THE RACE FOR SPACE

20 CUSHMAN & WAKEFIELD • 9.9 million sq ft is pre-let or under offer (29%). • There is just 6.72 million sq ft of office space currently under construction for speculative delivery between 2018 and 2023 (19% of pipeline). • The constrained pipeline sits against a backdrop of increased demand for new Grade A take-up. The volume of new or refurbished grade A space declined for the fifth consecutive quarter in Q3 2018. • The 10-year average annual volume of new Grade A take-up is 5.79 million sq ft. Submarkets: oversupply or undersupply? The map on figure 16 shows the potential impact of the development pipeline on a submarket level. Kensington has an extremely limited development pipeline and as such is the submarket most at risk of continued undersupply in the next five years. On the other end of the spectrum are the emerging submarkets of Stratford, White City and Vauxhall, Nine Elms and Battersea. Whilst these areas do indeed have relatively high levels of anticipated development completions in the coming years, their comparatively low stock levels distort the analysis. Non-core locations where landlords are prepared to build will continue to benefit from footloose occupiers who want quality buildings with good transport links. Looking at the more established submarkets, it is evident that the West End leans further towards potential undersupply than the City. The core West End submarkets are amongst the most acutely affected by a diminished development pipeline over the next five years. The City and surrounding submarkets are more likely to remain stable in terms of future supply coming online, however there are pockets that are exposed to oversupply if take-up volumes decline. The total potential size of the development pipeline between 2018 and 2023 is 35million sq ft. PIPELINE HOW MUCH IS BEING BUILT? Figure 14 Central London development pipeline (excluding committed space) Source: Cushman & Wakefield Figure 15 Central London development pipeline – speculative vs committed space KENSINGTON KNIGHTSBRIDGE PADDINGTON EUSTON& MARYLEBONE KING’SCROSS NORTHOF OXFORDSTREET MAYFAIR& STJAMES’S VICTORIA BLOOMSBURY CLERKENWELL &SHOREDITCH CITYCORE ALDGATE &WHITECHAPEL CANARY WHARF DOCKLANDS SOHO& COVENT GARDEN MIDTOWN WHITECITY STRATFORD Potential Oversupply Potential Undersupply Stable HAMMERSMITH VAUXHALL, NINEELMS& BATTERSEA SOUTHBANK Figure 16 Central London submarkets potential future supply “THE NEXT FEW MONTHS WILL BE IMPORTANT, WITH THE POLITICAL SITUATION. IF ANYTHING, IT’S A GOOD THING THAT THERE’S NOT HUGE AMOUNTS OF SUPPLY CURRENTLY IN THE MARKET.” A Central London Landlord The volume of space being pre-let across Central London is reducing the volume of speculative space being delivered to market. This trend looks set to continue, meaning that occupiers seeking large space-takes in good quality buildings will have to start their searches further and further in advance of their anticipated move date. With occupiers considering their options 3-4 years ahead of a move, forward-thinking landlords may find more opportunities to pre-let off-plan to existing tenants in their portfolio. Landlords able and willing to ‘push the button’ on significant speculative schemes in the core could benefit from a lack of local competition. 10-year average grade A take-up Completed-spec Completed-prelet Under construction Pipeline probable Pipeline possible 0 1 2 3 4 5 6 7 8 9 10 2023 2022 2021 2020 2019 2018 Sq ft millions Prelet or under offer 53% PRE-LET OR UNDER OFFER 47% SPECULATIVELY UNDER CONSTRUCTION Source: Cushman & Wakefield Source: Cushman & Wakefield 21 RACE FOR SPACE