The Investment Market

Tim LuckmanDirector, Valuation Advisory5 February 2014

Agenda• Economy

• Investment trends

• Office sector

• Industrial sector

• Retail and leisure sector

• Conclusions

Economy

UK Confidence IndicatorsOptimism at post-crisis high

Source: European Commission, October 2013

Economic GrowthEurozone leads the downswing in 2012

GDP % YoY 1990-2017

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

YoY%UK Eurozone World

Source: Oxford Economics,

Forecasts

Investment Trends

Current Trends – UK Investment Activity

2008 2009 2010 2011 2012 2013£0

£5,000

£10,000

£15,000

£20,000

£25,000

£30,000

£12,491 £12,143

£17,303£16,447

£22,253

£25,210

£6,505£8,036

£11,560£10,791

£15,379

£18,378

£341.15 £150.04 £371.98 £393.68 £156.87 £414.47

Investment by Region

United Kingdom London Manchester

Current Trends – Who are the vendors ?

43%

3%7%

30%

3% 13% Institutions / Pooled Funds

Private Investor

Propco's

Insolvency / Consensual

Unknown

Other

Source: Jones Lang LaSalle, 2013

Current Trends – Who are the purchasers?

33%

67%

Source: Jones Lang LaSalle, 2013

33%UK

67%Global 2013 (£m)

UK DomesticAmerica

Global

Asia Pacific

Middle East

Europe

Global Sources of Funds

Offices

Key Messages | Q4 2013

• Big 6 take-up totals 4.3m sq ft in 2013, up 35% compared to 2012

• Manchester & Leeds account for the biggest share of take-up across the Big 6

• Big 6 supply down 15% since end 2012 - to 10.1 million sq ft

• Average overall vacancy rate of 9.4%, across the Big 6

• Grade A supply severely constrained – further tightening expected in the short term

• 1.0 million sq ft under construction across the Big 6, of which almost half is in Glasgow

• Prime rents increase in a number of markets in Q4 2013

• The weight of money targeting the regions continues to place inward pressure on yields

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000 Take-up 5 Year Average000s sq ft

Manchester City Centre Take-upSolid performance in terms of leasing activity

Source: Jones Lang LaSalle, 2014

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

500

1,000

1,500

2,000

2,500

3,000

0%

2%

4%

6%

8%

10%

12%

14%Supply (LHS) Vacancy Rate (RHS)000s sq ft

Manchester SupplySupply down 9% since end 2012

Source: Jones Lang LaSalle, 2014

Manchester Speculative Development | Q4 2013

0

100

200

300

400

500

600

700

800

900

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

000'

s sq

ft

Completed U/C Definite Spec Start Likely Spec Start 50/50 Spec Start

Source: Jones Lang LaSalle 2014

Just one scheme currently under construction

Big 6 Investment Volumes by Purchaser Nationality

2008 2009 2010 2011 2012 20130

200

400

600

800

1000

1200

1400

UK Overseas Undisclosed

Source: Jones Lang LaSalle 2014

Long Term Prime Average Yields – UK Cities

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Dec

-87

Dec

-88

Dec

-89

Dec

-90

Dec

-91

Dec

-92

Dec

-93

Dec

-94

Dec

-95

Dec

-96

Dec

-97

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Pri

me

Yie

ld %

Regional preferred West End WE Average City City Average

Regional London City London West End

Prime Yield 6.00% 4.75% 3.75%

10 Year Average 6.23% 5.38% 4.37%

Long term Average 5.94% 5.54% 4.72%

Source: Jones Lang LaSalle 2014

Prime UK regional yields nearing long term average levels

UK Prime Office Yields

Source: Jones Lang LaSalle, 2014UK excl. London: Birmingham, Bristol, Cardiff, Leeds, Edinburgh, Manchester, Glasgow & Western Corridor

Prime yields trend keener4Q

03

2Q04

4Q04

2Q05

4Q05

2Q06

4Q06

2Q07

4Q07

2Q08

4Q08

2Q09

4Q09

2Q10

4Q10

2Q11

4Q11

2Q12

4Q12

2Q13

4Q13

3%

4%

5%

6%

7%

8%

9%UK incl. London UK excl. London

One Angel Square, £142mDecember 2012

REEF Estates/ Ginko Tree Investments, 6 %

100 Barbirolli Square, £41mJune 2013

Moorfield and Oaktree Capital Management, 8.75 %

1 Hardman Street £7mDecember 2013

Charles Street Buildings Group, 5.4%

Scottish Widows Investment Partnership, 6.25 %

Sunlight House, £34.5m, January 2014

Industrial

Industrial Market – Current themes

Occupational - Distribution• Good levels of take up • Grade A Supply continues to diminish • Strong demand from retailers • Return of speculative development in prime locations

Occupational - Estates• Demand and supply vary according to local micro markets• Limited new supply is hampering demand• Industrial land continues to suffer pressure from higher value uses• Increase in activity from occupiers catering for online retail fulfilment particularly parcel carriers

Property Market Overview: Yields as at January 2014

Single-let

Prime London 5.50%

South East 5.75%

Regions 6.00%

Multi-let

Prime London 5.50%

South East 5.75%

Regions 6.75%

Sentiment Supply Yield

• Positive sentiment

• Good occupational story

• Limited stock

• Depth of investors

• Yields down

• Asset class still looks good value

• Strong demand will continue

Standard LifeInvestments, 5.6 %

Travis Perkins, Omega North, £52.8mOctober 2013

Titan 350, £15mJanuary 2014

Delin, 7.5 %

Retail and Leisure

3.04.05.06.07.08.09.0

10.011.012.0

Mar

-91

Mar

-01

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Dec

-07

Mar

-08

Jun-

08Se

p-08

Dec

-08

Mar

-09

Jun-

09Se

p-09

Dec

-09

Mar

-10

Jun-

10Se

p-10

Dec

-10

Mar

-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Nov

-12

Mar

-13

Jun-

13Se

p-13

Nov

-13

Retail Warehouse / Leisure Investment Yields

Open A1 Parks (Fashion) 5.25% (Stronger)

Restricted Parks (Bulky) 6.00% (Stable)

Solus Bulky / DIY 6.25% (Stable)

Secondary RW 7.25% (Stable)

Foodstores 4.25% (Stronger)

Leisure 6.00% (Stable)

The Circus, £24.45mJanuary 2014

CBRE GlobalInvestors, 5.7%

Great Northern £71.1 mSeptember 2013

Confidential

Conclusions

SE will remain expensive

Who are and will be the purchasers?2013–2015

AND FINALLY…

• Occupational markets continue to improve

• Rental growth

• More speculative development

• Further compression of yields

• Gap between prime and secondary continues to narrow

• More availability of debt BUT CAUTION – debt more expensive!

• Generally, 2014 another strong year

January – What a month!

Questions

COPYRIGHT © JONES LANG LASALLE IP, INC. 2014

Tim LuckmanDirector, Valuation AdvisoryOne Piccadilly Gardens Manchester M1 1RGtim.luckman@eu.jll.com0161 828 6426