Asia Pacific Property Digest Q Sustained momentum leads to record-breaking investment volumes

Transcription

1 Asia Pacific Property Digest Q4 217 Sustained momentum leads to record-breaking investment volumes

2 4 Feature Articles 4 Solid prospects in review: Top real estate trends 9 Investor hotspots for Singapore property 1 Redrawing Hong Kong s CBD2 boundaries 11 Alternative investments in New Zealand 13 Office 14 Hong Kong 15 Beijing 16 Shanghai 17 Guangzhou 18 Taipei 19 Tokyo 2 Osaka 21 Seoul 22 Singapore 23 Bangkok 24 Jakarta 25 Kuala Lumpur 26 Manila 27 Hanoi 28 Delhi 29 Mumbai 3 Bengaluru 31 Sydney 32 Melbourne 33 Perth 34 Auckland 35 Retail 36 Hong Kong 37 Beijing 38 Shanghai 39 Guangzhou 4 Tokyo 41 Seoul 42 Singapore 43 Bangkok 44 Jakarta 45 Mumbai 46 Sydney 47 Melbourne

3 Editor's Note 217 ended on a positive note, and this will follow through to 218. Investment volumes in the last quarter of 217 reached a new high of US$52 billion in Asia Pacific, up 16 per cent compared to the same period in 216. Within the office sector, tech companies, professional and financial services firms continued to drive demand. You can view this report online at I hope you enjoy reading this report and as always, we welcome your feedback on our reports and service. Thanks, Dr Megan Walters Head of Research Asia Pacific 49 Residential 5 Hong Kong 51 Beijing 52 Shanghai 53 Singapore 54 Bangkok 55 Jakarta 56 Manila 57 Sydney 58 Brisbane Industrial 6 Hong Kong 61 Beijing 62 Shanghai 63 Tokyo 64 Singapore 65 Sydney 66 Melbourne Hotel 68 Hong Kong 69 Beijing 7 Shanghai 71 Tokyo 72 Singapore 73 Bangkok 74 Kuala Lumpur 75 Sydney

4 4 Features ASIA PACIFIC ECONOMY Solid prospects A healthy growth performance continues to take hold in the region as the upturn in global demand remains remarkably strong. The US and Europe are witnessing healthy rates of expansion while China is holding up and sentiment in Japan has improved. The cyclical recovery in world trade continues to benefit many of the region s exporters as strength in external demand has underpinned an increase in business investment, while a relatively accommodative macro policy is supporting domestic demand. Positive trade picture The strength of the global upturn has been an unexpected surprise and helped bolster growth across many export-oriented economies in the region. There has, perhaps, been no bigger beneficiary than South Korea, which has seen exports soar to new highs on the back of a boom in semiconductor shipments. Its North Asian neighbour, Japan, has also seen a buoyant performance with exports recovering throughout 217, and recording its strongest growth since the global financial crisis. With recent manufacturing activity expanding at a decent pace, and signs of resilience in new orders, the current situation bodes well for the outlook and sustainability of momentum in 218. Consumer spending remains on a firm track The retail sales rally in Hong Kong gathered further traction and finished the year up 2.2%, ending a three year decline. An ongoing revival in inbound tourism, in particular from China, coupled with strong domestic consumption, has underpinned the improvement. In China, the shift from investment-led growth to consumption continues to take place with retail sales sustaining doubledigit growth. The annual Singles Day shopping festival held in November further solidified its position as the world s largest online shopping event with more than USD 25 billion in transactions being logged during the 24-hour period and with more than 9% of sales taking place via mobile phones. Policy tightening in select markets but generally neutral stance Macro policy generally remained neutral across most markets, although interest rates did increase slightly in a handful of markets. In an unexpected move, the Bank of Korea raised the key policy rate by 25 bps in November, marking the first increase in six years. Malaysia followed suit in January, as it increased interest rates for the first time in nearly four years. Sustained momentum Short-term growth projections have generally been revised up across the region as global growth is expected to accelerate in 218 and with risks tilted to the upside. Trade is expected to maintain solid momentum while investment is firming despite slowing growth in China. Although interest rates are expected to rise in many countries, muted inflationary pressures should lead to only gradual monetary tightening. After a setback in 217, India is set to regain the title of the fastest-growing major economy with disruptions related to the recently Goods and Services Tax abating.

5 Table 1: Outlook for Major Economies Country Real GDP Growth (y-o-y change) 217E 218F China Outlook Consumption and service sector growth to remain strong. Fiscal spending less buoyant but still healthy. 5 Features Japan India Solid business investment and resilient trade performance. Wage gains amidst tight labour market to see consumer spending slowly improve. Consumption and infrastructure spending to support pick up in growth, as the impact of government initiatives/reforms ease. South Korea Healthy export performance and increased public spending key growth drivers. Australia Domestic demand mixed - subdued household spending while private business investment may provide a boost. Export volumes to rise. Indonesia Domestic consumption and infrastructure investment to remain key pillars of growth. Hong Kong Singapore Private consumption to hold up while ongoing infrastructure projects to support investment. Export performance to remain positive. Externally focused industries to be supportive of growth. Recovery in residential investment and consumer spending to be gradual. Source: Oxford Economics, February 218 ASIA PACIFIC PROPERTY MARKET Investors drawn to the region s positive outlook The region s property markets remained a magnet for investors as healthy fundamentals and strong prospects heightened interest, leading to record levels of investment activity in 217. The sale of a stake in The Center in Hong Kong highlighted the record year, with this transaction reportedly the largest sale of a single real estate asset globally ever. On the occupier front, office leasing volumes were down slightly from a year earlier; however, this is not necessarily reflective of weakness in the underlying fundamentals as tight vacancy in some key markets partly contributed to the fall. New office leasing declines Overall leasing activity dropped more than 2% y-o-y in Asia Pacific in 4Q17, contributing to a full-year decline of 5%. The quarterly decline was in part due to low vacancy and strong pre-commitment rates in several key markets. Delhi recorded the highest level of leasing volumes in both 4Q17 and full-year 217. High levels of activity were also recorded in Bengaluru, Tokyo, and Manila. New leasing was down in Sydney, but in large part due to limited available space as demand is still solid. In contrast, net absorption was down only slightly by 3% y-o-y in 4Q17, but up marginally for the full year. Most Asia Pacific cities saw healthy broadbased occupational demand, driven in large part by financials and tech firms. The strongest take-up was recorded in markets such as Mumbai, Shanghai and Bengaluru. Healthy supply with good commitment rates More than half of all Asia Pacific markets saw new completions in 4Q17. China and most Southeast Asian markets recorded new completions while the Australian cities had very limited or no new supply. Supply volumes declined slightly relative to a year earlier, and completions were mostly contributed by Shanghai, Mumbai and Jakarta. Vacancy rates continued to decline in more than half of the Asia Pacific markets during 4Q17, including notable drops in Taipei and Singapore. Singapore office rental rebound continues In aggregate, Asia Pacific office rents increased 1.1% q-o-q (up 3.8% y-o-y). Singapore continued to record the strongest quarterly office rental growth on the back of improved occupancy levels, with landlords of quality buildings increasing rents and some scaling back incentives. Sydney remained the regional leader for annual

6 6 Features growth, with incentives continuing to decline. Quarterly rent growth was limited in Tokyo as landlords remained focused on securing tenants ahead of a supply wave. Sustained demand from PRC firms against a tight vacancy environment supported a further uplift in Hong Kong Central rents during 4Q17. Tenant mix adjustments and asset enhancement initiatives persist Many landlords across the region continued to adjust tenant mixes to bring in more crowd-pleasing retailers. In Sydney, retailers are opening new concept stores that offer greater customer engagement and experience. Mass market fashion brands remained amongst the most active retailers in Beijing and Shanghai, with select international sports apparel brands expanding their presence. Leasing activity in Hong Kong was dominated by renewals and cost-saving initiatives, with F&B, lifestyle and entertainment operators the most active. Retailers continued to exhibit caution in Singapore despite signs that retail sales improvements are broadening. Demand for logistics space robust E-commerce and 3PLs continued to be the most active in the China Tier 1 leasing markets. Given the continued slowdown in container throughput, 3PL leasing activity in Hong Kong was largely characterised by relocation and downsizing, while some retailers were active, signing new leases and expanding amid strong domestic consumption. Strong demand persisted in Tokyo from e-commerce and 3PLs, while Singapore saw an uplift in activity supported by healthy economic, manufacturing and trade performances. The logistics sector drove demand in Melbourne, boosted by increased service provisions to agribusiness and wine sectors. Sustained momentum in Hong Kong and Singapore residential markets Home purchase restrictions and limited issuance of pre-sales certificates impacted sales activity in Shanghai. Some local governments in China have offered strong incentives to spur development of the leasing market including offering land sites for rentalonly housing. With limited new measures announced in the latest policy address in Hong Kong, market sentiment remained intact and buyers snapped up flats in new launches. Sales activity in Singapore was dominated by secondary transactions due to a lack of major new launches in the prime districts. Investment volumes soar to new heights Investment activity across the Asia Pacific region surprised on the upside in 4Q17, reaching a new record of USD 52 billion, up 15.8% y-o-y. As a result, full-year transaction volumes also set a new high, coming in at USD 149 billion, up 13.4% on the previous year. Australia, Japan and Hong Kong all supported the stronger than expected 4Q17 volumes, while China, Singapore and South Korea were all marginally down on 4Q16. The office sector made up half of all transaction volumes, while the retail sector bounced back to Figure 2: Office Rental & Capital Value Changes, Yearly % Changes, 4Q17 y-o-y % Figures relate to the major submarket in each city. (Real Estate Intelligence Service), 4Q17 Figure 3: Direct Commercial Real Estate Investment USD Billion Sydney Melbourne Rental Values Singapore Hong Kong Manila Capital Values Bangkok Mumbai Japan China Australia Hong Kong South Korea Singapore Other Tokyo Figures refer to transactions over USD 5 million in office, retail, hotels and industrial. (Real Estate Intelligence Service), 4Q17 account for one-quarter of the quarterly volume. Cross-border investment activity lifted again, accounting for 38% of quarterly transaction volumes. Strong investor demand underpins capital value growth Asia Pacific office capital value growth edged up slightly to 1.7% q-o-q. Investor demand for Hong Kong office assets continued to drive growth in capital values. Flat yields saw Tokyo capital values move in line with rents while Singapore capital values increased sharply, driven largely by rapid rental growth. Healthy fundamentals lead to optimism about the outlook Regional leasing volumes for full-year 217 declined slightly from 216, in part due to low vacancy and high precommitment rates for quality buildings Shanghai Beijing Seoul Jakarta 217 $149 bill 13% y-o-y

7 Figure 4: Rental Property Clocks, 4Q17 Grade A Office Wellington Taipei Beijing Tokyo, Hong Kong, Auckland Kuala Lumpur Shanghai Prime Retail Auckland Beijing Wellington Tokyo* Kuala Lumpur 7 Features Manila Sydney, Melbourne Osaka Guangzhou, Bangkok, Canberra Bengaluru Ho Chi Minh City Singapore Growth Slowing Rents Rising Delhi Chennai Mumbai Rents Falling Decline Slowing Hanoi Perth, Brisbane, Adelaide Seoul Jakarta *Clock positions for the office sector relate to the submarket in each city Shanghai Manila, Jakarta Mumbai Bangkok, Delhi Growth Slowing Rents Rising Bengaluru Chennai Rents Falling Decline Slowing SE Queensland (Regional) *High Street Shops/Multi-level High Street Seoul* Singapore Hong Kong* Guangzhou, Melbourne (Regional), Sydney (Regional), Prime Residential Prime Industrial Guangzhou Bangkok Jakarta Tokyo Beijing, Auckland Wellington Manila, Hong Kong Beijing Growth Slowing Rents Rising Rents Falling Decline Slowing Kuala Lumpur Sydney, Manila Melbourne Shanghai Growth Slowing Rents Rising Rents Falling Decline Slowing Shanghai Singapore* Singapore (Business Park) Singapore (Logistics), Hong Kong, Brisbane *Luxurious * Logistics space (Hong Kong, Shanghai, Beijing, Greater Tokyo) (Real Estate Intelligence Service), 4Q17 in several key markets. However, with a positive outlook for regional and global economies in 218, we are optimistic that leasing activity will hold up relatively well and remain on par with 217. The performance amongst markets will be mixed, and new growth segments of the technology industry (e.g. e-commerce, co-working) should be key sources of demand. Asia Pacific investment volumes surpassed our earlier expectations in 217, and at this stage, we are projecting 218 volumes to hold steady About the author Dr Megan Walters joined JLL in 21 and in October 216 was appointed as Head of Research Asia Pacific. In this role, Megan leads a team of 16 professional researchers in the region, which forms part of a network of over 4 researchers in 65 countries around the globe. amid continued appetite for real estate in the core markets and increased interest for investing in emerging locations.

8 8 Features 217 in review: Top real estate trends Technology has disrupted the status quo and shaped some of the top real estate trends in 217. Here s a look back at the most significant trends that have shaped the real estate landscape and are likely to flow through into Proptech A convergence of property and technology: proptech has changed the way we use real estate. From data analytics to artificial intelligence, the Internet of Things, virtual reality and blockchain; proptech s influence has been so pervasive that it s virtually what we breathe here in JLL. As part of JLL s Power Up: Proptech drive, we held our first hackathon in Singapore in October where the firm selected innovators from across Asia Pacific to build new apps and technologies. Following that, we streamed our first learning session: Will I have a job in five years? which saw thousands of colleagues logging in and watching. JLL kickstarted its proptech journey with the sponsorship of Southeast Asia s first proptech hackathon, Hood Disrupt, in August. We sponsored and spoke at Tech in Asia s first-ever proptech event in March, and also collaborated with them to launch a report about how proptech startups are bringing real estate in Asia beyond brick and mortar. 2. Future of Work JLL introduced its Future of Work model in April. This is our outlook on the changing world of work and its impact on the next generation of corporate real estate. The model highlights areas that companies should address to navigate seismic shifts in the market. It encompasses five pillars: human experience, digital drive, continuous innovation, operational excellence and financial management. 1 In embracing this aforementioned digital drive, we launched JLL Spark, our global business to identify and deliver new technology-driven real estate service offerings; as well as Concrete, a partnership with Seedcamp and Starwood Capital Group to identify and support the most promising proptech startups. This model was brought to life with our new office in Shanghai, which has recently received the first WELL Platinum certification in Asia Pacific and is the third in the world to do so. The WELL Building Standard measures and monitors features of buildings that impact the health and wellness of the people who live, work, and learn in them Co-working/Co-living Driven by the millennial generation which embraces the sharing economy (especially good for splitting high usage or ownership costs, and for under-utilised assets), things the older generation did not feel comfortable sharing-or would not even think of sharing-in the past can now be borrowed/lent or portioned, most times by or with someone else you do not know personally. These include car rides, office space ( co-working ), and more recently living space ( co-living ). In particular, the availability of open, flexible workspace and such arrangements are not only common nowadays; they are expected in an office setting. The co-working style in our new Shanghai office allows colleagues to collaborate effectively in a flexible, smart office environment, as well as providing an inclusive and inspiring atmosphere for clients to visit and work within. 2 These are just a few of the hot property trends in 217 and no doubt 218 will see an equally interesting assortment of property trends. We here at JLL look forward to sharing more insights about the future of real estate! About the author Hui Yan Koh is a Director for JLL, based in Singapore. She oversees the regional operations of JLL's subscription-based Real Estate Intelligence Service. In her current role, Hui Yan liaises heavily with stakeholders to provide clients with access to quarterly outputs including historical and forecast data for key property market indicators, and market reports.

9 9 Features Investor hotspots for Singapore property Optimism is running high in Singapore s property investment sales market a market that is defined by private assets worth SGD 5. million (USD 3.8 million) and above, and all government land sales (GLS). Investors have snapped up more assets in value terms in 217 than they did in 216. Total investment sales reached SGD 41.3 billion in 217, 6.1% more than the SGD 25.8 billion accumulated in 216. Residential and office properties have been investor hotspots. Together, these two sectors accounted for 74% of the value of all investment deals concluded in 217. Figure 1: Composition of investment sales by value, 217 Office 22.9% Residential 51.1% Composition of investment sales by value Research, January 218 Others.5% Industrial 1.7% Retail 7.9% Mixed Use 6.1% Hotel & Hospitality.8% Residential With prime home prices having bottomed in 2Q17 following the 11.6% correction since end-213, this sector remains a hotspot for investors looking to bottom-fish in safehaven Singapore. Developers appetite for land has surged as their unsold stock dwindles amid the robust home sales market. Given the limited state land supply from the GLS programme, developers have turned their attention to the private sector, particularly the collective sales market. 27 such deals worth SGD 8.1 billion were sealed in 217, far exceeding the three transactions totalling SGD 1. billion concluded in 216. Developers and investors sunk SGD 21.1 billion in residential investment assets (including land) in 217, more than twice of what they committed to in 216. Office CBD Grade A office assets were also sought after, buoyed by the recovery in the leasing market. JLL s research showed that by the end of 217, Grade A CBD office rents had recovered by 9.4% from the bottom in 1Q17. The two largest deals sealed in 217 were the sale of Asia Square Tower 2 in the Marina Bay financial district for over SGD 2 billion and the Beach Road GLS site for SGD 1.6 billion. Both deals took place in September. So eager are developers to secure land for office development to ride the rental upturn that the top bid of SGD 1,76 per sq ft per plot ratio received for the Beach Road GLS site located on the fringe of the CBD surpassed the SGD 1,689 per sq ft per plot ratio paid for a CBD site in the Marina Bay financial district in November 216! These two deals boosted the 217 s total sales value of office assets transacted to an estimated SGD 9.4 billion, accounting for almost a quarter of all the deals concluded in the year. Conclusion Singapore s property market has largely turned the corner. Against this backdrop, and underpinned by a brightening economic outlook, investor sentiment is expected to stay elevated. Residential and prime CBD Grade A office assets are poised to remain as investors hot picks in 218. Nonetheless, yield-accretive industrial assets and quality retail assets such as Jurong Point, a suburban mall, which changed hands for SGD 2.2 billion in April 217, are likely to remain on their radar. About the author Tay Huey Ying is the Head of Research and Consultancy for JLL in Singapore. She oversees a team of analysts in conducting market research and publishing thought leadership papers on all sectors of Singapore s property market. Huey Ying is also JLL s media spokesperson on matters relating to the Singapore property market.

10 1 Features Redrawing Hong Kong s CBD2 boundaries In the 211 Policy Address, Donald Tsang, the then-chief Executive announced his Energising Kowloon East initiative to promote the development of the former Kai Tak Airport, Kwun Tong and Kowloon Bay business areas collectively referred to as Kowloon East into a second CBD for the city. Since then, Kowloon East has added about 3.8 million sq ft of Grade A office space and is now the second largest office submarket in the city. With a wave of government land sales and improving infrastructure on the horizon, the future looks bright. The uniqueness of Kowloon East Although treated as a single office submarket, Kowloon East is anything but homogeneous. The submarket covers a land area of 74.4 million sq ft, which is only slightly less than the 81.7 million sq ft covered in the three major office submarkets on Hong Kong Island; Central, Wanchai/Causeway Bay and Hong Kong East. The three major areas that make up the Kowloon East submarket have very distinct characteristics that attract a broad range of different occupiers. Looking ahead, we believe that Kowloon East will splinter into at least two distinct submarkets: Kai Tak and Kowloon Bay/ Kwun Tong. Kai Tak likely to emerge as the leading office location Kai Tak is likely to emerge as the leading office location in Kowloon East due to the large amount of government land available for development and proximity to the future Shatin-to-Central Link, a new mass transit railway (MTR) line that will reduce travel time to Central to just 15 minutes. At end-4q17, there were no rental benchmarks in Kai Tak, as there were no commercial Grade A offices in the area. However, by using the latest government land sale result in the area as a guide, it appears that developers are pricing future office rents in Kai Tak at around HKD 7 (USD 9) per sq ft per month, on a NFA basis 1. This is more than double the amount achieved in Kwun Tong and Kowloon Bay. Kai Tak s rental premium is further evidenced from the recent sale of 8 Bay East in Kwun Tong, where a 3% yield on the purchase price equates to a monthly rent of about HKD 5 (USD 6) per sq ft, on a NFA basis. Hoi Bun Road Financial Corridor Outside of Kai Tak, developers are also trying to push the development of a Financial Corridor along the section of Hoi Bun Road nearest to Ngau Tau Kok MTR station. The new buildings built in the area are already drawing plenty of interest from the big financial institutions, with Citibank and JPMorgan the most notable banks committing to the area. Kowloon East still has plenty of room to grow and will likely be treated as a single submarket over the near term. However, as it develops and matures, we expect the occupier and rental markets to become more fragmented, which will inevitably lead to the submarket boundaries being redrawn. 1 In May, Nan Fung Development acquired a mixed-use development site for HKD 24.6 billion (accommodation value HKD 12,864 per sq ft). Assuming a gross development value of about HKD 2, per sq ft for the site and 3% yield, monthly office rents would need to be set close to HKD 7 per sq ft, on a NFA basis. About the author Henka Darsono is an Analyst for JLL, based in Hong Kong. He provides market analysis and forecasts for the office sector and also contributes to quarterly publications. Henka is also involved in consultancy projects.

11 11 Features Alternative investments in New Zealand New Zealand remained a destination for international capital in 217. While real estate transaction volumes moderated year-on-year, in large part due to a lack of stock available for sale, offshore investor activity remains above historical norms. New Zealand provides an opportunity to diversify commercial property portfolios in a mature and highly transparent market with stable governance and solid growth prospects. This is true both in the traditional commercial real estate sectors as well as New Zealand s growing alternatives market. With competition tight for big-ticket assets such as traditional CBD office buildings and shopping centres, both local and offshore investors looking for scale are now considering alternative markets to achieve yield and asset diversification. Rise in alternative investments in last three years Over the past three years, the volume of sales for alternatives, namely hotels, student accommodation, retirement villages and medical properties has increased markedly as a proportion of total property transactions. Over 213 and 214 less than 1% of transactions in New Zealand were for alternative assets, whereas 215 and 216 achieved 18% and 16%, respectively. In the nine months ending October 217, 14% of total transactions were attributed to alternatives, demonstrating the continuation of investor interest and opportunities in this growing sector. Unique opportunities in the alternatives sector One such opportunity was recently announced in the South Island s largest city, Christchurch, with the offering of a five-star hotel. What makes this opportunity unique is the fact the hotel site is located directly adjacent to the Christchurch Convention Centre, one of New Zealand s largest construction projects. The convention centre is being funded by the New Zealand government at a cost of NZD 475 million. The state-ofthe-art facility will have capacity for up to 2, delegates and its completion in early 22 will mark perhaps the most significant milestone in the city s NZD 4 billion rebuild after the February 211 earthquake. The hotel site adjoining the convention centre has been designated for a true international five-star operator, with JLL seeking an investor to develop the property. Given the site s position, the completed hotel will enjoy internal access through to the convention centre and a number of shared services and facilities. Major infrastructural projects to drive investment opportunities The relationship between convention centre and hotel is symbiotic in that the convention business relies heavily on the ability to offer a range of quality accommodation options for delegates to choose from. This is particularly pertinent in Christchurch where 1,25 CBD buildings were demolished following the earthquake, including the majority of the city s hotels. With a dearth of five-star hotel options in Christchurch, there is an opportunity for an astute investor to capitalise on the demand created by the convention centre. Prior to the earthquake, Christchurch captured 24% of the national convention business. The growth of tourism in Christchurch, given its position as the gateway to the wider South Island, is another key demand driver for room nights. By 223, an estimated 4.9 million international tourists are expected to visit New Zealand annually, spending NZD 15.3 billion in the process. Opportunities such as this, which centre on major infrastructure projects like convention centres, are placing New Zealand on a global platform as a destination for international investors seeking allocation into alternative assets. About the author Tom Barclay is an Associate Director for JLL New Zealand, based in Auckland. He heads the Research and Consulting team providing analysis and commentary on commercial property markets across New Zealand.

12 Real Estate Services jll.com/asiapacific More than 16 researchers waiting to deliver the data of your dreams. 218 All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

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14 Hong Kong 14 Office Record-breaking deals drive the investment market higher. Denis Ma, Head of Research, Hong Kong 5.6% sq ft per month, net effective on NLA HKD Growth Slowing Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for Central F Take-Up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for 218. are for the overall market Percent Tenant decentralisation and uptick in PRC leasing bolster demand Amid a widening rental gap, tenant decentralisation picked up as tenants sought out cost-effective options. Baker & McKenzie, a US law firm, reportedly pre-committed to several whole floors at One Taikoo Place in Quarry Bay, becoming the largest legal sector tenant outside of Central. PRC firms resumed their expansionary plans in the city after the National Congress in October, accounting for 53% of all new lettings in Central. Notably, Huarong Financial Services Asset Management leased 24,2 sq ft at Bank of China Tower to expand in-house, contributing to net take-up of 87,3 sq ft in the submarket. Two offices outside Central receive Occupation Permits During the quarter, Lee Garden Three in Causeway Bay and Kingston International Centre in Kowloon Bay were issued with their Occupation Permits, adding 32,6 sq ft and 436,1 sq ft, respectively, to Grade A office stock. Plans announced during the quarter to redevelop Goldin Financial Global Square in Kowloon Bay and the former How Ming Street Bus Depot in Kwun Tong will add a combined 592,9 sq ft of Grade A offices to the Kowloon East market by end-221. Rental and investment markets continue to climb higher Led by a 1.1% q-o-q growth in Central, rentals in the overall market advanced by.9% q-o-q in 4Q17, bringing full-year growth up to 3.8%. Rentals in Kowloon East advanced by.4% q-o-q in 4Q17, ending the year down 2.3%; the only submarket to record negative growth in 217. Cheung Kong sold its 75% stake of The Center in Central for HKD 4.2 billion or HKD 33,1 per sq ft to a PRC-backed consortium, setting a new benchmark for the sector, in terms of lump sum. Supported by a string of record-breaking transactions, capital values in the overall market advanced by 2.5% q-o-q, bringing full-year growth to 17.5%. Outlook: Rental markets to broadly edge higher in 218 Given the low vacancy rate environment across most major office submarkets, we expect rentals to grow in the range of -5% in 218. Kowloon East is likely to be the exception, with rentals forecasted to decline in the range of 5-1% owing to the elevated vacancy and new completions scheduled in the year ahead. With plenty of buyers in the market and yields still carrying a premium over risk-free rates, capital values in the overall market are expected to grow in the range of -5% in 218, with capital values in Central leading the way, up in the range of 5-1%. Note: Hong Kong Office refers to Hong Kong s overall Grade A office market.

15 Beijing -2.7% sqm per month, net effective on GFA RMB 384 Rents Stable Strength of domestic firms helps new projects fill up, reaffirming that pent-up demand remains. Joe Zhou, Head of Research, China 15 Office New, recent completions relieve pent-up demand Net absorption was strong as new completions entered the market with significant pre-commitment. Demand was dominated by domestic finance and IT firms, as foreign companies remained slow to expand in the market. Several IT companies started to consider recent completions in Olympic Area as an alternative to Zhongguancun, where large vacant space was lacking. Two new projects open in Olympic Area China Overseas Fortune Centre completed and was half-committed in 4Q17. The building received strong overflow demand from IT tenants who were unable to find space in the tight Zhongguancun submarket. Nearby, Hengyi Building entered the market more than half-committed; PetroChina secured a sizeable space at the new building. Vacancy rates for recent completions continued to fall as they attracted tenants. Despite this downward pressure, Grade A vacancy rose slightly in the quarter due to the new supply, reaching 7.1% by end-4q17. Finance Street rents climb 3.2% q-o-q Finance Street recorded a new high, as rents rose for a thirty-fifth consecutive quarter. Due to the unique advantages of being close to national regulators, finance firms with high rental affordability continue to prove how important the area is for business. By contrast, CBD rents were flat due to supply pressures. China Merchants Group sold a portfolio containing several floors of China Merchants Building to PAG Asia. The purchase was an exception to the current trend, where domestic investors dominate the market. Outlook: Key trends to carry over to 218 Domestic demand is expected to further dominate the office market. Rents are forecast to follow similar trajectories, with CBD and Finance Street rents continuing to diverge in the coming months. Co-working operators are expected to push forward with fast-paced growth around the city. As they continue to expand in the market, we expect to see some co-working growth at Grade A buildings. Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the CBD F Take-Up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for 218. are for the overall market Percent Note: Beijing Office refers to Beijing s overall Grade A office market.

16 Shanghai 16 Office Co-working operators a significant source of demand in 217. Daniel Yao, Head of Research, East China -1.4% sqm per day, net effective on GFA RMB 1.3 Rents Falling Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the CBD. Thousand sqm F Take-Up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for 218. are for the CBD Percent 217 net absorption doubles from 216 Grade A net absorption reached over 1.3 million sqm in 217, with the Decentralised submarket contributing the majority. Domestic financial services, retail and TMT companies were the most active sectors in the CBD. Co-working operators became a significant demand driver in both the CBD and Decentralised submarket as they aggressively expanded. Large supply met the demand for consolidation, upgrade and expansion. The CBD continued to feel the pressure from the Decentralised submarket, especially the fringe CBDs as companies continued to seek cost-saving options. Supply reaches record high and vacancy increases Over 2.2 million sqm of new supply entered the market in 217, with 1.6 million sqm in the Decentralised submarket and.6 million sqm in the CBD. Vacancy increased 2. percentage points y-o-y to 1.2% in the CBD and 8.8 percentage points y-o-y to 26.8% in the Decentralised submarket. In 4Q17, there were no new completions in the CBD. In the Decentralised submarket, five projects reached completion - two in Puxi and three in Pudong. Rents in the fringe CBDs continue to rise despite large supply The Decentralised submarket recorded a 4.4% y-o-y rental increase in 217. In particular, the fringe CBDs excellent metro access and completion of higher quality projects continued to drive leasing demand for these areas. On the other hand, the CBD was affected by supply pressures, from within the CBD and fringe CBDs, causing landlords to lower rental expectations. After a quiet 3Q17, investment transactions picked up towards year-end as several deals previously under negotiation closed. Notable investment deals in the quarter involved SOHO Linkong and Cross Tower. Foreign investors were active in 217, and the Decentralised submarket saw more activity with cap rates compressing throughout the year. Outlook: New supply volume to remain high in 218 A large amount of new supply is in the pipeline for 218, especially in the Decentralised submarket. While current stock in the Pudong Decentralised submarket is much smaller compared to Puxi, we expect to see areas like Qiantan and Pudong Expo gain momentum. The core CBD will receive several projects in 218, but new supply should ease post-218. Due to supply pressures, overall rental growth will likely remain limited in 218. However, some decentralised submarkets still have room for rental growth due to an improving business environment and attractive rental gap with the CBD. Note: Shanghai Office refers to Shanghai s overall Grade A office market consisting of Pudong, Puxi and decentralised areas.

17 Guangzhou 4.1% sqm per month, net on GFA RMB 179 Rents Rising Dynamic leasing activity observed from tech companies in emerging Pazhou. Silvia Zeng, Head of Research, South China 17 Office Pazhou s large space availability favoured by tech industry Overall demand was broadly stable with active lease enquiries. Tech firms drove demand for large units, with Pazhou standing out in particular due to its abundant leasable units. For instance, Alibaba s cultural and entertainment subsidiary secured three floors in Baoland Plaza. Existing vacant space in Zhujiang New Town (ZJNT) was absorbed at a rapid pace. As a result, a large number of Grade A buildings in ZJNT have attained relatively high occupancy rates. ZJNT remained a major contributor to the nearly 1, sqm of overall net absorption in the quarter. Vacancy returns to single digits after six quarters Noble Center, a Grade A office building with a total GFA of 77,7 sqm entered the market in the quarter. The building is located in Panyu and is the first Grade A office in this emerging submarket. The overall vacancy rate dropped.5 percentage points q-o-q to 9.8% in 4Q17, supported by less supply pressure and solid demand growth. Continued absorption in ZJNT and active leasing in Pazhou effectively contributed to this vacancy decline. Improved occupancy boosts landlords confidence in raising rents Overall rental values rose by 1.6% q-o-q, largely propelled by the mild rental increase in the majority of Grade A office buildings in ZJNT. Pazhou also witnessed rising rents as good absorption continued and the overall conditions of the submarket kept improving. Sentiment in the investment market was generally optimistic. Domestic financial institutions and SOEs actively enquired about purchasing space for self-use. Notably, the number of en bloc transactions in 4Q17 was higher than previous quarters in 217, and mostly involved under construction non-grade A projects in emerging areas. Outlook: Core CBD to lead overall rental upsurge in the near term Space in ZJNT is expected to remain in high demand; the submarket s vacancy rate, as well as other old CBDs, will keep sliding given no new supply in 218. Pazhou should see a further rise in demand, but two new buildings in 218 may cause the submarket s vacancy rate to increase. Healthy demand, lack of new supply in ZJNT, and the improving maturity of Pazhou as a Grade A submarket, is expected to result in a continued, yet steady, rise in the overall rental value in 218, up in the range of 4-5% Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for Zhujiang New Town. Thousand sqm F Take-Up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for 218. are for the overall market Percent Note: Guangzhou Office refers to Guangzhou s overall Grade A office market.

18 Taipei 18 Office Leasing and investment activity rebounds at year-end. Jamie Chang, Head of Research, Taiwan.4% ping per month, net on GFA NTD 3,121 Rents Stable Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for Xinyi F Take-Up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for 218. are for the overall market Percent Relocations and upgrades support demand Quarterly net absorption reached 1,8 ping in 4Q17. Large units were in demand by corporate tenants for consolidation and upgrade purposes. IT, high-tech and financial firms were the most active occupiers in the quarter. Annual net absorption for 217 reached 43,1 ping, a new record high. However, 7% of this take-up was attributed by owner-occupied space. Tenants maintained a caution stance and lease negotiations remained prolonged. Some deals signed in 4Q17 commenced the negotiation process in 216. Some projects delay completion until 218 There was only one building, Taiwan Cooperative Bank Headquarters, completed in 217 and the majority of its 32,639 ping of office space was for owner occupation. No new supply coupled with positive take-up pushed the overall vacancy rate down to 7.1% at end-4q17. Some Grade B office tenants relocated to new Grade A offices or industrial offices in the city fringe. This movement resulted in the Grade B vacancy rate edging up by.1 percentage points to 3.7%, while average rent remained stable at NTD 1,768 per ping per month. Rents hold firm With business sentiment remaining cautious and landlords competing for tenants, rentals for most buildings held relatively stable. The average rent for the overall market increased slightly by.3% q-o-q to NTD 2,651 per ping per month. Several large investment deals closed in 4Q17, pushing overall transaction volumes for the full year to NTD 61.2 billion. This was in line with 216 s performance. However, the market was quiet when compared with longer term averages and the amount of domestic capital available to be deployed. Outlook: Market prospects positive for 218 With a large amount of high-quality supply to be released in 218, this space is likely to attract tenants planning to consolidate operations or to upgrade. Rental growth should remain moderate in the near future amid increased competition. However, rental growth may pick up later the year as the new space is taken up and vacancy declines. Local investment activity was relatively slow in 217, due mainly to investors being unable to find investment opportunities that suitably meet their targeted returns. Investment volumes are unlikely to improve significantly until the price gap between buyers and sellers narrows. Note: Taipei Office refers to Taipei s overall Grade A office market.

19 Tokyo 1.4% tsubo per month, gross on NLA JPY 36,733 Growth Slowing Occupier demand remains robust, while the investment market sees some transactions. Takeshi Akagi, Head of Research, Japan 19 Office Strong pre-commitment activity amid low vacancy The December Tankan Survey indicated that business sentiment of large manufacturers was at its highest level in more than a decade. However, there was a slight deterioration in sentiment about the outlook that reflected caution due to a labour market shortage. In November, the unemployment rate decreased to a 24-year low of 2.7% while the job-to-applicant ratio rose to a 43-year high of Robust demand in 4Q17 came from sectors including information and communication, professional services and manufacturing. However, with low vacancy and no new supply, net absorption slowed down to 4, sqm, as much of the leasing activity was pre-commitments to upcoming supply. For full-year 217, net absorption totalled 155, sqm Vacancy moves below 3% again No new supply entered the market in 4Q17. For full-year 217, new supply totalled 22, sqm and increased total stock by 3%. The vacancy rate stood at 2.5% at end-4q17, decreasing 5 bps q-o-q. A major decline in vacanct space was evident in Otemachi/Marunouchi while further tightening was also seen in Shibuya and Shinjuku. 9 Rental Value Capital Value base: 4Q13 = 1 Rental and capital value growth accelerates slightly Rents averaged JPY 36,733 per tsubo per month at end-4q17, increasing.3% q-o-q. This marked 23 straight quarters of growth. On an annual basis, rents rose for the sixth straight year. Capital values grew.4% q-o-q and 2.9% y-o-y in 4Q17. This was the 23rd consecutive quarter of growth. In the investment market, transaction activity increased with the price gap between buyers and sellers narrowing. A major transaction in the quarter involved Nippon Building Fund acquiring Roppongi T-Cube for JPY 62.8 billion (NOI cap rate of 3.6%). Outlook: Rents and capital values to grow moderately Oxford Economics revised up Japan s real GDP growth forecast for 218 to 1.7%, while CPI is projected to rise.7%. Notable risks to the economic outlook include volatility in financial markets and uncertainties in the global economy. In spite of new supply in 218 expected to be more than double the past 1-year annual average and amongst the highest on record, vacancy is expected to only rise moderately. Sustained robust demand and high pre-commitment rates should help lessen the impact of new supply on vacancy. As such, rents are expected to continue to edge up. Capital values are also anticipated to rise, largely reflecting the upward rental trend. There is likely little room for further cap rate compression. Thousand sqm F Take-Up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for Percent Note: Tokyo Office refers to Tokyo s 5-Kus Grade A office market.

20 Osaka 2 Office Vacancy decline supports rental growth; investment activity strengthens. Yuto Ohigashi, Associate Director - Research, Japan 7.6% tsubo per month, gross on NLA JPY 18,799 Rents Rising Rental Value Capital Value base: 4Q13 = 1 Thousand sqm Take-Up (net) 18F Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for Percent Net take-up slows despite of robust demand due to limited supply According to the December Tankan Survey, business sentiment of large manufacturers remained at a high level. However, firms were slightly less optimistic about the short-term outlook due to an ongoing labour shortage. In September, the unemployment rate was 3.2% and jobs-to-applicant ratio In spite of healthy relocation demand sustaining from business sectors including manufacturing, wholesale and retail trade, as well as information and communication, net absorption was only 13, sqm in 4Q17. For full-year 217, net take-up totalled 134, sqm, supported by new supply in 2Q17 and 3Q17. Vacancy moves below 2% for the first time since 28 No new supply entered the market in 4Q17. For full-year 217, new supply totalled 13, sqm, increasing total stock by 6%. A notable completion in the year was Nakanoshima Festival Tower, which entered the market in 2Q17 and with a high pre-commitment rate. The vacancy rate stood at 1.9% at end-4q17, decreasing 7 bps q-o-q and 2 bps y-o-y. This marked the fourth straight quarter of decline. Submarkets including Nakanoshima and Midosuji saw major absorption. Rent and capital value growth accelerates Rents averaged JPY 18,799 per tsubo per month at end-4q17, increasing 3.% q-o-q. Growth was registered for the 14th straight quarter. For full-year 217, rents grew 7.6% compared with 6.8% in 216. This was the fourth straight year of growth. Capital values grew 6.9% q-o-q and 2.% y-o-y. This was the 17th straight quarter of growth. Investor interest remained strong and continued to spill over from Tokyo; however, there were no major Grade A office transactions recorded in the quarter. Outlook: Rents and capital values to grow moderately Oxford Economics revised upwards their GDP growth forecast for Osaka to.5% in 218. Risks to the outlook include uncertainties in the global economy such as geopolitical tensions and volatility in financial markets. Robust occupier demand is expected to be sustained while new supply will remain limited, equivalent to only 47% of the past 1-year annual average. As such, the vacancy rate is expected to remain below 2% and support further rental growth. Capital values should also rise, reflecting rent growth and further compression of cap rates amid sustained interest from investors. Note: Osaka Office refers to Osaka s 2-Kus Grade A office market.

21 Seoul -3.6% pyung per month, net effective on GFA KRW 91,74 Decline Slowing Slower demand alongside relocations into owner occupied stock leads to negative net absorption. Sungmin Park, Head of Research, Korea 21 Office Tenant exits and subdued demand leads to weak net take-up Negative net take-up was recorded in the overall market during 4Q17, with the weak result led by Yeouido and Gangnam. In Yeouido, the move of LG affiliates into their new campus in Magok led to most of its negative net absorption. In Gangnam, exits of several major tenants including Samsung Life and Kyobo Life contributed to the district s negative net absorption. The CBD recorded positive net absorption as Shinhan Card (11, pyung) completed their move-in at 11 Pine Avenue. The property also signed several notable deals during the quarter - Hotel Shilla (69 pyung) and Ocean Networks (836 pyung). WeWork signed new leases at Seoul Square and The-K Twin Tower, actively expanding its presence in Seoul. Vacancy slightly rises due to occupier exits at key buildings Overall vacancy increased to 11.7% as several landmark buildings in Yeouido and Gangnam saw sizeable negative take-up due to recent move outs. In the CBD, vacancy declined 17 bps q-o-q to 13.4%, aided by Shinhan Card s arrival at 11 Pine Avenue. No new major supply completed in three major districts during the quarter. Soft leasing demand limits rental growth Rents declined 1.5% q-o-q in 4Q17, mostly due to more generous rent incentives in the CBD and Yeouido. Landlords held an accommodative stance in light of lingering vacancy and scheduled upcoming departures. Notable investment deals during the quarter included the sale of Metro Tower (GFA 9,827 pyung) which traded from Angelo Gordon to Anda Asset Management for KRW 24 billion, and Hyundai Group s purchase of Hyundai Group Building for KRW 245 billion, its former headquarter building which was owned by Koramco. Outlook: Leasing and investment activity to improve in 218 Aided by a strong economic outlook, overall leasing demand will likely improve alongside healthy prospects for the IT and co-working industries. Furthermore, the trend of major tenant relocations into owner occupied stock, the issue which weighed on the market over 217, is likely to be concluded by early 218. This should help three major business districts manage existing vacancy. Solid investor sentiment and strong liquidity should continue to strengthen investment activity, which has been limited due to geopolitical tensions in the Korean peninsula over the past few quarters. Significant domestic and international liquidity in addition to the greater availability of quality stock in the market should support the investment market Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the CBD. Thousand sqm F Take-Up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for 218. are for the overall market Percent Note: Seoul Office refers to Seoul s Grade A office market.

22 Singapore 22 Office Strengthening market fundamentals fuel another quarter of strong growth in rents and capital values. Tay Huey Ying, Head of Research, Singapore 8.1% sq ft per month, gross effective on NLA SGD 9.23 Rents Rising Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the CBD. Thousand sqm F Take-Up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for 218. are for the CBD Percent CBD net absorption soars to highest in 11 quarters Occupier demand continued to improve with overall CBD net absorption in 4Q17 reaching the highest level in 11 quarters. This brought the full-year 217 net absorption to more than double that of 216. The growth spurt in the economy motivated some occupiers to secure more space. The leasing sentiment on the ground continued to be positive, with demand remaining broad based. The worst for financial institutions seemed to be over as consolidation efforts tapered off. Vacancy embarks on the declining path New supply took a breather after the injection of approximately 2. million sq ft from the completion of Marina One in 3Q17. There was no new en bloc building completion in 4Q17. With stock remaining stable, the gradual moving in of tenants into the recently completed buildings resulted in vacancy improving from 3Q17. Rents and capital values climb further The CBD rental recovery entered its third straight quarter, with 4Q17 growth coming in as equally strong as 3Q17. On the back of better occupancy levels, landlords of quality buildings increased their signing rents, with some scaling back on their lease incentives. Capital values stayed on a positive growth trajectory in 4Q17, although easing marginally from 3Q17. The investment market remained buoyed by continuing interest and liquidity, as exemplified by the sale of Chevron House. Outlook: Growth foreseen to extend into 218 Demand from occupiers could grow to meet the needs of businesses in light of optimistic economic growth. Supply, on the other hand, will taper sharply in 218, resulting in tightening vacancy. These factors should drive further rental growth in 218. Investment sales activity is expected to stay robust although the cumulative effect of the gradual increases in the US Federal Reserve s interest rates could potentially slow down capital value growth. Note: Singapore Office refers to Singapore s CBD Grade A office market in Marina Bay, Raffles Place, Shenton Way and Marina Centre.

23 Bangkok 2.% sqm per month, gross on NLA THB 835 Rents Rising Robust demand and a lack of new supply are expected to drive rent and capital value growth higher in 218. Andrew Gulbrandson, Head of Research, Thailand 23 Office Net absorption declines q-o-q but remains positive Net absorption fell to 2,8 sqm in 4Q17 amidst a flurry of relocation and expansion activity. Most downward pressure in the quarter came from several business units of Krungsri / Bank of Ayudhaya that vacated leased premises to relocate to a new (owner-occupied) headquarters (HQ) due to officially open in early 218. Leasing activity across the market was also strong, with at least 15 notable deals being inked encompassing more than 22, sqm that will be taken up in 218. Vacancy declines to near historical low No new supply completed in 4Q17. Total Grade A office stock in the CBA remained at 1.9 million sqm. With no new supply in the quarter and positive net absorption figures, the Grade A vacancy rate in the CBA declined to 7.7%. This is the second lowest level we have recorded in the last 25 years after an all-time low of 6.1% in 4Q14. New office REIT announced for IPO in early 218 Average gross rents in the CBA increased by.5% q-o-q in 4Q17. Capital values rose at the same pace as rents, leading market yields to remain stable. The Bhiraj Buri Group formally announced that Bhiraj EmQuartier, completed in 215, would be divested into a REIT that will IPO in late January 218. Estimates suggest a value of between USD 15 and 18 million once trading begins. Outlook: Lack of supply should put upward pressure on rents Two new projects should complete in 218. The new Krungsri / Bank of Ayudhaya HQ near BTS Ploenchit station will add 3, sqm of space to the market. The T-One project near BTS Thonglor station will add 22, sqm to the market in 2H18. Pre-leasing is reportedly very strong. With a limited amount of new supply entering the market in 218, robust demand and rising land prices, we expect to see vacancy continue to decline while rents and capital values should continue to rise. Thousand sqm Rental Value Capital Value base: 4Q13 = F Take-Up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for Percent Note: Bangkok Office refers to Bangkok s CBA Grade A office market.

24 Jakarta 24 Office Healthy net absorption in 4Q17. James Taylor, Head of Research, Indonesia -11.% sqm per annum, net effective on NLA IDR 3,429,623 Rents Falling Thousand sqm Rental Value Capital Value base: 4Q13 = F Take-Up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for Percent Take-up driven by pre-commitments in new completions Technology firms, co-working space providers as well as occupiers from a broad range of sectors continued to seek space in 4Q17, and net absorption continued to be driven by take-up in the quarter s new completions. Space availability remains high in a market that has seen unprecedented levels of supply over the past three years. With rents continuing to fall, upgrade demand remains a theme and we expect tenants to continue to move out of Grade B and C buildings in favour of recently completed Grade A premises. Three Grade A completions in 4Q17 Huge volumes of supply have come online since early 215 and there was no let-up in 4Q17. Just under 19, sqm of space was delivered in the form of PCPD Tower (SCBD), Mangkuluhur Tower (Gatot Subroto) and Sopo Del Tower A (Mega Kuningan). The quarter s new completions meant that more than 42, sqm of Grade A space was completed in the whole year. This made 217 a record supply year despite the delayed completion of three towers at the District 8 development in the SCBD. We now expect these projects to be completed in early 218. Rents fall for the tenth consecutive quarter Net absorption levels were relatively strong in each of the final three quarters of 217. However, despite improving demand, the sheer volume of supply was such that the market vacancy rate ended the year above 3% and because of this, many landlords remained willing to offer attractive rental packages to lure tenants. Therefore, Grade A rents came down by around 1.7% q-o-q in 4Q17. Despite strong interest, en bloc sales of existing cash-generating assets are extremely rare. Due to the tightly held nature of the market, the most likely entry points for foreign investors are development sites or joint ventures with local groups with access to an existing land bank. Sites with easy access to upcoming infrastructure projects are of particular interest to investors. Outlook: Huge volume of supply and strong demand expected We expect the strong demand recorded in 217 to carry over into 218. Rapid expansion by e-commerce, online gaming and fintech companies as well as co-working operators is likely in 218, along with upgrade demand to remain a theme. Despite improving demand, we do not expect net absorption levels to match supply. As such, the average market vacancy rate is likely to rise even further and many landlords are likely to remain flexible in order to capture demand. Single digit, quarterly rental declines are likely throughout the year. Note: Jakarta Office refers to Jakarta s CBD Grade A office market

25 Kuala Lumpur 1.1% sq ft per month, gross on NLA MYR 6.26 Growth Slowing Marginal rent growth in line with the current economic recovery and a fast evolving co-working market. James Short, Head of Markets, Malaysia 25 Office Leasing demand remains robust Leasing demand generally improved in 4Q17, thanks to the recovery of the economy and global oil prices. The co-working industry is leading demand for office space as it continues to expand. Vacancy stable despite completion of new building JKG Tower completed in 4Q17, adding 39, sq ft to the office market in Kuala Lumpur City Centre (KLC). This pushed total office stock to 33.7 million sq ft at end-217 in the KLC submarket. The KLC vacancy rate rose marginally by 1 bps q-o-q to 14.7%, as a result of the completion of the new building. Rents rise in KLC Rents in the city centre improved in 4Q17 amidst a slow recovery in the oil and gas industry. Landlords continued to have confidence in the market and their buildings. There were no sales transactions recorded in the quarter in KLC. Outlook: Unsustainable momentum with the incoming supply With major buildings such as The Exchange 16 in KLC expected to complete in 218, the large volume of incoming supply should impact occupancy rates and rents. As a result, the upward momentum in rents is unlikely to be sustained and instead, rents in KLC are expected to decline. However, the current economic recovery and general confidence in the market should lessen the impact of the large incoming supply and the threat of oversupply in the market over the next 12 months. Thousand sqm Rental Value Capital Value base: 4Q13 = F Take-Up (net) Vacancy Rate Percent For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for 218. Note: Kuala Lumpur Office refers to Kuala Lumpur City Centre s Grade A office market.

26 Manila 26 Office Office demand remains healthy amid improved O&O leasing activity. Sharon Saclolo, Associate Director - Research, Philippines 3.5% sqm per month, net effective on NLA PHP 1,12 Growth Slowing Thousand sqm Rental Value Capital Value base: 4Q13 = Take-Up (net) 18F Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for Percent Net absorption rises, underpinned by stable demand Net absorption was recorded at 113,6 sqm in 4Q17, up 32.% q-o-q. The healthy take-up may be attributed to stable demand from traditional office space occupiers and online gaming firms. Leasing activity from Offshoring & Outsourcing (O&O) firms started to gain momentum owing to the improved relations between the Philippines and USA. A large part of the office space demand for 4Q17 in Makati CBD and BGC was due to O&O, online gaming, telecommunications, consulting, financial services and logistics firms. Notable lease transactions included O&O firms leasing a total of 8,9 sqm in BGC and gaming firms occupying 9 sqm of office space in Makati CBD. Large supply completions push vacancy upwards Four office developments completed in 4Q17, adding approximately 138,4 sqm of space to existing stock. Developments completed in BGC included High Street South Corporate Plaza Tower 1 and Metrobank Center, while completed developments in Makati consisted of Circuit Makati Corporate Center 1 and Luz Building. Completion schedules of three developments expected to complete in 4Q17 were moved to 1Q18. The vacancy rate increased slightly yet remained low at 3.% in 4Q17. Capital value growth exceeds rent growth Average monthly office rents in Makati CBD and BGC in 4Q17 were PHP 1,12 per sqm per month, increasing.7% q-o-q and 3.5% y-o-y. Growth was supported by steady demand for office space, along with the renewed take-up by O&O firms. Capital values posted growth of 7.4% y-o-y. Meanwhile, investment yields contracted further to 8.8%, down about 3 bps y-o-y, as capital values rose faster than rents. Outlook: Positive investor prospects to support office demand Twenty-one office developments are expected to complete in 218, adding more than 5, sqm of office space to total existing stock in Makati CBD and BGC. Forecasts show the large upcoming supply is likely to absorb the resurging demand from the O&O sector. Fitch Ratings recently upgraded the long-term foreign currency issuer default rating (IDR) of the Philippines from BBB- to BBB due to the country s strong economic growth and tax reform initiative. The positive investment sentiment is expected to support office demand. Note: Manila s Office refers to Makati CBD and BGC Grade A office market.

27 Hanoi 2.5% sqm per month, net effective on NLA USD 23.1 Rents Stable Market turning favourable for landlords, with rents on the rise. Trang Le, Head of Research, Vietnam 27 Office Demand remains moderate More than 5,7 sqm of Grade A office space was taken up in 4Q17, helping total net absorption for full-year 217 to reach 4,7 sqm. Notably, the second tallest building in the city, Lotte Center Hanoi, recorded full occupancy after three years in operation. Office demand for expansion and new set-up purposes continued to be the main drivers in the Hanoi Grade A office market. No new supply No new supply completed in 4Q17, keeping total stock unchanged at 459,3 sqm. Available space in the Hanoi Grade A office market continued to decline. The vacancy rate decreased to 8.6% in 4Q17, from 9.8% in 3Q17, thanks to positive office demand. Rents move higher The average net effective rent was recorded at USD 23.1 per sqm per month in 4Q17, an increase of.9% q-o-q and 2.5% y-o-y, due to the rise in rents at several buildings with improved occupancy rates. Meanwhile, some buildings with poor management services or notable vacant space recorded softening rents. There were no major investment transactions recorded in the quarter. Outlook: Rise in both supply and demand is expected A new wave of Grade A office supply is expected to enter the market in 218, adding approximately 95, sqm of premium office space to the Hanoi market. Demand for new office space is expected to be positive in 218, on the back of positive economic prospects. Demand for office space for new set-up purposes is also expected to increase, in line with the likely rise in the number of newlyregistered companies in 218. Thousand sqm Rental Value base: 4Q13 = Take-Up (net) 18F Vacancy Rate Percent For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for 218. Note: Hanoi Office refers to Hanoi s Grade A office market.

28 Delhi 28 Office Cautious corporates coupled with a shortage of quality space brings 217 net take-up to a four-year low. Rohan Sharma, Associate Director - Research, India.% sq ft per month, gross on GFA INR 14 Rents Rising Thousand sqm ,4 1,2 1, Rental Value base: 4Q13 = 1 Financial Indicators are for the SBD. Take-Up (net) Capital Value F Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for 218. are for the overall market Percent Weak leasing activity and occupier exits sees net take-up drop Technology occupiers continued to drive the bulk of take-up, but demand also came from financial services, consulting and e-commerce firms. Serviced office and co-working operators were again active. Mid to large-sized lease transactions were led by consolidation and relocation activity; with some expansion-driven activity observed. The CBD saw occupier exits outpace new leasing, while less quality supply saw net absorption in the SBD fall further. Gurgaon s net absorption fell by 23.7% q-o-q despite positive take-up in DLF Cybercity and the new completion, while Noida saw a marginal increase in net absorption despite tenant exits. Quarterly supply additions at a three-quarter low The completion of three new buildings and a refurbished project added.8 million sq ft to stock. Two new buildings were added in Gurgaon, one in Noida, and one refurbishment project finished in the SBD. The overall vacancy rate dropped by 6 bps q-o-q to 3.1%. Vacancy remained low in prime office corridors and premium office buildings amid ongoing churn due to lease expiries and relocations. Rents and capital values edge up in Gurgaon, Noida and SBD Rents in Gurgaon were up on account of continued gains in DLF Cybercity and in prominent SEZ. Rents rose in the SBD and Noida because of increases in select, quality buildings and also SEZ buildings in the latter. CBD rents softened further. Capital values rose sharply in 3Q17 but growth slowed in 4Q17 and was in line with rents. Institutional interest remains largely focused on leased assets; however, some opportunities in under-construction supply are garnering investor attention, depending on project quality, potential and pre-leasing activity. Outlook: Demand momentum expected to be sustained Demand is expected to be driven by high-end analytics, software development, consulting, financial services, manufacturing, e-commerce, and co-working companies; with technology firms expected to drive big-ticket leasing transaction activity. However, much of the demand from technology firms will be for consolidation and relocation strategies, as increased automation encourages firms to undergo operational realignment. We expect rental growth to be led by premium buildings with high occupancy levels and quality upcoming projects. Capital value growth is likely to be driven by leased assets and mild yield compression is anticipated. Note: Delhi Office refers to Delhi NCR s overall Grade A office market.

29 Mumbai 1.5% sq ft per month, gross on GFA INR 214 Rents Rising Mumbai sees the completion of one of its largest built-to-suit facilities. Co-working operators continue leasing space. Subash Bhola, Director - Research, India 29 Office Net take-up rises sharply In 4Q17, net absorption increased by almost 5% from 3Q17 to reach 3.23 million sq ft. Buildings that commenced operations in the quarter had significant pre-commitments. There was steady demand from BFSI, co-working, pharmaceutical and FMCG companies for premium Grade A space. Navi Mumbai continued to be the favoured destination among the IT/ITeS sector. IT tenants remained cautious as national and global headwinds are impacting the industry s growth prospects, and thus many firms are prudently evaluating their expansion plans. Strong pre-commitments to new completions In 4Q17, three projects completed, providing a total area of over 1 million sq ft. With this new supply, Mumbai s total stock grew to million. Developers with sizable pre-commitments to their projects were observed to be speeding up construction to meet delivery timelines. With demand in IT subdued, developers are looking at the SBD and Suburbs to launch commercial/non-it projects. Rents and capital values move higher in most submarkets On an overall basis, financial indicators increased marginally q-o-q. The majority of renewals and new leases transacted were with rental rates.5-1.% higher than the previous quarter s average. In the CBD, rents continued to decline, causing yields to decrease slightly y-o-y. However, the eastern and western submarkets witnessed capital value appreciation of.6% q-o-q. Outlook: Net absorption to marginally increase Mumbai s office market is expected to see a slight increase in absorption during 218, with the IT industry remaining the main office driver of activity despite expansion plans for select firms being put on hold. Co-working operators should also remain active, bolstering demand in the short to medium term. Annual supply in 218 is projected to be higher than 217, and projects nearing completions already have healthy pre-commitment levels. Cost-conscious corporates and IT/ITeS tenants will continue to take up office space in the Suburbs submarket. Rents and capital values should grow steadily, and yields are likely to compress marginally, especially in non-it pockets. Thousand sqm Rental Value base: 4Q13 = 1 Financial Indicators are for the SBD BKC. Take-Up (net) Capital Value F Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for 218. are for the overall market Percent Note: Mumbai Office refers to Mumbai s overall Grade A market

30 Bengaluru 3 Office Space rationalisation initiatives by corporates bring about net absorption drop. Trivita Roy, Associate Director - Research, India 5.2% sq ft per month, gross on GFA INR 77.6 Rents Rising Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the SBD. Thousand sqm 1,2 1, F Take-Up (net) Vacancy Rate Percent Softer demand leads to reduction in net absorption Bengaluru saw net absorption of 1.6 million sq ft in 4Q17, down from 2.6 million sq ft in the previous quarter. Pre-commitments signed in prior quarters contributed most of the quarerly absorption, as tenants moved into newly completed buildings. As the SBD witnessed tenant exits, Whitefield contributed more significantly to net take-up in 4Q17. Key occupiers who leased space in 4Q17 were DXC, Accenture, TCS, Digicaptions and Synechron. Vacancy edges up Five buildings started operations in 4Q17, adding 2 million sq ft to the total stock, which stood at 18 million sq ft at end-4q17. A few buildings came online with more than 5% occupancy levels. Vacancy increased to 3.6% in 4Q17 from 3.4% in 3Q17, due to new supply and a few occupiers consolidating space in the quarter. Moderate uptick in rents across the city In the SBD and Whitefield submarkets, rents increased by 1.5% and 1.4% q-o-q, respectively. Sustained investor interest drove capital values upwards by.5-2.8% q-o-q across the city in 4Q17, with the highest growth recorded in the SBD submarket. Outlook: Strong pre-commitments likely to keep vacancy below 4% A pick up in construction activity at projects underdevelopment should support a healthy level of new supply in 218. While new project launches in 4Q17 should strengthen the supply pipeline in the medium term. Rents are likely to show moderate growth in the next 12 months; however, capital value growth is likely to outpace rents and lead to mild yield compression. High-quality buildings with good occupancy levels should continue to attract investor interest. For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for 218. are for the overall market. Note: Bengaluru Office refers to Bengaluru s overall Grade A office market.

31 Sydney 2.5% sqm per annum, gross effective on NLA AUD 964 Growth Slowing Centralisation activity and office withdrawals contribute to the Sydney CBD vacancy rate falling to a 16-year low of 5.4%. Andrew Ballantyne, Head of Research, Australia 31 Office Centralisation continues to be a key driver of demand Professional services and finance firms made up a large portion of tenant moves over 4Q17. A number of tenants consolidated their operations from multiple locations into one tenancy these included Origin (7,85 sqm) and Hannover Re (2,4 sqm) at International Towers Sydney Tower 1. Centralisation continues to be a key driver of demand in the Sydney CBD. A further three tenants relocated to the CBD over the quarter two from Sydney Fringe and one from St Leonards. The largest centralisation for 4Q17 was Melbourne IT, relocating from the Sydney Fringe to 68 George Street (5,31 sqm). Sydney CBD vacancy rate the lowest level in 16 years We withdrew a further five assets from Sydney CBD stock over the quarter, which totalled 57,5 sqm. This takes the yearly withdrawal figure to 15,4 sqm, the highest annual figure for the Sydney CBD since Nearly 63, sqm of the withdrawals were for the Sydney Metro infrastructure project. Withdrawal activity and continued tenant demand from a broad range of industry sectors resulted in the CBD vacancy rate trending down to 5.4%. Tenants upgrading into better quality space has also resulted in the premium grade vacancy rate trending down 8. percentage points over the year to 6.7%. Yields continue to trend down to record lows Asset owners wanting to capitalise on strong investor demand in the CBD resulted in nine sales totalling AUD 1.52 billion. The largest sale was Charter Hall Direct Property Fund purchasing 231 Elizabeth Street from Bright Ruby for an estimated price of AUD 342. million. The secondary yield range compressed by 25 bps on both ends to range between %. This is the first time the upper yield range (4.75%) is below the 5% threshold, and can be attributed to purchasers expecting strong rental uplift in secondary assets, as net effective rents have increased by 66% over the past two years. Outlook: Positive demand and positive rental growth in 218 Tight market conditions are expected to continue over 218. We forecast the Sydney CBD vacancy rate should continue to trend below 5% over 218. With limited availability of contiguous space, leasing activity is expected to be concentrated in small to mid-sized organisations. Rents are projected to move higher over 218, though not at the levels we have seen over the past three years. However, prime and secondary rental growth is expected to remain above the long-term average growth rates, which should be supported by continued competition for limited space options in the CBD. Thousand sqm Rental Value Capital Value base: 4Q13 = F Take-up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for Percent Note: Sydney Office refers to Sydney s CBD office market (all grades).

32 Melbourne 32 Office Net absorption rebounds strongly in Melbourne s CBD office market in 4Q17. Annabel McFarlane, Director Research, Melbourne 12.2% sqm per annum, gross effective on NLA AUD 53 Rents Rising Rental Value Capital Value base: 4Q13 = 1 Thousand sqm Take-Up (net) 18F Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for Percent 217 records third straight year of above-average net absorption CBD net absorption for the year was 91,1 sqm (29,4 sqm in 4Q17) and this follows two years of extraordinary expansion. Net absorption slipped into negative territory in Melbourne s Fringe submarket (-3,1 sqm) and expanded strongly in the SES (14,7 sqm) in 4Q17. Strength in the small business sector was apparent in 4Q17 with 83% of demand concentrated in the sub 1, sqm segment (134, sqm). Melbourne s Fringe submarket was impacted by the centralisation of larger tenants to the CBD. CBD vacancy declines to 6.4% Minimal supply in 217 resulted in CBD vacancy tightening to the lowest level in five years at 6.4% in 4Q17. Following nine quarters of minimal construction activity, new supply is expected to pick up in 1Q18. Ten projects are currently under construction and expected to add 41,9 sqm to the market by 22. The three assets expected to complete in 218 are all Docklands projects and are 97% pre-leased as at end-4q17. The Fringe submarket vacancy edged up to 7.4% in 4Q17 after five consecutive quarters of decline. Withdrawals of assets for redevelopment will continue to impact the Fringe submarket in 218 but the cycle of withdrawal of office assets for residential conversion has come to an end. The office sector supply cycle is picking up in the Fringe submarket. Three projects are under construction and 12 others have the potential to add 154, sqm to the market by 221. There will be no new supply additions in the SES submarket until late 218. Low vacancy, robust demand supporting rises in effective rents Yields remained broadly stable but yields for Melbourne s CBD and Fringe prime assets tightened further in 4Q17. Melbourne s CBD and Fringe prime office market yields tightened to % and % respectively. Melbourne effective rental growth moderated but remained robust in 4Q17. CBD prime and secondary gross effective rents increased by 12.2% and 1.8% y-o-y respectively. Prime Fringe gross effective rents also increased strongly over the year (9.4%). The SES prime market is benefiting from the hiatus in supply, with rents up 6.6% in the year. Outlook: Demand to moderate from recent strong levels Melbourne s CBD office market supply cycle should pick up and accelerate over Vacancy is expected to remain well below average throughout 218 and 219 before increasing in 22. Melbourne CBD office market yields are at record lows and minimal further tightening is expected. Note: Melbourne Office refers to Melbourne s CBD office market (all grades).

33 Perth.8% sqm per annum, gross effective on NLA AUD 435 Rents Stable The Perth CBD records positive net absorption in 217, the first positive result since 212. Andrew Ballantyne, Head of Research, Australia 33 Office Centralisation continues to drive CBD leasing activity As CBD office space has become more affordable, there has been a steady flow of tenants moving into the Perth CBD from suburban locations, as well as tenants upgrading within the CBD. Prime grade vacancy decreased throughout 217 as demand for large requirements remained directed towards higher quality buildings. As a sign of improving conditions in the wider Perth market, sub-lease vacancy declined over 216 and 217, as multiple occupiers either re-occupied or no longer marketed their premises for sub-lease. CBD vacancy stable over 4Q17 The Perth CBD recorded no change in headline vacancy over 4Q17, remaining at 21.8%. Prior to this, the vacancy rate had declined for four consecutive quarters. There is a minimal supply pipeline for the Perth CBD, with just one major office project under construction. Capital Square (48,5 sqm) is due for completion in 218, and is fully pre-committed by Woodside Petroleum. Speculative construction is unlikely in the current market. Four major CBD sales transactions in 217 Perth CBD office investment volumes for 217 totalled AUD million, over four transactions. In the largest sale of the year, The Insurance Commission of Western Australia sold the Westralia Square office building at 141 St Georges Terrace to GDI Property Group for AUD million. Prime net face rents remained stable over 4Q17; however, incentives remain high across the market. Prime yields remained stable over the year. Limited prime grade investment opportunities have driven investment interest towards secondary grade assets. Outlook: The Perth CBD is expected to recover steadily The Perth CBD is likely to continue to attract tenants from suburban locations, with attractive rents a key driver for tenant migration. Activity from existing CBD tenants is likely to remain driven by lease expiry and the opportunity to upgrade office facilities. Investment activity in the tightly held Perth CBD is anticipated to remain limited, with a small number of assets brought to market for sale. We expect to see further stabilisation in effective rents and prime incentives as prime vacancy tightens Rental Value Capital Value base: 4Q13 = 1 Thousand sqm F Take-up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for Percent Note: Perth Office refers to Perth s CBD office market (all grades).

34 Auckland 34 Office High levels of offshore investment into the Auckland CBD office market push yields to record lows in 217. Tom Barclay, Head of Research, New Zealand 2.4% sqm per annum, net on NLA NZD 489 Growth Slowing Thousand sqm Rental Value Capital Value base: 4Q13 = F Take-up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for % 1% 5% % -5% Percent White collar job growth underpins continued demand Occupier demand remains robust. Business growth and high net migration levels are driving demand for office space. Occupier preference is skewed towards prime stock with new options to become available over the next 18 months. Demand for secondary stock is less pronounced; however, vacancy levels are being regulated by the removal of stock for refurbishment or conversion. We expect to see landlords upgrading secondary space to remain competitive. Premium vacancy still low Premium vacancy increased marginally over 2H17 to 1.8%. Vacancy within the top end of the market is forecast to remain tight until the completion of the Commercial Bay development in 2H19, which will deliver 39, sqm of premium space. Vacancy across secondary stock decreased slightly over 2H17, a result of refurbishments and conversions. A spike in demand from smaller occupiers also assisted in preventing a spike in vacancy levels across lower grade space. Offshore buyers remain keenly interested in office assets Offshore investors remain active in the Auckland office market, with two large transactions occurring over 4Q17. The NZ Post Centre and NZI Centre were both sold over the period, transacting for NZD 3 million and NZD 63 million respectively. The average prime yield firmed by 5 bps in 4Q17 to 6.5%. There is potential for further yield compression given the weight of offshore capital seeking prime assets. Outlook: Prime vacancy forecast to firm further over 218 Available space across prime stock is forecast to remain minimal over 218, as the new supply entering the market has solid pre-commitment. However, secondary vacancy is expected to increase as occupiers move into new or refurbished premises. Apartment or student accommodation conversions may moderate the rise in vacancy, although construction costs and competing supply could offset some of this downward pressure on vacancy. Cross-border investors pushed yields to record lows in 217 and we expect to see sustained investor interest continue in 218, given the strength of the occupier market and the solid economic outlook for the country. While further yield compression is possible, we expect rental uplift to be the main driver of capital value growth in 218. Note: Auckland Office refers to Auckland s CBD and Viaduct Harbour office markets.

35 Retail

36 Hong Kong Revival in tourism and retail sales fuels market recovery. Terence Chan, Head of Retail, Hong Kong -1.5% sq ft per month, net on GFA HKD Decline Slowing 36 Retail Thousand sqm RV (High Street Shop) CV (High Street Shop) RV (Premium Prime Shopping Centre) RV (Overall Prime Shopping Centre) base: 4Q13 = F For 213 to 217, completions are year-end annual. Future supply is for 218. Visitor arrivals and retail sales increase Boosted by the holiday season, total visitor arrivals rose 6.8% y-o-y in the October-November period, with mainland visitors surging 8.5% y-o-y. Led by a resurgence in jewellery and watch sales, which were up 8.2% y-o-y through the October-November period, retail sales grew by a solid 5.7% y-o-y, bringing growth through the first eleven months up to 1.8% y-o-y. Leasing demand generally remained weak, with activity largely dominated by renewals and cost-saving initiatives. F&B operators and mass retailers, notably lifestyle and entertainment sectors, remained the bright spot in the market. Foreign retailers were also active, with Korean fashion house MLB Korea leasing two street shops, one each in Mongkok and Central. New supply boosts the non-core prime shopping centre market Three prime shopping centre projects were completed in 4Q17, adding about 3,6 sq ft to overall stock. Both Lee Garden Three (9, sq ft) in Causeway Bay and Ocean PopWalk (8,384 sq ft) in Tseung Kwan O obtained their Occupation Permits in 4Q17. The extension project of Maritime Square (13,243 sq ft) had its soft-opening in mid- December with over 9% of floor space leased. Rental correction further narrows on high streets The slide in high street shop rentals persisted through 4Q17, down 1.8% q-o-q, albeit at a slower pace, on the back of improving sector indicators. Supported by stronger sales and fewer malls undergoing repositioning works, overall prime shopping centre rentals edged up by.2% q-o-q in 4Q17. Investors continued to buy into Hong Kong s retail recovery, focusing largely on neighbourhood centres in non-core areas. A consortium led by GAW Capital Partners acquired 17 assets, including car-parking space, from Link REIT for a total consideration of HKD 23 billion, with estimated initial yields ranging from 2.3% to 3.2%. Outlook: Market to bottom out in 218 The ongoing improvements in inbound tourism and retail sales should continue to render support to the leasing market. Looking forward, we expect an L-shaped recovery to take place in 218, with high street shop rentals to increase in the range of -5%. Despite potential interest rate hikes in 218, retail properties should continue to draw plenty of interest as investors look to buy into the market recovery. As a result, we expect capital values of high street shops to grow in the range of -5% in 218. Note: Hong Kong Retail refers to Hong Kong s overall prime shopping centres and high street retail markets.

37 Beijing 1.7% sqm per month, net effective on NLA RMB 874 Growth Slowing Six new projects open, marking the largest Urban supply quarter since 24. Joe Zhou, Head of Research, China Flagship stores make a splash in 4Q17 Flagship openings were popular at the newly opened WF Central mall in Wangfujing. Lingerie retailer Victoria s Secret opened its three-floor Asia flagship, making it the first store in Beijing to provide access to full product lines. Also at the mall, Pandora opened its global flagship store and Superdry opened its China flagship store. Sports and sub-brands brands were also active in the quarter. Key openings included Lululemon, Adidas Terrex, Adidas Neo, Adidas Young Athletics and Nike Kicks Lounge. Peak supply quarter unmatched since 24 It was a peak supply quarter, with 4Q17 marking the largest quarterly supply for the Urban market since 24. A total of six new projects entered the market, adding 395,4 sqm of Urban supply and 47, sqm of Suburban supply. Key openings included the WF Central mall along the busy Wangfujing pedestrian street and MixC Miyun, the first large-scale shopping mall in the far north of Beijing. WF Central opened with high commitment, while MixC Miyun was fully committed. Meanwhile, IN88 department store closed its upper floors and is likely to convert the space. Slow rental growth persists Urban rental growth remained slow, but recorded a slight increase from the previous quarter as landlords of market-leading projects had greater bargaining power; rents grew.7% q-o-q and 1.7 y-o-y. The Suburban market continued to outpace the Urban market, registering.9% growth q-o-q and 3.2% growth y-o-y. Experienced developers continued to search the Beijing market for retail opportunities, as their confidence in Tier 1 cities remained high. Retail-to-office conversions also continued to attract attention from investors in the market. Outlook: Suburban malls to dominate future supply pipeline In 218, new supply should start to shift its focus from the Urban market to the Suburban market. Over the next twelve months, new Suburban supply is expected to make up the majority of new supply (at nearly 6%). By 219, new Suburban supply is expected to dominate new supply (at nearly 9%). F&B and children s brands should remain strong. Premium and luxury cosmetics will have strong growth potential at destination and regional malls. New retail supermarkets will consider entering malls, as the most competitive players in this rising sector look to upgrade from low-end projects. Thousand sqm Rental Value base: 4Q13 = 1 Capital Value F For 213 to 217, completions are year-end annual. Future supply is for Retail Note: Beijing Retail refers to Beijing s Urban retail market.

38 Shanghai Polarisation in mall performance intensifies in decentralised markets. Joe Zhou, Head of Research, China 2.6% sqm per day, net on NLA RMB 51.7 Growth Slowing 38 Retail Thousand sqm Rental Value base: 4Q13 = 1 Financial Indicators are for the Prime market. Capital Value F For 213 to 217, completions are year-end annual. Future supply is for 218. are for the Prime market. Retailers strive to offer interactive shopping experiences Mall operators and retailers have gradually made unique shopping experiences a prevailing focus in order to improve customer retention. Starbucks Reserve Roastery debuted at Taikoo Hui in the quarter, offering an interactive, multisensory coffee experience. New retail concepts gained traction as retailers sought to leverage digital strategies. For example, online-integrated supermarkets He Ma Xian Sheng and Super Species opened flagship stores in decentralised malls, while many online retailers opened pop-up stores in popular malls to boost sales during the Double 11 online shopping festival. Four projects deliver 55, sqm, the largest supply of 217 Overall supply in both Prime and Decentralised submarkets came in at 1.3 million sqm in 217, down slightly from 216 s 1.4 million sqm, but still one of the largest years on record. Nearly half of 217 s supply was completed in 4Q17, including the refurbished No.1 Shopping Center and mega projects: Gala Mall, Aegean Shopping Mall and Xuhui ASE Mall. Vacancy decreased to 9.2% in prime areas as a result of improved occupancy in new malls such as Raffles City Changning and mature malls such as Mosaic. Due to supply pressures, Decentralised vacancy slightly increased to 8.7%, despite new projects high occupancy. Rental growth slows in both Prime and Decentralised submarkets Prime open-market ground floor base rents increased by 2.6% y-o-y to RMB 51.7 per sqm per day, as growth was hindered by underperforming malls in West Nanjing Road and Lujiazui. Decentralised rents rose 2.5% y-o-y to RMB 19.8 per sqm per day, as strong performances by malls such as Kerry Parkside were balanced out by struggling malls in saturated areas. Park Lane, a 5,779 sqm retail podium of a serviced apartment project in Changning, was sold by HKSH Alliance to a Malaysian buyer for RMB 26 million. Outlook: Supply pressure to force operators to change strategies F&B, health and children s brands are still expected to drive most demand. Mall operators are expected to integrate online platforms, adopt new technologies, and collaborate with art and culture institutions to attract customers in a crowded and increasingly homogeneous retail market. City-wide supply may reach a peak in 218, and is likely to intensify the polarisation of performance across Shanghai, with the separation of winners and losers particularly acute in decentralised submarkets already under supply pressure. Note: Shanghai Retail refers to Shanghai s overall prime and decentralised retail markets.

39 Guangzhou.8% sqm per month, net on NLA RMB Rents Stable Investors willing to pay a premium for assets with greater improvement potential. Silvia Zeng, Head of Research, South China Brands targeting millennials drive leasing demand Demand in urban precincts continued to be stable in 4Q17. Fashion and accessories retailers that target the younger generation were actively expanding, thanks to the strengthening purchasing power of this demographic group. Automobile retailers were another bright spot recently, as several new energy car and luxury car brands took up space in urban malls. Suburban precincts saw mass market chain brands remaining the main source of demand. The continued growth of the residential population drove sales in the Suburban retail sector, as seen with optimal footfalls and performances in inner suburban malls. Trade-mix adjustments push up urban vacancy rate There were no new completions in 4Q17. The Urban vacancy rate increased slightly, affected by several malls trade-mix adjustments; while the Suburban vacancy rate edged down, as occupancy at recently opened malls rose. The overall vacancy rate was stable at around 4.5%, largely balanced by the opposite movements in Urban and Suburban vacancy rates. Investors active as they place greater value on asset potential A mild rise in Urban rentals was observed, mainly from malls that opened in recent years which saw improved footfalls. Suburban rentals also had moderate growth, benefiting from steady sales performances in inner Suburban malls. Rock Square was transacted in the quarter. Since there are very limited en bloc options available on the market, experienced retail investors have become more willing to accept relatively lower yields in exchange for malls they regard as having a good potential for future upgrade. Outlook: Vacancy rate to decline despite substantial supply Leasing demand is likely to improve mildly. New retail concepts are likely to gather momentum in Guangzhou, while brands appealing to young consumers are expected to remain active. Supply in next 12 months is projected to exceed 4, sqm, but the overall vacancy rate is expected to decline, owing to smooth pre-leasing progress. The rental performance is expected to see moderate improvement, following the enhancement in leasing demand. Low availability of investment-grade assets is likely to persist, as transactions in recent years leave very few saleable core assets in the market. 15 Thousand sqm Rental Value Capital Value base: 4Q13 = F Take-Up (net) Vacancy Rate For 213 to 217, completions are year-end annual. Future supply is for Percent 39 Retail Note: Guangzhou Retail refers to Guangzhou overall prime retail market.

40 Tokyo Further cap rate compression amid strong interest from investors. Takeshi Akagi, Head of Research, Japan.9% tsubo per month, gross on NLA JPY 79,49 Growth Slowing 4 Retail y-o-y (%) Q12 Rental Value base: 4Q13 = 1 Retail Sales Capital Value 3Q13 3Q14 3Q15 3Q16 3Q17 Sales Growth of Large-scale Retail Stores in Tokyo Source: Ministry of Economy, Trade and Industry Healthy occupier demand continues in Ginza and Omotesando Consumer confidence in November improved for the third straight month, reaching its highest level since September 213. Department store sales in Tokyo posted an increase of 3.8% y-o-y during the same month, as spending by domestic and foreign customers on higher priced goods was strong. Visitor arrivals continued set new benchmarks, supporting an increase in tourist consumption of 26.7% y-o-y in 3Q17. Healthy demand continued to come from international retailers and F&B operators. In 4Q17, new store openings included Rolex Boutique Lexia, one of their largest direct operating stores in Japan, alongside Namiki-dori, and the relocation of the Asics Harajuku flagship store, the largest in Japan, to a site fronting the crossing of Meiji-dori and Takeshita-dori. Tokyo Ginza Asahi Building completes The redevelopment of the Tokyo Ginza Asahi Building completed in 4Q17. In the retail podium, Rolex, Sun Motoyama and Louis Vuitton opened stores. The upper floors of the building will be occupied by the Hyatt Centric Ginza Hotel, the first lifestyle concept hotel by the group. The Ginza 7-chome Project started construction and is scheduled to complete in 219. Located on Sotobori-dori, the 1-storey project with a GFA of 1,5 sqm will be offered for lease to multiple tenants and with a strong focus on F&B. Rents hold firm near peak levels Rents held stable in 4Q17. Annual growth was recorded at.9%, slightly lower than the 2.1% growth in the previous year. Capital values increased 2.9% q-o-q and 3.% y-o-y in 4Q17 due to further cap rate compression. In the investment market, a joint venture between Norges Bank Real Estate Management (NBREM) and Tokyu Land Corporation acquired five retail properties in Omotesando and adjacent submarkets. This was NBREM s first real estate investment in Asia. Outlook: Rents and capital values to edge up Private consumption is expected to continue to pick up in 218 amid improvements in employment and income. According to Oxford Economics, private consumption is expected to grow.9% in 218. Strength from inbound tourism should continue to support retail sales. In spite of limited vacant space and healthy demand, further rental increases are likely to be limited as current rental levels are near the previous peak s level. With cap rates expected to hold relatively stable, capital values are likely to move in line with rents. Note: Tokyo Retail refers to Tokyo s prime retail markets of Ginza and Omotesando.

41 Seoul -1.4% pyung per month, net on NLA KRW 1,96,417 Rents Falling Retail demand improves despite a continuous slowdown in tourist arrivals. Sungmin Park, Head of Research, Korea Consumer sentiment remains high; tourist arrivals slow further The Consumer Sentiment for December remained near a six-year high. In addition, November retail sales increased by 5.6% m-o-m, the highest monthly gain since February 29. However, foreign tourist arrivals remained weak, decreasing 16.5% y-o-y in November, adversely affecting high street sales. High street leasing activity was focused on Gangnamdaero and Hongdae as Olive Young (365 pyung) and TWICE Store (168 pyung) opened new stores. Times Square mall benefitted from its recent tenant adjustment, as it welcomed global sports brands New Balance (87 pyung) and FILA (74 pyung). Occupancy improves in both high street and shopping malls Shopping mall vacancy declined 1.3 percentage points q-o-q as Times Square and Coex Mall nearly completed their tenant remixing. New major leases at Coex Mall included fashion retailer H&M, and health and beauty brand Boots. For high streets, vacancy declined 25 bps q-o-q to 8.9%, driven by new leases in Gangnamdaero and Hongdae. Yeoksam-dong 88 Building (total GFA 8,663 sqm) in Gangnam completed during the quarter; Adidas opened a new flagship store on the first four floors of the building. Rents decline despite positive consumer sentiment High street rents declined by.6% q-o-q, led by Cheongdam, reflecting high vacancy in the district. Rental growth was also limited in Myeongdong and Garosugil due to the ongoing slowdown in foreign tourist arrivals. For shopping malls, rents grew only marginally by.1% q-o-q, impacted by growing online sales. Investment volumes recovered on the back of strength from institutional investors. Notable deals included KB Reit s acquisition of Homeplus Namhyeon Building (GFA 32,282 sqm) for KRW 162 billion and IGIS purchase of the Swatch flagship store building in Garosugil for KRW 31.7 billion. Outlook: Retail conditions expected to improve Retail spending is likely to benefit from robust economic growth, along with an expected gradual recovery in Chinese tourist visits over 218. The upcoming Pyeongchang Winter Olympics should serve as a catalyst to drive improving retail sentiment, helping boost overall retail sales. A modest decline in vacancy is likely for core high street locations and shopping malls given a paucity of new supply and location advantage; however, rental growth is expected to be hindered by the growing online retail marketplace and slow recovery in foreign tourist arrivals. Note: Seoul Retail refers to Seoul s prime retail market. y-o-y (%) Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for Myeondong. Retail Sales Q12 3Q13 3Q14 3Q15 3Q16 3Q17 Source: Statistics Korea Sales Growth of Large-scale Retail Stores in Seoul 41 Retail

42 Singapore Cautious optimism approaching end-217, following stronger sales and slowing rental declines. Angelia Phua, Director - Research, Singapore -2.3% sq ft per month, gross effective on NLA SGD 33.3 Decline Slowing 42 Retail Thousand sqm Rental Value base: 4Q13 = 1 Financial Indicators are for Orchard Road. Capital Value F For 213 to 217, completions are year-end annual. Future supply is for 218. are for the overall market. Retailers enjoying improved sales, but are wary of expansion Consumer sentiment continued on an upward streak, with total retail sales, excluding motor vehicles, recording more than two consecutive quarters of growth ending 3Q17. The consistent increase in sales for watch and jewellery retailers, department stores and wearing apparel, paints a positive picture for the retail sector. While existing retailers are cautious of expansion, the quarter witnessed a flurry of new-to-market retailers - ranging from multi-concept stores to F&B operators - entering the Orchard and Marina submarkets to leverage on the festive season. Vacancy rates have decreased accordingly. Over half of 217 retail supply opens in 4Q17 The fourth quarter saw the opening of the retail podium in Marina One The Heart, adding about 14, sq ft to the Marina submarket. Occupancy rates were above 7%, with anchor tenants including fitness club Virgin Active, Cold Storage and Cookhouse by Koufu that will cater to the working population within the CBD. The Suburban submarket witnessed two openings in 4Q17 SingPost Centre (178, sq ft), which opened in early October, as well as Northpoint City (35, sq ft) in late December. The latter is the newly constructed extension of the popular suburban mall, Northpoint Shopping Centre. Rent decline slows in Orchard and Suburban Rents declined at a slower than expected rate in the Orchard and Suburban submarkets in 4Q17. The Marina submarket continued to record the steepest decline, as it continues to be marred by weak occupier demand, especially for trades such as fashion and accessories. In terms of investment sales, the 4Q17 total value more than doubled from the previous quarter. Shophouses continued to provide the most significant contribution to value, most likely due to their conservation and heritage status. Outlook: Slight rent growth projected in Orchard submarket Looking forward, increases in retail sales and tourist arrivals should drive demand growth for prime retail space. Coupled with the limited supply, this should bring about a quicker recovery in rents in the Orchard submarket compared to the Marina and Suburban submarkets. Capital values are expected to mirror the rental trend, keeping yields moderately stable. Note: Singapore Retail refers to Singapore s Orchard, Marina and Suburban prime retail markets.

43 Bangkok 1.% sqm per month, gross on NLA THB 2,493 Rents Rising Strong leasing activity by both local and international brands driving rents and capital values up. Andrew Gulbrandson, Head of Research, Thailand Net absorption softens but remains in positive territory International retailers continue to show strong interest in entering the Bangkok market as well as expanding existing footprints. In 4Q17, at least six internationally recognised retailers opened their first stores in Thailand. Net absorption declined by 5.7% q-o-q to 5,5 sqm in 4Q17. The decrease in net absorption was largely driven by ongoing renovations at several Central (CPN) shopping malls and the lack of new large-scale supply. Mega Bangna opens first of several planned extensions Both King Power Complex Rangnam (2,5 sqm NLA) and Mega Bangna (1, sqm NLA) opened new extensions to their existing centres in 4Q17, with all space being committed on opening. The new extension at Mega Bangna is the first step in a larger integrated precinct development plan currently underway. With the new additions above, market-wide prime grade retail stock reached 3.1 million sqm at end-4q17 while the vacancy rate was largely unchanged at 4.9%. Capital values and rental rates grow modestly Net effective rents grew moderately by.5% q-o-q on improved consumer confidence. We expect upward pressure on rents in early 218 as newly renovated space comes to the market. Capital values increased also increased by.5% q-o-q causing market yields to remain unchanged. That said, yields compressed by 42 bps y-o-y as rising land costs and ongoing capital expenditure on renovation activity drove capital value growth. Outlook: Investment to remain targeted on asset enhancement ICONSIAM from Siam Piwat is the only notable greenfield project that will complete in 1H18 while Gateway Bangsue from the TCC Group should open towards year-end. The next sizeable new project is not expected to complete until 22. With most investment focused on renovations, we expect the vacancy rate to hover around the 5% mark over the next 12 months as tenants move out and move back in. Based on the reputation of Siam Piwat, we expect ICONSIAM to open fully let or very nearly so, keeping vacancy rates stables later in 218. After launching a number of new projects outside of Bangkok, major retail developers/operators appear to be slowing growth plans to avoid saturating provincial markets. Thousand sqm Rental Value Capital Value base: 4Q13 = F For 213 to 217, completions are year-end annual. Future supply is for Retail Note: Bangkok Retail refers to Bangkok s prime retail market.

44 Jakarta No new completions; rents flat. James Taylor, Head of Research, Indonesia 3.3% sqm per annum, net effective on NLA IDR 6,182,769 Rents Rising 44 Retail Thousand sqm Rental Value Capital Value base: 4Q13 = F For 213 to 217, completions are year-end annual. Future supply is for 218. Limited expansion space for tenants Malls with attractive F&B and entertainment options as well as crowd-pleasing, fast-fashion tenants continued to enjoy healthy footfall. Some landlords continued to re-jig tenant mixes in order to offer more of these types of tenants in place of less attractive occupiers. Limited supply and low vacancy rates are such that we typically only see net absorption spike in quarters which observe new completions; these malls offer tenants the opportunity to expand. With no new supply in 4Q17, net absorption was relatively low. No new completions in 4Q17 A moratorium on standalone shopping malls has been in place since 211, and the supply pipeline is extremely thin; only Aeon Mall (6, sqm) was completed in the whole year, and no new malls were delivered in 4Q17. The moratorium does not affect locations outside of DKI Jakarta city limits and the sprawling townships to the west, east and south of the city offer expansion opportunities. Aeon s first project in Jakarta, delivered in 215, is located in the Bumi Serpong Damai (BSD) township in Tangerang, Greater Jakarta and more are expected in other locations. Rents flat q-o-q F&B and entertainment tenants as well as fast fashion retailers, which are also active, may not be in a position to pay the highest rents in the market. Average rents across the prime retail market in DKI Jakarta remained relatively flat q-o-q, while full-year growth was recorded at 3.3%. The situation in the shopping mall investment market remained unchanged in 4Q17. The prime retail market in DKI Jakarta is extremely tightly held. Given the relatively attractive supply demand dynamics, most landlords have been unwilling to offload and there have been no en bloc deals that we can point to in recent history. Outlook: No completions expected in 218 Our outlook for the coming year remains unchanged. There is nothing to indicate that the moratorium on shopping mall development will be lifted. Now that Aeon Mall has been completed at Jakarta Garden City, we only have one further prime completion in our five-year supply pipeline. Demand from F&B and entertainment is likely to remain strong and some landlords may re-jig tenant mixes to accommodate such tenants. Those landlords which are able to adjust to customer preferences are likely to be best placed to attract visitors. Single digit annual rental growth is expected in 218. Note: Jakarta Retail refers to Jakarta s overall prime retail market.

45 Mumbai.% sq ft per month, gross on GFA INR 257 Rents Rising The performance gap between premium malls and other malls becomes sharper. Ashutosh Limaye, Head of Research, India Improvement in net absorption, particularly in the Suburbs Net absorption in 4Q17 stood at 12,2 sq ft, moderately higher than the 8,2 sq ft recorded in 3Q17. The bulk of net take-up was attributable to leasing in malls that completed over the past two years in the Suburbs. Fashion and F&B operators were the most active in the quarter and focused their attention on space in quality malls. No new supply in 4Q17 Total shopping centre stock remained unchanged in 4Q17 at 18.3 million sq ft. The last major completion was in 2Q17. Overall vacancy decreased slightly from 12.4% in 3Q17 to 12.3% in 4Q17. However, vacancy in the Prime South edged up.3 percentage points q-o-q to 5.4%, due to a few retailers exiting malls of average quality. Overall rents edge up The Suburbs drove rental growth in the quarter as the Prime South and Prime North recorded stable rents. Investment yields remained unchanged at 11.1% in 4Q17 as capital values tracked rental movements. Outlook: Premium malls to drive rent and capital value growth Entertainment and experiential retail operators are likely to be key sources of demand for prime malls as landlords look at enhancing consumer experience and drawing greater footfall. International retailers in the lifestyle and premium categories are expected to continue to enter the city and look for quality space. Thousand sqm Rental Value base: 4Q13 = 1 Financial Indicators are for the Prime South. Capital Value F Take-Up (net) Vacancy Rate 45 Retail For 213 to 217, completions are year-end annual. Future supply is for 218. are for the overall market. Note: Mumbai Retail refers to Mumbai s overall prime retail market.

46 Sydney Tactical store closures being undertaken by some retailers are disproportionately impacting lower-quality centres. Andrew Quillfeldt, Director Research, Australia.6% sqm per annum, net on GLA AUD 1,945 Rents Stable 46 Retail Thousand sqm Rental Value base: 4Q13 = 1 Financial Indicators are for regional shopping centres F For 213 to 217, completions are year-end annual. Future supply is for 218. Amazon began operating in Australia in 4Q17 Retail spending growth slowed further in 4Q17 in New South Wales (3.2% y-o-y) and is now only.4 percentage points above the 2.8% y-o-y national average. Food retailing outperformed with supermarket and grocery store sales up 4.5% y-o-y as at November 217. Retailer performance continued to diverge with the announcement of more retailers going into voluntary administration. Leasing demand remained subdued in the fashion segment as many retailers continue to consolidate, notably Specialty Fashion Group. above-trend in 217, but down q-o-q in 4Q17 Retail completions totalled 188,2 sqm in 217, above the 144,4 sqm long-term 1-year annual average. Major completions over 4Q17 included Barangaroo South, a new retail precinct in Sydney s CBD and four neighbourhood centre projects. are expected to decrease in 218 and 219 before rising to 214,6 sqm in 22. Specialty shop vacancy rates in both the regional and CBD sub-sectors increased over 2H17 in Sydney. Vacancy is largely concentrated in secondary centres. Retail trade in Sydney s CBD has been disrupted by the infrastructure and development projects currently underway. Transaction volumes of AUD 1.4 billion in 4Q17 The AUD 1.1 billion swap transaction between Vicinity Centres and GIC in November 217 was the largest transaction for 217. Three regional sale transactions over 217 have provided transactional evidence for the tightly held sector. Median regional yield sharpened 25 bps q-o-q to 4.75% in 4Q17. Sydney is recording low levels of rental growth, particularly in the core shopping centre categories. Annual growth rates range between.6% and 2.% across the different categories. Re-leasing spreads are dependent on asset quality and performance with a divergence continuing to be observed between prime and secondary centres. Outlook: Rents to increase below the inflation rate until 219 Retailer margins are likely to remain under pressure as online competition grows, operating costs rise and retail spending continues to slow. Nevertheless, prime quality shopping centres should continue to attract and retain tenants. Divergence is expected to remain a key theme. Retail yield ranges are likely to widen to reflect the variation in asset performance. Despite the changes at either end of the range, yields are likely to remain stable on average in the short term. Note: Sydney Retail refers to Sydney s overall retail market.

47 Melbourne.2% sqm per annum, net on GLA AUD 1,49 Rents Stable While still exposed to national industry challenges, Melbourne s retail market is underpinned by a range of positive economic drivers. Andrew Quillfeldt, Director Research, Australia Melbourne a hotspot for international flagship stores Amazon launched in the Australian market in December 217 and choose Dandenong North in Melbourne for their first fulfilment centre. Kaufland also purchased their second Australian supermarket site in Melbourne in 4Q17. Apple announced its first Victorian flagship store will be located at Federation Square in the Melbourne CBD. Retail spending growth in Victoria was 3.8% in the 12 months to November 217, aligned with South Australia as Australia strongest performing markets. The divergence in retailer performance continued in 4Q17 with the announcement of a further four retailers falling into voluntary administration and a number of retailers, notably Specialty Fashion Group, to initiate significant store rationalisation strategies. Secondary centres challenged as retailers consolidate stores The sub-regional vacancy rate in Melbourne increased to 3.4% in 2H17 from 2.3% in 1H17. This is above the national rate of 3.2% in 2H17. However, Melbourne s regional vacancy rate improved in 2H17 decreasing from 1.3% in 1H17 to 1.%. The poor performance of the traditional anchor tenants in subregional centres has deterred some speciality tenants. Supply additions were down in 4Q17, with only one 6,413 sqm extension project completing. A total of 143,5 sqm was completed in Melbourne over 217, down 26.% from the long-term 1-year annual average. Supply additions in Melbourne are expected to remain low over 218 and 219 before increasing to 19,9 sqm in 22. Investor appetite softens for secondary grade Retail yields stabilised in 4Q17, on average, with the weighted average retail yield in Melbourne unchanged at 5.83%. The sub-regional yield range compressed 25 bps at both the upper and lower end to % in 4Q17, but the median yield was stable at 6.%. Rental growth remained low in 4Q17 with all retail sub-categories recording annual rental growth below the current rate of inflation (1.9% per annum). CBD and Large Format Retail were the only sub-sectors to record growth in 4Q17. Outlook: Retail yields are likely to stabilise over 218 A divergence in retail yields is likely to continue over the next months as the performance gap between prime and secondary assets widens. New retailer entrances and expansions should continue to gravitate to Melbourne given the solid population growth, strong tourism and healthy labour market conditions. However, overall leasing demand is expected to remain somewhat challenging. Note: Melbourne Retail refers to Melbourne s overall retail market. Thousand sqm Rental Value base: 4Q13 = 1 Financial Indicators are for regional shopping centres F For 213 to 217, completions are year-end annual. Future supply is for Retail

48 Real Estate Services jll.com/asiapacific The data to back up your real estate decisions. 218 All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

49 Residential

50 Hong Kong Primary launches draw the focus of buyers as capital values reach new record highs. Denis Ma, Head of Research, Hong Kong 2.9% sq ft per month, net on SA HKD 42.6 Growth Slowing 5 Residential Units Rental Value Capital Value base: 4Q13 = For 213 to 217, completions are year-end annual. Future supply is for F Market sentiment heads into the holiday season on a high Primary launches continued to draw the focus of buyers against a lack of new cooling measures announced in the government s October Policy Address. Of the 451 units launched at Cullinan West II developed by Sun Hung Kai Properties over 9% were sold within the first two weeks. New lettings were largely focused on higher quality stock in traditional luxury areas. Activity at the top end of the market primarily involved renewals, with most landlords still holding firm on asking prices. Government to release two sites for sale in 1Q18 In the latest quarterly land sale programme, the government announced that two residential sites, one each in Kai Tak and Tsing Yi, will be released for sale by tender in 1Q18. A total of 144 luxury units are expected to be issued with Occupation Permits in 4Q17, including 54 units at 8-12 Deep Water Bay Drive in Island South by Nan Fung and 22 units at 3 MacDonnell Road in the Mid-Levels by Chinachem. Up, up and away for housing prices in 217 Total considerations of properties priced over HKD 5 million were down 3.3% q-o-q and 34.4% y-o-y despite several record-breaking transactions. Two apartment units at Mount Nicholson Phase III on the Peak sold for a combined HKD 1.17 billion or HKD 132,71 per sq ft, SA, setting a record high for apartments in Asia, in terms of unit price. Luxury rents rose.5% q-o-q in 4Q17, moderating from the 1.5% q-o-q growth recorded the previous quarter amid the holiday season. Luxury capital values grew 4.% q-o-q, surging 15.3% for the full year, bolstered by record highs being achieved and a still strong land sales market. Outlook: Market outlook over the near term remains positive Any new supply-side measures initiated by the government will take time to be realised and are unlikely to have any negative impact on market sentiment over the near term. Given that the impending interest rate hikes have been factored into most purchasing decisions, we forecast luxury capital values to trend up in the range of 5-1% in 218. Despite a mild strengthening in demand, the leasing market is expected to remain affected by downgrading trends, which will keep vacancy at elevated levels at the top-end of the market and pressure on rents. Hence, we expect rents to decline in the range of -5% in 218. Note: Hong Kong Residential refers to Hong Kong s overall luxury residential market.

51 Beijing 4.% sqm per month, gross on GFA RMB Rents Rising New joint-ownership and leasing initiatives will promote greater housing affordability in Beijing. Joe Zhou, Head of Research, China Strong performance of newer projects boosts sales volumes Luxury apartment sales volumes increased 76.5% q-o-q in 4Q17, after a strong performance was recorded due to lower prices resulting from the price caps implemented by the local government. High-end villa sales were restrained by limited new supply, decreasing 15.4% q-o-q in 4Q17. The tight-policy environment persisted in the quarter. For mortgage lending rates, many banks in Beijing charged first-time home buyers up to a 1% premium over the benchmark rate (4.9%), while second-home buyers were charged up to a 2% premium. Pressure remains on developers to launch projects Housing authorities continued to urge developers to launch projects: 772 luxury apartment units were released in 4Q17. Six villa projects also launched new phases, adding 129 units to the market. One new serviced apartment building with 195 units, Ascott Riverside Garden Beijing, fully entered the market. Despite its outer location by the Fourth Ring Road, the project reached high occupancy due to its very competitive rental strategy. Luxury apartment primary capital values growth still negative Primary capital values growth for luxury apartments remained negative, registering -.7% q-o-q as prices continued to be restricted by policy. Meanwhile, stable demand and limited supply supported primary capital values growth for high-end villas (.9% q-o-q). Due to stable leasing demand, rents for luxury apartments and high-end villas inched up 1.2% q-o-q and.6% q-o-q, respectively. Outlook: Focus on joint-ownership housing, leasing market With steady supply and limited price growth, luxury apartment sales volumes are likely to remain stable in 218. Despite price caps set by the local government, supply should be steady as authorities continue to urge developers to launch new projects in the market. Less land supply is expected for the high-end residential market as the government focuses on developing the residential rental market and jointownership housing over the next five years. Government support for several REITs, and financial derivatives for long-term residential rental projects, is projected to further support the rental market. Units Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the overall Luxury market. 9, 8, 7, 6, 5, 4, 3, 2, 1, For 213 to 217, completions are year-end annual. Future supply is for 218. are for the overall market. 18F 51 Residential Note: Beijing Residential refers to Beijing s overall luxury and high-end residential market.

52 Shanghai High-end prices stable as inventory remains low. Joe Zhou, Head of Research, China 1.4% sqm per month, gross on GFA RMB Rents Stable 52 Residential Units , 5, 4, 3, 2, 1. Rental Value base: 4Q13 = 1 Capital Value For 213 to 217, completions are year-end annual. Future supply is for F Sales volumes contract further Higher mortgage rates and down payments continued to rein in demand in both the mass and high-end markets in 4Q17. Combined with limited supply, mass market sales fell to 8,851 units, down 47% y-o-y, while high-end sales fell to 15 units, down 19% q-o-q and 8% y-o-y in 4Q17. Despite slow sales through the year, inventory remained low at end-217 due to limited supply. In 4Q17, high-end inventory fell around 6% q-o-q and 27% y-o-y. As a result, prices stayed firm despite the slowdown in sales. Pre-sale permit controls continue to curb supply New supply hit record lows in both the mass and high-end markets. There were no new high-end launches for a second consecutive quarter, owing to strict controls on pre-sales permits. Developers also delayed new launches in hopes of a more favourable policy environment in the future. Developers remained cautious in the land sales market, with most residentialuse land plots sold at reserve prices. In an effort to diversify housing product, 21 land lots, for developing rental-only housing, were sold to state-owned enterprises (SOEs) in the past five months in Shanghai. High-end prices stay flat due to government price caps Prices stayed largely flat in the high-end segment in both the primary and secondary markets. Landlords were unwilling to offer price discounts as supply remained low. Rents stayed stable mostly due to seasonality, as well as consistent demand from senior executives. There were no en bloc sales transactions in 4Q17 given limited tradable stock. However, as land plots for new developments continue to be scarce in Shanghai s core areas, investors interest in acquiring en bloc residential buildings or serviced apartments remains intact. Outlook: Sales expected to rebound slightly in 218 Under the expected tight monetary policy, developers are likely to accelerate new launches in 218 in order to ease rising cash flow pressure. Combined with pent-up demand, sales are likely to experience a slight rebound. However, prices should stay largely flat as government intervention remains tight. A strong year for leasing is predicted for 218, as central and local authorities continue to spur the development of rental housing with strong incentives. Although state-owned enterprises (SOEs) currently play the leading role, more private investors and developers will likely join the competition amid huge market potential, robust demographic fundamentals and government support. Note: Shanghai Residential refers to Shanghai s high-end residential market.

53 Singapore Sales market recovery moves ahead of leasing market. -2.1% sq ft per month, gross on GFA SGD 4.6 Decline Slowing Ong Teck Hui, National Director- Research, Singapore Positive sentiment supports year-end demand In 4Q17, sales transaction volumes in prime districts eased slightly q-o-q, due to the year-end holiday period. Sales have continued to be dominated by secondary market transactions as there were no major new launches during the quarter. Expectations of prices strengthening in 218 has resulted in more buyers bringing forward their acquisition plans, thereby supporting transaction volumes. New completions in 217 reach an 18-year low Newly completed supply in prime districts remained moderate in 4Q17. As a result, full-year new completions dropped to the lowest level in 18 years. With leasing demand also slowing down in the year-end season, vacancy rates continued to climb marginally in 4Q17. In the near term, new supply is likely to remain moderate, which would help vacancy rates to improve. In the medium term, supply is expected to pick up, with the sale of two prime residential sites at Jiak Kim Street and Fourth Avenue under the government land sales programme in 4Q17. Tender for another two sites at Handy Road and Holland Road will close in 1Q18. These four sites could yield about 1,68 residential units in the prime districts upon completion. Collective sales market gaining momentum in prime districts Collective and en bloc sales in the prime districts gathered steam in 4Q17, with the closure of seven sites, amounting to SGD million. This exceeds the total recorded in the first nine months of the year of SGD million from the sale of four sites. Positive investment sentiment helped capital values of prime residential properties climb at their fastest pace since turning around more than a year ago. Affected by the seasonal slowdown in leasing demand, rents stepped into the negative territory once again in 4Q17, after rising in 3Q17. Outlook: Prices to continue rising, while rents firm Upcoming launches could inject new variety and create some buzz in the prime residential market. This would, in turn, attract more buyers back to the market, thereby supporting further price increases. Rents are expected to firm or even increase slightly amid healthy economic and business conditions, as well as a reduction in new supply and leasing stock. Units RV (Luxury) CV (Luxury) RV (Prime) CV (Prime) base: 4Q13 = 1 5, 4, 3, 2, 1, For 213 to 217, completions are year-end annual. Future supply is for F 53 Residential Note: Singapore Residential refers to Singapore s overall prime and luxury residential markets.

54 Bangkok Developers ramp up new condominium launches as confidence returns. Andrew Gulbrandson, Head of Research, Thailand 3.% sqm per month, gross on NLA THB 532 Rents Stable 54 Residential Units Rental Value Capital Value base: 4Q13 = 1 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, For 213 to 217, completions are year-end annual. Future supply is for F Newly-launched condominium projects are well-received Eight new projects were launched in the CBA in 4Q17, with a combined pre-sales rate of 53.4%. As individual investors scour the market for affordable properties, it is unsurprising that the least expensive of these projects sold out while the highest priced projects, those selling for more than THB 25, per sqm only managed to achieve an average pre-sales rate of 34.7%. Demand for luxury rental apartments improved in the quarter causing the vacancy rate to decline to 6.5%. Five new condominium projects complete in the quarter Nearly 1,8 new units across five projects completed in 4Q17, with a combined sales rate of 89.3%. CBA prime condominium stock now stands just shy of 46, units with an overall first-hand sold rate of 97.5%. No new luxury apartments were launched in the quarter as the result of high land prices and higher prospective investment yields offered by other development types. We expect one project to be withdrawn from the market in 218 when its land lease expires. Strong interest in securing freehold development sites In 4Q17, prime condominium net effective rents increased by 1.1% q-o-q and 3.% y-o-y, while luxury apartment net effective rents remained unchanged. While prime condominium capital values increased q-o-q and caused yields to expand, in y-o-y terms yields compressed by 14 bps. Sansiri PCL acquired a 5% share in Prime Area 38 Co., Ltd.; a holding company that owns a prime plot of land (3,344 sqm) on Soi Sukhumvit 38. We estimate the value of this development site to be roughly THB 45, per sqm or THB 1.8 million per square wah. Outlook: Pre-sales of newly launched projects to improve More than 7,8 new prime segment condominium units across 28 projects are scheduled to complete in 218. The overall pre-sales rate of 82.4% for these projects highlights strong demand in the CBA. The majority of the units are located in the Central East submarket. Demand for prime grade residential condominiums is expected to remain strong in 218. Domestic demand for prime segment condominiums in the CBA is expected to increase, as economic conditions improve. Additionally, foreign demand should continue to grow as more developers invest in international sales and marketing campaigns. Note: Bangkok Residential refers to Bangkok s Central high-end and luxury residential market.

55 Jakarta Unique selling points of some residential projects attract buyers..1% sqm per annum, net effective on NLA IDR 3,428,925 Rents Stable James Taylor, Head of Research, Indonesia Some projects selling well While luxury and super luxury taxes continue to impact demand in the higher end of the market, projects with unique selling points, such as Fifty Seven Promenade and Pakubuwono Menteng, have been able to achieve healthy sales figures in recent quarters. Buyers are drawn to attractive pricing, good developer quality, good location and accessibility, and superior amenities. The serviced apartment market remained relatively stable in 4Q17 with the market vacancy rate around 23%, but this is likely to rise in early 218 when new projects are delivered. Two high-profile launches in 4Q17 Two condominiums were launched in the sales market. The Stature is a mixed-use development by CapitaLand, located close to the Monas National Monument, while Pakubuwono Menteng is a high-end development also located in Central Jakarta. Two towers were also physically completed in the quarter The Orchard and The Residence are both part of the Ciputra World Two development on Jalan Satrio in the CBD. No new serviced apartments were completed in 217. Small price increments for lower end condos Rents in the serviced apartment market have remained relatively flat for some time and this trend continued in 4Q17. While two major deals were closed in 3Q17 GIC s joint venture with Intiland at Fifty Seven Promenade and The Ascott Limited s acquisition of Ascott Sudirman none were closed in the final quarter. However, interest remained strong with local developers as well as groups from around the region looking for opportunities in and around the city. Outlook: Improving demand for some unit types We have seen some developers rethink configurations to incorporate smaller, more affordable units in order to appeal to more buyers. While this is a trend that is likely to continue, some developers may be more optimistic selling higher end units given the good performance of a handful of recently launched developments. Condominium prices have now remained largely flat for a number of quarters. However, as the market begins to improve we may begin to see some small increments as we move into the new year. The lower to mid-end market segments may see the most significant growth. Units Rental Value base: 4Q13 = 1 Capital Value For 213 to 217, completions are year-end annual. Future supply is for F 55 Residential Note: Jakarta Residential refers to Jakarta s luxury condominium and serviced apartment markets.

56 Manila Vacancy rate slightly decreases due to healthy condominium demand. Sharon Saclolo, Associate Director - Research, Philippines 5.% sqm per month, net effective on NLA PHP 829 Growth Slowing 56 Residential Units Rental Value Capital Value base: 4Q13 = 1 9, 8, 7, 6, 5, 4, 3, 2, 1, F Take-Up (net) Vacancy Rate For 213 to 217, completions are year-end annual. Future supply is for 218. Stable residential condominium demand persists The continued rise of cumulative cash remittances from Overseas Filipino (OF) workers, totaling USD 23.1 billion as at YTD October 217, supported demand for residential units in 4Q17. Key demand drivers were expatriate employees, foreigners married to Filipinos, and high-income Filipinos, among others. The 3Q17 Residential Real Estate Price of Bangko Sentral ng Pilipinas recorded growth of.4% q-o-q and 2.4% y-o-y for residential condominium units in Metro Manila, the result of stable demand. Continued lack of skilled labourers delays project completions Delays in building completions persist due to the continued lack of skilled labourers in the construction industry, as real estate projects by government and private firms compete workers. Approximately 2,9 residential condominium units were added to total existing stock from the completion of five developments. The vacancy rate of residential condominium units in Makati and BGC decreased around 7 bps q-o-q to 1.8% in 4Q17, backed by healthy demand. Local developers expand outside Makati CBD and BGC No new developments were launched in 4Q17 within BGC and Makati City. However, ALI is set to develop Park Cascades, located in Arca South, Taguig City, on the fringe of the BGC. Rents rose 1.9% q-o-q in 4Q17, underpinned by stable leasing demand from expatriate employees and foreigners married to Filipinos. Meanwhile, capital values continued to outpace the growth of rents, rising 3.2% q-o-q in 4Q17. Outlook: Foreseen PHP depreciation to support residential demand An estimated 4, residential condominium units from eight developments are scheduled to complete in 1H18. The high volume of incoming supply is likely to push the vacancy rate upwards. The expected depreciation of the PHP against the USD is likely to increase the purchasing power of OF families for residential condominium buying. Likewise, the budget allocation of MNCs and O&O firms for expatriate employees housing may rise, supporting demand for residential condominium units in the luxury segment. Note: Manila Residential refers to Makati CBD and Fringe, and BGC residential condominium markets.

57 Sydney 1.9% per week, 2 bedrooms AUD 53 Rents Rising Sydney s apartment market is slowing in the face of new supply and slower investor demand. However, we still expect a moderate downturn. Leigh Warner, Head of Residential Research, Australia Demand slows as market passes mature stage in cycle Sales volumes declined marginally by.3% over the year ending 3Q17. This fall was less than in other markets (Melbourne 14%, Brisbane 19.4%), which reflects that Sydney is still catching up after a decade of undersupply. The effects of a tighter macro-prudential setting continued to weigh on investor demand, while owner-occupier demand remained resilient. Inner Sydney vacancy remains tight Vacancy rates remained tight at 1.9% in October 217. Despite a high volume of recent completions, historic undersupply means the market remains below historic average vacancy levels. There are 13, apartments under construction in Inner Sydney that are expected to complete between 218 and 22. Beyond this, the majority of projects in the pipeline are still awaiting development approval and we expect a substantial number of projects to be deferred into the next cycle or abandoned. Price growth remains resilient Apartment prices increased by 4.3% in the year ending 3Q17, despite a rise in new completions that has tested the depth of demand. In the last five years, capital growth was the driver of investor returns in Sydney. However, the total returns mix is becoming more balanced with yields at 3.8%. Outlook: Further moderate slowing in 218 Tight macro-prudential measures, particularly for investors, together with softer offshore demand, should continue to dampen demand in 218. A tight vacancy rate suggests there is still capacity to absorb much of the pending supply. However, we feel the market should pass balance in 218 and we will likely see price growth go moderately negative. Sydney s long-term prospects remain strong and we expect price growth after the initial supply bump is absorbed. y-o-y (%) Units 15% 1% 5% % -5% 3Q12, Corelogic 16, 14, 12, 1, 8, 6, 4, 2, 3Q13 3Q14 3Q15 3Q16 Price Growth Completed Currently Marketing Plans Submitted Projects with 5 units or more. 22 Under Construction Plans Approved 3Q17 57 Residential Note: Sydney Residential refers to Inner Sydney apartments Price, rents and yield data sourced from CoreLogic. Vacancy data from the Real Estate Institute of New South Wales.

58 Brisbane The Brisbane apartment market remains soft as it absorbs considerable supply. Leigh Warner, Head of Residential Research, Australia -1.% per week, 2 bedrooms AUD 48 Decline Slowing 58 Residential Units y-o-y (%) 1% 5% % -5% 3Q12 3Q13 3Q14 3Q15 3Q16 Price Growth, Corelogic 12, 1, 8, 6, 4, 2, Completed Currently Marketing Plans Submitted Projects with 5 units or more. 3Q17 22 Under Construction Plans Approved Negative sentiment, tight lending drag on investor demand Investor demand remains weak. Poor market conditions and negative sentiment surrounding the Inner Brisbane apartment market, plus Australian Prudential Regulation Authority s continued macro-prudential measures - tightening lending parameters for investors - have dampened demand significantly. Given capital values have not decreased dramatically, mass settlement failure appears unlikely throughout Inner Brisbane. Although there have been some examples of higher than normal settlement issues in lower quality projects, this is not widespread throughout the market. Supply peaks; limited starts in a difficult financing environment Approximately 8,9 apartments are under construction across 44 projects within Inner Brisbane. An additional 3, apartments are currently being marketed. Given supply levels remain elevated within Inner Brisbane, a number of projects have stayed in the plans approved or plans submitted stage. The vacancy rate for all dwellings within Inner Brisbane increased 2 bps q-o-q in 3Q17. Vacancy is likely to continue to remain elevated in the short to medium term as heightened supply levels remain an issue. Negative price growth appears to be stabilising Greater Brisbane median apartment values declined 2.6% over the 12 months to September 217. By comparison, Sydney and Melbourne s median values increased by 4.3% and 4.1% respectively, over the same period. Capital growth prospects for Brisbane apartments continue to be hindered by the recent increases in supply levels. Transaction volumes remain low for inner-city apartment development sites. Although some capital sources are searching for counter-cyclical purchases, there remains limited quality and appropriately priced opportunities in the market. Outlook: Rough ride in 218 but conditions should stabilise Following the large increase in supply over 216 and 217, apartment completions are expected to decline significantly from 218 and onwards. It is anticipated that the more normalised apartment completion levels will be supported by population growth in Queensland. Capital sources will likely continue to seek counter-cyclical investment opportunities. However, vendor expectations will likely need to be lowered or forced sales may be required in order to increase transaction volumes. Note: Brisbane Residential refers to Inner Brisbane apartments. Inner Brisbane refers to within 5 km of the Brisbane CBD. Pricing data from CoreLogic, rental data from The Queensland Rental Tenancy Authority and vacancy data from REIQ.

59 Industrial

60 Hong Kong Review of revitalisation policy draws investors back to the market. Denis Ma, Head of Research, Hong Kong -.5 sq ft per month, net effective on GFA HKD 12.3 Rents Stable 6 Industrial Thousand sqm Rental Value base: 4Q13 = 1 Capital Value F For 213 to 217, completions are year-end annual. Future supply is for 218. Landlords remain accommodative Supported by strong demand from China and the broader Asia Pacific region, exports and imports grew by 7.3% y-o-y and 8.2% y-o-y, respectively, in the October-November period. Airfreight cargo rose by 4.7% y-o-y while container throughput edged down by 2.5% y-o-y over the same two-month period. Taking advantage of longer rent-free periods being offered by landlords, Helu- Trans expanded 26,2 sq ft in-house at ATL Logistics Centre in Kwai Chung while OM Logistics expanded 53, sq ft in-house at Western Plaza in Tuen Mun. Vacancy edges higher amid tenant relocation and consolidation No new supply was completed in 4Q17. The sale of Winner Godown may further reduce the supply of warehousing space in the future given that the site has been rezoned for redevelopment. Relocation and consolidation activity in peripheral areas such as Shatin put upward pressure on the vacancy rate. Revitalisation policy review lifts investor sentiment Longer rent-free periods contributed to ramp-access facilities rentals sliding.9% q-o-q and overall warehouse rentals down.1% q-o-q in 4Q17. Bolstered by an up tick in investor interest following the government s announcement to review the industrial building revitalisation policy, capital values of warehouses moved higher in tandem with the broader industrial market, up.5% q-o-q. Outlook: Rentals to return to growth amid tightening vacancy Against a supply constrained market no completions are expected over the next three years vacancy should continue to gradually tighten, providing support for the rental market. Against this backdrop, rentals are expected to grow in the range of -5% in 218. Investor interest is expected to remain strong, riding on the government s plan to review the industrial building revitalisation policy as well as the potential uplift in leasing demand brought about by the completion of the Hong Kong- Zhuhai-Macao Bridge. As such, capital values are forecasted to grow in the range of -5% in 218. Note: Hong Kong Industrial refers to Hong Kong s industrial warehouse market.

61 Beijing 3.2% sqm per day, net effective on GFA RMB 1.17 Growth Slowing Limited available space is unable to satisfy strong leasing interest in mature areas. Joe Zhou, Head of Research, China Demand stable, but tight market leads to a quiet quarter E-commerce firms and supporting 3PLs continued to be active. However, the limited availability of large space in mature submarkets held back demand. A notable deal was a domestic e-commerce company leasing half a storage unit of around 2, sqm in Beijing Airport Logistics Park. Tenants of low-end facilities were active in seeking space as the government accelerated the demolition of illegal structures across the city. Beijing was unable to accommodate this demand given low vacancy rates and tight land supply, resulting in many transactions being transacted in surrounding areas such as Tianjin s Wuqing and Beichen. Vacancy flat after three consecutive quarters of no new supply As a result of restrictions on winter commercial construction, two projects originally scheduled for completion in 4Q17 were delayed to 1H18. With no new projects entering the market, the vacancy rate remained unchanged at 1.7%, leaving very limited space available for leasing. Total logistics stock was stable at 2 million sqm. No primary land plots for warehouse use were transacted in 4Q17. Rents record steady growth of 1.2% q-o-q Landlords of buildings in mature submarkets retained their pricing power to increase rents due to the low vacancy rate; Beijing Airport Logistics Park saw the largest rental increase of 2.2% q-o-q to RMB 1.35 per sqm per day. Overall rents rose to RMB 1.17 per sqm per day, up 1.2% on a like-for-like basis. While no en bloc sale transactions were recorded in the quarter, experienced developers remained interested in expanding their presence in the market through the purchase of industrial facilities from small, local landlords. Outlook: Pent-up demand to fill up the new projects Six projects totalling 37, sqm are scheduled for completion in 218, amounting to the highest annual new supply level in the past decade. Despite the large pipeline, the pent-up demand from e-commerce giants and 3PLs, as well as tenants in low-end buildings looking to upgrade, is expected to limit vacancies throughout the year. With vacancy expected to remain low, rents should still see room for growth. On average, we expect rents to grow around 3.% in 218 and 219. Thousand sqm Rental Value Capital Value base: 4Q13 = F For 213 to 217, completions are year-end annual. Future supply is for Industrial Note: Beijing Industrial refers to Beijing s prime non-bonded logistics market.

62 Shanghai Vacancy reaches a seven-year low thanks to strong demand and limited supply. Stuart Ross, Head of Industrial, China 2.4% sqm per day, net on GFA RMB 1.33 Rents Rising 62 Industrial Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the Non-bonded market For 213 to 217, completions are year-end annual. Future supply is for F Net absorption reaches 164, sqm in 4Q17 Despite a lack of new supply, demand from 3PLs and e-commerce firms enabled take-up to reach 164, sqm, which was helped in part by leasing in advance of the annual Double Eleven shopping festival. Much of the activity took place in buildings completed in 1Q17 s supply wave, two of which contributed more than 6, sqm of the quarter s absorption. Leasing activity was concentrated outside of the traditionally popular West Shanghai area throughout 217, where supply has been limited and vacancy near zero. Tenants have turned instead to submarkets like Baoshan, Fengxian, and Jinshan, where supply has been more plentiful and connections to downtown are still good. Vacancy declines to near-frictional level No new supply was completed in 4Q17, leaving total non-bonded stock flat at 5.1 million sqm. Overall supply for 217 was about 25, sqm, half the level of 216. Strong leasing demand led non-bonded vacancy to decline 3.2 percentage points to 4.4% in 4Q17. Baoshan saw the greatest decline, as leasing at GLP s Baoshan project pushed the vacancy rate down by 15 percentage points. Shanghai s remaining vacancy is concentrated in the Lingang and Pudong Airport (PVG) submarkets, which serve specialised demand focused on Shanghai s port and airport. Lingang s remote location causes buildings to lease out at a relatively slow rate. Rental growth accelerates Non-bonded rents rose 1.% q-o-q to RMB 1.33 per sqm per day in 4Q17. The pace of rental growth accelerated.4 percentage points from 3Q17 as landlords were more confident to raise rents, given strengthening leasing momentum and falling vacancy. Both foreign and domestic developers have shown great interest in logistics properties in the Greater Shanghai area. As a result, yield compression had accelerated. Outlook: Positive outlook for 218 We expect 218 s new supply to be 414, sqm. Most planned 218 projects are located in the Fengxian and Jinshan submarkets, where we expect leasing to proceed at levels similar to those observed in 217. Overall vacancy may increase slightly but should remain comfortably in single digits. We expect rental growth to accelerate over 218. Near-zero vacancy will give landlords in popular areas of West Shanghai pricing power, while rising tenant interest should give landlords in other submarkets confidence to raise rents as well. Note: Shanghai Industrial refers to Shanghai s modern warehouse market.

63 Tokyo Occupier demand remains robust; while investors appetite is strong but available product limited. 1.6% tsubo per month, gross on NLA JPY 4,22 Growth Slowing Takeshi Akagi, Head of Research, Japan Continued robust demand absorbs major new supply Externally-oriented sectors strengthened in the first two months of 4Q17, with industrial production rising.5% m-o-m in October and.6% in November. Exports maintained an uptrend for the 12th consecutive month in November rising 16.2% y-o-y, while imports improved 17.2% y-o-y and marked the 11th straight month of growth. Net absorption totalled a healthy 154, sqm in 4Q17, with strong demand sustaining from manufacturers, 3PLs and online retailers. For full-year 217, net absorption reached 788, sqm and slightly outpaced annual supply. Overall vacancy decreases, with Bay area reaching 1.% New supply totalled 148, sqm in 4Q17, increasing total stock by 2% q-o-q. Prologis Park Ichikawa 3 (GFA 19, sqm) in the Bay area and Chiba Newtown Logistics Center (GFA 83, sqm) in the Inland area completed in 4Q17. For full-year 217, new supply totalled 726, sqm, increasing stock by 1%. The vacancy rate in Greater Tokyo stood at 4.1% at end-4q17, decreasing 1 bps q-o-q and 12 bps y-o-y. The vacancy rate in the Bay area decreased 6 bps q-o-q and 2 bps y-o-y to 1.%. Tokyo Inland vacancy rose to 6.1%, up 2 bps q-o-q but down 7 bps y-o-y. Rents and capital values grow moderately Rents in Greater Tokyo averaged JPY 4,22 per tsubo per month in 4Q17, increasing.1% q-o-q and 1.6% y-o-y. Growth was driven by the Bay area, where high-quality new completions recorded rents in excess of the market average. Rents in the Inland area remained stable. Capital values in Greater Tokyo grew.1% q-o-q and 5.9% y-o-y in 4Q17. Although capital values grew for the fourth consecutive quarter, the rate of growth continued to slow. A notable sales transaction in the quarter involved Nomura Real Estate Master Fund disposing of Funabashi Logistics Centre for JPY 5.48 billion (NOI cap rate of 5.3%). Outlook: Rents to fall slightly given major new supply According to Oxford Economics, trade-oriented indicators are expected to continue to recover in 218. Industrial production is expected to grow 2.3%, exports 5.% and imports 3.7%. However, geopolitical tensions across the globe pose a risk to the outlook. In spite of sustained strong demand, rents are likely to be under downward pressure in some submarkets given the record volume of supply due to complete in the coming two years. On the investment front, continued investor interest for prime core assets may see cap rates compress further. Note: Tokyo Industrial refers to the Greater Tokyo s prime logistics market. Thousand sqm Rental Value Capital Value base: 4Q13 = 1 3, 2,5 2, 1,5 1, F For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for Industrial

64 Singapore Rental growth gathers momentum on brighter prospects. Doreen Goh, Associate Director - Research, Singapore 1.7% sq ft per month, gross effective on NLA SGD 3.76 Rents Rising 64 Industrial Thousand sqm Rental Value base: 4Q13 = 1 Capital Value F Take-Up (net) Vacancy Rate For 213 to 217, take-up, completions and vacancy rates are year-end annual. Future supply is for Percent Steady demand as market sentiment improves Leasing market activity continued to see y-o-y growth in 4Q17, culminating in some 256 rental records from the Urban Redevelopment Authority s Real Estate Information System (URA REALIS) for the whole of 217. This surpassed the total for 215 and 216. Take-up of business park space remained focused on existing buildings in 4Q17, given the lack of new completions during the quarter. Demand continued to stem from qualifying tenants from the science, technology and media industries. Sixth consecutive quarterly fall in vacancy There were no known completions or major withdrawals which kept the stock of business park space steady in 4Q17. Amid stable stock and as tenants physically moved into their new premises, the business park vacancy rate declined for the sixth consecutive quarter in 4Q17. For example, French plant-based ingredients maker Roquette opened its new innovation centre of about 11,84 sq ft at Biopolis in one-north in October 217. Rents and capital values strengthen Business park rents rose in 4Q17, after staying relatively stable in the first three quarters of 217, underpinned by the continued lack of new supply and filter-through effect from the rise in office rents. This lifted overall rents in 217, reversing two consecutive years of decline. Moving in tandem with rents, business park capital values (en bloc) rose in 4Q17 after staying flat in 3Q17. This contributed to the rise in capital values in 217, ending two straight years of decline. With capital value growth outpacing rental growth, yields for business park assets compressed slightly in 4Q17. Outlook: Rental growth to accelerate in 218 We continue to hold the view that the vacancy rate will fall further in 218, given limited new supply and expected space absorption on the back of better economic prospects. Against this backdrop, we expect the growth of business park rents to gain traction in 218. Capital values are foreseen to follow the rental uptrend, with yields continuing to compress slightly. Note: Singapore Industrial refers to Singapore s island-wide Business Park market.

65 Sydney 4.2% sqm per annum, net on GFA AUD 117 Rents Rising Another year of strong occupier activity coupled with limited development opportunities underscores high levels of rental growth. Andrew Ballantyne, Head of Research, Australia Three straight years with gross take-up above long-term average Approximately 23, sqm of leases were recorded in 4Q17. This was the largest volume of quarterly activity in 217. Sydney recorded three consecutive years with gross take-up above 1 million sqm - well above the 1-year annual average of 698, sqm. The majority of activity occurred in existing assets, which accounted for 113,7 sqm (5%) of the leasing activity in the quarter. Pre-lease activity also remained high with 11,4 sqm (48%) of take-up volumes in the quarter. Supply completions rise in 4Q17 Supply completions were below forecasts in 217 despite the elevated levels of demand. Approximately 543, sqm completed during the year. The largest level of completions occurred in 4Q17. Approximately 198, sqm of developments were completed in the quarter. This was across eight assets. The positive conditions have encouraged a lift in speculative development activity. Three speculative developments completed in the quarter, totalling to approximately 39, sqm. Average prime rents grow.7% q-o-q and secondary 1.2% Prime quarterly rental growth was recorded across the majority of precincts: Sydney South (1.8%), Outer North West (1.%), Sydney North (1.%), Sydney Outer Central West (.7%) and Outer South West (.7%). Transaction volumes decreased in 4Q17. Approximately AUD 171 million transacted over 14 sales. This figure is understated given the likely presence of Sydney assets in three large portfolios understood to have sold in the quarter. Prime yields were largely unchanged in the quarter with the exception of a 13 bps midpoint compression in the Outer Central West and Outer South West. Outlook: Yields appear to be approaching a cyclical peak We believe a sustained period of occupier demand and an increasing difficulty in expanding development pipelines should place upward pressure on market rents in the medium term. Construction activity is expected to increase in 218. There is currently 562, sqm of supply under construction with a further 183, sqm of developments approved. Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for Outer Central West. 1,2 1, F Take-up (gross) For 213 to 217, take-up and completions are year-end annual. Future supply is for Industrial Note: Sydney Industrial refers to Sydney s industrial market (all grades).

66 Melbourne The strong supply cycle accelerates in 4Q17. Annabel McFarlane, Director Research, Australia 2.7% sqm per annum, net on GFA AUD 88 Rents Rising 66 Industrial Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for South East. 1, Take-up (gross) For 213 to 217, take-up and completions are year-end annual. Future supply is for F A third consecutive year of strong industrial take-up Demand was focused on the West in 4Q17 with five lease transactions totalling 64, sqm. Industrial demand for the West was at the highest annual level since 22 and accounted for 62% of all take-up in 217. Declining serviced land availability is reducing options for occupiers in the South East. The transport and logistics sector dominated take-up again with six out of 14 transactions. However, manufacturing remained relevant with food manufacturer Simplot Australia committing to a pre-lease at DEXUS estate at 41 Foundation Road, Truganina (2,725 sqm). Industrial supply at the highest level since 28 Supply accelerated in 4Q17. Fifteen projects completed adding 39,3 sqm to the market bringing the 217 total to 646,4 sqm. There are 15 projects totalling 316,6 sqm in the West (49%) and East (45%) under construction with completion expected by end-218. Speculative supply is rare in Melbourne s industrial market. Fifteen projects completed in the quarter were 9% pre-committed (GBA). The largest was the completion of the chilled and freezer facilities for Newcold at Robinsons Road in the West. Land values increase sharply in many precincts in 4Q17 Melbourne s industrial average rents responded to strong occupier demand over the year and increased. Service land values also increased sharply, particularly in the South East, where value increases ranged between 11% and 21% in 4Q17, depending on the precinct. Investment volumes moderated in 4Q17, with AUD million of transactions recorded. The quarterly result included the sale of the Allied Pinnacle Portfolio (1 properties across Australia) which sold to Qualitas. The portfolio includes four Victorian assets with an estimated total sales price of AUD 62.3 million. Outlook: Limited availability of serviced land in some precincts There is currently 317, sqm of space under construction and 261, with plans approved with completion expected in 218. If supply is to complete as projected, 218 will be close to 217 s level - the second largest annual addition to stock since 28. We believe the yield compression cycle is approaching the end and pricing is broadly expected to be at its peak. Note: Melbourne Industrial refers Melbourne s industrial market (all grades).

67 Hotel

68 Hong Kong Continued growth in tourist arrivals spurs improved hotel trading performance. David Marriott, Senior Vice President Hotels & Hospitality Group, Asia Pacific RevPAR Growth Y-O-Y 5.4% YTD November 217 HKD 2,636 Stage in RevPAR Cycle RevPAR Rising Luxury Hotel Trading Performance ADR / RevPAR (HKD) No. of rooms 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 7, 6, 5, 4, 3, 2, 1, May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 ADR RevPAR Source: STR Global, JLL Note: MAA - Moving Annual Average Major Additions to Hotel Supply Additions to Supply Occupancy F Occupancy (%) Persistent growth in visitor arrivals in 217 Overnight visitation from China improved significantly by 1.% y-o-y during the month of October 217. Short-haul markets such as Taiwan (excluding China) recorded an increase of 8.2% y-o-y for the same period. Hong Kong s tourism market is now well into recovery mode. The upward market trend observed in 216 has persisted throughout 217. Significant new supply is anticipated in 218 In 217, 15 hotels with a total of 3,498 rooms entered the market, which is more than triple the new room inventory added in 216. This is due to multiple large hotel openings including the Disney Explorers Lodge (75 rooms) and Kerry Hotel by Shangri-La (546 rooms). Hong Kong will embrace a new wave of luxury hotels in 218 when The Murray, Hong Kong, a Niccolo Hotel opens with 336 rooms, followed by the 398-room Rosewood Hong Kong, the 129-room St Regis Hong Kong in 219, and the 46-room Fullerton Hong Kong Hotel Ocean Park in 22. Trading performance continues to improve Revenue Per Available Room (RevPAR) growth was recorded across all monitored segments as at YTD November 217, led by the midscale and economy hotel segment (RevPAR up 6.3% y-o-y). Luxury hotels also recorded stronger RevPAR compared to the same period in 216 (up 5.4% y-o-y). RevPAR growth was largely driven by improved occupancy, with occupancy in the luxury segment up by 5.% y-o-y to 82.2%. On the other hand, Average Daily Rate (ADR) only marginally increased by.3% y-o-y. Outlook: Continued improvement in trading performance Further growth in arrivals from China is expected to spur additional occupancy growth; however, ADR growth is expected to remain subdued. As a significant amount of new luxury supply is anticipated to enter the market in 218, this may potentially result in an increase in ADR for the first time since 214. Source: Industry sources, JLL 68 Hotels Note: Hong Kong Hotels refers to Hong Kong s luxury hotel market.

69 Beijing Recovery in the Beijing hotel market. RevPAR Growth Y-O-Y 4.% YTD November 217 RMB 767 Stage in RevPAR Cycle RevPAR Rising David Marriott, Senior Vice President Hotels & Hospitality Group, Asia Pacific International visitor arrivals continue to decline As at YTD November 217, international visitor arrivals declined 5.9% y-o-y to 3.1 million. Political tensions between China and South Korea continued to impact the tourism sector, which resulted in a 4.2% y-o-y decline in Korean visitor arrivals. Key national meetings and exhibitions significantly benefited hotel trading performance, boosting domestic demand and helping to make up for the shortfall in international visitor arrivals. Future projects largely in emerging and suburban districts Four international branded hotels opened in Beijing in 217, including the 45-room Hotel Jen, 119-room Bvlgari Hotel, 22-room Pan Pacific Hotel and 191-room Ascott Riverside Garden Beijing. Newly opened hotels in the year were mainly based in core areas, including Chaoyang and Dongcheng districts. If all projects materialise, 13 hotels with 2,84 rooms are expected to open in 218. Most of the projects are based in emerging and suburban areas like Shunyi and Changping districts. RevPAR continues to grow As at YTD November 217, occupancy improved 2. percentage points y-o-y to 74.4%. Meanwhile, Average Daily Rate (ADR) remained largely stable, increasing slightly by 1.2% y-o-y to RMB 1,31. Improvements in both occupancy and ADR resulted in a 4.% y-o-y growth in Revenue Per Available Room (RevPAR) to RMB 767. On a moving annual average basis, trading performance improved significantly in November 217. Compared with the same period last year, occupancy and ADR climbed 3.4 percentage points and 1.5% y-o-y respectively, which led to RevPAR growing 6.3% y-o-y to RMB 759. Outlook: Upcoming luxury hotels to drive ADR growth in Notable upcoming luxury hotel projects in 218 are expected to drive ADR growth in select submarkets including Dongcheng and Chaoyang districts. Meanwhile, the dispersed location of upcoming hotels means that new supply is unlikely to significantly impact occupancy levels. A shortage of Grade A office buildings remains a big concern in Beijing, particularly in CBD areas. For this reason, some developers are converting hotel properties into shared offices to achieve a higher return on investment and release the supply pressure. Note: Beijing Hotels refers to Beijing s upscale hotel market. Upscale Hotel Trading Performance ADR / RevPAR (RMB) No. of rooms 1,4 1,2 1, , 3,5 3, 2,5 2, 1,5 1, 5 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 ADR RevPAR Source: STR Global, JLL Note: MAA - Moving Annual Average Major Additions to Hotel Supply Occupancy F Additions to Supply Source: Yearbook of China Tourism Statistics,Industry sources, JLL Occupancy (%) 69 Hotels

70 Shanghai Significant supply continues to challenge hotel trading performance in key submarkets. David Marriott, Senior Vice President Hotels & Hospitality Group, Asia Pacific RevPAR Growth Y-O-Y 4.2% YTD November 217 RMB 85.4 Stage in RevPAR Cycle RevPAR Rising Upscale Hotel Trading Performance ADR / RevPAR (RMB) No. of rooms 1,4 1,2 1, , 7, 6, 5, 4, 3, 2, 1, May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 ADR RevPAR Source: STR Global, JLL Note: MAA - Moving Annual Average Major Additions to Hotel Supply Source: STR Global, JLL Additions to Supply Occupancy F Occupancy (%) International visitation sees little increase in growth As at YTD October 217, Shanghai received 7.2 million international visitor arrivals, a mere 1.7% improvement y-o-y. The ongoing political tension between China and South Korea resulted in a 2.2% y-o-y decline in Korean visitor arrivals. During the same period, visitor arrivals from Japan and the USA increased 12.1% and 4.1% y-o-y respectively, which alleviated the shortfall of Korean tourists. Large hotel supply addition to Hongqiao District In 217, over 2 hotels with nearly 5, rooms were added to the market. One-fifth of this supply was in the Hongqiao district, which could challenge the hotel trading performance in this specific submarket in the short to medium term. In 218, there will be several notable openings which were delayed from 217, including the 82-room Bvlgari Hotel Shanghai, 111-room Middle House and 21- room The Sukhothai Hotel Shanghai. Occupancy drives RevPAR growth As at YTD November 217, Average Daily Rate (ADR) increased slightly by 1.2% y-o-y to RMB 1,71, while occupancy climbed 2.2 percentage points y-o-y to 75.2%. Improvements in both occupancy and ADR drove Revenue Per Available Room (RevPAR) growth of 4.2% y-o-y to RMB 85. On a moving annual average basis, RevPAR increased 4.4% y-o-y to RMB 794 as at November 217. RevPAR growth was mainly attributed to the 2.4 percentage points y-o-y growth in occupancy to 74.6%, while ADR grew by a mere 1.1%. Outlook: Supply to be a challenge for trading performance A continual increase in international visitor arrivals is expected to benefit overall hotel trading performance. Over 3 upcoming hotel projects with 7,61 keys are anticipated to open in 218, with nearly half of them located in Pudong and Minhang districts. This significant supply is expected to challenge the hotel trading performance in these key submarkets in the short term. 7 Hotels Note: Shanghai Hotels refers to Shanghai s upscale hotel market.

71 Tokyo Further improvement in trading performance supported by continuously growing inbound demand. RevPAR Growth Y-O-Y 5.8% YTD November 217 JPY 47,756 Stage in RevPAR Cycle RevPAR Rising Tom Sawayanagi, Head of Hotels & Hospitality Group, Japan Inbound visitation supports lodging demand increase A total of 4.3 million visitor nights were spent in Tokyo as at YTD September 217, representing 12.7% of all visitor nights across Japan. International accommodation guests, which account for 34.5% of the total accommodation guests in Tokyo, increased by 15.2% y-o-y to 13.9 million. Domestic guests also increased by 2.4% y-o-y to 26.4 million. Inbound visitation to Japan grew by 18.3% y-o-y to 23.8 million as at YTD October 217; however, demand for hotels in Tokyo did not grow at the same pace. This may be due to a hike in room rates driven by high occupancy, which caused demand shifting to satellite cities for lower rates, and increased usage of Airbnb type of accommodations. No major openings of four or five-star hotels in 4Q17 There were no luxury hotel openings in 4Q17. Moxy Tokyo Kinshicho was introduced to the mid-scale hotel market in November. There are a number of luxury hotel openings in the pipeline planned for 22 when the Tokyo Olympic Games will be held. Major new supply includes the redevelopment of Hotel Okura Tokyo, scheduled for completion in 219, and the Four Seasons Otemachi, which is scheduled to open in 22. Increases in ADR and occupancy lead to further RevPAR gains Tokyo s hotel trading performance witnessed further growth, with Revenue Per Available Room (RevPAR) increasing 5.8% y-o-y as at YTD November 217. This was attributed to both Average Daily Rate (ADR) and occupancy growth of 2.8% and 2.9% y-o-y, respectively. The only announced sales transaction in the upscale hotel sector in the greater Tokyo area during 4Q17 was the Sheraton Grande Tokyo Bay Hotel bought by GIC and Invincible REIT. While investors appetite for hotel assets is strong, a luxury hotel offering is rare, especially in Tokyo. Outlook: Healthy performance expected to continue The new home-sharing act which regulates Airbnb type of businesses will be in effect as of June 218. Tokyo s luxury hotel market is not expected to see a large impact from this, and RevPAR is expected to grow steadily supported by ADR growth. It is expected that the number of hotel investment transactions should increase over the next 12 months due to a narrower price expectation gap between sellers and buyers. Note: Tokyo Hotels refers to Tokyo s luxury hotel market. Luxury Hotel Trading Performance ADR / RevPAR (JPY) No. of rooms 65, 6, 55, 5, 45, 4, 35, 3, 25, 2, 15, 1, 5, 1, May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 ADR RevPAR Source: STR Global, JLL Note: MAA - Moving Annual Average Major Additions to Hotel Supply Occupancy Additions to Supply Source: Industry sources, JLL F Occupancy (%) 71 Hotels

72 Singapore Trading performance decline eases as occupancy improves amid strong tourism growth. Scott Hetherington, CEO Hotels & Hospitality Group, Asia RevPAR Growth Y-O-Y -2.1% YTD November 217 SGD 312 Stage in RevPAR Cycle Decline Slowing 72 Hotels Luxury Hotel Trading Performance ADR / RevPAR (SGD) No. of rooms , 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 ADR RevPAR Source: STR Global, JLL Note: MAA - Moving Annual Average Major Additions to Hotel Supply Additions to Supply Occupancy F Source: Industry sources, JLL Occupancy (%) Strong performance in visitor arrivals fuels hotel demand Singapore tourism s industry finished on a strong note in 217, buoyed by strong arrivals from China and India. As at YTD September 217, arrivals totalled 13. million, a 5.1% y-o-y increase. If arrivals continue at this pace throughout 4Q17, Singapore is expected to have received 17 million visitors, outpacing the tourism ministry s forecasted arrivals of million for 217. As of YTD September 217, key source markets continued to drive visitor growth, with all registering increases except for Japan (-.8% y-o-y). Top growth markets were India (+16.3% y-o-y), Vietnam (+13.2%) and USA (+9.8%). China outpaced Indonesia to become Singapore s top source market, comprising 19.% of total visitor arrivals. Large hotel supply in 4Q17 to slow down significantly in 218 There was a significant influx of supply in 4Q17, with seven hotel openings providing a total of 2,42 rooms. All new openings were internationally-branded hotels, and most are in the upscale and luxury segments. Incoming hotel supply is expected to slow significantly in 218, with a mere 512 rooms entering the market. Expected openings to include The Duxton Club, Dusit Thani Laguna Singapore and The Patina, Capitol Singapore. Performance decline slows amid stabilising ADR and occupancy As at YTD November 217, occupancy for luxury hotels fell 2.% y-o-y to 77.3%. Average Daily Rate (ADR) decreased to SGD 43, a marginal fall of.1% y-o-y. As a result, Revenue Per Available Room (RevPAR) declined by 2.1% y-o-y to SGD 312. On a moving annual average basis, RevPAR declined from SGD 317 in November 216 to SGD 31 in November 217. Outlook: Performance to stabilise due to balanced conditions Hotel demand is expected to continue rising in the near term, on the back of strong visitor arrivals growth. Limited hotel supply in 218 should provide some respite for the market to absorb the recent influx of supply. This should reduce pressure on ADR and occupancy rates. Under the Hotel Industry Transformation Map (ITM), initiatives in 218 are centred on future-proofing the industry, equipping the workforce with necessary skills and promoting Smart hotels with the latest technologies. These government-led initiatives should lend greater support to the hotel industry s continued drive for innovation and transformation, enhancing its overall competitiveness. Note: Singapore Hotels refers to Singapore s luxury hotel market.

73 Bangkok RevPAR Growth Y-O-Y 6.% YTD November 217 THB 4,68 Stage in RevPAR Cycle RevPAR Rising Tourist arrivals continue to drive trading performance through strong occupancy. Mike Batchelor, Managing Director Hotels & Hospitality Group, Singapore International arrivals trend up International arrivals to Bangkok reached 21.1 million as at YTD November 217, representing 2.6% y-o-y growth. While arrivals from China to Bangkok were weak early in the year, the inflow of Chinese visitors to the city and country picked up and growth surpassed 9.% y-o-y. Arrivals to Bangkok saw further uplift supported by growth from South Korea, India and Malaysia, which recorded y-o-y growth of 24.3%, 18.6% and 13.6%, respectively. Close to 7 room additions in 4Q17 There were nearly 7 rooms completed in 4Q17 and this added to the almost 1,2 rooms opened in 1H17. Of these, notable hotel openings included the highly anticipated Park Hyatt Bangkok and Travelodge s second opening in Thailand with Travelodge Sukhumvit 11. Should all projects materialise, 218 will see an influx of supply with over 4, keys, including projects that were originally slated for completion in 217. The majority of this supply will be concentrated in the upscale segment, with openings dispersed among upcoming tourist areas such as Phayathai and Ratchadapisek beyond the traditional Sukhumvit area. Occupancy gains bolster hotel trading performance As at YTD November 217, the Bangkok luxury market continued to register strong growth in Revenue Per Available Room (RevPAR), rising 6.% y-o-y to THB 4,68. The growth was driven by simultaneous improvements in occupancy and Average Daily Rate (ADR). All other segments of the hotel market tracked also saw strong y-o-y growth, particularly the midscale and economy segment, which registered RevPAR growth of 7.8% y-o-y on the back of a 6.2% improvement in occupancy. Outlook: Large incoming supply may challenge occupancy growth Bangkok is expecting a large supply influx that may impact occupancy growth levels in 218. In addition, the recovery of mainland Chinese arrivals has been slower than expected. Nevertheless, Bangkok should continue to see strong growth from higher spending niche markets as the city remains a top tourist destination, as well as a hub for travel to other regional destinations. With ongoing expansions to the city s mass rapid transit system, and Don Mueang and Suvarnabhumi International Airports, Bangkok should continue to attract a growing number of visitors with its improved accessibility. Note: Bangkok Hotels refers to Bangkok s luxury hotel market. Luxury Hotel Trading Performance ADR / RevPAR (THB) No. of rooms 9, 8, 7, 6, 5, 4, 3, 2, 1, 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 ADR RevPAR Source: STR Global, JLL Note: MAA - Moving Annual Average Major Additions to Hotel Supply Additions to Supply Source: Industry Sources, JLL Occupancy F Occupancy (%) 73 Hotels

74 Kuala Lumpur Strong trading performance underpinned by rise in demand due to the improving Malaysian economy and weak Ringgit. Scott Hetherington, CEO Hotels & Hospitality Group, Asia RevPAR Growth Y-O-Y 9.9% YTD November 217 MYR 37 Stage in RevPAR Cycle RevPAR Stable 74 Hotels Luxury and Upscale Hotel Trading Performance ADR / RevPAR (MYR) No. of rooms ,5 4, 3,5 3, 2,5 2, 1,5 1, 5 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 ADR RevPAR Source: STR Globals, JLL Note: MAA - Moving Annual Average Major Additions to Hotel Supply Occupancy F Additions to Supply Source: Industry sources, JLL Occupancy (%) Mixed performance for top visitor source markets International visitor arrivals to Malaysia declined marginally by 1.5% y-o-y to 17.3 million as at YTD August 217. This was primarily due to the fall in arrivals from the top two source markets, Singapore and Indonesia. Weakness in the top two sources markets was partially offset by growth in other top source markets. In particular, China, Thailand and Brunei which recorded increases of 8.3%, 5.9% and 34.1% y-o-y, respectively. The rise in Chinese tourists is a trend reflected across Southeast Asia. Supply puts pressure on trading performance As at YTD November 217, over 1, new rooms from five hotels opened. Recent openings included the 312-room Sofitel Kuala Lumpur Damansara and the 253-room Sheraton Petaling Jaya. The majority of new hotels were in the upscale and luxury segment. In December 217, approximately half of the 531 rooms at the Hilton Garden Inn began operations; the remaining room inventory is scheduled to open in July 218. Incoming supply for 218 is expected to be significant, with a total of approximately 3,863 rooms expected to enter the market. Strong occupancy and ADR growth As at YTD November 217, Revenue Per Available Room (RevPAR) rose by 9.9% y-o-y to MYR 37. This was bolstered by growth in select top source markets as a lower valued Malaysian Ringgit during this period likely increased the country s appeal. Occupancy rose by 4.5% y-o-y to 68.5% as at YTD November 217, while Average Daily Rate (ADR) increased by 5.2% y-o-y to MYR 54. On a moving annual average basis, RevPAR increased from MYR 336 in November 216 to MYR 367 in November 217. Outlook: Significant supply pipeline remains key concern A significant hotel pipeline over the next few years may result in a supply glut, adding to downward pressure on occupancy rates and ADR amid an increasingly competitive market. This is particularly so in light of moderating growth in international visitor arrivals, as well as the recent appreciation of the Malaysian Ringgit. Under the master plan by Kuala Lumpur s Tourism Bureau, the aim is to double the city s international visitor arrivals to 16 million by 225. Total tourism receipts for Kuala Lumpur are expected to reach MYR 79 billion by 225, and will account for 35% of overall tourism receipts for Malaysia. Note: Kuala Lumpur Hotels refers to Kuala Lumpur s luxury and upscale hotel market.

75 Sydney Sydney s trading metrics continue to thrive with limited new supply and rising demand. RevPAR Growth Y-O-Y 9.3% YTD November 217 AUD 232 Stage in RevPAR Cycle RevPAR Rising Troy Craig, Managing Director Hotels & Hospitality Group, Australia Strong corporate demand and inbound tourism growth Sydney experienced market-wide occupancy of 89.4% on a moving average annual basis for the 12 months ending November 217, due to inbound tourism growth and a busy events calendar. The opening of the International Convention Centre Sydney as well as the implementation of annual events by the New South Wales government, such as Vivid Sydney, increased demand in traditionally weaker months. Two major hotel openings in Sydney throughout 217 Hotel openings comprised the 59-room Sofitel Sydney Darling Harbour, which opened in October 217 and the 188-room West Hotel Sydney, Curio Collection by Hilton, which opened in December 217. Room stock growth is anticipated to average 3.4% per annum between 218 and 223, with notable additions including, but not limited to, the Crown Hotel at Barangaroo (352 rooms), W Hotel Darling Harbour (59 rooms) and the Four Points by Sheraton Sydney, Central Park (297 rooms). Strong fundamentals support positive hotel performance As at YTD November 217, occupancy increased 1.5% y-o-y to 89.5%, and coupled with Average Daily Room (ADR) growth of 7.6%, this resulted in considerable Revenue Per Available Room (RevPAR) growth of 9.3% to AUD 232. As a result of the higher occupancy and ADR, RevPAR for the 12 months ending November 217 was AUD 235, a record high. Outlook: Market to strengthen throughout 218 Stable occupancy and an anticipated increase in ADR are expected to continue to push RevPAR upwards. While a relatively large number of rooms are anticipated to enter the Sydney market over the next 3 years, it is expected that continued strong demand will offset this supply increase. Marketwide Hotel Trading Performance ADR / RevPAR (AUD) No. of rooms May- 12 Nov- 12 May- 13 ADR (MAA) Nov- 13 May- 14 Nov- 14 May- 15 RevPAR (MAA) Note: MAA- Moving Annual Average Source: STR Global, JLL Nov- 15 Major Additions to Hotel Supply May- 16 Nov- 16 May-17 Nov Occupancy (MAA) F Additions to Supply Occupancy (%) Source: Australian Bureau of Statistics, JLL Note: Sydney Hotels refers to all grades of accommodation and includes both hotels and serviced apartments 75 Hotels

76 JLL Research - Asia Pacific ASIA PACIFIC Dr Megan Walters Head of Research - Asia Pacific megan.walters@ap.jll.com GREATER CHINA Hong Kong Denis Ma Head of Research Hong Kong denis.ma@ap.jll.com China Joe Zhou Head of Research China joe.zhou@ap.jll.com Taiwan Jamie Chang Head of Research - Taiwan jamie.chang@ap.jll.com Macau Mark Wong Senior Manager mark.wong@ap.jll.com NORTH ASIA Japan Takeshi Akagi Head of Research Japan takeshi.akagi@ap.jll.com South Korea Sungmin Park Head of Research - Korea sungmin.park@ap.jll.com SOUTH EAST ASIA Regina Lim Head of Capital Markets Research - Southeast Asia regina.lim@ap.jll.com Singapore Tay Huey Ying Head of Research - Singapore hueyying.tay@ap.jll.com Indonesia James Taylor Head of Research - Indonesia james.taylor@ap.jll.com Philippines Sharon Saclolo Associate Director - Research sharon.saclolo@ap.jll.com Thailand Andrew Gulbrandson Head of Research Thailand andrew.gulbrandson@ap.jll.com Vietnam Trang Le Head of Research - Vietnam trang.le@ap.jll.com Malaysia Veena Loh Head of Research - Malaysia veena.loh@ap.jll.com WEST ASIA India Ashutosh Limaye Head of Research - India ashutosh.limaye@ap.jll.com AUSTRALASIA Australia Andrew Ballantyne Head of Research Australia andrew.ballantyne@ap.jll.com New Zealand Tom Barclay Head of Research - New Zealand tom.barclay@ap.jll.com Note: All physical indicators charts are based on the local measurement standard - GFA or NLA. Office rental figures at the top of each market page refer to the main submarket in each city.

77 Real Estate Services jll.com/asiapacific The data to back up your real estate decisions. 218 All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

78 Real Estate Services The best investment opportunities for the most ambitious investors. jll.com/theinvestor 218 All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.