2011 Q2 Central London Offices JLL
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8/6/2019 2011 Q2 Central London Offices JLL
1/16
The Central London Market Q2 2011
Overall requirement volumes increased for the second consecutive
quarter, driven by a 20% increase in active demand. Take-up was
dominated by Service Industries, particulary the TMT sub-sector.
Growth in core Grade A rents continued to outperform prime,
particulary in the West End increasing 7.1% compared with 2.7%
while rents in the City relatively stable.
Investment volumes are 36% ahead of the equivalent period last
year driven by overseas purchasers investing 1.7 billion in the
second quarter.
TMT sector belies Eurozone issues
and drives demand growth
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Summary of statistics
Sub 10m 10-50m 80m+ Sub 40m 40-125m 125m+
4.00% 4.25% 5.00% 5.25%- 5.25% 5.25%
Sizes in 000 sq ft
Units of 5,400 sq ft and above
Take-Up
TOTALS
Grade A
Off-plan
Under construction
New completed
Second hand (incl. refurbished)
100,000+
50,000 - 99,999
10,000 - 49,999
Sub 10,000
Banking & Finance
Professional Services
Service Industries
Manufacturing IndustriesPublic Admin. & Institutions
Other
Net Absorption
TOTALS
Prime Rents & Rent Free
Prime Rent
Rent Free (months)
Net Effective1
Demand
TOTALS
100,000+
50,000 - 99,999
10,000 - 49,999
Sub 10,000
Banking & Finance
Professional Services
Service Industries
Manufacturing Industries
Public Admin. & Institutions
Other
Supply
Total Current Supply
VACANCY RATE (% of total stock)
100,000+
50,000 - 99,99910,000 - 49,999
Sub 10,000
Speculative Development
TOTALS
2011
2012
2013
2014
Capital Transactions
millions
TOTALS
UK PurchasersOverseas Purchasers
Property Companies
Institutions
Privates & Other Investors
Prime Yield
*As at 30 June 2011
West End City Docklands Central London
2010 2011 2011 2010 2011 2011 2010 2011 2011 2010 2011 2011
Q1-Q2 Q2 Q1-Q2 Q2 Q1-Q2 Q2 Q1-Q2 Q2
3,728 1,481 834 6,131 1,486 685 2,161 31 22 12,020 2,998 1,542
2,393 1,011 563 4,443 784 398 2,063 22 22 8,899 1,816 982
340 0 0 1,200 0 0 0 0 0 1,540 0 0
43 131 116 355 0 0 0 0 0 399 131 116
781 455 252 1,803 343 149 52 0 0 2,636 798 401
2,563 895 466 2,773 1,143 536 2,110 31 22 7,445 2,069 1,025
465 269 157 2,027 0 0 1,718 0 0 4,210 269 157
785 87 87 751 142 0 187 0 0 1,723 229 87
1,633 687 336 2,367 841 412 249 22 22 4,249 1,550 770
844 438 254 986 560 273 8 9 0 1,838 1,007 527
25% 12% 12% 43% 36% 31% 74% 0% 0% 43% 24% 20%
14% 3% 1% 18% 17% 22% 2% 0% 0% 14% 10% 11%
35% 62% 59% 28% 25% 30% 4% 100% 100% 26% 44% 47%
13% 11% 10% 4% 5% 5% 9% 0% 0% 8% 8% 7%8% 6% 10% 4% 8% 3% 10% 0% 0% 6% 7% 7%
4% 6% 8% 3% 9% 9% 2% 0% 0% 3% 7% 9%
2010 2011 2011 2010 2011 2011 2010 2011 2011 2010 2011 2011
Q1 (YoY) Q2 (YoY) Q1 (YoY) Q2 (YoY) Q1 (YoY) Q2 (YoY) Q1 (YoY) Q2 (YoY)
2,788 2,446 2,213 5,024 2,837 3,228 1,070 895 594 8,848 6,168 5,965
2010 2011 2011 2010 2011 2011 2010 2011 2011
Q1 Q2 Q1 Q2 Q1 Q2
88.43 92.50 95.00 55.00 55.00 55.00 37.50 37.50 38.50
16 16 16 24 22 22
76.64 80.17 82.33 44.00 44.92 44.92
Total Active Potential Total Active Potential Total Active Potential Total Active Potential
4,461 2,396 2,064 10,437 5,335 5,102 1,386 633 752 13,330 7,382 5,948
1,467 448 1,019 5,338 1,986 3,352 1,127 539 587 6,046 2,674 3,372
1,153 535 618 2,170 1,165 1,005 165 0 165 2,839 1,394 1,445
1,592 1,195 397 2,353 1,659 694 87 87 0 3,621 2,570 1,051
249 218 30 576 525 51 7 7 0 824 744 80
14% 10% 19% 29% 22% 36% 32% 34% 30% 26% 21% 33%
7% 13% 0% 25% 30% 19% 0% 1% 0% 21% 25% 16%
69% 69% 69% 39% 36% 42% 38% 0% 70% 43% 40% 46%
8% 7% 9% 5% 6% 3% 21% 47% 0% 7% 9% 3%
2% 2% 2% 3% 6% 0% 8% 18% 0% 3% 5% 1%
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Total Grade A Grade B Total Grade A Grade B Total Grade A Grade B Total Grade A Grade B
4,177 2,086 1,876 7,505 4,188 2,807 1,412 1,240 172 13,093 7,514 4,856
4.6% 2.3% 2.1% 6.9% 3.9% 2.6% 7.4% 6.5% 0.9% 6.0% 3.4% 8.3%
134 135 0 1,449 1,449 0 654 654 0 2,237 2,238 0
352 220 62 1,038 585 390 507 367 139 1,897 1,172 5912,637 1,218 1,324 3,534 1,603 1,570 181 166 16 6,352 2,987 2,910
1,054 513 490 1,483 551 847 70 53 17 2,607 1,117 1,354
Total Over 50,000- Total Over 50,000- Total Over 50,000- Total Over 50,000-
100,000 99,999 100,000 99,999 100,000 99,999 100,000 99,999
1,875 1,419 259 3,000 2,345 401 130 130 0 5,005 3,894 660
346 182 164 415 389 0 130 130 0 891 701 164
795 503 95 1,182 699 401 0 0 0 1,977 1,202 496
734 734 0 789 644 0 0 0 0 1,523 1,378 0
0 0 0 614 613 0 0 0 0 614 613 0
2010 2011 2011 2010 2011 2011 2010 2011 2011 2010 2011 2011
Q1-Q2 Q2 Q1-Q2 Q2 Q1-Q2 Q2 Q1-Q2 Q2
5,025 2,335 1,097 5,006 3,419 2,021 749 30 30 10,780 5,784 3,148
1,867 1,135 706 1,604 1,209 739 23 0 0 3,494 2,343 1,4453,159 1,200 390 3,403 2,210 1,282 726 30 30 7,287 3,440 1,702
875 821 500 828 406 190 17 0 0 1,720 1,227 691
1,312 784 168 1,703 1,942 911 231 0 0 3,246 2,726 1,079
2,838 730 428 2,475 1071 920 501 30 30 5,814 1,830 1,378
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On Point Central London Market Second Quarter 2011 3
The Economy
The momentum of the global recovery weakened in the rst half
of 2011, reecting the Japanese earthquake and tsunami, higher
oil prices and the re-emergence of sovereign debt problems in
the Eurozone. In the UK, activity has recovered from its end-
2010 dip, but the early indicators for Q2 suggest that GDP will at
best match a disappointing Q1 outturn and so growth will remain
below average.
Speculation about looming UK interest rate increases has eased
since the spring. Monthly RPI and CPI gures have remained
at rates well in excess of the ofcial 2% ination target. In June,headline CPI ination dipped to 4.2% from a rate of 4.5% in
May. Interest rate expectations have shifted from a summer
hike to an autumn move at the earliest. But much will depend on
how quickly demand recovers. If activity indicators continue to
disappoint, the rst move will be pushed into next year.
The most recent evidence on the London economy has also
been more downbeat. Business condence in the capital had
led the upturn in the wider economy from late 2009. But in
recent months gures have moved into line with the weaker UK
services sector trend for the rst time since the recession. Given
the importance of global demand to London, this is perhaps to
be expected, but it raises further concerns about the pace ofrecovery in the UK as a whole.
The Central London Market
Summary of Statistics (QoQ) West End City Docklands
Take-up F A F
Supply A A F
Overall Vacancy Rate A A F
Grade A Vacancy Rate A A F
Prime Rent F E F
U/C A F E
In the UK, activity has
recovered from its end-2010
dip.
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Occupier Take-up and Net Absorption
Occupier take-up remained below average with 1.5 million sq fttransacted across 111 deals. Although this was a 10% increase
on last quarter it was 40% behind the ve year quarterly average.
The year to date total of 2.9 million sq ft is 47% behind the
equivalent period last year.
Volumes in the second quarter were dominated by the Service
Industry particularly the TMT sub-sector accounting for 15%
of the total. Activity was driven by the West End with the likes of
Google completing their 157,450 sq ft acquisition at Central Saint
Giles, WC2 and Double Negative taking a pre-let on 86,500
sq ft at 160 Great Portland Street, W1. Low levels of take-up were
recorded in the City, however, 1.3 million sq ft remained under
offer at the end of June with a number of large requirementslikely to transact over the second half of the year. These include
Aon, CMS Cameron McKenna, Trowers & Hamlin and Mace.
Our expectations for the full year 2011 are for take-up to
remain modest, running slightly below the long term average.
Positively, there have been some notable improvements in
requirement volumes, however we are yet to see this translate
into completed deals and there is a risk that weak economic
activity and Eurozone fears will push decisions into 2012.
Occupier Demand
Requirement volumes continued to strengthen over the secondquarter, up 12% to 13.3 million sq ft. The relatively weak take-up
prevented erosion of requirement volumes, but even with average
volumes, demand would have increased by 3%. Occupier
demand is now at it highest level in 18 months and only slightly
behind the 10 year average of 13.8 million sq ft. Encouragingly,
improvements were driven by active demand which recorded
a 28% increase in the City and 21% in the West End. Over the
quarter, there were 48 new active requirements totalling 1.2
million sq ft registered in the City and 37 requirements in the
West End totalling 1 million sq ft.
Demand from the Service Industry continued to dominate
accounting for 43% of the total with the TMT and Advertising
& Publishing subsectors accounting for 11% and 10% of total
demand. Demand from the Service Industry increased 19%
over the quarter driven by the likes of Google increasing their
requirement from 400,000 sq ft to 500,000 700,000 sq ft
Central London: Net Absorption 2002-2011 Q2Source: Jones Lang LaSalle
Netabsorptionms
qft
10
8
6
4
2
0
-2
-4
-6
2011201020092008200720062005200420032002
yoy
Central London: Demand and Supply Balance 2011 Q2Source: Jones Lang LaSalle
Totalsizems
qft
Size Band (sq ft)
5-10,00010-50,00050-100,000100,000 +
10
9
8
7
6
5
4
3
21
0
1115
16
26113
10
341
0
296
209 92
The Central London Market
West End
,,,,
Total Existing Supply
,,,,
Active Demand
,,,,
Speculative Construction
City
Docklands
There has been a
notable improvement inrequirement volumes.
4 On Point Central London Market Second Quarter 2011
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6 On Point Central London Market Second Quarter 2011
The Central London Market
There is a belief that we arein the non-prime phase of
real estate workout.
Central London: Prime Headline Rents: 2002 to 2011 Q2Source: Jones Lang LaSalle
p
ersqf
t
June
02
June
03
June
04
June
05
June
06
June
07
June
08
June
09
June
10
June
11
120.00
100.00
80.00
60.00
40.00
20.00
0.00
West End
City
Docklands
Central London: Prime Yields and
the Cost of Money 2002-2011 Q2Source: Jones Lang LaSalle/Datastream
%
June02
June03
June04
June05
June06
June07
June08
June09
June10
June11
8%
6%
4%
2%
0%
West End
5 Year Swap
City
LIBOR
Over the year to date Core Grade A rents in the West End have
increased 12.3% compared with 7.3% for prime and in the City
have increased 2% while prime rents have remained stable. This
has narrowed the historically high differential between the best
space and good quality Grade A.
Investment Volumes and Yield Movements
Investment volumes totalled 3.1 billion, up 19% on last quarter.
The year to date total of 5.7 billion is 36% ahead of the equivalent
period last year. Volumes were dominated by overseas privates
accounting for 36% of the total. The 12 month rolling total of 12.3
billion is 13% ahead of the 10 year average. Seven signicant
transactions took place over the quarter with 1.3 billion traded
in lot sizes over 100m 42% of the total. The most notabletransactions included Jubilee House, Oxford Street, W1, 1
Finsbury Circus, EC2, Leadenhall Triangle, EC3, MidCity Place,
WC1, 10 Aldermanbury, EC2 and Aviva Tower, EC3.
Prime yields remained stable across both West End and City
submarkets. In the West End, prime benchmark yields for sub 10
million lot sizes remained stable at 4.00% and have been at this
level for 12 months. Yields for intermediate lot sizes (10m - 80m)
remained at 4.25%. In the City, yields for all lot sizes remained at
5.25%, however are coming under pressure for sub 40m lot sizes.
We are seeing strong competition between Institutions, FarEastern managed funds and private high net worth individuals
and investors are now willing to take on higher levels of risk
particularly in the West End driven by forecast rental growth
rather than any anticipated yield compression. This has made
refurbishment and the more straightforward development
opportunities more expensive, while competition for development
complexity is less strong.
While receivership and workout sales will remain a key supply
driver in the investment market and we expect increased activity
from NAMA in the second half of the year there is a sense that
the market has seen, or knows of, the more signicant distressed
assets. There is a belief that we are in the non-prime phase ofreal estate workout and while this will still have direct implications
to investable opportunities we believe buy side activity will be
dominated by specialist funds and private equity vehicles rather
than more traditional physical real estate players.
Residential developers are becoming more prevalent in the
market seeking to convert ofce space. This has particularly
been seen in the West End with a key example the purchase of
66 Chiltern Street W1 by Heron for a residential conversion on
lease expiry in 2014. Looking ahead, this coupled with impact of
the Heaney rights to light case may have a potential impact on
the future pipeline of schemes that have been proposed for ofcerefurbishment or development resulting in an even further delayed
supply response.
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On Point Central London Market Second Quarter 2011 7
Over 2011, although sentiment has improved, we have seen
average levels of take-up and concerns over the Eurozone
increase. However, we have seen notable improvements in
occupier demand which has recorded an 18% increase since the
start of 2011. Last quarter we were less optimistic about the pick
up in demand as levels still remained historically low, however,
the second quarter has shown continued increases, and we are
now more optimistic about future growth particularly, in key
sub-sectors within the Service Industry.
The Service Industry remains dominant in both the demand
and take-up statistics, and the growing trend of the TMT
(Technology, Media & Telecommunications) and Advertising
& Publishing sector appears to be solidifying. Six to nine monthsago, when these subsectors were dominating deals, there was too
much caution to identify it as a start of a new trend, but the
momentum has continued and this is the standout sub-sector from
a market otherwise characterised by churn and lease events.
Year to date, the TMT and Advertising & Publishing sub-sectors
have accounted for 16% and 6% of total take-up across central
London, particularly driven by the West End which has seen 26%
of total take-up this year from the TMT sub-sector and 11% from
the Advertising & Publishing sector. In terms of occupier demand,
the TMT sector accounts for 11% of the total, with Advertising
& Publishing accounting for 10%.
There is a clear trend between these two sub-sectors, with the
TMT sector (predominantly new media companies) driven by
growth with the likes of Google, NBC Universal, Facebook and
Skype, which was recently acquired by MSN. It is these new
media companies who are breaking the mould - they will pay
higher rents as they are location specic, better capitalised and
in a growth phase.
This has been seen in the recent deals at Central Saint Giles,
WC2, 160 Great Portland Street, W1 and with Expedia vacating
their space at Seven Dials Warehouse,WC2 to move to the
Angel Building, EC1 while Facebook, who needed to be in the
core, moved into Expedias space. Advertising & Publishing
companies remain cost driven with the likes of Ogilvy and
Mather, Publicis and Saatchi and Saatchi looking in lower
cost locations.
Most business sectors will
continue to be driven by
structural events, however
new media companies will
be predominantly driven
by growth.
Although future demand will continue to be driven by structural
events, we feel that these new media companies from the TMT
sector and Advertising & Publishing companies are positioningthemselves to full their business plans. We expect a ripple effect
to ow through to other sectors such as Banking & Finance as
companies position themselves to start to execute their new
business plans but at a more cautious rate.
Issue to watch: who is driving occupier demand?
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8 On Point Central London Market Second Quarter 2011
Occupier Take-up and Net Absorption
Just over 830,000 sq ft was let across 53 deals in the
second quarter, a 29% increase on Q1 and driven by thelikes of Google completing their 157,450 sq f t acquisition
at Central Saint Giles, WC2 and Double Negative taking
a pre-let on 86,500 sq ft at 160 Great Portland Street, W1.
Over the year to date volumes have reached 1.4 million
sq ft, down 24% on the equivalent period last year.
The Service Industry dominated take-up with 59% of
oorspace taken across 23 deals. This was particularly
driven by the TMT sub-sector which accounted for 23%
of the total.
Net absorption remained positive at 631,800 sq ft compared
with 383,900 sq ft last quarter.
Occupier Demand
Overall occupier demand increased by 5% to 4.4 million sq ft
Improvements were driven by active demand which saw a
21% increase to 2.3 million sq ft as 37 new requirements
came to the market this was the rst increase in active
demand since 2009.
Potential demand decreased 9% which can be attributed to
a number of requirements becoming active and withdrawingtheir search.
Demand was dominated by the Service Industry, particularly
the TMT sub-sector which accounted for 21% of total
occupier demand.
Existing Supply and the Development Pipeline
Total supply fell 12% to 4.1 million sq ft while Grade A fell
10% to 2 million sq ft.
Overall vacancy rates fell from 5.2% to 4.6% and Grade A
from 2.6% to 2.3%. Vacancy rates are now at their lowestlevels since 2008.
Core Grade A rental growth
exceeded the growth in
prime.
The West End Ofce Market
West End: Take-Up 2001-2011 Q2Source: Jones Lang LaSalle
ms
qft
2011201020092008200720062005200420032002
5
4
3
2
1
0
Off Plan
Under Construction
Second hand
New
West End: Demand 2002-2011 Q2Source: Jones Lang LaSalle
ms
qft
June02
June03
June04
June05
June06
June07
June08
June09
June10
June11
12
10
8
6
4
2
0
Active
Potential
Rolling 12 Month Take-Up
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On Point Central London Market Second Quarter 2011 9
After a 31% increase last quarter, speculative construction
decreased 5% due to the completion of 11 Baker Street and
the pre-let of 160 Great Portland Street W1 to end June at1.8 million sq ft.
Only one scheme commenced construction in Q2 (25 Soho
Square,W1) compared with four last quarter.
Rents
Prime rents increased 2.7% to 95.00 per sq ft while rent-free
periods remained at 16 months, assuming a 10-year lease. We
expect 100 per sq ft to be reached comfortably by year end.
For the second consecutive quarter, Core Grade A rental
growth exceeded the growth in prime, increasing 7.1% to72.90 per sq ft.
Over the year to date Core Grade A rents have increased
12.3% compared with 7.3% for prime.
Investment Volumes and Yields
Just over 1 billion was traded over the second quarter, this
was an 11% decrease on Q1 and 7% behind the ve year
quarterly average.
The year to date total of 2.3 billion was 5% behind the
equivalent period last year however the 12 month rolling
total of 4.9 billion was 18% ahead of the 10 year annualaverage.
Volumes were dominated by UK property companies and
overseas privates comprising 39% and 26% of the total,
respectively.
Eight signicant transactions took place over the quarter,
with 699 million traded in lot sizes over 50 million. The
most notable deal was the sale of Jubilee House, 197-213
Oxford Street, W1, purchased by a private Spanish Investor
for 160 million.
Prime yields for lot sizes sub 10 million remained stable at
4.00% and at 4.25% for 10 - 80 million.
West End: Vacancy Rates 2002-2011 Q2Source: Jones Lang LaSalle
availability(%)ofoverallstock
June02
June03
June04
June05
June06
June07
June08
June09
June10
June11
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Overall
Grade A
West End: Prime Headline Rents and Net Effective Rents2002-2011 Q2Source: Jones Lang LaSalle
persqf
t
June
02
June
03
June
04
June
05
June
06
June
07
June
08
June
09
June
10
June
11
120.00
100.00
80.00
60.00
40.00
20.00
0.00
Prime
Net Effective
West End: Investment Purchases 2002-2011 Q2Source: Jones Lang LaSalle
b
illion
7
6
5
4
3
2
1
02011201020092008200720062005200420032002
Property Companies
Institutions
Others
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10 On Point Central London Market Second Quarter 2011
The City Ofce Market
Occupier Take-up and Net Absorption
A relatively quiet quarter with just under 742,000 sq f t
transacted across 58 deals, a 14% decrease on last quarterand 50% behind the quarterly average.
Year to date, 1.4 million sq ft has been let, almost half of
what was transacted at the equivalent period last year.
However, just over 1.3 million sq f t was under offer at the
end of June, the highest quarterly total since 2008.
A number of large requirements (currently under offer) should
transact over the second half of the year such as Aon, CMS
Cameron McKenna, Trowers & Hamlin and Mace.
The Banking & Finance and Service Industries were the
most active during the second quarter both accounting for
31% of space let.
Net absorption remained positive at 428,500 sq ft compared
with 166,300 sq ft at the end of Q1.
Occupier Demand
Overall demand increased 24% to 10.4 million sq ft as a
number of media occupiers launched tentative requirements
seeking in excess of 100,000 sq f t; Occupier demand is
now 17% ahead of the 10 year average.
Improvements were driven by 44 new active occupier
requirements registered, totalling 1.2 million sq ft.
Over the past three months, we have seen an increase in
pre-letting activity with nearly half a million sq ft under offer
at the end of June; we expect this trend to continue over the
second half of the year with the likes of Schroders and JLT
potentially transacting before year end.
Demand from the Service Industry continued to dominate
accounting for 38% of the total; there were 10 requirements
from this sector, seeking in excess of 100,000 sq ftcompared with seven last quarter.
2011201020092008200720062005200420032002
City: Take-Up 2002-2011 Q2Source: Jones Lang LaSalle
ms
qft
10
8
6
4
2
0
Off Plan
Under Construction
Second hand
New
City: Demand 2002-2011 Q2Source: Jones Lang LaSalle
ms
qft
June02
June03
June04
June05
June06
June07
June08
June09
June10
June11
18
16
14
12
10
8
6
4
2
0
Active
Potential
Rolling 12 Month Take-Up
City: Vacancy Rates 2002-2011 Q2Source: Jones Lang LaSalle
ava
ilab
ility
(%)o
fovera
lls
toc
k
June
02
June
03
June
04
June
05
June
06
June
07
June
08
June
09
June
10
June
11
14%
12%
10%
8%
6%
4%
2%
0%
Overall
Grade A
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On Point Central London Market Second Quarter 2011 11
Existing Supply and the Development Pipeline
Total supply decreased 6% to end the quarter at 7.5 million sq
ft while Grade A fell by 3% to 4.1 million sq ft.
Overall vacancy rates decreased from 7.4% to 6.9% and Grade
A fell slightly from 4.0% to 3.9%.
Speculative construction increased 55% to end the quarter at
3 million sq ft. This was driven by the commencement of two
new build schemes - Sixty London, EC1 and The Place, SE1
totalling 644,450 sq ft.
We have seen more activity in refurbishments over the
quarter with three notable schemes totalling 307,800 sq ft
commencing, the largest at 199 Bishopsgate, EC2 totalling144,700 sq ft.
Rents
For the third consecutive quarter, Prime rents remained
stable at 55.00 per sq ft and rent-free periods, assuming a
10-year term remained at 22 months. Some tower buildings
have recently achieved rents in excess of 60.00 per sq ft .
With the supply constraint and increasing demand, we do
anticipate further rental growth towards the end of the year.
Investment Volumes and Yields
Investment volumes totalled 2 billion a 45% increase onQ1, driven by 13 deals in lots sizes over 50 million.
The year to date total of 3.4 billion is 105% ahead of the
equivalent period last year and the 12 month rolling total of
6.7 billion is 16% ahead of the 10 year average.
Volumes were driven by overseas purchasers investing
1.2 billion, 63% of the total, although UK Institutions
were very active over the quarter, investing 528 million.
The most signicant transaction was the acquisition of
Leadenhall Triangle, EC3 by Henderson and AIMCo
(Canadian Pension Fund) for c.190 million.
Prime yields for lot sizes under 40 million remained at
5.25% but with downward pressure; yields for larger lot
sizes yields remained stable at 5.25%.
Over 1.3 million sq ft was under
offer at the end of June, the highest
quarterly total since 2008.
City: Prime Headline and Net Effective Rents
2002-2011 Q2
Source: Jones Lang LaSalle
persq
ft
June
02
June
03
June
04
June
05
June
06
June
07
June
08
June
09
June
10
June
11
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
Net Effective
Prime
City: Investment Purchases 2002-2011 Q2Source: Jones Lang LaSalle
billion
12
10
8
6
4
2
0
2011201020092008200720062005200420032002
Property Companies
Institutions
Others
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12 On Point Central London Market Second Quarter 2011
Occupier Take-up and Net Absorption
Only one deal completed during the second quarter - at
1 Canada Square, E14 where Met Life signed on the 50thoor totalling 22,100 sq f t.
Occupier Demand
Occupier demand increased 9% over the quarter to
1.3 million sq ft.
Improvements were driven by active demand increasing
30% as two occupiers totalling 142,000 sq ft are now
considering Docklands for their search.
Potential demand remained relatively unchanged ending the
quarter at 752,000 sq ft.
Existing Supply and the Development Pipeline
Total supply increased 5% to end the quarter at
1.4 million sq ft.
Overall vacancy rates increased from 7.0% to 7.3%, with
Grade A slightly increasing from 6.4% to 6.5%.
Rents
Prime rents ended the quarter at 38.50 per sq f t, the slight
increase was driven by the resilience of demand, and the
attractive relative pricing differential between Canary Wharf
and the City and West End submarkets.
Investment Volumes
30 million was traded in the second quarter across one
deal at Chambers Wharf where an overseas investor
purchased the 174,250 sq ft building.
Prime rents ended the quarter
at 38.50 per sq ft, the slight
increase was driven by the
resilience of demand.
The Docklands & East London Ofce Markets
Docklands: Take-Up 2002-2011 Q2Source: Jones Lang LaSalle
ms
qft
4
3
2
1
0
2011201020092008200720062005200420032002
Off Plan
Under Construction
Second hand
New
Docklands: Demand 2002-2011 Q2Source: Jones Lang LaSalle
ms
qft
June02
June03
June04
June05
June06
June07
June08
June09
June10
June11
6
4
2
0
Active
Potential
Rolling 12 Month Take-Up
Docklands: Vacancy Rates 2002-2011 Q2Source: Jones Lang LaSalle
availa
bility
(%)o
fovera
lls
toc
k
June
02
June
03
June
04
June
05
June
06
June
07
June
08
June
09
June
10
June
11
16%
14%
12%
10%
8%
6%
4%
2%
0%
Overall
Grade A
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On Point Central London Market Second Quarter 2011 13
1 Canada Square, E14
Area: 22,100 sq ft
Tenant: Metlife
Reported Rent: CondentialBuilding Status:Second Hand
Jubilee House, Oxford Street, W1
Area: 121,150 sq ft
Purchaser: Private Spanish
Reported Price: 160 m
Est Initial Yield: 4.50%
160 Great Portland Street, W1
Area: 86,000 sq ft
Tenant: Double Negative
Reported Rent: 59.60 per sq ft
Building Status: Under Refurbishment
1 Curzon Street, W1
Area: 42,250 sq ft
Tenant: Rathbones
Reported Rent: 75.00 per sq ft
Building Status: Second Hand
77 Gracechurch Street,EC3
Area: 49,200 sq ft
Purchaser: IGNIS
Reported Price: 43.5 m
Est Initial Yield: 5.36%
6-8 Bishopsgate, EC2
Area: 146,880 sq ft
Purchaser: Mitsubishi
Reported Price: 95 m
Est Initial Yield: 7.04%
Headline Transactions
West End
Docklands & Canary Wharf
City
10 Stratton Street, W1
Area: 41,660 sq ft
Purchaser: Joint Treasure Holdings
Reported Price: 60 m
Est Initial Yield: 4.50%
The Angel Building, EC1
Area:17,000 sq ft
Tenant: NG Bailey
Reported Rent: 40.00 per sq ft
Building Status: New
30 St Mary Axe, EC3
Area: 19,550 sq ft
Tenant: Ion Trading
Reported Rent: 60.00 per sq ft
Building Status: New
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14 On Point Central London Market Second Quarter 2011
Rental Conditions across Central London
Q2 2011
10
&Upw
ards
20
&Upw
ards
30
&Upw
ards
40
&Upw
ards
50
&Upw
ards
60
&Upw
ards
70
&Upw
ards
80
&Upw
ards
90
&Upw
ards
100&Up
wards
110&Up
wards
12
0&Up
wards
West End Village
max
min
average
% annual change (average)
City Villagemax
min
average
% annual change (average)
Belgravia & Covent Marylebone North of
Knightsbridge Garden & Euston Mayfair Oxford Street Paddington Soho St Jamess Victoria
65.00 59.50 53.50 95.00 65.00 57.50 50.00 82.50 65.00
37.50 30.00 27.50 45.00 31.60 30.00 32.50 37.50 32.50
50.79 41.58 35.32 70.28 43.56 40.83 38.50 59.13 45.11
1.6% 5.1% 1.6% 2.8% 0.7% 9.9% 0.7% 2.1% 1.1%
City Eastern Northern
Central Core Midtown Eastern Fringe Northern Fringe Southbank Southern Western
55.00 50.00 50.00 37.50 52.50 36.00 47.50 52.50 54.50
50.00 30.00 25.00 20.00 30.00 22.50 35.00 40.00 32.50
52.25 42.73 39.75 27.83 44.74 28.30 40.13 46.00 45.26
10.0% 6.3% 1.6% 0.0% 9.1% 9.8% 7.0% 7.1% 3.0%
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On Point Central London Market Second Quarter 2011 15
Stratford
Royal Docks
Canary
Wharf
South Bank
Isle ofDogs
GreenwichPeninsula
Wapping
EasternFringe
Central City
NorthernFringe
CityMidtown
Camden
Bloomsbury
Marylebone/Euston
Regents
Park
North of
Oxford StreetCovent
GardenSohoMayfair
Denition of TermsFloorspace Threshold Data refers to ofce oorspace in units of 5,380 sq ft and above.Grading A subjective assessment taking into account specication, oorplate efciency
and image.
Take-Up Floorspace acquired for occupation by leasing, pre-leasing or purchasing a freehold
or long leasehold interest.
Supply Floorspace which is on the market and available for occupation. Floorspace which
is under offer prior to a contractual commitment is included. Speculative development prior to
practical completion is excluded.
Speculative Development Floorspace under construction or comprehensive modernisation
which will be available for speculative letting (or sale). The forecast of development
completions relates only to developments currently under construction.
Net Absorption a measure of the change in occupied stock between periods.
Demand Some applicants search across two or three market areas. In such cases their
demand appears in the total for each area. However, when calculating total Central London
demand, duplicates are eliminated.
Active Demand Organisations with a declared requirement for ofce accommodation which
are actively in the market to acquire oorspace in the short term.
Please note the Docklands and East London market now include Stratford.
Potential Demand Organisations with a potential requirement for ofce accommodation, but
without a nalised brief in terms of timing.
Prime Rent An opinion of the highest rent (excluding incentives) achievable upon a letting
agreed at the quarter-end of a notional 10,000 sq ft unit of the best quality ofce space in a
prime location.
Net effective rents are calculated against our prime headline rent values and assume a 10-year
term, a notional three month t-out period and amortisation over 10 years. In practice net
effective rents are subject to far more variability related to the specic characteristics of the
individual premises.
Prime Yield An opinion of the net initial yield which would be appropriate for a freehold
Grade A ofce investment in a prime location let at a current market rent to a tenant with a
strong nancial covenant.
Investment Turnover Capital transactions comprising freehold and long leasehold acquisitions
for investment, owner occupation or development. Corporate transactions are excluded.
Town Planning
LEGISLATIVE CHANGES HIGHLIGHTS
Greater London Authority
The Replacement London Plan published in October 2009
has been found sound following Examination in Public. The
Mayor is now considering how to include the Panel Report s
recommendations in the London Plan.
A Draft Charging Schedule for the Community Infrastructure Levy
was published for public consultation. It will part-fund Crossrail
and sit alongside the Mayors S106 requirements, although
developers will not be double-charged. The Levy will apply to
commercial and non-commercial uses in all London boroughs.
BoroughsSouthwark Council has been selected by the governments
department for Communities and Local Government as one
of the neighbourhood planning front runner authorities, testing
the principles of neighbourhood planning as set out in the
governments Localism Bill.
Westminster has granted ranted conditional permission to
the residential-led mixed-use scheme for Chelsea Barracks,
subject to referral to the Mayor. 123 affordable units will
developed on-site out of the proposed 448 units, and a 78m
payment will be made to the councils affordable housing fund.
The City of London Core Strategy has been found sound
following Examination in Public, and is expected to be adopted
in September 2011.
Tower Hamlets closed public consultations on the Site and
Placemaking and the Development Management PoliciesLocal Development Framework documents on 15 July 2011.
To discuss how these changes may affect your
development, contact Guy Bransby on 0207 399 5409
or Jeff Field on 020 7852 4742.
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8/6/2019 2011 Q2 Central London Offices JLL
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OnPoint reports from Jones Lang LaSalle include quarterly and annual highlights of real estate activity, performance and specialised
surveys and forecasts that uncover emerging trends.
www.joneslanglasalle.co.uk
Contacts
Neil Prime
Director
Head of UK Ofce Agency
+44(0)20 7399 [email protected]
Jonathan Evans
Director
West End Agency & Development
+44(0)20 7399 5950
Chris Brett
DirectorInternational Desk, Capital Markets
+44(0)20 7399 5883
Julian Nairn
Director
City Investment
+44(0)20 7399 5865
Damian Corbett
Director
Head of London Capital Markets
+44(0)20 7399 [email protected]
Julian Sandbach
Director
West End Investment
+44 (0)020 7399 5973
Bill Page
DirectorHead of EMEA Ofce Research
+44(0)20 3147 1212
Kimberley Paterson
Senior Analyst
EMEA Research
+44(0)20 7852 4685
Angus Goswell
Director
City & Canary Wharf Agency
+44 (0)20 7399 [email protected]
Dan Burn
Director
City Agency
+44 (0)20 7399 5966
Bina Shah
Senior Marketing ExecutiveEMEA Marketing
+44(0)20 3147 1526
COPYRIGHT JONES LANG LASALLE IP, INC. 2011. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior writtenconsent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it containsno factual errors. We would like to be told of any such errors in order to correct them.