london offices market analysis - egi · dtz took a 15% market share after slipping from top place...

London Offices Market Analysis

Issue 2 Apr - Jun 2009

1 | For all data enquiries call 020 7911 1881

Agent share by number of disposals done - Q1 + Q2 2009

47%53%

43%57%

58%

42% 42%

58%

56% 44%

Disposals done - office breakdown Q2 2009

DTZ King Sturge Knight Frank

CB Richard Ellis GVA

City

West End

Docklands

This analysis details the top agents by number of disposals done, and has been split out to reveal, where applicable, which office, and which market, is more active.

After slipping last quarter, DTZ is back on top with 59 deals and has been marginally more active in the West End. Sole office agents have again performed well this quarter with Richard Susskind, Farebrother, and E A Shaw achieving 55, 46, and 37 deals respectively and retaining top five placements despite the fringe markets struggling with poor occupier demand, a contrast to last quarter. CBRE took third place, completing 10 less deals than DTZ, and was more active in the City as were Knight Frank and Strutt & Parker.

GVA, King Sturge, and JLL have been relatively active in both office locations, completing slightly more deals in the West End. Changing occupier demand has certainly seen a more even spread of transactions this quarter but the City has still managed to hold a lead over the West End, in terms of numbers of deals which are attributable to a specific office – 189 to 169.

Rank Agent Name No of Disposals City West End

1 DTZ 59 28 31

2 Richard Susskind & Co Limited 55

3 CB Richard Ellis 49 28 21

4 Farebrother 46

5 E A Shaw 37

=6 King Sturge 36 15 21

=6 Knight Frank LLP 36 21 15

8 GVA 34 14 18

=9 Jones Lang LaSalle 31 14 17

=9 Strutt & Parker 31 21 10

11 Anton Page Limited 28

12 Drivers Jonas 25 9 16

13 Cushman & Wakefield 22 3 19

=14 Allsop 18

=14 Matthews & Goodman 18 14 4

=16 Ingleby Trice Kennard 17

=16 Stirling Ackroyd 17

=18 NB Real Estate 16 13 3

=18 Savills 16 7 9

20 Colliers Godfrey Vaughan 15

21 Newton Perkins 14

22 BH2 13

23 BNP Paribas Real Estate 12

=24 Crossland Otter Hunt 11

=24 Dron & Wright 11

For all data enquiries call 020 7911 1881 | 2


Central London letting agents league table – Q2 2009

CBRE back on top as Strutt & Parker makes top five CBRE is back on top for the first time since Q3 2008 after acting on 35 deals and letting almost 95,000 sq ft more than any other agent. It made the top five in three markets and topped the City core table. Its largest deal came in this market, where the Bank of Tokyo-Mitsubishi UFJ let 181,000 sq ft at Ropemaker, 25 Ropemaker Street EC2, through a deal joint with second placed Jones Lang LaSalle.

CBRE’s 42,000 sq ft joint agency disposal to Talbot Underwriting at 60 Threadneedle Street, EC2, also helped secure Strutt & Parkers fourth place finish, up three places on last quarter taking a 9% market share and making the top five for the first time in two years.

Other than the Ropemaker transaction, JLL also let 16,500 sq ft to Apple Computer UK at 1 Hanover Street, W1, confirming its top placement in the West End table, and 26,000 sq ft to Regus at British Land’s Broadgate Tower, EC2, in a transaction joint with fifth placed Knight Frank.

DTZ slipped to third this quarter from top spot last time, despite completing 37 deals and letting 286,600 sq ft. It made the top five in all but one of the markets, and topped the Docklands table. A 35,000 sq ft deal to the Youth Justice Board for England and Wales at 1 Drummond Gate, SW1, also helped it take second place in the West End.

Farebrother again took sixth spot, letting almost 167,000 sq ft and taking an 8% share of the market. It performed well in Midtown completing 22 transactions, taking the top spot. The largest of its deals was 50-52 Chancery Lane, WC2, where Russell Jones & Walker Limited took 28,500 sq ft.

GVA and NB Real Estate make top ten GVA moved up four places to seventh this quarter and managed a fourth place finish in Midtown. Its 6% market share was achieved largely due to its disposal at 10 Lime Street, EC3, where SCOR Reinsurance took 21,300 sq ft in a transaction joint with Kinney Green. King Sturge slipped three positions to eighth this time achieving a 5% market share. Its 11,000 sq ft disposal to Whistles at 183 Eversholt Street, NW1, aided it in taking third spot in the West End.

Slipping six places to ninth is Richard Susskind which acted on 27 transactions letting a total of 89,900 sq ft. It topped the City fringe table again, taking a 35% market share, and saw its largest deal complete at Saffron House, 6-10 Kirby Street, EC1 where 11,600 sq ft was let to Touch Group, in a deal joint with BNP Paribas Real Estate.

NB Real Estate completes the top ten, climbing seven places, acting on 11 deals. It claimed fifth place in the City core, where its largest deal completed with 33,900 sq ft let to HIS UK at 133 Houndsditch, EC3, in a joint transaction with DTZ.

Ropemaker, EC2: 181,000 sq ft lets to Bank of Tokyo-Mitsubishi

Rank Agent Disposals (sq ft) No deals Market share

1 CB Richard Ellis 461,884 35 22%

2 Jones Lang LaSalle 367,578 23 18%

3 DTZ 286,595 37 14%

4 Strutt & Parker 205,123 18 9%

5 Knight Frank 193,451 24 9%

6 Farebrother 166,958 28 8%

7 GVA 122,730 26 6%

8 King Sturge 107,924 21 5%

9 Richard Susskind & Co 89,921 27 4%

10 NB Real Estate 85,860 10 4%

11 Allsop 70,960 11 3%

12 Savills 65,282 8 3%

13 E A Shaw 64,794 16 3%

14 Cushman & Wakefield 61,880 19 3%

15 Drivers Jonas 60,367 15 3%

16 Kinney Green 52,038 6 3%

17 Anton Page 45,894 16 2%

18 BNP Paribas Real Estate 40,617 6 2%

19 BH2 32,837 7 2%

20 Brewster Leech 29,388 6 1%

21 The Noble Harris Partnership 28,783 6 1%

22 Stirling Ackroyd 25,472 9 1%

23 Ingleby Trice Kennard 23,172 7 1%

24 Edward Charles & Partners 21,884 3 1%

25 Montagu Evans 20,783 5 1%


Agents market share by market – Q2 2009City core West End

CBRE took top spot in the City core again with a 48% market share, letting an impressive 340,000 sq ft. The largest disposal came at Ropemaker, 25 Ropemaker Street EC2, where the Bank of Tokyo-Mitsubishi UFJ took over 180,000 sq ft in a deal joint with second placed Jones Lang LaSalle. Other than this deal, JLL let 26,000 sq ft at the Broadgate Tower, Bishopsgate, EC2 to Regus, acting jointly with Knight Frank. Stutt & Parker took third acting on nine transactions. Its largest letting came at 60 Threadneedle Street, EC2, where Talbot Underwriting Limited took 42,200 sq ft, in a disposal joint with CBRE. DTZ took fourth spot, with its largest transaction the 33,900 sq ft letting to HIS UK at 133 Houndsditch, EC3, in a deal joint with fifth placed NB Real Estate.

JLL achieved first place in the West End, letting 95,400 sq ft. Its largest transaction was the 16,400 sq ft disposal to Apple Computer UK, at 1-2 Hanover Street, W1. DTZ was a close second after disposing of 93,800 sq ft across 18 deals. Its largest transaction was to the Youth Justice Board for England and Wales at 1 Drummond Gate, SW1. King Sturge took third, completing on 11 transactions. The deal to Network Rail Infrastructure at Paddington Central, W2, was its largest letting and was joint with fourth placed CBRE which took an 8% market share. Cushman & Wakefield took fifth spot with its largest deal the 8,100 sq ft letting to the Associated Foreign Exchange at Davis House, 129 Wilton Road, SW1, joint with Edward Charles & Partners.

Midtown City fringe

Farebrother acted on 22 transactions this quarter and took a 49% share of the Midtown market. Its largest letting came at 50-52 Chancery Lane, WC2, where Russell Jones & Walker Limited took 28,500 sq ft. DTZ was second again after acting on 43,200 sq ft worth of deals. Its largest was the letting at Aldwych House, 81 Aldwych, WC2, where BDP Media Group has taken 10,100 sq ft in a deal joint with third placed E A Shaw. Elsewhere, a joint disposal with Farebrother of 11,900 sq ft at 6-16 St Andrew Street, EC4, to the Carter Ruck helped GVA Grimley’s fourth placement, slipping from third last time. JLL completes the table after acting on three transactions and claiming a 9% share of the market. A transaction joint with CBRE saw 23,300 sq ft let to GSMA at 5 New Street Square, EC4.

Richard Susskind retained first place this quarter after completing an impressive 26 transactions, earning them a 35% market share. The largest contributor was the letting of 11,600 sq ft to Touch Group at Saffron House, 6-10 Kirby Street, EC1, in a deal joint with BNP Paribas Real Estate. Knight Frank finished second after acting on four transactions and disposing of 43,100 sq ft. Its largest disposal was at Eden House, 5-14 Bishops Square, E1, where 27,200 sq ft was taken by Sapient in a transaction joint with fourth placed Strutt & Parker. Anton Page took third place again, acting on 12 deals with the largest being joint with Allsop at Arnold House, 36 -41 Holywell Lane, EC2, where CCA International took 14,200 sq ft. CBRE took fifth spot after completing a letting to Network Rail Infrastructure at Farringdon Place, 20 Farringdon Road, EC1.

Docklands Southbank

Letting activity was lacklustre again this quarter with no agent acting on more than one transaction. DTZ and Knight Frank top the table, both taking a 45% share of the market after acting on the disposal to Financial Ombudsman Service at south Quay 3, 185-189 Marsh Wall. BNP Paribas Real Estate made third place with a 26% market share after disposing of 18,000 sq ft to the Home Office at 1 Churchill Place. The Noble Harris Partnership claimed fourth due to its 17,300 sq ft letting at 3 Millharbour to River House Montessori School. Completing the table is Currell Commercial which let just 1,500 sq ft at the Elektron Builing, Aspen Way where an undisclosed tenant took the ground floor.

E A Shaw climbed two places to top the Southbank table after completing four deals and disposing of 13,500 sq ft. Its largest transaction was at 7 Holyrood Street where 6,300 sq ft was taken by Rugby House-ARP. DTZ took a 15% market share after slipping from top place and acted on one 5,500 sq ft disposal to Global Payments at the Blue Fin Building, 90 Southwark Street. Edward Symmons took third place, up by two positions from last quarter. Its largest deal was the 2,600 sq ft letting to an undisclosed tenant at 17 Park Street in a transaction joint with Field & Sons. JLL and Newton Perkins share fourth place after acting on a transaction of 3,400 sq ft at Broadwall House, 21 Broadwall.

Rank Agent Disposals (sq ft) No Deals Market share



3 Strutt & Parker 147,190 9 21%

4 DTZ 108,981 9 16%

5 NB Real Estate 50,025 6 7%



2 DTZ 93,769 18 16%

3 King Sturge 58,119 11 10%


5 Cushman & Wakefield 41,452 13 7%


1 Farebrother 151,774 22 49%

2 DTZ 43,150 7 14%

3 E A Shaw 42,006 10 14%

4 GVA Grimley 31,815 5 10%



1 Richard Susskind & Co 86,294 26 35%

2 Knight Frank 43,067 4 17%

3 Anton Page 35,299 12 14%

4 Strutt & Parker 27,178 1 11%



=1 DTZ 30,609 1 45%

=1 Knight Frank 30,609 1 45%

3 BNP Paribas 18,000 1 26%

4 Noble Harris 17,270 1 25%

5 Currell Comm 1,504 1 2%


1 E A Shaw 13,493 4 37%

2 DTZ 5,481 1 15%

3 Edward Symmons 4,372 2 12%

=4 Jones Lang LaSalle 3,384 1 9%

=4 Newton Perkins 3,384 1 9%



Q2 2009

Market Address Tenant Size (Sq Ft) Agent

City Core Ropemaker, 25 Ropemaker Street, EC2 Bank of Tokyo-Mitsubishi UFJ 180,608 CB Richard Ellis / Jones Lang LaSalle

City Core 60 Threadneedle Street, EC2 Talbot Underwriting 42,150 CB Richard Ellis / Strutt & Parker

City Core 20 Gracechurch Street, EC3 Robert Fleming Insurance Brokers 39,730 CB Richard Ellis / Strutt & Parker / Savills

West End 1 Drummond Gate, SW1 Youth Justice Board for England and Wales 34,477 DTZ

City Core 133 Houndsditch, EC3 IHS UK 33,875 DTZ / NB Real Estate

Docklands South Quay 3, 185-189 Marsh Wall, E14 Financial Ombudsman Service 30,609 DTZ / Knight Frank

Midtown 50-52 Chancery Lane, WC2 Russell Jones & Walker 28,491 Farebrother

City Fringe Eden House, 5-14 Bishops Square, E1 Sapient 27,178 Knight Frank / Strutt & Parker

City Core 125 Old Broad Street, EC2 Landmark Business Centres 26,450 CB Richard Ellis / Strutt & Parker / DTZ

City Core Broadgate Tower, Bishopsgate, EC2 Regus 26,018 Jones Lang LaSalle / Knight Frank

City Fringe Farringdon Place, 20 Farringdon Road, EC1 Network Rail Infrastructure 26,000 CB Richard Ellis

Midtown 5 New Street Square, EC4 GSMA 23,311 CB Richard Ellis / Jones Lang LaSalle

City Core 10 Lime Street, EC3 SCOR (UK) Reinsurance Co 21,344 GVA Grimley / Kinney Green

Docklands 1 Churchill Place, E14 The Home Office 18,000 BNP Paribas Real Estate

West End Carlyle House, 68-71 Newman Street, W1 Buro Happold 18,000 Cyril Leonard & Co

Key transactions – all markets

Key new instructions – all markets

Market Address Grade Size (Sq Ft) Agent

City Core Plantation Place 1, 30-35 Fenchurch Street, EC3 Secondhand 131,175 BNP Paribas Real Estate / Jones Lang LaSalle

Docklands Independent House (The Lothbury Building), 191 Marsh

Wall, E14

Secondhand 69,921 Jones Lang LaSalle

West End Henry Wood House, 3-7 Langham Place, W1 Secondhand 69,732 Lambert Smith Hampton

City Core 10 Devonshire Square, EC2 Secondhand 59,198 CB Richard Ellis

Midtown Tavis House, 1 Tavistock Square, WC1 Secondhand 57,402 Montagu Evans

Docklands 18-20 Cabot Square, E14 Secondhand 52,120 Jones Lang LaSalle

City Core Royal Exchange, 2 Cornhill, EC3 Secondhand 49,742 DTZ / Jones Lang LaSalle

City Fringe 33-39 Bowling Green Lane, EC1 Under Construction 41,715 Richard Susskind & Co

Midtown Shell Mex House, 80 Strand, WC2 Secondhand 40,090 Jones Lang LaSalle

City Fringe Bishops Square, 1-10 Bishops Square, E1 Secondhand 39,995 Cushman & Wakefield / Strutt & Parker

City Fringe 13-17 Worship Street, EC2 New/Refurb existing 39,157 Allsop / Richard Susskind & Co

Midtown Arundel Great Court, 2 Arundel Street, WC2 Secondhand 38,809 CB Richard Ellis / Jones Lang LaSalle

West End Francis House, 11 Francis Street, SW1 Secondhand 38,725 BNP Paribas Real Estate

City Fringe 153-157 Commercial Road, E1 Secondhand 36,570 Land Commercial

Midtown 265 Strand, WC2 Secondhand 28,162 Colliers Godfrey Vaughan


Summary statisticsCity core City fringe Docklands Midtown Southbank West End Overall

2008 2009

Q1+2

2009

Q2

2008 2009

Q1+2

2009

Q2

2008 2009

Q1+2

2009

Q2

2008 2009

Q1+2

2009

Q2

2008 2009

Q1+2

2009

Q2

2008 2009

Q1+2

2009

Q2

2008 2009

Q1+2

2009

Q2

Takeup (million sq ft) annual or quarter total

New/Refurb existing 0.16 0.44 0.36 0.33 0.07 0.05 0.01 0.00 0.00 0.20 0.04 0.02 0.04 0.00 0.00 0.47 0.16 0.04 1.20 0.71 0.47

Premarketing 0.01 0.00 0.00 0.14 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.01 0.00 0.00 0.17 0.00 0.00

Secondhand 1.83 0.45 0.28 0.85 0.34 0.14 0.75 0.09 0.07 0.75 0.39 0.26 0.25 0.11 0.04 1.91 0.61 0.43 6.33 1.98 1.21

Under Construction 0.45 0.01 0.01 0.10 0.00 0.00 1.90 0.00 0.00 0.13 0.02 0.00 0.05 0.00 0.00 0.26 0.01 0.00 2.88 0.04 0.01

Total 2.46 0.89 0.65 1.41 0.41 0.19 2.66 0.09 0.07 1.07 0.46 0.28 0.34 0.11 0.04 2.65 0.77 0.47 10.59 2.73 1.70

Availability (million sq ft) annual quarterly average or quarter end

Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2

New/Refurb existing 1.44 2.79 2.93 0.37 0.54 0.56 0.10 0.33 0.34 0.31 0.55 0.63 0.04 0.03 0.03 0.35 0.59 0.61 2.62 4.84 5.11

Premarketing 7.45 7.32 7.13 2.08 1.97 1.98 4.59 5.08 5.08 0.33 0.80 0.81 0.78 0.44 0.44 1.41 1.25 1.18 16.64 16.85 16.62

Secondhand 3.23 4.03 4.15 1.86 2.29 2.40 0.85 1.41 1.48 1.84 2.45 2.59 0.49 0.61 0.64 3.04 4.99 5.18 11.31 15.77 16.45

Under Construction 4.69 3.34 3.20 0.34 0.29 0.29 2.54 0.60 0.59 1.14 0.85 0.78 0.01 0.34 0.34 1.54 1.58 1.56 10.26 6.99 6.76

Total 16.82 17.48 17.40 4.66 5.09 5.23 8.08 7.41 7.49 3.63 4.66 4.82 1.32 1.42 1.45 6.34 8.41 8.53 40.84 44.46 44.92

Availability Rate % annual average or quarter

Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2

% 8.40% 12.09% 12.49% 10.69% 13.52% 14.07% 4.79% 7.84% 8.26% 7.08% 9.68% 10.37% 5.09% 5.86% 6.12% 5.50% 8.91% 9.23% 6.92% 9.65% 10.09%

Under Offer and Withdrawn (million sq ft) quarter or quarterly average

Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2

Under offer 0.68 0.30 0.34 0.15 0.07 0.06 0.09 0.02 0.04 0.17 0.16 0.17 0.04 0.01 0.01 0.24 0.22 0.22 1.38 0.78 0.83

Withdrawn 0.31 0.04 0.07 0.05 0.06 0.09 0.00 0.00 0.00 0.05 0.03 0.03 0.01 0.01 0.01 0.09 0.09 0.10 0.50 0.22 0.29

Average Asking prices (£psf) quarter or quarterly average

*New leases only Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2

New Build Existing £59.92 £48.68 £47.70 £53.79 £45.24 £41.50 £37.72 £40.04 £40.00 £56.49 £53.23 £50.08 £0.00 £0.00 £0.00 £84.08 £76.27 £69.78 £48.67 £43.91 £41.51

Second-hand Grade A £42.18 £34.65 £33.47 £32.70 £28.99 £28.39 £31.03 £31.31 £31.30 £45.71 £37.44 £34.67 £37.72 £32.05 £30.19 £60.67 £52.68 £50.73 £41.67 £36.19 £34.79

Investment Sales (million sq ft) Annual or quarter total

Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2

Total sq ft 1.84 1.10 0.37 0.44 1.09 1.08 3.08 0.00 0.00 0.88 0.34 0.11 0.85 0.05 0.01 2.09 1.25 0.63 9.18 3.84 2.20

No Transactions 23 10 5 23 8 6 4 0 0 24 11 4 10 3 1 72 29 18 156 61 34

Construction Starts (million sq ft) Annual or quarter total

Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2

Total started 0.69 0.68 0.57 0.49 0.13 0.08 0.38 0.00 0.00 0.33 0.06 0.01 0.00 0.62 0.04 1.33 0.03 0.02 3.21 1.52 0.72

Pre-let 0.00 0.18 0.18 0.16 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.25 0.01 0.18 0.00 0.00 0.34 0.43 0.19

Speculative 0.69 0.50 0.39 0.32 0.13 0.08 0.38 0.00 0.00 0.33 0.06 0.01 0.00 0.37 0.03 1.15 0.03 0.02 2.87 1.09 0.53

Completed Space Still available (million sq ft) (completion by full year or part of year)

Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2 Q1+2 Q2

Total completed 3.77 1.07 0.66 0.38 0.11 0.06 0.66 0.00 0.00 0.55 0.43 0.20 0.24 0.00 0.00 2.14 0.86 0.11 7.74 2.48 1.04

Still available 2.33 0.78 0.48 0.22 0.09 0.05 0.30 0.00 0.00 0.15 0.37 0.18 0.00 0.00 0.00 0.28 0.30 0.07 3.29 1.54 0.78

Future Completions (million sq ft) for full year or part of year

Delivery date 2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011

Total to complete 1.89 1.25 0.87 0.29 0.33 0.00 0.75 0.37 1.99 0.50 0.57 0.00 0.01 0.48 0.00 1.22 1.57 0.00 4.65 4.57 2.86

Amount still available 1.57 0.85 0.84 0.28 0.19 0.00 0.02 0.37 0.00 0.29 0.57 0.00 0.00 0.03 0.00 0.99 1.09 0.00 3.15 3.10 0.84

% still available 83% 68% 96% 97% 58% 0% 3% 100% 0% 57% 100% 0% 0% 6% 0% 81% 70% 0% 68% 68% 29%



IntroductionThe current downturn, described as the “first recession of the globalised age”, has continued to see London, like many other financial centres, shaken as the global economic system remains under ever increasing scrutiny. The turbulence is still being felt significantly in the real estate market and confidence has continued to crumble under the pressure. Capital values have tumbled further and despite a slight improvement in take up activity this quarter occupier demand is still likely to remain weak across the capital as a whole for some time.

This rate of decline appears to be slowing as London nears the bottom of the downward economic cycle and many begin to look forward and consider prospects of recovery. But predicting green roots may prove to be a little too optimistic a little too soon.

A key question is yet to be answered “is the impact on financial services simply a cyclical event or, more likely, a structural, long overdue change with longer term effects?” If the latter is true, the likelihood of major long term implications for the UK office markets, particularly central London, increases substantially with the most prominent effect being increased regulation in the finance sector.

After expanding its role globally over the last two decades London has become more susceptible to changes in the economic cycle. Despite the commitment of the Bank of England to recapitalise banks and restore some normality to lending and liquidity, current forecasts are still predicting the economy to contract, by up to 4.1% in 2009. It is therefore likely that the global nature of the current downturn will only further this effect, and London will see a significant loss of economic output and subsequently employment over the forthcoming months, all be it at a sustained or slightly slower rate of decline than already experienced.

There is still heavy importance placed on quality and not quantity when it comes to investment opportunities in the current market, and as some prime stock is starting to offer fair value, strong covenanted properties appear to be in high demand.

Contraction in the occupier marketMany have been hit by the downturn in the occupier market, and after much restructuring some are beginning to show signs of preparation for when the market begins to recover. This has started to see take up figures improve as firms shift space to meet new demands. However some markets are suffering from a shift in occupier demand, and with few large floor plate requirements around and the recent news that Nomura is to quit its 25 Bank Street office in Canary Wharf in favour of a move to Watermark Place in the City, does not bode well for Docklands.

Tenants still hold trump cards in the occupier market and landlords are having to fight to hold off rival competition, offering incentives and rent free periods of up to four years, like that seen at Ropemaker, EC2, where the Bank of Tokyo – Mitsubishi UFJ has taken space this quarter.

Average rental prices across London are continuing to play catch up with capital values, which are still falling but appear to be nearing bottom. Prime rents have been hit hard highlighting their level of increase of the previous upturn and while we expect to see them level out in 2010, it is expected that secondary rents will continue to tail off until 2011.

Some signs of life in the investment marketThe investment market has seen little activity over the past few quarters with a severe lack of certainty coupled with poor availability of liquidity forcing potential buyers to refrain from purchasing real estate despite the continued fall in capital values. This quarter has however begun to see renewed interest, with

Overviewwell secured North American and European investors looking at taking advantage of the low cost prime capital, possessing strong covenants, at a time when the sterling offers good investment value to foreign purchasers.

We had, until lately, failed to see many of the Middle Eastern investors making movements in the UK investment market, prompting the prospect that there is a vast difference between raising capital and spending it. But recently the market has been boosted by the 75% long leasehold sale of Bishops Square to the State of Oman, and the purchase of Milton Gate by a consortium of Evans Randall and Bahrain’s Al Salam Bank.

Developers build by tenant specificationThe severe lack of liquidity, expensive build costs and lack of committed demand has dramatically affected the amount of development across the capital, meaning that the development pipeline is substantially slowing down, with only 19 developments getting underway since the turn of the year, compared with 51 in the same time last year.

It is becoming increasingly apparent that developers are being more cautious towards speculative development and are now looking to delay construction until a tenant has been secured, often offering potential occupants the ability to have input into the design of the property tailoring it to their specification. This approach is being used at Argent’s Kings Cross Central with all of the office development to be built on demand. Although being a slow process, developers, like all in the current market, are keen to minimize exposure to the downturn.

As we progress and the market begins to recover it is likely that a lack of completions will be more obvious as time moves on, possibly leading to a restricted supply pipeline in 2011-2012.

SummarySpeculation of market recovery has been rife of lately but this is somewhat of an optimistic and over simplistic approach to an economy still facing the realisation of the consequences of the credit crunch.

Any thoughts that the market could be self-correcting and automatically bouncing back from the substantial fall couldn’t be further from the truth, and as we begin to see some stability returning, it is clear that a full recovery is going to take time. Many changes are likely to be made to a broken economic system, shaping the future in how London trades and invests in its growth, with increased regulation restricting any upturn.

A recent IMF report identifies this slow paced path to recovery, stating that recessions caused by crises in financial markets tend to be longer-lasting, and reduce subsequent substantial growth rates by more in a period of recovery.

On a more positive note some segments of the UK market, notably the West End, have seen little upward yield movement since the turn of the year and the overall rate of capital decline has begun to moderate slightly.

As we move into a new part of the current cycle, with some signs of life in certain markets, some are starting to form theories on the prospects of the inevitable upturn. With so much uncertainty still around, it would clearly be unwise to get too cheerful too soon. In particular, much depends on the banking sector and the extent to which more “normal” lending conditions return.

The possibility and likelihood that this lending will remain highly constrained for an extended period is probably the main factor which will prohibit any fast reversal in capital values. However it is clear that the fall in market activity is slowing considerably, so we may see some firms preparing sooner rather than later for the next upturn.

25 Bank Street, E14:

Nomura prepares to

leave Canary Wharf for

the City

1-10 Bishops Square, E1:

Government of Oman

purchases a 75% stake

for £445 million


Availability rateThe availability rate has increased again this quarter in the City core rising to 12.5%, up on the 11.7% seen last quarter and 8.3% of this time last year. This increase has been a result of several new availabilities of secondhand stock coming onto the market with many occupiers being forced to offload space as firms continue to downsize and cut costs. With almost 1.6 million sq ft of speculative stock set to complete throughout the remainder of 2009 and demand likely to remain subdued this rate is likely to remain high and be pushed out further.

City core

60 Threadneedle Street,

EC2: Talbot takes 42,200

sq ft with 42 months

rent free

Plantation Place 1, EC3:

Accenture looking to

offload 131,000 sq ft

% +/- % +/- % +/-

Take up(sq ft) Q2 2009 24 months 12 months 3 months

New/Refurb existing 359,665 258.67 1126.35 355.28

Premarketing - n/a n/a n/a

Secondhand 280,105 -55.47 -51.40 69.61

Under Construction 8,705 -97.48 -75.90 n/a

Total 648,475 -39.67 1.04 165.61

Take upTake up in the City core improved this quarter after the lows of the last sixth months, rising by 166% on last quarter and 1% on this time last year. Lettings of new build and secondhand stock increased substantially and contributed to the overall rise after increasing by 355% and 70% respectively. The largest transaction to take place was of new build stock and came at British Land’s Ropemaker, 25 Ropemaker Street EC2, where the Bank of Tokyo – Mitsubishi UFJ has taken 181,000 sq ft. Elsewhere, Talbot Underwriting took 42,200 sq ft of new build space at Hammerson’s 60 Threadneedle Street, EC2, on the seventh and eighth floors. IHS UK took 33,900 sq ft at 133 Houndsditch, EC3, in the largest letting of secondhand space.

Having seen no preletting activity last quarter, things have not really improved in Q2, with only one prelet signing. This was of stock under construction at Forum House 15-18 Lime Street, EC3, where SSL Insurance Brokers has prelet 8,700 sq ft on the sixth –

eighth floors. The volume of space placed under offer picked up this quarter,

rising by 82,000 sq ft on the lows of Q1. A total of 339,000 sq ft has received interest with the largest potential deal seeing 95,000 sq ft being placed under offer at Hammerson’s 60 Threadneedle Street, EC2, where Germany’s Berenberg Private Bank and Universities Superannuation are set to take space.

% +/- % +/- % +/-

Supply(sq ft) Q2 2009 24 months 12 months 3 months

New/Refurb existing 2,930,752 978.05 149.57 10.30

Premarketing 7,125,562 0.61 -6.16 -5.14

Secondhand 4,148,540 32.48 22.86 5.98

Under Construction 3,196,772 -18.57 -34.42 -8.24

Total 17,401,626 20.75 2.25 -0.94

SupplySupply in the City core has fallen by 1% on last quarter and by 2% on this time last year. The improved levels of take up helped contain the supply of vacant stock, but with a large amount of speculative stock completing and demand from the financial sector remaining subdued supply has not been reduced as much as the market would have hoped for.

Supply of new build stock continued to increase this quarter with over 2.9 million sq ft now available, which includes 480,000 sq ft of speculative completions. Supply of secondhand stock also rose this quarter and was up by 6% on last quarter. The largest new addition to the market was at Plantation Place 1, 30-35 Fenchurch Street, EC3, where 131,200 sq ft is now available with management consultant Accenture looking at quitting its office on the fifth - seventh floors. Elsewhere 59,000 sq ft has come onto the market at 10 Devonshire Square, EC2, with Aon considering vacating the first-fifth floors.

Supply for both stock under construction and premarketed

stock fell dropping by 8% and 5% respectively. This was not a result of an improvement in take up activity but due to several completions and construction starts taking place. There have been no new additions of these grades to the market this quarter.

The volume of space withdrawn from the market rose with 66,500 sq ft spread across 12 properties being taken off of the market. The largest retraction of space was the 15,800 sq ft at 10 Lindsey Street, EC1.

5

6

7

8

9

10

11

12

13 %

SheepGoats Ducks GeeseCats Dogs

Q1 09

Q2

09

Q4 08

Q3 08

Q2 08

Q1 08

Q4 07

Q3 07

Q2 07

Q1 07

Q4 06

Q3 06

Q2 06

Availability rates



10 Fenchurch Street,

EC3: 70,000 sq ft

completes this quarter

One Finsbury Circus,

EC2: Asking rent falls to

£45 per sq ft

Asking rentsAverage asking rents for new build and secondhand space in the City core continued to slide this quarter and now stand at £47.75 and £33.50 per sq ft respectively. The most significant rent drop for new build stock was at One Finsbury Circus, where the rent has fallen by £12.50 to £45 per sq ft. The fall in rents for secondhand stock were a result of low rents being released at Old Change House, 1 Old Change Court, EC4, where the quoting rent dropped £16 and now stands at £32.50 per sq ft. Elsewhere at Vintners Place, 68 Upper Thames Street, EC4, a quoting rent of £1 per sq ft has been released on part of the ground floor also lowering the average.

ConstructionA huge 570,000 sq ft got underway in the City core this quarter, up on the 110,000 sq ft of Q1. The largest start to get underway was at Cannon Place, 78 Cannon Street, EC4, where a total of 386,000 sq ft got underway, all of which is speculative. Elsewhere New Court, 1-10 St Swithin’s Lane, EC4, has started. The New Court Property Services owned scheme has already been prelet in its entirety to NM Rothschild & Son.

Completions were back up again this quarter after 664,000 sq ft finished, 480,000 sq ft of which is still available. The largest property to complete was British Land’s Ropemaker, 25 Ropemaker Street, EC2, where almost one third has been prelet. Elsewhere, 70,100 sq ft of refurbishment work has completed at Langbourne House, 10 Fenchurch Street, EC3.

Looking ahead the situation remains of real concern with over 2.4 million sq ft of speculative stock set to complete by end of 2010.

InvestmentA total of five investment transactions took place this quarter. The largest deal was at Friary Court, 61-65 Crutched Friars, EC3, where the long leasehold was sold to German closed-ended fund manager HIH for £43 million by LaSalle Investment Management. Elesewhere, ING Real Estate sold 60 Cannon Street, EC4, to Orchard Street Investment Management for £21.38 million, reflecting a yield of 8.23%.

Property in the City has certainly began to tempt foreign investors back into the market, but a sense of caution is being taken by those considering taking the plunge. It appears that many are waiting in the wings as prime stock hits fair value, but finding secure space with strong covenants is proving difficult.

30

40

50

60

70 £ per sq ftSecondhandNew build (existing)

Q1 09

Q2 09

Q4 08

Q3 08

Q2 08

Q1 08

Q4 07

Q3 07

Q2 07

Q1 07

Q4 06

Q3 06

Q2 06

Asking rents

0.0

0.5

1.0

1.5

2.0 sq ft (m)PreletSpeculative

Q1 09

Q2 09

Q4 08

Q3 08

Q2 08

Q1 08

Q4 07

Q3 07

Q2 07

Construction starts with prelets

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4 sq ft (m) Still available To complete

Q2 12

Q4 11

Q1 11

Q4 10

Q3 10

Q2 10

Q1 10

Q4 09

Q3 09

Completed space actively marketed

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4 sq ft (m) Still available To complete

Q2 12

Q4 11

Q1 11

Q4 10

Q3 10

Q2 10

Q1 10

Q4 09

Q3 09

Completions with space available


West End

Availability rates

1 Drummond Gate,

SW1: The Youth Justice

Board takes 34,500 sq ft

5 Langham Place, W1:

70,000 sq ft has come

onto the market

2

4

6

8

10 %


Q1 09

Q2 09

Q4 08

Q3 08

Q2 08

Q1 08

Q4 07

Q3 07

Q2 07

Q1 07

Q4 06

Q3 06

Q2 06

Take upTake up in the West End has risen by 51% on the poor levels of activity of last quarter. This is a result of an improvement in the lettings of secondhand space with 428,800 sq ft being taken this quarter up by 137% on Q1. The largest transaction to take place was the letting at the Crown Estates 1 Drummond Gate, SW1, where the Youth Justice Board for England and Wales has taken 34,500 sq ft. Elsewhere the disposal of 18,000 sq ft to Buro Happold at Carlyle House, 68-71 Newman Street, W1, also contributed to this figure, and in another letting 16,400 sq ft at the Crown Estates One Hanover Street, W1 has been taken on part of the third floor by Apple Computer UK.

Despite this increase, take up as a whole is still down by 41% on this time last year and only 38,000 sq ft of new stock has been let, down by 68% on last quarter. The largest letting of this grade to occur was the 9,800 sq ft letting to an undisclosed tenant at 10 Eastbourne Terrace, W2. Again no lettings of premarketed or under

SupplyDespite increased take up, the volume of supply has also risen this quarter, up by 3% on Q1 and 46% on this time last year. This was due to a rise in the availability of secondhand and new build stock, up by 8% and 7% respectively. The largest new availability was of secondhand stock and was at Derwent Londons’ 5 Langham Place, W1 where 70,000 sq ft is now available. Elsewhere 38,700 sq ft is now available at KGAL’s Francis House, 11 Francis Street, SW1.

The largest availability of new stock to come to the market was 8,000 sq ft on the fourth floor at 77 Grosvenor Street, W1, currently occupied by Blue Bay Asset Management.

In contrast, the availability of premarketed stock and stock under construction dipped this quarter, by 9% and 2% respectively. No new premarketed space was placed onto the market this quarter and the only new availability of stock under construction saw 5,000 sq ft come onto the market at 21 Grafton Street, W1.

The volume of space withdrawn increased slightly on the 75,000

Availability rateDespite improved take up activity this quarter, the West End is still suffering from a lack of demand and transactions have been on the small size. This, coupled with the slight rise in supply has led to a further increase in the availability rate which now stands at 9.3% up on the 8.6% of last quarter. With a total of almost one million sq ft of speculative space set to complete throughout the remainder of 2009 and almost 1.1 million sq ft in 2010 things are not looking too good, and this abundance of vacant stock is likely to continue to push the availability rate up.

construction stock took place this quarter. The volume of space placed under offer continued to improve,

with over 220,000 sq ft receiving interest. The largest property to be placed under offer was at Barclays 120 New Cavendish Street, W1, where the ground, first, and third floors, totalling 15,600 sq ft, have been placed under offer.

sq ft of last quarter, with 104,000 sq ft being taken off of the market spread across 23 properties. The largest retraction of space came at 10 Eastbourne Terrace, W2, where the lower ground floor, measuring 9,400 sq ft, is no longer available with current tenant Chapman Taylor likely to remain in occupation. Elsewhere, at Sheraton House, 15 – 19 Great Chapel Street, W1, a total of 8,500 sq ft has been withdrawn on the first-third floors.

% +/- % +/- % +/-


New/Refurb existing 38,032 -77.10 -64.78 -67.87


Secondhand 428,763 -42.62 -11.42 136.73

Under Construction - n/a -100.00 -100.00

Total 466,795 -48.89 -41.21 51.47

% +/- % +/- % +/-



Premarketing 1,183,403 -49.82 -15.41 -9.46

Secondhand 5,180,360 145.15 96.28 7.93

Under Construction 1,559,843 39.26 13.08 -2.44

Total 8,534,057 43.73 46.07 3.09



30

40

50

60

70

80


Q1 09

Q2 09

Q4 08

Q3 08

Q2 08

Q1 08

Q4 07

Q3 07

Q2 07

Q1 07

Q4 06

Q3 06

Q2 06

Asking rents

0.0

0.2

0.4

0.6

0.8

1.0Still availableCompleted

Q1 09

Q2 09

Q4 08

Q3 08

Q2 08

Q1 08

Q4 07

Q3 07

Q2 07

Completed space actively marketed

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7 sq ft (m)Still available To complete

Q2 12

Q4 11

Q1 11

Q4 10

Q3 10

Q2 10

Q1 10

Q4 09

Q3 09

Completions with space available

0.0

0.2

0.4

0.6

0.8

1.0

1.2 sq ft (m)PreletSpeculative

Q1 09

Q2 09

Q4 08

Q3 08

Q2 08

Q1 08

Q4 07

Q3 07

Q2 07

Construction starts with prelets

21 Grafton Street, W1:

Refurbishment of 5,000

sq ft began

10 Eastbourne Terrace,

W1: 9,400 sq ft was

withdrawn

Asking rentsAsking rents for both new build and secondhand stock fell again this quarter, dropping to £69.75 and £50.75 per sq ft respectively. With the occupier market remaining unstable and more speculative stock set complete it is likely that rents will be pushed down further, with good quality secondhand stock taking longer to stabilise.

The huge decrease of £13 per sq ft for the new build stock average is due to a drop of £14.50 per sq ft at Davis House, Wilton Road, SW1, and numerous low rents now being quoted, like the rent of £35 per sq ft being quoted at 66 Porchester Road, W2.

The £3.75 per sq ft drop in the average secondhand average came as a result of a low rent of £23.50 per sq ft being quoted on part of the ground floor at Mortimer House, 37-41 Mortimer Street, W1. Elsewhere a rent of £29.50 per sq ft is being quoted on part of the first floor at Clifton House, 101 Euston Road, NW1.

ConstructionConstruction activity remained subdued this quarter with just 17,800 sq ft getting underway. This is up on the 13,000 sq ft of last quarter but still way down on the end of 2008. The largest scheme to get underway was Frogmore Real Estates’ 12,800 sq ft development at 98-102 Wigmore Street, W1. Elsewhere at O’Callaghan Properties 21 Grafton Street, W1, a 5,000 sq ft refurbishment got underway with construction due to complete later this year.

Completions were down on the highs of last quarter, when over 750,000 sq ft completed, with only 115,000 sq ft being finalised. The largest scheme to complete was the 25,900 sq ft new build development by Fidelity / Pembroke Real Estates at 49 Park Lane & 6 - 7 Tilney Street, W1. Elsewhere at Grosvenor’s 63 Brook Street, W1, the 23,700 sq ft new build behind the existing façade has finished and remains available in its entirety.

InvestmentInvestment sales increased this quarter with a total of 18 transactions taking place, up on the 11 of last quarter. Capital values have continued to decline and with property appearing to be close to fair value, potential purchasers have been scouring the market for secure investments. Demand appears to be up for prime stock, with strong covenants which will reap the rewards of the next upturn. The largest investment transaction was at Portman Estates’ Portman House, 2 Portman Square, W1, where the long leasehold has been sold for £155 million after it was originally on the market for £175 million.


Midtown

2 Arundel Street, WC2:

67,500 sq ft is now

available

1 Southampton Row,

WC1: 100,000 sq ft

completes this quarter

30

40

50

60


Q1 09

Q4 08

Q3 08

Q2 08

Q1 08

Q4 07

Q3 07

Q2 07

Q1 07

Q4 06

Q3 06

Q2 06

Q2 09

Asking rents

Take upTake up in Midtown improved this quarter after a struggling start to the year, rising by 66%, and only down by 2% on this time last year. This improvement in activity has been a result of an increased demand for secondhand stock, rising by 99% on Q1 with 261,500 sq ft being let. The largest deal in Midtown was of this grade at Aviva Investors’ 50-52 Chancery Lane, WC2, where Russell Jones & Walker has taken 28,500 sq ft. Elsewhere, law firm Farrer & Co has taken the entire 7,500 sq ft building at 64 Lincoln’s Inn Fields, WC2.

Lettings of new stock also rose this quarter, up by 22%. The largest deal came at 5 New Street Square, EC4, where GSMA took 23,500 sq ft. In contrast, there were no lettings of stock under construction or premarketed stock this quarter.

SupplyDespite an improvement in take up activity supply has continued to rise, increasing by 7% on last quarter, and by 34% on this time last year. With the exception of stock under construction, which dropped by 15% on last quarter, all grades witnessed an increase with new build stock rising by the largest proportion up 35%, following three completions.

Supply of secondhand stock increased by 12% with the largest addition of this grade at Arundel Great Court, 2 Arundel Street, WC2, where a total of 67,500 sq ft is now available. Supply of premarketed stock also rose slightly this quarter as a result of 22,500 sq ft coming onto the market at Conquest House 37-38, John Street, WC1.

The amount of space withdrawn has risen to 29,000 sq ft. The

The volume of space placed under offer rose this quarter, to 166,000 sq ft, up on the 145,000 sq ft of Q1. The largest potential deal is at New Court, 45-48 Carey Street, WC2, where a total of 15,640 sq ft is under offer.

Availability rateAvailability rates continued to increase this quarter, rising to 10.37%, up on the 9% of last quarter. The improved level of take up activity is still not strong enough to absorb the volume of stock hitting the market and with almost 290,000 sq ft of vacant stock set to complete in the latter half of this year it is likely that this rate will continue to increase.

Asking rentsAverage asking rents have continued to slide this quarter both for new build stock, which has dropped by £6.25 to £50 per sq ft, and for secondhand stock which has fallen by £5.50 to £34.75 per sq ft. With supply still outstripping demand, and more speculative space set to complete next quarter it is likely that we sill see rents continue to slide further towards the end of the year.

A drop of £8 per sq ft on the ninth and tenth floors of 6 New Street Square, EC4, has contributed to the fall for new stock, and a fall of the same amount at Midway House 27-29 Cursitor Street, EC4 has seen the average secondhand rent slide.

ConstructionConstruction activity remained high with a total of 204,000 sq ft completing, 88% of which remains available. The largest scheme to complete was Englander’s 100,000 sq ft 1 Southampton Row, WC1, where some space was prelet to Metro Bank last quarter. Elsewhere 71,000 sq ft also completed at Stockland UK’s 1 Tudor Street, EC4, where the entire property remains available.

Construction starts were thinner on the ground with just 14,000 sq ft getting underway at St Martin’s Courtyard, Long Lane, 136-138 Long Acre, WC2.

The outlook for Midtown is rather gloomy with a total of over 850,000 sq ft of speculative space set to complete by the end of 2010.

largest retraction of space was at Headland House 308-312 Gray’s Inn Road, WC1, where 10,500 sq ft is no longer available after the National Union of Journalists decided to pull the freehold off the market until a later date.

InvestmentInvestment activity in Midtown was subdued this quarter with only four transactions occurring as opposed to the seven of last quarter. The largest transaction came at 22 Kingsway, WC2 where the freehold has been sold by Land Securities to a private overseas investor for £39 million representing a 7.5% yield.

% +/- % +/- % +/-


New/Refurb existing 23,311 -50.08 -32.83 22.34


Secondhand 261,463 7.52 26.10 98.63


Total 284,774 -1.76 -2.03 65.63

% +/- % +/- % +/-



Premarketing 811,754 -11.42 129.02 2.85

Secondhand 2,592,903 127.64 51.12 12.20

Under Construction 784,726 0.66 -30.35 -15.14

Total 4,820,253 56.89 33.79 7.30



South Quay 3, Marsh

Wall, E14: FOS takes

31,000 sq ft

10 Upper Bank Street,

E14: 39,300 sq ft goes

under offer

DocklandsTake UpTake up activity in Docklands improved this quarter, rising by 236% with 65,900 sq ft being let, after the all-time low seen in Q1. Activity levels are still poor however and still down by 91% on the highs of Q2 2007. The only grade to see any activity this quarter was again secondhand stock with three deals occurring, the largest seeing the Financial Ombudsman Service taking 31,000 sq ft at South Quay 3, 185-189 Marsh Wall. Elsewhere the Home Office took 18,000 sq ft at Songbird Estates 1 Churchill Place.

The lack of large floor plate demand is certainly likely to pose problems for Docklands in the forthcoming months with more space likely to be made available and not absorbed through take up. The volume of stock placed under offer this quarter was more encouraging with a total of 41,800 sq ft receiving interest. The

4

6

8

10 %

Q1 09

Q4 08

Q3 08

Q2 08

Q1 08

Q4 07

Q3 07

Q2 07

Q1 07

Q4 06

Q3 06

Q2 06

Q1 06


Availability rates

largest potential deal is at 10 Upper Bank Street, where 39,300 sq ft is under offer with Mastercard reportedly set to quit the City for Canary Wharf.

Availability rateDespite improved take up, activity levels are still very causing availability rates to increase. The rate now stands at 8.26%, up on the 7.42% of last quarter. The very subdued occupier market has hit Docklands particularly hard due to the severe lack of large floor plate requirements. With the financial service sector likely to remain highly cautious for some time to come, it is likely that this rate will be pushed out further with the only comfort being that only 25,000 sq ft of speculative space is set to complete in the remainder of 2009.

Asking rentsAsking rents have remained unchanged this quarter standing at £40 per sq ft for new build stock and £31.30 per sq ft for good quality secondhand space. Only one quoting rent remains available for new stock, and this is at 25 Bank Street with ATOS deciding not to take up the option to occupy part of the 20th floor.

Of the rents for secondhand space the highest remains at 40 Bank Street, where part of the 19th floor is available for £48.50 per sq ft. The lowest rent to be quoted is at Northern & Shell Tower, 4 Selsdon Way, with part of the ground floor offered at £10 per sq ft.

The outlook for Docklands is one of continued unrest as several key tenants look to downsize or move away from the Wharf. This lack of demand will put pressure on rental drops and incentives being offered by landlords, but whether this can attract new business to this market, only time will tell.

ConstructionConstruction activity has remained subdued in Docklands again this quarter with no new starts getting underway and no completions taking place. There is only 25,000 sq ft of speculative stock set to complete throughout the remainder of 2009, but all of the 375,000 sq ft currently under construction at 25 Churchill Place and set to complete in 2010 is still available.

Other than this the pipeline is relatively contained with all the 2 million sq ft currently under construction at Riverside South already prelet to JP Morgan.

SupplySupply in Docklands rose slightly this quarter and was up by 2.4% on last quarter. The largest addition of stock was of secondhand grade space, with 69,900 sq ft is now available at Independent House (The Lothbury Building), 191 Marsh Wall, with Independent News and Media set to vacate. Elsewhere over 52,000 sq ft is now available at 18-20 Cabot Square where Barclays capital has placed its ninth and tenth floors onto the market.

No space was withdrawn from the market this quarter.

InvestmentThere has again been no investment activity in Docklands this quarter with little interest being shown. This may be a result of the current market hampering the level of expansion by firms across London and as some are forced to downsize only poor covenants are available on investment opportunities putting off possible investors.

% +/- % +/- % +/-


New/Refurb existing - -100.00 n/a n/a

Premarketing - -100.00 n/a n/a

Secondhand 65,879 -38.51 93.52 235.62

Under Construction - n/a n/a n/a

Total 65,879 -91.21 93.52 235.62

% +/- % +/- % +/-



Premarketing 5,075,463 -2.54 16.34 0.00

Secondhand 1,484,109 60.76 62.22 11.62

Under Construction 591,843 13.53 -80.68 -1.07

Total 7,492,094 12.18 -10.49 2.37


City fringe

Availability rateThe availability rate continued to rise this quarter, mainly as a result of slackening take up and the increased supply of secondhand stock. The rate has risen by 1.1% from last quarter and now stands at 14.1%, the highest since Q3 2006. With a total of 286,000 sq ft due to complete in 2009, 97% of which is still available, it looks very likely that the availability rate will rise further in the second half of the year.

Asking rentsAsking rents saw a decrease for new build stock this quarter falling from £49 to £41.50 per sq ft. This is partly due to an increase in take up of new build stock, resulting in some higher rents being taken off the market and also due to some reduced asking rents being released, such as a £10 drop in asking rent at 30 Crown Place, EC2, where the rent now stands at £42.50 per sq ft. Elsewhere the fifth floor at 1-10 Bishops Square, E1, which has been on the market since 2007, has seen an £18 reduction in asking rent and is now £39.50 per sq ft.

Rents for good quality secondhand stock slid marginally this quarter, to £28.50 from the £29.75 per sq ft of Q1. One of the most significant rental drops came at 10 Chiswell Street, EC1, where the asking rent dropped by £10 and now stands at £35 per sq ft.

ConstructionA total of four completions took place this quarter, totalling 63,000 sq ft, the largest of which was the refurbishment of the City of Londons’ 13-17 Worship Street, EC2, where the entire 39,000 sq ft remains available.

Eden House, Bishops

Square, E1: 27,000 sq ft

lets to Sapient

Milton Gate, EC1: Evans

Randall and Al Salam

Bank purchase the

freehold

20

30

40

50


Q1 09

Q4 08

Q3 08

Q2 08

Q1 08

Q4 07

Q3 07

Q2 07

Q1 07

Q4 06

Q3 06

Q2 06

Q2 09

Asking rents

Take up(sq ft) Q2 09

% +/-

24 months

% +/-

12 months

% +/-

3 months



Secondhand 138,973 -48.10 -39.60 -29.57


Total 192,216 -46.89 -45.31 -9.77

Supply(sq ft) Q2 09

% +/-

24 months

% +/-

12 months

% +/-

3 months


Premarketing 1,978,160 79.56 -10.06 0.67

Secondhand 2,400,881 16.87 32.03 10.40

Under Construction 287,504 -43.16 -7.67 0.84

Total 5,225,056 33.07 11.84 5.48

Take upThe City fringe saw declining levels of take up with activity down by 10% on last quarter and 45% on this time last year. The decline was seen across all grades with the exception of new stock, which was up by 333% on Q1. One key contributor to this increase was at the newly completed 52-58 Commercial Road, E1, where 11,500 sq ft was let to multiple tenants. The largest deal of new build stock was at Scottish Life Assurances’ property Eden House, 5-14 Bishops Square, E1, where interactive service provider Sapient took 27,000 sq ft over the ground to second floors, this was also the largest deal for this market. Elsewhere, Jane Street took 10,200 sq ft at Fairplay Estates’ 10 Chiswell Street, EC1.

No prelets were signed this quarter and take up of secondhand space fell to 139,000 sq ft, down by 30% on last quarter and 40% on this time last year. The largest letting of secondhand stock

SupplySupply in the City fringe is up by 5% on last quarter, largely due to a 10% increase in secondhand stock. The largest contributor to this was at 1-10 Bishops Square, E1, where 87,000 sq ft came onto the market.

Availability of new build stock increased by 6%, predominantly due to the completion of 13-17 Worship Street, EC2, where the entire 39,000 sq ft remains available.

Supply of stock under construction increased by 1%, with the most significant addition of this grade being 42,000 sq ft at Rathbone Trusts’ 33-39 Bowling Green Lane, EC1. Supply of premarketed stock also increased by just 1%.

The volume of withdrawn space increased this quarter totalling 86,000 sq ft across 14 properties. The largest of these was 26,000 sq ft at 51-53 Hatton Garden, EC1, after ETC Venues decided to stay at the property.

saw 26,000 sq ft taken by Network Rail at Farringdon Place, 20 Farringdon Road, EC1.

A total of 60,000 sq ft was placed under offer with the largest potential deal in the pipeline at 207 Old Street, EC1, where the 8,100 sq ft seventh floor has been placed under offer.

Two schemes got underway totalling 82,000 sq ft. The largest saw works start at the 56,000 sq ft extension and refurbishment of Nyraffs’ 65-69 Wilson Street, EC2, where all the space remains available. The refurbishment is estimated to complete in the spring of 2010.

InvestmentActivity in the investment market increased this quarter with a total of six properties being sold as opposed to the two sold in Q1. The largest transaction to take place was the sale of a 75% stake of Bishops Square, 1-10 Bishops Square, E1, where the Government of Oman paid £445 million, reflecting a yield of 7.3%. Elsewhere, UBS sold the freehold of Milton Gate, EC1, to Evans Randall and Al Salam Bank for £127 million.



Southbank

Availability rateThe availability rate rose slightly this quarter, slipping from 5.6% to 6.1% as a result of the extremely poor levels of take up activity. The rate could have been worse if the volume of supply had increased further, but this has remained contained and the severe lack of construction on the Southbank has again helped to restrict this value. With construction activity likely to remain low it is expected that the availability rate for this market will remain relatively contained, irrelevant of letting activity.

Asking rentsThe average asking rents for new build stock could not be reported on this quarter as there are currently no quoting rents present on the market. This was after a rent of £47 per sq ft was lost at 4 More London, with a guiding rent of low-mid £40’s per sq ft now expected. Average rents for good quality secondhand stock continued to fall this quarter dropping by £3.50 and now stand at £30.25 per sq ft. The reason for the fall was the reduced rent released at Hatfield House, 52-54 Stamfield Street, where the quoting rent now stands at £22.50 per sq ft, down by £5 per sq ft on last quarter.

ConstructionConstruction activity on the Southbank remained subdued with only two schemes getting underway. The largest was at a development on the corner of Lavington Street and Great Suffolk Street where Unite is redeveloping the Londonewcastle Holdings 31,200 sq ft site. Elsewhere, Octavia House, 54 Ayres Street got underway where the entire 6,000 sq ft refurbishment has already been prelet to the Glass & Glazing Federation. There are no new construction starts set to take place in the foreseeable future and again no completions took take place this quarter.

2

3

4

5

6

7

8 %


Q1 09

Q4 08

Q3 08

Q2 08

Q1 08

Q4 07

Q3 07

Q2 07

Q1 07

Q4 06

Q3 06

Q2 06

Q2 09

Availability rates

Ludgate House, 245

Blackfriars Road, SE1:

29,900 sq ft comes onto

the market

4 More London, SE1: £47

per sq ft asking rent

removed form the

market

Take up(sq ft) Q4 08

% +/-

24 months

% +/-

12 months

% +/-

3 months

New/Refurb existing - -100.00 -100.00 -100.00

Premarketing - -100.00 n/a n/a

Secondhand 37,983 -76.31 -57.53 -47.44

Under Construction - -100.00 n/a n/a

Total 37,983 -95.73 -59.46 -50.57

Supply(sq ft) Q4 2008

% +/-

24 months

% +/-

12 months

% +/-

3 months


Premarketing 442,281 -52.78 -42.48 0.00

Secondhand 639,708 268.04 42.97 12.12

Under Construction 335,613 -6.40 1042.08 0.00

Total 1,451,673 -8.43 11.80 5.00

Take upTake up on the Southbank remained poor this quarter dropping by a further 51% on Q1 and down by 59% on this time last year. The only lettings to take place were of secondhand stock with a total of 38,000 sq ft being taken, but this is still down by 47% on the levels of activity of last quarter. The largest of the eight transactions came at 7 Holyrood Street where Rugby House-ARP has taken 6,250 sq ft. Elsewhere Global Payments has let 5,500 sq ft at the Blue Fin Building, 90 Southwark Street.

This quarter has again seen a very limited amount of space placed under offer on the Southbank with just 7,300 sq ft gaining interest. The largest potential deal is at the Emerson Studios, 4-8 Emerson Street where 2,300 sq ft is now under offer.

SupplySupply has again remained restricted on the Southbank, with only secondhand stock witnessing an increase, rising by just over 12% on last quarter. Supply overall is up by 5% on last quarter and almost 12% on this time last year. The largest new addition to the market was 29,900 sq ft at Ludgate House, 245 Blackfriars Road, where the third and part seventh floors have been placed onto the market with Property Week looking to vacate some of its space in the building. Elsewhere there is 12,100 sq ft available at 2 London Bridge.

The volume of space withdrawn from the market fell this quarter with only 6,250 sq ft taken off of the market. The majority of this space was at 82 Southwark Bridge Road where the entire building measuring 4,800 sq ft has been withdrawn.

InvestmentSouthbank saw just one investment transaction take place this quarter, down from the two of Q1. This was the £4.6 million freehold purchase of Notcutt House, 36 Southwark Bridge Road, where ING Real Estate sold the 13,400 sq ft edwardian building to a private UK investor at a yield of 8.75%.


What London Offices monitorsMarketsCity core: EC1A, EC2M, EC2N, EC2R, EC2Y, EC2V, EC2A (only Finsbury Pavement, Finsbury Square, Appold Street and Chiswell Street), EC3, EC4 (excluding EC4A & EC4Y)City fringe: EC1M, EC1N (excluding postcode sector 2), EC1R, EC1V, EC1Y, EC2A (excluding Finsbury Pavement, Finsbury Square, Appold Street and Chiswell Street), E1Southbank: SE1 postcode sectors, 0, 1, 2 & 9Docklands: E14Midtown: EC4A & EC4Y, EC1N (postcode sector 2), WC1, WC2 (excluding Leicester Square)West End: W1, SW1, NW1 sectors 2 (Euston Road only), 3, 5 & 6, Leicester Square (WC2) and W2 sectors 1, 2 & 6

Additional markets: South central: Remainder of SE1 and SE11North central: Remainder of NW1 and N1West central: Remainder of W2, W6, W8, W14, SW3, SW5, SW6, SW7 & SW10

Data:Building stock: Any office building over 93 sq m (1,000 sq ft) in City Core, West End, Midtown, Docklands, City Fringe and Southbank and over 465 sq m (5,000 sq ft) in North Central, West Central and South Central.Availability: Any unit above 93 sq m (1,000 sq ft) in buildings subject to the above stock thresholdsTake up: Any unit above 232 sq m (2,500 sq ft) subject to stock thresholds.Planning: Any project over 232 sq m (2,500 sq ft) subject to stock thresholds

EGi London OfficesEstates Gazette Group1 Procter StreetLondonWC1V 6EU020 7911 1881

www.egi.co.uk

KeyCity and DocklandsMidtownWest End (including Leicester Square and Paddington Central)

South centralNorth centralWest centralSouthbank

NW2

NW6

NW10

W12

W10

W11

W6 W14 SW5SW7

SW3

SW1

SW11SW8

SW9

W1

W8

W2

W9

NW8 NW1

N1E8

E1

EC1

EC4EC2

EC3

WC1

SE1

SE11 SE17

WC2

SE5 SE15

SE16

SE14

SE8

SE10

SE3

E16

E13

E7

E14

E9 E15

E2 E3

N7N5NW3

NW5

SW13 SW6

SW10



Definitions Quarters: For data collation reasons, our quarters run from the 1st of the month to the

last day of the 3rd month i.e. 1st January to 31st March; 1st April to 30th June; 1st July to 30th September and 1st of October to 31st December. Some data in this report is given in half years for space reasons.

Agency league tables: The total space disposed by each agent adds up to more than total take-up. This is because space in joint agency deals has been attributed to all agents involved. The market share is each agent’s share of take-up, not the total of all agents. The tables include all completed deals over 93 sq m (1,000 sq ft) within our boundaries (see map) including prelets and excluding space under offer, lease renewals, restructures, management agreements, or investment sales.

Availability rate: Total building stock figures divided by vacant space which is actively being marketed. Neither figures include space under construction or yet to commence construction.

Availability and take up: New/Refurb (existing) is a combined total of newly constructed and refurbished space; Premarketing is any space marketed which is yet to commence construction; Secondhand is any space which has previously been occupied; Under Construction is a combined total of refurbishment and redevelopment projects currently under construction. Space under offer is included in availability figures.

Average asking prices: An average of asking prices by grade of space by market. Only

space available on new leases with a quoting rent is collated. Space under offer has been included. Please note that Secondhand Grade A space is previously occupied units with air conditioning and one or more of raised floors, under floor trunking or perimeter trunking.

Investment sales: Subject to stock thresholds, a total of space sold as freehold, long leasehold or virtual freehold, both for investment and for owner occupation.

Construction starts with prelets: A total of space commencing refurbishment or redevelopment by quarter with a total of that space prelet. This includes space not on the market.

Completed space actively marketed: Simply a total of completed refurbishments and redevelopments being actively marketed by quarter. Includes space let but never occupied.

Completions with space available: A total of all office space currently under construction by completion date with how much is still available. This includes space not on the market.


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Contacts

Hannah GardinerTeam Manager – London Research Estates Gazette Group1 Procter StreetLondonWC1V 6EU020 7911 [email protected]

Andy HeardResearcher – London Offices020 7911 1889

LO Sales and SubscriptionsDaniel ClementsSales Manager020 7911 [email protected]

This report is published for general information only. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no legal responsibility can be accepted by London Office Database or EGi for any loss or damage resultant from the contents of this document. As a general report, this document does not necessarily represent the view of EGi in relation of particular properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to EGi’s London Office Database.

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