2011 q2 central london offices jll

8/6/2019 2011 Q2 Central London Offices JLL

1/16

The Central London Market Q2 2011

Overall requirement volumes increased for the second consecutive

quarter, driven by a 20% increase in active demand. Take-up was

dominated by Service Industries, particulary the TMT sub-sector.

Growth in core Grade A rents continued to outperform prime,

particulary in the West End increasing 7.1% compared with 2.7%

while rents in the City relatively stable.

Investment volumes are 36% ahead of the equivalent period last

year driven by overseas purchasers investing 1.7 billion in the

second quarter.

TMT sector belies Eurozone issues

and drives demand growth


2/162

Summary of statistics

Sub 10m 10-50m 80m+ Sub 40m 40-125m 125m+

4.00% 4.25% 5.00% 5.25%- 5.25% 5.25%

Sizes in 000 sq ft

Units of 5,400 sq ft and above

Take-Up

TOTALS

Grade A

Off-plan

Under construction

New completed

Second hand (incl. refurbished)

100,000+

50,000 - 99,999

10,000 - 49,999

Sub 10,000

Banking & Finance

Professional Services

Service Industries

Manufacturing IndustriesPublic Admin. & Institutions

Other

Net Absorption

TOTALS

Prime Rents & Rent Free

Prime Rent

Rent Free (months)

Net Effective1

Demand

TOTALS

100,000+

50,000 - 99,999

10,000 - 49,999

Sub 10,000

Banking & Finance

Professional Services

Service Industries

Manufacturing Industries

Public Admin. & Institutions

Other

Supply

Total Current Supply

VACANCY RATE (% of total stock)

100,000+

50,000 - 99,99910,000 - 49,999

Sub 10,000

Speculative Development

TOTALS

2011

2012

2013

2014

Capital Transactions

millions

TOTALS

UK PurchasersOverseas Purchasers

Property Companies

Institutions

Privates & Other Investors

Prime Yield

*As at 30 June 2011

West End City Docklands Central London

2010 2011 2011 2010 2011 2011 2010 2011 2011 2010 2011 2011

Q1-Q2 Q2 Q1-Q2 Q2 Q1-Q2 Q2 Q1-Q2 Q2

3,728 1,481 834 6,131 1,486 685 2,161 31 22 12,020 2,998 1,542

2,393 1,011 563 4,443 784 398 2,063 22 22 8,899 1,816 982

340 0 0 1,200 0 0 0 0 0 1,540 0 0

43 131 116 355 0 0 0 0 0 399 131 116

781 455 252 1,803 343 149 52 0 0 2,636 798 401

2,563 895 466 2,773 1,143 536 2,110 31 22 7,445 2,069 1,025

465 269 157 2,027 0 0 1,718 0 0 4,210 269 157

785 87 87 751 142 0 187 0 0 1,723 229 87

1,633 687 336 2,367 841 412 249 22 22 4,249 1,550 770

844 438 254 986 560 273 8 9 0 1,838 1,007 527

25% 12% 12% 43% 36% 31% 74% 0% 0% 43% 24% 20%

14% 3% 1% 18% 17% 22% 2% 0% 0% 14% 10% 11%

35% 62% 59% 28% 25% 30% 4% 100% 100% 26% 44% 47%

13% 11% 10% 4% 5% 5% 9% 0% 0% 8% 8% 7%8% 6% 10% 4% 8% 3% 10% 0% 0% 6% 7% 7%

4% 6% 8% 3% 9% 9% 2% 0% 0% 3% 7% 9%

2010 2011 2011 2010 2011 2011 2010 2011 2011 2010 2011 2011

Q1 (YoY) Q2 (YoY) Q1 (YoY) Q2 (YoY) Q1 (YoY) Q2 (YoY) Q1 (YoY) Q2 (YoY)

2,788 2,446 2,213 5,024 2,837 3,228 1,070 895 594 8,848 6,168 5,965

2010 2011 2011 2010 2011 2011 2010 2011 2011

Q1 Q2 Q1 Q2 Q1 Q2

88.43 92.50 95.00 55.00 55.00 55.00 37.50 37.50 38.50

16 16 16 24 22 22

76.64 80.17 82.33 44.00 44.92 44.92

Total Active Potential Total Active Potential Total Active Potential Total Active Potential

4,461 2,396 2,064 10,437 5,335 5,102 1,386 633 752 13,330 7,382 5,948

1,467 448 1,019 5,338 1,986 3,352 1,127 539 587 6,046 2,674 3,372

1,153 535 618 2,170 1,165 1,005 165 0 165 2,839 1,394 1,445

1,592 1,195 397 2,353 1,659 694 87 87 0 3,621 2,570 1,051

249 218 30 576 525 51 7 7 0 824 744 80

14% 10% 19% 29% 22% 36% 32% 34% 30% 26% 21% 33%

7% 13% 0% 25% 30% 19% 0% 1% 0% 21% 25% 16%

69% 69% 69% 39% 36% 42% 38% 0% 70% 43% 40% 46%

8% 7% 9% 5% 6% 3% 21% 47% 0% 7% 9% 3%

2% 2% 2% 3% 6% 0% 8% 18% 0% 3% 5% 1%

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

4,177 2,086 1,876 7,505 4,188 2,807 1,412 1,240 172 13,093 7,514 4,856

4.6% 2.3% 2.1% 6.9% 3.9% 2.6% 7.4% 6.5% 0.9% 6.0% 3.4% 8.3%

134 135 0 1,449 1,449 0 654 654 0 2,237 2,238 0

352 220 62 1,038 585 390 507 367 139 1,897 1,172 5912,637 1,218 1,324 3,534 1,603 1,570 181 166 16 6,352 2,987 2,910

1,054 513 490 1,483 551 847 70 53 17 2,607 1,117 1,354

Total Over 50,000- Total Over 50,000- Total Over 50,000- Total Over 50,000-

100,000 99,999 100,000 99,999 100,000 99,999 100,000 99,999

1,875 1,419 259 3,000 2,345 401 130 130 0 5,005 3,894 660

346 182 164 415 389 0 130 130 0 891 701 164

795 503 95 1,182 699 401 0 0 0 1,977 1,202 496

734 734 0 789 644 0 0 0 0 1,523 1,378 0

0 0 0 614 613 0 0 0 0 614 613 0

2010 2011 2011 2010 2011 2011 2010 2011 2011 2010 2011 2011

Q1-Q2 Q2 Q1-Q2 Q2 Q1-Q2 Q2 Q1-Q2 Q2

5,025 2,335 1,097 5,006 3,419 2,021 749 30 30 10,780 5,784 3,148

1,867 1,135 706 1,604 1,209 739 23 0 0 3,494 2,343 1,4453,159 1,200 390 3,403 2,210 1,282 726 30 30 7,287 3,440 1,702

875 821 500 828 406 190 17 0 0 1,720 1,227 691

1,312 784 168 1,703 1,942 911 231 0 0 3,246 2,726 1,079

2,838 730 428 2,475 1071 920 501 30 30 5,814 1,830 1,378


3/16

On Point Central London Market Second Quarter 2011 3

The Economy

The momentum of the global recovery weakened in the rst half

of 2011, reecting the Japanese earthquake and tsunami, higher

oil prices and the re-emergence of sovereign debt problems in

the Eurozone. In the UK, activity has recovered from its end-

2010 dip, but the early indicators for Q2 suggest that GDP will at

best match a disappointing Q1 outturn and so growth will remain

below average.

Speculation about looming UK interest rate increases has eased

since the spring. Monthly RPI and CPI gures have remained

at rates well in excess of the ofcial 2% ination target. In June,headline CPI ination dipped to 4.2% from a rate of 4.5% in

May. Interest rate expectations have shifted from a summer

hike to an autumn move at the earliest. But much will depend on

how quickly demand recovers. If activity indicators continue to

disappoint, the rst move will be pushed into next year.

The most recent evidence on the London economy has also

been more downbeat. Business condence in the capital had

led the upturn in the wider economy from late 2009. But in

recent months gures have moved into line with the weaker UK

services sector trend for the rst time since the recession. Given

the importance of global demand to London, this is perhaps to

be expected, but it raises further concerns about the pace ofrecovery in the UK as a whole.

The Central London Market

Summary of Statistics (QoQ) West End City Docklands

Take-up F A F

Supply A A F

Overall Vacancy Rate A A F

Grade A Vacancy Rate A A F

Prime Rent F E F

U/C A F E

In the UK, activity has

recovered from its end-2010

dip.


4/16

Occupier Take-up and Net Absorption

Occupier take-up remained below average with 1.5 million sq fttransacted across 111 deals. Although this was a 10% increase

on last quarter it was 40% behind the ve year quarterly average.

The year to date total of 2.9 million sq ft is 47% behind the

equivalent period last year.

Volumes in the second quarter were dominated by the Service

Industry particularly the TMT sub-sector accounting for 15%

of the total. Activity was driven by the West End with the likes of

Google completing their 157,450 sq ft acquisition at Central Saint

Giles, WC2 and Double Negative taking a pre-let on 86,500

sq ft at 160 Great Portland Street, W1. Low levels of take-up were

recorded in the City, however, 1.3 million sq ft remained under

offer at the end of June with a number of large requirementslikely to transact over the second half of the year. These include

Aon, CMS Cameron McKenna, Trowers & Hamlin and Mace.

Our expectations for the full year 2011 are for take-up to

remain modest, running slightly below the long term average.

Positively, there have been some notable improvements in

requirement volumes, however we are yet to see this translate

into completed deals and there is a risk that weak economic

activity and Eurozone fears will push decisions into 2012.

Occupier Demand

Requirement volumes continued to strengthen over the secondquarter, up 12% to 13.3 million sq ft. The relatively weak take-up

prevented erosion of requirement volumes, but even with average

volumes, demand would have increased by 3%. Occupier

demand is now at it highest level in 18 months and only slightly

behind the 10 year average of 13.8 million sq ft. Encouragingly,

improvements were driven by active demand which recorded

a 28% increase in the City and 21% in the West End. Over the

quarter, there were 48 new active requirements totalling 1.2

million sq ft registered in the City and 37 requirements in the

West End totalling 1 million sq ft.

Demand from the Service Industry continued to dominate

accounting for 43% of the total with the TMT and Advertising

& Publishing subsectors accounting for 11% and 10% of total

demand. Demand from the Service Industry increased 19%

over the quarter driven by the likes of Google increasing their

requirement from 400,000 sq ft to 500,000 700,000 sq ft

Central London: Net Absorption 2002-2011 Q2Source: Jones Lang LaSalle

Netabsorptionms

qft

10

8

6

4

2

0

-2

-4

-6

2011201020092008200720062005200420032002

yoy

Central London: Demand and Supply Balance 2011 Q2Source: Jones Lang LaSalle

Totalsizems

qft

Size Band (sq ft)

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

10

9

8

7

6

5

4

3

21

0

1115

16

26113

10

341

0

296

209 92


West End

,,,,

Total Existing Supply

,,,,

Active Demand

,,,,

Speculative Construction

City

Docklands

There has been a

notable improvement inrequirement volumes.

4 On Point Central London Market Second Quarter 2011


5/16


6/16



There is a belief that we arein the non-prime phase of

real estate workout.

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

p

ersqf

t

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

City

Docklands

Central London: Prime Yields and

the Cost of Money 2002-2011 Q2Source: Jones Lang LaSalle/Datastream

%

June02

June03

June04

June05

June06

June07

June08

June09

June10

June11

8%

6%

4%

2%

0%

West End

5 Year Swap

City

LIBOR

Over the year to date Core Grade A rents in the West End have

increased 12.3% compared with 7.3% for prime and in the City

have increased 2% while prime rents have remained stable. This

has narrowed the historically high differential between the best

space and good quality Grade A.

Investment Volumes and Yield Movements

Investment volumes totalled 3.1 billion, up 19% on last quarter.

The year to date total of 5.7 billion is 36% ahead of the equivalent

period last year. Volumes were dominated by overseas privates

accounting for 36% of the total. The 12 month rolling total of 12.3

billion is 13% ahead of the 10 year average. Seven signicant

transactions took place over the quarter with 1.3 billion traded

in lot sizes over 100m 42% of the total. The most notabletransactions included Jubilee House, Oxford Street, W1, 1

Finsbury Circus, EC2, Leadenhall Triangle, EC3, MidCity Place,

WC1, 10 Aldermanbury, EC2 and Aviva Tower, EC3.

Prime yields remained stable across both West End and City

submarkets. In the West End, prime benchmark yields for sub 10

million lot sizes remained stable at 4.00% and have been at this

level for 12 months. Yields for intermediate lot sizes (10m - 80m)

remained at 4.25%. In the City, yields for all lot sizes remained at

5.25%, however are coming under pressure for sub 40m lot sizes.

We are seeing strong competition between Institutions, FarEastern managed funds and private high net worth individuals

and investors are now willing to take on higher levels of risk

particularly in the West End driven by forecast rental growth

rather than any anticipated yield compression. This has made

refurbishment and the more straightforward development

opportunities more expensive, while competition for development

complexity is less strong.

While receivership and workout sales will remain a key supply

driver in the investment market and we expect increased activity

from NAMA in the second half of the year there is a sense that

the market has seen, or knows of, the more signicant distressed

assets. There is a belief that we are in the non-prime phase ofreal estate workout and while this will still have direct implications

to investable opportunities we believe buy side activity will be

dominated by specialist funds and private equity vehicles rather

than more traditional physical real estate players.

Residential developers are becoming more prevalent in the

market seeking to convert ofce space. This has particularly

been seen in the West End with a key example the purchase of

66 Chiltern Street W1 by Heron for a residential conversion on

lease expiry in 2014. Looking ahead, this coupled with impact of

the Heaney rights to light case may have a potential impact on

the future pipeline of schemes that have been proposed for ofcerefurbishment or development resulting in an even further delayed

supply response.


7/16


Over 2011, although sentiment has improved, we have seen

average levels of take-up and concerns over the Eurozone

increase. However, we have seen notable improvements in

occupier demand which has recorded an 18% increase since the

start of 2011. Last quarter we were less optimistic about the pick

up in demand as levels still remained historically low, however,

the second quarter has shown continued increases, and we are

now more optimistic about future growth particularly, in key

sub-sectors within the Service Industry.

The Service Industry remains dominant in both the demand

and take-up statistics, and the growing trend of the TMT

(Technology, Media & Telecommunications) and Advertising

& Publishing sector appears to be solidifying. Six to nine monthsago, when these subsectors were dominating deals, there was too

much caution to identify it as a start of a new trend, but the

momentum has continued and this is the standout sub-sector from

a market otherwise characterised by churn and lease events.

Year to date, the TMT and Advertising & Publishing sub-sectors

have accounted for 16% and 6% of total take-up across central

London, particularly driven by the West End which has seen 26%

of total take-up this year from the TMT sub-sector and 11% from

the Advertising & Publishing sector. In terms of occupier demand,

the TMT sector accounts for 11% of the total, with Advertising

& Publishing accounting for 10%.

There is a clear trend between these two sub-sectors, with the

TMT sector (predominantly new media companies) driven by

growth with the likes of Google, NBC Universal, Facebook and

Skype, which was recently acquired by MSN. It is these new

media companies who are breaking the mould - they will pay

higher rents as they are location specic, better capitalised and

in a growth phase.

This has been seen in the recent deals at Central Saint Giles,

WC2, 160 Great Portland Street, W1 and with Expedia vacating

their space at Seven Dials Warehouse,WC2 to move to the

Angel Building, EC1 while Facebook, who needed to be in the

core, moved into Expedias space. Advertising & Publishing

companies remain cost driven with the likes of Ogilvy and

Mather, Publicis and Saatchi and Saatchi looking in lower

cost locations.

Most business sectors will

continue to be driven by

structural events, however

new media companies will

be predominantly driven

by growth.

Although future demand will continue to be driven by structural

events, we feel that these new media companies from the TMT

sector and Advertising & Publishing companies are positioningthemselves to full their business plans. We expect a ripple effect

to ow through to other sectors such as Banking & Finance as

companies position themselves to start to execute their new

business plans but at a more cautious rate.

Issue to watch: who is driving occupier demand?


8/16



Just over 830,000 sq ft was let across 53 deals in the

second quarter, a 29% increase on Q1 and driven by thelikes of Google completing their 157,450 sq f t acquisition

at Central Saint Giles, WC2 and Double Negative taking

a pre-let on 86,500 sq ft at 160 Great Portland Street, W1.

Over the year to date volumes have reached 1.4 million

sq ft, down 24% on the equivalent period last year.

The Service Industry dominated take-up with 59% of

oorspace taken across 23 deals. This was particularly

driven by the TMT sub-sector which accounted for 23%

of the total.

Net absorption remained positive at 631,800 sq ft compared

with 383,900 sq ft last quarter.

Occupier Demand

Overall occupier demand increased by 5% to 4.4 million sq ft

Improvements were driven by active demand which saw a

21% increase to 2.3 million sq ft as 37 new requirements

came to the market this was the rst increase in active

demand since 2009.

Potential demand decreased 9% which can be attributed to

a number of requirements becoming active and withdrawingtheir search.

Demand was dominated by the Service Industry, particularly

the TMT sub-sector which accounted for 21% of total

occupier demand.

Existing Supply and the Development Pipeline

Total supply fell 12% to 4.1 million sq ft while Grade A fell

10% to 2 million sq ft.

Overall vacancy rates fell from 5.2% to 4.6% and Grade A

from 2.6% to 2.3%. Vacancy rates are now at their lowestlevels since 2008.

Core Grade A rental growth

exceeded the growth in

prime.

The West End Ofce Market

West End: Take-Up 2001-2011 Q2Source: Jones Lang LaSalle

ms

qft

2011201020092008200720062005200420032002

5

4

3

2

1

0

Off Plan

Under Construction

Second hand

New

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

ms

qft

June02

June03

June04

June05

June06

June07

June08

June09

June10

June11

12

10

8

6

4

2

0

Active

Potential

Rolling 12 Month Take-Up


9/16


After a 31% increase last quarter, speculative construction

decreased 5% due to the completion of 11 Baker Street and

the pre-let of 160 Great Portland Street W1 to end June at1.8 million sq ft.

Only one scheme commenced construction in Q2 (25 Soho

Square,W1) compared with four last quarter.

Rents

Prime rents increased 2.7% to 95.00 per sq ft while rent-free

periods remained at 16 months, assuming a 10-year lease. We

expect 100 per sq ft to be reached comfortably by year end.

For the second consecutive quarter, Core Grade A rental

growth exceeded the growth in prime, increasing 7.1% to72.90 per sq ft.

Over the year to date Core Grade A rents have increased

12.3% compared with 7.3% for prime.

Investment Volumes and Yields

Just over 1 billion was traded over the second quarter, this

was an 11% decrease on Q1 and 7% behind the ve year

quarterly average.

The year to date total of 2.3 billion was 5% behind the

equivalent period last year however the 12 month rolling

total of 4.9 billion was 18% ahead of the 10 year annualaverage.

Volumes were dominated by UK property companies and

overseas privates comprising 39% and 26% of the total,

respectively.

Eight signicant transactions took place over the quarter,

with 699 million traded in lot sizes over 50 million. The

most notable deal was the sale of Jubilee House, 197-213

Oxford Street, W1, purchased by a private Spanish Investor

for 160 million.

Prime yields for lot sizes sub 10 million remained stable at

4.00% and at 4.25% for 10 - 80 million.

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

availability(%)ofoverallstock

June02

June03

June04

June05

June06

June07

June08

June09

June10

June11

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%

Overall

Grade A

West End: Prime Headline Rents and Net Effective Rents2002-2011 Q2Source: Jones Lang LaSalle

persqf

t

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

Prime

Net Effective

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

b

illion

7

6

5

4

3

2

1

02011201020092008200720062005200420032002

Property Companies

Institutions

Others


10/16


The City Ofce Market


A relatively quiet quarter with just under 742,000 sq f t

transacted across 58 deals, a 14% decrease on last quarterand 50% behind the quarterly average.

Year to date, 1.4 million sq ft has been let, almost half of

what was transacted at the equivalent period last year.

However, just over 1.3 million sq f t was under offer at the

end of June, the highest quarterly total since 2008.

A number of large requirements (currently under offer) should

transact over the second half of the year such as Aon, CMS

Cameron McKenna, Trowers & Hamlin and Mace.

The Banking & Finance and Service Industries were the

most active during the second quarter both accounting for

31% of space let.

Net absorption remained positive at 428,500 sq ft compared

with 166,300 sq ft at the end of Q1.

Occupier Demand

Overall demand increased 24% to 10.4 million sq ft as a

number of media occupiers launched tentative requirements

seeking in excess of 100,000 sq f t; Occupier demand is

now 17% ahead of the 10 year average.

Improvements were driven by 44 new active occupier

requirements registered, totalling 1.2 million sq ft.

Over the past three months, we have seen an increase in

pre-letting activity with nearly half a million sq ft under offer

at the end of June; we expect this trend to continue over the

second half of the year with the likes of Schroders and JLT

potentially transacting before year end.

Demand from the Service Industry continued to dominate

accounting for 38% of the total; there were 10 requirements

from this sector, seeking in excess of 100,000 sq ftcompared with seven last quarter.

2011201020092008200720062005200420032002

City: Take-Up 2002-2011 Q2Source: Jones Lang LaSalle

ms

qft

10

8

6

4

2

0

Off Plan

Under Construction

Second hand

New

City: Demand 2002-2011 Q2Source: Jones Lang LaSalle

ms

qft

June02

June03

June04

June05

June06

June07

June08

June09

June10

June11

18

16

14

12

10

8

6

4

2

0

Active

Potential


City: Vacancy Rates 2002-2011 Q2Source: Jones Lang LaSalle

ava

ilab

ility

(%)o

fovera

lls

toc

k

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

14%

12%

10%

8%

6%

4%

2%

0%

Overall

Grade A


11/16



Total supply decreased 6% to end the quarter at 7.5 million sq

ft while Grade A fell by 3% to 4.1 million sq ft.

Overall vacancy rates decreased from 7.4% to 6.9% and Grade

A fell slightly from 4.0% to 3.9%.

Speculative construction increased 55% to end the quarter at

3 million sq ft. This was driven by the commencement of two

new build schemes - Sixty London, EC1 and The Place, SE1

totalling 644,450 sq ft.

We have seen more activity in refurbishments over the

quarter with three notable schemes totalling 307,800 sq ft

commencing, the largest at 199 Bishopsgate, EC2 totalling144,700 sq ft.

Rents

For the third consecutive quarter, Prime rents remained

stable at 55.00 per sq ft and rent-free periods, assuming a

10-year term remained at 22 months. Some tower buildings

have recently achieved rents in excess of 60.00 per sq ft .

With the supply constraint and increasing demand, we do

anticipate further rental growth towards the end of the year.

Investment Volumes and Yields

Investment volumes totalled 2 billion a 45% increase onQ1, driven by 13 deals in lots sizes over 50 million.

The year to date total of 3.4 billion is 105% ahead of the

equivalent period last year and the 12 month rolling total of

6.7 billion is 16% ahead of the 10 year average.

Volumes were driven by overseas purchasers investing

1.2 billion, 63% of the total, although UK Institutions

were very active over the quarter, investing 528 million.

The most signicant transaction was the acquisition of

Leadenhall Triangle, EC3 by Henderson and AIMCo

(Canadian Pension Fund) for c.190 million.

Prime yields for lot sizes under 40 million remained at

5.25% but with downward pressure; yields for larger lot

sizes yields remained stable at 5.25%.

Over 1.3 million sq ft was under

offer at the end of June, the highest

quarterly total since 2008.

City: Prime Headline and Net Effective Rents

2002-2011 Q2

Source: Jones Lang LaSalle

persq

ft

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

Net Effective

Prime

City: Investment Purchases 2002-2011 Q2Source: Jones Lang LaSalle

billion

12

10

8

6

4

2

0

2011201020092008200720062005200420032002

Property Companies

Institutions

Others


12/16



Only one deal completed during the second quarter - at

1 Canada Square, E14 where Met Life signed on the 50thoor totalling 22,100 sq f t.

Occupier Demand

Occupier demand increased 9% over the quarter to

1.3 million sq ft.

Improvements were driven by active demand increasing

30% as two occupiers totalling 142,000 sq ft are now

considering Docklands for their search.

Potential demand remained relatively unchanged ending the

quarter at 752,000 sq ft.


Total supply increased 5% to end the quarter at

1.4 million sq ft.

Overall vacancy rates increased from 7.0% to 7.3%, with

Grade A slightly increasing from 6.4% to 6.5%.

Rents

Prime rents ended the quarter at 38.50 per sq f t, the slight

increase was driven by the resilience of demand, and the

attractive relative pricing differential between Canary Wharf

and the City and West End submarkets.

Investment Volumes

30 million was traded in the second quarter across one

deal at Chambers Wharf where an overseas investor

purchased the 174,250 sq ft building.

Prime rents ended the quarter

at 38.50 per sq ft, the slight

increase was driven by the

resilience of demand.

The Docklands & East London Ofce Markets

Docklands: Take-Up 2002-2011 Q2Source: Jones Lang LaSalle

ms

qft

4

3

2

1

0

2011201020092008200720062005200420032002

Off Plan

Under Construction

Second hand

New

Docklands: Demand 2002-2011 Q2Source: Jones Lang LaSalle

ms

qft

June02

June03

June04

June05

June06

June07

June08

June09

June10

June11

6

4

2

0

Active

Potential


Docklands: Vacancy Rates 2002-2011 Q2Source: Jones Lang LaSalle

availa

bility

(%)o

fovera

lls

toc

k

June

02

June

03

June

04

June

05

June

06

June

07

June

08

June

09

June

10

June

11

16%

14%

12%

10%

8%

6%

4%

2%

0%

Overall

Grade A


13/16


1 Canada Square, E14

Area: 22,100 sq ft

Tenant: Metlife

Reported Rent: CondentialBuilding Status:Second Hand

Jubilee House, Oxford Street, W1

Area: 121,150 sq ft

Purchaser: Private Spanish

Reported Price: 160 m

Est Initial Yield: 4.50%

160 Great Portland Street, W1

Area: 86,000 sq ft

Tenant: Double Negative

Reported Rent: 59.60 per sq ft

Building Status: Under Refurbishment

1 Curzon Street, W1

Area: 42,250 sq ft

Tenant: Rathbones


Building Status: Second Hand

77 Gracechurch Street,EC3

Area: 49,200 sq ft

Purchaser: IGNIS

Reported Price: 43.5 m


6-8 Bishopsgate, EC2

Area: 146,880 sq ft

Purchaser: Mitsubishi



Headline Transactions

West End

Docklands & Canary Wharf

City

10 Stratton Street, W1

Area: 41,660 sq ft

Purchaser: Joint Treasure Holdings



The Angel Building, EC1

Area:17,000 sq ft

Tenant: NG Bailey


Building Status: New

30 St Mary Axe, EC3

Area: 19,550 sq ft

Tenant: Ion Trading


Building Status: New


14/16


Rental Conditions across Central London

Q2 2011

10

&Upw

ards

20

&Upw

ards

30

&Upw

ards

40

&Upw

ards

50

&Upw

ards

60

&Upw

ards

70

&Upw

ards

80

&Upw

ards

90

&Upw

ards

100&Up

wards

110&Up

wards

12

0&Up

wards

West End Village

max

min

average

% annual change (average)

City Villagemax

min

average

% annual change (average)

Belgravia & Covent Marylebone North of

Knightsbridge Garden & Euston Mayfair Oxford Street Paddington Soho St Jamess Victoria

65.00 59.50 53.50 95.00 65.00 57.50 50.00 82.50 65.00

37.50 30.00 27.50 45.00 31.60 30.00 32.50 37.50 32.50

50.79 41.58 35.32 70.28 43.56 40.83 38.50 59.13 45.11

1.6% 5.1% 1.6% 2.8% 0.7% 9.9% 0.7% 2.1% 1.1%

City Eastern Northern

Central Core Midtown Eastern Fringe Northern Fringe Southbank Southern Western

55.00 50.00 50.00 37.50 52.50 36.00 47.50 52.50 54.50

50.00 30.00 25.00 20.00 30.00 22.50 35.00 40.00 32.50

52.25 42.73 39.75 27.83 44.74 28.30 40.13 46.00 45.26

10.0% 6.3% 1.6% 0.0% 9.1% 9.8% 7.0% 7.1% 3.0%


15/16


Stratford

Royal Docks

Canary

Wharf

South Bank

Isle ofDogs

GreenwichPeninsula

Wapping

EasternFringe

Central City

NorthernFringe

CityMidtown

Camden

Bloomsbury

Marylebone/Euston

Regents

Park

North of

Oxford StreetCovent

GardenSohoMayfair

Denition of TermsFloorspace Threshold Data refers to ofce oorspace in units of 5,380 sq ft and above.Grading A subjective assessment taking into account specication, oorplate efciency

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 ofce accommodation which

are actively in the market to acquire oorspace in the short term.

Please note the Docklands and East London market now include Stratford.

Potential Demand Organisations with a potential requirement for ofce accommodation, but

without a nalised 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 ofce 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 t-out period and amortisation over 10 years. In practice net

effective rents are subject to far more variability related to the specic characteristics of the

individual premises.

Prime Yield An opinion of the net initial yield which would be appropriate for a freehold

Grade A ofce investment in a prime location let at a current market rent to a tenant with a

strong nancial covenant.

Investment Turnover Capital transactions comprising freehold and long leasehold acquisitions

for investment, owner occupation or development. Corporate transactions are excluded.

Town Planning

LEGISLATIVE CHANGES HIGHLIGHTS

Greater London Authority

The Replacement London Plan published in October 2009

has been found sound following Examination in Public. The

Mayor is now considering how to include the Panel Report s

recommendations in the London Plan.

A Draft Charging Schedule for the Community Infrastructure Levy

was published for public consultation. It will part-fund Crossrail

and sit alongside the Mayors S106 requirements, although

developers will not be double-charged. The Levy will apply to

commercial and non-commercial uses in all London boroughs.

BoroughsSouthwark Council has been selected by the governments

department for Communities and Local Government as one

of the neighbourhood planning front runner authorities, testing

the principles of neighbourhood planning as set out in the

governments Localism Bill.

Westminster has granted ranted conditional permission to

the residential-led mixed-use scheme for Chelsea Barracks,

subject to referral to the Mayor. 123 affordable units will

developed on-site out of the proposed 448 units, and a 78m

payment will be made to the councils affordable housing fund.

The City of London Core Strategy has been found sound

following Examination in Public, and is expected to be adopted

in September 2011.

Tower Hamlets closed public consultations on the Site and

Placemaking and the Development Management PoliciesLocal Development Framework documents on 15 July 2011.

To discuss how these changes may affect your

development, contact Guy Bransby on 0207 399 5409

or Jeff Field on 020 7852 4742.


16/16

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

Director

Head of UK Ofce Agency

+44(0)20 7399 [email protected]

Jonathan Evans

Director

West End Agency & Development

+44(0)20 7399 5950

[email protected]

Chris Brett

DirectorInternational Desk, Capital Markets

+44(0)20 7399 5883

[email protected]

Julian Nairn

Director

City Investment

+44(0)20 7399 5865

[email protected]

Damian Corbett

Director

Head of London Capital Markets

+44(0)20 7399 [email protected]

Julian Sandbach

Director

West End Investment

+44 (0)020 7399 5973

[email protected]

Bill Page

DirectorHead of EMEA Ofce Research

+44(0)20 3147 1212

[email protected]

Kimberley Paterson

Senior Analyst

EMEA Research

+44(0)20 7852 4685

[email protected]

Angus Goswell

Director

City & Canary Wharf Agency

+44 (0)20 7399 [email protected]

Dan Burn

Director

City Agency

+44 (0)20 7399 5966

[email protected]

Bina Shah

Senior Marketing ExecutiveEMEA Marketing

+44(0)20 3147 1526

[email protected]

COPYRIGHT JONES LANG LASALLE IP, INC. 2011. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior writtenconsent 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 containsno factual errors. We would like to be told of any such errors in order to correct them.

2011 q2 central london offices jll

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