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CENTRAL LONDON OFFICE MARKET UPDATE Q2 2018 RESEARCH Real Estate for a changing world

CENTRAL LONDON OFFICE MARKET UPDATE CONTACTS Leasing Strong occupier activity continued in Q2 2018 with 3.35m sq ft of lettings Despite the addition of several developments due for delivery in Q4 Asset Management purchased 20 Old Bailey, EC4 for 341m reflecting a Daniel Bayley Head of City Agency daniel.bayley@realestate. +44 (0)20 7338 4444 STATS AT A GLANCE recorded. This brings H1 2018 levels to 7.06m sq ft, 26% ahead of the same period last year. 2017 was defined by a lack of activity from SME s; this year however deals of <5,000 sq ft are up 2018 to the supply figures, strong demand for new/refurbished space, as well as second hand space meant the vacancy remained steady at 5.63% in Q2. NIY of 4.2% and Korea Investment & Securities acquired 70 Mark Lane, EC3 for 200.5m reflecting a NIY of 4.62%. UK institutions have become SImon Knights Head of West End Agency simon.knights@realestate. +44 (0)20 7318 5041 Aidan Meynell Head of City Investment aidan.meynell@realestate. +44 (0)20 7318 5018 4.04BN Q2 2018 office investment volumes are up 72% on Q1 2.60BN Curly under offer in Central London 21% on H1 2017 however still below the long term H1 average of 452 deals. Despite continued economic uncertainty, occupier sentiment seems to be mounting. Rolling 12-month take-up is at 14.1m sq ft, its highest level post Referendum. Furthermore, under offers stand at 3.40m sq ft from 3.00m sq ft in Q1, this includes 611,000 sq ft to Facebook in King s Investment Q2 2018 volumes reached 4.04bn, 72% ahead of Q1. This brings H1 2018 volumes to 6.39bn, 18% below H1 2017. Strong Q2 levels were largely due to a return of multiple transactions in excess of 100m. The largest was the sale of UBS s headquarters at 5 Broadgate, EC2 increasingly active, focusing on smaller lot sizes, particularly in the submarkets of Clerkenwell and Southbank where the al story remains positive. The West End has also seen an uptick in activity from UK institutions, as demonstrated in the sale of Portland and Riding Estate, W1 for 49.6m, reflecting a NIY of 3.90% to M&G Real Estate. Simon Glenn Head of West End Investment simon.glenn@realestate. +44 (0)20 7318 5045 3.50% Prime yields in the West End remained stable in Q2 2018 4.00% City prime yields saw no movement in Q2 2018 Cross, which has now been agreed. After a subdued Q1 for Serviced Office operators, the sector returned to take an 18% share of Q2 take-up. for 1.0bn reflecting a NIY of 3.95% to Hong Kong investor CK Asset Holdings. The second largest was the sale of Ropemaker Place, EC2 for 650m reflecting a NIY of 4.6% to Strong demand and competition for the best stock is keeping prime yields stable at 4.0% in the City and 3.5% in the West End. Kuldeep Gadhary Research kuldeep.gadhary@realestate. +44 (0)20 7338 4844 5.63% Central London Q2 2018 vacancy rate is 7bps up on Q1 2018 27% Tenant space share of total supply fell for the first time since the EU referendum in Q2 The four largest deals from the sector unsurprisingly came from WeWork and The Office Group, however activity from smaller niche operators also picked up pace including Knotel, Fora and Storey. The Media Tech sector also accounted for an 18% share. Tenant supply fell to 3.46m sq ft in Singaporean investor Ho Bee Land In the West End, key transactions included the sale of Burlington Arcade, W1 to Motcombe Estates for 296.5m reflecting a NIY of 3.60%. The sale of 20 Soho Square, W1 for 117.0m reflecting a NIY of 4.00% to a Private German investor, demonstrates The latest MSCI initial yield data suggested a degree of softening on average Central London office yields in June. For those investors priced out of the capital, the next 12 months may present a window of opportunity on stock perceived as riskier i.e. high vacancy/developments and refurbishments. Q2, the first quarterly fall since the renewed appetite in the West End EU referendum. This equates to a 27% from European investors. share of total supply which is down from its peak in Q1 2018 of 30%. The After a pause for breath in Q1 from 7.06M 18% availability of second hand tenant space has given some cost conscious Asia Pacific investors, Q2 activity from the region picked up pace. H1 2018 take-up is 26% ahead of H1 2017 Media Tech and Serviced Offices took an equal share of Q2 2018 take-up occupiers more choice. Levels of second hand take-up has been rising, reaching 1.80m sq ft in Q2. Appetite remains for large freehold assets with secure income streams. Q2 also witnessed an uptick in activity from South Korean investors on larger lot sizes. South Mirae www.realestate..com 3

herd s CENTRAL LONDON OFFICE RENTS & VACANCY RATES BY SUBMARKET WEST END Vacancy rate: 4.22% 10 yr avg vacancy rate: 5.86% Mayfair & St 115.00-9.8% James s Victoria 80.00-3.6% Soho 85.00-3.4% Noho East 82.50 3.1% Noho West 85.00-8.1% Paddington 67.50 5.5% Paddington Knightsbridge Chelsea West End Bond Street Mayfair Buckingham Palace Victoria MIDTOWN Vacancy rate: 4.72% 10 yr avg vacancy rate: 6.21% Covent Garden 77.50-3.1% Holborn 65.00-3.7% Soho Westminster Midtown Holborn Covent Garden Islington King s Cross St Pancras The Silicon Roundabout South Bank Nine Elms Battersea Power Station City London Bridge Northern Fringe City Fringe Bank NORTHERN FRINGE Vacancy rate: 1.64% CITY Vacancy rate: 6.32% 10 yr avg vacancy rate: 8.37% City 67.50-2.2% City Fringe 67.50 8.0% City Tower 77.50-3.1% The Shard SOUTHBANK Vacancy rate: 2.59% 10 yr avg vacancy rate: 5.34% Southbank 65.00 3.2% 10 yr avg vacancy rate: 7.04% King s Cross 75.00-1.3% Canary Wharf Rest of Docklands Stratford STRATFORD Vacancy rate: 8.24% Docklands Canary Wharf CENTRAL LONDON OFFICE MARKET UPDATE Stratford Stratford 45.00 5.9% DOCKLANDS Vacancy rate: 11.11% 10 yr avg vacancy rate: 7.92% 42.50-5.6% 30.00-6.3% The O2 www.realestate..com 5

THE WEST END (W1, SW1, W2, SW3, SW7, W8, NW1) MIDTOWN(WC1 & WC2) Take-up levels reached 0.87m sq ft in Q2 2018 bringing H1 levels to 1.85m sq ft, 53% ahead of H1 2017. So far this year 14 deals of >25,000 sq ft have been recorded, up on the average of eight traditionally seen in A combination of strong demand and a restricted development pipeline has resulted in supply falling to 2.84m sq ft, its lowest level since Q1 2016. This is 29% below long term average levels and equivalent to a vacancy rate of Deals to Apple and Facebook in Q2 resulted in the Media Tech sector dominating take-up 21% Media Tech sector take-up share Q2 take-up reached 0.39m sq ft in Q2, 51% ahead of Q1 and 35% ahead of the average. Buoyant demand means H1 take-up has reached 0.65m sq ft, in line with H1 average levels. 0.44m sq ft of development space will complete in Midtown, 28% of which is already pre-let. The largest development to complete is 261,000 sq ft at The Post Building, New Oxford Street, WC1, 123,000 sq ft of 0.65M SQ FT H1 2018 Midtown take-up H1 2018 take-up is inline with H1 average levels this size band. 4.22%. One deal of >100,000 sq ft was the Oxford Properties and Brockton recorded in Q2, WeWork took 131,500 scheme is pre-let to McKinsey. The largest deal recorded in Q2 was Sony s 77,200 sq ft pre-let at the Brunel Building, North Wharf Road, W2. The Derwent London scheme is due for completion in Q1 2019. Deals to Sony, Apple and Facebook 2018 will see approximately 0.78m sq ft of developments complete, well below average levels of 1.20m sq ft recorded per annum. The largest of which are the refurbishment and redevelopments of 21 St James s Square (62,000 sq ft) and 20 St 4.22% Q2 vacancy dropped by -30bps Q2 2018 West End vacancy rate sq ft at Aviation House, Kingsway, WC2. This marks the Serviced Office provider s 30th lease signed in the capital since January 2014. The Office Group also acquired space in the submarket in Q2, taking 38,000 sq ft at Orion House, Upper St Martin s Prime s remain at 65.00/ sq ft in Holborn however a number of new developments have significantly exceeded this. In Covent Garden, prime s stand at 77.50/ sq ft with better s being achieved on 4.72% The vacancy rate remained steady in Q2 Q2 2018 Midtown vacancy rate helped push Media Tech share of James s Street, SW1 (53,200 sq ft), Lane, WC2. exceptional buildings like the Post total take-up to 21%. These deals both of which completed in Q2. Building, New Oxford Street, WC1. demonstrate the West End s continued The vacancy rate saw no movement popularity amongst key Media Tech Prime s remained at 115.00/ sq and stands at 4.72%, well below companies. ft in Q2, however face pressure with average levels of 6.21%. This year incentives now hitting their peak. CENTRAL LONDON OFFICE MARKET UPDATE THE CITY (E1, EC1, EC2, EC3, EC4) SOUTHBANK (SE1) Robust leasing activity continued in Q2 with take-up reaching 1.75m sq ft, on par with Q1 levels. At 3.51m sq ft, H1 2018 is up 28% on H1 last year. Whilst the 510,000 sq ft Chinese Embassy deal at Royal Mint Court, EC3 boosted figures, discounting this deal would mean levels are still ahead stock in the supply restrained City fringe including, One Bartholomew Close, The Tower, Old Street and Spectrum, Old Street. Such is demand for the City fringe; 54% of 2018 developments are already pre-let. Strong Media Tech demand has resulted As a result of the City core s exposure to the Banking & Finance sector, s will face pressure due to continued uncertainty regarding our exit from the European Union. Generally, take-up levels in Southbank are driven by large deals, in Q2 however no deals over 25,000 sq ft were recorded meaning take-up levels reached 0.15m sq ft, down 30% on both Q1 levels and the long term quarterly average. H1 take-up as a result has reached 0.37m sq ft, 40% Can development pipeline offer any reprieve? 2018 completions total 0.75m sq ft which is well above the 0.27m sq ft recorded on average per annum over the last 10 years. 95% of 2018 completions however are prelet, meaning further vacancy rate compression is expected over the 2.59% Q2 2018 vacancy rate The vacancy rate continues to hover around record low levels of last year and above the quarterly average. The Media Tech sector dominates demand accounting for 24%. Indeed, the in City fringe prime s rising to 67.50/ sq ft in Q2 from 65.00/ sq ft in Q1, which is now on par with the City core levels. This reflects al of 30% over the past five years (2014-18) City fringe prime s are now on par with the City core. This reflects annual of 8.0% below H1 2017. Subdued demand can be attributed to very low levels of supply limiting occupier choice. Indeed, the vacancy remainder of the year. Unlike the majority of Central London submarkets, Southbank prime s are likely to face gentle upward Southbank prime s held steady in Q2 sector is set to continue to drive London employment over the next five years (2018-22) with of 7.2%. and 8% annually. The Crossrail effect has combined with high quality new buildings to deliver 67.50 /SQ FT Q2 2018 City fringe prime rate continues to hover around record low levels at 2.59%. This reflects the lowest levels of vacancy across the seven Central London submarkets. pressure over the next 12-18 months. As at end Q2, they stood at 65.00/ sq ft. 65.00/SQ FT Q2 2018 Southbank prime The vacancy rate rose marginally by even higher s in Farringdon where 16bps to 6.32% in Q2. This year will see 75 to 85/ sq ft is being achieved on the arrival of some much needed Grade A the best stock. www.realestate..com 7

Q2 2018 DEALS TABLES Key leasing deals Address (Floor) Sq Ft Approx (per sq ft) Term (Break) Tenant Landlord 6 in Europe A 360 vision BUSINESS LINES Royal Mint Court, EC3 (Building) 520,000 - - Chinese Embassy Delancey Aviation House, Kingsway, WC2 (Building) 131,518 60.00 20 Years WeWork Permodalan Nasional Berhad Main locations* Alliances* Governors House, Laurence Pountney Hill, EC4 127,317 50.00 16 Years Berwin Leighton Paisner MED Holdings (B-7th) 1 Canada Square, E14 (7th-9th) 82,999 late 40 s 20 Years The Office Group Canary Wharf Group Holdings Brunel Building, North Wharf Road, W2 (9-13th) 77,200 65.00 15 Years Sony Derwent London 18-19 Hanover Square, W1 (5th-8th) 57,200 120.00 15 Years Kohlberg Kravis Roberts Great Portland Estates One Bartholomew Close, EC1 (9th-11th) 54,261 c. 83.00 15 Years (10) TradeDesk Ashby Capital/Helical Bar 70 Wilson Street, EC2 (1st - 4th) 48,561 65.00 20 Years WeWork Threadneedle Orion House, Upper St Martin s Lane, WC2 (G, 37,687 Conf. Conf. The Office Group WELPUT 1st-5th, 8th) 1 Westfield Avenue, E20 (18th - 19th) 32,722 Conf. Conf. UNICEF Lend Lease Key investment deals Address Lot Size Capital Value Yield Purchaser Vendor (per sq ft) 5 Broadgate, EC2 1,000m 1,364 3.95% CK Asset Holdings British Land/GIC Ropemaker Place, EC2 650m 1,081 4.62% Ho Bee Land Gingko Tree/AXA REIM/Hanwha EUROPE FRANCE Headquarters 167, Quai de la Bataille de Stalingrad 92867 Issy-les-Moulineaux Tel.: +33 1 55 65 20 04 BELGIUM Avenue Louise 235 1050 Brussels Tel.: +32 2 290 59 59 CZECH REPUBLIC Pobřežni 620/3 186 00 Prague 8 Tel.: +420 224 835 000 GERMANY Goetheplatz 4 60311 Frankfurt Tel.: +49 69 2 98 99 0 HUNGARY 117-119 Vaci ut. A Building 1123 Budapest, Tel.: +36 1 487 5501 IRELAND 20 Merrion Road, Ballsbridge, Dublin 4 Tel.: +353 1 66 11 233 ITALY Piazza Lina Bo Bardi, 3 20124 Milano Tel.: +39 02 58 33 141 LUXEMBOURG Axento Building Avenue J.F. Kennedy 44 1855 Luxembourg Tel.: +352 34 94 84 Investment Management Tel.: +352 26 26 06 06 POLAND Al. Jana Pawła II 25 Atrium Tower 00-854 Warsaw Tel.: +48 22 653 44 00 ROMANIA Banul Antonache Street n 40-44 Bucharest 011665 Tel.: +40 21 312 7000 SPAIN C/ Emilio Vargas, 4 28043 Madrid Tel.: +34 91 454 96 00 UNITED KINGDOM 5 Aldermanbury Square London EC2V 7BP Tel.: +44 20 7338 4000 MIDDLE EAST / ASIA DUBAI Emaar Square Building n 1, 7th Floor P.O. Box 7233, Dubai Tel.: +971 44 248 277 HONG KONG 25 /F Three Exchange Square, 8 Connaught Place, Central, Hong Kong Tel.: +852 2909 2806 ALGERIA AUSTRIA CYPRUS DENMARK ESTONIA FINLAND GREECE HUNGARY ** IVORY COAST JERSEY LATVIA LITHUANIA MOROCCO NORTHERN IRELAND NORWAY PORTUGAL SERBIA SWEDEN SWITZERLAND TUNISIA USA * November 2017 ** Coverage In Transaction, Valuation & Consulting 20 Old Bailey, EC4 341m 1,419 4.20% Mirae Asset Daewoo Blackstone Burlington Arcade, W1 296.5 8,009 3.60% Motcomb Estates Meyer Bergman / Thor Equities NETHERLANDS Antonio Vivaldistraat 54 1083 HP Amsterdam Tel.: +31 20 305 97 20 @BNPPRE www.realestate..com 70 Mark Lane, EC3 200.5m 1,106 4.62% Korea Investment & Securities Mitsui Fudosan CAA House, Kingsway, WC2 165m 720 4.00% Seaforth Land Almacantar PROPERTY DEVELOPMENT TRANSACTION INVESTMENT MANAGEMENT PROPERTY MANAGEMENT VALUATION CONSULTING 20 Soho Square, W1 117m 1,765 4.00% Private German Aviva 5 Strand, WC2 92.5m 1,278 4.00% Abil Group BlackRock The Centro Building, 39 Plender St, NW1 76.5m 902 4.90% Workspace Brockton Capital Portland & Riding, 78/92 Great Portland Street, W1 49.6m 1,362 3.90% M&G Real Estate Great Portland Estates Real Estate for a changing world