UK Office Market Outlook H1
Investors target the regions Notwithstanding strong levels of activity, the occupational market has been overshadowed by the investment market where demand far outstrips supply and prices continue to harden. Developers are responding to the shortage of Grade A supply and confidence returning to the market with speculative space now under construction in all but one of the core eight markets outside London. The continued strengthening of the economy and growth in employment will bolster increased occupational demand over the second half of with further tightening of incentives and forecast rental growth.
Summary Summary statistics* H1 H1 H1 14 vs H1 13 (s sq ft) 3,4 3,181-6. Vacancy Rate (%) 11.9% 1. -15bps Average Weighted Prime Rent ( psf) 28.17 29.16 +3. U/C Spec (s sq ft) 2,3 3,27 +42. * Includes Birmingham, Bristol, Cardiff, Leeds, Manchester, Western Corridor, Edinburgh and Glasgow UK office rental clock Rental Growth Slowing Rents Falling London West End London City West London, Manchester, Edinburgh Thames Valley Glasgow Rental Growth Accelerating Rents Bottoming Out Birmingham, Bristol, Cardiff, Leeds For information on the Central London market, please see the JLL Central London Market Report UK Office Market Outlook H1 3
UK Outlook Highlights for on track to match the 1 year average. Continued erosion of Grade A supply in most markets. Rising confidence drives speculative development starts. Net effective rents increase as incentives move in. The sheer weight of money targeting the regional investment market hardens yields. Strong and balanced growth in H1 The UK economy saw GDP grow by. in the second quarter of, meaning the economy is now above its previous peak after more than six years. Significantly, we are now witnessing a sustained rebound in business investment which lends more balance with growth spread broadly across different sectors and regions. Manchester, Bristol and the South East are expected to outperform the UK average for growth in with Edinburgh forecast to pick up pace in 215. Figure 1: GVA Growth across the UK 3% 1% % Manchester Bristol Source: Oxford Economics South East UK Glasgow Edinburgh Birmingham 215 216 Leeds Cardiff Strong employment growth has accompanied the growth in output with the unemployment rate falling to 6. in the three months to April, its lowest level since 28. The referendum in Scotland has deferred decision-making for some occupiers volumes on track to hit 1-year average While the level of momentum seen in has not been maintained during H1, there has been a solid level of activity across the core eight regional markets. The 3.2 million sq ft transacted during H1 is already close to the 5-year annual average (3.5 million sq ft) and the market stands in good shape to match the 1 year average of 6.4 million sq ft. Corporates continue to seek to achieve property efficiency, but the reality is that many occupiers are being forced to make real estate decisions due to lease events or real growth, and there is a significant level of named demand due to convert into take-up during the latter half of the year. Manchester bucked the trend during H1 with a very strong start to the year, off the back of a strong, from both an occupational and investment perspective. during H1 was just shy of last year s total, boosted by Slater & Gordon s 14,312 sq ft acquisition of 68 Mosley Street, which was also the largest transaction to sign in the regions during H1. The UK office market continues to attract a wide range of business sectors with banking & finance, professional services (including legal) and manufacturing accounting for some of the larger deals during H1. Notable transactions include 81,63 sq ft to Barclays Bank in Manchester, 75,514 sq ft to Rockstar in Edinburgh and 59,245 sq ft to Pernod Ricard in Chiswick, West London. Figure 2: Big 8 Office 24-H1 s sq ft 9, 8, 7, 6, 5, 4, 3, 2, 1, 24 25 26 27 28 29 21 211 1 year average Source: JLL Big 8: Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Manchester and Western Corridor We are confident in the increase in occupier activity during the latter half of with the Western Corridor market alone recording 4.8 million sq ft of named active demand, up 3% year-on-year. The acceleration in employment growth is also a strong indicator 4 UK Office Market Outlook H1
of increased demand for floorspace. Whereas larger deals have typically been driven by consolidation or lease events, job growth will increasingly add momentum to the market. Development activity begins to address Grade A shortage Overall supply levels continue to be eroded in the major cities outside of London with the vacancy rate falling by 15 basis points year-on-year to 1.; the lowest level recorded since Q4 28. However, the volume of Grade A supply continues to be the pinch point with all markets experiencing a shortage. The Grade A vacancy rate is exceptionally low in Manchester (1.), Bristol (1.) and Leeds (1.) and remains at an historic low in West London (2.3%). The pressure the Grade A shortage places on the market is likely to lead to increased pre-letting activity in some markets but has also been a driving force for the commitment to speculative development in the core eight regional markets. As at mid- there is 3.3 million sq ft of speculative space under construction across the core 8 regional markets, up 4 year-on-year. The Western Corridor accounts for the greatest proportion of space on site (1.6 million sq ft) followed by Manchester (45, sq ft), Glasgow (435, sq ft) and Leeds (395, sq ft). During the first 6 months of, 1.4 million sq ft started on site across the core eight regional markets in 18 schemes. Figure 3: Core 8 Markets Speculative Development Activity s sq ft 4, 3,5 3, 2,5 2, 1,5 1, 5 28 29 21 211 215 216 217 Rents and rental expectations The contraction in Grade A supply and competition for the best quality space has seen a turning point in the core eight regional markets during H1 with incentives moving in in the majority of markets and a subsequent increase in net effective rents. The JLL UK Regional Office Rental Index saw prime rents increase by 3. year-on-year at mid-, driven by growth in the Western Corridor. Market conditions will continue to drive rental growth for the best space. We forecast that prime rents across the UK major markets (excluding London) will show modest growth over the -18 forecast period, averaging 2.1% per annum. The Western Corridor market is forecast to outperform the UK major markets averaging growth of 4.% per annum over the next five years. In the secondary market, rental growth is expected to be more limited with the JLL forecast of IPD data indicating growth of 1. per annum over -18 for Rest of UK Offices. Investment volumes and yields Investment volumes in the core eight regional markets outside of London totalled 1.5 billion over H1-, indicating that the 5-year average of 2 billion will be exceeded. The market was dominated by the sale of 1 Spinningfields / 3 Hardman Boulevard in Manchester for circa 32m; the largest deal recorded in the Big 6 regional markets. Manchester subsequently accounted for 3 of investment volumes in the core eight regional markets during H1, followed by the Western Corridor with 3%. Activity in Edinburgh and Glasgow has been more subdued as investors await the outcome of September s referendum. Figure 4: Prime Yield Profiles 8.% 7.% Source: JLL Completed U/C Definite Spec Start Likely Spec Start Likely Spec Start 6.% 5.% Despite construction activity, some markets will see a supply shortage over the next 12-18 months and refurbishment opportunities will need to be maximised 4.% 3.% Mar-9 Source: JLL Jul-9 Nov-9 Mar-1 Jul-1 Nov-1 Mar-11 Jul-11 Nov-11 Mar-12 West End Regional M25 towns Birmingham Manchester Edinburgh The investment market continues to recover ahead of the occupational market with South East and Regional offices continuing to attract an increasing pool of capital which shows no signs of abating. The sheer weight of money continues to drive yields inwards with all core eight regional markets seeing yield compression over the first six months of the year with prices expected to harden further by year-end. Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 UK Office Market Outlook H1 5
Birmingham Summary statistics Q2 (s sq ft) 114 Figure 5: 8 7 Vacancy Rate (%) 11. Prime Rent ( psf) 28.5 U/C Spec (s sq ft) Investment market Q2 Investment Vol. ( m) 161 s sq ft 6 5 4 3 2 1 29 21 211 Prime Yield (%) 5. 5 year average Market overview The Birmingham city centre market has seen a relatively slow first six months of with 216, sq ft of space taken-up. The largest deal of the year to sign so far was BCU acquiring 27,56 sq ft at the NTI Building during Q2. Despite the subdued start, the for the latter half of is encouraging with the proposed letting of the remaining 1, sq ft of 2 Snowhill to the HS2 construction company announced in July and a number of deals in the 2, 25, sq ft size bracket currently under offer. On this basis the five-year annual average of 633, sq ft looks more achievable. Figure 6: Supply and vacancy rates s sq ft 3,5 3, 2,5 2, 1,5 1, 5 29 21 211 Supply (lhs) Vacancy rate (rhs) 1 1 % Supply continues to gradually reduce with the overall vacancy rate moving in to 11.. The Grade A vacancy rate has remained constant at 2., but is expected to move in significantly over the next six months. In response to improved confidence in the market it is likely that speculative development will get underway in Birmingham over the next 6-s with the Post & Mail site well-placed to start on site in addition to two 15, sq ft buildings at Paradise Circus, and the refurbishment of 55 Colmore Row. Prime rents remain stable at 28.5 per sq ft but after a long period of stagnation incentives have moved in to circa 33 months on a 1 year term. As supply begins to tighten we expect further tightening of incentives. The investment market has seen a strong start to with 27m of stock sold during H1. There is continued appetite for regional offices as demonstrated by several transactions of note during Q2, including the 88m purchase of Priory & Temple Court by Legal & General, the 38m purchase of 5 St Philips Place by Cordea Savills and the 34m purchase of 55 Colmore Row by IM Properties, in addition to a number of significant sales that are due to complete during the latter half of. Prime yields in Birmingham continue to harden. Figure 7: Prime rents and rental growth % - -1% -1-29 21 211 Rental growth (y-on-y) (lhs) Figure 8: Prime yields 7% 29 21 211 Prime rent (rhs) 34 32 3 28 26 24 22 2 per sq ft Prime yields 1 year average 2 year average Source all Charts: JLL 6 UK Office Market Outlook H1
Bristol Summary statistics Q2 (s sq ft) 18 Vacancy Rate (%) 8.7% Prime Rent ( psf) 27.5 U/C Spec (s sq ft) 184 Investment market Q2 Investment Vol. ( m) 6.5 Figure 9: s sq ft 8 6 4 2 29 21 211 8 64 48 32 16 Prime Yield (%) 5.7 5 year average Market overview The Bristol city centre office market has had a steady start to the year with 295, sq ft of space taken-up which puts the market well on track to exceed the five-year annual average of 425, sq ft. However, when you drill down into the detail, the first six months have been characterised by a large number of smaller Grade B deals. Only 16,44 sq ft of Grade A space has been taken-up (within three transactions), all of which were occupiers expanding within their existing buildings. We expect to see significant levels of activity in the latter half of with a number of larger requirements seeking to commit to office space in a market where the Grade A supply options remain limited. The take-up of better quality Grade B space and loss of office space to alternative uses has moved the overall vacancy rate in by 1 basis points since the start of the year to 8.7%. Looking forward, speculative development activity will address some of the shortage with 184, sq ft under construction within three schemes. However, given the level of named active demand circulating in the market this space will soon be absorbed and a new wave of development activity is needed to maintain fluidity in the market. Prime rents remain at 27.5 per sq ft as at end-q2 but incentives have moved into circa 3 months rent free on a 1 year term as competition for space intensifies. We also expect growth in prime rents before year-end. The for Bristol offices is positive with JLL forecasting the city to show the strongest rental growth across the Big 6 (2. per annum) over the period -18. Figure 1: Supply and vacancy rates s sq ft 2, 1,6 1,2 8 4 29 21 211 Supply (lhs) Vacancy rate (rhs) Figure 11: Prime rents and rental growth % 29 21 211 Rental growth (y-on-y) (lhs) Prime rent (rhs) Figure 12: Prime yields 7% 3 28 26 24 22 2 1 1% % per sq ft Bristol s city centre investment market has been constrained by a lack of available stock over the first six months of with the key transaction comprising the sale of The Paragon for 29.45m in Q1. There continues to be strong investor interest in Bristol and as stock becomes available we expect prices to harden. 29 21 211 Prime yields 1 year average Source all Charts: JLL UK Office Market Outlook H1 7
Cardiff Summary statistics Q2 (s sq ft) 54 Figure 13: 6 5 Vacancy Rate (%) 8. Prime Rent ( psf) 22. U/C Spec (s sq ft) 22 Investment market Q2 Investment Vol. ( m) s sq ft 4 3 2 1 29 21 211 Prime Yield (%) 6.% 5 year average Market overview While Cardiff city centre has seen a relatively quiet start to, all eyes are on the second half of the year as a number of long standing requirements are under offer and would result in overall take-up exceeding the five year annual average of 35,7 sq ft. The most significant deal to sign during Q2 was British Gas taking 14,666 sq ft at 3 Callaghan Square at 21 per sq ft; this was also the only Grade A transaction to sign during Q2. During Q2, BBC Wales also announced that it has selected Rightacre s Capital Square as the preferred site for its new 15, sq ft building which would be due to start on site in early 216. Figure 14: Supply and vacancy rates s sq ft 1,4 1,2 1, 8 6 4 2 29 21 211 Supply (lhs) Vacancy rate (rhs) 1 1 1% % With developer confidence returning to the Cardiff market, the previous lack of supply of Grade A space is being addressed but there will continue to be a pinch point over the next 12-18 months when refurbishment opportunities will need to be maximised. JR Smart has now started on site with an additional 8, sq ft at Capital Quarter, which is due for completion in Q4 215. In addition, Rightacres have commenced their 14, sq ft speculative Capital Square development which is due for completion Q4 215. Prime headline rents in Cardiff City Centre have remained at 22 per sq ft for the past 2 years although we have seen incentives beginning to move in. There is now a real case for rental growth in the city centre and we expect to see in excess of 22 achieved before year-end. Figure 15: Prime rents and rental growth 1% % 29 21 211 Rental growth (y-on-y) (lhs) Figure 16: Prime yields Prime rent (rhs) 24 22 2 18 16 per sq ft The investment market has been constrained by a lack of available stock over the first six months of, however there continues to be strong demand from institutions and private investors and as stock becomes available we expect prices to harden. 9% 7% 29 21 211 Prime yields 1 year average Source all Charts: JLL 8 UK Office Market Outlook H1
Edinburgh Summary statistics Q2 (s sq ft) 226 Figure 17: 9 8 Vacancy Rate (%) 6. Prime Rent ( psf) 29.5 U/C Spec (s sq ft) 1 Investment market Q2 Investment Vol. ( m) Prime Yield (%) 5.7 s sq ft 7 6 5 4 3 2 1 29 21 211 5 year average Market overview The looming referendum does not seem to have impacted take-up so far in, with Edinburgh seeing 226, sq ft let across 59 transactions in Q2, for a half year total of 489, sq ft. This represents the strongest start to the year since 24 and demonstrates the underlying strength of the market. The largest transaction of the quarter was a 25,555 sq ft letting to Johnston Press (The Scotsman) at Orchard Brae House. Figure 18: Supply and vacancy rates s sq ft 2,5 2, 1,5 1, 5 1% While the first half of the year has been strong, we anticipate a quieter Q3, although new requirements are continuing to come forward. Quoting rents for prime city centre offices remain at 29.5 per sq ft, reflecting the letting activity at Atria. Whilst generous incentive packages are still required to achieve lettings across the city, we are forecasting that tightening supply conditions will reduce these levels during the second half of. 29 21 211 Supply (lhs) Vacancy rate (rhs) Figure 19: Prime rents and rental growth 1% 3 28 % The strength of recent take-up has seen supply fall, with vacancy now at 6., down from 7.7% a year ago, and Grade A vacancy at 2.. The dynamics of the market are right for pre-letting activity with only three buildings currently able to accommodate a requirement over 3, sq ft in the city centre. % - - 26 24 22 per sq ft While there were no investment transactions in Q2, the 8 million funding of Quartermile 3 and 4 by M&G Real Estate was announced, enabling these two developments to proceed on a speculative basis. This indicates that market sentiment remains positive, with yields down by 5bps over the past year. Vendors remain cautious about the timing of sales but there remains a weight of money in the market for the right product and there may be a bounce-back in activity after September. - 29 21 211 Rental growth (y-on-y) (lhs) Figure 2: Prime yields 7% Prime rent (rhs) 2 28 29 21 211 Prime yields 1 year average 2 year average Source all Charts: JLL UK Office Market Outlook H1 9
Glasgow Summary statistics Q2 (s sq ft) 67 Figure 21: 8 7 Vacancy Rate (%) 1.3% Prime Rent ( psf) 28.5 U/C Spec (s sq ft) 435 Investment market Q2 Investment Vol. ( m) 21 s sq ft 6 5 4 3 2 1 29 21 211 Prime Yield (%) 5.7 5 year average Market overview The second quarter saw subdued leasing activity, with 67, sq ft let across 19 transactions, the lowest quarterly total since Q3. However, after a strong Q1 the first half of the year has seen solid activity overall, and ahead of the total in first half of. There was only one deal over 1, sq ft in Q2, a 11,6 sq ft letting to consultancy Hymans Robertson at Central Exchange, 2 Waterloo St. Other notable deals included 9,3 sq ft to Hays Recruitment at the Spectrum Building, 55 Blythswood Street and 9,1 sq ft to Morgan Stanley at the Sentinel, 13 Waterloo St. While take-up was subdued in Q2, there is around 155, sq ft under offer which indicates that we should see activity bounce back in Q3 in spite of the upcoming referendum. Tenants under offer include Grant Thornton and Deloitte. Prime rents moved up to 28.5 per sq ft, with incentives currently at 27 months for a ten year term. The Glasgow market continues to experience tight supply for Grade A space, but new supply scheduled to complete in 215 at 11 Queen St, 33 St Vincent St and 1 West Regent St will provide attractive options for tenants, and it is likely that more space will be let prior to completion in coming months. Figure 22: Supply and vacancy rates s sq ft 2, 1,6 1,2 8 4 29 21 211 Supply (lhs) Vacancy rate (rhs) Figure 23: Prime rents and rental growth % - - - - -1% 29 21 211 3 28 26 24 22 2 1 1 1% % per sq ft Investment activity was also limited in Q2, with four buildings traded for a total turnover of 21 million. Highlights were Patrizia s purchase of 3-4 St Vincent Place for 1.8 million, reflecting a net initial yield of 6.8, and LaSalle Investment Management s acquisition of 38 Cadogan St for 7. million. While there will be little stock brought to market over the summer months, there is strong underlying investor demand for Glasgow office stock and prime yields remain well supported at 5.7. Figure 24: Prime yields 7% Rental growth (y-on-y) (lhs) Prime rent (rhs) 29 21 211 Prime yields 1 year average 2 year average Source all Charts: JLL 1 UK Office Market Outlook H1
Leeds Summary statistics Q2 (s sq ft) 99 Vacancy Rate (%) 6.3% Prime Rent ( psf) 25. U/C Spec (s sq ft) 395 Investment market Q2 Investment Vol. ( m) 11 Figure 25: s sq ft 9 8 7 6 5 4 3 2 1 29 21 211 Prime Yield (%) 5. 5 year average Market overview Activity in Leeds has been relatively subdued during H1 after a strong. There were some 24 city centre deals during Q2, of which all but three were for less than 1, sq ft. The most significant was the letting of 24,242 sq ft of space at St John s to French motorway operator Sanef. However, enquiry levels remain strong and take-up is likely to increase in the second half of. Given the level of enquiries, it seems likely that there will be some major prelets later in the year. Nevertheless, many occupiers remain cautious, but are increasingly aware that supply is limited and that the balance of control is tipping towards the landlord. Figure 26: Supply and vacancy rates s sq ft 1,6 1,4 1,2 1, 8 6 4 2 29 21 211 Supply (lhs) Vacancy rate (rhs) 1 1 1% % Supply increased slightly over the quarter to 77, sq ft, bringing the vacancy rate to 6.3%. Grade A vacancy rates also rose (to 1.) but remain low by historic trends, explaining the increasing interest in prelets. The major event in the quarter was the volume of speculative space that started on site. MEPC s No. 6 Wellington Place (13, sq ft) is now under construction. In addition, Central Square (2, sq ft) and 21 Queen Street (38, sq ft) also started on site. Prime rents remained stable at 25 per sq ft, typically 24 months rent free on a 1-year term. However as confidence builds we expect further tightening of incentives. Figure 27: Prime rents and rental growth 1% % 28 29 21 211 Rental growth (y-on-y) (lhs) Prime rent (rhs) 27 26 25 24 23 22 21 per sq ft Leed s investment market has been constrained by a lack of available stock over the first six months of with the key transaction during Q2 comprising the sale of Wellington House, Lisbon Street for 8.8m (5.5). There continues to be strong investor interest in Leeds and as stock becomes available we expect prices to harden. Figure 28: Prime yields 7% 29 21 211 Prime yields 1 year average 2 year average Source all Charts: JLL UK Office Market Outlook H1 11
Manchester Summary statistics Q2 Figure 29: 1,4 (s sq ft) 477 1,2 Vacancy Rate (%) 7. Prime Rent ( psf) 31. U/C Spec (s sq ft) 45 Investment market Q2 s sq ft 1, 8 6 4 2 Investment Vol. ( m) 469 29 21 211 Prime Yield (%) 5.2 5 year average Market overview Manchester has seen a very strong start to, both from an occupational and investment perspective. for the first half of the year totalled 795, sq ft and, with a five-year annual average of 896, sq ft, it looks set to be a bumper year for the city centre market. In addition, the largest Big 6 investment sale recorded completed in Manchester at end-q2 with the sale of 1 Spinningfields / 3 Hardman Boulevard for circa 32m. Figure 3: Supply and vacancy rates s sq ft 3, 2,5 2, 1,5 1, 5 1 1% The majority of occupational activity so far this year took place during Q2 when four deals alone accounted for 198,1 sq ft of take-up. Slater & Gordon (14,312 sq ft), Towergate Insurance (34,775 sq ft), Economic Solutions (34,261 sq ft) and Ford Capital (24,753 sq ft) all acquired existing Grade A space. A number of large requirements in the market are also due to complete before year-end, placing further pressure on Grade A supply. The erosion of Grade A supply has resulted in the vacancy rate moving in by 7 basis points to just 1., the lowest level since records began. The volume of Grade B space remains relatively static and Manchester has not yet seen the volume of conversion to other uses seen in some other regional city centres. The market is responding to the shortage of Grade A by committing to speculative activity at The Embankment, Greengate, One New Bailey and The Cotton Building, Spinningfields. Prime rents remain stable at 31. sq ft. As supply continues to be squeezed we are already seeing the hardening of incentives with 27 months rent free on a 1 year term and trending keener. 29 21 211 Supply (lhs) Vacancy rate (rhs) Figure 31: Prime rents and rental growth 1 1 % - - 29 21 211 Rental growth (y-on-y) (lhs) Prime rent (rhs) Figure 32: Prime yields 7% 32 3 28 26 24 22 2 % per sq ft The landmark sale of 1 Spinningfields / 3 Hardman Boulevard by RBS to M&G Real Estate dominated the wider regional investment market during Q2 and has seen prime yields in Manchester move into 5.2. Manchester remains on the radar and we expect continued strong demand from buyers over the remainder of the year with further yield compression. 29 21 211 Prime yields 1 year average 2 year average Source all Charts: JLL 12 UK Office Market Outlook H1
Western Corridor Summary statistics Q2 (s sq ft) 435 Figure 33: 3, 2,5 Vacancy Rate (%) 13.1% Prime Rent ( psf) 3.71 U/C Spec (s sq ft) 1,573 Investment market Q2 Investment Vol. ( m) 237 s sq ft 2, 1,5 1, 5 29 21 211 Prime Yield (%) 5. 5 year average Market overview The Western Corridor is yet to pick up momentum after a slow start to the year. for Q2 totalled 435,35 sq ft, just short of the five year quarterly average, and brought the half-year total to 85, sq ft. Key transactions during Q2 included VM Ware committing to Flow One and Flow Two (62, sq ft) in Staines and Accor UK Hotels acquiring 25, sq ft at 1 Hammersmith Grove. The disappointing take-up levels reflect the spaceless growth and push for property efficiency which many corporates are striving to achieve. However, the volume of named active demand continues to increase (up 9% year-on-year) as occupiers with lease events or who are experiencing real growth are forced to consider their real estate options. Much of this activity should convert to take-up during the latter half of /15. Overall supply levels fell by 7% year-on-year during Q2 to the lowest level recorded since mid-29; a direct result of office space being converted to alternative uses. The Western Corridor Grade A vacancy rate stands at just 2.7% and reflects the fact that occupiers continue to strive for good quality Grade A space, with this being the pressure point in the market. The Grade A shortage is being addressed by speculative activity with 555, sq ft of new space starting on site in Q2. Over the period -16 there is currently 1.6 m sq ft of speculative space under construction and due to complete. Rents in the Western Corridor continue to grow, increasing by 6.% year-on-year during Q2, to reach 3.71 per sq ft. The West London market led this growth, with rents increasing by 7. to 35.57 per sq ft. JLL forecasts show Western Corridor prime average rents increasing by 4.% per annum over -18. The investment market remains buoyant and we expect a strong H2- as investors look to move up the risk curve by investing in properties outside of London, with the South East proving to be a particularly attractive market. Figure 34: Supply and vacancy rates s sq ft 13,5 13, 12,5 12, 11,5 11, 1,5 29 21 211 Supply (lhs) Vacancy rate (rhs) Figure 35: Prime rents and rental growth % - - - - -1% -1 29 21 211 Rental growth (y-on-y) (lhs) Prime rent (rhs) Figure 36: Prime yields 7% 29 21 211 Thames Valley prime yields TV 1 year average West London prime yields WL 1 year average 32 3 28 26 24 22 2 1 1 13% 1 per sq ft Source all Charts: JLL UK Office Market Outlook H1 13
Definitions Floor space acquired for occupation by lease, prelease, freehold or long leasehold sale in the City Centre (unless otherwise stated). All deals are included with the exception of Western Corridor and Bristol where 5, sq ft and 1, sq ft thresholds are applied respectively. Cardiff take-up includes City Centre and Cardiff Bay. Supply Floorspace on the market and available for occupation. It includes space that is under offer. Under Construction Speculative development of new building or substantial refurbishment where construction activity is ongoing. Demand New enquiries logged on a quarterly basis, over 2, sq ft for London and the South East and over 1, sq ft for the regional markets. Prime Rent The JLL view of the highest rent achievable for a hypothetical 1, sq ft unit of Grade A space in a prime location, without any adjustment for incentives. Business Sectors Broad business sectors are classified as: Banking & Finance: Banks and other financial institutions Professional Services: Accountants, legal, management consultants etc Service Industries: Advertising and PR, broadcasting, internet services, printing and publishing, software houses and data processing, telecommunications services, transport, retail, leisure etc Manufacturing Industries: Pharmaceuticals, computer hardware, electronics, construction, mining, engineering, food and drink etc Public Administration & Institutions: Central and local government, institutions, charities, quangos, health and social etc Investment Volumes Investment volumes include city centre investment volumes, quoted in GBP (grossed up). 14 UK Office Market Outlook H1
Contacts BUSINESS CONTACTS Jeremy Richards Head of National Offices Bristol +44 ()117 93 5745 jeremy.richards@eu.jll.com Angus Minford Capital Markets +44 ()2 787 535 angus.minford@eu.jll.com Mark Wilson Capital Markets +44 ()2 7399 5874 mark.wilson@eu.jll.com LEASING CONTACTS Jonathan Carmalt Birmingham +44 ()121 214 9935 jonathan.carmalt@eu.jll.com Andrew Pearce Exeter +44 ()139 242 932 andrew.pearce@eu.jll.com Matthew Smith Nottingham +44 ()115 98 2123 matthew.smith@eu.jll.com Ian Wills Bristol +44 ()117 93 5746 ian.wills@eu.jll.com Mike Buchan Glasgow +44 ()141 567 6623 mike.buchan@eu.jll.com David McGougan Southampton +44 ()238 38 5628 david.mcgougan@eu.jll.com Rhydian Morris Cardiff +44 ()292 72 62 rhydian.morris@eu.jll.com Jeff Pearey Leeds +44 ()113 261 6236 jeff.pearey@eu.jll.com James Finnis Western Corridor +44 ()2 8283 2534 james.finnis@eu.jll.com Cameron Stott Edinburgh + 44 ()131 31 6715 cameron.stott@eu.jll.com Chris Mulcahy Manchester +44 ()161 238 6228 chris.mulcahy@eu.jll.com Chris Hiatt National Offices London West End + 44 ()2 7399 5323 chris.hiatt@eu.jll.com UK Office Market Outlook H1 15
Contacts INVESTMENT CONTACTS Ross Burns Glasgow +44 ()141 567 6625 ross.burns@eu.jll.com Simon Merry North West +44 ()161 238 6213 simon.merry@eu.jll.com Ben Kelly Midlands +44 ()121 634 6527 ben.kelly@eu.jll.com Olly Paine South West +44 ()117 93 5718 oliver.paine@eu.jll.com Justin Millett Cardiff +44 ()292 72 66 justin.millett@eu.jll.com Andrew Summersgill North East +44 ()113 235 529 andrew.summersgill@eu.jll.com Chris Macfarlane Edinburgh +44 ()131 243 221 chris.macfarlane@eu.jll.com Colin Finlayson Edinburgh +44 ()131 31 6721 colin.finlayson@eu.jll.com RESEARCH CONTACTS Ben Burston UK Research +44 ()2 7399 5289 ben.burston@eu.jll.com Vicky Heath UK Research +44 ()117 93 5738 vicky.heath@eu.jll.com UK Office Market Outlook H1 jll.co.uk COPYRIGHT JONES LANG LASALLE IP, INC.. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent 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 contains no factual errors. We would like to be told of any such errors in order to correct them.