Alony Hetz

Regulatory Filings • Aug 14, 2024

Central London Office Market Outlook

Prepared for Alony Hetz Capital Markets Call Q2 2024

Improved levels of take-up evident, whilst under offer remains above average Central London office performance – Q2 2024

Source: JLL Research

Improved leasing activity in the City, whilst West End remains subdued City & West End leasing activity, 2015-2024 Q2

Source: JLL Research

Key activity across Central London Q2 2024

50 Electric Boulevard, SW8 SharkNinja Size: 32,000 sq ft

Beginning of resurgence of activity in non-core submarkets?

M Building, 334 Oxford St, W1 BDO Size: 187,000 sq ft

Quality of development pipeline generating pre-let activity

YY London, E14 Revolut Size: 114,000 sq ft

Expansion led - Fintech Potential spin off?

88 Wood Street, EC2 Mako / Millenium Capital Size: 25,000 sq ft

Investment = activity Significant discount to prime

Source: JLL Research

Replacement demand grows over the quarter

Source: JLL Research

Stay vs Go a consideration for most occupiers

Central London take-up over 50,000 sq ft

Source: JLL Research

Occupier Insights

Key themes – Occupier, July 2024

Debt Market – Key Themes

The Debt Market is Open Valuations Managing Execution Risk

Covenants Interest Rates Deal Size Matters

Fixed / Floating Cost of Hedging Growing Lender Pool

	12th July 2024	Previous Month (11th June 2024)
Daily SONIA Rate	5.20% -	5.20%
3Y SONIA Swap	4.16% ↓	4.44%
5Y SONIA Swap	3.90% ↓	4.14%
3M EURIBOR	3.69% ↓	3.74%
3Y EURIBOR Swap	2.94% ↓	3.18%
5Y EURIBOR Swap	2.79% ↓	2.99%

8 | © 2024 Jones Lang LaSalle IP, Inc. All rights reserved.

Debt Funds

• Most liquid part of the stack LPs and existing platforms favouring risk-adjusted returns
• First signs that forward looking liquidity may be constrained due to capital raising challenges, given investors are reconsidering RE allocations
• Many lenders require back leverage, which presents an additional execution "risk"

Insurance Companies

• Focused on cash-flowing assets with strong WAULTs and good credits
• Majority provide fixed rate debt (above prevailing swap or gilt rates)
• Continue to look for new opportunities, albeit focused on low-risk deals

Investment Banks

• Whilst still active, are more focused on post loan sell down visibility and liquidity
• With the syndication and securitisation markets more challenging, IBs are less attracted to very large transactions
• For new deals, many require an element of the loan to be "pre-syndicated" or "soft-circled"

Banks

• Banks increasingly occupied with managing existing loan books
• Increasing pressures of regulatory capital from Basel III and IV requirements which is leading to reduced LTV appetite
• With increasing rates and existing loan pressures, general risk appetite is reducing

(1) Lender "sweet spot" assuming high quality sponsor and stabilized asset.

Indicative Lender Appetite(1)

Loan Size £/€	30-150
LTV	60-70%
ICR	1.1-1.3x
Pricing	3.25-4.50%

Loan Size £/€	50-150
LTV	45-55%
ICR	1.4-1.6x
Pricing	1.85-2.45%

Loan Size £/€	75-150
LTV	50-60%
ICR	1.3-1.5x
Pricing	2.00-3.00%

Loan Size £/€ 25-75

Pricing	1.85-2.75%
ICR	1.3-1.5x
LTV	45-55%

Central London investment of £2.5bn in H1 2024 Q2 2024

Quarterly investment volumes £ billion

55% of H1 purchasers were from overseas

Central London Purchaser by Nationality – H1 2024

Private/Other

• Institution
• Property Company
• Owner Occupier

Finding opportunities to satisfy capital

Fundraising increasingly focussed on Value-Add strategies, matching majority of recent sales

Source: JLL Research, Preqin, July 2024

Investor Insights

Key themes – Capital Markets, July 2024

11 | © 2024 Jones Lang LaSalle IP, Inc. All rights reserved.

Source: JLL Research

Thank you

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