London Offices Market Analysis Q3 2014

londonofficesMarket
analysisq3:2014
citycore
docklands
contents
midtown
cityfringe
The market has proved wrong last
quarter’s assessment of 2014 being a
good, rather than spectacular, year.
Take-up soared in Q3 and has driven the
market to a position where the highs of
2007 and 2010 may be surpassed.
CLick on the area name to view its market breakdown
CLick on the tabs below for more in-dePth analysis
u Overview
Amazon’sheadline-
grabbingdealshave
boostedtake-upinQ3,
butsuchisthestrength
ofthemarketthateven
withoutthesedealsthe
marketwouldbeina
strongposition.
u leaguetables
Allchangethis
quarter,withan
unfamiliarname
hittingthetopofthe
overalltableforthe
firsttimeandanother
agentclimbingby13
places.
u submarkets
TheCitycoreand
Cityfringetakethe
leadthisquarter,
drivingtake-upfor
thecapitalwith
record-breaking
figures.
southbank
westend
CLick for
detailed
boundary
map

R
emember 2004? The
Gherkin had just opened its
shiny doors, the London
Plan was published and
something called The
Facebook was registered by
an unknown Harvard student called
Mark Zuckerberg. City lettings were on
a high and Toxic was a chart-topping
song by Britney Spears that had
nothing to do with debt, writes Nadia
Elghamry.
Those good times might be on the way
back with the City office market soaring.
Quarter three figures show lettings in the
City core are at a decade high of 1.79m sq
ft, up 80% on the same time last year.
The City fringe market fared even
better. At 868,000 sq ft, it had its best
quarter since EGi’s London office
research began analysing the market
in 2002. London as a whole secured
4.35m sq ft of take-up, a figure that
hasn’t been exceeded since the end of
2006 and puts the capital on a steady
footing to end the year on 13.3m sq ft.
Itwouldbetemptingtolaythesuccessof
thosemarketsatthedoorsofone
company:Amazon.Tempting,butwrong.
Theonlineretailinggiantsignedthe
largestdealofquarterthree,takingfully
527,000sqftofofficespacesplitbetween
431,000sqftatPrincipalPlace,E1,and
96,000sqftatLeadenhallCourt,EC3.
Thedealhascausedanupsetatthetop
ofEG’sLondonofficeleaguetable,
citydeliversdecLondon lettings are soaring and the City is on course for its best figures in years. Have the good
LondonOffices Delve deeper into the data with interactive maps
Q3 overview
London offices
market analysis
Londonoffice

cadehightimes returned? And can they last?
thefullq3Londonofficemarketanalysiswww.estatesgazette.com/loma
esmarketanalysisQ3:2014
Amazon dealpropelled cushman&wakefieldtotopoftheleasingleague
ThefirstruleabouttheAmazondealisnooneinvolvedtalksabouttheAmazondeal.Thelarge
Americancorporatehassworntheagentstosecrecyonits527,000sqftoflettingsin
thecapital. Buttherestofthemarkethasbeenwatchingclosely.
Detailsarescant,butwhatthemarketcommentatorssayisthatthedealappearedtobeswift,
lackingthelayerofdecisionmakersandbureaucracyoftenassociatedwithabigsigning.Butthen
AmazonneededtomovefasthavingmissedoutinHolborn.“Everythingtheyplannedaroundthat
locationstartedtounravellastChristmas,”saidonecommentator.“Theyrealisedtheycouldn’t
getholdoftheSainsbury’sbuildingatHolbornCircus,andMizunotook2Ludgateandthen
Smithfielddidn’tgettherightcallfortheplanningconsent.”
ThedealboostedCushman&WakefieldtothetopofEG’sleasingleaguetable–andwill
undoubtedlyhelpintheend-of-yearacquisitiontable.“Therehasbeenamassivepolarisation
towardsthetopfive[agents],”addedthesource.“Itisunprecedentedandalotofthatisabout
globalreachintermsofsomeofthebigUSmandates.”
BothCushman&WakefieldandAllsopdeclinedtocomment.
pushingJLLfromthetopspotand
parachutinginAmazonagentCushman&
Wakefield.Theshockwavesdidn’tstop
there,withjointagentsAllsoprocketing
13positions(seeleaguetables,overleaf).
On paper, it might look like a mega deal
artificially boosted one quarter’s lettings,
but delve down into the figures and a high
volume of deals, rather than two or three
headline deals, are behind it.
Factor in the Amazon deal and London
as a whole had its best quarter since the
citycore docklandsmidtown cityfringesouthbankwestendanalysiscontents
CLickonthe area name to go direct to market breakdown

westendtopickupthepace
WhiletheCity roarsandtheCityfringefinds
itsgrowl,theWestEndsoundsmoreof
miaow.Take-upinquarterthreedropped
19%to746,000sqft comparedwiththe
previousquarter.
WiththelargeprelettoEstéeLauderin
quartertwoitwouldhavebeendifficultto
maintainlettingsatthatlevel,butwhetherit
islackofsupplyoralock,stockandbarrel
movefromwesttoeastbyoccupiersis
debatable.
Cushman&Wakefield’sheadofWestEnd
officeagency,AndyTyler,ispredicting4msq
ft-plusoftake-upbyyear-end.Thatwould
mean,hesays,“ifwehadacrackingfairwind
behinduswecouldgettothehighestlevels
since2000”.
Thatwouldputpressureonvacancy
rateswhich,now3.3%,couldendtheyear
aslowas2.7%.“Ithinkifyouareatenant
youaregettingincreasinglynervousabout
thelackofchoiceandwhererentswillgo,”
saysTyler.
Dealsinthepipelinethatmightcome
throughinquarterfourcouldincludea
950,000sqftquarterwhichwouldleadto
whatTylerdescribesas“somepretty
competitivebiddingforspace”.
Andtheconsequence?“Ithinktenants
willgowestaswellaseast–whichisawell
troddenpath.Thewesthasbeenforgotten.”
“The stats don’t lie. You can’t have the levels of take-up
we are experiencing at the moment without massively
depleting the stock, and the new supply is looking skinny”
downloadthefullq3Londonofficemarketanalysiswww.estatesgazette.com/loma
end of 2006. Strip out the Amazon deal
and it is still the best three months since
Q4 2010 – the peak of the current cycle.
Canitcontinue?
“Ithinkquarterfourwillbeverystrong.
We’vegotcloseto3msqftunderoffer,”says
PhilipPearce,executivedirectorofcentral
London,Savills.“Thefundmanagersare
backinactionandtheTMTsectorhas
undoubtedlyboostedfigures,especiallyin
thefringe...infactcanyouevencallthem
fringeanymore?”hequestions,addingthat
“nearlyallthesectorsareactiveandIfindit
encouragingthatitisnotjustreliantonone
ortwo”.
Buttheelephantintheroomis
availability.“Nextyearisgoingtobetough,”
admitsPearce.“Thestatsdon’tlie,you
can’thavethelevelsoftake-upweare
experiencingatthemomentwithout
massivelydepletingthestock,andthenew
supplyislookingskinny.”
InLondon,2.37msqftofspacestarted
constructionthisquarter,with11.36msqft
duetocompleteby2016,afigurewhichisup
onlastquarter’s1.09msqftofspacestarted.
PeterLance,partnerofofficeleasingin
Allsop’sCityteamagrees:“Thebigger
occupiershavestartedtolookatprelet
options,availabilityisdryingupandweare
expectingawaveofrefurbs.Thiswillbe
followedbythesupplybeingreplacedin
2017withspecdevelopment,andin2018
therewillbeoversupply.”
top london leasing agents 2014
1 Cushman & Wakefield 967,669 34
2 DTZ 878,878 44
3 JLL 847,113 73
4 CBRE 839,295 52
5 KnightFrank 698,036 39
6 Savills 535,164 43
7 Allsop 518,573 9
8 DeloitteRealEstate 242,943 15
9 HattonRealEstate 169,959 38
10 MontaguEvans 160,286 7
11 ColliersInternational 149,136 25
12 MonmouthDean 138,507 26
13 Strutt&Parker 136,493 14
14 HallKemp 121,093 12
15 NewtonPerkins 98,722 14
16 GryphonPropertyPartners 92,973 6
17 BNPParibasRealEstate 82,689 16
18 Farebrother 77,648 12
19 EdwardCharles&Partners 75,009 15
20 GMRealEstate 68,109 7
21 Tuckerman 58,916 12
22 FrostMeadowcroft 53,157 11
23 InglebyTrice 50,446 10
24 CrosslandOtterHunt 47,697 8
25 Bluebook 42,916 4
Rank Agent Disposals
(sqft)
No of
deals
(sq ft)
Noof
deals
1 Cushman&Wakefield 122,242 4
2 DTZ 114,250 5
4 CBRE 44,672 4
5 Cherryman 19,934 7
(sq ft)
Noof
deals
1 DTZ 218,865 7
2 JLL 191,060 10
3 Savills 171,347 5
4 DeloitteRealEstate 130,035 2
5 MontaguEvans 118,276 1
(sq ft)
Noof
deals
2 JLL 31,680 6
2 Savills 30,052 4
4 CBRE 22,831 6
(sq ft)
Noof
deals
2 CBRE 160,123 10
3 JLL 142,862 15
5 ColliersInternational 79,589 16
agents by submarket 2014
dockLands
midtown
southernfringe
westend
(sq ft)
Noof
deals
1 CBRE 516,848 15
2 JLL 364,162 35
3 DTZ 343,262 15
4 Savills 275,103 26
(sq ft)
Noof
deals
1 Allsop 440,714 2
3 HattonRealEstate 157,025 34
4 DTZ 110,276 3
CITYCORE CITYFRINGE

Forfullanalysisofalllondonmarketwww.estatesgazette.com/loma
Q3DevelopmentYTDconstructiontocompleteby2016 largest
letting
Cityofficessoarwith
biggestquarterinadecade
EGBluffer’sGuide:
London
in6seconds
Londonbusinessconfidenceisatan
eight-yearhighaftertheamountof
officespacesignedforinthethird
quarterof2014hititshighestlevel
sincetheendof2006.Spacesigned
forrocketedby22%onthesame
periodlastyearandtheamountof
spaceplacedunderofferroseforthe
seventhconsecutivequarter.
TheCitymarketledthis,with
lettingsatadecadehigh,helpedby,
butnotexclusivelybecauseof,
Amazon’s96,000sqftlettingat
LeadenhallCourt,EC3.Theonline
retailer’s430,000sqftlettingat
PrincipalPlace,EC1,alsoboosted
theCityfringemarket,whichsaw
itsbestquarteronrecord.Tech
firmssignedfortwo-thirdsofthe
spacetakenhere.
Take-up
Top tenants
where 2014
might end
AssumesQ4 isin
linewithfive-
yearlyaverage
■ Associations 1%
■ Central & local
government 2%
■ Construction 1%
■ Cultural 0%
■ Financial 18%
■ Health & education 4%
■ Industry &
manufacturing 0%
■ Insurance 2%
■ Others 12%
■ Professional 11%
■ Property 8%
■ Retail & leisure 2%
■ Services 8%
■ TMT 28%
■ Transport 2%
■ Utilities 0%
■ construction starts ■ to complete by2016
Û
London
4.35msqft
▲ onQ32013
City
1.79msqft
▲onQ32013
West End
0.75msqft
▼onQ32013
Five-year
quarterlyaverage
Five-year
quarterlyaverage
Five-year
quarterlyaverage2.83m 1.01m 0.7m
Best since
13.5msqft2007
London
13.3msqft2014
High
14.3msqft2006
8.3msq ft
Low
2012
Amazon
431,000sq ft, Principal
Place, EC1
TMT
▲
percentage points
23
Biggest
moverÛ
Cultural
▼
percentage points
19
Biggest
Loser
Û
Utilities
Transport
TMT
Services
Retail & Leisure
Property
Professional
Others
Insurance
Industry & Manufacturing
Health & Education
Financial
Cultural
Construction
Central & Local Government
Associations
11.36M 2.97m
westend
0.77m
3.5m
London
2.37m
city
0.52m

W
ith London returns still
rising past the point
that most said was
sustainable, it is difficult
to know where to stash
your cash in the capital.
For example, the map of consensus rents
(opposite), shows returns on a
hypothetical 20,000 sq ft office with a
10-year lease – every submarket rose.
Even the loser, Paddington, was in the
black with an annual rise of 1%.
Onpaper,theEustonRoadmarkethashad
themostastoundingyear,withreturnsupby
morethanone-third.Manypointtothefact
thatthemarketwassimplyunderpriced
before.Onaquarterlybasis,therental
riseisamoremodest1%,butthat
helpsonlyifyoupiledinyourmoney
morethanayearago.Sowhere
shouldyouheadnow?
Thetrendoffootloosetenants
lookssettocontinue.Agentspoint
tocontinuedstocksqueezesinthe
WestEnd–whererentalgrowth
seemstohavepeteredout–thatare
forcingoccupierstolookatpreletsand
casttheirnetseverwider.
Butnoinvestorwantstofollowthe
tenantstosomewherethathasjusthititbig;
muchbettertobetherewhenit’sstillabit
roughroundtheedges.Thatiswhat
somethinkLandSecuritiesdidin
Victoria,althoughwithitsWhitehall
tenants,itisdebatablewhetherthe
areawaseverthatshabby.
AndyTyler,Cushman&Wakefield’s
partner,Londonmarkets,says:“They
hadtheballstobuildandtheyaregoing
toreaptherewards.”
Wheretoput
rentsLondon offices market analysis
yourmoneyEvery submarket rose in
Q3 as the trend of footloose
tenants continued, writes
Nadia Elghamry
CITY CORE, MIDTOWN, DOCKLANDS, CITY FRINGE, WEST END, SOUTHERN FRINGE | EXTENDED
L
soho
£13.7mCHANGEONQ24%
rent £80psf
freeperiod17months
paddington
£9.7Mchangeonq21%
RENT£57.80PSF
freeperiod19months
victoria
£12.1mchangeonq22%
rent £72psf
freeperiod19months
eustonroad
£9.8MCHANGEONQ22%
rent£57.90psf
freeperiod18months
coventgarden
£12.7MCHANGEONQ28%
RENT £73.75PSF
freeperiod17months
mayfair/stjames
£20.2mchangeonq25%
RENT£115.50PSF
freeperiod15months

Pointingtothesqueezeinsupplyin
almosteverysubmarket,TylersaysVictoria
canactasapressurevalve.Consensus
rentsshowthemarketisalreadyreasonably
pricedandreturnsaremodest,butsteady.
OtherareastowatcharetheWest,but
furtherflungthanwestofTottenhamCourt
Road.“Themarchfromeasttowestisawell-
troddenpath,butthewesthasbeen
forgotten,”saysTyler.“Ithinkthere’llbegreat
opportunitiesforoccupiersinWhiteCityand
it’sanareatolookatgoingforward.”
Buyersarenotthinonthegroundand
figuresfromEGi’sLondonOfficesResearch
showthatinvestmenthit£4bninthethird
quarter,withover£1.7bnofthatintheWest
End.Thistotalisdownonthelastquarter
andonthefive-quarteraverage,butroughly
inlinewithwherethemarketwasinthe
equivalentperiodlastyear.
FelixRabeneck,directorofSavills’central
Londoninvestmentteam,says:“Thereis
quitealotunderofferatthemomentand
lastyearwasananomaly.”Thereislittle
doubtthatitwas,includingaremarkable
doublewhammyoffinal-quarterportfolio
deals,atBroadgateandMoreLondon,
whichwentforacool£1.7bnapiece.
ExpectyieldcompressionintheCity,says
Rabeneck.“Thereisstillabiggapbetween
theCityandWestEndandCityyieldsareout
ofkilterfortherightbuildings,”headds.
Buyersarestillglobalwithalotof
institutionalinvestorscominginand
sovereignwealthstillfeaturingstrongly,
saysRabeneck.Whatismissingisbig
MiddleEasternmoney,althoughinterestis
thereatthemarketingstage,headds.
Withseveraltrophyassetslininguptobe
soldasweenterthelastquarteroftheyear,
2014couldyetbearecord-breaker.Andifit
is,itcouldbeevenhardertowinkleoutthe
bestpocketsofreturns.
TENDED ANALYSIS FOR EACH CORE MARKET ONLINE WWW.ESTATESGAZETTE.COM/LOMA
GROVEROAD
investment barometer
1%orbelow Sizeofcircledenotestotalreturn 8%orover
Panel:Cushman&Wakefield,DeloitteRealEstate,
JLL,CBRE,Savills,Farebrother(Midtown,Covent
GardenandSouthBankonly)
canarywharf
£5.9mchangeonq23%
Rent £39.10psf
freeperiod
29months
aldgate
£7.5mCHANGEONQ27%
RENT£46PSF
freeperiod22months
morelondon
£9mCHANGEON Q23%
Rent £54.42PSF
freeperiod21months
chancerylane
£10.3mchangeonq24%
Rent £60.67psf
freeperiod18months
greshamst/
leadenhallst/
broadgate
£9.8MCHANGEONQ23%
RENT£60PSF
freeperiod22months
Total return on a hypothetical 20,000
sq ft letting with a 10-year lease

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Q3:2014summarystatistics
Citycore Cityfringe Docklands Midtown SouthBank WestEnd Overall
2013 2014 2014 2013 2014 2014 2013 2014 2014 2013 2014 2014 2013 2014 2014 2013 2014 2014 2013 2014 2014
Q1,2+3 Q3 Q1,2+3 Q3 Q1,2+3 Q3 Q1,2+3 Q3 Q1,2+3 Q3 Q1,2+3 Q3 Q1,2+3 Q3
Take-up(msq ft)annualorquartertotal
New/refurbexisting 1.19 0.66 0.34 0.24 0.08 0.03 0.21 0.00 0.00 0.21 0.35 0.14 0.17 0.24 0.05 0.64 0.50 0.22 2.66 1.83 0.78
Premarketing 0.31 0.41 0.41 0.01 0.44 0.43 0.00 0.00 0.00 1.15 0.20 0.16 0.00 0.00 0.00 0.02 0.04 0.01 1.49 1.09 1.01
Secondhand 2.33 1.80 0.96 0.90 0.88 0.41 0.36 0.57 0.20 0.96 0.83 0.20 0.51 0.32 0.06 1.78 1.39 0.43 6.84 5.80 2.26
Underconstruction 0.66 0.67 0.09 0.14 0.10 0.00 0.00 0.23 0.00 0.27 0.35 0.13 0.71 0.10 0.00 0.21 0.31 0.08 1.99 1.77 0.31
Total 4.50 3.55 1.80 1.28 1.50 0.87 0.57 0.80 0.20 2.60 1.73 0.63 1.39 0.66 0.11 2.65 2.24 0.75 12.98 10.48 4.35
Availability(msq ft)annualquarterlyaverageorquarterend
Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2
New/refurbexisting 1.47 1.70 1.96 0.12 0.13 0.16 0.31 0.35 0.37 0.33 0.35 0.35 0.67 0.65 0.59 0.83 0.76 0.68 3.74 3.94 4.12
Premarketing 2.83 3.46 3.80 1.31 1.48 0.95 3.59 3.51 3.51 3.30 2.91 2.44 1.09 1.00 0.82 1.17 0.94 0.96 13.29 13.31 12.47
Secondhand 3.87 3.26 2.93 1.24 1.06 0.79 1.55 1.38 1.32 1.74 1.23 1.03 0.76 0.85 0.98 2.44 2.02 2.00 11.60 9.80 9.05
Underconstruction 4.06 2.93 2.32 0.70 0.98 1.24 0.29 0.05 0.05 0.60 0.90 0.88 0.99 0.33 0.22 1.12 1.42 1.61 7.76 6.60 6.32
Total 12.22 11.35 11.01 3.37 3.65 3.14 5.75 5.29 5.24 5.97 5.38 4.70 3.52 2.83 2.62 5.56 5.15 5.25 36.39 33.65 31.96
Availabilityrate% annualaverageorquarter
% 9.40% 8.82% 8.65% 5.79% 5.20% 4.26% 9.95% 9.11% 8.83% 6.61% 5.30% 4.73% 8.49% 8.66% 9.05% 5.28% 4.81% 4.83% 7.59% 6.98% 6.72%
Underofferandwithdrawn(msq ft)quarterorquarterlyaverage
Underoffer 0.58 0.84 0.70 0.13 0.24 0.34 0.10 0.12 0.02 0.23 0.35 0.14 0.16 0.29 0.21 0.33 0.47 0.60 1.53 2.31 2.01
Withdrawn 0.08 0.14 0.11 0.15 0.09 0.11 0.01 0.03 0.04 0.05 0.26 0.21 0.04 0.13 0.30 0.13 0.10 0.13 0.45 0.75 0.89
Averageaskingprices(£persq ft)quarterorquarterlyaverage
*Newleasesonly Q1,2+3 Q3 Q1,2+3 Q3 Q1,2+3 Q3 Q1,2+3 Q3 Q1,2+3 Q3 Q1,2+3 Q3 Q1,2+3 Q3
Newbuildexisting £46.08 £56.86 £62.20 £31.49 £40.00 n/a £34.93 £35.02 £35.00 £42.64 £59.09 n/a n/a £58.62 £57.83 £74.60 £64.75 £70.00 £38.29 £52.39 £56.26
SecondhandgradeA £41.34 £42.55 £44.00 £28.52 £27.50 £32.50 £33.45 £32.33 £34.55 £39.11 £43.57 £47.07 £40.41 £35.95 £40.00 £57.32 £64.38 £68.28 £40.03 £41.05 £44.40
Investmentsales(msq ft)annualorquartertotal
Totalsqft 7.53 3.80 1.67 1.44 0.88 0.47 2.34 2.65 0.99 2.83 1.22 0.45 2.98 0.62 0.08 3.84 2.09 1.51 20.96 11.26 5.17
Nooftransactions 69 49 21 44 26 15 8 8 3 47 25 11 22 8 5 102 52 24 292 126 79
Constructionstarts(msq ft)annualorquartertotal
Totalstarted 1.42 0.94 0.52 0.71 1.24 1.00 0.00 0.05 0.00 0.76 0.63 0.06 0.27 0.03 0.02 1.48 1.26 0.77 4.64 4.15 2.37
Prelet 0.48 0.36 0.31 0.08 0.46 0.43 0.00 0.00 0.00 0.33 0.19 0.00 0.10 0.00 0.00 0.25 0.04 0.00 1.24 1.05 0.74
Speculative 0.94 0.58 0.21 0.63 0.78 0.57 0.00 0.05 0.00 0.43 0.44 0.06 0.17 0.03 0.02 1.23 1.22 0.77 3.40 3.10 1.63
Completedspacestillavailable(msq ft)(completionbyfullyearorpartofyear)
Totalcompleted 0.74 1.90 0.47 0.36 0.30 0.18 0.00 0.54 0.00 0.36 0.90 0.62 0.56 0.56 0.00 1.31 0.36 0.21 3.33 4.56 1.48
Stillavailable 0.16 1.22 0.37 0.03 0.13 0.03 0.00 0.06 0.00 0.09 0.04 0.02 0.11 0.45 0.00 0.21 0.11 0.06 0.60 2.01 0.49
Futurecompletions(msq ft)forfullyearorpartofyear
Deliverydate 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016
Totaltocomplete 0.90 2.14 0.46 0.47 0.56 0.27 0.00 0.00 1.99 0.56 0.47 0.28 0.03 0.25 0.00 1.05 0.90 1.02 3.02 4.32 4.02
Amountstillavailable 0.12 1.30 0.15 0.40 0.54 0.27 0.00 0.00 1.99 0.55 0.10 0.28 0.03 0.25 0.00 0.82 0.81 1.02 1.91 3.00 3.71
%stillavailable 13% 61% 33% 85% 96% 100% 0% 0% 100% 98% 22% 100% 100% 100% 100% 78% 90% 100% 63% 69% 92%
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in depthLondon offices market analysis
With1.8msqftletin116deals,thisequatestothe
mostimpressivequarteroflettingsintheCitycore
sincethefourthquarterof2004,when2.1msqftwaslet.Thatthis
figurewasmadeupofsuchahighvolumeofdeals,ratherthantwo
orthreeheadlinetransactionsaccountingforalargeproportionof
thefigure,suggestshighlevelsofconfidenceacrossthemarket.
TheprofileofthelettingsalsohighlightstheappealoftheCitytoa
diverserangeofbusinesssectors,withTMT–asectormore
commonlylocatedintheWestEndorCityfringe–accountingfor
13%oftake-up.
ThelargestdealintheCitycorethisquarterwasM&G’s323,000
sqftpreletofGenerali’s10FenchurchAvenue,EC3,where
demolitionworksarenowunderway.Thesecondlargestdealwas
Amazon’s96,000sqftlettingofBrookfield’sLeadenhallCourt,EC3.
CITYCOREq3:2014
Overview
nHighestlevelof
take-upachieved
sinceQ42004
nOnlyonedeal
exceeded100,000sqft
thisquarter
nThefinancialsector
accountedfor34%of
take-upinQ3,against
35%inQ2and36%
inQ1
nTheprofessional
sectorincreasedfrom
5%lastquarterto14%
thisquarter
nTheconstruction
sectorhasaccounted
forjust1%oftake-up
inthepasttwo
quarters
Take-up
Key deals
Take-up by sector
Availability
Asking rent
Address Tenant Size(sq ft)
10FenchurchAvenue,EC3 M&GInvestmentManagement 323,000
LeadenhallCourt,1LeadenhallStreet,EC3 Amazon 96,000
AlbanGate,125-130LondonWall,EC2 LloydsBankingGroup 73,000
SceptreCourt,40TowerHill,EC3 LondonSchoolofBusiness&Finance 63,000
99Bishopsgate,EC2 DeutscheBank 49,000
0
1
2
3
4
5
6
201420132012201120102009
Sq ft (millions)
nnew-buildnsecondhand
6
9
12
15
14 Q314 Q214 Q113 Q413 Q313 Q213 Q112 Q412 Q312 Q212 Q111 Q411 Q311 Q211 Q110 Q410 Q3
%
nnew-build(existing)nsecondhand
TheAmazondealisashort-termlettinguntilspaceatanotherof
Brookfield’sdevelopments,PrincipalPlace,EC1,iscomplete.The
prelettingof431,000sqftatPrincipalPlaceisincludedasthe
biggestdealofthequarter,butitfallsintotheCityfringemarket.
Thehighleveloflettingshasinevitablyhadanimpactonthe
availabilityrate,withnewinstructionsfailingtokeeppacewithtake-
up.Availabilitynowstandsat8.65%,downfrom9.41%inQ2.While
thedropissizable,therateisnotaslowasattheendof2013,whenit
dippedto7.93%.Thedecliningavailabilityofspaceispushingrents
upwards,withtheaveragerentonnew-buildspaceintheCitycore
nowstandingat£62.20persqft.Thelargestnewinstructiontothis
marketinQ3was62,071sqftatStMartin’s-le-Grand,EC1.
ConstructionstartsinQ3accountedformorespacethanthefirst
twoquarterscombined,butthefigureisstilllowat520,000sqft.
30
40
50
60
70
80
20142013201220112010
£ psf
Q2
Construction
Financial
Insuranceindustry & manufacturing
Health & Education
Professional
TMT
transport
city core
continued
à
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520,000
sq ft put under
construction
in Q2
1.8m
sq ft
let
11.01m
sq ft
available
£60
per sq ft
EGiconsensus
rent
8.65%
availability
rate
4.89m
sq ft
Available and
ready to occupy
Ofthatfigure,310,000sqftisprelet,sothesestartswilldo
littletoalleviateanincreasingshortageofgrade-Aspaceinthe
Citycore.
ThelargestconstructionstartofthequarterwasatOneLondon
WallPlace,EC2,whereSchrodersprelet309,397sqftinQ4oflast
year.Thelevelofprelettingofspacethatisduetocompletethisyear
ishigherstill,with87%ofthe900,000sqftduetocompletealready
n470,000sqft
completedthis
quarter
n79%ofthespace
thatcompletedisstill
available
n520,000sqftwent
underconstruction
thisquarter
n3.5msqftisdueto
completebeforethe
endof2016
Development Future development
investment saLESDevelopment Under construction
Address Price(£m) Size(sqft)
WoolgateExchange,25BasinghallStreet,EC2 £320 339,000
125OldBroadStreet,EC2 £320 320,000
PlanationPlaceSouth,60GreatTowerStreet,EC3 £142 158,000
RoyalMintCourt,EC3 £50 478,000
AbacusHouse,33GutterLane,EC2 £45 65,000
0
0.5
1
1.5
2
2.5
201620152014
Sq ft (millions)
0
5
10
15
20
201420132012201120102009
Sq ft (millions)
npreletnspeculative npreletnspeculative
nSupplydroppedby
1.15msqftquarter-on-
quarter
nPremarketedspace
accountsfor35%ofall
Citycoresupply
Supply
Address Completiondate Sizespeculative(sq ft)
BloombergPlace,Bucklersbury,EC4 2015 380,000
AngelCourtTower,EC2 2015 365,000
MoorgateExchange,72ForeStreet,EC2 2014 217,000
71QueenVictoriaStreet,EC4 2014 187,000
Alphabeta,FinsburySquare,EC2 2015 167,000
0
0.5
1
1.5
2
2.5
3
201420132012201120102009
Sq ft (millions)
nnew/refurbexistingnpremarketingnsecondhandnunderconstruction
let.Lookingaheadto2015,thesituationisbetter,with2.1msqftto
bedeliveredand61%ofitstillavailable.However,ofthe460,000sqft
scheduledfor2016,only33%isstillavailable.
Thedemandforcityassetswasstrongthisquarter,with
20investmentdealscompletingandthreeofthoseover£100m.
ThelargestdealwasCathayLife’s£320mpurchaseofWoolgate
Exchange,EC2,for£320m,representinganetinitialyieldof5.1%.
Headline figures
For any data queries, please contact tom.pilkington@estatesgazette.com or call 020 7911 1775

Take-upintheWestEnddroppedfrom919,000sqft
inQ2to746,000sqftinQ3.Thefigureisabovethe
five-yearquarterlyaverageof700,000sqftandtheyear-to-date
figureis2.2msqft,whichisthehighestlevelachievedatthisstage
oftheyearsince2010–aparticularlystrongyear.Thereisalso
potentialforastrongfinishtotheyear,with600,000sqftplaced
underofferintheWestEndinQ3.
Thestrongestdriveroftake-upintheWestEndwasthefinancial
sector,whichaccountedfor19%ofthetotal,althoughthebiggest
dealofthequarterwastheParliamentaryEstatesDirectorate’s
lettingof91,000sqftatBritishLand’s39VictoriaStreet,SW1,where
constructioncompletedinJuly.Elsewhere,LandSecurities’ZigZag
Building,SW1,achieveditsfirstprelet,withJupiterAsset
Managementtaking56,000sqftona20-yearlease.
westendq3:2014
Overview
n Take-updroppedby
6%year-on-year
n 58%oftake-upwas
insecondhandspace
n Thefinancial
sectoraccountedfor
19%ofWestEnd
take-upforthesecond
consecutivequarter
n TheTMTsectorrose
from8%lastquarter
to14%thisquarter
n Central&local
governmenttake-up
rosefrom1%last
quarterto12%this
quarter
Take-up
Key deals
Take-up by sector
Availability
Asking rent
Address Tenant Size(sq ft)
39VictoriaStreet,SW1 ParliamentaryEstatesDirectorate 91,000
ZigZagBuilding,VictoriaStreet,SW1 JupiterAssetManagement 56,000
1StephenStreet,W1 FreudCommunications 25,000
StJames’sHouse,23KingStreet,SW1 LondonExecutiveOffices 24,000
4Millbank,SW1 LightspeedResearch 23,000
0
0.5
1
1.5
2
2.5
3
3.5
201420132012201120102009
Sq ft (millions)
nnew-build nsecondhand
0
2
4
6
8
10
12
%
nnew-build(existing) nsecondhand
Despitelettingsabovethefive-yearaverage,theavailabilityrate
movedoutslightlyfrom4.76%to4.83%.Thiswashelpedbytwo
largenewinstructionstothemarket–237,300sqftatDerwent
London’s55-65NorthWharfRoad,W2,and216,000sqftatGreat
PortlandEstate’s1RathboneSquare,W1.Despitetheavailability
ratemovingout,itisstillexceptionallylowandcontinuestodriveup
rents.Theaverageaskingrentfornew-buildspaceacrosstheWest
Endis£70persqft,whichisfollowedcloselybysecondhandspace
at£68.23.Thereare,ofcourse,muchhigherlevelssought,suchas
theaskingrentof£85persqftatGrosvenor’snew-buildspaceat
ParkHouseorthe£100persqftsoughtonsecondhandspaceat
25 HanoverSquare,W1.
ConstructionstartsintheWestEndwereatahealthylevelthis
quarterat770,000sqft,whichaccountsforalmostone-thirdofthe
40
60
80
100
20142013201220112010
£ psf
Q2
Cultural
Financial
Others
Property
Retail & Leisure
Services
Health & education
Central & local
government
Professional
TMT
Transport
West end
continued
à
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£80
per sq ft
EGi Consensus
rent
746,000
sq ft
let
5.25m
sq ft
available
770,000
sq ft put under
construction in Q2
4.83%
availability
rate
2.68m
sq ft
Available and
ready to occupy
startsacrossLondonthisquarter.Encouragingly,allofthespace
startedisspeculativespace.Thelargeststartwasthe
aforementioned216,000sqft1RathboneSquare,W1,whichwas
followedcloselybytheCrownEstateandOxfordProperties’St
James’sMarketdevelopment,whichwilldeliver200,000sqftof
officespace.Thesetwodevelopmentscontributetoaconstruction
pipelinethatlookshealthierthanthoseofothermarketsacross
n 210,000sqft
completedinQ3
n Only30%ofthe
spacethatcompleted
isstillavailable
n 3msqftisdueto
completebeforethe
endof2016
n 89%ofthespace
underconstructionis
speculative
Development Future development
investment salesDevelopment Under construction
Address Price(£m) Size(sq ft)
PollenEstate,W1(64%stake) £381 43sites
ThePoint,NorthWharfRoad,W2 £210 226,000
33GrosvenorPlace,SW1 £204 256,000
101NewCavendishStreet,W1 £87 89,000
9-15SackvilleStreet,W1 £83 34,000
0
0.2
0.4
0.6
0.8
1.0
1.2
201620152014
Sq ft (millions)
0
2
4
6
8
10
201420132012201120102009
Sq ft (millions)
nprelet nspeculative nprelet nspeculative
n Supplyincreased
by 410,000sqft
quarter-on-quarter
n Premarketedspace
accountsfor18%ofall
WestEndsupply
n Thereis2msqftof
secondhandavailable
spaceintheWestEnd
Supply
Address Completiondate Sizespeculative(sq ft)
Nova,TerminusPlace,SW1 2016 480,000
1RathboneSquare,W1 2016 216,000
StJames’sMarket,52Haymarket,W1 2016 200,000
16BabmaesStreet,SW1 2014 151,000
SceptreHouse,169-173RegentStreet,W1 2014 150,000
0
0.5
1
1.5
2
201420132012201120102009
Sq ft (millions)
nnew/refurbexisting npremarketing nsecondhand nunderconstruction
London,with2.97msqftduetocompletebeforetheendof2016and
ofthat89%isstillavailable.
TheWestEndinvestmentmarketwasbusythisquarterand
dominatedbythesaleofastakeinthePollenEstate.NorgesBank
InvestmentManagementtooka57.8%stakeandtheCrownEstate
tooka6.4%stake,withthepairpayingtheChurchCommissioners
forEngland£381mforthe43sites.
Headline figures

Take-upinQ3stayedinlinewithQ2,with633,00sq
ftletthisquarter,following620,000sqftinQ2.The
largestlettingofthequarterwasthe161,000sqftpreletof3Pancras
Square,N1,toHavas.Thisdealhelpedtodrivethetake-upinunder-
constructionorpre-constructionspaceto46%ofthetotalletinthe
quarter.ThedealalsohelpedtheTMTsectortoaccountformoreof
thetake-upthananyothersector,with38%ofthetotal.
Take-upforthequarterwassignificantlyabovethefive-year
averageof431,000sqftandhelpedtoerodetheavailabilityrateto
4.73%.Therearenowthreemarkets(Midtown,Cityfringeat4.26%
andWestEndat4.83%)withanavailabilityrateoflessthan5%,
whichwillresultinrapidrentincreasesasdemandoutstripssupply.
Theconstructionpipelinewilldolittletoalleviatestockshortages
inMidtown,withnosignificantconstructionstartsinQ3,andofthe
midtownq3:2014
Overview
n At633,000sqft,
Midtowntake-upwas
203,000sqftabovethe
five-yearquarterly
averageforthis
market
n 46%oftake-upwas
prelettingactivity
n Theprofessional
sectorincreasedfrom
9%lastquarterto28%
thisquarter
n TheTMTsectorwas
themostprevalent,
accountingfor38%of
take-up,increasing
from35%lastquarter
n Healthand
educationincreased
from5%oftake-up
lastquarterto13%
thisquarter
Take-up
Key deals
Take-up by sector
Availability
Asking rent
Address Tenant Size(sqft)
King’sCrossCentral,3PancrasSquare,N1 Havas 161,000
AfricaHouse,64-78Kingsway,WC2 MishconDeReya 118,000
HaloBuilding,1MabledonPlace,WC1 TheDoctorsLaboratory 81,000
SevenDialsWarehouse,42-44EalhamStreet,WC2 king.com 36,000
81ChanceryLane,WC2 ThirtyNineEssexStreet 32,000
0
0.5
1
1.5
2
2.5
3
201420132012201120102009
Sq ft (millions)
4
6
8
10
12
%
620,000sqftthatcompleted,only20,000sqftremainsavailable.
Lookingfurtherahead,thepictureissimilarlybleak,withonly1.3m
sqftduetocompletebeforetheendof2016andofthat370,000sqft
isalreadylet.
Investmenttransactionstotalled£495minMidtowninQ3,with
thelargestdealTIAAHenderson’spurchaseof440Strand,WC2for
£175m,representinganetinitialyieldof4.3%
30
40
50
60
20142013201220112010
£ psf
Q2
Associations
Financial
Others
Property
Transport
Health & Education
Professional
TMT
£60.50
per sq ft EGi
Consensus rent
1.38m
sq ft available and
ready to occupy
633,000
sq ft
let in Q2
Headline figures
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At197,000sqft,take-upincreased24%onQ2but
cameinshortofthefive-yearquarterlyaverageof
239,000sqft.Theactivitywasfocusedon25CanadaSquare,E14,
whichaccountedfor62%oflettings,thelargestofwhichwasthe
60,000sqftlettingtoTruphone.Thisdealispartofthereasonthe
TMTsectoraccountedfor41%ofthetake-upinDocklandsthis
quarter.Lookingahead,theamountofspaceplacedunderofferin
Q3(20,000sqft)doesnotpointtoastrongfinishtotheyear.
ConstructionactivityinDocklandsisalsomutedatpresent.There
werenoconstructionstartsorcompletionsinDocklandsthis
quarterandwedonotanticipatenewspacetobedeliveredtothis
marketthisyearornext.Thenextinjectionofnewspaceis
anticipatedtobein2016,when2msqftwillbedelivered.Thereis
constructionactivityatHeronQuays,E14.However,insteadofa
docklandsq3:2014
Overview
n At197,000sqft,
take-upis89,000sqft
behindthefive-year
quarterlyaverage
n 100%ofQ3take-up
wasinsecondhand
space
n TheTMTsector
increasedfrom2%of
take-uplastquarterto
41%oftake-upthis
quarter
n Theutilitiessector
accountedfor38%of
take-uplastquarterbut
only2%thisquarter
n Afternotfeaturingin
thismarketlastquarter,
thefinancialsector
returnedandaccounted
for17%oftake-up
Take-up
Key deals
Take-up by sector
Availability
Asking rent
25CanadaSquare,E14 Truphone 60,000
25CanadaSquare,E14 GFK 40,000
5CanadaSquare,E14 HSBCBank 31,000
25CanadaSquare,E14 Netnames 16,000
1CanadaSquare,E14 FirstData 7,000
0
0.5
1
1.5
2
2.5
201420132012201120102009
Sq ft (millions)
4
6
8
10
12
%
constructionstartitappearstobesitepreparation.
WhilethelettingsandconstructionmarketswerequietinQ3,
thereweretwosignificantdealsintheinvestmentmarket.The
largestdealsawExchangeTower,E14,soldtoGawCapitalPartners
for£191m,representingayieldintheregionof6.5%,while
Blackstonepurchasedthelongleaseholdof25NorthColonnade,
E14,for£162.7m,representingan8%yield.
10
20
30
40
50
20142013201220112010
£ psf
Q2
Professional
tmt
1.69m
sq ft available and
ready to occupy
£39
per sq ft
EGi Consensus rent
8.83%
availability
rate
Headline figures
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In depthLondon offices market analysis
Amazon’sdecisiontoprelet431,000sqftat
Brookfield’sPrincipalPlace,E1,helpedtopush
take-upto868,000sqft.EvenwithouttheAmazondeal,thismarket
wouldhavehaditshighestquarterlypeaksinceQ32011,when
460,000sqftwaslet.TheotherimpactofthelettingatPrincipal
Placewastopushtheshareoftake-upbytheTMTsectorto60%.
Thehighleveloftake-upandalackofnewinstructionsmeansthe
availabilityratedroppedalmost1.5percentagepointsquarter-on-
quarter.Itnowstandsat4.26%–thelowestrateinthesixmarkets
wemonitorincentralLondon.Theeffecthasbeentoincreaseasking
rents,withtheaveragesecondhandaskingrentnowstandingat
£32.50persqft–thehighestrecordedinthismarketsinceQ32008.
Morespace(1msqft)wasputunderconstructioninthismarket
thananyotherthisquarter.Thisfigureincludesthelargelyprelet
Cityfringeq3:2014
Overview
n At868,000sqft,take
upwas562,000sqft
abovethefiveyear
quarterlyaverageand
thehighestlevelever
achievedinthis
market
n Theprevious
highestleveloftake-
upintheCityFringe
was774,620sqft
recordedinQ22004
n TMTaccounted
for60%whichis
doublethe30%it
recordedinQ2
n Thesecondmost
prominentbusiness
sectorwastheservice
sector,which
accountedfor9%of
take-up
Take-up
Key deals
Take-up by sector
Availability
Asking rent
PrincipalPlace,E1 Amazon.co.uk 431,000
3ThomasMoreSquare,E1 IpsosMORI 65,000
AlbertHouse,1-6SingerStreet,EC2 TheOfficeGroup 50,000
3ThomasMoreSquare,E1 MitsuiOSKLines 32,000
WilsonHouse,3-7RayStreet,EC1 All3Media 18,000
0
0.5
1
1.5
2
201420132012201120102009
Sq ft (millions)
0
3
6
9
12
%
PrincipalPlaceandsoonly570,000sqftofthespacethatwent
underconstructionremainsavailable.Thebiggestspeculative
constructionstartthisquarterwasatDerwentLondon’s268,000sq
ftWhiteCollarFactory,EC1.Atotalof180,000sqftcompletedbutof
thisonly30,000sqftisstillavailable.
ThelargestinvestmentsalewasStandardLife’spurchaseof
100 LemanStreet,E1,for£41m,reflectinga4.5%yield.
10
20
30
40
50
20142013201220112010
£ psf
Q2
4.26%
availability
rate
868,000
sq ft
let
1m
sq ft put under
construction in q3
Headline figures
Construction
Others
Retail & leisure
TMT
Property
Insurance
Professional
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Thesouthernfringehaditsquietestquartersince
theendof2012,withtake-upof109,000sqft
registered.Thisfigureisconsiderablybelowthe284,000sqftand
270,000sqtletinQ1andQ2respectively,andthefive-yearaverage
of148,000sqft.Thelargestdealofthequarterwasthe9,855sqft
lettingtoE2Xat1LondonBridge,SE1,wheretherewereafurther
threelettingsthisquarterthatbroughtthetotaloftake-upinthis
buildingto28%ofthetotalletinthismarket.
Despitethelowleveloflettings,alackofnewspacebeingbrought
tomarketmeantthattheavailabilityratedroppedslightlyto9.05%,
whichiscurrentlythehighestrateofthesixmarketsthatwe
monitorincentralLondon.Theexpectationisthatthisratewill
continuetodrop,withalackofconstructionactivityinthismarketto
alleviatepressureonsupply.Therewerenoconstructionstartsor
Southbankq3:2014
Overview
n TheTMTsector
increasedfrom20%of
take-uplastquarterto
28%thisquarter
n Theprofessionalsector
droppedfrom 19%oftake
uplastquarterto9%this
quarter
n Associationsandthe
constructionsector
droppedoutofthe
southernfringetake-up
figuresinQ3butwere
replacedbyretail&leisure
andtransport
Take-up
Key deals
Take-up by sector
Availability
Asking rent
1LondonBridge,SE1 E2X 10,000
1LondonBridge,SE1 ISSGroup 8,000
TheShard,LondonBridgeStreet,SE1 Tiffany&Co 8,000
BlueFinBuilding,SouthwarkStreet,SE1 TableauSoftware 8,000
56SouthwarkBridgeRoad,SE1 LifewaysCommunityCare 7,000
0
0.3
0.6
0.9
1.2
1.5
201420132012201120102009
Sq ft (millions)
4
6
8
10
12
%
completionsofnotethisquarterandtheonlysignificantcompletion
duebeforetheendof2016isthe220,000sqftSouthbankTower,
SE1,whichiscurrentlyfullyavailable.
TheinvestmentmarketwassimilarlyquietinQ3,withfivedeals
completingforatotalof£36.6m,thelargestofwhichwas
Overcourt’spurchaseof4-5ParisGardens,SE1,for£27.85m,
representinga4.5%yield.
10
20
30
40
50
60
70
80
20142013201220112010
£ psf
Q2
0sqft
construction
completed in Q3
1.57m
sq ft available and
ready to occupy
£54.50
per sq ft EGi
Consensus rent
Headline figures
retail & Leisure
transport
Services
Industry &
manufacturing
Professional
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TMT
Others
Health
& education
n At109,000sqft,
take-upthisquarteris
thelowestrecordedin
thismarketsinceQ4
2012
nTheaveragedeal
sizeinQ3was4,011sq
ftwhichisthelowestof
allthesixmarketsthat
weanalyse
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