rail has taken 33,000 sq ft.The Service sector accounted for the entire take-up, of which two transactions involved the TMT sub-sector.

Occupier DemandOverall demand ended the first quarter at 1.8 million sq ft. Of that, active demand accounted for 46%, with the remaining balance of potential demand of 987,500 sq ft including Thomson Reuters’ requirement (250,000 - 750,000 sq ft). Professional services firms account for the two largest requirements in the market, although neither search is confined to Docklands.

Existing Supply and the Development PipelineFollowing an increase at the end of 2012, total supply declined to 1.3 million sq ft in Q1.The overall vacancy rate has declined by 40 basis points to stand at 6.6%. RentsPrime rents remained unchanged at £38.50 per sq ft in Q1, having remained at this level since Q2 2011. The highest rent achieved in this quarter was in One Stratford Place, E20, where Network Rail paid a rent of £35 per sq ft, on a 10-year lease term. Investment VolumesThere were three sizable investment transactions in Docklands in Q1, totalling nearly £512 million. This is the highest quarterly investment volume since December 2009, and a significant improvement on Q4 (£41 million).The largest investment deal, and indeed one of the largest transactions in Central London this quarter, was the sale of 5 Canada Square, E14, by Evans Randall to the Middle Eastern investor fund St Martins Property for £383 million, reflecting an initial yield of 5.0%. Another notable transaction was TIAA-CREF’s disposal of No.1 and No.7 Westferry Circus, E14.The combined sale price was £128.6 million with Hines purchasing No.1 for £82.0 million (7.15% initial yield) and Canary Wharf Group purchasing No.7 for £46.6 million (13.90% initial yield).

The Docklands & East London Office Markets

Docklands: Take-Up 2004-2013 Q1 Source: Jones Lang LaSalle

m sq

ft

3

2

1

0

Off Plan

Under Construction

Second hand

New 2013Q1201220112010200920082007200620052004


m sq

ft

2011201020092008200720062005200420032002

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New


m sq

ft

2011201020092008200720062005200420032002

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New


m sq

ft

2011201020092008200720062005200420032002

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New


m sq

ft

2011201020092008200720062005200420032002

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New

Docklands: Demand 2004-2013 Q1 Source: Jones Lang LaSalle

m sq

ft

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

Mar 1

2

Mar 1

3Potential

Active


5

4

3

2

1

0


m sq

ft

Mar 0

2

Mar 0

3

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

12

10

8

6

4

2

0

Potential

Active



m sq

ft

Mar 0

2

Mar 0

3

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

12

10

8

6

4

2

0

Potential

Active



m sq

ft

Mar 0

2

Mar 0

3

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

12

10

8

6

4

2

0

Potential

Active


Docklands: Vacancy Rates 2004-2013 Q1 Source: Jones Lang LaSalle

avail

abilit

y (%

) of o

vera

ll stoc

k

Grade A

Overall

Mar 0

4

Mar 0

5

Mar 0

6

Mar 0

7

Mar 0

8

Mar 0

9

Mar 1

0

Mar 1

1

Mar 1

2

Mar 1

3

11.8% 10.4%12.5% 11.2%13.4% 12.3%13.9% 13.0%13.3% 12.6%11.7% 10.8%11.1% 10.3%10.6% 9.6%

9.4% 8.3%9.4% 8.4%8.4% 7.2%7.9% 6.7%7.7% 6.5%5.3% 4.0%3.9% 2.7%4.2% 3.3%3.3% 2.5%2.9% 2.2%3.2% 2.4%2.7% 1.9%3.5% 2.7%6.4% 5.1%8.5% 7.1%

13.0% 11.4%11.7% 10.3%10.5% 9.1%

7.9% 7.0%7.4% 6.7%7.0% 6.4%7.4% 6.5%8.0% 6.7%7.6% 6.3%6.4% 5.7%6.2% 5.7%7.1% 6.4%5.9% 6.7%6.6% 6.3%

16%

14%

12%

10%

8%

6%

4%

2%

0%


avail

abilit

y (%)

of ov

erall s

tock

Grade A

Overall

Mar 0

2

Mar 0

3

Mar 0

4

Mar 0

5

Mar 0

6

Man 0

7

Man 0

8

Mar 0

9

Mar 1

0

Mar 1

1

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%


avail

abilit

y (%)

of ov

erall s

tock

Grade A

Overall

Mar 0

2

Mar 0

3

Mar 0

4

Mar 0

5

Mar 0

6

Man 0

7

Man 0

8

Mar 0

9

Mar 1

0

Mar 1

1

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%


One Stratford Place, E20 Area: 33,000 sq ftTenant: Network RailRent: £35.00 per sq ftBuilding Status: New

King’s Cross Central, N1Area: 863,000 sq ftTenant: GooglePrice: ConfidentialStatus: Site

Eagle Place, SW1 Area: 10,765 sq ftTenant: Haymarket FinancialRent: £95.00 per sq ftStatus: Under construction

1 Grafton Street, W1Area: 37,428 sq ftPurchaser: Pembroke Reported Price: c. £70 million Est Initial Yield: 4.40%

5 Canada Square, E14Area: 536,338 sq ftPurchaser: St Martins Property FundReported Price: £383 million Est Initial Yield: 5.0%

Headline Transactions

West End

Docklands & East London

City

151 Buckingham Palace Road, SW1Area: 193,617 sq ftPurchaser: Lembaga Tabung Haji Reported Price: £205 million Est Initial Yield: 6.58%

20 Gracechurch Street, EC3Area: 313,554 sq ftPurchaser: Northwood InvestorsReported Price: £105 million Est Initial Yield: 5.28%

Ropemaker Place, EC1Area: 602,658 sq ftPurchaser: International Consortium represented by Axa Real Estate Investment ManagersReported Price: £472 million Est Initial Yield: 5.0%

20 Fenchurch Street, EC3 Area: 116,300 sq ftTenant: Liberty MutualRent: Confidential Status: Under Construction

Millennium Bridge House, EC4Area: 127,000 sq ftTenant: Old Mutual PlcRent: ConfidentialStatus: Secondhand


Rental Conditions across Central London

West End Village

maxminaverage% annual change (average)

City Village

maxminaverage% annual change (average)

Belgravia & Marylebone North of Knightsbridge Covent Garden & Euston Mayfair Oxford Street Paddington Soho St James’s Victoria

£67.50 £65.00 £55.00 £97.50 £85.00 £57.50 £67.50 £97.50 £65.00£40.00 £40.00 £30.00 £62.50 £40.00 £32.50 £40.00 £47.50 £35.00£52.89 £48.84 £40.09 £76.05 £49.45 £42.95 £46.32 £65.50 £43.981.0% 3.7% 1.4% 4.9% 8.0% 3.8% 14.7% 2.1% 0.5%

Central Core City Midtown Eastern Eastern Fringe Northern Northern Fringe Southbank Southern Western

£57.00 £55.00 £55.00 £40.00 £55.00 £45.00 £47.50 £52.50 £55.00£50.00 £35.00 £30.00 £20.00 £35.00 £30.00 £35.00 £40.00 £35.00£53.38 £44.71 £42.13 £29.67 £46.67 £33.80 £41.63 £47.00 £47.210.7% 2.9% 2.1% 4.7% 3.7% 13.0% 3.7% 2.2% 3.1%


Stratford

Royal DocksCanaryWharf

South Bank

Isle ofDogs

GreenwichPeninsula

Wapping

EasternFringe

Central City

NorthernFringe

CityMidtown

Camden

Bloomsbury

Marylebone/Euston

RegentsPark

North ofOxford Street

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Policy Update

LEGISLATIVE CHANGES - HIGHLIGHTS

Greater London AuthorityFurther to the Government’s proposals to allow for permitted development rights for change of use from commercial to residential use, the Mayor has submitted a bid to exempt London’s key business districts in recognition of their significance as nationally important office locations, backed up by the relevant boroughs. These include:

The Central Activities Zone, which includes the City of London, the South Bank and the West End;

The commercial area in the north of the Isle of Dogs; The emerging Tech City opportunity area in the City Fringe

in East London; London’s Enterprise Zones in the Royal Docks.

Currently a Draft Town Centres SPG is out for consultation until the 31st May. This provides guidance on London Plan Policies 2.15 ‘Town Centres’ and 2.16 ‘Strategic Outer London Development Centres’.

BoroughsCamden Council is currently consulting on the main modifications to its Site Allocations development plan document until Friday 26th April.

From the 15th March to 26th April Lambeth Council is consulting on a review of its Local Plan. Tower Hamlets will be consulting on its Statement of Community Involvement document from 16th April to 28th May. Southwark Council is currently consulting on the Dulwich SPD until 22nd April and the Camberwell SPD until the 12th April. The City of London is currently consulting on a preliminary draft CIL charging schedule until the 13th May.

ApplicationsPollen Estates has achieved planning consent from Westminster City Council for a mixed use scheme at Cork Street, New Bond Street, Cork Street Mews and Maddox Street, W1. The proposal consists of two sites: site one provides retained façades with retail and ancillary offices. Site 2 on Maddox Street provides six flats with retail and residential access at ground floor. The Crown Estate’s Haymarket scheme achieved permission in January from Westminster. Jones Lang LaSalle provided Development Consultancy advice.

To discuss how these changes may affect your development, contact Guy Bransby on 020 7399 5409 or Jeff Field on 020 7852 4742.

Definition of TermsFloorspace Threshold – Data refers to office floorspace in units of 5,380 sq ft and above.Grading – A subjective assessment taking into account specification, floorplate efficiency and image.Take-Up – Floorspace acquired for occupation by leasing, pre-leasing or purchasing a freehold or long leasehold interest.Supply – Floorspace which is on the market and available for occupation. Floorspace which is under offer prior to a contractual commitment is included. Speculative development prior to practical completion is excluded.Speculative Development – Floorspace under construction or comprehensive modernisation which will be available for speculative letting (or sale). The forecast of development completions relates only to developments currently under construction.Net Absorption – a measure of the change in occupied stock between periods.Demand – Some applicants search across two or three market areas. In such cases their demand appears in the total for each area. However, when calculating total Central London demand, duplicates are eliminated.Active Demand – Organisations with a declared requirement for office accommodation which are actively in the market to acquire floorspace in the short term.

Potential Demand – Organisations with a potential requirement for office accommodation, but without a finalised brief in terms of timing.Prime Rent – An opinion of the highest rent (excluding incentives) achievable upon a letting agreed at the quarter-end of a notional 10,000 sq ft unit of the best quality office space in a prime location.Net effective rents are calculated against our prime headline rent values and assume a 10-year term, a notional three month fit-out period and amortisation over 10 years. In practice net effective rents are subject to far more variability related to the specific characteristics of the individual premises.Prime Yield – An opinion of the yield which would be appropriate for a freehold Grade A office investment in a prime location let at a current market rent to a tenant with a strong financial covenant.Investment Turnover – Capital transactions comprising freehold and long leasehold acquisitions for investment, owner occupation or development. Corporate transactions are excluded.

OnPoint reports from Jones Lang LaSalle include quarterly and annual highlights of real estate activity, performance and specialised surveys and forecasts that uncover emerging trends.

www.joneslanglasalle.co.uk

Contacts

Neil Prime DirectorHead of UK Office Agency+44(0)20 7399 [email protected]

Jonathan Evans DirectorWest End Agency & Development+44(0)20 7399 [email protected]

Chris NorthamDirectorCity Investment+44(0)20 7399 [email protected]

Damian CorbettDirectorHead of London Capital Markets+44(0)20 7399 [email protected]

Julian SandbachDirectorWest End Investment+44 (0)020 7399 [email protected]

Angus Goswell DirectorCity & Canary Wharf Agency+44 (0)20 7399 [email protected]

Jon Neale Head of Research - UKEMEA Research+44(0)20 7852 [email protected]

Dan BurnDirectorCity Agency+44 (0)20 7399 [email protected]

Sam McMillenMarketing ManagerEMEA Marketing+44(0)20 7399 [email protected]

COPYRIGHT © JONES LANG LASALLE IP, INC. 2013. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.

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