UK Office Market Outlook H1 2016

UK Office Market Outlook

Strong H1 despite political uncertaintyH1 2016

2 | UK Office Market Report H1 2016

£ Growth expectations revised down following the EU referendum

The UK’s vote to leave the EU has led to significant political uncertainty, and it is likely that the UK will see slower economic growth in the near term as a consequence. However, the UK regional office markets have initially seen a more limited slowdown in activity when compared with the Central London markets and early indications, as we head into Q3, are that a ‘business as usual’ approach is generally being adopted, albeit decision-making is taking longer.

The market reaction was initially severe, with steep falls in the value of the pound and in equity markets. However, a swift response from the Bank of England has calmed nerves, and supported a strong recovery in the FTSE 100. The Bank has announced a cut in base interest rates as part of a substantial package of support measures, including further quantitative easing, and this has helped to drive long term rates to record lows.

Forecasts for UK GDP growth have been revised down, with the pace of expansion in 2016 and 2017 expected to slip to 1.8% and 1.1% respectively, down on the pace of growth in 2014-15. For the UK regional office markets, the impact on the labour market will be a key determinant of performance. While the pace of employment growth is likely to slow, the labour market appears resilient, with the corporate sector in good financial health.

£Strong aggregated regional take-up continues

Following a stellar performance in 2015, H1 2016 has also delivered encouraging levels of leasing activity across the Big 6 markets with H1 take-up totalling 2.5 million sq ft and on track to exceed the 10-year annual average of 4 million sq ft. Activity in the Western Corridor has been more subdued and brings Core 8 H1 take-up to 3.5 million sq ft, against a 10-year annual average of 6.6 million sq ft. Glasgow has seen an exceptionally strong H1 with 657,000 sq ft transacted in the city centre, already exceeding the 10-year annual average, and Birmingham, Bristol and Cardiff have also seen a strong H1. Looking ahead, live demand remains stable with circa 9.5 million sq ft active across the Core 8 markets, suggesting strong underlying demand-side fundamentals notwithstanding that some occupiers may be more cautious in the aftermath of the referendum.

UK outlook

£Supply levels continue to be eroded as pipeline space is absorbed

Following a strong H1 overall vacancy levels have been eroded further across the Core 8 with total supply at mid-2016 standing at 15.9 million sq ft, equating to an average overall vacancy rate of 7.9%, down from 9.1% a year ago. The Core 8 Grade A vacancy rate is 3.2%, with Bristol (0.8%) and Birmingham (1.3%) at the lowest levels and the Thames Valley the highest with 7%.

H1 2016 has seen a continuation of strong pre-let demand with seven deals totalling 426,500 sq ft, including Morgan Stanley (Glagsow), PwC (Birmingham) and Cirrus Logic (Edinburgh). The professional services sector (combining a mix of legal, accountancy and other professional services), accounted for five of the seven to sign during H1 2016.

The volume of speculative space under construction increased further during H1 2016 with 6 million sq ft on site across the Core 8 markets, the highest level recorded for at least 10 years. The Western Corridor accounts for just over 50% of activity while at a regional level Manchester and Birmingham account for the greatest shares of activity, at 1.1 million sq ft and 851,000 sq ft respectively.

£Headline rents hold up

Prime rental growth continued in H1 across the Core 8 markets, albeit the rate of growth slowed to an average of 5.3% per annum in Q2 2016. Many markets continue to face a shortage of new or high quality Grade A space and this should support headline rents, with some markets expected to see an uplift during H2. Rent free periods were unchanged across the board at end-Q2 but may rise in H2 2016 as occupiers seek more flexible terms in the aftermath of the EU referendum decision.

Ben Burston Head of UK Office Research

Core 8: Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Manchester and Western Corridor

UK Office Market Report H1 2016 | 3

West LondonBirmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds,

Manchester, Western CorridorBelfast, Nottingham,

Thames ValleySouthampton

BirminghamThames Valley West London

Leeds Manchester

0%

2%

4%

6%

8%

10%

Grade A vacancy

Big 6 Pre-let activity

UK office rental clockQ2 2016

Core 8 take-up

Speculative development under construction (sq ft)

Take-up by market share H1 2016 (sq ft)

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

02006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016H1

Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016

H1 2016 take-up

3.5m sq fton track to

meet 10 year average

Western Corridor Big 6

2.7m2.8m

3.1m

1.5m

2.8m2.7m

mid-2015 end-2015 mid-2016

Cardiff 241,000Edinburgh

344,000

Leeds 195,000

Manchester 417,000

Glasgow 657,000

Bristol 381,000

Birmingham 501,000

Western Corridor 797,000

Core 8 rentsAverage weighted prime rent per sq ft

Q2 2015 £30.40Q2 2016 £32.00 (▲+5.3% Y-o-Y)

London City, London West End

Rent

al

growth

slow

ingRents falling

accelerating

Rental growthRents botto

min

g ou

t

million sq ft

1,000

800

600

400

200

0

000 sq ft

2011 2012 2013 2014 2015 2016

Deals 3 Deals

1

Deals 5

Deals 6

Deals 6

Deals 18

Pre-let site

Pre-let off plan

Number of deals

Cardiff

▲+9.1%

Western Corridor

▲+7.1%

Birmingham

▲+6.7%


Investment outlook

Prime yields

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Manchester Edinburgh Western Corridor Birmingham

Investment volumes hold up, buoyed by the Western CorridorInvestment market turnover for the Core 8 reached £2.9 billion during H1 2016 with the Western Corridor accounting for 43% of this total. The £563 million sale of Green Park, Reading to Mapletree Investments during Q2 2016 boosted the Western Corridor share. The most active Big 6 markets were Manchester and Birmingham, each transacting circa £270 million over H1 2016. The mid-year Core 8 total is only 12% short of the five-year annual average indicating that, despite market uncertainty, 2016 will again outperform the average.

In light of the vote to leave the EU, activity is expected to be dampened in the near term by political and economic uncertainty and a consequent lack of clarity on the impact on market pricing and the

implications for occupier demand. Reflecting this, demand moderated somewhat in the latter part of Q2. Prime yields remained stable across all Core 8 markets at end-Q2 but may soften during Q3 as pricing levels are reviewed, with the impact likely to be greater for secondary stock and short term income rather than prime. Once this re-pricing has been established the combination of record low long term interest rates and fall in the value of the pound will act to counter the knock to confidence.

Global interest in the UK market remains diverse. UK money accounted for circa 45% of total Core 8 investment during H1 2016 with the remaining larger lot sizes dominated by Singaporean, US and German money in addition to other European and Middle Eastern equity.

2016 H1 Core 8 investment volumes by purchaser origin

UK

45%

Overseas

55%

Volumes (£millions)

£2,332 Western Corridor

£1,543

£789 Manchester

£270

£712 Birmingham

£265

£353 Glasgow £181

£103 Leeds£98

£371 Edinburgh

£246

£428 Bristol

£183

£307 Cardiff£76

2015 H1 2016


Key activity

Quartermile 4, EdinburghPrice: £68.5mVendor: M&GNIY: 5.21%Colin FinlaysonDirector Capital Markets (Edinburgh)

World Business Centre 4, HeathrowSize: 85,000 sq ftPre-let to AmadeusJames FinnisDirector South East Office Agency

Number One First Street, ManchesterPrice: ConfidentialVendor: PatriziaJames PorteousDirector Capital Markets (Manchester)

Stellar H1 2016 for GlasgowMike Buchan Lead Director Glasgow

“JLL advised M&G on the sale of this newly completed Grade A office building in Edinburgh city centre. Following advising M&G on the speculative forward funding in 2014, the building was fully let to high calibre tenants, Cirrus Logic and FanDuel during construction and was 100% let at completion. Rents achieved ranged from £29-£31 per sq ft on leases with 10 years term certain, reflecting the quality of the development. The investment was sold to clients of TRIUVA for £68.5m, reflecting a 5.21% net initial yield. On the back of this success, M&G are now progressing

with the speculative development of Quartermile 3, which is due to complete in late 2017.”

“JLL was appointed by Amadeus, the Spanish global travel technology firm, to identify and acquire a new UK HQ to house their growing UK team. The new facility needed to provide approximately 85,000 sq ft of top quality space with excellent access to Heathrow. After an extensive search considering a number of standing speculative developments, Amadeus agreed a pre-let on 4 World Business Centre, Heathrow. JLL’s Project Management team worked closely with the agency team to agree and document the

pre-let specification. Planning has now been secured and the development is well underway.”

“JLL advised the European investor Patrizia on the disposal of Number One First Street to Standard Life. This 180,000 sq ft Grade A building, in one of Manchester’s newest and most vibrant quarters, has attracted a number of inward occupiers into the city and is let to Gazprom, Autotrader, Jacobs and Ford with a WAULT of circa 8 years. First Street is a gateway site to the city with excellent transport links with a mix of new leisure, retail, business and residential accommodation. Quoting rents have already risen from £23 per sq ft to £28 per sq ft and the next phase (Number 8) is already part

pre-let and under construction with completion scheduled for September 2017.”

“In June, JLL were involved in advising clients, Tristan Capital, on the disposal of the remaining 50,000 sq ft of new Grade A office accommodation at the Cuprum Building on Argyle Street to AXA. JLL was also involved in the largest transaction in Q2 with the purchase of The Stow College on behalf of The Glasgow School of Art, for owner occupation. Take-up this year is already above the 5 and 10 year averages with JLL having an active six months with involvement in approximately 40% of the transactions by sq ft taken-up. With continued strong

take-up Glasgow is now experiencing historically low levels of supply.”


Vacancy Immediately available

supply is under pressure

Market overviewThe Birmingham office market has continued to see a strong 2016 with over 217,000 sq ft transacted in Q2. After a record breaking 2015 and a robust Q1 2016, activity within the market was solid. Occupier demand has largely held up and the market has witnessed no sign of a slowdown in Q2 despite the EU referendum at the end of the quarter. The key transaction over the quarter was Network Rail leasing just over 83,400 sq ft in Baskerville House.

Take-up levels have remained buoyant since the record breaking 2015 and as a result this has maintained the pressure on the amount of available good quality space. Overall vacancy has dipped below 10% for the first time since 2014, with Grade A vacancy even tighter at 1.3%. However, the development pipeline is increasingly addressing the scarcity in good quality space, with 851,000 sq ft currently under construction.

After moving up in Q1, prime rents were unchanged over the quarter and remain at £32 per sq ft. Although with rent free periods currently 24 months on a 10 year term, the current supply shortage should help to support headline rents.

After a steady initial start to 2016, investment volumes were more muted in Q2 with only one deal completing; the £24.1 million transaction at 1 Victoria Square acquired by DTZ Investors for 6.25%. This took deal volumes to £265 million in the first half of the year. There are a number of more secondary transactions under offer or on the market, but few prime office investments are currently available. Prime yields were unchanged over the quarter, remaining at 5%, however prime pricing levels are under review and will become clearer through the course of the second half of the year.

Jonathan Carmalt Leasing

Ben Kelly Investment

Birmingham

Take-up

1,000

800

600

400

200

02012 2013 2014 2015 2016H1

Take-up 5 year average

Supply and vacancy rates (year-on-year change)

Investment volumes

000 sq ft

Overallvacancy

9.7%down from11%

Grade Avacancy

1.3%down from1.8%

Speculative space under construction

851,000 sq ft

Q2 2016

49,000 sq ft

Q2 2015

Pipeline responds to

acute under supply of

Grade A space

2015

£712million

H1 2016

£265million


Vacancy Acute shortage of

immediately available Grade A space

1,000

800

600

400

200

0

Ian Wills Leasing

Oliver Paine Investment

Bristol

Take-up

2012 2013 2014 2015 2016H1

Market overviewThe Bristol city centre office market has seen a strong first six months of 2016 with H1 take-up totalling 381,000 sq ft and on track to exceed the 10-year annual average of 547,000 sq ft. Despite concerns that the looming EU membership referendum would impact on corporate decision-making, the Bristol market saw no sign of a slowdown in Q2 with Direct Line’s 63,000 sq ft transaction at The Core dominating activity. Early indications are that the market is also yet to see any notable post-referendum impact in Q3 with OVO Energy agreeing to lease 23,000 sq ft at 10 Templeback. Live requirements are proceeding as planned in the main, albeit decision making may take slightly longer.

Supply remains under pressure with overall vacancy standing at just 6.3% and a new Grade A vacancy rate of just 0.8% (totalling 107,700 sq ft). There is currently 348,000 sq ft of refurbished space on site in the city centre, and during Q3 2016 this space will begin to complete and improve the offer for tenants. The only new build scheme on site is Aurora (98,000 sq ft) which is due to complete by end-2017.

Headline prime rents remained unchanged during Q2 2016 at £28.50 per sq ft. The shortage of supply should support headline rents with the market waiting with interest into Q3.

Bristol’s city centre investment saw a quieter Q2 with the sale of Bridgewater House for £56 million and Direct Line’s purchase of The Core for owner occupation the only transactions of note. Prime yields remained at 5.25% in Q2 but are expected to soften during H2 2016.



Investment volumes

000 sq ft


Overallvacancystable at

6.3%

Grade Avacancy just

0.8%down from1.4%

446,000 sq ft

Q2 2016

64,000 sq ft

Q2 2015Major refurbishments

respond to supply shortage

(78% of current total)

2015

£428million

H1 2016

£181million


Vacancy New Grade A supply became available in

Q2 2016

Cardiff

Market overviewCardiff experienced a strong Q2 with 167,000 sq ft of space taken up, bringing the mid-year total to 241,000 sq ft and comfortably on track to exceed the 10-year annual average of 311,000 sq ft. The city continues to be boosted by strong public sector demand with HMRC (54,500 sq ft) and Cardiff University (29,000 sq ft) accounting for the two largest transactions during Q2. In addition, the outlook for H2 remains positive with MotoNovo Finance (71,000 sq ft) and Julian Hodge Bank (16,000 sq ft) remaining under offer at No.1 Central Square, and continued significant public sector interest in the city.

Overall supply levels increased by nearly 100 basis points during Q2 as over 200,000 sq ft of Grade A space became available, pushing the extremely tight Grade A vacancy rate up to 2.4%. However, as already outlined above, significant chunks of this space are already under offer and there is sufficient latent demand to soon absorb this influx of supply. While there is 220,000 sq ft of speculative space on site only 40,000 sq ft is due to complete in 2016 (the 2 Kingsway refurbishment) with the remainder scheduled to complete in 2017/18. Unless further commitment is made to build speculatively large occupiers will need to continue to look to secure space via the pre-let option.

Headline prime rents were unchanged in Q2 2016, remaining at £24 per sq ft. The shortage of supply should support headline rents into H2.

The Cardiff investment market paused in Q2 with only Anchor Court sold in the city centre and bay markets. However a strong Q1 means the market returned a total of £76 million during H1 and further activity is expected in H2 as redemptions encourage institutional investors to release stock into the market. Prime yields were unchanged over the quarter at 6.% but may soften during H2 2016.

Rhydian Morris Leasing

Justin Millett Investment

Take-up

0

100

200

300

400

500

600



000 sq ft

2012 2013 2014 2015 2016H1

Overallvacancystable at

8.6%

Grade Avacancy

2.4%up from1.3%


220,000 sq ft

Q2 2016232,000 sq ft

Q2 2015Strong demand

absorbs steady supply

of new build space

Investment volumes

2015

£307million

H1 2016

£76million


Edinburgh

Market overviewThe Edinburgh office market maintained its steady start to the year, as take-up reached 181,000 sq ft in Q2 2016. A key deal over the quarter was the People’s Postcode Lottery who took just over 33,000 sq ft at 28 Charlotte Square. The sub-5,000 sq ft market continues to be the most buoyant in Q2, accounting for almost 90% of all deals over the quarter as smaller occupiers remain active.

The scarcity in good quality space continues to characterise the city centre market as overall vacancy eased down to 4.6%, the lowest level since late 2008. Furthermore, with the Grade A vacancy declining to 1.9% in Q2, competition for good quality space will continue. However, with the development pipeline remaining tight for the remainder of the year, pre-lets are anticipated to become more attractive for occupiers looking to secure good quality space within the city centre.

Prime rents were unchanged over the quarter at £31 per sq ft. In terms of incentives, these also maintained the same level in Q2 at 24 months’ rent free on a 10 year term.

The investment market continued its strong start to the year with a healthy Q2. H1 volumes have reached just over £250 million which is well ahead of the equivalent period in 2015. The most significant transaction over the quarter was the purchase of Quartermile 4 by Triuva for £68 million, reflecting a yield of 5.21%. Yields were unchanged over the quarter at 5.25% but may soften during the second half of the year.

Cameron Stott Leasing

Colin Finlayson Investment

Take-up

0

200

400

600

800

1,000


000 sq ft


2012 2013 2014 2015 2016H1

Vacancy Pressure on Grade A

space expected to continue into H2

Overallvacancy

4.6%down from5.7%

Grade Avacancy

1.9%down from2.5%

New build speculative activity

108,000 sq ft*

Q2 2016

328,000 sq ft

Q2 2015

Investment volumes

Strong demand absorbs steady supply of new build space

2015

£371million

H1 2016

£256million


Market overviewThe Glasgow office market has seen a very strong second quarter of the year as take up for the combined city centre and periphery reached almost 368,000 sq ft, the highest quarterly figure recorded for the market and bringing the H1 total to 657,000 sq ft (exceeding the 10-year annual average). Consequently, occupier demand was robust during H1 and good quality space remains tight. The largest deal over the quarter was the Glasgow School of Art acquiring 117,000 sq ft at Kelvin College, Shamrock Street in an owner occupation transaction.

Overall vacancy moved down further in Q2 to 9.2%, the lowest level since 2010 and highlighting the current scarcity in supply. Good quality space also remains in short supply as the vacancy rate edged down to 2.4% over the quarter. With no new build space due for completion before 2019 at best, pre-letting is expected to become more prevalent over the next 12-24 months. Furthermore, this will likely spur landlords to consider undertaking significant refurbishments as demand levels are expected to hold firm.

Prime rents were unchanged over the quarter at £30 per sq ft. Although with strong take up levels seen in Q2 and the ongoing scarcity in good quality space, pressure on rents is likely to be maintained. Incentives held up over the quarter and stand at 21 months’ rent free on a 10 year term.

After a strong Q1, the investment market was more subdued in the second quarter of the year with £29.5 million transacted. Prime yields were unchanged over the quarter at 5.25% but may soften over the remainder of the year. The largest transaction in Q2 was UBS acquiring the Grosvenor Building, 72 Gordon Street for £17.8 million.

Mike Buchan Leasing

Ross Burns Investment

Glasgow

Take-up

800

600

400

200

0



000 sq ft

2012 2013 2014 2015 2016H1

Vacancy Grade A vacancy under pressure and will reduce

further in H2 2016

Overallvacancy

9.2%down from10.5%

Grade Avacancy

2.4%down from3.8%

New build development activity

Earliest new build speculative completions: 2019up to

800,000 sq ft

Investment volumes

No new build space on site,

supply gap until 2019

2015

£353million

H1 2016

£183million


Jeff Pearey Leasing

Mathew Atkinson Investment

Leeds

Take-up

1,000

800

600

400

200

0


Market overviewThere’s no hiding the fact that Leeds experienced a subdued start to 2016 with take-up for the first six months of the year standing at 194,800 sq ft and some way off being on target for the 10-year annual average of 498,000 sq ft. While the market was less active in the run up to the EU referendum early indications are that the market fundamentals of Leeds remain strong, with a number of corporates and the government progressing with significant office space requirements. Alongside relatively limited quality supply, this will continue to underpin market stability and confidence levels.

Supply levels currently remain tight and the overall vacancy rate moved in to 4.1% during Q2. The scarcity of Grade A space will be addressed in Q3 when three new build schemes complete (some of which are already part pre-let). Beyond 2016 there are no major new build schemes on site in the city centre and developers are currently exercising caution. Therefore, occupiers requiring Grade A space into 2017 may need to purse the pre-let route unless this is addressed.

Headline prime rents remained unchanged at £27 per sq ft during Q2 2016. The new high quality space coming to the market should support headline rents.

In line with some other markets, investment activity was relatively subdued in Q2 as the EU referendum came into sight. The largest transaction was Leeds City Council’s purchase of 3 Sovereign Square for £43.7 million, reflecting a net initial yield of 5.4%. The mid-year total stands at £99 million with a further circa £15 million under offer. Prime yields were unchanged over the quarter and remained at 5.25% but are expected to soften during H2 2016.

000 sq ft


2012 2013 2014 2015 2016H1

Vacancy Despite increase

immediately available Grade A space remains tights

Overallvacancy

4.1%down from4.4%

Grade Avacancy

1.8%up from1.5%

Speculative development activity

0 sq ft

2017

Supply gap

looms

Earliest new build speculative completions:

2018

115,000 sq ft

Investment volumes

2016

332,350 sq ft

2015

£103million

H1 2016

£98million


Market overviewThe Manchester city centre office market has seen a solid second quarter of the year with 220,000 sq ft transacted in Q2. Occupier demand was robust over the quarter as take-up increased from the previous quarter. Despite the EU referendum, the Manchester market saw no noticeable slowdown in Q2. The largest deal over the quarter was Co-op taking almost 33,000 sq ft in Martins House. The professional and services sectors dominated activity accounting for 57% of total take-up in Q2.

Overall supply continued to decrease in Q2 and the vacancy rate edged down to 6.1%. Development activity remains strong with over 1 million sq ft currently under construction, a combination of both new build and refurbished space. However, good quality space remains scarce with the Grade A vacancy rate currently at 1.4% and, as a result an increase in pre-let activity is expected as occupiers seek to secure the best quality space.

Prime rents were unchanged over the quarter, holding up at £34 per sq ft in Q2. Rent free periods were also unchanged in Q2 at around 18-21 month’s rent free on a 10 year term. The scarcity of good quality space should support prime rents.

The Manchester investment market saw a more subdued Q2, but with over £270 million transacted in H1 2016, this was higher than in the equivalent period in 2015. The largest deal over the quarter was the Canal & River Trust who purchased Byrom Place for £14.5 million reflecting a yield of 5.4%. Prime yields were unchanged over the quarter at 4.75% but may soften in H2.

Chris Mulcahy Leasing

James Porteous Investment

Manchester

Take-up

0200400600800

1,0001,2001,400



000 sq ft

2012 2013 2014 2015 2016H1

Vacancy Strong demand for City

Centre prime space reflected in vacancy rates

Overallvacancy

6.1%down from7.7%

Grade Avacancy

1.4%down from1.9%


875,000 sq ft

Q2 2015 1,061,000 sq ft

Q2 2016

Despite high rate of

development activity

vacancy rates remain

under pressure

Investment volumes

2015

£789million

H1 2016

£270million


Market overviewThe Western Corridor has seen a subdued Q2, with take-up levels reaching 321,000 sq ft. In contrast to the previous quarter, West London was the more active region recording 173,300 sq ft in comparison to 148,000 sq ft transacted in the Thames Valley. The largest deal in Q2 was Amadeus pre-letting 85,000 sq ft at World Business Centre 4, Heathrow.

Supply levels across the Western Corridor remain tight as overall vacancy edged down to 9.5% over the quarter, the lowest level for over 10 years. However, good quality space is scarce with the vacancy rate in the Thames Valley for Grade A space at 7% and in West London, 3.7%. Committed speculative development in the region will address this shortage of supply, especially in West London where there is 1.9 million sq ft under construction.

Prime rents have moved up over the quarter as good quality space is still in short supply. Occupier demand held up and the TMT sector were the most active, accounting for 62% of all Western Corridor take-up by floor space in Q2. Rents moved up by 1.3% in West London and by 1% in the Thames Valley, with Slough and Bracknell leading the way. Rent free periods were unchanged in Q2, remaining at 15 months in West London and 21 months in the Thames Valley on a 10 year term.

The Western Corridor investment market has seen a strong Q2, with over £1 billion of space transacted. These figures were boosted by the purchase of Green Park in Reading by Mapletree Investments for £563 million, by some way the largest transaction over the quarter. Prime yields were unchanged over the quarter at 5% in West London and 5.25% in the Thames Valley. However, prime pricing levels are under review and are expected to become clearer during H2 2016.

Take-up

0500

1,0001,5002,0002,5003,0003,500


James Finnis Leasing

Angus Minford Investment

Western Corridor

000 sq ft


2012 2013 2014 2015 2016H1

Vacancy Overall supply

continues downward trend

Overallvacancy

9.5%down from11.0%

Grade Avacancy

5.3%up from5.0%

Average headline prime rents (as at Q2 2016)

Investment volumes

7.1% year-on-year growth

£34.54 psf

Western Corridor

7.3% pa year-on-year growth

£40.14 psf

West London

6.9% pa year-on-year growth

£28.93 psf

Thames Valley

2015

£2,332million

H1 2016

£1,543million


LEEDS

BIRMINGHAM

MANCHESTER

BRISTOL

CARDIFFCENTRALLONDON

WESTERNCORRIDOR

EDINBURGHGLASGOW

Leeds£27.00

0.0%+1.9%

Birmingham£32.00

0.0%+6.7%

Western Corridor£34.54

+1.2%

+7.1%

West End£120.00

0.0%+2.1%

City£70.00

0.0%+7.7%

Edinburgh£31.00

0.0%+3.3%

Glasgow£30.00

0.0%+1.7%

Manchester£34.00

0.0%+3.0%

Bristol£28.50

0.0%0.0%

Cardiff£24.00

0.0%+9.1%

Q-o-Q Y-o-Y(£ per sq ft)

Prime office rents Q2 2016


Contacts

Leasing contacts

Jonathan Carmalt Director, Birmingham +44 (0)121 214 9935 [email protected]

Ian Wills Director, Bristol +44 (0)117 930 5746 [email protected]

Rhydian Morris Director, Cardiff +44 (0)292 072 6002 [email protected]

Cameron Stott Director, Edinburgh +44 (0)131 301 6715 [email protected]

Andrew Pearce Director, Exeter +44 (0)139 242 9302 [email protected]

Mike Buchan Director, Glasgow +44 (0)141 567 6623 [email protected]

Jeff Pearey Director, Leeds +44 (0)113 261 6236 [email protected]

Chris Mulcahy Director, Manchester +44 (0)161 238 6228 [email protected]

Matthew Smith Director, Nottingham +44 (0)115 908 2123 [email protected]

David McGougan Director, Southampton +44 (0)238 038 5628 [email protected]

James Finnis Director, Western Corridor +44 (0)20 8283 2534 [email protected]

jll.co.uk

© 2016 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to Jones Lang LaSalle and shall be used solely for the purposes of evaluating this proposal. All such documentation and information remains the property of Jones Lang LaSalle and shall be kept confidential. Reproduction of any part of this document is authorized only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorization of Jones Lang LaSalle. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof.

Ben Kelly Director, Birmingham +44 (0)121 634 6527 [email protected]

Oliver Paine Director, Bristol +44 (0)117 930 5718 [email protected]

Justin Millett Director, Cardiff +44 (0)292 072 6006 [email protected]

Colin Finlayson Director, Edinburgh +44 (0)131 301 6721 [email protected]

Ross Burns Director, Glasgow +44 (0)141 567 6625 [email protected]

Mathew Atkinson Director, Leeds +44 (0)113 261 6246 [email protected]

James Porteous Director, Manchester +44 (0)161 238 7408 [email protected]

Angus Minford Director, Western Corridor +44 (0)20 7087 5350 [email protected]

Noel Lander Director, Western Corridor +44 (0)20 7399 5874 [email protected]

Investment contacts

Business contacts

Jeremy Richards Head of National Offices Bristol +44 (0)117 930 5745 [email protected]

Chris Ireland UK CEO and Lead Director UK Capital Markets +44 (0)20 7087 5333 [email protected]

Research contacts

Ben Burston UK Research +44 (0)20 7399 5289 [email protected]

Vicky Heath UK Research +44 (0)117 930 5738 [email protected]

Barrie David UK Research +44 (0)20 7087 5165 [email protected]

Documents

UK Office Market Outlook H1 2016