Savills Research UK Commercial West End Office Market Watch Last minute surge in leasing activity results in take-up hitting 4.2m sq ft n The Technology, Media & Telecoms sector (TMT) was the most active sector in 2014 accounting for 32% of take-up, significantly ahead of the five year average (2009-13) share of takeup of 24%. Of the TMT companies to acquire space last year, Media & Entertainment companies have been the most active, accounting for 35% of TMT sector take-up, followed by Technology companies accounting for 28%. Q3 Q4 10 yr average n Developments due for completion in Q2 2015 include Blackstone's The Adelphi, WC2, 93,875 sq ft of which now remains, Coca Cola's 80,000 sq ft 1 Queen Caroline Street, W6 and The Crown's 75,000 sq ft Quadrant 2 South, Air Street, W1. 4 3 2 2014 2013 2011 2012 2010 2009 2008 2007 2006 2005 0 2004 1 2003 n The addition of several developments due for completion in Q2 2015 has resulted in the vacancy rate rising to 3.4%, up from 3.3% the previous month. This equates to supply of 4.1m sq ft. Grade A supply has also risen to 74% as a result of this additional supply. Source: Savills Research GRAPH 2 Development activity Complete 3.5 Pre-let Speculative Avg completions 3.0 2.5 n The highest reported rent in Q4 2014 was £120 per sq ft at 33 Davies Street, W1. This equates to annual headline rental growth of 9%. Average prime rents grew by 5% over a 12 month period and stand at £104.59 per sq ft in Q4 2014. 2.0 1.5 1.0 2017 2016 2015 2014 2013 2012 2011 2010 2009 0.0 2008 0.5 2007 n Despite this, the vacancy rate still remains at a very low level. Will development activity in 2015 offer some reprieve to restricted supply? We estimate 2015 will see 2.2m sq ft of developments and extensive refurbishment complete, 24% ahead of the long term average annual level of 1.8m sq ft. 30% of 2015 completions are already pre-let, highlighting the current supply squeeze. 2006 n We expect to see a similar levels of pre-letting activity in 2015 as witnessed last year. In total 14 pre-lets were recorded in 2014, above the eight seen per annum on average over a 10 year period. Q2 5 2005 n In total, four transactions of >100,000 sq ft were recorded in 2014 totalling 671,361 sq ft of total take-up. The majority of transactions (37%) fell in the 5-10,000 sq ft sizeband (in terms of number of transactions). Q1 6 2004 n Google's 207,000 sq ft acquisition of the remainder of BNP Paribas's 6 Pancras Square provided a boost to take-up figures. Take-up sq ft (million) n 557,705 sq ft of take-up was recorded in December in 28 transactions bringing an end to below average levels of take-up seen over the previous two months. This last minute surge in take-up brings 2014 takeup to 4.2m sq ft, 22% ahead of the long term average annual figure and ahead of 2013's total of 4.1m sq ft, the highest level since 2007. GRAPH 1 sq ft (million) Supply and demand snapshot January 2015 Source: Savills Research TABLE 1 Key December stats Stats Monthly change Take-up 557,705 sq ft  Supply 4.1m sq ft  Vacancy Rate 3.4%  Top rent (psf) £115.00  2.3m sq ft  Demand Source: Savills Research savills.co.uk/research 01 Market Watch | West End offices Analysis close up TABLE 3 TABLE 2 Supply Take-up Month Year to date Sq ft Sq ft % change on previous year % change on average Total % Grade A % chg on prev mnth Vacancy rate (%) Dec-13 329,664 4,085,194 33% 22% 4,644,988 75% 4.5% 3.8% Jan-14 254,077 254,077 -75% -13% 4,438,999 74% -4.4% 3.7% Feb-14 265,389 519,466 -55% -3% 4,474,644 74% 0.8% 3.7% Mar-14 363,789 883,255 -38% 6% 4,622,003 73% 3.3% 3.8% Apr-14 386,685 1,269,940 -21% 24% 4,323,746 76% -6.5% 3.6% May-14 381,345 1,651,285 -7% 27% 4,175,057 74% -3.4% 3.5% Jun-14 326,527 1,977,812 -5% 18% 4,193,382 74% 0.4% 3.5% Jul-14 318,879 2,296,691 0% 22% 4,186,477 71% -0.2% 3.5% Aug-14 445,119 2,741,810 2% 30% 4,189,683 71% 0.1% 3.5% Sep-14 383,167 3,124,977 -2% 25% 4,053,774 68% -3.2% 3.4% Oct-14 224,565 3,349,542 -1% 21% 4,075,206 68% 0.5% 3.4% Nov-14 244,188 3,593,730 -4% 20% 4,023,249 69% -1.3% 3.3% Dec-14 557,705 4,151,435 2% 22% 4,057,113 74% 0.8% 3.4% TABLE 4 TABLE 5 Rents Demand & Under Offers Average £ per sq ft Top Grade A Grade B WE Potential demand (sq ft) Prime* Rent free** 717,000 WE Active demand (sq ft) 1,548,500 2,265,500 Dec-13 £110.00 £67.11 £45.14 £99.85 8 WE Total demand (sq ft) Jan-14 £115.00 £57.01 £41.34 - - % change on 12 month ave Feb-14 £95.00 £67.31 £42.50 - - Total under offer (sq ft) 512,964 Mar-14 £115.00 £68.79 £33.88 £99.13 8 Under offer this month (sq ft) 219,648 Apr-14 £100.00 £64.52 £37.86 - - % change on ave -15% May-14 £115.00 £58.30 £43.64 - - Landlord controlled supply 59% Jun-14 £110.00 £84.31 £34.83 £103.33 9 Tenant controlled supply 18% Jul-14 £90.00 £54.59 £30.00 - - Aug-14 £107.50 £74.81 £37.50 - - Sep-14 £107.50 £73.27 £35.99 £98.25 9 Oct-14 £92.00 £66.88 £45.10 - - Nov-14 £120.00 £64.74 £33.10 - - Dec-14 £115.00 £82.84 £47.40 £104.59 8 -33% TABLE 6 Development pipeline Sq ft Refurb Devs Total % Pre-let 2014 478,300 1,294,396 1,772,696 61% 2015 259,800 1,972,954 2,232,754 30% 2016 445,000 2,707,421 3,152,421 7% 2017 0 1,767,000 1,767,000 3% Total 1,183,100 7,741,771 8,924,871 Completions due in the next 6 months are included in the supply figures 02 23% *Average prime rents for preceeding 3 months ** Average rent free on leases of 5 years for preceeding 3 months Market Watch | West End offices TABLE 7 Significant December transactions Sq ft Grade Achieved rent Tenant Lessor B-pt 5, 11 207,117 A Confidential Google AXA The Adelphi, 1-11 John Adam Street, WC2 1, 2 63,145 A Confidential Neuehouse Blackstone Walmar House, Regent Street, W1 Bldg 38,956 A Confidential Richemont Great Portland Estate 33 Davies Street, W1 1, 2 11,818 A £115.00 AGC Equity Partners Grosvenor Estate Devonshire House, 1 Mayfair Place, W1 pt 2 11,381 A £101.11 LTS Advisory Ltd Ponte Gadea Group 10 New Burlington Street, W1 2 10,252 A £102.50 Finnisterre Capital Crown Estate St. James's House, 23 King Street, 4 7,843 A Confidential Balyasny Europe Asset Standard Life 2 Pancras Square, King's Cross, N1C pt 4 7,545 A £70.00 Astra Zeneca Vista Print 2 Stephen Street, W1 4 6,340 A £80.00 Freemantle Derwent London Berkeley Square House, Berkeley Square, W1 4 suite 4 5,145 A £82.50 Cheniere Marketing Undisclosed Address Floor/s 6 Pancras Square, N1C TABLE 8 Significant supply Address Floor/s Sq ft Grade Quoting rent Park House, Park Street, W1 2-5, 7, 8 143,010 A £97.50 QNB Telstar House, 2 Eastbourne Terrace, W2 1-6 106,812 A £47.19 Rio Tinto 10 Bloomsbury Way, WC1 1-7 117,000 A £60's The Adelphi, John Adam Street, WC2 3-6 93,875 A NQ 62 Buckingham Gate, SW1 3-pt6 83,805 A £70.00 Land Securities 2 Fitzroy Place, Mortimer Street, W1 Bldg 81,233 A NQ Aviva / Exemplar 1 Queen Caroline Street, W6 Bldg 80,000 A NQ Coca Cola Quadrant 2 South, Air Street, W1 Bldg 75,000 A NQ Crown Estate 127 Sloane Street, SW3 Bldg 71,000 A NQ Cadogan 8 St James's Square, SW1 Bldg 67,500 A NQ Green Property Ampersand, 180 Wardour Street, W1 1, 2, 3, 4 64,660 A NQ Resolution / Peterson Group 91 Wimpole Street, W1 Bldg 57,000 A NQ Lazari Air W1, 20 Air Street, W1 4, 5 50,980 A NQ Telefonica 77-85 Shaftesbury Avenue, WC2 Bldg 47,000 A NQ Dolford Oxford House, 76 Oxford Street, W1 1-6 44,329 B NQ Great Portland Estates 80 Strand, WC2 5 40,090 A mid £60's 03 Lessor U/O London & Regional Blackstone Pearson y Market Watch | West End offices MAP 1 Savills West End office submarkets Please contact us for further information Tracy Collins Director 0207 409 8958 [email protected] Liell Francklin Director 0207 409 8712 [email protected] Nick Pearce Associate Director 0207 409 8740 [email protected] Freddie Corlett Associate Director 0207 409 8764 [email protected] Tim Wadhams Director 0207 409 8803 [email protected] Brian Allen Director 0207 409 8778 [email protected] Mark Gilbart-Smith Director 0207 409 5925 [email protected] Andrew Wedderspoon Kuldeep Gadhary Associate Research 0207 409 8706 0207 016 3832 [email protected] [email protected] Savills plc Savills is a leading global real estate service provider listed on the London Stock Exchange. 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