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The London Office Crane Survey 20 years of building for business

Summer 2016

Contents

The report 1

Key findings 2

Submarket snapshots 4

Crane Survey results 13

Outlook 22

Development table 30

Contacts 36

The London Office Crane Survey 1

The report

Where?London, covering the central office markets: City, West End, Docklands, King’s Cross,Midtown, Paddington and Southbank

What?A report which measures the volume of office development taking place across central London and its impact

How?A team of researchers have walked every street in central London to monitor office construction. Our field research is thenverified with direct industry links and in-house property experts

Who?Developers building new offices or undertaking significantoffice refurbishment of 10,000 sq ft +

When?1 October 2015 to 31 March 2016

2

Key findings


Key findings

Outlook

Uplift in new space due to complete in 2016/17

Construction volumes expected to increase to almost 16 million sq ftover the next six months

Evolution of working styles to influence type and location of space required

Tenant choice of new space to increase.

Yet current low vacancy will

prompt more early leasing

Geographic expansion of London office marketto advance

Crane Survey results

The financial sector has leased the most space underconstruction

Office construction is up28% over the past six months

to 14.2 million sq ft

51 new schemes have started, the highest total in a single survey

42% ofspace underconstructionis already let

Further rise in demolition levels indicate more constructionis imminent

Refurbishments account for nearly half of the space in new schemes

TOLET

Below average level of completions in 2015 totalling 3.1 million sq ft

4

Submarket snapshots


Which sector is currently taking the most space?

Average size of a scheme

Number of new construction starts

Central London office development pipeline

Total amount completed this survey Total amount of space under construction which has been let

130,000 sq ft

Average size of a floor

Number of cycle spaces being built

12,850 sq ft

12,316

Total amount under construction

1.7 million sq ftacross 20 buildings

Million sq ft

Completed u/c available u/c let

0

2

4

6

8

10

201920182017201620152014201320122011201020092008200720062005200420032002

19

51

Previous high

Lowest

37(2007)

4(2010)

10 year average

Today

The highest number of new starts in over 20 years

42%let

0% 100%

Financial

Highest volume of construction since 2008

Today: 14.2 million sq ft

Lowest5.9 million sq ft (2010)

Highest19.5 million sq ft (2002)

Submarket snapshotsCentral London

6

Which sector is currently taking the most space?



City office development pipeline

164,000 sq ft


Number of cycle spaces being built

14,500 sq ft

6,329


Total amount completed this survey


Total amount of space under construction which has been let

38%let

0% 100%

Million sq ft


0

1

2

3

4

5

201920182017201620152014201320122011201020092008200720062005200420032002

TMT

7

26

Previous high

Lowest

20(2007)

0(2010)

10 year average

Today

Highest number of new starts in a single Crane Survey

Construction has risen by 44% to 8.2 million sq ft




Submarket snapshotsThe City


Submarket snapshotsWest End


73,300 sq ft

Which sectoris currentlytaking themost space?


10,300 sq ft

Number of cycle spacesbeing built

2,673

West End office development pipeline

Number of new construction starts Total amount under construction




Million sq ft


0.0

0.5

1.0

1.5

2.0

2.5

201920182017201620152014201320122011201020092008200720062005200420032002

Construction has fallen by 9% over the past six months




2

8

12

Highest

Lowest

13(2011)

(2009)

10 year average

Today

Number of new starts up fromfour last survey

30%let

0% 100%

TMT

8

Submarket snapshotsDocklands


688,000 sq ft



26,400 sq ft


864

Docklands office development pipeline



0 sq ftTotal amount of space under construction which has been let

Million sq ft


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

201920182017201620152014201320122011201020092008200720062005200420032002

Today: 0.7 million sq ft Lowest

0 million sq ft (2014)


0

Highest

Lowest

1(2012)

(2015)1

0

10 year average

Today

38%let

0% 100%

Financial

No new starts this survey


Submarket snapshotsKing’s Cross


133,600 sq ft

Which sectoris currentlytaking themost space? TMT


15,160 sq ft


770

King’s Cross office development pipeline



0.04 million sq ftacross two buildings


Highest

4(2012)

0

Lowest

(2014)

2

Today

Construction volume rises by 28%


Lowest0 million sq ft (2011)


Million sq ft


0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

201920182017201620152014201320122011201020092008200720062005200420032002

100%let

0% 100%

2

10 year average

10

Submarket snapshotsMidtown


111,300 sq ft



12,200 sq ft


1,348

Midtown office development pipeline





Million sq ft


0.0

0.2

0.4

0.6

0.8

1.0

1.2

201920182017201620152014201320122011201020092008200720062005200420032002

Total construction volume is a new survey high at 2.1 million sq ft



Previous high1.3 million sq ft (2014)

0

9

Previous high

Lowest

8(2013)

(2010)

Today

The highest number ofnew starts

3

10 year average

Financial

57%Let

0% 100%


Submarket snapshotsPaddington

0


112,500 sq ft



10,000 sq ft


208

Paddington office development pipeline


Highest

Lowest

2(2006)

(2015)1

0

10 year average

Today


No completions in this survey Total amount of space under construction which has been let

0% 100%

Million sq ft


0.0

0.1

0.2

0.3

0.4

0.5

0.6

201920182017201620152014201320122011201020092008200720062005200420032002

The same volume of space as last survey


Lowest0 million sq ft (2014)


No new startsthis survey

25%let

Corporate

12

Submarket snapshotsSouthbank


34,000 sq ft



8,500 sq ft


124

Southbank office development pipeline


Total amount completed this survey Total amount of space under construction which has been let

Million sq ft


0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

201920182017201620152014201320122011201020092008200720062005200420032002

Despite two new starts, construction volumes are low

Today: 0.1 million sq ft Lowest

0.0 million sq ft (2003)


0

Highest

Lowest

2(2012)

(2015)1

2

10 year average

Today

Two new starts this survey - equalling 2012

0.2 million sq ftacross 1 building

43%Let

0% 100%

TMT

Crane Survey results


The past 20 years have seen London become more populous, more prosperous, more diverse and undoubtedly more globalised. Throughout this time, our Crane Surveys have enabled us to track the development of the capital’s new office spaces, home to the great variety of businesses that have helped drive this evolution. So what do our latest findings tell us about the next stage of construction?

14

Crane Survey results Construction activity accelerates

Developer rush to deliver space boosts construction activityRecognising that the low supply of available office space across central London offers a limited choice for tenants, developers have responded by starting a record number of new schemes since our last survey. The latest results show that the volume of office construction has increased by 28% over the past six months to 14.2 million sq ft, the highest level since Q1 2008. In just 18 months we have seen activity nearly double, from 7.7 million sq ft in 2014. Only two surveys over the past 10 years recorded more than 14 million sq ft of space under construction.

The pace of development is rapid, with 38% of the space currently under construction scheduled to complete over the next twelve months. This is partly the result of an increase in refurbishment projects, which account for just under half of the volume of new starts, and are typically quicker to complete than new-build. This is perhaps the first survey in a long time where we are able to point to the pendulum swinging away from landlords back towards tenants, with greater choice leading to more opportunity.

The changing face of MidtownThe Midtown submarket, however, has seen the greatest percentage jump in development, with activity up by 58%. This is largely attributed to the 843,000 sq ft Goldman Sachs scheme at 70 Farringdon Street.

The 9 new Midtown schemes add just over 1.2 million sq ft to the pipeline, and represent both the highest volume and highest number of new starts ever recorded for the Midtown market in one survey. This area has been the focus of new development over the past year with concentration on both its western and eastern

0.7King’sCross

2.1Midtown

0.2Paddington

0.7Docklands

0.1Southbank

2.2West End

8.2City

14.2Total

Total volume under construction by submarketMillion sq ft

Total volume under construction per survey – central LondonMillion sq ft

Source: Deloitte Real Estate

2011

Q3

2012

Q1

2012

Q3

2013

Q1

2013

Q3

2014

Q1

2014

Q3

2015

Q1

2015

Q3

2016

Q1

2011

Q1

2010

Q3

2010

Q1

2009

Q3

2009

Q1

2008

Q3

2008

Q1

2007

Q3

2007

Q1

2006

Q3

2006

Q1

2005

Q3

2005

Q1

2004

Q3

2004

Q1

2003

Q3

2003

Q1

2002

Q3

2002

Q10

2

4

6

8

10

12

14

16

18

20


edges, close to the new Crossrail stations of Tottenham Court Road and Farringdon. Much of this around station development (ASD) is directly related to the opportunity that this major infrastructure project has created, the installation of a first class transport link has created attractive and viable office districts.

More new starts than ever before51 new buildings have started over the past six months, the highest number of new starts in our survey’s history and comfortably surpassing the average of 19. Collectively, these new starts will provide an additional 4.8 million sq ft of space, an increase of 58% on the volume of new starts recorded just six months ago. While our previous reports had already pointed to a new wave of construction, the current activity does not include some large schemes that we have been tracking, but which had not officially begun at our survey cut-off date. Had these developments been included, the record result would have been even higher.

26 new schemes have started in the City, with a combined total of 2.9 million sq ft. This is the largest amount of new construction activity recorded in this submarket, even higher than in 2011 the year in which three tower schemes commenced, including the former Pinnacle site.

Elsewhere across central London, both the Southbank and King’s Cross submarkets recorded two new starts, each, adding a total of 264,000 sq ft. The West End has seen 12 new starts, but the combined volume of new space in these schemes amounts to just 426,500 sq ft, highlighting the smaller size of developments generally undertaken in that submarket.

Volume of new starts per survey – central LondonMillion sq ft


2011

Q3

2012

Q1

2012

Q3

2013

Q1

2013

Q3

2014

Q1

2014

Q3

2015

Q1

2015

Q3

2016

Q1

2011

Q1

2010

Q3

2010

Q1

2009

Q3

2009

Q1

2008

Q3

2008

Q1

2007

Q3

2007

Q1

2006

Q3

2006

Q1

2005

Q3

2005

Q1

2004

Q3

2004

Q1

2003

Q3

2003

Q1

2002

Q3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Average volumeof new starts

Let sq ft Available sq ft

City 8,212,350 3,098,600 5,113,750

West End 2,198,650 656,650 1,542,000

Docklands 688,000 262,000 426,000

King’s Cross 668,000 668,000 –

Midtown 2,116,000 1,206,000 910,500

Paddington 225,000 57,000 168,000

Southbank 102,000 44,000 58,000

Total 14,210,000 5,992,244 8,217,756

Winter 2016 – Office space under construction

Change since last survey

0% 0% 0%

0%

0%0%

-8%-12%-9%

-60%

-100%

-25%

-77%

58%

28%

28%

123%

42% 19%

14%

44%

86%

35% 51%

Total sq ft

16

Developer Rank

Brookfield 1

Land Securities 2

Canary Wharf Group 3

Derwent London 4

Great Portland Estates 5

King's Cross Central Limited Partnership 6

Stanhope 7

Tishman Speyer 8

Goldman Sachs 9

Blackstone 10

Top 10 developers by office space under construction across central London Institutional investors drive new constructionProperty companies account for 38% of space under construction, down from the 49% recorded six months ago. This decline in share has been exacerbated by a number of the REITs coming to the end of their development programmes started earlier in the cycle.

Our 20-year Crane Survey history shows that property companies have been the dominant developer type, delivering 72% of office stock constructed since 1996.

Public property companies had been the most active during 2001-10, but over the past five years private property companies have taken the lead and now account for the largest share of space under construction.

Looking ahead, we expect this dominance to be challenged by institutional investors in the short-to-medium term: just over half the volume of new space started in the Crane Survey is being developed by institutional investors.

Five years of low construction is limiting occupier choiceThe current low level of available space across central London submarkets is partly due to developers postponing schemes following the 2008/09 recession. Our research shows that roughly 15 million sq ft of office space was completed during 2011-15, only around two thirds of the volume delivered in the previous five years, and half the delivery seen from 2001-2005.

Largest new start70 Farringdon Street

843,000 sq ft


What’s more, healthy levels of take-up over the past three years have done much to ensure that the choice of schemes, both small and large, has been limited. This has caused some firms to seek to secure new space early across central London whether through a pre-let or early letting during construction.

Indeed, the rise in pre-letting activity seen in 2013-15 is now starting to feed through into the new construction starts. Five schemes, totalling 1.5 million sq ft, were leased before construction started. This has been particularly noticeable in the legal sector, where the share of leasing on buildings under construction has risen from 5% to 9% over the past six months.

Financial and TMT businesses dominate leasing42% of space under construction is now let, up from 38% six months ago. The percentage rise appears modest, yet the volume of let floorspace has increased by 1.7 million sq ft to 6.0 million sq ft, driven by financial and technology, media and telecoms (TMT) businesses.

The financial sector has leased the largest share of office space under construction in the latest results, accounting for 2.3 million sq ft, or 39% of the let space. Of note is the amount of space that international banks have committed to, totalling 1.5 million sq ft, or 25% of all let space. This reflects current trends for leasing on existing stock, which also saw financial businesses increase their share of activity during 2015 and early 2016.

Percentage of pre-completion lettings space let by sector

Legal

9%Insurance

2%Corporate

6%Professional

6%TMT

38%Financial

39%

18

The TMT sector has been a major driver of leasing on new space for a number of years and, currently accounting for 38% of the space let, it remains a leading occupier group. While schemes in the ‘tech belt’, as featured in our last Crane Survey, attract both technology and media firms, the sector has been active across central London, with particular focus on King’s Cross.

The sustained growth of the technology sector within London is highlighted in Deloitte’s recent Technology Fast 50 report. Showcasing the fastest growing technology firms in the UK, the research identifies that half of the top 50 are located in London and 20 have headquarters in central London, with the Southbank and Midtown well represented. A number of these businesses have taken space in buildings previously featured in the Crane Survey.

London 50%

Cambridgeshireand East 2%

North East 6%NorthernIreland 2%

North West 8%

Midlands 2%

South West 4%South East 18%

Scotland 8%

UK Technology Fast 50 winners by region, November 2015

LON

DO

N B

RID

GE

THE HIGHWAY

BLA

CK

FFR

IAR

S B

RID

GE

MIL

LEN

NIU

M B

RID

GE

VICTORIA EMBANKMENT

SOUTHWARK STREETSTAMFORD STREET

WA

TERLOO

BRIDG

E

VICTORIA EMBANKMENT

CANNON STREET

LEADENHALL STREET

LONDON WALL

BEECH STREET

OLD STREET

OLD STREET

COMM

ERCIAL STREET

HOUNDSDITCH LEMA

N STR

EET

KIN

GSL

AN

DR

OA

D

CITY ROAD

STJO

HN

STR

EET

CITY ROAD

EAST

RO

AD

FARRINGDON ROAD

LONDON WALL

CHEAPSIDE

STRAND

LUDGATE

HOLBORN

HOLBORN

FETT

ER LA

NE

HILL

CABLE STREET

MINT STREET

ROYAL

OLD

STR

EET

BRO

AD BI

SHO

PGA

TE

GO

SWELL R

OA

D

CEN

TR

AL ST

REET

GO

LDEN

STREET

BR

ICK

LAN

E

BETHNAL GREEN

VA

LLAN

CE R

OA

D

GOSSET STREET

HACKNEY ROAD

ROAD

Tech belt

The City


Traditional markets, but non-traditional areas in favour Tracking the movement of tenants taking space under construction since Q1 2014 has shown us that both the traditional markets of the City and the West End continue to be favoured by existing occupiers. Both of these markets have high retention rates, with 77% and 65% of moving tenants respectively choosing to stay in the same market. In previous Crane Surveys we have noted the rising popularity of the fringes of these markets and the latest results confirm this trend. Seven new deals have been recorded on space under construction in the City, yet only two are in the core. Similarly, in the West End, of six deals recorded in this survey, only two were in the traditional core of Mayfair-St James’, with the remainder opting for North of Oxford Street and Victoria.

Movedin

8Moved

out

2Stayed

28Net

submarket deals

34Total

numberof deals

36Moved

in

7Moved

out

8Stayed

13Net

submarket deals

12Total

numberof deals

20

Movedin

1Moved

out

0Stayed

0Net

submarket deals

1Total

numberof deals

1

Movedin

9Moved

out

0Stayed

0Net

submarket deals

9Total

numberof deals

9Moved

in

5Moved

out

5Stayed

7Net

submarket deals

7Total

numberof deals

12Moved

in

2 0Stayed

0Net

submarket deals

2Total

numberof deals

2

Tenant movement: Q1 2014-Q1 2016

West End

Docklands

Movedin

1Moved

out

1Stayed

1Net

submarket deals

1Total

numberof deals

2Southbank

King’s Cross

Midtown

Paddington

City

Movedout

Largest building completedSouthbank Tower

224,000 sq ft

20

Outlook


OutlookThe next five years

Overview• The current level of space under construction is the

highest since 2008. This boost in development will go some way to responding to current low levels of available office space.

• Furthermore, demolition levels continue to rise as developers press on with new schemes, suggesting the next Crane Survey will see a continued rise in activity.

• Nevertheless, with 42% of space under construction already let to tenants, the resulting increase in availability from new space completing will be muted.

• The rush to deliver ahead of 2018-19 has seen a surge in actual and proposed developments due for delivery in 2017.

• Looking further ahead, the geographic expansion of London’s key office markets is set to continue, as new business districts are established.

• Rapid advances in technology, combined with a new generation entering the workforce, and evolving business structures, mean that the way in which offices are used will continue to change. Businesses will increasingly seek providers who can offer real estate as a service.

Average Grade Atake-up

Central London development pipelineMillion sq ft


0

1

2

3

4

5

6

7

8

9

10


2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

22

The further significant rise in construction recorded in this Crane Survey was not unexpected, but it does mean that activity is now back to levels last seen in 2008. In total, we predict that the combination of schemes currently under construction, and those yet to start, will deliver 38 million sq ft over the next five years. Boosted by the high number of new schemes recorded this survey, we have marginally increased the volume of space we expect to be delivered in 2016. 2017 has seen a sharper increase compared with six months ago, but our analysis of current activity and potential future schemes continues to suggest that a greater volume of space will be delivered in 2018.

Yet while the overall amount of space that could be delivered over the next five years is relatively high, even in the context of the past 20 years, a major difference today compared with previous periods of strong activity is the lower availability ratio. Amongst existing stock, availability remains close to 15 year lows, despite the rise in office completions during 2014, while the amount of space under construction that is already let is high, and rising. Indeed, a significant number of the schemes currently under construction have been kick-started by tenant pre-lets: firms that have opted to secure space early due to the scarcity of available existing stock or suitable speculative development. The increase in construction activity recorded in this survey will start to alleviate some of this pressure. However, as many of the new speculative schemes are relatively small, tenants with larger or more specific requirements will still find pre-letting attractive, and in some cases necessary.

Completed u/c available u/c let Agreed let not yet started

Grade A (10yr average) take-upForecast speculative Forecast pre-let


0

2

4

6

8

10

12

14

16

Central London development pipeline forecastMillion sq ft

1990

1991

1992

1993

1994

1985

1986

1987

1988

1989

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Supply & demand


In addition, new construction starts on speculative schemes are likely to slow if the UK’s EU referendum produces a vote to leave. Aside from any longer-term implications of a leave vote, there would be the initial uncertainty over the strength of occupier demand that tends to arise from significant economic and political events. In the past, this has been followed by a slowdown in central London office construction. While the specific impact on central London leasing activity has been difficult to discern so far, Deloitte’s recent CFO Surveys have shown that UK-based firms are carefully considering the potential impact of a referendum, and recent readings have indicated a reduced willingness to expand and hire.

Currently, however, there is little sign that the referendum is influencing future construction. Demolition activity, a reasonably reliable indicator of future new starts, has risen by more than 10% over the past six months - even as a record number of schemes have moved from demolition to construction.

This suggests that at least for now, developers remain sufficiently confident to push ahead with new schemes, and we therefore predict that our next survey will see space under construction rise to almost 16 million sq ft. We do not expect that this new space will reach the market in time to significantly add to available supply in 2016, and therefore the vacancy rate will remain close to its current low level in the short term. Looking further ahead, however, this new supply will begin to have a more tangible effect on availability levels, ultimately adding choice for businesses and slowing the pace of rental growth, particularly towards the latter years of our supply forecast.

Demolition levels have increased by

since our last Crane Survey to

12% 7.1million sq ft

24

Over the past 20 years the Crane Survey has tracked not just the construction of new buildings but the birth of new office locations across central London, from the rise of Canary Wharf, the growth of Paddington and Southbank and more recently the arrival of King’s Cross onto the list of established office destinations. The latest wave of development is seeing an unprecedented number of schemes start and, increasingly, this activity will not be confined to the traditional market boundaries. Regeneration and new transport links will open up London even more making it easier for businesses to locate further from the centre and drawing in new tenants from across London and beyond.

Three such areas are advancing rapidly and over the next five years new schemes will be built out that could see them become established as genuine alternatives to the markets that we currently report on. Vauxhall-Nine Elms-Battersea (VNEB), Stratford and White City are benefitting from investment on a large scale and, alongside residential and leisure development, there is expected to be close to 10 million sq ft of office space created, in some cases, innovative schemes tailored to sector and talent related needs.

Going south of the river?The southern stretch of river from Chelsea Bridge in the west and Vauxhall Bridge in the east was historically largely industrial. The husk of the mighty Battersea Power Station lay derelict and a congested area dominated by a gyratory leading to central London has been the subject of stalled regeneration for years. The realisation of such plans is now coming forward, spurred on by the commitment from the US Embassy to relocate from Mayfair and a new extension to the

Stratford

Battersea

White City

A new London is under construction


Northern Line tube under development which will likely lead to associated ASD to build on the scheme already underway.

Our research shows that there is 3.4 million sq ft of office space that is at varying stages of development. With three quite distinct areas being developed, the type of occupiers that this new market could attract will be varied. At present the anchor to this area is the US Embassy. This may well entice complementary businesses and organisations or indeed establish a new diplomatic quarter away from the centre. Accessibility to these areas, whether by tube, rail, boat or bike is certain to be enhanced, boosting the credentials of this emerging destination.

Aiming for gold medal successThe 2012 London Olympic Games left a blank canvas on which to design a new area of London in Stratford. The sporting spectacular brought with it a super-infrastructure of transport, utilities and digital connectivity. While the main focus has been on the delivery of a post-Games sporting legacy and residential provision, the creation of a thriving office market is increasingly becoming a reality.

The Here East scheme has seen the transformation of the former Press and Broadcasting Centres into a new creative quarter which has already attracted a variety of tenants including BT Sport, University College London, Loughborough University and Infinity. Aimed at innovative businesses, this scheme is being developed with a large start-up hub forming a core component of its offer.

A new business district that is also coming out of the ground is The International Quarter. This scheme has secured high-profile tenants from the traditional central

London market: with Transport for London and The Financial Conduct Authority pre-letting a combined floorspace of 690,000 sq ft across two buildings. These lettings could well attract further businesses in what is one of the best connected locations in London.

Just over five million sq ft of commercial space is planned for the Stratford area up to 2020. This market, soon to be connected to the Crossrail route will certainly be a game changer when businesses look to relocate and will perhaps be the largest example of ASD since King’s Cross.

Lights, camera, actionThe transformation of the legacy BBC sites (Television Centre and White City) will help to relaunch this area as a new hub for west London delivering a variety of types of space to the market together with specialist facilities such as studios. The combination of these developments will provide the necessary momentum to enable a fundamental repositioning of the area.

Placemaking, widely seen as the key to regeneration projects, is core to the wider development of the area. A new academic and student accommodation campus for Imperial College, to be named Imperial West and covering 25 acres, will add to the changing feel of this emergent destination. In addition, Westfield has committed to the expansion of its shopping centre. These credentials will help the creation of a diverse hub location, potentially attracting businesses from a variety of sectors. In the long term the location will also benefit from its proximity to Old Oak Common, the site for a major new rail interchange with High Speed 2 and the location of the Mayor of London’s vision for a cultural quarter.

26

Office design has come a long way over the past 20 years, and it is easy to see the architectural differences between a mid-1990s building and one under construction today. But arguably the greater change over this time relates to the functionality of buildings and the way that businesses use their space. The intervening years have seen vast improvements in mobile devices and connectivity that have enabled employees to work in a far more flexible way. Office design has evolved to reflect these changes, sometimes very successfully. Yet for the businesses that lease these spaces, and in some cases sign the pre-let agreements that enable them to be built, this evolution in working styles is continuous. In particular, there are three factors set to drive further significant change within their workforces, which will ultimately impact the way they use the office and the type of space they require:

1. The rise of the contingent workforce and greater employment flexibility The growing share of the workforce working on a project-by-project or task-by-task basis will allow for much greater flexibility, both for firms and employees. As an example, recent Deloitte research predicts that transient ‘super-temps’ and non-specialists will come to make up a far larger proportion of the legal sector talent pool over the next decade. However, employing staff in this way will also come with its own real estate challenges. Firms will have to consider how they efficiently accommodate employees who may or may not be in the office on any given day; how they provide flexible spaces that allow employees to work with a variety of project teams; and how to implement different levels of security and access for employees, depending on their assignments.

2. Attracting the talent from the millennial generationMillennials, the generation born after 1982, are a rapidly growing part of the workforce, and as our research into financial sector talent shows, the most skilled in this cohort are highly sought after. Yet Deloitte’s latest Millennial Survey shows that many young employees are dissatisfied with the level of flexibility offered by their employers, and that more generally, they think businesses are not focused enough on aiming to be ‘the best possible place to work’. Couple this with the fact that millennials in the UK are more likely than those in any other Western country to want to leave their current employer in the next five years, it is clear that companies in the UK need to work harder than most to retain their younger staff, in whom many invest heavily.

Part of the answer could involve responding to millennials’ desire to work more flexibly, perhaps by providing different types of working environments, such as the mixture of touch-down spaces and collaboration hubs that have been exemplified by recent entrants to the serviced office market. This does not negate the demand for traditional desk spaces - as our recent TMT Predictions report showed, while millennials are heavy users of smartphones and other mobile devices, they still value full-sized keyboards, large screens, and accurate pointing devices for certain tasks. In short, they want to be able to work in a range of locations and settings depending on the type of work they happen to be doing at the time.

The evolution of the workplace


3. Harnessing technology for efficiency and value-add workA more subtle way to consider the impact of technology is at the level of tasks, rather than whole jobs. Not every job can be automated entirely, as many have aspects that are currently just too complicated for automation to be effective. But by taking away their most tedious routine chores, technology can free up employees to spend time on more varied, more productive, and ultimately more interesting work. If the type of work that is being done changes, it is logical to think about how the workplace environment needs to change too, especially if automation paves the way for roles to become more creative and collaborative. The evolution of software robots to automate repetitive clerical processes is already advancing apace. It is now a question of when, not if, this increasingly pervasive technology will impact every business process and, consequently, what people actually do in their office environments. The re-purposing of the traditional office towards the collaborative, teaming and social space long forecasted by the workplace seers is edging ever closer.

Rethinking real estateAll of these considerations point to firms needing to rethink their real estate requirements, and inevitably that leads to questions around cost. Yet on average, real estate costs have risen far less quickly than staff costs. For example, since 1998, prime rents in the City market have risen by around 13%, while data from Oxford Economics shows that average wages in the City have increased by just over 50%. Looking further back, adjusted for inflation, prime rents today are 48% lower than their late 1980s peak, which saw both the City and West End record rents of £65.00 per sq ft. Of course rents are not the only consideration: the rating revaluation due in 2017 will have an impact on some operating costs. But in essence, the proportion of total employee costs that the workplace now represents is decreasing. Arguably, we are closer to the tipping point where, having been a major cost to be chipped away at for the past two decades, the workplace may now be increasingly considered as an enabler of the increasingly expensive human capital that occupies it.

As we look at the data for for this 20th anniversary edition of our research it is clear that the market is flush with confidence: there is a momentum that is leading to a new phase of construction, the emergence of new districts and, ultimately, greater choice for businesses that seek to locate in London.

28

Development table

Red texts indicates a new start

No.

Scheme

Post code

Developer

Tenant

Completion date

Total space sq ft

Space available sq ft

City Under Construction 1 1 King William Street EC4 Nippon Telegraph and Telephone

Corporation/Kajima EuropeQ2 2016 100,000 100,000

2 The Monument Building ,11-19 Monument Street

EC3 Skanska Q2 2016 94,000 94,000

3 69 Carter Lane EC4 Columbia Threadneedle/Stanhope/Low Carbon Workplace

Q2 2016 30,000 30,000

4 3 Copthall Avenue EC2 Columbia Threadneedle Q2 2016 14,350 14,350 5 45 Cannon Street EC4 Morgan Capital Partners LLP Q3 2016 88,500 88,500

6 Seventy Wilson, 70 Wilson Street EC2 Columbia Threadneedle/Stanhope/Low Carbon Workplace

Q3 2016 70,000 70,000

7 20 Great Eastern Street EC2 Colt Telecom Colt Telecom Q3 2016 60,000 - 8 One Puddle Dock EC4 Network Rail Q3 2016 60,000 60,000 9 108 Cannon Street EC4 Beltane Asset Management/M&G Real

EstateQ3 2016 40,000 40,000

10 17 Devonshire Square EC2 Golden Hinde Ltd Q3 2016 18,000 18,000 11 Angel Court EC2 Mitsui Fudosan/Stanhope Q4 2016 300,000 300,000 12 One Creechuch Place EC3 Helical Bar/HOOPP/City of London

CorporationQ4 2016 273,000 273,000

13 White Collar Factory, Old Street Yard EC1 Derwent London The Office Group, AKTII, BGL Group, Adobe

Q4 2016 276,000 163,400

14 The White Chapel Building (Phase 1) E1 Derwent London Q4 2016 200,000 200,000 15 20 Farringdon Road EC1 Derwent London Moo Print Q4 2016 88,000 54,500 16 Cannon Green House, Bush Lane EC4 Ocubis Q4 2016 80,000 80,000 17 Alderman's House, 117-121 Bishopsgate EC2 Amsprop Q4 2016 65,000 65,000 18 21 Lime Street EC3 City of London Corporation Q4 2016 35,000 35,000 19 1 Aylesbury Street EC1 Meritcape Alexander McQueen Q4 2016 28,500 - 20 19-28 Watling Street EC4 Morgan Capital Partners LLP Q4 2016 21,000 21,000 21 181 Queen Victoria Street EC4V City Bridge Trust Q4 2016 17,000 17,000 22 80 Clerkenwell Road EC1 Undisclosed Q4 2016 10,000 10,000 23 Principal Place, Shoreditch High Street E1 Brookfield Amazon Q1 2017 607,000 -

24 2 London Wall Place EC2 Brookfield/Oxford Properties Cleary Gottlieb Steen & Hamilton

Q1 2017 177,000 117,000

25 Herbal House, 10 Back Hill EC1 Herbal House Investments Q1 2017 77,000 77,000 26 24 King William Street EC4 Beltane Asset Management/Angelo

GordonQ1 2017 71,500 71,500

27 Dixon House, 72-75 Fenchurch Street EC3 Greenoak Real Estate MAPFRE Q1 2017 48,000 35,000 28 25 Charterhouse Square EC1 Helical Bar Q1 2017 38,000 38,000 29 Bloomberg Place EC4 Bloomberg/Stanhope Bloomberg Q2 2017 669,000 - 30 1 London Wall Place EC2 Brookfield/Oxford Properties Schroders Q2 2017 309,000 - 31 20 Old Bailey EC4 Blackstone (Severn Investments) Q2 2017 235,000 235,000 32 33 Central, 33 King William Street EC4 HB Reavis Q2 2017 225,000 225,000 33 160 Aldersgate Street EC1 Mercer Real Estate DLA Piper Q2 2017 207,000 50,000 34 The Epworth, 25 City Road EC1 London and Regional Properties Q2 2017 66,000 66,000 35 15 Bishopsgate EC2 Tower Partnership Q2 2017 52,000 52,000 36 25-39 Eastcheap EC3 Thackeray Estates Q2 2017 25,000 25,000 37 10 Fenchurch Avenue EC3 Generali Real Estate/Greycoat/CORE M&G Investments Q3 2017 398,000 67,000 38 1a-1c Shepherdess Walk EC1 Schroders Q3 2017 130,000 130,000 39 8 Devonshire Square EC2 Blackstone (CG Cutlers Gardens LLP) Q3 2017 130,000 130,000 40 30-32 Lombard Street EC3 McKay Securities Q3 2017 56,000 56,000 41 90 Bartholomew Close EC1 Helical Bar Q3 2017 23,500 23,500


Development table


No.

Scheme

Post code

Developer

Tenant

Completion date

Total space sq ft

Space available

sq ftCity Under Construction 42 52-54 Lime Street & 27 Leadenhall Street

(The Scalpel)EC3 WRBC Development WR Berkeley Q4 2017 386,000 305,000

43 148 Old Street EC1 Great Portland Estates Q4 2017 152,000 152,000 44 60-70 St Mary Axe EC3 TH Real Estate Q1 2018 326,000 326,000 45 London Fruit & Wool Exchange E1 Exemplar Properties Ashurst Q1 2018 275,000 - 46 The Tower, The Bower, 207 Old Street EC1 Helical Bar Q1 2018 171,000 171,000 47 80 Fenchurch Street EC3 Partners Group Q3 2018 236,000 236,000 48 One Bartholomew Close EC1 Helical Bar/Ashby Capital Q3 2018 212,000 212,000 49 100 Bishopsgate EC3 Brookfield Royal Bank of Canada Q4 2018 867,000 505,000 50 250 City Road EC1 Berkeley Homes Q1 2019 75,000 75,000

Total 8,212,350 5,113,750 City Completed 51 20 St Dunstan's Hill EC3 Forum Partners/Office Space in Town Office Space In Town Q4 2015 75,000 - 52 4 Fore Street EC2 The Salters' Company The Salters' Company, Undisclosed tenant Q4 2015 50,000 - 53 8 Finsbury Circus EC2 Mitsubishi Estate Company/Stanhope Rathbone Brothers Q1 2016 170,000 96,000 54 Sutton Yard EC1 East City Investments Q1 2016 75,000 75,000 55 9-10 Philpot Lane EC3 One Re One Re Q1 2016 18,300 -

Total 388,300 171,000 West End under construction56 1 St James's Market, Regent Street SW1 The Crown Estate/Oxford Properties Carlyle Group, The Crown Estate Q2 2016 144,000 53,000 57 2 St James's Market, Haymarket SW1 The Crown Estate/Oxford Properties Q2 2016 67,000 67,000 58 64-66 Wigmore Street W1 Howard de Walden Estates Q2 2016 55,000 55,000 59 Clarges House, 6-12 Clarges Street W1 British Land Q2 2016 48,000 48,000 60 127 Sloane Street SW1 The Cadogan Estate Marshall Wace Q2 2016 45,000 - 61 48 Pall Mall SW1 SFL1 (Qatar National Bank)/REM Q2 2016 32,000 32,000 62 51-52 Welbeck Street W1 Howard de Walden Estates Q2 2016 17,500 17,500 63 25 Bury Street SW1 The Crown Estate Q2 2016 12,000 12,000 64 44-46 Whitfield Street W1 DTZ Investors Q2 2016 11,000 11,000 65 Nova South SW1 Land Securities Advent International, Egon Zehnder Q3 2016 296,000 246,000 66 Verde SW1 (Eland House, Bressenden

Place)SW1 Tishman Speyer Pret a Manger, Oak Tree Capital

ManagementQ3 2016 281,000 242,000

67 Nova North SW1 Land Securities Q3 2016 184,000 184,000 68 30 Broadwick Street W1 Great Portland Estates Q3 2016 87,000 87,000 69 11-12 Hanover Square W1 Aviva Investors Q3 2016 40,000 40,000 127 The Harley Building, 77 New Cavendish

StreetW1 Harley Property Holdings Q4 2016 36,000 36,000

70 78 Whitfield Street W1 Derwent London Q4 2016 34,000 34,000 71 58-62 Newman Street W1 Celus Holdings Farm Group (WPP) Q4 2016 33,000 - 72 15-18 Rathbone Place W1 Royal London Asset Management Q4 2016 22,500 22,500 73 84-86 Great Portland Street W1 Great Portland Estates Q4 2016 18,000 18,000 74 14-15 Stratford Place W1 Morgan Capital Partners LLP Q4 2016 15,000 15,000 75 7-10 Hanover Square W1 Morgan Capital Partners LLP Undisclosed tenant Q1 2017 71,500 - 76 Rathbone Square, 35-50 Rathbone Place W1 Great Portland Estates Facebook Q2 2017 240,000 - 77 25 Wilton Road SW1 Royal London Asset Management Q2 2017 80,000 80,000 78 1 Dean Street W1 Great Portland Estates Q2 2017 42,500 42,500 79 7-10 Waterloo Place SW1 Cornerstone Real Estate Advisers Q2 2017 34,000 34,000 80 1 Marlborough Walk, Sloane Avenue SW3 RBKC Q2 2017 28,000 28,000 81 The Copyright Building, 30 Berners Street W1 Derwent London Capita Business Services Q3 2017 87,150 - 82 63-65 Buckingham Gate SW1 Anquila Corporation/London and

OrientalQ3 2017 63,000 63,000

83 7 Cork street W1 Pollen Estate Q3 2017 36,500 36,500 84 65 Wells Street W1 Great Portland Estates Q4 2017 38,000 38,000

Total 2,198,650 1,542,000

30

Development table


No.

Scheme

Post code

Developer

Tenant

Completion date

Total space sq ft

Space available

sq ftWest End Completed 85 Zig Zag Building, Victoria Street SW1 Land Securities Jupiter Asset Management, Deutsche Bank,

MoneyCorpQ4 2015 188,000 22,000

86 Curtis Green Building, Victoria Embankment

SW1 Metropolitan Police Metropolitan Police Q4 2015 150,000 -

87 Yalding House, 152 Great Portland Street W1 British Land Q4 2015 23,000 23,000 88 Colegrave House, 70 Berners Street W1 Arcadia Arcadia Q2 2016 155,000 - 89 1 New Burlington Place W1 The Crown Estate/NBIM/Exemplar Davidson Kempner Capital Management,

Accel PartnersQ1 2016 79,000 52,000

Total 595,000 97,000 Docklands Under Construction 90 1 Bank Street E14 Canary Wharf Société Générale Q1 2019 688,000 426,000 Total 688,000 426,000 Docklands Completed

Total 0 0King's Cross Under Construction 91 Three Pancras Square N1C King's Cross Central Limited Partnership Havas Media Q2 2016 163,000 - 92 Fish & Coal Building N1C King's Cross Central Limited Partnership Jamie Oliver Group Q3 2016 10,000 - 93 Four Pancras Square N1C King's Cross Central Limited Partnership Universal Music Q2 2017 170,000 - 94 R7 Handyside Street N1C King's Cross Central Limited Partnership New Look, XTX Markets Q2 2017 145,000 - 95 S2 Handyside Street N1C King's Cross Central Limited Partnership Google Q4 2017 180,000 -

Total 668,000 - King's Cross Completed 96 Pivotal, 123 Pentonville Road N1 Monteagle Barlow Trust Ltd Houzz Q1 2016 26,000 - 97 Lighthouse, Pentonville Road N1 UK Real Estate Ltd Q1 2016 16,500 16,500

Total 42,500 16,500 Midtown Construction98 Weston House, 242 High Holborn WC1 Frogmore Q2 2016 63,000 63,000 99 Holborn Tower, 137-144 High Holborn WC1 Private overseas Q2 2016 25,000 25,000 100 Strand Bridge House, 138-142 Strand WC2 Banco de Oro Banco de Oro Q2 2016 21,000 - 101 Bloomsbury Plaza, 2-8 Bloomsbury Street WC1 Friends Life Q2 2016 21,000 21,000 102 33-34 Alfred Place WC1 Great Portland Estates Q2 2016 14,000 14,000 103 1 New Street Square EC4 Land Securities Deloitte Q3 2016 260,000 - 104 LSQ London, 48 Leicester Square WC2 Old Park Lane Management Q3 2016 91,000 91,000 105 35 Chancery Lane WC2 Aberdeen Asset Management/

Endurance Land Q3 2016 66,000 66,000

106 Elm House, Elm Street WC1 Great Portland Estates Q3 2016 49,000 49,000 107 31-32 Alfred Place WC1 Great Portland Estates Q3 2016 30,000 30,000 108 16-16a Baldwins Gardens EC1 Workspace Group Q4 2016 59,000 59,000 109 29 Mount Pleasant WC1 Low Carbon Workplace Fred Perry Q4 2016 24,000 - 110 28 Chancery lane EC4 Viridis Real Estate Q4 2016 100,000 100,000 111 98 Fetter Lane EC4 Blackstone/Morgan Capital Partners LLP Macfarlanes Q4 2016 58,000 - 112 One Bedford Avenue / 251-258

Tottenham Court RoadWC1 Exemplar Properties Q1 2017 70,000 70,000

113 St Andrew’s House, 18-20 St Andrew Street

EC4 AXA IM/Morgan Capital Partners LLP Q1 2017 56,000 56,000

114 8 Salisbury Square EC4 Greycoat/Cheyne Capital Q2 2017 156,000 156,000


Development table


No.

Scheme

Post code

Developer

Tenant

Completion date

Total space sq ft

Space available

sq ftMidtown Construction 115 1 New Oxford Street (aka

Commonwealth House)WC1 TH Real Estate/BA Pensions Q2 2017 110,000 110,000

116 70 Farringdon Street EC4 Goldman Sachs/Tishman Speyer Goldman Sachs Q1 2018 843,000 - Total 2,116,000 910,000

Midtown Completed 117 12-14 New Fetter Lane EC4 Great Portland Estates Bird & Bird Q4 2015 142,500 - 118 Audit House, 58 Victoria Embankment EC4 FORE Partnership NESTA Q4 2015 48,000 - 119 Lacon House, 84 Theobalds Road WC1 Blackstone Q1 2016 215,000 215,000 120 77 Shaftesbury Avenue WC2 Dolford Property Holdings Bank of East Asia Q1 2016 49,000 34,000

Total 454,500 249,000

Paddington Under Construction121 4 Kingdom Street W2 British Land Q2 2017 132,000 132,000 122 20 Eastbourne Terrace W2 Land Securities The Office Group, Coty UK Q2 2016 93,000 36,000

Total 225,000 168,000 Paddington Completed

Total 0 0Southbank Under Construction123 The Cooperage, Courage Yard SE1 Columbia Threadneedle Zoopla Q2 2016 44,000 - 124 3 Valentine Place SE1 South Square/Gemaco Q3 2016 28,000 28,000 125 53 Great Suffolk Street SE1 Morgan Capital Partners LLP Q3 2017 30,000 30,000

Total 102,000 58,000 Southbank Completed 126 South Bank Tower, Stamford Street SE1 Hermes/Canada Pension Fund Q1 2016 224,000 224,000

Total 224,000 224,000

32

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121

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82

6359

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81

25

99

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28

3348

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126

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120

118

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93 91

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92

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108

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102

121

82

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62

73

70

64

81

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99

98

28

3348

41

31

3

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29

34

1 40

26

3216

9

21

15

22

19

71

7276

78

68

84

69

75

83

61

79

77

60

80

66

100

6

7

24/30

65/67

56/57

90

Definitions

Time period: October 2015 – March 2016

Size minimum: 10,000 sq ft

Construction type: New build construction or significant/comprehensive refurbishment – work to have started, demolition stages not included

Download the New London app To view the London development website visit: www.newlondondevelopment.com

With the future of London literally at your fingertips, the New London App is a must have for investors, property owners, developers or occupiers, within the UK and internationally. There is simply no other tool in the market with the capability to showcase London’s offer in this way and it is set to revolutionise how the industry goes to market.

London Office Crane Survey data now added. www.deloitte.co.uk/newlondonapp

34

Notes


Notes

36

Notes

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

Deloitte LLP is the United Kingdom member firm of DTTL.

This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. Deloitte LLP would be pleased to advise readers on how to apply the principles set out in this publication to their specific circumstances. Deloitte LLP accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.

© 2016 Deloitte LLP. All rights reserved.

Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 2 New Street Square, London EC4A 3BZ, United Kingdom. Tel: +44 (0) 20 7936 3000 Fax: +44 (0) 20 7583 1198.

Designed and produced by The Creative Studio at Deloitte, London. J5599

www.deloitte.co.uk/cranesurvey

Contacts

Martin Laws Partner, Occupier Consulting020 7007 [email protected]

Jon MilwardPartner, Development020 7303 [email protected]

Neill Morrison Partner, Cost Consultancy 020 7007 [email protected]

John AdamsPartner, Planning 020 7303 [email protected]

Mike Cuthbert Partner, Construction Advisory 020 7303 [email protected]

Chris LewisPartner, Occupier Advisory020 7303 [email protected]

Shaun DawsonResearch Manager020 7303 [email protected]

Will MatthewsHead of Real Estate Research020 7303 [email protected]

Philip Parnell Partner, Valuation 020 7303 [email protected]

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