Changing Boundaries. Inside this report:

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www.lsh.co.uk

Inside this report:

Changing Boundaries

Research into the impact that Crossrail and Thameslink will have on

property investment and development in London and the South East

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Crossrail, Thameslink and the Property Investment Market

Lambert Smith Hampton 3

Changing Boundaries

The establishment of Crossrail, and

upgrade and extensions taking

place on the Thameslink network

will change the boundaries of some

of London and the South East’s

commercial and residential property

markets; providing significant

opportunities for property

developers, investors and occupiers

alike. This report highlights those

markets that will benefit most from

the increased connectivity and

shortened journey times provided

by the improvements to the

transport infrastructure.

The central London

markets which have

access to Crossrail or

Thameslink stations

are expected to

remain pre-eminent.

Executive Summary

• The health of London’s economy is vital to the whole of the UK. London contributes 21% to the UK’s annual GVA1_;

a 40% out-performance per capita in comparison with the rest of the country.

• The financial and business services sectors contribute the most to London’s economy. Reflecting this, London ranks number one in the Global Financial Centres Index survey of the most attractive places for financial firms to do business.

• Continuing the modernisation of London’s transport infrastructure is one of the most important things the authorities can do to maintain the city’s competitive advantage.

• The west-east Crossrail network will complete in 2018, serving 37 stations and increasing London’s rail capacity by 10%. It will bring an additional 1.5m people within 45 minutes commuting distance of London’s main business districts.

• The improvements to the Thameslink network will mean

more capacity, more stations served and an increased number of trains travelling across London at peak times.

• The major central London markets which will have access to new Crossrail or refurbished Thameslink stations are expected to remain pre-eminent in terms of demand from investors and developers.

• The less established or less well connected central London locations will grow as they become more attractive to occupiers through the new transport links provided by Crossrail and Thameslink. This will lead to outperformance in comparison with other similar markets which do not benefit from these transport improvements.

• Markets outside central London such as Maidenhead (and

therefore Reading), Slough, Ealing, Stratford and Croydon will also benefit from the new, direct and quicker links into central London.

• We have split the markets we have analysed into two broad

categories; short term focus and long term opportunity. Primarily it is the central London markets and Maidenhead which will perform best in the short term. Aside from Maidenhead, the markets outside of central London present themselves as a long term opportunity, as the transport improvements lead to a positive shift in their market dynamics. For investors and developers with an eye on the medium to long term, the changing boundaries brought about by the further modernisation of London and the South East’s transport infrastructure will provide opportunities from which to profit.

1 GVA is the difference between gross output and intermediate consumption and used as a proxy for GDP

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Changing Boundaries

4Lambert Smith Hampton

The transport

infrastructure of a

city is one of the

key factors which

determines its

economic success.

0 10 20 30 40 50 60 70 80 90 100 6 8 878889909192939495969798990001020304050607080910

DLR opens Jubilee Line Extension opens

Figure 1: Canary Wharf prime rents as a % of city prime rents

Introduction

The transport infrastructure of a city is one of the key factors which determines its economic success. Improvements to the transport network support existing employment clusters, create opportunities for new ones, contribute towards the creation of an environment in which public and private enterprise can flourish, and change the overall perception of the city and its existing boundaries.

For example, the new development at Canary Wharf only began to establish itself after the creation of the DLR network in the late 1980s (Figure 1). Lewisham has been transformed as a commuter location by the DLR, and Paddington emerged as a new office location on the back of the Heathrow Express, and at the expense of more traditional office centres along the A4/M4 corridor.

With the introduction of Crossrail and the works centering on the improvements to the Thameslink network we will see a further expression of these boundary changes. In this report we highlight the hotspots where improved connectivity will add focus. These include locations such as Maidenhead, and Reading at the western end of the Crossrail route. In central London, the rise of Farringdon as a major transport hub and the further development of the King’s Cross/St Pancras/Euston area along the northern edge of central London. Meanwhile the City will benefit through better transport links from Liverpool Street and Blackfriars; and London Bridge will further establish itself as a viable location in its own right. Tottenham Court Road, Bond Street and Paddington will all be beneficiaries of improved transport links.

The new interchanges will provide better connections to areas outside central London. Additionally London’s five airports – City, Gatwick, Heathrow, Luton and Stansted – will become more accessible than ever before through the public transport network.

The prominence of new locations will create development opportunities at these hotspots, and as seen before, activity will reduce in other less well connected locations.

Source: LSH Research

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Crossrail, Thameslink and the Property Investment Market

Table 1: GDP growth in large European cities %

Average 2003-2007 2008 2009 2010 2011 2012 2013 2014 London 3.9 1.1 -5.6 1.1 2.1 3.1 3.9 4.3 Barcelona 3.3 0.4 -4.2 0.6 0.7 1.2 2 1.8 Brussels 1.5 0.3 -0.4 0.7 2.5 2.7 2.9 2.5 Frankfurt 1.3 1 -3.7 3.7 3.1 1.5 2.2 2.2 Madrid 3.8 1.1 -3.3 -0.3 0.7 1.3 2.1 2.2 Milan 1.1 -1.7 -6.3 1.3 1.2 1.4 1.3 1.4 Munich 2.3 -0.5 -4 7 2.5 2.9 3.3 3.3 Paris 2.1 0.4 -1.5 1.2 2 2.4 2.4 2.2 Rome 1.6 -0.4 -3.3 0.9 1.9 1.9 1.9 1.9 Stockholm 4.4 0.3 -4.5 2.3 8.2 4.7 4.2 3.4

London as a global city

In all respects London can be defined as a truly global city. It performs a critical role as one of the two major global financial centres (the other being New York); it is a major political centre; it is a leader in culture, media, sport and the arts; it attracts people from all over the world and a significant proportion of London’s population (33%) were born overseas (source: Oxford Economics – London’s Competitive Place in the UK and Global Economies).

In many senses, London’s pre-eminence in financial and business services is due to its historical significance and seat at the centre of the British Empire and global trade. For example, London’s docks remained the busiest in the world well into the 20th century, a legacy which lives on in London’s substantial role in the global ship-broking industry.

There are other advantages which have acted to maintain London’s leading position well into the 21st century. In geographical terms it sits in-between the markets in Asia and those in the US, it has a competitive tax and regulatory regime, a flexible labour market, relatively easy access to a highly educated workforce. It has strong links to the academic community, it provides a stimulating business environment, and it has a dense and well developed transport network.

As a reflection of this, London’s financial and business services sector grew by 6% per annum in the 10 years to 2008. This figure is below the growth rates recorded in the major cities in the emerging markets, but outstrips other rivals such as Paris and New York. As such, London’s share of the market for financial services in the US, Europe and Japan grew from 2% in the late 1990s to 3.7% in 2008 (pre-financial crisis). As with the other major financial centres, London was hit hard by the recession of 2008 and 2009. The latest data shows that the number of jobs lost was equal to 4.5% of the workforce and total loss of output in 2008 and 2009 was 4.6%, which was worse than many other large centres.

Although the UK’s economic recovery remains fragile, London is performing well in comparison with the rest of the country. Looking forward, prospects for growth are good. London will continue to lead the UK’s economic recovery and London’s GDP should grow by over 2% this year. Oxford Economics’ forecasts show that London’s GDP is expected to grow at a faster rate than most of its European rivals. London is therefore set to retain its competitive edge.

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Changing Boundaries

London and the South East’s economy

London is the engine room of the UK economy, contributing 21% of the annual GVA (Figure 4), a significant

outperformance per capita (approx. 40%) in comparison with the rest of the UK. This is driven by the high value-added Financial and Business Services (F&BS) sector, which accounts for 1.4m jobs out of a total of just over 4m. Output from the F&BS sectors drives activity in the rest of the London economy and as this sector started to recover from the global financial crisis, so has the rest of London’s economy.

Another indication of London’s dominance is the importance of the markets that surround the capital. Centres such as Reading, Maidenhead and Croydon have large well developed markets. As well as acting as business locations in their own right, they are also able to feed off the opportunities available from being in relative close proximity to London and London’s national and international transport links (especially the major airports). This is reflected in the similar employment structure seen in the South East and in London (Figures 3 and 5). The South East is the most important UK region, outside of London, in terms of share of GVA (Figure 4).

We have already outlined that London’s attractions are based upon a number of factors, and the results from the most recent Global Financial Centres Index (GFCI) reflect this. This bi-annual survey carried out by consultancy Z/Yen showed London to be the most competitive and attractive financial services centre in the world. Reflecting this, office based employment in London is set to grow by 303,000 in the next 20 years (source GLA). There are risk factors that could act to militate against these forecasts. These can be broadly summarised as any substantial changes to the tax and regulatory regime and a deterioration of the current transport network. Respondents quoted in the GFCI said that one of the best things regulators and politicians could do to show their commitment to the business community was investment in transport infrastructure. This emphasises the importance of a modern transport network to businesses and also the opportunities that can be created by the improvements to the existing network.

The GFCI shows

London to be the

most competitive and

attractive financial

services centre in

the world.

Construction

-15 -10 -5 0 5 10 15 Q1 2014 Q1 2013 Q1 2012 Q1 2011 Q1 2010 Q1 2009 Q1 2008 Q1 2007 Q1 2006 Construction Distribution, Hotel & Catering Transport & Communications Financial & Business Services Other (mainly Public) Services

Figure 2: London – GVA by Sector % per annum

0 200 400 600 800 1,000 1,200 1,400 1,600 Other Services F&BS Transport & Comms Distribution, Hotels, Catering Construction Other Manufacturing

Figure 3: London – Employment Structure 000s

0 50,000 100,000 150,000 200,000 250,000 Northern Ireland North East Wales East Midlands Yorks & The Humber West Midlands South West Scotland East of England North West South East Greater London

Figure 4: GVA Output by Region 2010 £m

Fig 1: Docklands prime rents

0 10 20 30 40 50 60 70 80 90 100

Docklands Prime Rents as % City

10 09 08 07 06 05 04 03 02 01 00 99 98 97 96 95 94 93 92 91 90 89 88 87 86

Docklands prime rents as % City

Fig 3: Employment structure

Fig 4: GVA Output

-15 -10 -5 0 5 10 15

Other (mainly public) Services Financial & Business Services Transport & Communications Distribution, Hotels & Catering Construction Q1 2014 Q1 2013 Q1 2012 Q1 2011 Q1 2010 Q1 2009 Q1 2008 Q1 2007 Q1 2006 0 200 400 600 800 1000 1200 1400 1600 Column1 Other Services F&BS

Transport & Comms Dist., Hotels, Catering Construction Other Manufacturing 0 50000 100000 150000 200000 250000 Northern Ireland North East Wales East Midlands Yorkshire & Humber West Midlands South West Scotland East of England North West South East Greater London 0 50,000 100,000 150,000 200,000 250,000 Northern Ireland North East Wales East Midlands Yorks & The Humber West Midlands South West Scotland East of England North West South East Greater London 0 200 400 600 800 1,000 1,200 1,400 1,600 Other Services F&BS Transport & Comms Distribution, Hotels, Catering Construction Other Manufacturing -15 -10 -5 0 5 10 15 Q1 2014 Q1 2013 Q1 2012 Q1 2011 Q1 2010 Q1 2009 Q1 2008 Q1 2007 Q1 2006 Construction Distribution, Hotel & Catering Transport & Communications Financial & Business Services Other (mainly Public) Services

Fig 2: GVA by sector

DLR Opens Jubilee Line Extension opens 0 200 400 600 800 1000 Oxford St: West Stratford Reading Maidenhead Slough Ealing Croydon Liverpool St. / Broadgate Oxford St:East Bond St:Old Q2 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000

Fig 22: Zone A retail rents

Fig 5: SE employment structure

0 200 400 600 800 1000 1200 Other Services Other Services F&BS

Transport & Comms Dist., Hotels, Catering Construction Other Manufacturing

Fig 6:

0 1 2 3 4 5 6 7 8 9 Yield (%) Slough/Heathrow Croydon Paddington London Bridge Blackfrairs Stratford Ealing Reading Kings Cross/St PancrasFarringdon Euston Canary Wharf Bond St Tot Ct Road Maidenhead Liverpool St 0 20 40 60 80 100 120

Inward yield shirt

Slough/Heathrow Croydon Paddington London Bridge Blackfrairs Stratford Ealing Reading Kings Cross/St Pancras Farringdon Euston Canary Wharf Bond St Tot Ct Road Maidenhead Liverpool St 0 1 2 3 4 5 6 7 8 9 Slou gh/ Hea thro w Croy don Padd ingt on Lond on Brid ge Blac kfra irs Stra tfor d Ealin g Read ing King ’s Cr oss/ St P ancr as Farr ingd on Eust on Cana ry W harf Bond Str eet Tott enha m Cour t Roa d Mai denh ead Live rpoo l Stre et Other Services F&BS Transport & Comms Distribution, Hotels, Catering Construction Other Manufacturing 0 200 400 600 800 1,000 1,200 0 20 40 60 80 100 120

Yield (%) Inward yield shift 2011-13 (bp rhs)

Fig 23: Residential capital values

0 200 400 600 800 1000 1200 1400 1600

Residential Capital Values (£ psf)

Slough/Heathrow Croydon Reading Stratford Maidenhead Ealing London Bridge Canary Wharf Kings Cross/St PancrasBlackfriars Farringdon Paddington Liverpool St Euston Tot Ct Road Bond St 0 200 400 600 800 1,000 1,200 1,400 1,600 Slou gh/ Hea thro w Croy don Read ing Stra tfor d Mai denh ead Ealin g Lond on Brid ge Cana ry Wha rf King ’s Cr oss/ St P ancr as Blac kfria rs Farr ingd on Padd ingt on Live rpoo l Stre et Eust on Tott enha m Cour t Roa d Bond Stre et 0 200 400 600 800 1,000 Q2 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000

Oxford Street West

Ealing Croydon Liverpool Street/Broadgate Oxford Street East Bond Street Stratord Reading Maidenhead Slough

Figure 5: South East – Employment Structure 000s

Source: Experian

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Crossrail, Thameslink and the Property Investment Market

London’s transport network

The expansion of London’s transport network has been largely unplanned. Heathrow Airport is a classic example of this; the ad hoc manner of its expansion since the 1950s has left London with an airport that handles 14.5m passengers every year, yet many say it is unfit for purpose. Concerted attempts have been made to improve the network and bring London’s transport system into the 21st century and one befitting of a true global city.

The development of the Docklands Light Railway in the 1980s, the establishment of the London Overground Network, the provision of express trains to London’s airports, the high speed Eurostar links to the continent and continued improvements to London Underground have all moved London closer to the goal of a modern integrated transport system.

To ensure London is not left behind, it is important to keep on improving the transport network. Paris already has an extensive suburban and urban rail network, the RER, that serves 246 stops on five lines. The development of which in the 1970s facilitated the establishment of La Défense as one of the major European business locations.

This is where the new Crossrail network and the substantial improvements to Thameslink as part of the Thameslink Programme come into play. The major improvements to London’s transport network will have significant and positive effects on the commercial and residential property markets in a number of key locations.

Crossrail

• Crossrail will be a new west-east rail link, linking

Maidenhead and Heathrow in the west with Shenfield and Abbey Wood in the east, via the West End, City of London and Canary Wharf.

• With works already underway, it is anticipated that the £15.9bn scheme will be open to the public in 2018.

• The new route will serve 37 stations and provide a 10% increase in the capacity of London’s rail network.

• The network will service up to 78,000 passengers an hour.

• Shortening journey times, Crossrail will bring an additional 1.5m people within 45 minutes commuting distance of London’s main business districts.

• The number of travellers passing through Bond Street station will increase from 155,000 people a day to 220,000 people a day when Crossrail opens.

• Funding has been provided by a £5bn grant from the

Department for Transport and money has also been given to the project by the City of London Corporation, BAA, Canary Wharf and Berkeley Homes. In addition, a supplementary business rate is being paid by London businesses and money from Crossrail fare payers will be used to service the project debt.

• The estimated benefit to the UK economy is £42bn.

Table 2: Impact of Crossrail – increase in commuter population by station and travel time

Station Within Within 30 minutes 60 minutes

Canary Wharf 260% 52%

Paddington 94% 35%

Tottenham Court Road 75% 23%

Bond Street 61% 20% Farringdon 56% 17% Liverpool Street 51% 19% Ealing Broadway 33% 52% Heathrow Airport 31% 58% Slough 23% 61% Maidenhead 3% 54% Source: CACI

Thameslink programme

• Thameslink is a north-south rail link which connects Brighton and Sevenoaks in the south with Bedford in the north via London Bridge, the City of London and St Pancras.

• The system is currently undergoing a £6bn upgrade (funded

by The Department for Transport), which will extend the network, increase capacity and dramatically improve upon the existing service.

• Three London stations – Blackfriars, Farringdon and London Bridge – will be refurbished as part of the programme. Blackfriars station will extend across the Thames and be accessible from the Southbank.

• The works at Blackfriars and Farringdon will be completed by the 2012 Olympics, whereas those at London Bridge will not complete until 2018.

• As the hub of the Crossrail and Thameslink interchange, approximately 140 trains will pass through Farringdon station every hour during peak periods.

• The programme will not be finished until 2018, but to increase capacity, longer trains will be in use from the end of 2011 and new purpose built rolling stock will be introduced from 2015.

This investment in Greater London’s infrastructure will assist London’s evolution as a global business centre; the ability to move from home to work place to recreational space will be improved; London’s competitive edge in terms of costs of occupation will be maintained; and the quality of life that comes with better communications will also be enhanced.

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Opportunity

Crossrail, Thameslink

and the London and

South East Property

Investment Market

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Changing Boundaries

Opportunities by location

It is clear that these programmes will make a major difference to London’s transport infrastructure, but how will this affect the property markets in the capital and the South East? It is sometimes taken as a given that improved transport links will lead to a commensurate improvement in the relative property markets, but can we qualify this relationship at all?

• The core central (ie almost solely commercial) markets are those which already have good transport links and business infrastructure. The improvements to the transport network surrounding these locations will act to cement their place at the top of the tree in terms of occupier and investor preference.

• Transport improvements in non-core central (ie primarily commercial) location will affect businesses as they enable more people to access that particular place on a daily basis. This will encourage businesses to locate there as they look to take advantage of the improved links at what would initially be lower rents than relatively more connected locations.

• As occupier demand increases so will capital values, as developers and investors look to capitalise by exploiting commercial opportunities in a location that was previously less attractive.

• Transport improvements in more peripheral (i.e. mixed commercial and residential) locations will affect these markets slightly differently. Shorter journey times to major employment centres encourage businesses looking to save cost through relocation from more expensive areas, and also provide a boost to the residential market as particular commutes become newly feasible, i.e. journey time from Slough to central London will be halved by Crossrail. The benefits of improved journey times will also apply to the eastern end of Crossrail.

• Thereafter the dynamic is the same, in that increased occupier demand results in increased developer and investor demand.

We have taken these principles and used them to identify the following 15 key investment and

development hotspots; markets which will outperform their peers in the short and /or long term as a result of the improved connectivity provided by Crossrail and Thameslink.

1. Bond Street

Transport infrastructure

Bond Street will be one of the new Crossrail stations; passenger numbers passing through the station are forecast to increase from the current figure of 150,000 a day to 220,000 a day when Crossrail opens.

Development potential

There is potential for development around Hanover Square. For example Great Portland Estates has received permission for a 205,000 sq ft mixed-use development around the eastern ticket hall at Hanover Square and there is planning permission for a 34,000 sq ft office led development on Davies Street. In addition, Land Securities’ Park House development on Oxford Street is already underway and due to complete in 2012. It will provide 160,000 sq ft of offices, 90,000 sq ft of retail and 60,000 sq ft of residential space.

Outlook

The increased station capacity will be attractive to high profile office occupiers and retailers on Oxford Street and Bond Street. We expect developers to concentrate their efforts on mixed-use projects (as with the Park House development) designed to appeal to international retailers and companies from the financial and business services sectors.

1. Bond Street

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

2. TCR

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

3. Liverpool St

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

4. Farringdon

0 1 2 3 4 5 6 7 8 9 2013 (f) 2012 (f) 2011 2010 2009

5. Kings’ Cross etc

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

6.London Bridge

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

7. Canary Wharf etc

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

8. Paddington

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

9. Blackfriars

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

10. Reading

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

11. Maidenhead

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

12. Slough etc

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

14. Croydon

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

13. Ealing

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

15. Stratford

0 1 2 3 4 5 6 7 8 9 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 9 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 9 2013 (f) 2012 (f) 2011 2010 2009

Figure 7: Yield expectations %

Current Outlook

Rent £80.00 psf 6.5% pa

Yield 5.50% -75 bp

Development Land Securities is Potential for further development potential currently developing a around Hanover Square and

mixed-use scheme on Bond Street. Oxford Street, close to

Bond Street tube station.

Please note:

All data in the following tables applies to the office market. The rental and yield outlook is for 2011-13.

Analysis of central London markets is by 750 metre radius from the relevant station. Central London offices Grade A spec defined as 5,000 sq ft plus floor plates. Regional offices Grade A spec defined as 10,000 sq ft floor plates.

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Crossrail, Thameslink and the Property Investment Market

2. Tottenham Court Road

3. Liverpool Street

Transport infrastructure

Liverpool Street is already a major London Underground and rail interchange, so the improved connectivity that Crossrail offers may have less of an impact in comparison with Farringdon for example. It will be considerably easier to move between Liverpool Street and Canary Wharf, and that may appeal to banking and financial services occupiers.

There are a number of large schemes that already have planning permission in the area around Liverpool Street. These include:

• Great Portland Estate’s 770,000 sq ft development at 100 Bishopsgate.

• Hammerson’s 590,000 sq ft mixed-use scheme, Principal

Place (200,000 sq ft already let to CMS Cameron Mckenna), which is due to complete in 2015.

• The Pinnacle, 24 Bishopsgate; a 1m sq ft office scheme due for completion 2014.

• British Land and Blackstone’s redevelopment of the Broadgate campus to provide UBS with a new London HQ.

• Targetfollow’s 326,000 sq ft scheme at 70 St Mary Axe.

Outlook

As a major City submarket, Liverpool Street is already a prominent and popular location for professional services and financial firms; Crossrail will only enhance its attraction as a location for this type of occupier. It will be the only Crossrail stop within the City of London, so it is possible that the “geographical” centre of the City will shift further north, away from Bank and towards the newly accessible Liverpool Street.

1. Bond Street

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

2. TCR

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

3. Liverpool St

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

4. Farringdon

0 1 2 3 4 5 6 7 8 9 2013 (f) 2012 (f) 2011 2010 2009

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

6.London Bridge

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

7. Canary Wharf etc

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

8. Paddington

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

9. Blackfriars

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

10. Reading

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

11. Maidenhead

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

12. Slough etc

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

14. Croydon

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

13. Ealing

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

15. Stratford

1. Bond Street

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

2. TCR

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

3. Liverpool St

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

4. Farringdon

0 1 2 3 4 5 6 7 8 9 2013 (f) 2012 (f) 2011 2010 2009

5. Kings’ Cross etc

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

6.London Bridge

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

7. Canary Wharf etc

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

8. Paddington

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

9. Blackfriars

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

10. Reading

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

11. Maidenhead

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

12. Slough etc

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

14. Croydon

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

13. Ealing

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

15. Stratford

Current Outlook

Rent £62.50 psf 8.50% pa

Yield 6.00% -100 bp

Development Good. Central St Giles New buildings could attract potential Project has already raised corporates, media and professional

the area’s profile. occupiers and establish the area as a prime office location in the West End.

Current Outlook

Rent £55.00 psf 10.50% pa

Yield 5.75% -75bp

Development The area is already a Some substantial schemes are potential prime location in the planned around Liverpool Street.

City of London. The Crossrail will only improve this new Crossrail station area of the city and reinforce will help to maintain its micro credentials as an office this position. destination for financial occupiers. Transport infrastructure

Tottenham Court Road will be a new station on Crossrail, allowing passengers to interchange between Crossrail and the Northern and Central lines on the London Underground.

Development potential

The eastern end of Oxford Street is renowned for being fairly run-down. The station's redevelopment, improved connectivity, and the recent completion of the Central St Giles development will act as catalyst for further redevelopment.

Some investors are already looking to exploit existing

development opportunities and the anticipated improvements that Crossrail will provide:

• Aviva Investors are thought to be looking into the possibility of developing a 600,000 sq ft plot at 1 New Oxford Street.

• Derwent London Plc have acquired 18-30 Tottenham Court

Road and are planning a refurbishment of the 60,000 sq ft building, with an option to acquire a 277,000 sq ft mixed use scheme over-station development site.

• Frogmore and Development Securities are redeveloping a retail unit at the eastern end of Oxford Street.

• The Royal Mail sorting office and goods yard at Rathbone Place could also be made available for redevelopment. Although this is complicated by the fact that the yard is secured for use during the Crossrail construction works.

Outlook

In terms of future demand, this area has already proved popular with TMT firms acquiring office space (e.g. lettings at Central St Giles to Google, WPP, Universal Pictures etc), and the increased connectivity and further redevelopment will continue this trend. It is a similarly positive story in the retail sector as the recent 141,000 sq ft pre-let to Primark demonstrates.

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4. Farringdon

5. King’s Cross/St Pancras/Euston

Changing Boundaries

Transport infrastructure

Farringdon will provide an interchange with Thameslink and Crossrail and London Underground as such it is set to become one of the most accessible locations in central London. Passengers will be able to travel directly to three of London’s five main airports from here (Heathrow, Gatwick and Luton) and interchange with intercity and international train services.

Farringdon’s central location and improved transport links will make it an attractive proposition for developers. There is money already flowing into the area with several proposed schemes:

• Helical Bar and Baupost’s St Barts Development Site – a planned 400,000 sq ft mixed use scheme.

• Henderson’s Caxton House – to form part of the larger Smithfield Market redevelopment. The site has planning for a new 215,000 sq ft office scheme. In addition, the adjacent meat market and annex block could provide 300,000 sq ft subject to planning.

• AXA and Favermead are developing 60 Holborn Viaduct, a

speculative 215,000 sq ft office development.

• Derwent has submitted a planning application for Turnmill, a 70,000 sq ft office building located opposite Farringdon Station.

Outlook

Farringdon’s location on the fringes of the City, as well as the increased accessibility, means that the area will become increasingly popular with occupiers from the financial and business services sector. As the area establishes itself as a business location, retailers will also be attracted to the market and mainstream retailing will also become possible.

Transport infrastructure

St Pancras will be one of the main hubs of the Thameslink network, meaning that passengers will be able to interchange with inter-city and Eurostar services from stations to the north and south of London.

As one of the more under-developed areas of London, King’s Cross is set to benefit from the major scheme proposed by Argent. This consists of the redevelopment of a 67 acre site to the east of the station. When completed it will provide some 3.4m sq ft of offices, 500,000 sq ft of retail and up to 2,000 homes and flats.

The area around Euston station has benefitted from British Land’s 1.2m sq ft mixed-use Regent’s Place development. The next phase of development – the North East Quadrant – will provide up to 500,000 sq ft of mixed-use space and be delivered by 2013. When completed, Regent’s Place will total more than 2m sq ft and 14,000 people will live or work there.

Outlook

The British Land development at Regent’s Place has already proved popular with media and advertising agencies; this and other major developments alongside the transport improvements can only add to the area’s attractiveness to occupiers and investors.

Whilst the HS2 (High Speed 2) line between London and Birmingham has not yet been given the green light by the Government, the proposed route has been announced. If it is to go ahead, trains will depart London from an extended and redeveloped Euston station, which will open up a whole new area around the station for further development and provide significant opportunities for property developers and investors.

Current Outlook

Rent £42.50 psf 11.00% pa

Yield 6.00% -75 bp

Development Farringdon is under- Farringdon will be at the hub of potential developed as a the new transport network.

business location. It is anticipated 140 trains an Developers have been hour will pass through the held back by the current station. Prospects are transport infrastructure excellent provided large scale and a lack of suitable sites. development can be realised.

Current Outlook

Rent £50.00 psf 11.00% pa

Yield 5.75% -50 bp

Development Argent has an 8m sq ft The continued regeneration of potential mixed-use development the area will drive rental growth

to the east of King’s Cross and establish the area as a key station already planned. business location.

1. Bond Street

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2. TCR

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3. Liverpool St

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4. Farringdon

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6.London Bridge

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7. Canary Wharf etc

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8. Paddington

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9. Blackfriars

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10. Reading

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11. Maidenhead

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12. Slough etc

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14. Croydon

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13. Ealing

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15. Stratford

1. Bond Street

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2. TCR

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3. Liverpool St

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4. Farringdon

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5. Kings’ Cross etc

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6.London Bridge

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7. Canary Wharf etc

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8. Paddington

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9. Blackfriars

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10. Reading

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11. Maidenhead

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12. Slough etc

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14. Croydon

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13. Ealing

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15. Stratford

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Crossrail, Thameslink and the Property Investment Market

6. London Bridge

7. Canary Wharf/Royal Docks

Transport infrastructure

The major change to London Bridge will be the planned redevelopment of the station and the extensions to the Thameslink Network, which will improve access to the station from both north and south London.

The Shard and London Bridge Quarter development have raised the profile of London Bridge as a location in its own right, rather than as a gateway to the City or West End of London. The Shard will consist of offices, residential and hotel space. Additionally, there are further plans by the same developer, Sellar Group, to construct a 17 storey office block opposite the Shard. The two developments will provide in total 1m sq ft of office space for the area.

Outlook

The development of the area will attract occupiers who might have only previously considered locations north of the river in the City or Midtown. Landlords should therefore be targeting professional services and financial firms for their new

developments. For example, Norton Rose already has its London offices at the More London development on the South Bank between London Bridge and Tower Bridge.

Transport infrastructure

It will be quicker than ever before to access Canary Wharf from central London. The journey time from Bond Street to Canary Wharf will be cut by 4 minutes and from the City (Liverpool Street) by 11 minutes. It will also be possible to go directly from Heathrow Airport to Canary Wharf in 40 minutes.

Canary Wharf has just announced that it plans to build a new 500,000 sq ft 20 storey tower on the back of a 250,000 sq ft pre-let to the European Medicines Agency. The EMA is paying £46.50 psf on a 25 year lease with upwards only rent reviews and a 37 month rent free period. Construction will start in 2011 and completion is scheduled for 2015.

This is the last building to be developed from the original Canary Wharf masterplan drawn up in the 1980s. There remains a large amount of space with planning permission in the pipeline – circa 12.6m sq ft – at Bank Street, North Quay and Wood Wharf. The timescale for the development of these projects remains uncertain.

The Royal Docks is a 650 hectare area which has been zoned for redevelopment and there is significant scope for commercial and residential property development. For example, at

Silvertown Quays planning permission exists for a 50 acre residential and office development. The LDA is in the process of choosing a developer for this site from a seven strong short list.

Outlook

Canary Wharf will continue to attract occupiers from the banking and financial services sector. The quicker journey times between Canary Wharf and the City will only be an added attraction for most occupiers. At the Royal Docks large scale development will be possible but this is a long term project.

Current Outlook

Rent £45.00 psf 11.50% pa

Yield 6.00% -50 bp

Development High profile Shard and Planned redevelopment of potential London Bridge Quarter the station to commence

development is already in 2013 and will be finished underway, providing by 2018. This will increase 1m sq ft of new capacity by 66%. Anticipated office space. that London Bridge will

become a new location to rival the City and Midtown for office occupiers.

Current Outlook

Rent £38.00 psf 8.00% pa

Yield 5.75% -50 bp

Development Total Canary Wharf Canary Wharf station is at potential pipeline is 12.6m sq ft capacity so the construction

(equates to 45 years of a new £256m station will development at the rate continue to position Canary seen over last five years). Wharf as a credible alternative Nothing u/c at the moment. to the City as an office location.

1. Bond Street

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

2. TCR

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

3. Liverpool St

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

4. Farringdon

0 1 2 3 4 5 6 7 8 9 2013 (f) 2012 (f) 2011 2010 2009

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

6.London Bridge

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

7. Canary Wharf etc

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

8. Paddington

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9. Blackfriars

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10. Reading

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11. Maidenhead

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12. Slough etc

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14. Croydon

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13. Ealing

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15. Stratford

1. Bond Street

0 1 2 3 4 2013 (f) 2012 (f) 2011 2010 2009

2. TCR

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

3. Liverpool St

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

4. Farringdon

0 1 2 3 4 5 6 7 8 9 2013 (f) 2012 (f) 2011 2010 2009

5. Kings’ Cross etc

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

6.London Bridge

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

7. Canary Wharf etc

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

8. Paddington

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

9. Blackfriars

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

10. Reading

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

11. Maidenhead

0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009

12. Slough etc

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

14. Croydon

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

13. Ealing

0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009

15. Stratford

0 1 2 3 4 5 6 7 8 9 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 9 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 2013 (f) 2012 (f) 2011 2010 2009 0 1 2 3 4 5 6 7 8 9 2013 (f) 2012 (f) 2011 2010 2009

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Changing Boundaries

8. Paddington

9. Blackfriars

Transport infrastructure

Paddington continues to be an important London transport hub, especially in relation to the markets in the Thames Valley and Heathrow Airport. Via Crossrail, it will take only nine minutes to get from Paddington to Liverpool Street and 16 minutes to travel from Paddington to Canary Wharf.

Paddington has already benefitted from significant development of office space in recent years and we expect this to continue in the light of the forthcoming arrival of Crossrail. Some potential schemes include:

• North Wharf Road – Planning consent obtained for 313,000

sq ft scheme to include 240,000 sq ft offices and 70,000 sq ft residential.

• Paddington Central – Four and Five Kingdom Street. The final two developments have detailed planning permission and will total 130,000 sq ft and 204,000 sq ft respe