UNITED KINGDOM SOUTH EAST OFFICES QUARTER

UNITED KINGDOM SOUTH EAST OFFICES QUARTER 4

2 ANNUAL TAKE-UP 3.66m SQ FT 5-YEAR ANNUAL AVERAGE 10% 5-YEAR AVG Q4 TAKE-UP 1.38m SQ FT 37% YEAR-ON-YEAR 34% QUARTER-ON-QUARTER MARKET HIGHLIGHTS Any concerns over a Brexit slowdown in the South East were unfounded as leasing activity in was the highest since 2015 and is an incredible 37% higher than total takeup in. Demand in started slowly, but ended on an unexpected high with total annual take-up at 3.6 million, which is 10% above the 5yr annual average (3.3 million ). Quarterly take-up in Q4 helped to bolster the annual figure with 1,384,877 leased. The trend towards larger floor plates continued in Q4, with 20 deals between 20,000 and 50,000+. The largest deal this quarter saw Virgin Media take the entirety of 500 Brook Drive (120,000 sq ft) at Green Park. This marks a move for the media giant from Hook. There are a number of other large deals worth noting this quarter including McLaren leasing 65,000 sq ft at Victoria Gate, Woking, Novartis taking 54,000 at Westworks in White City, while Audatex purchased 50,000 at Worldwide House in Bracknell and IQVIA took 50,000 at 3 Forbury Place in Reading. Lettings between 20,000 and 50,000 accounted for 41% of total annual take-up and 25% of the total number of transactions. This is in line with levels of demand in the same size band in (see Figure 1). However, there were more transactions in the smaller size bands (5,000 10,000 ) in with 94 transactions, representing 47% of total deals. Thus showing that the smaller end of the market continued to support strong takeup levels (see Figure 1). Although, there have been a number of occupiers moving from business parks to town centre accommodation, business park take-up across the South East was greater than in-town take-up in at 1.9 million. The key attraction for occupiers to business parks is the parking and privacy that business parks provide (see Figure 2). The growth in business park take-up was further supported by the three largest deals this year. They were, the ASOS deal at Leavesden Park, Watford for 120,000, Virgin Media took 120,000 at Green Park and Pernod (85,000 ) at Building 7 in Chiswick Park. Growth in flexible office take-up continued to strengthen during, with a total of 569,561. Q4 was the strongest quarter for leasing to the serviced office sector, which saw a 52% increase q-o-q (see Figure 3). Spaces and Regus were the most active flexible space providers in the South East this quarter, with Spaces accounting for 60% of all serviced office take-up this quarter. They took a total of 133,000 in Hammersmith, Stockley Park and Milton Keynes. In addition to the increase in demand for larger units this quarter, we continue to see occupiers seeking the best space available. As a result, Grade A take-up has gone from strength to strength over the year, with the most Grade A space being transacted in Q4 (1,030,617 ). In total, 2.6 million of prime space was transacted this year (see Figure 4). Supply levels in the South East continue to be eroded as vacancy levels are now at 8.1% compared with 9.3% at this time last year. Supply dynamics will keep rents strong in the South East. Key centres that have seen strong rental growth include Windsor with 22% annual growth, as well as Ealing and Brighton both seeing 14% annual growth.

ANNUAL % TAKE-UP BY MARKET ANNUAL % AVAILABILITY BY MARKET 3 44% 24% 17% 13% 1% 45% 29% 13% 12% 1% TV South M25 West London North M25 SW London NW London ANNUAL VACANCY % AND TRENDS TV 8.7% South M25 12.6% North M25 5.9% FIGURE 1: PERCENTAGE ANNUAL TAKE-UP BY SIZE BAND West London 11.1% NW London 0.3% SW London 4.6% FIGURE 2: SOUTH EAST BUSINESS PARKS VS IN-TOWN TAKE-UP 5-10K 10K-20K 20k-50K 50k+ % Total Number of Deals 17% 18% 41% 24% 47% 24% 25% 4% 20% 29% 44% 7% 44% 32% 23% 2% SQ FT (000 S) 900 800 700 600 500 400 300 200 100 OOT 0 Q1 TOWN Q2 Q3 Q4 FIGURE 3: SERVICED OFFICE TAKE-UP (Q1 - Q4 ) 223,747 FIGURE 4: SOUTH EAST GRADE A TAKE-UP BY QUARTER 1,030,617 113,223 147,354 138,800 580,398 691,137 70,661 60,508 53,000 59,660 285,841 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FIGURE 5: ANNUAL RENTAL GROWTH BY TOWN Windsor Ealing Brighton 14% 14% 22% 39.50 psf 42.75 psf 32.00 psf Woking 8% 32.50 psf Reading OOT 7% 36.50 psf Slough 6% 36.00 psf Stockley Park 4% 35.00 psf Reading 1% 37.00 psf Weybridge 1% 35.00 psf

4 Foundation Park, Maidenhead TOWN FOCUS MAIDENHEAD Maidenhead is a core Thames Valley town with a thriving office market, situated between Reading and Heathrow on the M4. The town benefits from excellent rail and road connectivity, set only to improve with the arrival of the Elizabeth Line. The town has always attracted a number of major corporate occupiers; including Adobe, Maersk, 3, Abbott, Johnson & Johnson and Hitachi. Supply in Maidenhead is now at its lowest since 2013, with just under 300,000 available. Of this availability, just under 50% is deemed Grade A and only 19,000 is in the town centre. Take-up in totalled 112,000, which is marginally down on the long term average of 125,000 per annum; however, this can largely be attributed to the lack of available options for occupiers to consider. The prime rent in the town centre now sits at 38.00 per sq ft, and in the out-of-town market at 32.00 per. Lack of Grade A supply and occupier demand meant that primes rents in the Maidenhead town centre have grown by 27% since 2010. The lack of supply, consistent demand and strong rental tone make Maidenhead an appealing market for investors and developers. There are currently two schemes under development in the town. JP Morgan are on site developing the newest building at Foundation Park, which will comprise 70,000 and is due to complete Q1 2020. Berwick Hill are close to completing their 19,000 Lantern development in the town centre, which is expected to complete in March 2019. The strong profile of the town has also resulted in a number of planning applications being submitted. Smedvig and HUB have recently been granted consent for the mixed-use regeneration of the Landing site, which will comprise two office buildings, residential accommodation in four buildings and a number of retail units around a central landscaped public square. Aberdeen Standard have put in an application to refurbish and extend King s Chase to 80,000 and Mayfair Capital have also applied for consent to redevelop Bell Tower House to provide 40,000.

5 MAIDENHEAD ANNUAL AVAILABILITY 612,732 517,701 494,796 344,449 714,294 668,863 524,423 433,540 298,676 2010 2011 2012 2013 2014 2015 2016 SUPPLY AT LOWEST SINCE 2013 50% OF AVAILABLE SPACE IS GRADE A, ONLY 19,000 SQ FT IS LOCATED IN CITY CORE MAIDENHEAD MAJOR CORPORATE OCCUPIERS UPCOMING DEVELOPMENTS BELL TOWER HOUSE 40,000 THE LANDING FOUNDATION PARK 70,000

6 INVESTMENT COMMENTARY Q4 saw 53 South East office investment transactions totalling 0.93bn. This represents a 16% increase on the 0.8bn transacted in Q4. Q4 continued to see a diverse spread of South East office investors. Councils accounted for 32% of the total transactions, whilst funds (19%), overseas investors (15%), residential developers (13%), privates (8%), private equity (4%) and property companies (4%) all invested in the quarter. Total investment volumes in South East offices for stand at 3.5bn. This reflects a 9% decrease on the 3.85bn transacted in, and a 23% increase on the 2.85bn transacted in 2016. The total number of transactions decreased by 5% from 180 transactions in to 170 transactions in, this is still some way below the peak of 2015 where 209 transactions were recorded. Prime South East office yields hardened and now stand at 4.75%, as evidenced by the following transactions in ; o St Georges House, Wimbledon - 52.8m / 4.35% (Dec-18) o Brinell Building, Brighton - 38.35m / 4.82% (Dec-18) o British Gas HQ, Oxford - 35m / 4.90% (Jan-18) Councils invested the highest volume of capital in South East Offices in, accounting for 29% of total investment with 1bn invested across 32 transactions (19% of total transactions). The most notable council acquisitions included; o Spelthorne Borough Council The Brockton Portfolio (1. Thames Tower, Reading 2. Porter Building, Slough 3. Charter Building, Uxbridge) - 285m (Aug-18) o Spelthorne Borough Council 12 Hammersmith Grove, Hammersmith - 170m / 5.25% (Jan-18) o Runneymede Borough Council Pine Trees, Staines-upon- Thames - 80.7m (Jun-18) o Runneymede Borough Council Volkswagen HQ, Milton Keynes - 50.15m / 4.83% (May-18) Investor demand from UK funds and councils remained strong in accounting for a combined 56% of total investment volumes and 42% of total transactions. Both types of investor were buyers of defensive Grade A assets, located in town centres and in close proximity to good transport links. Councils were the most prevalent buyer of long income offices in the South East in. Value-add and town centre office assets remained competitively sought after throughout the year. At the other end of the scale, business park assets struggled to gain traction, particularly given the perceived investor sentiment for whole business parks from overseas investors. Buyer diversity has been a key trend in. Out of 170 office transactions there were 123 different buyers, meaning 72% of transactions were from different parties. The current uncertainty that surrounds the UK s exit from the European Union did not appear to dampen investor appetite in, as evidenced in the final quarter. There were, however, a few deals that failed to appeal and were subsequently withdrawn due to lack of interest at the required price. Whilst we expect some investors to see Brexit as justification to apply caution at the start of 2019, many investors are currently sat on active capital and will be opportunity lead during this period of political uncertainty. With this in mind, we expect defensive town centre office income to attract reasonable demand at the start of 2019. There are now fewer office to residential deals transacting in the South East. This is due to an ever more limited pool of offices that remain suitable for conversion and which are situated outside Article 4 Directions, plus the declining levels of residential sales prices in certain markets. Until the uncertainty surrounding the UK s exit from the European Union is resolved, we envisage overseas investors continuing to apply a cautious investment stance to the South East office market. However, we believe that the weakened pound and relative safe heaven offered by the UK will continue to draw inward investment from the Middle East and Asia, albeit, this is most likely towards the latter half of 2019.

7 SOUTH EAST OFFICE INVESTMENT VOLUMES BY YEAR 4.475m 2.850m 3.850m 3.500m NUMBER OF TRANSACTIONS BY INVESTOR TYPE (%) IN COUNCIL FUND 29% 27% OVERSEAS 14% 3% 6% OWNER OCCUPIER PRIVATE PRIVATE EQUITY PROPERTY COMPANY 5% 6% 2015 2016 UNDISCLOSED 1% RESIDENTIAL 9% Q4 SE INVESTMENT HIGHLIGHTS Size () Term Certain Price Net Initial Yield Purchaser MICROSOFT HQ, READING 246,136 8 years 100,000,000 6.31% Valesco & AIP WESTSIDE, APSLEY, HEMEL HEMPSTEAD 189,849 6.2 years 65,250,000 6.61% (SPV) Gulf Finance House BRINELL BUILDING, BRIGHTON 65,253 10 years 39,000,000 4.75% Orchard Street ST GEORGES HOUSE, WIMBLEDON 65,291 3.75 years 52,800,000 4.35% M&G VICTORIA GATE, WOKING 66,415 10 years 41,000,000 4.76% Woking Council GLOBESIDE, MARLOW 119,000 7.7 years 41,300,000 6.25% Bucks County Council

METHODOLOGY AND CHANGES TO STATISTICAL ANALYSIS Colliers International South East Offices has changed our geographic boundaries to separate out NW London, West London and SW London. The map below provides a detailed representation of the towns and cities included in these groupings. A43 Milton Keynes A43 M40 Stevenage NORTH M25 Welwyn Garden City Oxford Hemel Hempstead St Albans Hatfield Harrow NW LONDONM11 Watford Borehamwood Wembley High Wycombe Ealing WEST LONDON White City Hammersmith Newbury THAMES VALLEY Reading BLACKWATER VALLEY Hook Basingstoke Fleet Marlow South Ruislip Uxbridge Maidenhead Stockley Park Slough Hayes & Heathrow Brentford Bracknell Camberley Farnborough Windsor Guildford Woking Staines Chertsey Weybridge SOUTH M25 Leatherhead Epsom Reigate Croydon Redhill Chiswick Richmond SW LONDON Twickenham Wimbledon Kingston upon Thames A2 New Malden M20 M26 M23 A3 Crawley FOR MORE INFORMATION NATIONAL OFFICES Mark Taylor +44 20 7344 6575 mark.taylor@colliers.com Mark Emburey +44 20 7344 6906 mark.emburey@colliers.com Toby Lumsden +44 20 7344 6706 toby.lumsden@colliers.com Alys Holland +44 20 7344 6794 alys.holland@colliers.com INVESTMENT Rob Cregeen +44 20 7344 6579 rob.cregeen@colliers.com Alex Titheridge +44 20 7487 1617 alex.titheridge@colliers.com Tom Farkas +44 20 7487 1609 thomas.farkas@colliers.com RESEARCH & FORECASTING Lisa Dean +44 20 7487 1961 lisa.dean@colliers.com Colliers International Group Inc. (NASDAQ:CIGI) (TSX:CIGI) is a top tier global real estate services and investment management company operating in 69 countries with a workforce of more than 12,000 professionals. Colliers is the fastest-growing publicly listed global real estate services and investment management company, with corporate revenues of $2.3 billion ($2.7 billion including affiliates). With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide, and through its investment management services platform, has more than $20 billion of assets under management from the world s most respected institutional real estate investors. Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services firm. Colliers is ranked the number one property manager in the world by Commercial Property Executive for two years in a row. Colliers is led by an experienced leadership team with significant equity ownership and a proven record of delivering more than 20% annualized returns for shareholders, over more than 20 years. For the latest news from Colliers, visit Colliers.com or follow us on Twitter: @Colliers and LinkedIn. Colliers International 50 George Street London W1U 7GA Research & Forecasting