Alony Hetz

Investor Presentation • Mar 23, 2022

The Office & Life Sciences Landscape

London, Cambridge & Oxford

Sean Coghlan | Global Head of Capital Markets Research, JLL 23rd March 2022

© 2022 Jones Lang LaSalle IP, Inc. All rights reserved.

London: A Global city and Gateway to Europe

Access to highly skilled workforce

• World-leading universities
• #2 behind U.S. in no of universities in global top 20

Clear and transparent

• #1 for Real Estate Transparency
  • Conviction in market strength, resilience

Ongoing infrastructure improvements

• National; Elizabeth Line, HS2
• London; Thameslink and Bakerloo and Northern Line extensions

Diverse occupier base

• Leading global financial centre
• Significant growth from tech and life sciences

Leading levels of capital flows & attractive pricing

• Most traded city globally in 7 of the past 10 years
• Leading cross-border capital flows
• Prime yield advantage over other global cities

Favourable supply and demand dynamics

• Low vacancy rate of 7.6%
• Constrained development pipeline which is majority pre-let

GDP growth to slow but remain stable in 2022

Diminishing stimulus will set growth rates back on the path toward their natural rates

As stimulus fades postpandemic, GDP growth rates are slowing toward trend rates

The Ukraine crisis will cause growth rates to soften, but still remain positive

Inflation is likely to be higher and for longer, amplified by the crisis

Office employment expected to recover in 2022 (growing 2.2%) 0.0

Strong rebound in office demand in 2021

	Office take-up by market		Central London at a glance
14 12				2021	10-year average
10			Quarterly take-up (sq ft) Annual take-up (sq ft)	8.5 million	2.5 million 10.0 million
8 q ft			Under offer (sq ft)	2.9 million	2.5 million
s n 6 o Milli		+80%	Active demand (sq ft)	8.3 million	8.8 million
4			Overall vacancy	7.6%	5.1%
2			New build vacancy	1.7%	1.1%
0			Speculative under construction (sq ft)	9.6 million	7.5 million
	2011 2012 2013 2014 2015 2016 2017 City West End East London	2018 2019 2020 2021 10- year average	Quarterly Investment volumes Annual Investment volumes	£13.7 billion	£3.8 billion £15.0 billion

Tech and media are reshaping and diversifying London

• Tech & Media Professional Services
• Banking & Finance Service Industry
• Public admin Manufacturing
• Other

Significant footprint growth by big tech

King's Cross / Covent Garden / Victoria

800,000 sq ft | New c1.0m sq ft HQ underway in King's Cross

Amazon

Shoreditch / Midtown

825,000 sq ft

Facebook

Noho / King's Cross / Euston

1.6 million sq ft

Apple

Battersea / City / Regent Street

270,000 sq ft | Pre-let 500,000 sq ft in Battersea for new HQ

London's submarkets are evolving with the changing needs of occupiers

Bridge & Waterloo stations

Rents in core return to pre-pandemic levels

Prime rent by sub-market, Q4 2021 (£ per sq ft)

© 2022 Jones Lang LaSalle IP, Inc. All rights reserved. 7 Source : JLL Research

Development pipeline: Limited new committed supply

• Completed prelet
• 10-year average completions
• 10-year average new/refurb take-up

9.6 million sq ft Under construction speculatively

50% Located in the City

2021 completions totalled 4.6 million sq ft 45% was pre-let / owner occupied

2022 total space under construction

7.7 million sq ft

41% 3.2m sq ft (pre-let) 6% 0.4m sq ft (under offer) 53% 4.1m sq ft (speculative)

Resurgent investment market in 2021

Central London office investment turnover, 2011 – 2021 Volumes of purchaser source of capital, 2021

Prime office yields remain flat or compressed

Source : JLL Research

© 2022 Jones Lang LaSalle IP, Inc. All rights reserved. 10

Office market revival

Demand drivers to outweigh pandemic-related uncertainty and portfolio reductions

Changing market dynamics will trigger supply-demand imbalances, fueling rental growth upside for quality spaces

The next opportunity

Life Sciences in the Golden Triangle

© 2022 Jones Lang LaSalle IP, Inc. All rights reserved. 12

Defining the life sciences sector

Life Sciences is a critical part of Knowledge Intensive Industries that includes Tech and High-Tech Manufacturing The Office for Life Sciences (OLS), a UK central government body defines Life Sciences as 'the application of biology and technology to health improvement'		Diverse sector with multiple subsectors	Important to understand growth characteristics and facility needs
Sub sectors	Who (examples)		Needing
Pharma, Therapeutics & diagnostics			Offices Wet labs (high & low spec) Dry labs
R&D Service - Discovery & development			Wet labs (high & low spec)
Medtech			Dry labs Offices
Pharmatech & Healthtech			Offices

Life sciences demand drivers

A range of non real estate data points provide insight on current and future trends that will underpin real estate performance across different geographies and clusters

Venture capital investment fueling start-up activity and increasing demand

Total Venture Capital Investment to UK Life Science Companies (£Bn)

London, Cambridge & Oxford present significant opportunity

		Advanced:	Cluster	USP	Company Numbers	Employment	VC Investment (£M)	Leading Universities	High Quality Publications
		Oxford, Cambridge, London	London	Digital Health
		Established:	Cambridge	Antibody/Advanced Therapeutics & AI
		Stevenage, Manchester, Edinburgh, Glasgow,	Oxford	Therapeutics & Regenative Medicine
Edinburgh Glasgow		Nottingham	Stevenage	Cell Therapy & Gene
		Emerging:	Edinburgh	MedTech & Genetics
Newcastle		Birmingham, Newcastle, Leeds,	Manchester	Advanced Materials
		Cardiff	Glasgow	Medicine Precision & AgTech
Leeds Manchester			Birmingham	Medical Technology
	Nottingham		Newcastle	Ageing
Birmingham		Cambridge Stevenage	Nottingham	Pharmacology , Chemistry , Regen Medicine
Oxford	London		Leeds	Digital Health

Golden Triangle outperforming UK market-at-large

	Cambridge	Oxford	London (Kings Cross)
Occupational / Investor Metrics – Life Sciences
ERV growth pa 2015-20	6.00%	10.00%	1.00%
Forecasted ERV growth	2.50%	3.00%	3.00%
Prime Life Science yield NIY (2015)	6.00%	5.75%	3.50%
Prime Life Science yield NIY (2021)	4.00%	4.00%	3.50%
Trending	Stronger	Stronger	Stable
Life Science Cap Rate premium*	- 75 BPS	- 75 BPS	- 25 to 50 BPS
Prime Office Rent (psf)	£37.50	£37.50	£82.50
Prime Lab Rent (psf)	£50.00 +	£50.00 +	£100.00 +
Rent premium (%)**	33.00% +	33.00% +	20.00% +

* Life Sciences cap rate premium over prime offices

** Life Sciences rental premium over prime offices

• Strong ERV growth, although London is less mature
• Forecasted ERV growth is positive
• Yield movement positive historically, with a current yield premium to offices up to 75 bps
• Lab rents achieving a 20-30% premium over prime office rents based on location

Three themes for 2022

Thank you

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