www.corenetglobal.org.uk

Christina SiglianoDirector of Programmes,

CoreNet Global UK Chapter

christina.sigliano@hok.com

www.corenetglobal.org.uk

Ann Lewis Research AnalystDrivers Jonas

Nigel Grice Head of Occupier AdvisoryDrivers Jonas

Paul Burgess Director, Head of London LeasingThe British Land Company

SEPTEMBER 2009

LONDON CRANE SURVEY

NIGEL GRICE - Occupier Agency

ANN LEWIS - Research

Source : DJ Crane Survey

18 MONTHS AGO

37 new starts – 4.2 m sq ft

Source : DJ Crane Survey

6 MONTHS AGO

17 new starts – 1.1 m sq ft

Source : DJ Crane Survey

TODAY

6 new starts – 160,000 sq ft

Latest construction starts

32,000 sq ft 49,000 sq ft 80,000 sq ft – all pre-let

12,000 sq ft 37,000 sq ft 30,000 sq ft

Only one new significant start

390,000 sq ft

Headlines – Q2

Prime Headline Rent

Take-up (Q1 & Q2)

Availability

£42.50 sq ft

1.2 m sq ft

10.2%

CITY WEST END

Take-up (2008) 3.0 m sq ft

9.2%

0.6 m sq ft

2.0 m sq ft

£70.00 sq ft

Source: Drivers Jonas Research

Falling rents…

West End

Prime Rents – Fall from peak

-42% -36%

City

Source: Drivers Jonas Research

Take-up at a record low

Q1 2009 Take up lowest on record

Source: Drivers Jonas Research

M sq ft

Q2 better but not much

Source: Drivers Jonas Research

M sq ft

Q2 09

Construction has fallen 35% YR on YR

M sq ft

Volume under construction

Source: Drivers Jonas Research

Speculative space fallen 33%

M sq ft

Volume under construction

Source: Drivers Jonas Research

Available

Let

Forecast jobs growth

% Change

Source: Experian

Westminster

City Lower job loses

But weaker recovery

London pipeline is much smaller than 90s

M sq ft

Completed Available u/c Let u/c

Source: Drivers Jonas Research

Want 100,000 sq ft of new space?

sq ft

Source: Drivers Jonas Research

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Want 100,000 sq ft of new space?

sq ft

Source: Drivers Jonas Research

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Want 200,000 sq ft?

Completed

395,000 sq ft

220,000 sq ft

370,000 sq ft

20 Gracechurch

200 Aldersgate

Ropemaker

2009

290,000 sq ft

Drapers Gardens

2010

385,000 sq ft

442,000 sq ft

205,000 sq ft

The Walbrook

St Botolphs

One New Change

2011

290,000 sq ft

440,000 sq ft

Cannon Place

Heron Tower

So…

• Construction is down…. but spec space remains high

• Jobs growth is weak… but construction cycle is smaller

• 2009 is the maximum point of pessimism

Structural demand: it’s coming!

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: Drivers Jonas Research

West End

City

London pipeline: tenant’s dilemma

M sq ft

Completed Available u/c

Source: Drivers Jonas Research

Let u/c

SEPTEMBER 2009

LONDON CRANE SURVEY

CoreNet Breakfast ForumCoreNet Breakfast ForumCurrent State of the London real estate Current State of the London real estate

industryindustryTuesday 15 September 2009Tuesday 15 September 2009

www.britishland.com

Paul BurgessPaul BurgessHead of London LeasingHead of London Leasing

The British Land Company PLCThe British Land Company PLC

British Land’s Office Portfolio:British Land’s Office Portfolio:

- £3.563 BN*- £3.563 BN*

- £2.394 BN* in the City- £2.394 BN* in the City

*Values as of March 2009*Values as of March 2009

Office Outlook - Occupier Market

• London office vacancy 7.3% (long-term average 8.1%London office vacancy 7.3% (long-term average 8.1%11))

• Development activity 48% less than early 90s across all Development activity 48% less than early 90s across all

London sub-marketsLondon sub-markets22

• Speculative development unviable and made worse Speculative development unviable and made worse

by increasing tax burdenby increasing tax burden

• Occupier market fragile with take-up on a rolling annual Occupier market fragile with take-up on a rolling annual

basis lowbasis low

• Increased signs of activity within BL’s prime, modern Increased signs of activity within BL’s prime, modern

and well located portfolio and well located portfolio

• Increased viewingsIncreased viewings

• 210,000 sq ft of City lettings, 49% of Q1 total take-up 210,000 sq ft of City lettings, 49% of Q1 total take-up

• Further 63,000 sq ft under offerFurther 63,000 sq ft under offer

1 Jones Lang LaSalle – based on last 20 yrs2 PMA – 5 yr Rolling Annual from 1992-2008

London Vacancy1

Development Completions over Cycles2

0

24

6

8

1012

14

16

2000 2002 2004 2006 2008 2010 2012

%

City West End

0

3

6

9

12

15

18

City West End Midtown Docklands

m s

q ft

1988-92 5 Yr Rolling Annual 2006-10

Lease now while stocks lastLease now while stocks last

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2010

2011

2012

2013

2014

2015

2016

2017

m s

q ft

200,000 sq ft+

150 - 200,000 sq ft

100 - 150,000 sq ft

75 - 100,000 sq ft

50 - 75,000 sq ft

20 - 50,000 sq ft

City Lease Events (20,000 sq ft+)

Build it and they will comeBuild it and they will come

Securing Income From High Quality Modern Securing Income From High Quality Modern BuildingsBuildings

Key Office Voids

To LetSq

ft ‘0003

% Let

/Under Offer

Lease Le

ngth

yrs4

Assumed Income

void mths5

Averag

e ERV £

psf6

Investments

201 Bishopsgate

49 88 18 48 45

Broadgate Tower

141

64 12 48 44

Ropemaker2

376

32 20 51 44

Sub-total

566

58 17 50 44

DevelopmentsRegents Place One & Two

364

- - 42 47

Total93

046 17 47 45

• 94% occupancy94% occupancy11 (90% pro forma for Ropemaker (90% pro forma for Ropemaker22))

• 93% of vacant accommodation brand new Grade A 93% of vacant accommodation brand new Grade A

spacespace

• 58% of recently completed developments let/under 58% of recently completed developments let/under

offeroffer

• New lettings achieved at average £48 psf for 17 yrsNew lettings achieved at average £48 psf for 17 yrs

• Only 9% of rent subject to break/expiry over next 3 yrs Only 9% of rent subject to break/expiry over next 3 yrs

(compared to IPD 24%)(compared to IPD 24%)

• Valuers’ build in assumptions on breaks/expiryValuers’ build in assumptions on breaks/expiry

• Average ERV £39 psfAverage ERV £39 psf

• Average void of 32 monthsAverage void of 32 months

• Capex of £40 psfCapex of £40 psf

1 Underlying occupancy rate including accommodation subject to asset management and under offer2 PC achieved in May 20093 Office space only (excludes storage)4 To first break5 Valuers’ assumed combined letting void and tenant incentive package6 Current estimated headline rent (excludes provision for tenants’ incentives) on space to let

Priorities for the Future

• Continually evolving, dynamic property portfolio

• Rigorous and analytical overlay to support core property skills

• Robust and flexible financial structure and balance sheet

• Sustainable dividend supported by long, strong income streams

City Office Demandknown requirements of 10,000 sq ft+, Q2 2009

12%

20%

8%

8%

43%4%

2%

Banking &Finance

Media &MarketingProfessional

IT & Telecoms

Insurance

Corporates

Gov't

Other

Total: 4.12 million sq ft

Active Potential

19%

45%

20%

1%

11%

1%

2%

1%

Total: 1.45 million sq ft

Additional non-geographically specific demand = 2.20 million sq ft

Big Bang to Credit CrunchBig Bang to Credit Crunch

The seminal 20The seminal 20thth

Century development Century development

in Londonin London

Scenario 1Scenario 1

- Back to The Future- Back to The Future

Scenario 2Scenario 2

- Back to Basics- Back to Basics

Scenario 3Scenario 3

- Things have changed- Things have changed

Conundrums and ContradictionsConundrums and Contradictions

- Sustainability and Operational Sustainability and Operational RequirementsRequirements

- PowerPower

- DensityDensity

RopemakerRopemaker

A newA newbenchmarkbenchmark

‘‘The modular design steps back at each level to The modular design steps back at each level to reveal a series of enchanting gardens in the air. reveal a series of enchanting gardens in the air. It is an accomplished example of a design It is an accomplished example of a design approach which integrates energy efficiency, approach which integrates energy efficiency, humane working conditions and technology to humane working conditions and technology to produce an alternative to the usual office block’produce an alternative to the usual office block’

Gateway House BasingstokeGateway House BasingstokePeter Murray - RIBA Guide to Modern British ArchitecturePeter Murray - RIBA Guide to Modern British Architecture

Good Design PrinciplesGood Design Principles

- AdaptabilityAdaptability

- PermeabilityPermeability

- SustainabilitySustainability

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