Central London Report Q4 2013

The Central London Market Q4 2013
Weight of money driving growth

in investment activity
Central London investment volumes totalled 18.4 billion in 2013,
up by 19% on last years total of 15.4 billion. New entrants to the
market are emerging from all around the world, and demand for
large lot sizes is growing, including from high net worth individuals.
The leasing market sprung back to life in dramatic fashion in 2013,
with full year take-up surging to 11.0 million sq ft, up by 54% on the
2012 total of 7.2 million sq ft. Market activity has been broad-based
across all sectors, as we have witnessed a re-emergence of activity
from banking, finance and energy related businesses.
The return of strong pre-letting activity was a key feature of the
market in 2013. The rise in pre-commencement and pre-completion
lettings reflects improved confidence from occupiers and also
increasing scarcity of new supply.
Summary of statistics
Units of 5,400 sq ft and above
Take-Up

West End
City
Docklands
Central London

2012 2013 2012 2013 2012 2013 2012 2013
Q1 Q1 Q1 Q1
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 Industries
Public Admin. & Institutions
Other
2,521
1,364

4,160
1,069

1,730
1,305

3,120
802

20 863 190
159
491
11 219
249
237 111 692
56
1,773
379

3,059
605

127
863

673
127

256
69

681
198

1,426
327

1,922
485

713
104

884
259

13%
6%

13%
24%

7%
4%

22%
10%
52%
79%

51%
50%
10%
2%

5%
12%
14%
7%

7%
1%

5%
1%

1%
3%

Sizes in 000 sq ft
Net Absorption
TOTALS
Prime Rents & Rent Free
Prime Rent
Rent Free (months)
Net Effective
Demand (As at 31 March 2013)
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 (As at 31 March 2013)
Total Current Supply
VACANCY RATE (% of total stock)
100,000+
50,000 - 99,999
10,000 - 49,999
Sub 10,000
Speculative Development
(As at 31 March 2013)
TOTALS
2013
2014
2015
2016
Capital Transactions
millions
TOTALS
UK Purchasers
Overseas Purchasers
Property Companies
Institutions
Privates & Other Investors
Prime Yield (As at 31 March 2013)
475
228
0
0
97
378
165
75
203
32
10%
1%
21%
0%
68%
0%
54
7,156
54
5,078
0 209
0 711
33 1,025
21
5,210
0

965
0
1,012
33
3,551
21
1,628
0%

11%
0%
17%
88%
51%
0%
8%
0%
10%
12%

3%
2,486
2,160
1,022
259
200
1,005
990
267
845
384
14%
6%
67%
6%
5%
2%
2012 2013 2012

2013 2012
2013 2012
2013

Q1
Q1
Q1
Q1

382
-203

-476
-328

27
0

-67
-531

2012
2012 2013
2012 2012 2013
2012 2012 2013

Q1 Q1 Q1 Q1 Q1 Q1

95.00
95.00 97.50
57.00 55.00 57.00
38.50 38.50 38.50
16 16
16 24
24
24
82.33
82.33
86.93
47.02
44.00
47.02

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

5,302 3,078
2,224 9,565
5,508
4,057 1,825
837
987 13,004
9,223
3,781
2,190 1,000
1,190 4,000
1,952
2,047 1,342
420
922 6,191
4,470
1,720
1,327
875
452 2,000
992
1,007
350
285
65 2,002
1,185
817
1,580 1,072
508 3,015
2,058
957
132
132
0 4,144
2,990
1,154
204 131
73 551
505
46
0
0
0 666
576
90

5% 6% 4%
26% 19% 36%
54% 17% 43%
23% 18% 30%
15% 19%
10% 26%
35%
12% 19%
76%
0% 22%
29%
14%

61%
57% 65%
43% 39% 49%
19% 2% 57%
42% 41% 45%

15%
11%
21%
2% 2% 0%
5% 5% 0%
8% 7% 10%

4%
6% 1%
3% 3% 2%
3% 0% 0%
4% 5% 2%

0%
0% 0%
0% 0% 0%
0% 0% 0%
0% 0% 0%

Total Grade A Grade B
Total
Grade A
Grade B
Total
Grade A
Grade B
Total
Grade A
Grade B

3,730 2,835 775 7,979 5,930 1,819 1,343 1,280
63
13,052 10,044 2,658
4.1%
3.1% 0.9%
7.4% 5.5% 1.7%
6.6% 6.3% 0.3%
5.9% 4.6% 1.2%
470 470
0 2,846 2,846
0 573
573
0 3,889 3,889
0
673 533
71 772
712
60 305
305
0 1,750 1,550
130
1,852 1,332
483 3,387
1,867
1,378
403
360
44 5,643
3,559
1,905

734 499 222 975 505 381 61 41 19
1770 1046 622

Total 100,000 +
50,000
Total 100,000 +
50,000
Total 100,000 +
50,000
Total 100,000 +
50,000

-99,999

-99,999

-99,999

-99,999

2,733 1,785 712 4,457 3,856
550 285
272
0 7,475 5,913 1,262
1,135
697
322 2,105
1,657
398
285
272
0 3,525
2,626
720
930 420
390 2,352 2,199
152
0
0
0 3,282 2,619
542

188
188 0
0 0 0
0 0 0
188
188 0

480
480 0
0 0 0
0 0 0
480
480 0
2012

2013
Q1
2012
2013
Q1

5,895
953

9,026
1,146

2,126
290

1,682
265
3,769
663

7,344
881

1,741
288

1,366
194
1,532
48

5,701
663
2,622
618

1,959
233
10-50m
80m+ Sub 40m
40-125m
125m+
Sub 10m

4.00% 4.25% 5.00% 5.00% 5.25% 5.25%
2012
2013
Q1

498
117
340
90
27
340
2012
512
15,420
47
3,926
465
11,453
430
3,197
82
7,261
0
4,921

2013
Q1
2,611
602
2,009
911
793
734

On Point Central London Market Fourth Quarter 2013 3
The Central London Market

Sizes in 000 sq ft Q4 2013
West End
City
Dockland
Take-up
702 A 1,937
A 63
A
Supply 3,523
A 7,026
A 1,390
F
Overall Vacancy Rate
3.80% A
6.50% A
6.80% F
Grade A Vacancy Rate
2.80% A 4.50%
A
6.60% F
Occupier Demand
4,225 F 10,094
A 2,152
F
Prime Rent
105 F
60.00 F
38.50 E
Speculative development under construction
2,338 A 3,672
A 272
E
Investment Volumes
1,961 mil A
5,883 mil F
100 mil A
GDP Growth Forecasts
Economic overview
Source: Oxford Economics
2014 set for strongest growth since 2007
4%
After several false starts, and several years of disappointing
GDP growth
GDP
Growth
Forecasts
performance, the economy recovered strongly in 2013 with the
3%
pace of growth accelerating through the year. GDP
growth
of
GDP
Growth
4% Forecasts
GDP growth
0.8% was recorded in Q3, and surveys indicate aSource:
similar
result
Oxford
Economics
2%
GDP
Growth
Forecasts
will be achieved in Q4. On the back of this improvement,
we
4%
3%
GDP growth
expect growth to hit 2.4% in 2014, which
would be the strongest
1%
4%
3%
performanceGDP
sinceGrowth
2007. Forecasts
2% GDP growth
2% driven by
1%an
GDP growth
Thus far, the pick-up in growth has been
primarily
2012
2013
Greater London
UK
-1%
increase 3%
in consumer confidence2%associated with higher house
1%
0
prices and a reduction in savings rates. The hope is that 2014
will
bring a broader
based recovery, 1%
particularly through
a
pick-up
2%
0
-1%
in business investment and exports. Encouragingly, there are
2012
0
1%
several positive
indicators suggesting
that this-1%transition will take
place as the year progresses, with business surveys2012
reporting a2013
-1%
pick-up in 0investment intentions and
rising export demand.
-1%
Greater London
3%
4%
Greater Lo
2012
Greater London
UK
2014
2015
2013
2014
UK
US
2014
2015
2015
2016
US
2016
Eurozone
Eurozone
Eurozone
2015
2016Economics
Source: Oxford
Eurozone
In London, growth is forecast to hit 3.3%, in a continuation of

9%
2013
2014
2015
recent strength, 2012
as the Capital
continues
to benefit from
its 2016
8%
position as a leading global employment hub for a multitude of
7%
high skilled sectors within financial services, TMT and business
Unemployment6%& Finance Rates
and professional services, consumer business and education.
5%
Unemploy
Unemployment9%& Finance Rates4%

10 Year G
3%
2%
Bank Rate
1%
Unemployment Rate
0%
2006 2007 2008 2009 2010 2011 2012

2013 2014 2015
Unemployment
Rate2016 2017
10 Year Gilt
Unemployment Rate
10 Year Gilt
10 Year Gilt
Bank Rate
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Bank Rate
2012 2013 2014 2015 2016 2017
0%
In London, growth is forecast to

hit 3.3%
Eurozone
Unemployment & Finance Rates
2014
Falling unemployment leading to rate rise speculation

8%
9% Rates
Unemployment
& Finance
7%
Growth is feeding
through
to
rising
employment,
and
the
Source: Oxford Economics 8%
6%
unemployment
rate
is
starting
to
fall
as
a
result.
The
outlook
9%
7%
for unemployment
has become more significant since the5%
8%
6%
4% in
announcement
forward guidance
7% of the Bank of Englands
5%
3% rate
August, and 2014
will see increasing speculation
on whether
6%
4%
2%
rises are imminent.
This has already had
an impact on long
term
5%
3%
1%
rates, with the4%ten year gilt yield now over
2% 3%. We expect the base
0%
rate to remain3%on hold until 2015, but long
1% term rates may creep
2006 2007
up further as 2%
we get closer to the point0%
when base rates
1%
2006 2007 2008 2009 2010 2011
will rise.
US
2016US
US
UK
Greater London
2013
UK
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Bank Rate
4 On Point Central London Market Fourth Quarter 2013
Net absorption m sq ft
4
The growth in activity was most
evident in the
0 City market, where
6
take-up soared to 7.1 million2sq ft, the strongest
since 2000 and
-2
0 This represented growth of over
the second highest4 on record.
-4
2 also saw a pick-up to 3.4 million sq ft from
70%. The West End
-2
-6
2.5 million in 2012,0 growth of-4 over 30%.
2002 2003 2004 2005
-2
-6
Docklands
million sq ft
Letting activity up by over 50% in 2013

Central London Take-up 2004-2013
Source: Jones Lang LaSalle
The Central London leasing market sprung back to life in
14
dramatic fashion in 2013, with full year take-up
surging
to
Central London: Net Absorption 2002-2011 Q2
11.0 million sq ft, up by 54% on the 2012 totalSource:
of 7.2 Jones
million
sqLaSalle
ft.
Lang
12
The acceleration in office take-up
reflected
the
recovery
in
the
Central London: Net Absorption 2002-2011 Q2
10
10asLaSalle
Lang
broader economy, and in manySource:
waysJones
acted
a leading indicator
8
8 more prepared
of improved confidence,
withLondon:
firms becoming
to Q2
Central
Net Absorption
2002-2011
10 Lang LaSalle
Source:
Jones
6
take decisions on their
accommodation
requirements
from
6
8
4
Q2 onwards. 10
4
2002 2003
2004 all2005
2006 as
2007
Market activity has
across
sectors,
we 2008
-4 been broad-based
have witnessed a-6re-emergence of activity from banking, finance
2002 2003 2004
2005 continued
2006 2007 strong
2008 2009 2010
and energy related businesses,
alongside
performance from the TMT, legal and insurance sectors. Despite
surging levels of take-up, active requirements remain at a healthy
level demonstrating the underlying strength of demand.
2004
City 2007
2006
2005
2008
2009
2010
West End
2010
2008
West End
City
2007
2009
WestEnd
City
2006
City
West End
2009
2010
New
2011
2012
2013
Docklands
2011
yoy
Docklands
2011
yoy
Docklands
2011
yoy
Central London Prelets 2004-2013

4.0
16
billion
million sq ft
Pre-lets driving the market

3.5
The return of strong pre-letting activity was a key feature of
3.0
Figure 7: Central London Investment Volumes
the market in 2013 and we expect this to continue in 2014. The
2.5
2006 - 2013 H1
rise in pre-commencement and pre-completion
lettings
reflects
Source:
Jones
Lang
LaSalle
2.0
Figure 7: Central London Investment Volumes
improved confidence
from occupiers and a desire to upgrade
2006 - 2013 H1 20
1.5
their office accommodation.
also
Source: Jones LangItLaSalle
18 reflects increasing scarcity of
1.0
new supply,20with competition an 16
increasing feature for the best
0.5
accommodation
and buildings. 14
18
12
2004
Oversea
2005
2006
Pre-completion
billion
10
There were143.4 million sq ft of pre-lets
(including both site lettings
and lettings12during construction) in8 2013, following very low levels
6
in 2011 and102012. This represented
31% of overall take-up. Q4
4
8
built on the strong pre-letting activity we saw over summer, as
2
6
evidenced by the Schroders acquisition
of the entire 310,000
0
4
2006
2007 letting
2008 of2009
sq ft at 1 London
Wall
Place,
EC2
and
Hachettes
the 20010
2
134,000 sq ft0 Carmelite Riverside, EC4 development on Victoria
Embankment. 2006 2007 2008 2009 20010 2011 2012 H1 2013
0.0
UK
Overseas
2007
UK
2008
2009
2010
2011
2012
2013
Pre-commencement
The return ofOthers

strong preletting
Others activity was a key
feature of the market in 2013
2011
2012
H1 2013
Others
availability (%) of overall stock
Shortage of new supply

Central London Vacancy Rates 2004-2013
Strong take-up and associated pre-letting activity continues to
16%
erode the level of supply and the development pipeline. Reflecting
this, overall vacancy rates fell through theCentral
year, and
now stand
at Headline14%Rents: 2002 to 2011 Q2
London:
Prime
3.8% in the West End and 6.5% in the City.
12%
Central
London: Prime Headline Rents: 2002 to 2011 Q2
120.00
8%
6%
West En
4%
City
2%
0%
2004
2005
2006
2007
2008
West End
2009
2010
2011
2012
2013
Docklan
City
June 10
June 09
June 11
West End
June 11
West End City
June 07
June 09
June 06
June 08
June 05
June 07
June 04
June 06
June 03
June 05
June 02
June 04
per sq ft
June 03
0.00
June 02
per sq ft
per sq ft
20.00
10%
June 08
June 10
As the supply Central

of available
new accommodation
focus
London:
Prime Headlinereduces
Rents: the
2002
to 2011 Q2
120.00
100.00
has now moved
on to the developments being built speculatively.
100.00 ahead80.00
As more120.00
buildings are leased
of completion, we expect
that the100.00
market will look increasingly
supply
constrained as
80.00
60.00
2014 progresses. Without a significant increase in speculative
80.00 the opportunity
60.00 for occupiers
development,
to secure the new
40.00
space they
will
need
will
become
more
limited,
particularly in 2015
60.00
40.00
20.00
and 2016 in the City. This is likely to result in an increase in the
40.00
20.00occupiers
number of
re-gears as some
0.00may need to remain in
their current offices.
City
Docklands
Docklands
June 11
per sq ft
June 10
June 09
June 08
June 07
June 06
June 05
June 04
June 03
June 02
Rents up0.00
during 2013
Docklands
Competition for prime Central London office space drove rental
Central London Prime Headline Rents 2004 to 2013
growth of 5% in the City and 11% in the West End during 2013.
City rents rose to 60 per sq ft in Q4, and West End rents
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
120Jun-04
increased to 105 per sq ft. This growth is evidence that a tipping
Central
Rents: 2002 to 2011 Q2
100
point has been reached. We expect that 2014
will London:
see furtherPrime Headline
growth and a reduction in incentives
as
the
market
responds
Central
London: Prime Headline Rents: 2002
80 to 2011 Q2
120.00
Source:
Jones Lang
LaSalle and
to the twin forces of an improving
economic
backdrop
London:
Headline Rents: 2002 to 2011 Q2 60
120.00 Prime
tight supply. Central
100.00
120.00
100.00
100.00
80.00
80.00
40
West En
60.00
20
City
60.00
40.00
60.00
40.00
20.00
40.00
20.00
0.00
2005
2006
2007
Docklands
June 11
City
June 10
West End
June 09
June 11
June 08
June 10
June 07
June 09
June 06
June 08
June 11
June 10
June 09
June 08
June 07
June 03
June 06
June 05
June 04
June 03
June 02
Prime rents
20.00are increasingly
0.00being determined by the pre-let
market, with large occupiers transacting in far greater numbers
0.00
and driving
the market for larger floorplates. The market for
smaller size bands is also active, however we are yet to see an
acceleration in demand from mid-tier firms and this means there
is still an surplus of available space in the 10,000-30,000 sq ft
range. This in part reflects consolidation in several industries as
larger firms increase their market share at the expense of mid-tier
rivals, but we would expect demand to gradually improve in this
size band during 2014.
June 02
2004
2008
West2010
End
2009
West End City

June 05
June 07
June 04
June 06
June 03
June 05
June 02
June 04
80.00
per sq ft
per sq ft
per sq ft
We expect that 2014 will see

further rental growth and a
reduction in incentives
City
Docklands
Docklands
2011
2012
2013
Docklan

Central London Investment Volumes 2004-2013
Large Q4 deals drive investment volumes to highest level
since 2007
20
Central London investment volumes totalled 18.4 billion in 2013,
18
up by 19% on last years total of 15.4 billion, and the second
16
highest level of activity on record
after 2007 when turnover hit
Figure 7: Central London Investment Volumes14
18.7 billion. In the West End,
a record
2006
- 20136.4
H1 billion was transacted,
12
volumes in theFigure
City totalled
11.1London
billion,
with
911 million
in
Source:
Jones Lang
LaSalle
10
7: Central
Investment
Volumes
the Docklands.2006 - 2013
20 H1
8
billion
UK
Source: Jones18Lang LaSalle
16
Market activity
in Q4, with investment totalling 7.8
20 was very strong
18
billion. This was boosted 14
by a number of very large deals including
16
the sale of More
London,12SE1 to St Martins, GICs acquisition of a
14
50% stake in Broadgate, 10
EC1 (each transaction circa 1.7 billion)
8
12
and One Grosvenor
Square, W1 (306 million).
4
2
billion
billion
2004
2005
2006
UK
2007
2008
2009
2010
2011
2012
2013
Others
Overseas
UK
10
Oversea
Overseas
London remains
the most 2active global city, with deal volumes
6
OthersYields
around one and
a half times
Central London Prime
0 its nearest competitor New York,
4
2006
2007
2008
2009
20010
2011
2012
H1
2013
followed by Tokyo
and Paris, and we have seen continued interest
and the Cost of Money 2004-2013
2
Source:
Jones Lang LaSalle/Datastream
Others
from foreign 0buyers. Indeed, new entrants to the market are
Central
London:
Prime Yields and
2006
2007
2008
2009
20010
2011
2012
H1 2013
8%
emerging from all around the world, both institutional and private
the Cost of Money 2002-2011 Q2
Central
London:
Prime Yields and
investors. Lot sizes in the region of 60 to 80 million
are proving
Source: Jones Lang LaSalle/Datastream
the
Cost
of
Money
Q2
particularly attractive to institutional
investors,
and
demand8%for and 2002-2011
6%
Central
London:
Prime
Source:Yields
Jones Lang LaSalle/Datastream
large lot sizes is growing, including
fromofhigh
net worth
individuals.
the Cost
Money
2002-2011
Q2
8%
Central
London:
Prime
Yields
and
Source:
Jonesconfidence
Lang LaSalle/Datastream
Meanwhile, UK
funds have
shown
great
in the West
4%
6%
Costseeking
of Money
2002-2011 Q2
8% value add and short-dated
End, and are the
actively
Source: Jones Lang LaSalle/Datastream
6%
income opportunities.
8%
%
6%
2006
June 07
June 09
June 11June 08June 06

June 11

June 10
June 06June 03
June 09
June 05June 02
June 08
June 04
June 07
June 03
June 06
June 02
June 05
West End
5 Year Swap
City
2007
2008
West End
2009
2010
5 Year Swap
City
LIBOR
June 11
2005
June 10
2004
June 09
June 11
0%
June 08
June 10
The improved performance0%of the occupier market has buoyed

investors, especially for stock with an element of risk attached with
0%
investors much more willing to take this on compared to a year ago.
Looking ahead, the weight of capital will maintain the downward
pressure on yields despite the recent rise in long term rates, and
will support the development of new districts as investors look wider
due to intense competition in the central core.
June 04
West End
West End
0%
2%
June 03
5 Year S
2%
4%
Yields stable, but downward pressure remains

4%
Yields were6%stable in Q4 at 3.75% for the West End and 4.75%
2%
4%
in the City, but an inward bias
remains on the back of increased
2%
competition4%from a diverse range of buyer groups, we expect
this to
0%
2%
continue in 2014.
June 02
West E
2011
2012
5 Year Swap
2013
5 Year Swap City

City
Bank Rate
LIBOR
Demand
for large lot sizes is
LIBOR
growing, including from high
net worth individuals
City
LIBOR
Issue to watch: Upcoming lack of new supply

The surging take-up we have seen in 2013, particularly in the City,
has rapidly exposed a lack of new supply. We believe that supply
constraints will emerge during 2014, and that an acute shortage will
become apparent in 2015 and 2016.
City development behind the curve
City development completions have been below average for the
previous three years. Despite this, supply has not fallen significantly,
due to subdued take-up in 2011-12, and the fact that a substantial
proportion of the high 2013 take up was pre-leasing. The volume
of development completions will recover in 2014, but from 2015
onwards the City development pipeline is severely restricted. The
level of committed speculative deliveries is below average in 2015
and 2016 and very little has been committed for delivery thereafter.
The majority of development schemes (76%) that could potentially
deliver between 2015 and 2017 currently require a pre-let.
We anticipate demand for new and refurbished space will total
around 15.6 million sq ft over the next four years. During the same
time period,
onlyEnd
5.7 million
sq ft will
be deliveredpipeline
speculatively.
West
speculative
development
(2014-18)
Jones
Lang2.2
LaSalle
When we Source:
add this
to the
million sq ft already available, we have
available
new supply
over the next
four years
of 7.9 million sq ft, well
West End
speculative
development
pipeline
(2014-18)
Source: Jones
Lang
short
of LaSalle
the quantum
required to meet demand.
St Jamess
Soho
Bloomsbury
St Jamess
Mayfair
Sohodevelopment
City
pipeline and
Hammersmith
Bloomsbury
new/refurbished take-up forecast
Paddington
Mayfair
Waterloo
Hammersmith
5
Fitzrovia/Noho
Paddington
Victoria
Waterloo
4 and
Battersea
pipeline
Fitzrovia/Noho
Euston/Kings Cross
Victoria
million sq ft
3Battersea
Euston/Kings Cross
2
0.0
0.0
0.5
0.5
1.0
2015
2016
Forecast new/refurb./pre-let
new/refurb./pre-let take-up
take-up
Forecast
Potential supply
supply (requires
(requires pre-let)
pre-let)
Potential
2015
2017
2017
2016
2017
Speculative
completions
Speculative
completions
St Jamess
Soho
Bloomsbury
Mayfair
Hammersmith
Paddington
Waterloo
Fitzrovia/Noho
Victoria
Battersea
Euston/Kings Cross
0.5
Speculative
1.0
1.5
2.0
million sq ft
Requires pre-let
Requires pre-let
0
2014
Speculative
million sq ft
West End speculative development pipeline (2014-18)
0.0
lopment
bished take-up forecast
s Lang LaSalle
West End development skewed to new districts rather

than core
In the West End, three years of limited new supply has now caused
a shortage of accommodation, especially for larger occupiers. While
the West End development pipeline is less restricted than in the City,
with above average speculative deliveries for the next three years,
the majority of these developments are located outside the traditional
core markets. As a result, occupiers with large requirements will
need to widen their search areas to locations such as Victoria,
Battersea and Kings Cross.
Implications: strong rental growth, along with development

and refurbishment
opportunities
Forecast
new/refurb./pre-let
take-up
1.0
1.5
2.0 trends can be expected to emerge as the shortfall becomes
Several
million sq ft
apparent.
Firstly,
we expect
Potential
supply
(requires
pre-let)that rental growth will be strong in
1.5
2.0
the core City and West End markets during 2014 and 2015. We
Speculative
expect thatcompletions
prime rents will hit 70 per sq ft by end 2015 in the City
and 121 per sq ft in the West End. We also expect an increase in
Forecast new/refurb./pre-let take-up
refurbishment activity, and that more tenants will work with landlords
2017
Potential supply (requires pre-let)to negotiate improvements to existing premises. Take-up of new
space will be limited by availability, and partly for this reason we do
Speculative completions
not expect take-up to match the 2013 level over the forecast period.
While the shortfall presents a challenge for occupiers, it presents
an opportunity for developers able to bring forward the delivery
of speculative schemes to benefit from a subdued speculative
development pipeline from 2015 onwards. Similarly, there are
asset management opportunities for landlords that can secure
vacant possession in the short term and deliver comprehensive
refurbishments within six to 18 months.
The West End Office Market
m sq ft
m sq ft
m sq ft
m sq ft
million sq ft
Occupier take-up and net absorption

West End: Take-Up 2004-2013
702,000 sq ft was let in 50 transactions in Q4, bringing the full
5
year total to 3.4 million sq ft, well above the 2012 total of 2.6
West End: Take-Up 2001-2011 Q2
million sq ft and marginally higher than the long term average of Source: Jones Lang LaSalle
4
3.3 million sq ft.
5
West End: Take-Up
2001-2011 Q2
Source:
Off Pla
The TMT and public and administration sectors were
theJones
mostLang LaSalle
3
5 2001-2011
West
Take-Up
dominant in Q4 representing
24%End:
and 23%
of total
take-up Q2 4
Jones Lang LaSalle
Under
respectively, followed by theSource:
banking
and finance sector (20%).
2
Off Plan
3
5 Take-Up 2001-20114Q2
Westwere
End:
Smaller occupiers
particularly
active in Q4; 90% of
Second
transactions were
sub 25,000 sq ft and while this is not out of
1
Off Plan
Under Construction
2
3
4
5
character for the West End it is significantly higher than the long
New
0
Off Plan
Under Construction Second hand
term average of 64%. 3
1
2
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
4
Significant transactions in Q4 include: 2 Pancras Square, NW1
Under Construction
Off Plan
Second hand
New
let to Performing
Rights Society
(52,342 sq ft) at1 59 psf; 1
0
2
3
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Pancras Square, NW1 (28,200 sq ft) let to CSC at 55 psf on a
Second hand
New
Under Construction
0
10 year term;2 and, 23 King1 Street, SW1 let to Temasek
(8,375 sq
West End: Demand 2004-2013
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
ft) at 130 psf, the second highest rent achieved on record.
Second hand New
8
1
There is a further
496,0000 sq2002
ft under
offer,
13%
below
the
long
2003 2004 2005 2006 2007 2008 2009 2010 2011
West End: Demand 2002-2011 Q2
term average of 567,000 sq ft.
7
2002-2011
2008 2009 Q2
2010
m sq ft
million sq ft

Occupier demand
Overall demand
remained
stable at2002-2011
4.2 million
sq ft, however
12
10
West End: Demand
Q2
Source:
LaSalle of 5.3 million sq ft. In
this is below the
longJones
termLang
average
10
8
contrast to 12
the trend toward smaller units evident in our takeup statistics, 56% of all requirements
are650,000 sq ft plus.
8
10
The TMT sector continues to drive the market, accounting for
6
4
8 demand.
42% of overall
Active demand stands at42.5 million sq ft,2 down 11% from 2.9
6
million sq ft in Q3. Significant requirements include Amazon
2
200,000-300,000
sq ft, Mishcon
de Reya0 100,000-150,000
4
sq ft and Havas 130,000-140,000
sq ft.
0
m sq ft
Activ
1
2004
2005
Active
Potential
2006
2007
Active
2008
Potential
June 11
June 07
June 06
June 11 June 09
June 10 June 08
Pote
Active
June 10
June 05
June 04
June 09 June 07
June 03
June 08 June 06
June 02
June 07 June 05
June 06 June 04
June 05 June 03
June 04 June 02
June 03
June 02
Existing supply
and the development pipeline
0
Total supply fell 12% quarter-on-quarter to 3.5 million sq ft.
65% of supply is second-hand.
Speculative development under construction fell 7% quarteron-quarter to 2.3 million sq ft however this is still higher than
the long term average of 1.9 million sq ft.
Building completions included: 33 Davies Street, W1 (27,460 sq
ft), 20 Garrick Street, WC2 (14,000 sq ft), Marble Arch House,
62-64 Seymour Street, W1 (60,205 sq ft) and 1 Pancras
Square, NW1 (55,113 sq ft).
231,000 sq ft commenced construction during the quarter in
three schemes: The Adelphi, 1-11 John Adam Street, WC2
(160,000 sq ft); 66 Wigmore Street, W1 (54,855 sq ft) and 3436 Bruton Street, W1(16,020 sq ft).
m sq ft
New
2011
June 09
West 2005
End: 2006
Demand
2004
12 2007
June 08
2003
June 11
2002
June 10
2009
2010
Potential
2012
2013
Rolling 12 Month Take-Up
2011
Rolli
9%
8%
7%
8%
Rents
6%
7%
Prime rents
remained stable
at 105.00 per sq ft (assuming a
5%
6%
10,000 sq ft floor plate and
a
10 year term), an increase of 11%
4%
5%
year-on-year.
Rent free 3%
periods remain at 16 months.
4%
3%
West End: Vacancy Rates 2004-2013

9%
8%
Overall vacancy decreased 50 basis points quarter-on-quarter

to 3.8% and remains significantly lower than the long term
average of 5.0%.
West End: Vacancy Rates 2002-2011 Q2
Grade A vacancy
is
2.8%
a
decrease
from2002-2011
3.3% at Q3
West End:9%Vacancy
Rates
Q2and is
Source:
Jones
marginally lower
than
theLang
longLaSalle
term average of 2.9%.
7%
6%
5%
4%
3%
2%
Grad
1%
0%
2%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
June 11
June 10
June 11
June 09
Over
Net
June 11
June 10
June 09
Prim
June 11
June 08
June 10
June 07
June 09
June 06
June 08
June 05
June 07
June 04
June 06
June 03
June 05
June 04
June 03
June 02
June 02
per sq ft
per sq ft
per sq ft
June 10
June 08
June 09
June 07
June 08
June 06
June 07
June 05
June 06
June 04
June 05
June 03
June 04
June 02
June 03
June 02
Overall
Investment volumes and
1% yields
2%
Overall
Grade A
2.0 billion was traded0%in 30 transactions in Q4, bringing
1%
the 2013 0%
total to 6.4 billion, the highest year on record
Grade A
and 8% ahead of 2012 volumes. This is despite the market
West End: Prime Headline Rents and Net Effective Rents
constantly being plagued by limited supply in 2013.
2004-2013
Foreign investment was robust in Q4, accounting for 62%
Source: Jones LangLaSalle
West
Rents
Rents
of total investment compared
toEnd:
48% Prime
of totalHeadline
investment
in and Net Effective
120
2002-2011 Q2
2013 as a whole.
West End: Prime
Headline
Rents
Source:
Jones Lang
LaSalleand Net Effective Rents
100
Larger lot sizes
in excess
of 50 million are driving the
2002-2011
Q2
120.00
Source: Jonesfor
Lang
LaSalle
market and accounted
84%
of total investment in Q4 in
80
120.00
100.00
13 transactions.
60
Significant deals include: Devonshire House, W1 acquired
100.00
80.00
by the Spanish Investor Ponte Gadea Group, pricing
40
remains80.00
confidential;60.00
Lodha Group purchased One
20
Grosvenor Square, W1 for 306 million; Waterside, W2
60.00
40.00
which sold for circa 200 million to Gaw Capital and a 25%
0
2004 2005 2006 2007
share in40.00
The Crown Estates
Quadrant 3, W1 acquired by
20.00
Prime2008 2009 2010 2011 2012 2013
Norges Bank Investment Management for 97.5 million.
20.00
Net Effective
Prime
Rising confidence
and0.00
forecast rental growth will see
investors0.00
become increasing willing to invest further up the
Net Effective
risk curve in 2014.
West End: Investment Purchases 2004-2013
Yields remain unchanged at 3.75% for sub 10 million, 4.0%
for 10 to 80 million lot sizes and 4.50% for lot sizes over
7
West End: Investment Purchases 2002-2011 Q2
80 million, but trending stronger.
Source: Jones Lang 6
LaSalle
7
West End: Investment
Purchases52002-2011 Q2
billion
5
4
3
2
5
billion
4
3
2
1
0
billion

7
2002-2011 Q2
5
billion

6
7
Purchases
1
0
Prope
Property Companies
2004
2005
2006
2007
2008
Property Companies Institutions
2009
Property Companies
2002
2003
2004
2005
2006
2007
Institutions
2008
2009
2010
2011
Institutions
2010
2011
Others
2012
2013
Others
Institu
Othe
The City Office Market
12
m sq ft
m sq ft
14%
June 09
June 08
Active
Potential
2009
Potential
2010 2011
2012
2013
City: Vacancy Rates 2004-2013

Source:
Jones12Lang
LaSalle
Rolling
Month
Take-Up
12%
10%
8%
6%
4%
0%
Ne
2004
2005
Mar 11
Mar 10
Mar 09
Rolling
Potential
2%
r 11
r 10
Man 08
r 09
Man 07
Mar 06
n 08
Mar 05
n 07
Mar 04
r 06
Mar 03
r 05
Mar 02
Active 2008
2007
June 11
2006
Overall
r 04
r 03
2005
June 11
June 06
availability (%) of overall stock June 11 June 09
June 10
June 08
June 05
June 04
June 07
June 09
June 03
June 06
June 08
June 05
June 02
June 07
June 04
June 06
June 03
June 05
June 02
June 04
June 03
June 02
r 02
2004
June 10
m sq ft
0%
1%
Active
Active
1%
2%
0%
Potent
Existing Supply and the Development Pipeline

Westsq
End:
Vacancy
Rates
2002-2011 Q1
Total supply fell 10% to 7.0 million
ft, and
is now at
its lowest
point since Q4West
2008.End: Vacancy
Rates 2002-2011 Q1
9%
Jones Lang
The volume ofSource:
new space
alsoLaSalle
fell 10% to 2.0 million sq ft, from
8%
2.2 million 9%
sq ft, equating to a vacancy rate of 1.8%.
7%
8%
Three schemes
reached practical
completion in Q4 totalling
6%
7%
600,000 sq ft: The Place,5%
London Bridge, SE1 which has been
6%
pre-let to News
International;
Monument Place, EC3 (78,000 sq
4%
5%
ft) and 8-10 New Fetter Lane,
3% EC4 (93,000 sq ft), both of which
4%
are fully available.
2%
3%
June 10
Occupier demand
18
14
10
Despite the16recent improvement
in occupier 8activity, active
12
demand increased
to 6.8 million
sq ft, a 24%6 increase compared
14
10
to 5.5 million12sq ft at the start
of
2013,
demonstrating
the
8
4
underlying strength
of
demand.
10
6
2
The service 8(44%), banking4 and finance (26%) and professional
0
(22%) sectors
largest shares of active demand.
6 account for the
2
Notable requirements
considering
options include Thomson
4
0
Reuters (300,000-600,000
sq
ft),
the
Financial Conduct Authority
2
(300,000-500,000
sq
ft)
and
M&G
(200,000-300,000).
0
June 07
Source: Jones16
Lang LaSalle
million sq ft
m sq ft
m sq ft
m sq ft
m sq ft
million sq ft

City: Take-Up 2004-2013
1.9 million sq ft was let in 100 transactions in Q4, 47%
8
above the 10 year quarterly average, and the third
consecutive quarter of above average take-up.
This brings the annual total to 7.1 million sq ft,West
a significant
6 Q1
5
End: Take-Up
2001-2011
rise on the 2012 total of 4.2 million sq ft, and the
highest
Source:
Jones Lang LaSalle
annual total since 2000. West End: Take-Up5 2001-2011 Q14
4
Off Plan
Source:
Jones
Lang
LaSalle sector in
The service industries were
again
the
dominant
Off Plan
4 Q1 Banking 3
Under C
Q4, accounting
for End:
47%5 of
quarterly
transactions.
West
Take-Up
2001-2011
2
Source:
Jones Lang LaSalle
and finance, and
professional
services each accounted for
Off Plan
Under ConstructionSecond
2
3
5 of market4 share.
a further 20%
New
0
The largest two transactions in Q4 were both let prior to
Off Plan
Second hand
2004 2005 2006 2007 2008 2009 2010Under
2011Construction
2012 2013
1
2
3
4
completion: Schroders have pre-let the entire 310,000 sq ft
New
Off Plan
Second hand
Under Construction
at 1 London Wall Place,2 EC2 and Hachette 1have acquired 0
3
Carmelite, Victoria Embankment, EC4 totalling 134,000 sq 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
New
Second hand
Under Construction
ft, ahead of 2completion 1in Q2 2014.
0
City:2008
Demand
2002 2003 2004 2005 2006 2007
2009 2004-2013
2010 2011
34% of take-up was pre-let or let during construction
during
Second hand New
2013, compared
to the 10
0 year annual average of 18%.
1
14 2011
2002 2003 2004 City:
2005 Demand
2006 20072002-2011
2008 2009Q22010
The volume of floorspace under offer fell 28%
to
850,000
New
12
0 a raft of large transactions completed towards
sq ft in Q4 as
18
City: 2005
Demand
2002 2003 2004
2006 2002-2011
2007 2008 Q2
2009 2010 2011
the end of the year, and is Source:
now atJones
its lowest
point since
10
Lang
16 LaSalle
Q1 2011.
18 2002-2011 Q2
14
City: Demand
8
Grade A
2006
2007
2008
Overall
New
2009
2010
2011
2012
2013
Ov
per sq ft
per sq ft
A total of 1.7 million sq ft was completed in 2013, the third

City: Prime Headline and Net Effective Rents
consecutive year of below average development completions.
2004-2013
Despite 5.4 million
ft currently
under
construction
and Rents
City: sq
Prime
Headline
and
Net Effective
70
scheduled to complete
in
2014,
41%
has
been
pre-let
leaving
2002-2011 Q2
City:
Prime Headline and Net Effective Rents
Jones Lang
LaSalle
only 3.3 millionSource:
sq ft available.
60
2002-2011
Q2
Despite70.00
this, we expect the supply
of grade
space to tighten
Source: Jones
LangALaSalle
50
due to the
recent high70.00
levels of pre-leasing (41% of 2014
60.00
40
completions
have been pre-leased) and the limited development
50.00
60.00
pipeline from 2015 onwards.
30
40.00
50.00
20

6
Net
2011
2012
2013
Prim
June 11
June 10
June 11
June 09
June 10
June 08
June 09
June 07
June 08
June 06
June 07
June 05
June 06
June 04
June 05
June 03
June 04
June 02
June 03
June 02
per sq ft
Rents 30.00
40.00
10
The strength
of
occupier
demand has put upward pressure
20.00
30.00
on prime rents which increased to 60 per sq ft in Q4 2013,
0
2004 Net
2005
2006 2007 2008 2009 2010
10.00
Effective
from 58.50
in Q3. 20.00
City prime
rents are now
0.00
10.00at their highest level since 2008.
Net Effective
Prime
Typical incentives, assuming a 10 year lease, remained at 12
0.00
Prime
months rent free for each five years term certain.
We anticipate strong rental growth in 2014. Prime rents are
City: Investment Purchases 2004-2013
forecast to reach 65 per sq ft before the end of the year,
12
while incentives will move in by three to six months as theWest End: Investment
Purchases 2002-2011 Q1
market becomes more landlord favourable and competition
10
for space intensifies.
7
Purchases 2002-2011 Q1
8
billion
billion
billion
billion
Investment volumes
and yields
West End:
Investment 7Purchases 2002-2011 Q1
6
5
Lang
5.9 billion hasSource:
been Jones
traded
in LaSalle
35 transactions
in Q4, the highest
6
7 on record.
4
Others
4
quarterly total
5
This brings 6
the 2013 total to 11.1 billion, 70% ahead of the
Property Companies Institut
3
2
4
10 year average of 6.5 billion, and a record
year for City
5
2
Proper
0
Investment turnover.
Property CompaniesInstitutions
3
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
1
The Q4 total4was boosted by two exceptionally
large
2
Property Companies
Others
Institutions
transactions,3which accounted for 72% (3.4 billion) of quarterly
0
1
turnover; the21.7 billion acquisition of the
More London estate2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Others
Institutions
0
by Kuwaiti sovereign wealth fund St Martins,
and the purchase
1
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
of a 50% share of the Broadgate Estate by the
Singapore
Others
0
sovereign wealth
fund GIC, again for 1.7 billion.
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Large lot sizes continued to dominate the market with 18
transactions of over 50 million in Q4.
These include: the St Botolph Building, EC3 which was
purchased by German institutional fund DEKA, for a price in
the region of 460 million, and M&G Real Estates acquisition of
Prime yields remained at 5.00% for lot sizes of 40 to 125
Bankside 1, 2 & 3 for 315 million, at a net initial yield of 5.2%.
million lot sizes and 5.25% for lot sizes of above 125 million.
Foreign investment accounted for 83% of investment volumes in
Q4, although this was skewed by the large lot size of the More
London and Broadgate Estate transactions.
Prime yields for sub 40 million lot sizes remained stable at
4.75%, and are unchanged since Q4 2012.
We anticipate further upward

pressure on rents continuing into
2014
The Docklands & East London Office Markets
million sq ft

Docklands: Take-Up 2004-2013
Occupier activity was subdued in Q4 with only 63,000 sq ft
3
transacted in five deals.
Total annual take-up reached 532,000 sq ft, around the same Source: Jones Lang LaSalle
level as the previous two years and less than halfWest
the 10
yearTake-Up
5
End:
2001-2011 Q1
2
average of 1.1 million sq ft.
4
5
The largest transaction of the
quarter
was
the
27,000
sq
ft
Source:Square,
Jones Lang
LaSalle
acquired by HSBC at 1 Canada
E14.
1
4Q1
5 Take-Up
West End:
Take-up will improve
in the
first half 2001-2011
of 2014, if as
expected, 3
the 288,000 sq ft currently under offer at 25 Churchill Place,
2
3
4
5
E14 completes.
m sq ft
m sq ft
Off Plan
2004
2005
2006
Off Plan
2007
2008
Off Plan
2010
2011
2012
million sq ft
m sq ft
12
Existing supply
and the development pipeline
6
Supply increased
10% to 1.48 million sq ft, compared
to 1.3
10
million sq ft at the end of Q3.6 As a result the4overall vacancy
rate increased8 to 6.8%.
2 75% is
Nearly all available
space is4 grade A, of which
6
second-hand.
2
0
As in previous4 quarters, there were no speculative construction
0
starts or completions.
25 Churchill
Place, E14, remains the only
2
scheme under construction, of which 250,000 sq ft has been
0 and the remaining 288,000 sq ft is under offer
pre-let to EMA,
to two tenants: Ernst & Young (177,000 sq ft) and EMA
(111,000 sq ft).
New
5%
6%
Investment Volumes
and Yields
4%
5%
2013 investment
volumes reached
911 million, compared to
3%
4%
498 million in 2012; the highest
annual
total since 2009.
2%
2009
2010
2011
Potential
2012
2013
16%
Mar 11
Mar 10
Docklands: Vacancy Rates 2004-2013

Source:
Jones12
Lang
LaSalle
Rolling
Month
Take-Up
14%
12%
10%
8%
6%
4%
0%
Gra
Ove
2004
Mar 10
Mar 09
Mar 11
Rollin
Potential
Mar 11
Mar 10
Mar 08
Mar 07
Mar 06
Potential
2007
Active 2008
2%
Mar 10
Man 08
Mar 09
Man 07
Mar 06
Man 08
Mar 05
Man 07
Mar 04
Mar 06
Mar 02
Mar 03
Mar 05
Mar 03
Mar 02
2006
2005
Overall
Mar 04
0%
1%
2005
Active
1%
2%
0%
2004
Mar 11
3%
Mar 09
6%
Active
Mar 11
Mar 05
Mar 08
Mar 10
Mar 04
Mar 07
Mar 09
Mar 03
Mar 06
Mar 08
Mar 05
Mar 02
Mar 07
Mar 04
Mar 06
Mar 03
Mar 05
Mar 04
Mar 02
7%
Active
Mar 09
m sq ft
Mar 03
Mar 02
9%
Rents
Prime rents9%
remain stable 8%
at 38.50 per sq ft, maintaining this
7%
level for the8%
last nine quarters.
Poten
2
1
m sq ft
New
2013
m sq ft
m sq ft
Occupier demand
Off Plan
Second hand
Under Construction
Overall demand
increased2to 2.2 million sq ft in Q4,
1 an 18% rise 0
3
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
quarter-on-quarter.
Second hand
Under Construction
Docklands:
Demand
2004-2013 New
There was a significant
change
in the balance of 0active and
1
2
2002 2003 2004 2005 2006 2007
2008Jones
2009
Source:
Lang2010
LaSalle2011
potential demand. Active demand increased to 1.7 million
sq ft,
Second hand New
5
compared to 1775,000 sq ft0at the end of Q3 as a number of large
2002 2003 2004 West
2005 2006
2008 2002-2011
2009 2010 Q1
2011
End: 2007
Demand
requirements became live searches, including Thomson
Reuters
Source: Jones
Lang LaSalle
New
4
0
(300,000-600,000
sq
ft)
and
the
FCA
(300,000
500,000
sq
ft). Q1
West
End:
Demand
2002-2011
12
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source:
Jones
Lang LaSalle
Services (42%) and banking and
finance
sectors
(38%) account for
3
12
10
West of
End:
Demand
2002-2011
Q1
the largest proportion
overall
demand.
10
Under
Under Construction Secon
Under Construction Second hand
2009
Off Pla
Grade A
2006
2007
2008
Overall
Grade A
2009
2010
2011
2012
2013
Headline Transactions
West End
2 Pancras Square, N1
Area: 52,340 sq ft
Tenant: Performing Rights Society
Rent: 59 per sq ft
Building Status: New
Devonshire House, W1
Area: 186,480 sq ft
Purchaser: Ponte Gadea Group
Reported Price: Confidential
Est Initial Yield: Confidential
23 King Street, SW1

Area: 8,375 sq ft
Purchaser: Temasek
Rent: 130 per sq ft
Building Status: New
Waterside, Paddington, W2
Area: 237,580 sq ft
Purchaser: Gaw Capital
Reported Price: circa 200 million
Est Initial Yield: circa 5.10%
1 London Wall Place, EC2

Area: 309,490 sq ft
Tenant: Schroders
Rent: Confidential
Building Status: Site
More London, SE1

Area: 2,082,455 sq ft
Purchaser: St Martins
Reported Price: 1.7 billion
Est Initial Yield: N/A
Carmelite, Victoria Embankment, EC4

Area: 133,980 sq ft
Tenant: Hachette
Rent: Confidential
Building Status: Under construction
Broadgate Estate (50% share)

Area: 4,704,060 sq ft
Purchaser: GIC
Price: 1.7 billion
Est Initial Yield: N/A
City
Docklands & East London

1 Canada Square, E14
Area: 27,120 sq ft
Tenant: HSBC
Rent: Confidential
Building Status: Refurbished
Rental Conditions across Central London
West End Sub-market
Belgravia &
Marylebone
Knightsbridge Covent Garden & Euston
Mayfair
North of
Oxford Street Paddington
Soho
St Jamess
Victoria
max
67.50 65.00 67.50 105.00 92.50 55.00 72.50 105.00 72.50
min
40.00 40.00 30.00 65.00 40.00 32.50 40.00 47.50 35.00
% annual change (average) 2.0% 4.7% 4.3% 9.8% 5.6% -1.1% 20.9% 12.6% 4.4%
City Sub-market
Central Core
City Midtown
Eastern
Eastern Fringe
Northern
Northern Fringe
Southbank
Southern
Western
max
60.00 55.00 55.00 42.50 55.00 47.50 52.50 55.00 55.00
min
50.00 37.50 30.00 25.00 40.00 32.50 37.50 42.50 35.00
% annual change (average) 2.2% 7.2% 4.5% 10.1% 4.3% 11.7% 7.6% 3.2% 3.7%
Planning Policy and Development Update

LEGISLATIVE CHANGES - HIGHLIGHTS
Draft Community Infrastructure Levy (Amendment)
Regulations 2014
Draft regulatory changes have been published setting out a number of
proposed changes to the way in which CIL is set, calculated and paid,
as well as changes relating to reliefs and the relationship between CIL
and planning and highways agreements. Some of the changes include
allowing the phasing of CIL in relation to all planning permissions rather
than just outline consents, providing for CIL to be paid in kind through the
provision of infrastructure, pushing back the restriction on the pooling of
planning obligations to April 2015 and including reference to obligations
in highways agreements. Charges will apply to permissions granted after
the regulations come into force in January / February 2014.
Office to Residential Permitted Development Rights
Judicial Review
A High Court challenge against the governments new permitted
development rights allowing offices to be converted into homes without
the need for planning permission was dismissed on 20th December
2013. The challenge, led by the London Borough of Islington and
supported by the Boroughs of Camden and Richmond upon Thames,
with a separate action brought simultaneously by Lambeth, sought a
judicial review on the way the government handled the selection process
for determining which areas of should be exempted from the new

permitted development rights.
Applications
Southwark Council resolved to grant permission to The Carlyle
Group in October, for a 145,000sq m office and residential
development near Blackfriars Bridge. The scheme includes the
demolition of two office buildings and the erection of nine new
buildings, ranging from 5 to 49 storeys, to deliver 489 flats and
45,372sq m of offices as well as community facilities, a gym, a
new public square and improved pedestrian access. An off-site
affordable housing contribution of 65 million was also made under
a Section 106 Agreement, considered to be equivalent to the local
policy requirement of a 35% on-site affordable homes provision.
Westminster City Council resolved to grant planning permission
to Crossrail and Grosvenor in November for a 65,000 sq ft office
scheme. Located above the western ticket hall for Crossrails new
Bond Street Station at 65 Davies Street, plans for the six-storey
development include improvements to surrounding public areas.
To discuss how these changes may affect your development, contact
Guy Bransby on 0207 399 5409 or Jeff Field on 020 7852 4742.
Definition of Terms
Potential Demand Organisations with a potential requirement for office accommodation, but
without a finalised brief in terms of timing.
Floorspace Threshold Data refers to office floorspace in units of 5,380 sq ft and above.
Grading A subjective assessment taking into account specification, floorplate efficiency
and image.
Take-Up Floorspace acquired for occupation by leasing, pre-leasing or purchasing a freehold
or long leasehold interest.
Supply Floorspace which is on the market and available for occupation. Floorspace which
is under offer prior to a contractual commitment is included. Speculative development prior to
practical completion is excluded.
Speculative Development Floorspace under construction or comprehensive modernisation
which will be available for speculative letting (or sale). The forecast of development
completions relates only to developments currently under construction.
Net Absorption a measure of the change in occupied stock between periods.
Prime Rent An opinion of the highest rent (excluding incentives) achievable upon a letting
agreed at the quarter-end of a notional 10,000 sq ft unit of the best quality office space in a
prime location.
Net effective rents are calculated against our prime headline rent values and assume a
10-year term, a notional three month fit-out period and amortisation over 10 years. In practice
net effective rents are subject to far more variability related to the specific characteristics of the
individual premises.
Prime Yield An opinion of the yield which would be appropriate for a freehold Grade A
office investment in a prime location let at a current market rent to a tenant with a strong
financial covenant.
Investment Turnover Capital transactions comprising freehold and long leasehold acquisitions
for investment, owner occupation or development. Corporate transactions are excluded.
Demand Some applicants search across two or three market areas. In such cases their
demand appears in the total for each area. However, when calculating total Central London
demand, duplicates are eliminated.
Active Demand Organisations with a declared requirement for office accommodation which
are actively in the market to acquire floorspace in the short term.
Stratford
Camden
Regents
Park
Marylebone/Euston
North of
Oxford Street
Mayfair
Bloomsbury
Northern
Fringe
City
Covent Midtown
Soho Garden
Central City
South Bank
Eastern
Fringe
Wapping
Royal Docks
Canary
Wharf
Isle of
Dogs
Greenwich
Peninsula
Contacts
Leasing
Capital Markets
Research
Neil Prime
Director
Head of UK Office Agency
+44(0)20 7399 5190
neil.prime@eu.jll.com
Damian Corbett
Director
Head of London Capital Markets
+44(0)20 7399 5286
damian.corbett@eu.jll.com
Jon Neale
Head of UK Research
UK Research
+44(0)20 7852 4685
jon.neale@eu.jll.com
Jonathan Evans
Director
West End Agency & Development
+44(0)20 7399 5950
jonathan.evans@eu.jll.com
Julian Sandbach
Director
West End Investment
+44 (0)020 7399 5973
julian.sandbach@eu.jll.com
Ben Burston
Head of UK Office Research
UK Research
+44 (0)20 7399 5289
ben.burston@eu.jll.com
Dan Burn
Director
City Agency
+44 (0)20 7399 5966
dan.burn@eu.jll.com
Chris Northam
Director
City Investment
+44(0)20 7399 5826
chris.northam@eu.jll.com
Alex Hodge
Business Development Manager
UK Marketing
+44(0)20 7399 5735
alex.hodge@eu.jll.com
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
COPYRIGHT JONES LANG LASALLE IP, INC. 2014. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without
prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer
any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.

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The Central London Market Q4 2013

Weight of money driving growth

2012 2013 2012

On Point Central London Market Fourth Quarter 2013 3

The Central London Market

In London, growth is forecast to hit 3.3%, in a continuation of

Unemployment9%& Finance Rates4%

2006 2007 2008 2009 2010 2011 2012

2012 2013 2014 2015 2016 2017

In London, growth is forecast to

Unemployment & Finance Rates

Falling unemployment leading to rate rise speculation

4 On Point Central London Market Fourth Quarter 2013

The Central London Market

Letting activity up by over 50% in 2013

Central London Prelets 2004-2013

Pre-lets driving the market

The return ofOthers

On Point Central London Market Fourth Quarter 2013 5

availability (%) of overall stock

Shortage of new supply

West End City

Source: Jones Lang LaSalle

As the supply Central

West End City

We expect that 2014 will see

6 On Point Central London Market Fourth Quarter 2013

The Central London Market

Source: Jones18Lang LaSalle

June 11June 08June 06

June 10June 07June 05

June 09June 06June 04

June 08June 05June 03

June 07June 04June 02

The improved performance0%of the occupier market has buoyed

Yields stable, but downward pressure remains

5 Year Swap City

On Point Central London Market Fourth Quarter 2013 7

Issue to watch: Upcoming lack of new supply

Source: Jones Lang LaSalle

West End speculative development pipeline (2014-18)

West End development skewed to new districts rather

Implications: strong rental growth, along with development

8 On Point Central London Market Fourth Quarter 2013

The West End Office Market

Occupier take-up and net absorption

Source: Jones Lang LaSalle

Rolling 12 Month Take-Up

Rolling 12 Month Take-Up

Rolling 12 Month Take-Up

On Point Central London Market Fourth Quarter 2013 9

availability (%) of overall stock

availability (%) of overall stock

West End: Vacancy Rates 2004-2013

availability (%) of overall stock

Overall vacancy decreased 50 basis points quarter-on-quarter

Source: Jones Lang LaSalle

West End: Investment

Source: Jones Lang LaSalle

Property Companies Institutions

10 On Point Central London Market Fourth Quarter 2013

The City Office Market

availability (%) of overall stock

Rolling 12 Month Take-Up