Central London Market Report Q4 2012 - Jones Lang LaSalle

The Central London Market Q4 2012
Investment volumes high
Investment volumes reached £15.4 billion in 2012. Only two years
have exceeded this volume since our records began in 1989. Once
again, overseas investors led purchasing activity, accounting for
74% of this total. £7.3 billion of this was invested in the City alone.
Central London take-up reached just over 7.2 million sq ft in 2012.
The City proved more robust than the West End and produced a
22% improvement over the previous year, although take-up in both
markets remained below the 10-year average.
The Insurance sector buoyed lettings in the City in 2012, while TMT
remained the key driver of active demand across Central London.
New media organisations generated some very large footloose
requirements and several long established advertising agencies
are also actively seeking new space.

Summary of statistics
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 Industries
Public Admin. & Institutions
Other
Net Absorption
TOTALS
Prime Rents & Rent Free
Prime Rent
Rent Free (months)
Net Effective
Demand (As at 31 Dec 2012)
TOTALS
100,000+
50,000 - 99,999
10,000 - 49,999
Sub 10,000
Banking & Finance
Professional Services
Service Industries
Manufacturing Industries
Public Admin. & Institutions
Other
Supply (As at 31 Dec 2012)
Total Current Supply
VACANCY RATE (% of total stock)
100,000+
50,000 - 99,999
10,000 - 49,999
Sub 10,000
Speculative Development
(As at 31 Dec 2012)
TOTALS
2013
2014
2015
Capital Transactions
£millions
TOTALS
UK Purchasers
Overseas Purchasers
Property Companies
Institutions
Privates & Other Investors
Prime Yield (As at 31 Dec 2012)
West End City Docklands / East London Central London
2011 2012 2012 2011 2012 2012 2011 2012 2012 2011 2012 2012
Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4
3,201 2,521 621 3,444 4,160 1,244 496 475 40 7,141 7,156 1,905
2,315 1,730 533 1,774 3,120 1,082 488 228 34 4,577 5,078 1,649
216 20 0 0 190 84 250 0 0 467 209 84
402 491 156 197 219 52 0 0 0 599 711 207
806 237 60 583 692 462 102 97 0 1,491 1,025 523
1,777 1,773 405 2,663 3,059 646 144 377 40 4,585 5,210 1,091
600 127 0 197 673 415 250 165 0 1,047 965 415
267 256 115 411 681 146 59 75 0 737 1,012 261
1,516 1,426 351 1,774 1,922 472 143 203 34 3,433 3,551 858
817 713 154 1,062 884 210 44 32 6 1,923 1,628 370
13% 9% 9% 21% 13% 12% 7% 10% 54% 16% 11% 12%
7% 12% 14% 24% 22% 28% 0% 1% 0% 15% 17% 23%
52% 53% 53% 40% 51% 57% 20% 21% 46% 44% 51% 55%
10% 13% 20% 5% 5% 3% 62% 0% 0% 11% 8% 8%
14% 5% 1% 5% 7% 0% 10% 68% 0% 9% 10% 0%
5% 6% 2% 5% 1% 0% 0% 0% 0% 4% 3% 1%
2011 2012 2012 2011 2012 2012 2011 2012 2012 2011 2012 2012
Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4
1,647 382 76 148 -476 214 83 27 -64 1,985 -137 210
2011 2012 2012 2011 2012 2012 2011 2012 2012
Q3 Q4 Q3 Q4 Q3 Q4
£95.00 £95.00 £95.00 £55.00 £55.00 £57.00 £38.50 £38.50 £38.50
16 16 16 22 24 24
£82.33 £82.33 £82.33 £44.92 £44.00 £45.60
Total Active Potential Total Active Potential Total Active Potential Total Active Potential
5,941 2,957 2,984 9,836 5,370 4,466 1,756 603 1,153 13,412 6,786 6,627
2,562 1,152 1,410 4,800 2,148 2,652 1,462 375 1,087 5,705 2,148 3,558
1,236 563 673 2,034 1,117 917 233 168 65 2,818 1,393 1,425
1,847 1,021 827 2,568 1,704 864 60 60 0 4,171 2,633 1,538
296 221 75 433 400 32 0 0 0 718 611 107
8% 7% 10% 24% 17% 32% 41% 23% 51% 21% 16% 25%
10% 13% 8% 23% 30% 14% 26% 77% 0% 19% 26% 12%
72% 74% 71% 49% 47% 51% 32% 0% 49% 53% 51% 56%
6% 5% 8% 2% 3% 1% 0% 0% 0% 4% 5% 4%
3% 1% 4% 2% 2% 2% 0% 0% 0% 3% 2% 3%
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Total Grade A Grade B Total Grade A Grade B Total Grade A Grade B Total Grade A Grade B
3,764 2,937 709 8,195 6,136 2,024 1,428 1,365 63 13,387 10,437 2,796
4.1% 3.2% 0.8% 7.5% 5.7% 1.9% 7.0% 6.7% 0.3% 6.1% 2.8% 8.9%
470 470 0 3,025 3,025 0 548 548 0 4,043 4,043 0
728 588 71 699 639 60 419 419 0 1,846 1,646 131
1,770 1,322 410 3,576 1,976 1,494 401 357 44 5,746 3,655 1,948
798 557 228 1,046 495 469 61 42 19 1,905 1,093 717
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
2,679 1,980 699 5,953 5,212 741 522 522 0 9,154 7,714 1,440
1,500 1,137 363 2,753 2,195 558 522 522 0 4,775 3,854 921
651 315 336 2,567 2,384 183 0 0 0 3,218 2,699 519
528 528 0 633 633 0 0 0 0 1,161 1,161 0
2011 2012 2012 2011 2012 2012 2011 2012 2012 2011 2012 2012
Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4 Q1-Q4 Q4
4,720 5,895 1,810 6,029 8,994 2,361 42 512 55 10,791 15,401 4,226
2,070 2,126 395 2,258 1,656 654 30 131 41 4,357 3,913 1,090
2,651 3,769 1,415 3,772 7,338 1,707 12 380 14 6,435 11,487 3,136
1,619 1,741 263 976 1,357 261 30 90 0 2,625 3,188 524
1,437 1,532 520 2,951 5,701 1,493 0 68 41 4,387 7,301 2,054
1,664 2,622 1,027 2,103 1,936 607 12 353 14 3,780 4,911 1,648
Sub £10m £10-£50m £80m+ Sub £40m £40-£125m £125m+
4.00% 4.25% 4.75% 5.00% 5.25% 5.25%
2

On Point • Central London Market • Fourth Quarter 2012 3
The Central London Market
Market Indicators (QoQ) West End City Docklands
Take-up F F A
Supply A A F
Overall Vacancy Rate E A F
Grade A Vacancy Rate E E F
Occupier Demand F A F
Prime Rent E F E
Under Construction A F E
Investment Volumes F F E
The Economy for London Bulletin
January 2013
Frantic tax debates in the US at the start of 2013 provided a
sobering reminder that the global Chart economy GDP growth is still forecasts fragile. The compared
Source: Jones Lang LaSalle
avoidance of the impending fiscal cliff was a relief for markets, but
only a temporary Chart one, GDP
5
with growth agreement forecasts on spending compared still required
Source: Jones Lang LaSalle
over the next couple of months. 4 In the Eurozone, the economic
5
news has remained downbeat, especially for the fringe economies.
But the underlying health of
3
Source: Jones Lang LaSalle
4
the single currency area looks
5
more secure since the ECB’s
2
pledge to buy bonds, which had a
3
sustained impact in lowering spreads. Nonetheless, 4 swingeing
austerity means the economic 1 outlook remains weak in 2013.
% of forecasts
% of forecasts
December’s Autumn Statement provided few surprises. With
the double-dip de-railing fiscal consolidation, there was no extra
spending to support the recovery. Corporation tax cuts were
welcomed, but will be clawed back in a further squeeze on welfare
and other spending. On the monetary front, the Bank of England
appears to have abandoned Quantitative Easing for the time
being. A lack of evidence of the effectiveness of the most recent
injections is likely to blame, as banks continue to use the extra
liquidity to bolster capital, not lending.
% of forecasts
Chart GDP growth forecasts compared
5
4
3
2
1
Chart GDP growth forecasts compared
Source: Jones Lang LaSalle
1.0% 0.9%
0
Inner London
2.1% 2.0% 2.6%
-1
2
-0.3% -0.5%
3
0.6%
Inner London UK
0
2.1% 2.0% 2.6%
Last year was
1
not a vintage one for the UK. Even 2 if Christmas
trading is healthy, -0.3% the economy -1-0.5% will at 0.6% best be flat in 2012 as
UK
Rest of UK
2012 2013-16
0
2.1% 2.0% 2.6%
1
a whole. After a second dip, output will start 2013 more than
3% below its -1
-0.3% -0.5% 0.6%
2008 peak, with little prospect of returning there
Rest of UK
2012 0
2013-16
before 2015. There have been some brighter signs. Jobs have
-1
been created at a healthy rate and lower inflation has eased 2012 the
2013-16
pressure on real incomes. But with confidence fragile, any upturn
is likely to be faltering, at least until later this year. GDP is forecast
to rise to by about 1% overall, better than 2012, but not strong by
historic standards.
% of forecasts
1.5%
2.3% 2.2%
2013 2014-16
Inner London
UK
Rest of UK
3.2%
“With confidence fragile, any
upturn is likely to be faltering,
at least until later this year.”
Inner Lon
UK
Rest of U
The London economy appears to have been the UK’s most
resilient and is certainly where much of the recent jobs impetus
has been concentrated. But business sentiment has slipped even
in the capital, with the Lloyds-TSB’s index mirroring the national
downtrend last year. Oxford Economics project that the capital will
pull away again in 2013 and consistently out-perform the national
economy thereafter. Central London’s growth for the current year
is about 0.5 percentage points higher than the UK benchmark and
this margin is sustained over a four year horizon.

4 On Point • Central London Market • Fourth Quarter 2012
The Central London Market
Occupier Take-up and Net Absorption
Just over 1.9 million sq ft was let in the final quarter of the
year, taking the total for the whole year to 7.2 million sq ft. The
rate of take-up was surprisingly consistent in 2012, ranging
Source: Jones Lang LaSalle
narrowly between 1.6 and 1.9 million sq ft per quarter. This was
disappointing after a promising end to 2011, when 2.2 million sq
Source: Jones 10 Lang LaSalle
ft was let in Q4. In fact, 2012 turned out to have been the most
subdued letting market
Central
since
London:
2003. Occupiers
Net Absorption
8
have been
2002-2011
slow to
Q2
Source: Jones Lang 10 LaSalle 6
commit to relocations in an economic
8
environment that remains
4
uncertain. The annual 10 average take-up over the last 10 years has
6
2
been 9.3 million sq 8 ft, but volumes for three of the last four years
4
have been well below 6 that level at around 7.1
0
million sq ft, with
2
only 2010 bucking
4the recent trend, when take-up -2 exceeded
0
12.0 million sq ft.
-4
Net absorption m sq ft
2
0
In the absence of banking and finance,
-4
2002 2003 2004 2005
TMT has once again been
-2
the dominant taker of space over -62012 as a whole, accounting
-4
2002 2003 2004 2005 2006
for 22% of the total. This sets a new high for the sector’s market
-6
share, although insurance has also played an important role
2002 2003 2004 2005 2006 2007 2008 2009
over the year. In Q4, while TMT accounted for 15% of take-up,
the insurance sector made up 28%. Insurance activity is tightly
focussed around EC3 and has shored up volumes in the City.
Just 4% of the Central space let London: during Demand 2012 was and in units Supply of more Balance than 2011 Q2 6
Source: Jones Lang LaSalle
Central London: Demand and Supply Balance 2011 Q2
200,000 sq ft and that was the result Source: of one Jones single Lang LaSalle letting to
5
10
10
4
JLT, an insurance Central occupier, London: in Q4. Demand 10In fact this was the first
9
and Supply Balance 2011 Q2
letting of this scale
Source:
since
Jones Lang
Q3 2011.
LaSalle9
3
8
More than half of all space
18
2
26
let (55%) in
10
8
2012 7 was in units of less than 25,000 sq ft and a
9
7
296
1
quarter was 6in units smaller than 10,000 sq ft. The proportion 296
8
6
0
of small unit 5lettings inevitably rises in a year when large
100,000 +
7
5
296
transactions 4
16
Total Existing Supply
are not a feature. The market for units under
6
4
16
25,000 sq ft
3 15
is reassuringly reliable, with at least 3.5 million
5
3 15
113 341
11
113 341
2
26
Active Demand
11
sq ft turning over every 16 year for the 20 past decade. 26
Total Existing Supply
Total size m Total sq ft size m sq ft
4
1
3
0
2
15
11
100,000 +
Net absorption m sq ft
-2
Total size m sq ft
Occupier Demand 1
9 100,000 + 50-100,000 92
Size Band (sq ft) 10
There is currently 0 13.4 million sq ft of demand, either active or
100,000 + 50-100,000 10-50,000
potential, across Central London, including requirements where
Size Band (sq ft)
space is under offer but the deal has not yet been signed. It splits
fairly evenly between active and potential demand at 6.8 million
sq ft and 6.6 million sq ft respectively. Demand has been around
11.0 to 13.0 million sq ft for nine to 10 years, with the exception
being 2007 when it rose to 18.1 million sq ft. The last time there
was a prolonged period of higher demand was in the lead up to the
dotcom bubble in 1996 to 2001 when it ranged between 16.0 and
18.0 million sq ft and peaked in 2000 at 24.6 million sq ft.
Central London: Net Absorption 10 2002-2011 Q2
8
6
4
2
0
-2
-4
-6
2003 2004 2005
Central London: Net Absorption 2002-2011 Q2
Net absorption m sq ft
-6
2007
2010
2006
2008
Net absorption m sq ft
2011
yoy
2007
Total size m sq ft
2009
Central London: Net Absorption 2003-2012
Source: Jones Lang LaSalle
2008
2010
West End
2009
City
2011
yoy
2006
2007
2008
2009
2010
2011
2012
Central Docklands London: Demand and Supply Balance 2012
Source: Jones Lang LaSalle
10
9
8
23
7
2
9 20 92
1
10
113 3419 0
92
10
26
0
0
50-100,000 20
10-50,000
5-10,000
10-50,000
5-10,000
Size Band (sq 0 ft)
5-10,000
2010
2011
yoy
West End
City
Docklands
19 16
Speculative Construction
Active Demand
Speculative Construction
West End
City
Docklands
261
114
10
50-100,000 10-50,000
Size Band Total (sq Existing ft) Supply
Active Demand
250
Speculative Construction
77
0
5-10,000
“2012 turned out to have been
the most subdued letting market
since 2003.”
Docklands
City
West End
Total Exis
Active De
Speculat

On Point • Central London Market • Fourth Quarter 2012 5
The primary drivers of current demand are lease expiries or the
desire to consolidate occupied property in order to reduce costs.
Even then, in many cases, the prospect of an expiry culminates in
a lease regearing or renewal rather than relocation. Occupiers are
Source: Jones Lang LaSalle
inhibited by the continuing uncertainties in the UK economy, the
18%
Eurozone and wider global markets. Source: Nevertheless, Jones Lang LaSalle there are some
very large active Central requirements London: generated Vacancy 16%
by Rates business 2002-2011 expansion Q2
18%
Source: Jones Lang LaSalle
in London. The most obvious examples
14%
16% are in the TMT sector,
18%
particularly new media or technology companies 12%
14%
such as Google,
16%
which is under offer at King’s Cross. But 10%
12% the long established
14%
London advertising agencies have some 8%
10%
big requirements too
12%
– such as Ogilvy (200,000 sq ft) and Saatchi 6% & Saatchi (up to
8%
10%
175,000 sq ft).
4%
availability (%) of overall stock
June 02
June 03
availability (%) of overall stock
June 04
June 05
June 06
June 07
June 08
June 09
June 10
availability (%) of overall stock
June 11
Central London: Vacancy Rates 2003-2012
Source: Jones Lang LaSalle
sq ft. In the City however there was a slight increase in Q4, for
Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08
Existing Supply & the Development Pipeline
the first time since Q4 2010, to £57.00. The impetus has come
The vacancy rate for Central London was 6.1% at the end of
from the strength of the insurance sector and an increase in
2012. That level has been broadly maintained since 2009. This is
lettings over 50,000 sq ft during 2012.
Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08
a sustainable level of vacancy for London and just below the
Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06
long-term average of 7.4% established over the last 20 years.
Of Dec-06 Mar-07 the Jun-07 Sep-07 10.4 Dec-07 Mar-08 million sq ft that is Grade A, only 3.8 million sq ft is
Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08
new development. While a further 6.3 million sq ft of space is
Most of the 13.4 million sq ft available at the end of 2012 is of
speculatively being developed, this is a relatively small pipeline
Grade A quality, although it is far more likely to be second hand
by historic standards and there will be little added to it for the
than newly developed space. Of the 10.4 million sq ft that is
foreseeable future. In the City it is the towers that can attract
Grade A, only 3.7 million sq ft is new development, however an
premium rents, while in the West End location is the critical
additional 6.3 million sq ft is speculative under construction and
factor. In the core of St James’ and Mayfair, rents of over £100.00
will feed through into the availability statistics over the next three
per sq ft are well-established for smaller lot sizes.
years. Construction is at its highest level since 2008.
18%
16%
14%
12%
10%
8%
6%
4%
2%
Central London: Vacancy Rates 2002-2011 Q2
Central London: Vacancy Rates 2002-2011 Q2
June 02
availability (%) of overall stock
June 03
June 02
June 04
June 03
June 05
June 04
June 06
June 05
June 07
June 06
June 08
June 07
June 09
Dec 03
June 08
June 10
Dec 04
June 09
June 11
Dec 05
June 10
Dec 06
June 11
Dec 07
Dec 08
Dec 09
Dec 10
Dec 11
Docklands City
0% West End DocklandsCity
Docklan
6%
Docklands
8%
West End City City West End
2%
4%
The insurance
6%
sector, which has boosted take-up in 2012, is the
West End
City
West End
0% City Docklands
2%
source of some 4% large active requirements in the City. Liberty and
0% City
Docklands West End
Munich Re 2% both need over 100,000 sq ft while Royal and Sun
Alliance, Heath 0% Gallagher and Fidelity Insurance all have sizeable
Docklands
units under offer.
Rents and Rental Expectations
Prime rents remained unchanged in the West End at £95.00 per
Dec 12
West En
“There are some very large
active requirements generated
by business expansion in
London.”

6 On Point • Central London Market • Fourth Quarter 2012
The Central London Market
Investment Volumes & Yields
£15.4 billion of investment stock changed hands in Central London
in 2012, with £4.2 billion invested in Q4 alone. That is the highest
£120.00
total since 2007 by a wide margin. Between Central 2008 and London: 2011, Prime total Headline Rents: 2002 to 2011 Q2
£100.00
Source: Jones Lang LaSalle
investment spend ranged from
Central
£6.5 billion
London:
to £11.6
Prime
billion
Headline
per
Rents: 2002 to 2011 Q2
annum. In fact only two years
£120.00
Source: have exceeded Jones Lang this LaSalle year’s total since £80.00
our records began Central in 1989 London: £120.00 and these Prime were Headline 2006 and Rents: 20072002 when to 2011 Q2
£100.00
Source: Jones Lang LaSalle
£60.00
volumes reached £17.3 billion and £18.7 billion, respectively.
£ per sq ft
June 02
June 03
June 04
June 05
June 06
June 07
June 08
June 09
June 10
£ per sq ft
June 11
Central London: Prime Headline Rents: 2003 to 2012
Source: Jones Lang LaSalle
£120.00
£100.00 £80.00
£40.00
West En
Once again £100.00 overseas investors £80.00 have been the driving force,
£60.00
accounting for 74% of the money invested in Q4 and 75% in the
£80.00
£60.00
year as a whole - a total of £11.5 billion. £40.00 Most of this went to the City
£20.00
£0.00 West End
City
Docklan
market -
£60.00
£7.34 billion, or 82%
£40.00of the total. In the West End the
£20.00
division was slightly more balanced with 64%, or £3.8 billion, of the
West End City
investment £40.00 coming from overseas £20.00 buyers £0.00 and 36% from UK
West End City Docklands
investors. Far Eastern investors were notably active in 2012,
£20.00
£0.00 City
Docklands
particularly those from Malaysia and Indonesia.
Central London: Prime Yields and
£0.00 Docklands
£ per sq ft
June 02
£ per sq ft
June 03
June 02
June 04
June 03
June 05
June 04
June 06
June 05
June 07
June 06
June 08
June 07
June 09
%
Dec 03
June 08
June 10
Dec 04
June 09
June 11
Dec 05
June 10
Dec 06
June 11
Dec 07
the Cost of Money 2003-2012
Source: Jones Lang LaSalle/Datastream
The majority of these investors tend to seek long, secure income
streams, although there is evidence that, since supply is so tightly
8%
restricted, their investment criteria may be shifting. This may entail Central London: Prime Yields and
considering more risky opportunities – for example, Central shorter London: leases
the Cost of Money 2002-2011 Q2
Prime Yields and
Source: Jones Lang 6% LaSalle/Datastream
that produce higher yields. Three major Chinese investors the Cost were of Money 2002-2011 Q2
Central London: Prime
Source:
Yields 8%
Jones Lang
and
LaSalle/Datastream
active in the London market in 2012 – COLI, Gingko Tree and CIC.
the Cost of Money 2002-2011 Q2
Interest from China Central has London: increased Prime Yields and 8%
4%
Source: as Jones a result Lang of LaSalle/Datastream
the removal of
the Cost of Money 2002-2011 Q2
6%
regulations preventing funds 8% from investing in property outside their
Source: Jones Lang LaSalle/Datastream
home market. We expect large Chinese insurers 6% to be a feature of
2%
8%
the market in 2013.
4%
4%
0% LIBOR
The London 6% market retains its appeal as a safe haven based West End
2%
on its
5 Year Swap
relatively long leases and political
4%
stability. Prime yields for larger lot
West End 5 Year SwapCity
2%
sizes in the 4% City are under downward pressure from 5.25%, whilst
0% West End 5 Year Swap City
for smaller deals yields have
LIBOR
2% already fallen to 5.0% driven by
competition for safe haven product among Asian 0% and European
5 Year Swap City
LIBOR
2%
UHNWIs. In the core West End, prime yields are between 4.0% and
0% City
LIBOR
4.5%, reaching 5.0% for larger lot sizes in more peripheral markets.
0% LIBOR
%
June 02
June 03
%
June 04
6%
June 02
June 05
June 03
June 06
%
June 04
June 07
June 02
June 05
June 08
%
June 03
June 06
June 09
June 02
June 04
June 07
June 10
June 03
June 05
June 08
June 11
June 04
June 06
June 09
Dec 03
June 05
June 07
June 10
Dec 04
June 06
June 08
June 11
Dec 05
June 07
June 09
Dec 06
June 08
June 10
Dec 07
June 09
June 11
Dec 08
Dec 08
June 10
Dec 09
Dec 09
June 11
Dec 10
Dec 10
Dec 11
Dec 11
Dec 12
West End
“Once again overseas investors
have been the driving force,
accounting for 74% of money
invested.”
Dec 12
West E
5 Year S
City

On Point • Central London Market • Fourth Quarter 2012 7
Central London Market
2012 was always expected to be a quiet year in the Central
London letting market. Even without the distractions of a ‘summer
like no other’, sluggish conditions in the UK economy, combined
with a hugely unsettled Eurozone and uncertainties in the
emerging markets, would have conspired to make forward
planning challenging. It was inevitable that businesses would be
reluctant to make significant medium term commitments to new
property. Bizarrely, the same uncertainties that dampened letting
activity attracted record volumes of investment funds to London,
simply because it seemed safe and stable compared with so
many other places.
In fact, the very characteristics that make London a magnet for
investment also mean it is never truly quiet – even in a slow year.
London is one of the most mature, dynamic office markets in the
world and as such it is in a constant state of flux. It is interesting
to reflect on the scale of change in recent decades. London’s
stock of offices has increased by 41% since 1984. Most of that
growth has taken place in the City and Docklands where 50.4
million sq ft has been added to the stock. The West End, over
the same period, has acquired an additional 12.0 million sq ft.
Of course, Docklands and Canary Wharf have grown from
almost nothing, but the City has expanded by 39% and the
West End by 16%.
Office employment in London doubled over the same period, so
expansion was necessary to accommodate the additional
demand. The current vacancy rate of 6.1% demonstrates that
there is a healthy balance between supply and demand. But the
magnitude of expansion in the City compared with the West End
does, at least in part, explain the differential in rental growth
between the two markets. While the City’s rents have remained
broadly stable in real terms since the mid 1980s, the heart of the
West End has experienced significant growth.
It raises an important question about business location within
London. We have seen in the past that occupier groups can shift
over quite large distances: investment banks to Canary Wharf or
advertising agencies to the West End. Today the City looks like
an attractive proposition for footloose occupiers. There is a huge
opportunity here, given that there are 2.3 million sq ft of current,
footloose requirements in Central London.
The question is whether we are really about to see a significant
diversification in the City’s occupier base. Its building stock is
predominantly Grade A, much of it has been renewed since the
1980s; its rents are relatively low; its streetscape is attractive and
it has excellent public transport. It looks like very good value,
especially as floorspace densities increase. For all these
reasons, we believe that the City will gradually begin to attract a
wider mix of occupier types. This has already begun on the
fringes – a trend that will intensify over the next few years.
Whether they will be attracted to the core will depend on whether
its amenities and the overall ‘lifestyle offer’ continue to improve
over the longer term. We do not expect the City’s gain to be at
the expense of the West End. Indeed, supply is so tightly
constrained that the West End has its own built-in protection
mechanism.
The City Core’s close association with the banking and financial
sector is, however, a barrier for some occupiers, who see
themselves as part of a very different kind of business culture.
Image and lifestyle is increasingly important to many companies
when they choose their premises, particularly as it is key to
attracting and retaining young, talented, globally footloose
workers. The Fringe offers the bars, shops and restaurants that
fit in with this requirement. While more retail and leisure – and
residential – is increasingly on offer in the City core, in addition to
established venues such as the Barbican, it remains a
predominantly corporate environment, albeit one that will
continue to change. A wider mix of uses will probably be
introduced into its heart. In time, it may well be that more atypical
occupiers begin to move into the square mile itself, perhaps when
they themselves have become more established.

8 On Point • Central London Market • Fourth Quarter 2012
The West End Office Market
Occupier Take-Up and Net Absorption
Just under 620,500 sq ft was let in 38 transactions, still
trailing at 23% below the quarterly average for the past
10 years.
In 2012 as a whole, 2.5 million sq ft was let, compared
with 3.2 million sq ft in 2011 and a 10 year average of
3.2 million sq ft. West End: Take-Up 5 2001-2011 Q2
Source: Jones Lang LaSalle
TMT accounted for 35% of take-up this quarter.
Once again, it West was End: 5
the best Take-Up quality 2001-20114
space that Q2let, with
Source: Jones Lang LaSalle
Grade A comprising 85% of take-up.
5
4
3
The largest deal in Q4 was 61,000 sq ft let to Coca Cola
at Kingsley House, 1a Wimpole Street, W1.
4
3
2
11 transactions totalling 249,200 sq ft fell into the TMT
sector, including Linkedin (48,300 sq ft); Emap (27,800
3
2
1
sq ft) and Medidata (23,000 sq ft). There was 545,000
sq ft under offer 2 at the end 1 of the year, suggesting 0 that take-up
2002 2003
in the early months of 2013 will be strong and this excludes the
863,000 sq ft 1 under offer 0to Google at King’s Cross.
m sq ft
m sq ft
Existing Supply and the Development Pipeline
Total supply increased by a small margin to 3.8 million sq ft in
the final quarter of 2012, having changed very little over the
course of the year – it ended just 3% above the level recorded
at end of 2011. However, this is still just over half the volume
available at the beginning of 2010.
The vast majority of space available, 2.9 million sq ft, is
Grade A (78% of the total).
2.0 million sq ft is under construction speculatively and adding
that to the total supply increases it to 5.8 million sq ft.
m sq ft
Source: Jones Lang LaSalle
4
5
West End: Take-Up 2001-2011 Q2
Source: Jones Lang LaSalle
m sq ft
4
3
2
1
0
m sq ft
5
3
2
1
0
West End: Take-Up 2003-2012
Source: Jones Lang LaSalle
West End: Take-Up 2001-2011 Q2
2002
2004 2005 2006
Under Construction Second hand
New
West End: Demand 2003-2012
2007 2008 2009 2010 2011
Source: Jones Lang LaSalle
Second hand New
8
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
West End: Demand 2002-2011 Q2 7
New
0
Source: Jones Lang LaSalle
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 6
Occupier Demand West End: Demand 12 2002-2011 Q2
Source: Jones Lang LaSalle
5
There was 5.9 million sq ft of active and potential demand
outstanding at
West
the end
End: 12
of
Demand
2012. Of
2002-2011 10
that, 2.9 million
Q2
4
sq ft was
Source: Jones Lang LaSalle
3
active and the balance of 103.0 million sq ft 8was made up of
12
potential demand from businesses with impending lease
2
8
6
expiries or breaks 10 that have not yet initiated active searches.
1
Outstanding demand is at its highest level since Q4 2009,
Active
6
4
0
8
although the proportion actively seeking new space has
Active
4
2
declined.
Potential
6
The TMT subsector made 2 up 62% of overall 0 demand adding
4
up to 3.75 million sq ft, of which 1.6 million sq ft, is active and
Active Potential Rolling 12 Month Take-Up
0
the balance 2is potential demand. Some of the more notable
active requirements are: Ogilvy (200,000 sq ft); Havas
0
(120-170,000 sq ft) and Capita for 60,000 sq ft.
Potential
Rolling 12 Month Take-Up
m sq ft
June 02
June 03
m sq ft
June 02
June 04
June 03
June 05
m sq ft
June 04
June 06
June 02
June 05
June 07
June 03
June 06
June 08
June 04
June 07
June 09
June 05
June 08
June 10
June 06
June 09
June 11
2003
m sq ft
June 07
2004
June 10
Dec 03
2003
June 08
2004
Off Plan
2005
June 11
Dec 04
June 09
2006
2005
Dec 05
June 10
Off Plan
2006
2007
Under Construction
2007
Dec 06
June 11
2008
Dec 07
2009
“Take-up
Rolling 12 Month
is
Take-Up
still trailing at 30%
below the quarterly average for
the past 10 years.”
2008
Dec 08
2010
2009
2010
2011
2012
Off Pla
Under
Off Plan
Second
Off Plan
Under Construction
New
Under Construction Second hand
Second hand
Dec 09
2011
Dec 10
Dec 11
New
Dec 12
Activ
Pote
Rolli

On Point • Central London Market • Fourth Quarter 2012 9
There are 10 buildings that could offer more than 100,000 sq ft
but only two are completed – Park House, Oxford Street, and
5 Howick Place, Victoria. The largest is 62 Buckingham Gate
West End: Vacancy Rates 2002-2011 Q2
where 260,000 sq ft should Source: be completed Jones Lang in LaSalle mid-2013.
The overall vacancy West End: rate Vacancy remained Rates unchanged 2002-2011 at 4.1% Q2
9%
Source: Jones Lang LaSalle
and there was no change 8% in any of the individual grade
9%
vacancy rates. 7%
8%
During Q4, 403,000 sq 6%
7%
ft went under construction in four
developments, which were 5%
6%
the Zig Zag Building, Victoria Street,
SW1 (188,000 sq ft); 394%
5%
Victoria Street, SW1 (88,000 sq ft);
1 Mabledon 4% Place, WC1
3%
(87,300 sq ft) and Walmar House,
2%
Regent Street, 3% SW1 (40,000 sq ft).
availability (%) of overall stock
£ per sq ft
June 02
June 02
availability (%) of overall stock
June 03
£ per sq ft
June 03
June 04
June 02
June 04
June 02
June 05
June 03
June 05
June 03
June 06
June 04
June 06
June 04
June 07
June 05
June 07
June 05
June 08
June 06
June 08
June 06
June 09
June 07
June 09
June 07
June 10
June 08
June 10
June 08
June 11
availability (%) of overall stock
June 09
£ per sq ft
June 11
June 09
£ billion
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
June 10
West End: Vacancy Rates 2003-2012
Source: Jones Lang LaSalle
Grad
Over
Overall
2%
1%
1%
0%
Overall Grade A
Rents 0%
Grade A
Prime core rents remained stable at £95.00 per sq ft for the
West End: Prime Headline Rents and Net Effective Rents
2003-2012
seventh consecutive quarter and rent free periods, assuming
Source: Jones Lang LaSalle
a 10 year term, remained at 16 months.
West End: Prime Headline Rents and Net Effective £120.00 Rents
2002-2011 Q2
West End: Prime Source: Headline Jones Lang Rents LaSalleand Net Effective Rents £100.00
Investment Volumes 2002-2011 £120.00 and Q2 Yields
Source: Jones Lang LaSalle
£1.8 billion was invested in Q4 across 38 transactions.
£120.00 £100.00
Over the whole of 2012, £5.8 billion was invested, 25%
more than £100.00 2011. This £80.00 represents the highest West End
investment turnover since the financial crisis and the third
£80.00
£60.00
highest on record after 2006 (£6.3 billion) and 2007
(£6.2 billion). £60.00
£40.00
Once again, overseas purchasers were the dominant force,
£80.00
£60.00
£40.00
£20.00
£0.00
Prim
Net
£40.00
accounting for 78% of
£20.00
all transactions in Q4, and 64% over
the whole
£20.00
of 2012.
£0.00
Asian investors made up the largest purchasing group in
Prime
Prime
Net Effective
Q4, acquiring
£0.00
£380 million of assets in six transactions.
Net Effective
West End: Investment Purchases 2003-2012
The largest single transaction was North American, being
Source: Jones Lang LaSalle
Blackstone’s acquisition of The Adelphi, John Adam Street,
£7
WC2, for £265 million, reflecting a net initial yield of 6.2%. West End: Investment Purchases 2002-2011 Q2
Source: Jones Lang £6 LaSalle
Prime yields for sub £10 million lot sizes remained stable at
4.0%, since September 2010. West End: Investment £7 Purchases £52002-2011 Q2
Source: Jones Lang LaSalle
For lot sizes over £80 million, yields within the core are £6 sub
£4
4.5%. Outside West of the End: core, Investment £7
prime yields Purchases for larger 2002-2011 lots sizes Q2
Source: Jones Lang LaSalle
£5
£3
Prope
have remained at 5.0%.
£6
£7
£4
£2
£5
Institu
£6
£3
Property Companies
£1
£4
£5
£2
£0
Othe
£3
Property Companies Institutions
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
£4
£1
£3
£2
£0
Property Companies Institutions Others
£1
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
£2
£0 Institutions
Others
£ billion
£ billion
£ billion
Dec 03
June 10
Dec 03
June 11
June 11
Dec 04
Dec 04
Dec 05
Dec 05
Dec 06
Dec 06
Dec 07
Dec 07
Dec 08
Dec 08
Dec 09
Dec 09
Dec 10
Dec 10
Dec 11
Dec 11
Dec 12
Dec 12

10 On Point • Central London Market • Fourth Quarter 2012
The City Office Market
Occupier Take-up and Net Absorption
Leasing activity picked up in the final quarter of the year
with 1.2 million sq ft let in 53 transactions.
4.2 million sq ft was let in the whole of 2012, that is 22%
more than 2011 when the total was 3.4 million sq ft but
remains below the long term 20 year average of
5.1 million sq ft. West End: Take-Up 5 2001-2011 Q1
For the first time in two years, Source: the Jones City Lang delivered LaSalle a deal of
more than quarter West of End: a million 5 Take-Up sq ft. 2001-2011 JLT’s acquisition 4Q1
of
287,500 sq ft Source: in St Botolph’s Jones Lang House LaSalle boosted take-up and
accounted for 5
4
3
23% of the space let in the quarter.
Inevitably, the insurance sector accounted for the largest
4
3
2
share of take-up in the quarter, with 38% of the total.
The TMT sector accounted for only 5% of take-up in Q4
3
2
1
2012 with only 60,400 sq ft in seven transactions. This is
in stark contrast
2
to the rest 1 of the year. In the 0 first three
2002 2003
quarters, 710,000 sq ft was let to the TMT sector.
The amount 1of space under 0 offer rose in Q4 to 1.2 million
2002 2003 2004 2005 2006 2007
sq ft, a minimal increase of 9% over the quarter from 1.1
million sq ft 0at the end of September. This provides for an
2002 2003 2004 2005 2006 2007 2008 2009
encouraging start to 2013 City: and includes Demand 18
111,800 2002-2011 sq ft Q2 under
Source: Jones Lang
offer to Amlin Plc in the Leadenhall Building 16LaSalle
and 90,145
sq ft in 20 Fenchurch City: Demand 18
Street, 2002-2011 under offer Q2 14to Liberty Re.
m sq ft
m sq ft
Occupier Demand 12
8
14
Demand remained broadly 10 stable in Q4 at 6just over 9.8 million
12
sq ft, of which 5.3 million 8sq ft was active and 4 the balance
10
was potential demand. 6
2
Ogilvy and Mather
8
WPP’s 4 search for 250,0000
sq ft extends
to the City market 6 and is the 2 largest active search in this part
of the market; 4 Cameron McKenna 0 and Bird & Bird are both
in the market 2 for up to 200,000 sq ft and KPMG is seeking
150,000 sq 0ft, as is, potentially, Mishcon de Reya.
West End: Take-Up 5 2001-2011 6 Q1
Source: Jones Lang LaSalle
Source: Jones Lang LaSalle
2010
West End: Vacancy Rates 2002-2011 Q1
Existing Supply and the Development Source: Jones Lang Pipeline LaSalle
West End: Vacancy Rates 2002-2011 Q1
Overall supply was 8.2 million 9%
Source: Jones Lang LaSalle
sq ft, at the end of Q4 2012,
which translates into a manageable 8%
9%
vacancy rate of 7.5%.
Almost three quarters of
7%
8%
the space available was of Grade A
6%
quality and 7% that equates to a Grade A vacancy rate of 5.7%.
5%
There was 6% just under 4.0 million sq ft speculatively under
4%
construction 5% at the end of Q4.
availability (%) of overall stock
m sq ft
Source: Jones 16 Lang LaSalle
18
14
16
4%
3%
2%
1%
0%
June 02
02
m sq ft
June 03
availability (%) of overall stock
03
June 04
3%
2%
1%
0%
04
June 02
Mar 02
June 05
05
June 03
Mar 03
m sq ft
June 06
06
June 04
Mar 04
m sq ft
12
10
June 05
June 07
June 06
June 08
m sq ft
June 07
June 09
4
3
2
1
0
2004
2008
2005
2009
2011
m sq ft
2006
8
4
2
0
2010 13
City: Take-Up 2003-2012
Source: Jones Lang LaSalle
West End: Take-Up 2001-2011 Q1
Source: Jones Lang LaSalle
June 10
2002
June 08
June 11
2003
City: Demand 2002-2011 Q2
June 02
07
Mar 05
June 03
08
Mar 06
June 04
09
Man 07
June 05
10
Man 08
June 06
m sq ft
June 09
availability (%) of overall stock
11
Mar 09
11
2004
9
7
5
3
1
June 07
2004
2005
Off Plan
2006
2007
Under Construction Second hand
City: 2008 Demand 2009 2003-2012
2010 2011
Source: Jones Lang LaSalle
Second hand New
2007
Dec 03
2011
2005
New
Dec 04
Active
2006
Dec 05
2007
Off Plan
2008
Under Construction
Dec 06
2008
Dec 07
2009
Dec 08
2009
2010
Dec 09
Off Plan
Off Plan
Under C
Off Plan
Under Construction Second
New
Under Construction Second hand
2010
2011
Second hand
2011
New
Potential Rolling 12 Month Take-Up
City: Vacancy Rates 2003-2012
Source: Jones Lang LaSalle
Rolling 12 Month Take-Up
14%
June 10
12%
10%
8%
6%
4%
2%
0%
Mar 10
Dec 03
June 08
June 11
Dec 04
June 09
Overall
Grade A
Mar 11
Dec 05
June 10
Active
Potential
Dec 06
June 11
Dec 07
Overall
Grade A
Dec 08
Active
Potential
Dec 10
Dec 11
2012
New
Dec 12
Rolling 12 Month Take-Up
Dec 09
Dec 10
Dec 11
Dec 12
Potentia
Active
Rolling 1
Gra
Ove

On Point • Central London Market • Fourth Quarter 2012 11
Three large projects were commenced during Q4, adding
up to 431,700 sq ft. These were 71 Queen Victoria Street, EC4
(187,000 sq ft); Commodity Quay, East Smithfield, E1 (143,000
sq ft) and 40 Chancery City: Prime Lane, Headline WC2 (101,600 and Net sq Effective ft). Rents
Three developments 2002-2011 were Q2completed in the final quarter of
Source: Jones Lang
City:
LaSalle
Prime Headline and Net Effective Rents
2012. These were 97,700 sq 2002-2011 ft at 8 Fenchurch Q2 Place, EC3;
£70.00
79,300 sq ft in 26 Finsbury Source: Square, Jones EC2 Lang and LaSalle 63,000 sq ft in
£60.00
280 High Holborn, WC1. £70.00
£ per sq ft
£50.00
£40.00
Rents
£30.00
Prime core rents now £40.00 stand at £50-£57.00 per sq ft. This
represents £20.00a slight (3.6%) £30.00 increase after eight consecutive
quarters in which the maximum remained at £55.00 per sq ft.
£10.00 £20.00
Incentives, assuming a 10-year term, remained at 24 months.
£0.00
Towers attract significant
£10.00premiums, with rents of up to
£70.00 being achieved £0.00 – although around £60.00
is more typical.
June 02
£ per sq ft
June 03
£60.00
£50.00
June 04
June 02
June 05
June 03
June 06
June 04
June 07
June 05
June 08
June 06
June 09
June 07
June 10
June 08
£ per sq ft
June 11
June 09
£70.00
£60.00
£50.00
£40.00
£30.00
£20.00
£10.00
City: Prime Headline and Net Effective Rents
2003-2012
Source: Jones Lang LaSalle
£0.00
Net Effective
Prime Net Effective
Prime
City: Investment Purchases 2003-2012
West End: Investment Purchases 2002-2011 Q1
Investment Volumes and Yields
Source: Jones Lang LaSalle £10
There were £2.4 million of investment transactions West End: in Investment the £7 Purchases 2002-2011 Q1
City in Q4 2012. This was 15% higher than Source: Q3 Jones and, Lang although LaSalle
£8
£6
not reaching the West £3.1 End: billion Investment total of Q2, £7 Purchases was still the 2002-2011 second Q1
£6
highest quarterly
Source:
volume
Jones Lang
since
LaSalle
£5
June 2007.
£6
72% was purchased £7
£4
by overseas investors, amounting to
Others
£4
£5
£1.7 billion. £6
£3
£2
Property Companies Institut
Throughout the whole of 2012, City turnover £4 amounted to
£5
£2
Proper
£0
£8.9 billion, compared with £6.1 billion £3in 2011. This is the
2003 2004 2005 2006 2007 2008Property 2009 Companies
2010 2011 Institutions 2012
£4
highest volume since 2007 when £9.4 billion changed hands. £1
£2
Chinese Overseas £3 Land and Investment (COLI) bought £0
Property Companies Institutions Others
£1
1 Finsbury Circus for £152 million, reflecting a net initial yield
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
£2
of 5.25% and a capital value of £729 £0 per sq ft. The building
Institutions
Others
£1
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
is 208,536 sq ft and is multi-let, although 80% of the rental
income is secured £0 against Stephenson Harwood until 2025. “Prime Others core rents grew by 3.6%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Other significant transactions include: St Martin’s Court,
10 Paternoster Row, bought by Oxford Properties for £110
in Q4, to £57.00 per sq ft”
million, reflecting a net initial yield of 5.48% and Winchester
House, 75 London Wall, a 313,000 sq ft building sold for £250
million to Invesco/CIC equating to a net initial yield of 5.4%.
Prime initial yields now range from 5.0% to 5.25% depending
on the lot size. Given the volume of demand relative to
supply, they are likely to remain at this level.
£ billion
£ billion
£ billion
£ billion
June 10
Dec 03
June 11
Dec 04
Dec 05
Dec 06
Source: Jones Lang LaSalle
£12
Dec 07
Dec 08
Dec 09
Dec 10
Dec 11
Dec 12
Net
Prim

12 On Point • Central London Market • Fourth Quarter 2012
The Docklands & East London Office Markets
Occupier Take-up and Net Absorption
Just over 40,000 sq ft was let in Docklands in Q4, in three
transactions.
The largest of the three transactions was 21,800 sq ft,
which Deutsche Bourse took in 11 Westferry Circus, E14.
This takes the total for the whole year to 474,700 sq ft, a
West End: Take-Up 5 2001-2011 Q1
similar volume to 2011 and 2009 but below the long term 20 4
year average of 1.3 million
Source:
in this
Jones
volatile
Lang LaSalle
part of the market.
West End: 5 Take-Up 2001-20114
3
Q1
Source: Jones Lang LaSalle
5
Occupier Demand
Overall demand, including active and potential, ended the
0
Off Plan
4
3
2
1
2003 2004 2005 2006
year at 1.8 million sq ft.
2007 2008
Of this, active searches account for 620,800 sq ft and
Off Plan Under Construction
3
2
1
0
2002 2003 2004 2005 2006 2007 2008 2009
the balance is potential, including the Thomson Reuters’
requirement for up to 750,000 sq ft.
Under Construction Second hand
2
1
0
Docklands: Demand 2003-2012
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Professional services firms account for the two largest
Source: Jones Lang LaSalle
Second hand New
requirements 1 in the market, 0 although neither search is
6
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
confined to Docklands.
West End: Demand 2002-2011 Q1
New
0
Source: Jones Lang LaSalle
2002 2003 2004 West 2005 End: 2006 Demand 2007 2002-2011 2008 2009 Q1 2010 2011
m sq ft
m sq ft
4
Existing Supply West and End: the Development 12 Demand 2002-2011 Pipeline 10 Q1
Total supply has Source: crept Jones upwards Lang LaSalle over the second half of 2012,
10
8
to 1.4 million 12 sq ft, after dipping in the early months of the
year. It is now back to the 8same level as Q4 6 2011.
10
The vacancy rate is 7.0%, almost all of which is Grade A
(6.7%) space, although much
6
of it is second
4
hand.
m sq ft
8
6
Rents
2
0
4
Prime rents were £38.50 per sq ft at the end of Q4,
0
2
although none of the transactions completed in this quarter
were at that level.
0
Mar 02
Mar 03
m sq ft
Mar 04
Mar 05
West End: Take-Up 5 2001-2011 3 Q1
Source: Jones Lang LaSalle
West End: Vacancy Rates 2002-2011 Q1
Investment Volumes
Source: Jones Lang LaSalle
There was one West investment End: Vacancy transaction Rates in 2002-2011 Docklands Q1
9%
in Q4;
Source: Jones Lang LaSalle
6 Greenwich View Place 8% was sold for £41 million to Legal
9%
and General by the occupier, 7% Telstra, which has taken a
8%
25-year lease with RPI uplifts. 6% The yield equates to 5.76%.
availability (%) of overall stock
7%
6%
5%
4%
3%
2%
1%
0%
ar 02
availability (%) of overall stock
ar 03
4
Mar 06
m sq ft
12
Source: Jones Lang LaSalle
Mar 02
5%
4%
3%
2%
1%
0%
ar 04
Mar 02
ar 05
Mar 03
Mar 03
m sq ft
ar 06
Mar 04
Mar 04
2
3
Mar 02
Mar 07
an 07
Mar 05
Mar 05
Mar 03
Mar 08
an 08
Mar 06
Mar 06
m sq ft
Mar 04
Mar 09
ar 09
Mar 07
Man 07
2
m sq ft
4
2
1
Docklands: Take-Up 2003-2012
Source: Jones Lang LaSalle
West End: Take-Up 2001-2011 Q1
Source: Jones Lang LaSalle
Mar 05
Mar 10
ar 10
Mar 08
Man 08
Mar 06
Mar 11
ar 11
Mar 09
availability (%) of overall stock
m sq ft
Mar 09
4
2
0
Mar 07
Dec 03
Dec 04
Active
Dec 05
Dec 06
Dec 07
Dec 08
2010
Off Pla
Off Plan
Under
Off Plan
Under ConstructionSecon
New
Under Construction Second hand
2009
2010
Second hand
2011
New
Dec 09
Rolling 12 Month Take-Up
Docklands: Potential Vacancy Rates 2003-2012
Source: Jones Lang LaSalle
Rolling 12 Month Take-Up
16%
14%
12%
10%
8%
6%
4%
2%
0%
Mar 10
Dec 03
Mar 10
Mar 08
Mar 11
Dec 04
Mar 09
Overall
Mar 11
Grade A
Dec 05
Mar 10
Active
Potential
Dec 06
Mar 11
Dec 07
Overall
Grade A
Dec 08
Active
Potential
Dec 10
2011
Dec 11
2012
New
Dec 12
Rolling 12 Month Take-Up
Dec 09
Dec 10
Dec 11
Dec 12
Poten
Active
Rollin
Gra
Ove

On Point • Central London Market • Fourth Quarter 2012 13
Headline Transactions
West End
Kingsley House,
1A Wimpole Street, W1
Size: 61,037 sq ft
Tenant: Coca Cola
Rent: £60.00 per sq ft
Status: Under construction
95 Wigmore Street, W1
Size: 40,000 sq ft
Tenant: Lane Clark and Peacock
Rent: £77.50 per sq ft
Status: Under construction
The Adelphi, John Adam Street, WC2
Purchaser: Blackstone
Reported price: £265 million
Est initial yield: 6.2%
78 St James’s Street, SW1
Purchaser: State Oil Fund of Azerbaijan
(SOFAZ)
Price: £177.35m
NIY: 4.50%
City
The St Botolph Building,
Houndsditch, EC3
Size: 287,960 sq ft
Tenant: JLT
Rent: Confidential
1 Finsbury Circus, EC2
Purchaser:Chinese Overseas Land
and Investment (COLI)
Reported price: £152 million
Est initial yield: 5.25%
70 Mark Lane, EC3
Size: 84,000 sq ft
Tenant: Miller Insurance
Rent: £54.50 per sq ft
Status: Under construction
St Martin’s Ct, 10 Paternoster
Row EC4
Purchaser: Oxford Properties
Reported price: £110 million
Est initial yield: 5.48%
Docklands & East London
11 Westferry Circus, E14
Size: 21,750 sq ft
Tenant: Deutsche Bourse
Rent: £27.50 per sq ft
Status: Refurbished
6 Greenwich View Place E4
Purchaser: Legal and General
Reported price: £41 million
Est initial yield: 5.76%

14 On Point • Central London Market • Fourth Quarter 2012
Rental Conditions across Central London
West End Village
Belgravia & Marylebone North of
Knightsbridge Covent Garden & Euston Mayfair Oxford Street Paddington Soho St James’s Victoria
max
min
average
% annual change (average)
£67.50 £65.00 £55.00 £95.00 £80.00 £57.50 £65.00 £95.00 £65.00
£40.00 £40.00 £30.00 £62.50 £40.00 £32.50 £40.00 £45.00 £35.00
£52.89 £47.84 £39.55 £73.94 £48.70 £42.95 £44.74 £64.50 £43.98
4.1% 2.4% 9.2% 3.1% 7.6% 5.0% 12.2% 2.8% 3.8%
City Village
Central Core City Midtown Eastern Eastern Fringe Northern Northern Fringe Southbank Southern Western
max
min
average
% annual change (average)
£57.00 £55.00 £55.00 £40.00 £55.00 £45.00 £47.50 £52.50 £54.50
£50.00 £35.00 £30.00 £20.00 £35.00 £30.00 £35.00 £40.00 £35.00
£53.50 £44.19 £42.00 £29.67 £46.45 £33.44 £41.63 £47.00 £47.21
0.7% 2.2% 2.1% 4.7% 3.7% 15.9% 2.7% 2.2% 3.1%

On Point • Central London Market • Fourth Quarter 2012 15
Town Planning
LEGISLATIVE CHANGES – HIGHLIGHTS
Greater London Authority
The Greater London Authority, in partnership with London
Boroughs is issuing a ‘call for sites’ to be included in the Londonwide
Strategic Housing Land Availability Assessment (SHLAA).
All sites over 0.25 ha will be considered. If you have any sites
you think should be included, please contact the planning team.
The call for sites will be open until 28th January.
Boroughs
The Royal Borough of Kensington and Chelsea is consulting
on the following policy documents until January 31st 2013:
Basements, Conservation & Design, Involving People in Planning
and Miscellaneous Matters. Camden Council is consulting on the
Fitzrovia Area Action Plan which is at the advanced ‘proposed
submission’ stage, until January 31st.
Camden is consulting on its Local List until 22nd January – buildings
that will have a local (non-statutory) listing. If you have buildings that
may be at risk, or benefit from, local listing, contact the planning team.
The City of London will seek views on a single plan for the district
combining Core Strategy and development management policies,
to be known as its Local Plan, in January 2013.
Due to the release of the NPPF Westminster has reviewed its
LDF documents and is preparing to put out to consultation a
merged Core Strategy and City Management Plan, which will
replace the UDP to create a new main/single development plan for
Westminster. Westminster will be consulting in January 2013.
Applications
Communications House, 48 Leicester Square, received a
resolution to grant permission on 13th December at Westminster’s
Planning Committee for demolition and reconstruction of
the current building to provide a nine storey employment-led
development with retail uses on the lower floors.
On 13th December Wandsworth Planning Committee permitted
the first phase of Battersea Power Station redevelopment. It will
provide 800 homes, a hotel and space for cafes, restaurants, bars,
a gym, pool, spa, theatre, office studios and a new six-acre public
park right on the bank of the Thames.
To discuss how these changes may affect your development,
contact Guy Bransby on 020 7399 5409
or Jeff Field on 020 7852 4742.
Definition of Terms
Floorspace Threshold – Data refers to office floorspace in units of 5,380 sq ft and above.
Grading – A subjective assessment taking into account specification, floorplate efficiency
and image.
Take-Up – Floorspace acquired for occupation by leasing, pre-leasing or purchasing a freehold
or long leasehold interest.
Supply – Floorspace which is on the market and available for occupation. Floorspace which
is under offer prior to a contractual commitment is included. Speculative development prior to
practical completion is excluded.
Speculative Development – Floorspace under construction or comprehensive modernisation
which will be available for speculative letting (or sale). The forecast of development
completions relates only to developments currently under construction.
Net Absorption – a measure of the change in occupied stock between periods.
Demand – Some applicants search across two or three market areas. In such cases their
demand appears in the total for each area. However, when calculating total Central London
demand, duplicates are eliminated.
Active Demand – Organisations with a declared requirement for office accommodation which
are actively in the market to acquire floorspace in the short term.
Potential Demand – Organisations with a potential requirement for office accommodation, but
without a finalised 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 office space in a
prime location.
Net effective rents are calculated against our prime headline rent values and assume a
10-year term, a notional three month fit-out period and amortisation over 10 years. In practice
net effective rents are subject to far more variability related to the specific characteristics of the
individual premises.
Prime Yield – An opinion of the yield which would be appropriate for a freehold Grade A
office investment in a prime location let at a current market rent to a tenant with a strong
financial covenant.
Investment Turnover – Capital transactions comprising freehold and long leasehold acquisitions
for investment, owner occupation or development. Corporate transactions are excluded.
Stratford
Camden
Regents
Park
Marylebone/Euston
North of
Oxford Street
Mayfair
Bloomsbury
Covent
Soho Garden
Northern
Fringe
City
Midtown
South Bank
Central City
Eastern
Fringe
Wapping
Canary
Wharf
Royal Docks
Isle of
Dogs
Greenwich
Peninsula

Contacts
Neil Prime
Director
Head of UK Office Agency
+44(0)20 7399 5190
neil.prime@eu.jll.com
Damian Corbett
Director
Head of London Capital Markets
+44(0)20 7399 5286
damian.corbett@eu.jll.com
Jon Neale
Head of Research - UK
EMEA Research
+44(0)20 7852 4685
jon.neale@eu.jll.com
Jonathan Evans
Director
West End Agency & Development
+44(0)20 7399 5950
jonathan.evans@eu.jll.com
Julian Sandbach
Director
West End Investment
+44 (0)020 7399 5973
julian.sandbach@eu.jll.com
Dan Burn
Director
City Agency
+44 (0)20 7399 5966
dan.burn@eu.jll.com
Chris Northam
Director
City Investment
+44(0)20 7399 5826
chris.northam@eu.jll.com
Angus Goswell
Director
City & Canary Wharf Agency
+44 (0)20 7399 5508
angus.goswell@eu.jll.com
Sam McMillen
Marketing Manager
EMEA Marketing
+44(0)20 7399 5964
sam.mcmillen@eu.jll.com
OnPoint reports from Jones Lang LaSalle include quarterly and annual highlights of real estate activity, performance and specialised
surveys and forecasts that uncover emerging trends.
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