Who is Developing London: Trends in Office Development, Occupation & Investment. Richard Yorke Director

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1 Who is Developing London: Trends in Office Development, Occupation & Investment Richard Yorke Director

2 2018: Big Year for Office Completions Central London Annual Office Completions by Market 10 Office Completions ( Million SF) London City London West End London Midtown London Docklands London Southbank

3 And Much is Still Under Construction Central London Offices Under Construction

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6 Developments Around Crossrail Stations 5 Kingdom St Proposed 210,000 SF 2 Merchant Sq Proposed 170,000 SF 65 Davies St Proposed 65,000 SF Soho Place Proposed 285,000 SF Charterhouse Place Proposed 181,000 SF 2-3 Finsbury Ave Proposed 563,000 SF 1 Whitechapel High St Proposed 65,000 SF Paddington Square Under Construction 410,000 SF Brunel Building Under Construction 244,000 SF Source: CoStar Group Hanover Sq Under Construction 205,000 SF 100 Liverpool St Under Construction 546,000 SF 100 Bishopsgate Under Construction 868,000 SF 22 Bishopsgate Under Construction 1.3 m SF 70 St Mary Axe Under Construction 312,000 SF One Braham Under Construction 320,000 SF 6

7 Too Much New Supply this Cycle? Rolling Annual Net Completions, Central London vs Big Six 7 Rolling Annual Net Completions (Million SF) (1) (2) Q2 06 Q2 07 Q2 08 Q2 09 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 Q2 15 Q2 16 Q2 17 Q2 18 Q2 19 Big Six Central London

8 Vacancies Remain Low Despite Recent Supply Wave Central London Office: Supply, Demand & Vacancy

9 But Leasing Has Slowed, Despite Co-Working Quarterly Leasing Activity in Central London

10 WeWork Now 2 nd Biggest Holder of Office Space Top Occupiers in Central London Occupier Office Space (Million SF) 1 UK Government WeWork* Regus HSBC Deutsche Bank JPMorgan 1.67 * Includes pre-let space, excludes Devonshire Sq Source: CoStar UK As of Q4 2017

11 Impact of Serviced Office Take-up on Smaller Buildings Central London Office Vacancy Rate in Buildings <25,000 SF WeWork takes first major London office at 199 Bishopsgate

12 Lots of Pre-lets, But Lots of Relocation & Consolidation

13 City Core Submarkets Could See Vacancy Increases Net Absorption, Deliveries, Vacancy London City Core North

14 Average Office Rents Falling Across London Average Office Rents - London Markets

15 18Q2: Strongest Quarter Ever for City Investment London City Office Investment by Quarter

16 Far Eastern Investors Snap Up City Trophies 20 Old Bailey 5 Broadgate Ropemaker Place Month: June 2018 Buyer: Mirae AM Seller: Blackstone Month: June 2018 Buyer: CK Asset Hldgs Seller: GIC & BL Month: June 2018 Buyer: Ho Bee Land Seller: AXA & Gingko

17 Far East Investing Heavily Top Foreign Investors by Country in Q2 2018

18 Americans in Retreat North American Net Investment in UK CRE 5 Net Investment ( bn) Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17 Q4 17 Q2 18 North American Net Investment

19 Big Deals Mask Weaker Activity in London No of Central London Office Sales by Quarter No of Deals Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17 Q4 17 Q2 18 No of Central London Office Sales Five-Year Quarterly Average

20 Summary Lots of new office stock to be delivered in 2018 And much more in the pipeline Crossrail and mega projects driving development volume London pipeline greatly exceeds other big UK cities combined Positive net absorption has pulled down vacancies But demand slowing, despite huge growth in co-working Pre-letting partly underpinned by relocations and consolidations Vacancies in smaller office buildings rising (WeWork effect?) And average office rents falling in most submarkets City looks vulnerable to Brexit fallout and rapidly escalating vacancies However, record levels of investment, especially from Far East, targeting City But US investors have been big sellers since referendum Trophy assets mask wider slowdown in office investment activity