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City OfficeMarket Watch July 2016

Supply and demand snapshotg Take-up for June was 440,638 sq ft, bringing the year-to-date City total to 2.6m sq ft, which is 31% down on this point last year. However, this is in-line with the 10-year average for the first half of the year (Graph 1). Furthermore, 82% of all transactions to date have been of a Grade A standard.

g June's activity has brought the 12-month rolling take-up figure to 6.2m sq ft, which is still 25% up on the long-term average.

g There have been 215 transactions so far this year, up 16% on the 10-year average for the first half (186 deals).

g The largest deal of the month was the acquisition of 47,101 sq ft at Beaufort House, 15 St Botolph Street, EC3 by Instant Managed Offices. The serviced office provider took the space on a 5 year lease at £40.00/sq ft.

g Another notable deal for June was at The Whitechapel Building, E1. Perkins & Will took the third floor (26,641 sq ft) on a 10 year lease with a fifth year break at a confidential rent.

g So far this year, Insurance & Financial services have accounted for the greatest amount of take-up at 27%. They are followed by Professional services (12%), Tech & Media (12%), Retail & Leisure (10%). Serviced offices accounted for 12% of take-up last year, however so far this year they have accounted for just 5%.

g Total City supply stood at 6.4m sq ft, equating to a vacancy rate of 5.2%, up on this point last year by 0.5%. The rise in supply is a result of schemes scheduled to

achieve PC in Q4 being added to current supply, such as Angel Court (312,000 sq ft) and Creechurch Place (273,000 sq ft).

g There is currently 1.3m sq ft of space under-offer in the City, which is 2% up on the long-term average. Of this, 47,855 sq ft went under-offer in June.

g Despite occupier uncertainty both prior, and post, the Referendum, rents have seemingly not been affected. The average grade A rent for the first half of this year is £62.25/sq ft, which is higher than any annual equivalent on record and up on the 10-year annual average by 31%.

g The average prime rent (including towers) for the year so far is £75.91/sq ft, falling to £72.74/sq ft when towers are omitted.

g Our development pipeline is under constant review as news regarding future schemes emerges. However, we are currently tracking 16.5m sq ft of refurbishments and developments due to arrive to the market between now and the end of 2019, of which 27% is already pre-let (Graph 2).

g Following the Referendum, we have seen City leasing activity remain robust with over 500,000 sq ft of activity. More of this will be addressed next month, but decisions by both Amazon to take an additional 80,000 sq ft in Principal Place, and Wells Fargo to owner occupy 33 Central (227,000 sq ft) are very encouraging for the market. Moreover, total City requirements are at 8.7m sq ft, which is 10% up on the 12-month average, and the greatest amount since March 2015.

City stays strong in post-Brexit aftermath

Source: Savills Research

Source: Savills Research

GRAPH 1

City take-up by quarter

GRAPH 2

City future pipeline

Savills Research UK Commercial

TABLE 1

Key June Stats

June stats

Take-up 440,638 sq ft

2016 Take-up 2,629,303 sq ft

Supply 6,401,861 sq ft

Vacancy Rate 5.2%

Top Rent £71.00/sq ft

Avg Grade A Rent £58.11/sq ft

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Market Watch | City offices

TABLE 7

Demand & Under Offers

TABLE 6

Development pipeline

Analysis close upTABLE 2

Monthly take-up

Sq ft % Grade A Total % Grade A % chg on prev month

Vacancy rate (%)

Jun-15 793,310 82% 5,844,052 87% -7.7% 4.7%

Jul-15 649,077 93% 6,177,038 87% 5.7% 5.0%

Aug-15 724,348 93% 5,582,209 87% -9.6% 4.5%

Sep-15 608,635 91% 5,452,795 86% -2.3% 4.4%

Oct-15 302,899 75% 5,854,776 88% 7.4% 4.7%

Nov-15 558,912 93% 5,681,604 88% -3.0% 4.6%

Dec-15 772,590 87% 5,583,260 89% -1.7% 4.5%

Jan-16 420,887 83% 5,848,356 88% 4.7% 4.7%

Feb-16 399,236 82% 5,325,841 88% -8.9% 4.3%

Mar-16 841,219 81% 5,483,368 90% 3.0% 4.4%

Apr-16 316,885 87% 5,619,663 89% 2.5% 4.5%

May-16 210,438 98% 5,511,110 88% -1.9% 4.5%

Jun-16 440,638 71% 6,401,861 89% 16.2% 5.2%

TABLE 5

Supply

TABLE 4

Rents

£ per sq ft Top achieved

Average

Grade A Grade B Prime* Rent free**

Jun-15 £83.00 £56.81 £32.80 £74.97 19

Jul-15 £81.00 £58.18 £39.19

Aug-15 £90.00 £61.94 £42.38

Sep-15 £75.00 £55.00 £39.15 £80.20 21

Oct-15 £70.00 £53.05 £36.80

Nov-15 £64.00 £58.45 £28.75

Dec-15 £76.79 £57.60 £44.08 £69.52 18

Jan-16 £95.00 £60.57 £21.00

Feb-16 £77.50 £62.84 £43.36

Mar-16 £75.00 £56.89 £46.77 £78.13 21

Apr-16 £72.50 £59.73 £42.17

May-16 £72.50 £63.70

Jun-16 £71.00 £58.11 £43.19 £74.14 17

City Potential Requirements (sq ft) 2.5m

City Active Requirements (sq ft) 6.3m

City Total Requirements (sq ft) 8.7m

% change on 12 month ave 10%

Total under offer (sq ft) 1.3m

Under offer this month (sq ft) 47,855

% change on average 0%

Landlord controlled supply 82%

Tenant controlled supply 18%

*Average prime rents for preceeding 3 months

** Average rent free on leases of 10 years with no breaks for preceeding 3 months

N.B. We have amended our historic stock figures, resulting in a slight change of our historic vacancy rates (Aug 2015)

Completions due in the next 6 months are included in the supply figures

Sq ft Refurb Devs Total%

Pre-let

2016 1,855,723 3,274,429 5,130,152 41%

2017 2,336,400 1,141,544 3,477,944 21%

2018 1,287,734 3,577,778 4,865,512 33%

2019 518,901 2,519,644 3,038,545 0%

Total 5,998,758 10,513,395 16,512,153 27%

Sq ft% change on previous year

% Grade A

Jan 15 - Jun 15 3,823,509 15% 83%

Jan 16 - Jun 16 2,629,303 -31% 82%

TABLE 3

Year to date take-up

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Market Watch | City offices

Address Floor/s Sq ft Grade Rent achieved Tenant Lessor

Beaufort House, 15 St Botolph Street, EC3 3, Part 4 47,101 B £40.00 Instant Managed Offices

LtdLibyan Investment Authority

Swan House, 33 Queen Street, EC4 Building 35,000 A £60.00 WeWork Corpus Sireo

The Whitechapel Building, 10 Whitechapel High Street, E1 3 26,641 A Confidential Perkins & Will Derwent

Cottons Centre, Cottons Lane, SE1 Part 1 25,252 A £55.00 Zopa.com Network Rail

1 London Wall, EC2 3 20,647 A £57.50 Manulife Asset Management HansaInvest

City Place House, Basinghall Street, EC2 8 19,474 A £35.00 SThree Recruitment GPE

The Shard, London Bridge Street, SE1 Part 11 16,875 A £62.00 Dodd Group Teighmore Ltd via REM

The Relay Building, 1 Commercial Street, E1 3 15,913 A £56.50 8X8 Solutions Angelo Gordon

14 Cornhill, EC3 1 14,624 A £57.50 Vestra Wealth Ashton Global Investments

70 Mark Lane, EC3 3 14,209 A £63.50 Accenture Miller Insurance

Address Postcode Available Sq ft Comments

Angel Court EC2 311,590

Creechurch Place EC3 278,609

Lacon House WC1 159,184

Herbal House EC1 110,867

The Shard SE1 99,573 further 10,333 sq ft under offer

Whitechapel Building E1 95,821 further 48,763 sq ft under offer

International House E1 92,007 further 10,000 sq ft under offer

Cannon Place EC4 83,386

8 Finsbury Circus EC2 79,489

1 King William Street EC4 57,355 further 37,420 sq ft under offer

The Monument Building EC3 53,495 further 8,475 sq ft under offer

TABLE 8

Significant June transactions

TABLE 9

Significant supply

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Market Watch | City offices

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Peter ThursfieldCity Agency0207 409 8928pthursfield@savills.com

MAP 1

Savills City office market area (updated at the end of each quarter)

City 2016 Q2 stats

Ben RaywoodResearch Analyst0207 409 8791braywood@savills.com

Josh LambCity Agency0207 409 8891jlamb@savills.com