2014: A New Investment Record. Asia Pacific Property Digest Fourth Quarter 2014

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1 214: A New Investment Record Asia Pacific Property Digest Fourth Quarter 214

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3 Asia Pacific Property Digest Fourth Quarter Dear Reader, AP commercial real estate investment volumes surged to a record high in 4Q14, bringing full year volumes to USD 131 billion, also a record high for the region. Office leasing activity continued to gain traction in the final quarter and full year net take-up was around 15% higher than the year before. You can view this report on-line at where you will also find our other research outputs. The AP research team hopes that you find this publication valuable. Happy reading! Best regards, Dr Jane Murray Head of Research Asia Pacific Feature Articles Asia Pacific Economy and Property Market 4 Mind the (data) gap 8 Kangbashi Ghost Town : Not as empty as one might expect 9 The Korean logistics market 1 Indonesia logistics a new frontier in the making 11 Office Hong Kong 12 Beijing 15 Shanghai 16 Guangzhou 17 Taipei 18 Tokyo 19 Osaka 2 Seoul 21 Singapore 22 Bangkok 23 Kuala Lumpur 24 Jakarta 25 Manila 26 Ho Chi Minh City 27 Delhi 28 Mumbai 29 Bangalore 3 Sydney 31 Melbourne 32 Perth 33 Auckland 34 Retail Hong Kong 35 Beijing 36 Shanghai 37 Guangzhou 38 Tokyo 39 Singapore 4 Bangkok 41 Kuala Lumpur 42 Jakarta 43 Delhi 44 Mumbai 45 Sydney 46 Melbourne 47 Residential Hong Kong 48 Beijing 51 Shanghai 52 Singapore 53 Bangkok 54 Kuala Lumpur 55 Jakarta 56 Manila 57 Industrial Hong Kong 58 Beijing 59 Shanghai 6 Tokyo 61 Singapore 62 Sydney 63 Melbourne 64 Hotels Hong Kong 65 Beijing 66 Shanghai 67 Tokyo 68 Singapore 69 Bangkok 7 Kuala Lumpur 71 Jakarta 72 Sydney 73

4 4 Asia Pacific Property Digest Fourth Quarter 214 Economy Asia Pacific Economy Steady growth in 214 Dr Jane Murray Head of Research Asia Pacific China slowing but fastest in the region In 214, the Asia Pacific economy is estimated to have grown by just over 5%, similar to the year before. This rate of expansion was more than twice that of the rest of the world which grew by around 2% last year. China s full year growth came in at 7.4%. This was the slowest rate since 199, but still the fastest across Asia Pacific. After two quarters of contraction, Japan s economy is expected to have exited recession in 4Q, and a decisive election victory for Prime Minister Abe in December indicated ongoing political support for Abenomics. India s growth is stabilising and sentiment remains buoyant following Modi s election victory. Figure 1: Outlook for Major Economies Country Real GDP Growth (%) 214E 215F China Japan.1.9 India Australia South Korea Indonesia Singapore Hong Kong Elsewhere, growth in Australia, Hong Kong and Singapore remains underwhelming, while emerging Southeast Asia is mixed strong in the Philippines but weaker in Indonesia which recorded its worst annual result since the Global Financial Crisis. Mixed retail sales, exports and manufacturing Retail sales in China have been bolstered in recent months by surging online sales. However, sales have faltered in Hong Kong with a 4% y-o-y decline in December largely due to reduced spending on luxury goods by Mainland tourists while full year sales fell by.2%, the first decline since SARS struck in 23. The recovery in Japan s retail sales showed some signs of fading towards the end of 214 despite record 215 Outlook Further slowing in growth as the property sector continues to weigh on investment spending. Slightly stronger exports and public infrastructure spending; consumption growth to exceed overall GDP. Policymakers are committed to new growth drivers, while further monetary loosening and targeted stimulus measures are likely to ensure employment growth. A mild recovery on aggressive QE, delay in the 2nd consumption tax hike to 2Q17 and slight improvement in exports (due to a weak yen and stronger US demand). The central bank has sharply cut its core inflation forecast to.6% and admitted that it may take longer than expected to hit the 2% annual inflation target. Growth to start recovering, with stronger exports and fixed investment. The extent of recovery will largely depend on how much progress the new government makes on its reform agenda. Recent rapid falls in inflation provide more scope to reduce interest rates following cut in mid-january. Below-trend growth due to weak consumption (soft labour market, high household debt) and investment (end of mining boom). Slower home price growth and inflation should allow the RBA to cut interest rates again following cut in early-february. Slow export growth on soft demand from China and lower commodity prices, but the recent weakening of the AUD should assist exporters competitiveness. Slow export growth, with sluggish demand from China. Gradual improvement in consumer spending, helped by a healthy labour market, low interest rates and higher public spending. Strong consumer and public spending, but limited scope for a recovery in exports. Headline inflation (more changes to administered prices likely) and interest rates to remain elevated this year. Widodo s reform-minded government may face strong opposition in removing bureaucratic and regulatory bottlenecks. Steady growth supported by public investment, but limited improvement in exports and consumption (weaker inbound tourism, ongoing housing market correction). Interest rates to rise in line with the US but low inflation expectations second consecutive month of deflation recorded in December. More solid economic footing after the end of Occupy Central protests but changing shopping patterns of Mainland tourists to impact consumption growth. Sales volumes in the primary residential market are likely to fall in 2H15 as local interest rates rise in line with the US. Source: Oxford Economics, February 215

5 Asia Pacific Property Digest Fourth Quarter tourist arrivals. Growth remained sluggish in Singapore (excluding cars) as well as Australia, where Christmas sales were disappointing. Exports from Japan have been encouraging of late, growing by 12.8% y-o-y in December. China s export performance has been more volatile, with a strong December figure followed by a 3.3% y-o-y decline in January. Falling commodity prices have dented exports from Australia and Indonesia. Manufacturing has started the year on a slightly stronger footing for a number of countries, based on the January PMI readings. However, the figures for China came in slightly below 5, indicating a slowdown in the sector. Falling inflation and loose monetary policy Inflation is subsiding in most countries in the region, largely due to falling commodity prices. Central banks are generally prioritising growth through looser monetary policy. China lowered policy interest rates by 4 bps in November for the first time since 213, and also cut banks reserve requirements in early February. India and Australia cut rates by 25 bps in early 215. Despite the expected commencement of interest rate tightening in the US later this year, reduced price pressures in Asia Pacific should allow central banks to keep monetary policy loose, with no significant interest rate hikes expected until 216. Figure 2: Uneven Growth Across Asia Pacific y-o-y (%) China Philippines 214E India Vietnam Indonesia 215F Malaysia Thailand Source: Oxford Economics, February 215 Another year of growth around 5% Stable regional economic growth of around 5% is expected this year, with most economies likely to see a gradual improvement in growth on accommodative monetary/fiscal policy and a slow pick-up in global demand. Lower oil prices should also boost consumers purchasing power and support growth in many AP countries. Risks to the outlook include a re-emerging economic crisis in Europe, geopolitical tensions, the vulnerability of some emerging market currencies to US interest rate hikes, and a possible fallout from the increase in global debt levels over the last few years. Taiwan South Korea Hong Kong New Zealand Singapore Australia Japan Economy and Property Market Asia Pacific Property Market A record year for investment in 214 AP commercial real estate investment volumes surged to a record high in the final quarter of 214, bringing full year volumes to USD 131 billion, also a record high for the region. Office leasing activity continued to gain traction in 4Q14 and full year net take-up was around 15% higher than the year before. Further improvement in office leasing activity. Technology firms most active Across Asia Pacific, gross leasing volumes grew by 14% y-o-y in 4Q14, with India being the most active market. However, it is evident that expansion demand in the region is still much lower than the peak level of 211, with leasing remaining patchy across many markets. Domestic occupiers and technology-related firms have been at the forefront of the demand recovery, while large corporates generally remain in cost-saving mode. During 4Q, Singapore and Hong Kong continued to see small requirements from the financial sector, business centre operators and non-traditional occupiers. Activity in China mainly came from domestic financial firms augmented by small requirements from nonfinancial MNCs. Expansion by IT firms and manufacturers supported mild take-up in Tokyo. Manila continued to see healthy underlying demand but activity remained quiet elsewhere in Southeast Asia. Leasing activity has gathered pace in Sydney and Melbourne, but other Australian markets are still seeing only limited demand. Full year Grade A supply additions in the Tier I markets were down by one-third from the year before to 3.4 million sqm and the lowest since 26. As a result, vacancy rates fell in three-quarters of the major markets during 214. The aggregate vacancy rate for the region stood at 11.6% at the end of the year, but with a wide range across cities from as low as 2.5% in Beijing to a high of 29% in Hanoi. Office rental growth moderates. Singapore and Tokyo slow Quarterly average office rental growth slowed to.2% in 4Q (.9% in 3Q). Concerns around large upcoming supply in Singapore saw q-o-q growth slow sharply to.9% (3.5% in 3Q). Rental growth also slowed in Tokyo (.3% versus 1.9% in 3Q), and modest growth of less than 1% was recorded in Hong Kong and Shanghai due to patchy demand/limited tenant affordability. Rents remained largely flat in Southeast Asia and India, apart from growth of 1.5 to 2.5% in Bangkok and Manila, and a 2.8% decline in Mumbai due to some tenants exiting costly space. In Australia, leasing recovery supported mild rental growth in Sydney and Melbourne (less than 1% q-o-q) but rents continued to fall in most other cities by 1 to 8% (the most in Perth).

6 6 Asia Pacific Property Digest Fourth Quarter 214 Property Market Over the last 12 months, average rents have grown by around 3%. Singapore has been the strongest performer with a 14.9% increase, followed by Taipei, Auckland and Wellington which recorded annual growth of 8 to 1%. Healthy retailer demand. Bangkok records highest quarterly growth The region saw generally healthy retailer demand in 4Q. New international brands as well as dining and entertainment services have become larger demand segments for malls. The picture was varied in China during 4Q, with quality mature malls continuing to outperform and garner strong retailer interest. Retailer caution in Hong Kong has led to a longer decision-making process; however, demand remained healthy for prime malls. Southeast Asia and Australia continued to see demand for space from international retailers, while leasing activity in India has been diverted to high streets. Bangkok saw the strongest quarterly rental growth (2.6%) and rents rose slightly in China (strongest in Beijing with growth of 1.4%). Subdued residential leasing. Rents fall in Singapore High-end residential leasing demand remains subdued in most markets as a result of slow corporate hiring and stringent housing budgets. Rents fell further in Singapore during 4Q (partly due to restrictions on imported labour) but were stable or increased marginally elsewhere. In general, we do not expect take-up or rents to pick up significantly in the near term. Stable warehousing demand. Hong Kong sees solid rental growth Across the region, third-party logistics companies, retailers and manufacturers continued to underpin industrial leasing activity. Hong Kong recorded solid rental growth in 4Q (2.8% q-o-q) and Greater Tokyo saw a mild uplift (.9%), but rents remained mostly flat in China, Singapore and Australia. Over the next year, rents are projected to grow by 4 to 5% in Greater China and 1 to 2% elsewhere. Strong fourth quarter sees commercial real estate investment volumes hit a record in 214 In 4Q14, commercial real estate investment volumes set a new quarterly record of USD 44 billion (+18% y-o-y), with activity buoyed by AP s largest markets of Australia, Japan and China as well as strong performances by Korea and New Zealand. In 214, Japan was the largest commercial real estate investment market in Asia Pacific by a wide margin, and with record volumes in yen terms. The market there has been benefiting from the massive amounts of liquidity unleashed by Abenomics, with ultra-low borrowing costs and attractive yield spreads. Second behind Japan was Australia which recorded its highest ever yearly volumes (+22% y-o-y) supported by strong buying activity from offshore investors. Macro issues have dented investment in China over the last year ( 23% y-o-y) but encouragingly 4Q volumes staged a strong recovery. Other markets remain mixed, with full year volumes up by 3% in South Korea but down by the same percentage in Singapore, due partly to a lack of available product. Hong Kong also saw below par activity (down 1% for the full year). Office rental and capital value trends have mirrored the differing performance of the investment and leasing markets, with capital values continuing to outpace rentals. During 214, average prices increased by 7%, the strongest result since 211. Tokyo surged by almost 2% while Taipei, Manila, Melbourne and Sydney also registered double digit growth. Leasing and investment to strengthen. Moderate rental and price growth During 215, we are expecting a further pick up in leasing and investment in Asia Pacific. Some volatility is likely in world markets, especially in relation to the expected interest rate hike by the US Fed. However if the global economy can continue to make a steady Figure 3: Office Rental & Changes Yearly % Changes, 4Q14 Figure 4: Direct Commercial Real Estate Transactions $13.9 bill 3% y-o-y y-o-y % 1 5 USD Billion Singapore Bangkok Manila Tokyo Beijing Melbourne Sydney Hong Kong Seoul Shanghai Jakarta Mumbai Japan China Australia Singapore s s Hong Kong South Korea Other Figures relate to the major submarket in each city (Real Estate Intelligence Service), 4Q14 Figures refer to transactions over USD 5 million in office, retail, hotels and industrial (Real Estate Intelligence Service), 4Q14

7 Asia Pacific Property Digest Fourth Quarter Figure 5: Rental Property Clocks, 4Q14 Grade A Office Kuala Lumpur, Jakarta Guangzhou Shanghai Prime Retail Hong Kong Singapore Kuala Lumpur, Jakarta Guangzhou Property Market Singapore Bangkok Beijing Hong Kong Manila Tokyo Bangalore Delhi Taipei Auckland, Chennai Growth Slowing Rents Rising Wellington Melbourne Osaka, Sydney Rents Falling Decline Slowing Brisbane Perth Hanoi Seoul, Ho Chi Minh City, Adelaide, Canberra, Mumbai Shanghai Beijing Manila Tokyo Bangkok Mumbai Delhi Bangalore Growth Slowing Rents Rising Chennai SE Queensland* Auckland Rents Falling Decline Slowing Wellington Sydney*, Melbourne*, Brisbane* *Regional Prime Residential Kuala Lumpur, Beijing, Guangzhou Shanghai Bangkok Jakarta Industrial Shanghai Singapore (Logistics) Singapore (Business Park) Singapore (Multi User) Growth Slowing Rents Falling Growth Slowing Rents Falling Manila *For Luxurious Residential Properties Rents Rising Hong Kong Decline Slowing Singapore * (Real Estate Intelligence Service), 4Q14 Note: Clock positions for the office sector relate to the main submarket in each city. Tokyo Hong Kong Manila Rents Rising Auckland Wellington Sydney, Melbourne Decline Slowing Brisbane Beijing *Business Parks (Singapore) & Conventional (Singapore) Logistics Space (Hong Kong, Shanghai, Beijing, Tokyo Bay Area) recovery, we should see a continued improvement in demand for space. Meanwhile ample liquidity in the system will underpin another buoyant year of investment activity. Moderate rental and capital value growth of less than 1% is expected across most sectors and markets over 215. We expect the disconnect between rental and capital value growth to continue this year, but to narrow average rents and prices to increase by 4% and 5% respectively. Outperformers are likely to include Tokyo, Beijing, Sydney and Auckland in the office sector, and Beijing and Bangkok in retail. In some residential markets such as Hong Kong and Singapore, policy curbs are expected to remain in place for some time which together with likely interest rate increases should put downward pressure on prices. About the Author Dr Jane Murray joined JLL in 1998 and in 25 was appointed as Head of Research Asia Pacific. In this role, Jane leads a team of over 1 professional researchers in the region, which forms part of a network of around 3 researchers in 6 countries around the globe. The Asia Pacific Research team produces a range of outputs to assist the clients of the Firm with their decision making, including comprehensive market monitoring and analysis across major institutional-grade real estate markets in the region; forecasts of key real estate indicators; consultancy projects; thought leading research papers on topical issues as well as regular publications.

8 8 Asia Pacific Property Digest Fourth Quarter 214 Asia Pacific Mind the (data) gap Susan Sutherland Head of Corporate Research, Asia Pacific Recently, I saw two headlines which summarise the dichotomous view of data and analytics: one said Saving the World? How Big Data Is Tackling Everything From Cancer to Slavery but it was sitting within a special page on the Bloomberg website entitled Buried in Big Data. Indeed, big data or any data and the analytical tools that turn it into actionable insights provide massive opportunity, but can be equally daunting. While some industries or functions are known for capitalising on the power of analytics and big data (retail; banking; risk management), others have made less progress, for reasons of (at least perceived) lack of data, unwillingness or inability to invest in technology tools and specialists, or remaining scepticism about its value no surprise given the hype-o-metre is off the chart. JLL recently commissioned a survey from the global technology market research firm, Forrester Consulting, to assess corporate real estate s current and planned data and analytics strategy, and how it supports the broader businesses of which they are a part. The survey reveals that the number of corporate real estate leaders who plan to be data-centric using CRE data to shape all their decisions will double in the next three years from 28% to 56% (see figure 1). So there is a clear appetite to use the wealth of data that exists in real estate portfolios to drive better and faster decision-making, and to ultimately differentiate and generate competitive advantage. This is supported by, for many companies, a broader effort spearheaded by the C-suite, and backed up by increasing financial resources. How would you best characterise your firm s use of data and analytics three years from now? 1% Data denial (firm has a distrust of CRE data and avoids using it) Today 4% 2% Data-indifferent (firm does not care about CRE data and/or has no need for it) Three years from now 67% 42% Data-information (firm uses CRE data only when it supports oponions or decisions) 28% Source: Mind The Data Gap: Aspirations vs. Reality In Corporate Real Estate, a commissioned study conducted by Forrester Consulting on behalf of JLL, November % Data-centric (firm uses CRE data to shape all opinions and decisions) However, when probed in more detail, it seems that the CRE function is lacking some of the capabilities that are essential in achieving data-centricity. They are focusing too much on how to get the data, and less on the insights that it generates. While they say they are strongest at data gathering and storage, their weakest perceived capabilities are those which in fact add the most value like establishing data governance policy. It s not entirely their fault organisational barriers like fragmented data initiatives, and limited sharing of data across functions are standing in their way as well. More disappointingly, CRE leaders are not seeing value in some of the most powerful tools like real time and predictive analytics. This is a missed opportunity. So how can they fill the gap between where they are and where they want to be, given these challenges? Stepping up efforts to work across departments to drive data and analytics, in acknowledgement of shared corporate goals, pivoting towards strategic rather than tactical data and analytics efforts, and cultivating/recruiting talent are just a start. Read more in the paper from Forrester Consulting commissioned by JLL: Mind the Data Gap: Aspiration vs. Reality in Corporate Real Estate. About the Author Susan Sutherland is the head of corporate research for JLL in Asia Pacific. She is responsible for delivering thought leadership and support for the Corporate Solutions business in the region and globally. Susan holds a Bachelor of Arts from Wellesley College (USA) and a Master of Science from the University of Illinois (USA).

9 Asia Pacific Property Digest Fourth Quarter Kangbashi Ghost Town : Not as empty as one might expect China Linda Yu Senior Analyst, Research, Beijing Known, if at all, as the most notorious of China s modern ghost towns, Kangbashi (formally Kangbashi New Area of Inner Mongolia s Ordos city) is something of a peculiar place and somewhat difficult to describe. But that s not to say that the young district is still deserving of the infamous status that has stuck with it since being named and shamed some five years ago by Aljazeera and subsequently all major international media outlets. Nearly 5, people now call Kangbashi home, according to an official count released in 214. Though the population comprises just 5 percent of the 1 million people Kangbashi was originally said to be planned for, residents here contribute to a regular hub of activity in the centre of town as they go about their daily lives, defying the definition of a true ghost town. Still, relative to the progress of new towns across China, Kangbashi is not extraordinary and continues to exude qualities unmistakably associated with a city in the early stages of development: the (perhaps unsurprisingly) misspelt Ordos Huneng Shoping Mall has very high vacancy; and unlike the curious daytime, night-time in Kangbashi can be rather haunting. Endless rows of visibly vacant apartment towers are disturbingly easy to spot in the town s would-be flourishing residential neighbourhoods, where a limited number of vehicles sit in unfilled car parks beside massive housing blocks showing few lit windows after dark. Perhaps best likened to where a nondescript Chinese city meets Ashgabat, the notably strange capital of Turkmenistan, Kangbashi shares a few oddities with the little-known Central Asian city, including public buildings infused with monumentalist vision and a smattering of statues that are both kitschy and representative of local traditions. Guarded by giant fighting horse sculptures, the Ordos government s new home is not far from Kangbashi s high street made up of a cluster of projects offering mass market-oriented brands. Largely ignoring the low-end fashion on offer here, locals mostly come to eat, not shop. Shopping is generally reserved for Ordos more developed Dongsheng district some 25 kilometres away, or increasingly, like elsewhere in China, online. Anchored by a McDonald s that serves as the only obvious international chain around town, Kangbashi Food Plaza offers a surprising amount of F&B options, including Chinese fast-food chain Dicos; it competes with the Golden Arches near the building s main entrance. Inside, a food court offers tasty cuisines and sugary fruit drinks. It is calm, but happening here. Affordable meals do well to bring modest crowds out, particularly on weekends. The nearby Jin Chen International Shopping Center also draws customers with a Suning store, simple electronics market, and small nail salon. Widely criticised for the hubristic scale of its development, Kangbashi is often mocked for its master plan which has led to the town s oversized roads and a ubiquity of barely occupied residential projects. Yet at the core of this so-called ghost town, there is life and enough to support a viable, if weak, commercial centre. Considering it all, even Kangbashi s remarkably bizarre existence, it is no longer fair or accurate to call Kangbashi a ghost town. About the Author Based in Beijing, Linda Yu is a senior analyst with JLL s China research team. Her contributions to quarterly reports and work on special publications are intended to further client-understanding on China s vast commercial real estate landscape.

10 1 Asia Pacific Property Digest Fourth Quarter 214 Korea The Korean logistics market following in the footsteps of Japan? Yongmin Lee Head of Research, Korea The economies and real estate markets of Korea and Japan have many similarities so it s not too surprising that I occasionally hear the Korean logistics market compared to its Japanese counterpart only 15 years ago. Certainly, the local logistics market has a lot in common with Japan circa 2: Warehouse space is predominantly outdated and/or functionally obsolete due to one or a combination of location, design, specifications and building size; Domestic conglomerates are the dominant market players but have typically run their own supply and distribution chains; and As a result of the above two factors, the quantity and quality of leasable space is limited. Since 2, the Japanese logistics market has seen dramatic structural changes especially after the arrival of notable global logistics developers and, as a consequence, the market has evolved into one of the most active logistics investment markets in Asia. So is it possible that the Korean logistics market may follow a similar path to maturity? Well, over the past couple of years some positive signs have certainly emerged: The Korean national government has designated the logistics industry as an economic growth engine with the stated aim of increasing logistics industry revenue by nearly 5% by 217; The outsourcing of logistics functions is on the rise. Government tax incentives and global competition are encouraging domestic conglomerates to utilise 3PL operators and to improve the efficiency and flexibility of their distribution and supply channels; A forecast uptick in new supply is expected to significantly improve the quality of space available. The government s Logistics Service Improvement Plan released in August 214 provides for investment of around KRW 1 trillion in new logistics facility projects. Private developers are also responding to growing tenant and investor demand for modern, hi-tech distribution centres in key locations; and, Lease covenants are improving. As more blue-chip tenants occupy leasable space, the days of one to two year lease terms are disappearing and terms of up to 1 years are becoming more common, particularly for build-to-suit facilities. While the market is still characterised by a lack of transparency and limited transaction volumes, the signs of progress are encouraging. How long the Korean logistics market will take to reach the level of maturity of its Japanese equivalent is of course hard to predict, but the improving fundamentals of the industry are likely to provide a compelling investment story to the increasing number of institutional buyers reviewing the sector in coming years. About the Author Yongmin Lee is responsible for leading the research team at JLL Korea. Yongmin s primary focus is on the analysis of the Seoul office market to produce market-leading research and consultancy reports. He also actively monitors retail and industrial markets.

11 Asia Pacific Property Digest Fourth Quarter Indonesia logistics a new frontier in the making Indonesia Vivin Harsanto Head of Advisory Group, Indonesia Indonesia is the largest archipelagic country in the world and the fourth most populous nation, with about 25 million people. The Indonesian economy is driven by robust domestic consumption attributed to rapid urbanisation and a growing middle class. With a large population base, the demand for consumer products from basic foodstuffs and personal care to high-tech gadgets and motorcycles has risen. With this expanding consumer market, a larger volume of goods is being transported throughout the archipelago. Coupled with a greater number of new international brands with production facilities in the Greater Jakarta area, the demand for distribution and logistics services by local and foreign manufacturers, including third-party logistics (3PL) companies, has expanded rapidly. between demand and available supply where major occupiers have been looking at multiple locations will continue to drive rents up and asset yields down for some time. However, with a population this large and geographically dispersed, the weak infrastructure translates into longer distribution times and higher costs. Nonetheless, this is set to change. At the Asia Pacific Economic Cooperation (APEC) convention, recently elected President Jokowi invited foreign investors to support his government s programme to build and improve the ports and other transportation infrastructure. If the new president is able to deliver on this, this infrastructural issue could be minimised, if not mitigated, eventually providing significant opportunities for logistics operators and developers. Average Land Price (IDR psm) vs. Annual Take-up (Ha) ,5, 2,, 1,5, 1,, 5, Avg. Take-up Ha per Year Avg. Land Price IDR psm As such, there has been considerable interest from local and foreign investors in the logistics market. These include local and regional private equity groups as well as pension and sovereign funds. A number of these investors have enjoyed success, being the first movers in other emerging cities in the Asia Pacific region. Most investors and 3PL companies look to acquire land within established industrial estates in the Greater Jakarta area, with a number in Surabaya, Medan and other secondary cities. While land prices within industrial estates have increased significantly over the past few years, estates with good infrastructure, utilities and professional estate management are still preferred. Despite these exciting changes and the potential in the Indonesia logistics market, some large international owners, operators and developers are still hesitant in their participation, as they feel that the Indonesian market is not mature or sophisticated enough. In my opinion, the opportunities are bountiful. The underlying conditions 1) the increase in retail and e-commerce and 2) the current imbalance About the Author Vivin heads JLL s Indonesia Advisory Group which covers Strategic Consulting, Research and Valuation businesses. She has been involved in numerous projects covering all property sectors and in most major cities throughout Indonesia, providing strategic advisory services to both private and public sectors. Vivin has a Civil Engineering background and a Master s in Real Estate and Construction Management from the University of Denver.

12 12 Asia Pacific Property Digest Fourth Quarter 214 Hong Kong: Office 2 Tsimshatsui and Hong Kong East only submarkets to record positive net take-up Industrial refurbishment projects continue to weigh on Kowloon East rentals Capital values remain broadly stable on back of low holding costs Hong Kong: Office base: 4Q1 = 1 Financial Indicators are for Central Q1 4Q11 4Q12 4Q13 4Q14 4Q Percent All submarkets, with the exception of Tsimshatsui and Hong Kong East, recorded negative net take-up in 4Q14. However, stronger than expected demand in Central, Tsimshatsui and Hong Kong East helped offset large lease expiries. As a result, the overall occupier market contracted by only 75,2 sq ft, trimming net take-up for the full year to 724, sq ft. In Central, demand for larger office space was led by tenants outside of the banking and finance sector. Pure Yoga, for example, leased 15,1 sq ft at Hutchison House in Central while two floors at Citibank Plaza were leased to a medical clinic Hong Kong Integrated Oncology Centre. The Occupy Central protest did not have any notable effect on the city s office leasing market. The completion of The Octagon in Tsuen Wan and 1 Shing Yip Street in Kwun Tong in 4Q14 brought the total new supply for the year to 1 million sq ft, which is half of the ten-year average annual supply. The government released two commercial development sites for sale via public tender during the quarter, both with tender deadlines in January 215. Both sites are located in decentralised areas KCTL 495 in Kwai Chung and NKIL 6512 in Kwun Tong and have maximum buildable GFA of 228, sq ft and 883,9 sq ft, respectively. There are no restrictions on stratification for the two sites, unlike the last two commercial sites sold in Kowloon East NKIL 6312 (buyer Swire Properties) and KTIL 761 (Mapletree) Take-Up (net) Future 15F Vacancy Rate For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. are for the Overall market. 2 All office submarkets, with the exception of Hong Kong East and Kowloon East, posted marginal rental growth in 4Q14, padded by a tight vacancy environment. competition arising from refurbished industrial projects continued to weigh on Kowloon East rentals. The investment market was relatively quiet ahead of the holiday season. Investment sentiment, nonetheless, remained intact as transaction volumes continued to be largely supported by end-user demand, especially in decentralised locations. For example, Chinese developer Evergrande Group purchased two floors at Global Trade Square in Wong Chuk Hang for HKD million (HKD 18,6 per sq ft). Capital values remained broadly stable across the submarket on the back of low holding costs. ^ net effective, on NFA HKD 9.4 psf pm Rents rising 7 The overall occupier market is forecast to grow by about 2 million sq ft in 215, its highest level since 211. However, about 6% of demand is expected to be from the realisation of pre-committed space in three upcoming developments. Excluding precommitments, demand for office space should be moderately higher in 215 on the back of stronger economic growth, which should support modest rental growth across all submarkets with the exception of Kowloon East, where rental growth may continue to be negatively impacted by industrial refurbishment projects. Investors are likely to continue to be on the lookout for long-term investment properties. For example, Chinese insurer China Life reportedly was in negotiation to purchase Wheelock Properties One HarbourGate in Hunghom at end-214. The investment market should receive a boost with the launch of several upcoming Grade A projects. As such, capital values are expected to hold firm over the next 12 months. Note: Hong Kong Office refers to Hong Kong s Overall Grade A office market.

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15 Asia Pacific Property Digest Fourth Quarter Beijing: Office Domestic finance and IT firms continue to drive leasing demand Citywide rental growth declines, while CBD rents stay flat Yields remain unchanged q-o-q; supply of tradable assets limited 2 18 Domestic investment and wealth management firms drove demand, with most of the leasing activity concentrated in the CBD and Finance Street. As such, landlords continued to exercise discretion when leasing to different types of financial companies, showing a preference for large, stable private equity firms. Domestic IT firms were consistently the second most active source of enquiries, but leasing activity from smaller IT companies was often limited by budgetary constraints. Due to a scarcity of space in Zhongguancun, domestic IT companies, and software firms in particular, turned to Beijing s eastern submarkets. No new supply was completed in 4Q14, marking an entire calendar year without any Grade A completions. Although Beijing s office building quality has improved greatly in recent years, new Grade A completions are categorised separately from Grade B office and business park projects. Meanwhile, Fortune Financial Center, the most recent completion in the Grade A market and a useful barometer for the CBD, continued to make steady leasing progress and reached a commitment rate of 75% Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Financial Indicators are for the CBD. 1,2 15 Beijing: Office The Grade A office market was largely a landlord s market characterised by renewals, with landlords mainly focused on striking a balance between raising rents and managing tenant-risk profiles. The run-up in rents over the past few years has created opportunities for landlords to substantially increase incomes through positive rental reversion. However, CBD market rents were flat q-o-q as landlords prioritised low-risk tenants, sacrificing higher rents in favour of more stable occupiers. Upcoming anchor tenant expiries also weighed on key buildings. In Finance Street, strong demand from big, domestic financial institutions with high rental affordability pushed rents up 2.1% q-o-q as new leases were signed at current market rents F Take-Up (net) Future Vacancy Rate Percent Overall, there was a sharp uptick in the volume of enquiries in 4Q14, and these enquiries are expected to account for a fair amount of leasing activity over the coming quarters. Five new Grade A projects are scheduled to complete in 215. However, new supply is likely to offer tenants only a short respite from the tight vacancy environment, as roughly half of the space is for self-use. Furthermore, much of the new space will be in outlying areas, not within central areas where demand is most concentrated. Domestic financial institutions should continue driving demand, keeping vacancy rates down and further bolstering landlord confidence. As such, we expect rents to resume rising at a moderate pace in 215. For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. are for the Overall market. RMB 373 psm pm Rents stable 4 ^net effective, on GFA Note: Beijing Office refers to Beijing s overall Grade A office market.

16 16 Asia Pacific Property Digest Fourth Quarter 214 Shanghai: Office 16 Domestic finance companies and MNC retailers active in CBD market Rents in Pudong and Puxi edge up Decentralised office Suntown Plaza sells for RMB 3.1 billion Shanghai: Office Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Domestic financial services companies remained active in the CBD leasing market in 4Q14. In Pudong, domestic and JV financial institutions were active seeking Premium Grade A office space. For example, the New Development Bank, a multilateral development bank operated by the BRICS states, leased around 6, sqm in Oriental Financial Center to set up its office in Shanghai in the quarter. In Puxi, domestic finance companies continued to demonstrate strong demand in the leasing market. Many new enquiries for office space were from domestic companies in new financial services such as internet finance. Additionally, MNC retailers were also active in seeking opportunities for upgrading and expanding their office space. For example, VF Corporate, an American retailer, leased 8, sqm in Henderson 688 in the quarter. Financial Indicators are for the CBD No new projects were completed in the CBD market in 4Q14. In the decentralised market, three new projects with a combined office space of 238,998 sqm were completed. One project was in Decentralised Puxi HQ Green Valley Plaza Ph 1(89,373 sqm) and two in Decentralised Pudong Lujiazui Century Financial Plaza Bloc 3 (62,125 sqm) and Chamtime Plaza (87,5 sqm) For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. are for the CBD. ^net effective, on GFA Take-Up (net) Future RMB 9.4 psm per day Growth slowing 7 15F Vacancy Rate Percent Pudong Grade A rents continued to steadily increase, up by.9% q-o-q to RMB 1.1 per sqm per day. Meanwhile, Grade A rents in Puxi reversed their downward trend and edged up by.6% q-o-q to RMB 8.8 per sqm per day in 4Q14. To retain high quality tenants in their buildings, the landlords of Premium Grade A buildings in both Pudong and Puxi became more negotiable on renewal rents. As a result, Pudong Premium Grade A rents grew by just.2% q-o-q to RMB 11.5 per sqm per day, while Puxi Premium Grade A rents went up slightly by.1% q-o-q to RMB 1.1 per sqm per day. Domestic RMB funds continued to show interest in en bloc investment opportunities in the Shanghai office market. Gopher Asset Management, a domestic real estate fund, purchased Suntown Plaza, a project under development in Huangpu District, for RMB 3.1 billion in 4Q14. Looking forward to 215, demand from domestic companies should remain the main source of demand in the CBD leasing market. Although both Pudong and Puxi will witness a large volume of new supply, rising demand from domestic tenants is expected to prevent a decline in rents in both markets. We expect rents to continue to grow in Pudong, albeit at a slower pace than 214. In Puxi, rents are projected to remain flat throughout 215. Note: Shanghai Office refers to Shanghai s Overall Grade A office market consisting of Pudong, Puxi and the decentralised areas.

17 Asia Pacific Property Digest Fourth Quarter Guangzhou: Office Office leasing activity slightly increases Declining vacancy and rising demand underpin stable rents Local end-users and individual investors support strata-titled demand 14 The leasing market witnessed a gradual pickup in transaction volumes and new enquiries in the quarter. Signs of a stabilising Chinese economy and decreasing interest rates have improved business sentiment, and more local companies, in particular IT, finance and professional services firms, are using this soft rental environment to expand. Strong pre-commitment (8%) at a new completion in the quarter helped push net absorption higher to 93, sqm. As a result, the overall vacancy rate declined to 9.1% at end-4q14. Agile Centre (79,196 sqm, GFA) in Zhujiang New Town (ZJNT) completed in the quarter, increasing overall stock of Grade A office space to 3.9 million sqm (GFA). This building was developed by Agile Property and the company will self-occupy a portion of the building for its headquarters. With improving demand conditions, most landlords of existing buildings maintained asking rents. However, rents in a few core buildings, such as R&F Centre in ZJNT and Taikoo Hui in Tianhe CBD, rose slightly, benefiting from more enquiries and declining vacancy rates. Landlords of some new buildings in ZJNT softened their rental stance to compete with upcoming supply to fill vacant space. After declining for two quarters, overall average rents edged up.1% q-o-q to RMB per sqm per month (GFA) in 4Q14. Market sentiment in the sales market remained stable despite market liquidity improving following the People s Bank of China 4 bps interest rate cut in November. Although leasing demand picked up slightly, lower sales volumes resulted in a few vendors willing to lower asking prices. Average capital values edged down.6% q-o-q to RMB 37,3 per sqm (GFA) in 4Q14. We hold a relatively positive view on leasing market conditions over the next 12 months, as economic reforms encourage further development of finance and IT related industries while improving credit market liquidity should support expansion of state owned enterprises and private companies. Nevertheless, these positive factors should mainly benefit local companies, while most MNCs are likely to continue to have limited budgets for expansion. In 215, 474, sqm of new supply is expected to be completed. However, with healthy pre-commitment levels we expect overall vacancy to stay at around 1%. On the rental front, potential tenant outflows to newer buildings and a supply influx in ZJNT is likely to continue to exert downward pressure on rent growth in older buildings, thus only minimal rental growth is expected. Limited availability of investment grade assets and stable demand from end-users and investors in the strata-titled sales market is expected to underpin modest capital value growth. base: 4Q1 = 1 Financial Indicators are for Zhujiang New Town Q1 4Q11 4Q12 4Q13 4Q14 4Q For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. are for the Overall market. Last Peak ^ net effective, on GFA Take-Up (net) Future RMB psm pm Growth slowing F Vacancy Rate Percent Guangzhou: Office Note: Guangzhou Office refers to Guangzhou s Grade A office market.

18 18 Asia Pacific Property Digest Fourth Quarter 214 Taipei: Office Taipei: Office base: 4Q1 = 1 Financial Indicators are for Xinyi Q1 4Q11 4Q12 4Q13 4Q14 4Q For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. are for the Overall market. ^ net, on GFA Take-Up (net) Future NTD 2,566 per ping pm Rents rising 11 15F Vacancy Rate Percent Overall vacancy remains stable despite new supply Modest rental growth driven by higher rents at new buildings Investment restrictions and property tax reform impact sales volumes In 4Q14, net take-up was recorded at 15,4 ping (5,8 sqm) and was boosted by owner-occupancy. Corporate tenants were most active in Xinyi and Non-Core submarkets, with notable sources of take-up including a local bank moving into its newly completed headquarters in Xinyi and a local IT firm leasing nearly 4, ping of space at a newly completed building in the Non-Core submarket. The overall vacancy rate remained stable at 8.%. Annual net absorption reached 32,6 ping in 214, the second highest amount in the last eight years. Two notable trends observed in 214: 1) corporate consolidation of operations into self-owned buildings or large office units in non-core or city fringe areas 2) rising prominence of small space occupiers in the CBD. Two buildings, namely HuaNan Bank World Headquarters Building and Taipei New Times Square, came on stream in the quarter with a total of 16,553 ping of space. The majority of space at HuaNan Bank World Headquarters Building was occupied by its owner with only 2% (or 2,5 ping) of space made available for lease, while strong pre-commitments to Taipei New Times Square saw it open with over 88% occupancy. A low vacancy environment and higher asking rents at new buildings pushed overall rents higher by.8% q-o-q (3.9% y-o-y) to NTD 2,566 per ping per month. Total investment volumes for all property types in 4Q14 totalled NTD 19.9 billion, a decrease of 39.6% q-o-q ( 28.1% y-o-y). Full year investment volumes reached NTD 88.2 billion, a 2.6% decrease compared to 213 due mainly to high property prices in the main business districts along with slower rental growth in these areas. Investors have found it difficult to find suitable properties that provide adequate rental yields. Government restrictions on insurers acquiring commercial real estate and property tax reform have both made investors take a cautious view. is likely to remain stable supported by a gradually improving economy and tenant relocations to new buildings. Our market research indicates that over 1, ping of new supply will enter the Grade A office market by end-215 of which nearly 3% is committed for owner-occupancy. Thus, the overall vacancy rate is expected to rise. Moderate rental growth is projected for 215, driven mainly by higher asking rents at new completions. Modest economic growth prospects and restrictive government investment policies are likely to have an impact on sales volumes despite an abundance of domestic capital available for investment in real estate. In recent quarters, investors have focused their attention on foreign properties and public infrastructure developments. Note: Taipei Office refers to Taipei s Overall Grade A office market.

19 Asia Pacific Property Digest Fourth Quarter Tokyo: Office Otemachi/Marunouchi and Akasaka/Roppongi near full occupancy Rental growth driven by Otemachi/Marunouchi and Shibuya Yields compress for fifth straight quarter and support capital value growth 13 The overall vacancy rate stood at 3.% at end-4q14, a decrease of 9 bps q-o-q and 4 bps y-o-y. For the Otemachi/Marunouchi and Akasaka/Roppongi submarkets, vacancy reached an extremely low level of 1%, while some buildings situated in the Nihonbashi, Shiodome and Shibuya submarkets saw an increase of vacant space. Net absorption was registered at 64, sqm in 4Q14. The information and communication, professional services and manufacturing sectors, among others, were active in taking up space in the quarter for relocation, expansion and consolidation. Notable activity included the consolidation of Fujitsu Marketing at Shinagawa Intercity Tower C, the expansion of NEC Personal Computers and Renovo Group at Akihabara UDX, and the relocation of Japan Medical R&D at The Yomiuri Building. Net absorption for the full year 214 totalled 287, sqm and was at a similar level to 213. Notable future tenant relocations announced in 4Q14 include Metal One moving to JP Tower in May 215 and Tanseisha s moving to Shinagawa Season Terrace in September Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Tokyo: Office No new supply entered the market in 4Q14. For the full year 214, total stock increased by 27, sqm (4.1% y-o-y) with the completion of six buildings Rents averaged JPY 33,399 per tsubo per month in 4Q14, an increase of.4% q-o-q and a moderate rise for the 11th consecutive quarter. Rent growth was mostly driven by Otemachi/Marunouchi and Shibuya submarkets, while a slight decrease was observed in some buildings located in Roppongi and Shiodome. For the full year 214, rent growth accelerated to 5.% from 2.4% in 213. Investment yields compressed for the fifth straight quarter in 4Q14, while capital values grew for the 11th straight quarter. Capital value growth for the full year 214 accelerated to 19.3% compared with 6.1% in 213, due in part to an interest rate environment that has reached historic lows following continued monetary easing by the Bank of Japan. The investment market remained active in 4Q14 with numerous Grade A buildings transacting. Activia Properties acquired a 15% stake in Shiodome Building for JPY 3.3 billion (NOI yield 4.1%), Hulic Reit acquired a 13% stake in Ochanomizu Sola City for JPY billion (NOI yield 3.9%) and Mori Trust Reit acquired an interest in Kioicho Building for JPY 34.3 billion (NOI yield 3.4%). 12-month Outlook According to Oxford Economics, economic growth in 215 is expected to improve (.9% in 214 vs..1% in 213) supported in part by a tight labour market with an unemployment rate expected to remain below 4.%. The occupier market is expected to see stable demand amid a strengthening economy and against a supply pipeline mostly in line with the past ten-year average. As such, vacancy is likely to remain at a low level and support the growth trend of rents. The investment market is expected to see capital values rise, underpinned by rent growth. However, given the rapid compression of yields witnessed over the past 12 months, further yield compression is expected to be less pronounced For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. ^ gross, on NLA F Take-Up (net) Future JPY 33,399 per tsubo pm Rents rising 11 Vacancy Rate 4 2 Percent Note: Tokyo Office refers to Tokyo s 5 Kus Grade A office market.

20 2 Asia Pacific Property Digest Fourth Quarter 214 Osaka: Office 12 Improving occupancy at Grand Front Osaka pushes vacancy lower Rents grow for second straight quarter, driven mainly by Umeda submarket Capital values rise and record first annual growth in seven years Osaka: Office Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 The vacancy rate at end-4q14 stood at 8.1%, a decrease of 6 bps q-o-q and 22 bps y-o-y, and falling rapidly for the second consecutive quarter. Vacancy declined significantly in Umeda as Grand Front Osaka s occupancy rate reached 7%, although vacant space increased moderately across some buildings located in submarkets including Honmachi, Osaka Business Park and Nakanoshima. Industry occupiers, including those from the manufacturing, professional services and medical sectors, absorbed space for a variety of reasons, including consolidation, and net absorption in 4Q14 was 21, sqm. Occupier activity in the quarter included the consolidation of Mitsubishi Electric at Grand Front Osaka and the relocation of The Kanden L&A at Ujiden Building. Net absorption for the full year 214 totalled 64, sqm, down slightly from 213 but in line with F Take-Up (net) Future Vacancy Rate For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for Percent increased.8% q-o-q in 4Q14 with the completion of the Ujiden Building (13, sqm, NLA), which had a full commitment upon opening. This was the first new Grade A building since Grand Front Osaka entered the market in early 213. Rents in 4Q14 rose for the second consecutive quarter and averaged JPY 15,674 per tsubo per month, an increase of.3% q-o-q. Rental growth was driven by Umeda, where declining vacancy improved landlords confidence to raise rents. For the full year 214, positive rent growth (.6% y-o-y) was registered for the first time in three years. In 4Q14, investment yields compressed for the fifth consecutive quarter and supported the growth of capital values, which also increased for the fifth consecutive quarter. Growth for the full year 214 was 11.4%, the first positive growth in seven years, in part reflecting an interest rate environment that reached historical lows. Major investment deals in 4Q14 included Orix J-Reit s acquisition of Dojima Plaza for JPY 9.5 billion (NOI yield 5.1%) and Activia s acquisition of Osaka Nakanoshima Building (5% co-ownership) for JPY 5.85 billion (NOI yield 5.5%). ^ gross, on NLA JPY 15,674 per tsubo pm Rents rising 2 12-month Outlook According to Oxford Economics, the economy in Osaka is expected to return to positive growth in 215. However, sentiment among large manufacturers as measured by the Greater Osaka Tankan Survey in December was less optimistic about the shortterm outlook. In the occupier market, demand is expected to strengthen relatively in line with the economy, while new supply is expected to amount to about 8% of the past ten-year average. As such, further downward pressure on vacancy is expected while rent growth should accelerate. In the investment market, a further compression of yields is likely, and this coupled with accelerating rent growth should see capital values grow. Note: Osaka Office refers to Osaka s 2 Kus office market.

21 Asia Pacific Property Digest Fourth Quarter Seoul: Office Vacancy rises as tenants relocate due to refurbishment project Landlords offer attractive incentives to induce large deals State Tower Namsan sells for record high price In 4Q14, net absorption was recorded at 1,8 sqm and marked the first time in two years that it moved into negative territory. However, this figure was distorted by the withdrawal of Hanhwa Janggyo Building for refurbishment and the resulting relocation of several Hanwha affiliates to lower grade stock. The overall vacancy rate increased 46 bps q-o-q to 1.3%. Yeouido was the main source of take-up in the quarter, with positive demand recorded at the district s landmark buildings. Two IFC welcomed several new tenants including TUV SUD Korea (2,6 sqm) and JLL Korea (1,1 sqm), while Hanwha E&C (3,7 sqm) and Toray Chemical Korea (1, sqm) arrived at FKI Tower. The occupancy rate of Hanwha Life 63 Building rose to its highest level in three years due to the arrival of KTCU (15,2 sqm), which relocated due to the redevelopment of its Yeouido headquarters. Other activity of note included a taskforce team dealing with the pending merger of Hana Bank and KEB taking up 23,6 sqm at Seoul Square in the CBD, and Kyobo Life relocating from Capital Tower in Gangnam to 6,8 sqm at nearby SI Tower. D Tower (GFA 15,795) completed in October with the owner, Daelim, pulling a division of their business from nearby Twin Trees to occupy 5% of the building. Negotiations with several third-party tenants were known to be ongoing as at end-4q14. Overall net effective rents declined.1% q-o-q as Two IFC and FKI Tower ramped up incentives to conclude sizeable leasing deals. Record quarterly investment volumes pushed the average Seoul office market yield below 5% for the first time on record. The overall market yield declined 12 bps q-o-q to 4.9% as capital values increased (2.2% q-o-q) to KRW 6,615,723 per sqm in 4Q14. Deal activity was led by CBRE Global Investors acquisition of State Tower Namsan (GFA 66,799 sqm) in the CBD for KRW 53.1 billion. The deal was backed by ADIA and reflected a record price of KRW 7,531, per sqm. IGIS Asset Management acquired two assets during the quarter - Jeongdong Building (GFA 39,144 sqm) in the CBD from Samsung SRA for KRW billion and the recently completed Autoway Tower (GFA 47,721 sqm) in Gangnam from SK Networks for KRW 39 billion. Although predominantly vacant, Deutsche Asset & Wealth Management purchased Olive Tower (GFA 59,52 sqm) for KRW 347 billion and YTN disposed of their CBD building (GFA 42,322 sqm) via a sale-and-leaseback to KB Real Estate Trust for KRW 231 billion. is forecast to decline further with Tower 8 (GFA 51,751 sqm) in the CBD expected to be the only Grade A completion of 215. Coupled with stable demand, vacancy is therefore likely to tighten over the coming 12 months to sit around 8.% by end-215 and may support modest rental growth via a softening in incentives. The outlook for the investment market remains positive with strong liquidity and the potential for further interest rate declines likely to underpin activity. base: 4Q1 = 1 Financial Indicators are for the CBD Q1 4Q11 4Q12 4Q13 4Q14 4Q For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. are for the Overall market. ^ net effective, on GFA KRW 96,539 per pyung pm Rents rising F Take-Up (net) Future Vacancy Rate Percent Seoul: Office Note: Seoul Office refers to Seoul s Overall Grade A office market.

22 22 Asia Pacific Property Digest Fourth Quarter 214 Singapore: Office 13 driven by expansion and relocation activity Rents rise at slower pace Capital values stable amid limited sales activity Singapore: Office Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Financial Indicators are the CBD. Net take-up in the overall CBD remained positive at over 58, sqm with a flight-toquality among occupiers persisting. Vacancy declined in all submarkets except Shenton Way and as a result the overall CBD vacancy rate remained relatively stable at 6.1%. was driven by a mix of expansion and relocation activity across various occupier segments including small financial institutions. Consumer goods, IT and social media occupiers provided some expansion activity with LinkedIn, Facebook and Twitter moving into the CBD over the quarter. This recent occupier trend could be attributed to the perception of Singapore as an access point to ASEAN and APAC regions. As a commercial gateway, office demand could rise as modern services such as IT, business advisory including legal firms, real estate and financial are expected to grow on the back of the formation of the ASEAN Economic Community (AEC) in CapitaGreen (65,32 sqm) was completed in 4Q14 and is located within the Shenton Way submarket F Take-Up (net) Future Vacancy Rate Percent Average CBD rents rose at a slower pace of.9% q-o-q in 4Q14 as compared to 3.5% q-o-q in 3Q14. Slower growth was partly due to seasonality as the fourth quarter normally sees a lower level of leasing activity. On the investment front, the total value of CBD sales transactions fell by 84.5% q-o-q to SGD 194 million as there were no major en bloc transactions in the quarter. This could be partly attributed to a mismatch of price expectations between buyers and sellers as yields and interest rates continued to compress. For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. are for the CBD. Rental growth is likely to slow despite the tight supply situation in 215. This is in light of the upcoming supply in 216, which is expected to commence pre-leasing in 2H15. A large amount of office space, especially from Marina One, is expected to inject at least 1.5 million sq ft into the market. This is likely to add pressure on landlords to lock-in existing tenants by offering attractive rental rates and/or longer lease periods. A longer lease term for tenants may be deemed attractive as it helps to amortise their overhead cost over a longer period. ^ gross effective, on NLA SGD 1.42 psf pm Growth slowing 8 Modest economic growth of 2.8% in 214 and a forecast for below trend growth of 3.% in 215 may prompt some companies to adopt a more cautionary approach towards expansion due to uncertainties in major economies such as China, Japan and the European Union. Note: Singapore Office refers to Singapore s CBD Grade A office market in Marina Bay, Raffles Place, Shenton Way and Marina Centre.

23 Asia Pacific Property Digest Fourth Quarter Bangkok: Office Vacancy declines amid no new supply and active leasing Gross rents move higher as vacancy tightens Yields compress as capital value growth outpaces rentals Net absorption increased to 28,9 sqm in 4Q14 as business sentiment continued to improve due to the stable political climate. Leasing demand remained active and consisted mostly of lease renewals in existing prime grade office buildings. All large renewals were in Central Bangkok. As a result of increased leasing demand and no new supply completing in the quarter, the vacancy rate declined from 7.8% in 3Q14 to 6.1% in 4Q14. The vacancy rates in Central Bangkok and Central East both decreased, reaching 7.4% and 2.6% respectively. Grade A office stock remained unchanged in 4Q14 at 1,738, sqm, with no new supply in the Central Bangkok and Central East submarkets Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Bangkok: Office AIA Sathorn Tower (38,5 sqm), on South Sathorn Road in Central Bangkok, and Bhiraj Tower at EmQuartier (47,442 sqm), on Sukhumvit Road near Phrom Phong BTS station in the Central East, are expected to complete in 1Q15. The Metropolis Building (13,425 sqm) located on Sukhumvit Road in Central East and the mixed-use Magnolia Ratchadamri Boulevard on Ratchadamri Road are all scheduled to complete in 4Q15. The average gross rent increased by 2.1% q-o-q to THB 762 per sqm per month in 4Q14. Capital values increased more rapidly than average gross rents, up 3.9% q-o-q to THB 11,878 per sqm in 4Q14, causing market yields to compress by 1 basis points to 6.9%. One office building sales transaction was completed in October 214 when Teo Hong Silom Co., Ltd. sold Bangna Towers, a non-prime grade asset, to the Prime Office Leasehold Property Fund for THB 2.45 billion F Take-Up (net) Future Vacancy Rate Percent The Bank of Thailand revised its 215 economic growth forecast down from 5.5% to 4.8% in September due to slower-than-expected budget disbursements and delays in public spending on infrastructure development projects. For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. Despite a downward revision in 215 s GDP growth forecast, positive winds are blowing in the economy as tourism has started to recover despite Bangkok still being under martial law. Major infrastructure projects are moving closer to kickoff and improvements in export figures are soon expected as the baht weakens relative to the dollar. With 15, sqm of new Prime Grade space expected to complete in the CBD in 215 and only 35, sqm of new completions elsewhere in the market, we expect that demand should be strong as tenants occupy AIA Sathorn and Bhiraj Tower. ^ gross, on NLA THB 762 psm pm Growth slowing 12 Note: Bangkok Office refers to Bangkok s CBD Grade A office market.

24 24 Asia Pacific Property Digest Fourth Quarter 214 Kuala Lumpur: Office Kuala Lumpur: Office Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Financial Indicators are for the City Centre Slowing demand for prime office space Rents stable for most office buildings Limited prime office investment activity Despite positive net absorption of 231,2 sq ft, the average vacancy rate increased to 14.4% in 4Q14 due to new supply in the Golden Triangle. In 4Q14, relocation and expansion activities of existing local tenants continued to support demand. Notable take-up in the City Centre included: the expansion of Carigali Hess Operating Company Sdn Bhd at Menara Darussalam, relocation of MSIG Malaysia to Menara Hap Seng 2 from Menara Weld, and relocation and expansion of FELDA and its subsidiaries from Wisma Felda to Menara FELDA Platinum 3. Total stock in the City Centre increased to 22.9 million sq ft due to the completion of Menara Hap Seng 2, a 32, sq ft prime office building located on Jalan Tengah. Two prime office buildings are expected to be completed in 215, namely Naza Tower and IB Tower. Naza Tower is a 5-storey office building with net lettable area (NLA) of 535,112 sq ft located within a mixed-use development known as Platinum Park which comprises office, retail and residential components. IB Tower is a 6-storey tower comprising serviced apartments and office space with NLA of 426,2 sq ft located on Jalan Binjai For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. are for the CBD. ^gross, on NLA Take-Up (net) Future MYR 6.6 psf pm Growth slowing 1 Vacancy Rate 15F Percent In general, rental rates for the majority of office buildings remained stable as occupancy held firm. Rising operation and maintenance costs has led landlords to hold their asking rents. However, landlords of buildings with relatively high vacancy rates were more willing to offer incentives (i.e. rent free periods) to remain competitive. In 4Q14, the average rental rate increased marginally by.9% q-o-q to MYR 6.6 per sq ft per month. One prime office building, namely Menara ING, was transacted in 4Q14. The 2-storey freehold office tower located on Jalan Raja Chulan was sold by Tower REIT to Goldstone Kuala Lumpur Sdn Bhd for MYR 132 million (MYR 825 per sq ft). The average vacancy rate in the City Centre is expected to increase marginally in the short to medium term due to new incoming supply and a stable level of demand. Steady demand is still expected to prevail driven by positive growth of several local economic sectors such as oil & gas, banking/finance, insurance and services, which are expected to achieve good, sustainable growth in the short term. However, if oil prices remain lower it is expected that oil & gas companies may adopt a cautious approach about expanding their operations. Despite limited rental growth prospects, capital values are expected to see marginal growth in the short to medium term, underpinned by several factors such as higher construction costs, better quality new buildings and escalating land costs in the more sought after commercially established locations. The investment market is expected to remain quiet due to the cautious approach of some investors, limited short-term rental growth prospects, pricing mismatch between vendors and purchasers, and limited prime grade office buildings available for sale in the market. Note: Kuala Lumpur Office refers to Kuala Lumpur s Grade A office market.

25 Asia Pacific Property Digest Fourth Quarter Jakarta: Office Subdued demand due to limited supply and slowing economy Rents broadly stable amid political and economic uncertainty Sustained interest from foreign investors but no major investment deals Although some small tenants leased space within the CBD, the relocation of a major tenant, with an area of 2, sqm, to an owner occupied building resulted in net takeup of 2, sqm in 4Q14. Smaller firms from the mining and consulting sectors took up space in buildings in Satrio and Sudirman as these areas continue to be perceived as prestigious locations for corporate tenants. Firms engaged in professional services, commodities trading, consumer goods and manufacturing for the local economy continued to be the main drivers of demand for premium office space in Jakarta. No new projects were completed during the final quarter of 214 and no supply has entered the market since 2Q13. As such, existing stock of investment grade office space in Jakarta remained at 1.29 million sqm. However, in 215 we expect to see over 26, sqm of Grade A office space enter the market and vacancy rates are likely to enter double digit territory for the first time since early 211. Significant rental growth was recorded between 211 and 213 in Jakarta. As such, anecdotal evidence suggests that rents are in the upper range of affordability for some tenants, particularly given the weakening of the Rupiah against the USD. Many leases in Jakarta are denominated in USD. Landlords responded accordingly in 4Q14 and rents moved lower (.7% q-o-q). However, whole-year growth remained in positive low single digit territory. Foreign investors, including private equity, sovereign wealth funds and developers remained active in 4Q14 and continued to show interest in Jakarta. However, no major Grade A office sales transactions were closed and with no evidence to suggest otherwise, capital values remained unchanged at USD 4,335 per sqm. The bulk of the new supply in 215 (26, sqm) is likely to be completed towards the back-end of the year meaning that the majority of net absorption in these buildings is not expected to be recorded until 216, and thus vacancy rates are expected to rise. Affordability is already an issue for some tenants, and as such rental growth is expected to remain relatively weak; especially given the increased competition from upcoming projects. From an investment perspective, the macroeconomic and general business outlook for Jakarta give grounds for cautious optimism and we expect to see continued interest from international institutional investors in the coming year. base: 4Q1 = Q1 4Q11 4Q12 4Q13 4Q14 4Q For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. ^ net effective, on NLA USD 334 psm pa Growth slowing F Take-Up (net) Future Vacancy Rate Percent Jakarta: Office Note: Jakarta Office refers to Jakarta s CBD Grade A office market.

26 26 Asia Pacific Property Digest Fourth Quarter 214 Manila: Office Manila: Office Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = Net absorption increases in line with new office completions Rental growth remains steady due to healthy leasing demand Capital values post strong growth, while investment yields slightly compress Healthy office demand continued to support strong take-up of office space within Makati CBD and Bonifacio Global City (BGC). This was evidenced by an increase in net absorption, which was recorded at 32,5 sqm in 4Q14. The average vacancy rate registered a slight increase from 3.9% in 3Q14 to 4.1% in 4Q14, but remained healthy on the back of robust leasing demand from various sectors. Notably, Grade A office developments located in Makati CBD and BGC maintained healthy occupancy levels, as most office developments remained fully occupied while other developments posted relatively low vacancy rates. Offshoring & outsourcing (O&O), IT and software firms continued to buoy demand for office space in the local property market in Metro Manila. Other notable sources of demand during the quarter included firms from the manufacturing, logistics, pharmaceutical, marketing and services sectors. Key lease transactions during 4Q14 included an O&O firm occupying 3,57 sqm in Net Square and a marketing firm occupying 1,41 sqm of office space in Frabelle Business Center For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. ^ net effective, on NLA F Take-Up (net) Future Vacancy Rate PHP 1,538 psm pa Rents rising Percent Three office developments were completed in 4Q14, adding a consolidated total office supply of 37,8 sqm. However, five office developments initially expected to become operational within the quarter were not completed likely due to construction delays. Upcoming office developments scheduled to complete in 1Q15 include MDI Corporate Center, Orion, Techzone, Uptown Bonifacio Tower 1, One World Place and Wilcon IT Hub. The six buildings are expected to add a consolidated 148, sqm of office space. Sustained office demand from both multinational and local firms of different sectors supported the continued growth of office rents and capital values. Average rents posted growth of 1.6% q-o-q in 4Q14, reaching PHP 1,538 per sqm per annum. Meanwhile, average capital values were recorded at PHP 111,885 per sqm, posting a slightly faster growth of 3.6% q-o-q given strong investor interest buoyed by the continued positive performance of the local property market supported by recent credit rating upgrades. Investment yields posted a slight decrease of 2 bps q-o-q to 9.4% in 4Q14. Fifteen office developments are scheduled to complete in 215, adding a consolidated total floor area of around 435,5 sqm. The significant volume of upcoming office space in the next several quarters may create upward pressure on vacancy rates during 215. from various segments of the O&O sector, such as business processing outsourcing and knowledge processing outsourcing, are likely to remain among the major sources of demand during 215. Other sectors, such as financial services, IT and software, among others, may likewise buoy demand for office space. Both average rents and capital values are likely to sustain an upward trend, in line with sustained office demand. Note: Manila Office refers to the Makati CBD and BGC Grade A office market.

27 Asia Pacific Property Digest Fourth Quarter Ho Chi Minh City: Office New leasing activity helps push vacancy down Stable rents as landlords focus on maintaining occupancy Quiet investment market with no sales transactions Moderate leasing activity was witnessed in 4Q14. Net absorption totalled 1,2 sqm, driven by new leases in Bitexco Financial Tower. As a result, the overall vacancy rate declined to 8.2%. While some major office buildings saw tenants vacate space in the quarter, most buildings in the CBD either maintained occupancy rates or welcomed new tenants. The Grade A office market has recently moved away from a tenants favoured market, as vacancy has continued to trend lower and leave only limited options of large spaces for lease. As at end-4q14, there was only around 12,5 sqm of space available for lease, mainly available in Bitexco Financial Tower and Times Square. However, with ample new supply expected in 215, this trend could be short lived Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Ho Chi Minh City: Office There were no new supply completions in the quarter and as a result, office stock remained at 155, sqm. Buildings expected to be launched in 215 continued to make good construction progress in 4Q14, with Vietcombank Tower s windows and glazing done, Le Meridien s interiors installed and The Waterfront Saigon topped out. On the other hand, The One Ho Chi Minh City, scheduled for completion in 216, saw construction halted. The proposed projects likely to be launched in 217 should add 1, sqm to stock. The average net effective rent held steady at USD 39.1 per sqm per month in 4Q14, as most landlords maintained asking rents in a bid to preserve occupancy rates. However, landlords of properties with higher vacancy rates offered incentives to fill up available space. There were no major investment deals reported in the Grade A office sector in the quarter, however, the residential investment market remained active. The office investment market has been quiet since the acquisition of Saigon Tower by Daibiru Corporation in 212. Valuation-based yields for Grade A office space remained in the range of 8 9%. Office stock is expected to increase significantly in 215, with more than 7, sqm of new supply anticipated to come online. This will mark the end of more than two years of no new Grade A office completions. Tenant expansions and new setups are likely to be the major occupier trends witnessed in 215, in line with prospects of a better macroeconomic environment. Net absorption might rise, thanks mostly to pre-commitments in the new supply. Rents are expected to increase slightly as new properties enter the market with higher asking rents. Landlords of existing properties are likely to wait and gauge market sentiment after the launch of these new properties before deciding on their rental strategies For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for Take-Up (net) Future Last Peak ^ net effective, on NLA USD 39.1 psm pm Rents stable 25 15F Vacancy Rate Percent NA Note: Ho Chi Minh City Office refers to Ho Chi Minh City s CBD Grade A office market.

28 28 Asia Pacific Property Digest Fourth Quarter 214 Delhi: Office 14 Leasing activity driven by relocations and consolidations Gurgaon rents increase, unchanged elsewhere Capital values rise in CBD, SBD and Gurgaon Delhi: Office base: 4Q1 = 1 Financial Indicators are for the SBD Q1 4Q11 4Q12 4Q13 4Q14 4Q For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. are for the Overall market. ^ gross, on GFA Take-Up (net) Future INR 145 psf pm Rents rising 18 15F Vacancy Rate Percent Leasing activity continued to be strong in 4Q14, but occupier exits as part of relocation and consolidation activity caused net absorption volumes to decline 61.5% q-o-q to 94, sq ft. Occupier movement continued to be driven by the need for portfolio optimisation through relocation and consolidation to reduce occupancy costs. This was also accompanied by fresh expansion-driven demand and kept leasing volumes healthy. This demand was led by IT/ITeS occupiers, and among others, by telecom, e-commerce, consulting and financial service firms. The CBD continued to see healthy leasing volumes, although net absorption was lower compared to the previous quarter. With stable rents a major attraction for occupiers, net absorption in the SBD remained robust. While leasing activity retained its momentum, exits by occupiers from older space resulted in net absorption declining by 61.9% q-o-q in Gurgaon, while in Noida it declined by 65.2%. Major leases in the CBD were SBI taking up 45, sq ft in Redfort Parsvnath Towers and Metal One Corp and BNP Realtors leasing 15, sq ft each in Birla Towers. Mankind Pharmaceuticals leased 54, sq ft and Indian Energy Exchange leased 22, sq ft in TDI Center. Notable lettings in Gurgaon included British Telecom leasing 5, sq ft across DLF Buildings 14C and D, and Boston Scientific leasing 8, sq ft in Parkview Business Park. In Noida, Exponential (Tribal Fusion) leased 3, sq ft in Advant Navis IT Park Tower 2 and Naukri.com took up 25, sq ft in Express Trade Tower 2. Additional supply of 1.13 million sq ft became operational in 4Q14 across four projects two in the SBD and one each in Gurgaon and Noida. With occupiers still focusing on reducing costs, landlords remained flexible on rents in all submarkets. Overall rent growth was slightly faster than in the previous quarter at 1.1% q-o-q, primarily on the back of rising rents in Gurgaon. Capital values edged up in the CBD and SBD while rising at a slightly higher rate in select office corridors in Gurgaon. Yields declined by 1 bps q-o-q in the SBD and the overall market. Occupier sentiment is expected to remain positive on the back of some supporting global economic cues and a better investment climate in India, and these factors are expected to keep leasing volumes and net absorption healthy. Future demand for office space is likely to be driven by the relocation/consolidation strategies of occupiers, with fresh expansion also a driving factor. Going forward, occupier interest may shift towards quality supply in the growth corridors, as the established office corridors may see lower vacancy rates and limited new supply. Rent growth in the established office corridors should be slightly higher and capital values may rise with improving investor sentiment. Note: Delhi Office refers to the Overall NCR Grade A office market.

29 Asia Pacific Property Digest Fourth Quarter Mumbai: Office Improved business sentiment underlies stronger net absorption SBD BKC landlords soften rental stance to minimise tenant exits Yields compress in CBD, Thane and Navi Mumbai 13 During 4Q14, net absorption stood at 1.72 million sq ft, a notable improvement of 23.9% q-o-q. This was the highest level of take-up in the past six quarters and likely highlights a lag between improved business sentiments following the elections being converted into visible business expansion. The quarter was characterised by the sale of large office spaces in buildings that are under-construction. There was about 6, sq ft of office space sold in 4Q14. The key contributors to absorption were IT/ITeS and pharmaceutical sectors. Select occupiers from media, banking, financial services and insurance industries were observed consolidating and entering into rental re-negotiations. About 6, sq ft of leasehold space was renewed during the quarter. In 4Q14, seven projects were expected to become operational but only three managed to obtain the occupancy certificate needed to commence operations. These three completions added about 55, sq ft of office space to market stock and became operational with a moderate level of occupancy. The overall vacancy rate declined by 14 bps q-o-q and stood at 2.4%. However, the decrease in vacancy is likely to be short lived as upcoming supply may witness weak pre-commitments. During 4Q14, CBD and SBD BKC rents dipped marginally. The trend of CBD tenants relocating to SBDs and Suburban submarkets to obtain modern amenities and wide floor plates continued. The SBD BKC commercial precinct which has large office buildings in advanced stages of construction provided occupiers with more leasing options to pre-commit to space. Landlords were also flexible in rental negotiations in a bid to minimise occupier exits. Both of these factors contributed to SBD BKC rentals slightly declining. base: 4Q1 = 1 Financial Indicators are for the SBD BKC Q1 4Q11 4Q12 4Q13 4Q14 4Q15 1,2 1, Take-Up (net) Future 15F Vacancy Rate Percent Mumbai: Office Robust leasing activity is expected in 1H15, in line with improving economic sentiment. This anticipated growth will likely lead to established businesses expanding and new foreign players entering the market. Request For Proposals (RFP) for more than 1 million sq ft of office space are being shopped around the market for implementation in a phased manner. It is likely that institutional investors will become confident in purchasing strategically located income generating office assets as they know that quality space should attract a good number of MNCs and Indian corporations willing to pay a premium. Rents and capital values are expected to grow steadily after 1Q15, likely holding yields relatively firm. For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. are for the Overall market. Last Peak ^ gross, on GFA INR 225 psf pm Rents stable 1 Note: Mumbai Office refers to Mumbai s Overall office market.

30 3 Asia Pacific Property Digest Fourth Quarter 214 Bangalore: Office Bangalore: Office Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Financial Indicators are for the SBD Vacancy edges down as corporate expansion underpins demand Limited availability of leasable space puts upward pressure on rents Capital values increase marginally across all submarkets Leasing activity in the Bangalore office market dropped in 4Q14 with about 2.3 million sq ft of office space leased compared with a total transacted area of 3.6 million sq ft in the previous quarter. However, net absorption recorded a smaller decline ( 9% q-o-q) and was recorded at 2.7 million sq ft. The overall vacancy rate edged down by to 8.2% in 4Q14. Corporate expansion continued to be strong and supported demand. Major companies such as Akami Technologies, Unisys, Snapdeal, Flipkart, Wipro, FlowServe, Airwatch, Amazon, Accenture, Brocade, Boehringer Ingelheim, Success Factors, Moveinsync and Royal Chemistry leased space in the quarter. Eight projects totalling 3.3 million sq ft commenced operations in 4Q14 in Bangalore. New completions include BCIT Block 1 Wing A, BCIT Block 1 Wing B, Karle Town Centre Hub 1, Embassy Manyata Tech Park L3, Prestige Valdel Valance, Pardhanani Wilshire, NCC Windsor and Prestige Star. As a result, total stock of Grade A office space in Bangalore increased to 85.7 million sq ft Take-Up (net) Future For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. are for the Overall market. 15F Vacancy Rate Percent In 4Q14, average rents for office space increased across all submarkets of the city. In the CBD, the average rent increased by 1.2% q-o-q to INR 86 per sq ft per month in 4Q14. Meanwhile, in the SBD, the average rent rose by 1.% q-o-q to INR 52 per sq ft per month. Rents in the Whitefield and Electronic City submarkets grew in the range of 1 2% q-o-q and were INR 34 and INR 27 per sq ft per month, respectively. Capital values increased marginally across all submarkets due to stronger demand. In the CBD, capital values rose 1.5% q-o-q to INR 1,1 per sq ft during 4Q14, while in the SBD q-o-q growth was recorded at.9%. Capital values in the Whitefield and Electronic City submarkets also slightly increased. for office space is expected to increase across all of the submarkets of the city during 215, supported by expansion of major sectors such as manufacturing, IT, banking, financial services and insurance. Investor sentiment and activity in the Bangalore office market has improved, as evidenced by a rise in the number of enquiries for the purchase of office space. As a result, we expect more sales transactions in the market and capital values are likely to increase across all submarkets. ^ gross, on GFA INR 51.5 psf pm Rents rising 18 Note: Bangalore Office refers to Bangalore s Overall Grade A office market.

31 Asia Pacific Property Digest Fourth Quarter Sydney: Office Improving tenant demand with fourth straight quarter of positive take-up Rents edge up as vacancy drops below 1% Strong investment activity persists Tenant demand improved further with Sydney CBD recording its fourth successive quarter of positive net absorption (27,7 sqm) in 4Q14. The positive net absorption recorded in the quarter was generally driven by tenants in the A-grade market which recorded positive net take-up of 25,7 sqm. Overall the market remains buoyant with a general increase in activity and enquiry. Increased activity across the market saw overall vacancy tighten by.6 percentage points to 9.5% in 4Q14. Prime grade vacancy decreased by 1. percentage point to 11.%, with A-grade vacancy declining 1.3 percentage points to 1.3%. Secondary grade vacancy recorded a marginal decline to 7.7%, largely driven by activity in the C grade market. Improvement across the leasing market is partly the result of tenants making real estate decisions to support their future business strategies. In 4Q14, Challenger pre-committed to 9,127 sqm at Pitt Street. Overall there are pre-commitments for 67% of the construction projects that are expected to be delivered by end-216. There were no new supply additions to Sydney CBD in the quarter, leaving supply additions in the Sydney CBD at 41,1 sqm for the year. However, taking into account stock withdrawals, the net supply was 24, sqm, below the ten-year average of 45,5 sqm. Prime gross effective rents increased by.7% over the quarter and have increased 2.8% over the year to finish at AUD 62 per sqm per annum. Average prime net face rents and outgoings increased 1.2% and.4% q-o-q respectively in 4Q14, but the impact was partially offset by a small increase in incentives. The strong investor appetite for Sydney CBD core product has pushed prices higher and resulted in yield compression during 214. In 4Q14, Sydney CBD prime yields compressed 25 basis points at the lower end to now range from 5.75% to 6.75%. Strong investment activity continued into 4Q14, with seven transactions totalling AUD 1 billion recorded in the Sydney CBD. The robust activity in 4Q pushed 214 investment volumes to the highest level on record at AUD 5 billion. base: 4Q1 = Q1 4Q11 4Q12 4Q13 4Q14 4Q F Take-Up (gross) Future Vacancy Rate For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for Percent Sydney: Office conditions are expected to improve further over 215 with the availability of space stimulating activity across the market, particularly from the professional services and technology sectors. Rents are forecast to increase modestly over 215, with prime gross effective rents forecast to record growth. Strong investment demand is expected to continue in 215. The competition for prime assets and the scarcity of product is expected to push yields lower. Last Peak ^ gross effective, on NLA AUD 616 psm pa Rents stable 11 Note: Sydney CBD Office refers to Sydney s CBD office market (all grades).

32 32 Asia Pacific Property Digest Fourth Quarter 214 Melbourne: Office Melbourne: Office Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = continues to improve third straight quarter of positive net take-up Modest rise in average prime net effective rents Prime yields compress due to strong investment demand The recovery in demand seen in the Melbourne CBD throughout 214 continued in 4Q14 with a further 16,6 sqm of positive absorption recorded. Annual net absorption for 214 reached 48,3 sqm, marking a return to positive annual figures after two years of negative results in 212 and 213. This demand recovery has been largely driven by the Education and Health and Community Services sectors. Overall vacancy in Melbourne CBD fell.3 percentage points to 1.3%, driven by a decline in available space in the secondary grade. Prime vacancy in the CBD increased marginally by.3 percentage points to 1.3%. However, this was counterbalanced by a significant decrease in secondary vacancy, which fell 1.2 percentage points to 1.5%. Two major projects completed in the quarter in the Melbourne CBD, totalling 23,5 sqm. The Scot s Church Office Tower at 15 Collins Street, anchored by a Westpac pre-commitment of 13,61 sqm, added 18,955 sqm. Meanwhile, the extension of the owner-occupied Owen Dixon Chambers West building at Lonsdale Street added a further 4,5 sqm For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for Take-Up (net) Future Last Peak ^ gross effective, on NLA AUD 419 psm pa Decline slowing 1 15F Vacancy Rate Percent Net face rents in the Melbourne CBD increased 2.4% q-o-q to AUD 446 per sqm per annum. However, this was tempered by an increase in incentive levels, which pushed out to 38-months free on a 1-year lease (32%). This resulted in a moderate.9% q-o-q uplift in gross effective rents to AUD 272 per sqm per annum. Prime yields tightened 25 basis points at the upper end to 5.75% 7.5% after breaching the 6.% pricing benchmark in the previous quarter. Secondary yields held firm at 7.% 9.%. Investment activity remains buoyant. Nine transactions were recorded in 4Q14 totalling AUD million. This follows AUD 1.58 billion of investment volumes recorded in 3Q14. Annual transaction volumes reached AUD 4. billion in the Melbourne CBD, eclipsing the then-record AUD 2.8 billion of sales recorded for the full year in Month Outlook in the CBD is expected to remain positive with centralisation activity a major driver of future absorption. However, new supply coming on line in the second half of 215 is expected to keep headline vacancy above 1% over the short-term, impacted by untenanted new space coming to market. Effective rental levels are expected to increase as landlords reduce incentive levels to match improving business sentiment. Yields are expected to tighten further in 215 as investor demand for office assets continues. However, the ongoing compression of commercial property yields nationally, coupled with a downwardly revised global growth outlook in 215 is likely to increase investor perceptions of market risk, which may result in a decline in transaction volumes compared to 214 levels. Note: Melbourne Office refers to Melbourne s CBD office market (all grades).

33 Asia Pacific Property Digest Fourth Quarter Perth: Office Net absorption negative for ten consecutive quarters Net face rents decline while incentives increase Investment volumes for 214 total AUD million Headline vacancy rose to 15.8% over the quarter, reflecting a quarterly increase of 1.1 percentage points. In 4Q14, sub-lease vacancy increased by 4.7% from the previous quarter, to 59,1 sqm. It accounted for 22.9% of vacant stock and 3.6% of total market stock. Consolidation and contraction from corporate occupiers, particularly those in the resources sector, contributed to the subdued demand result. Perth has the second highest vacancy among CBD markets in Australia after Brisbane (16.8%), and is followed by Canberra at 15.1% and Adelaide at 15.%. A tenth consecutive quarter of negative net absorption ( 22,2 sqm) brought the 6-month total to 35,5 sqm. There were eight tenant moves (greater than 1, sqm) in 4Q14, contributing to positive take-up of 9, sqm. The largest contribution was made by Inpex, which leased 3,44 sqm of space. The main sectors to vacate space were mining (9,1 sqm) and government administration and defence (6, sqm) Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Perth: Office There were three project completions in the last six months of 214, adding 21,1 sqm to stock. These projects were 863 Hay Street (1,7 sqm), the refurbishment of 565 Hay Street (7,7 sqm) which was entirely pre-leased to the state government, and the refurbishment of 5 William Street (2,695 sqm). A medium-term construction cycle is underway, with 215 expecting the highest annual addition to stock since Eight projects totalling 146,1 sqm are expected to reach completion in 215, which equates to 9.% of total office stock in the Perth CBD. Prime net effective rents decreased by 8.2% q-o-q in 4Q14 to AUD 39 per sqm per annum, following an increase in average incentives to 4 months rent-free (on a ten-year lease). Capital values are trending downward, with the decrease of 1.7% recorded in the quarter contributing to a decline of 5.2% over the 12 months to December. One transaction valued at AUD 35 million was finalised in 4Q St Georges Terrace was sold by 22 St Georges Terrace Pty Ltd to an undisclosed private investor. One CBD office transaction was finalised in 3Q14. A 5% share of QV1 was sold by Investa Property Group to Investa Commercial Property Fund (ICPF) for AUD million, reflecting an initial yield (passing income) of 7.4%. is expected to track at similar levels to recent quarters into the first half of 215, as occupiers continue to rationalise space requirements, particularly those in the resource industry. However, there has been an increase in activity in the market, with a number of tenants taking advantage of the current market conditions to relocate. Vacancy is expected to increase in 215, with large amounts of new supply coming into the Perth CBD market. The pace of contraction in demand for space is expected to slow in 215, although a further small negative number for net absorption is forecast. A sustained recovery in net absorption is likely to depend on a pickup in the resource sector For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for Take Up (net) Future Last Peak ^ gross effective, on NLA AUD 594 psm pa Decline slowing 7 15F Vacancy Rate Percent Note: Perth Office refers to Perth s CBD office market (all grades).

34 34 Asia Pacific Property Digest Fourth Quarter 214 Auckland: Office Auckland: Office base: 4Q1 = Q1 4Q11 4Q12 4Q13 4Q14 4Q F Take-Up (net) Future Vacancy Rate For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for Percent Improving business confidence drives stronger occupier demand Falling Prime vacancy pushes rents higher Capital values move higher on strengthening investor sentiment Stronger business sentiment and robust economic fundamentals are driving leasing activity in the Auckland office market. In the second half of 214, vacancy for the overall CBD declined by 2 basis points to 5.8%. Vacancy for Prime grade stock continued to fall with occupier demand remaining high and has reached a new low of 1.2%, exacerbated by the limited fragmented space that is currently available. Two large refurbishments combined with improving tenant demand has driven vacancy levels in the secondary grade lower by 3.4 percentage points to 9.9% with occupiers now moving into the lower graded spaces. Construction of new office stock over the short term remains limited with only two office buildings, one located on Victoria Street and the other Fonterra s new headquarters in the Wynyard Quarter, expected to complete by end-215. Optimistic landlords are now starting to restore and renovate their buildings to take advantage of current conditions and shorter build time relative to new buildings, with both 125 Queen St and 22 Fanshawe St starting refurbishment. The lack of occupier options is likely to spur more speculative development, with several corporates having expressed interest in developing new office premises, but this activity has generally been concentrated in the Fringe areas and is expected to only be completed over the medium term. Falling vacancy levels and better market conditions are driving increases in rental values across the Auckland Office market. Average Prime rents on a q-o-q basis moved.9% higher reaching NZD 433 per square meter per annum while average Secondary rents remained steady at NZD 249 per square meter per annum in 4Q14. In line with increasing demand from occupiers, incentives have started to move lower across all grades. Prime incentives have fallen to less than one month per year of term while secondary have decreased to around 1.5 months per year of term which is driving up net effective rents. Along with rising rental values, strong investor appetite for office assets has led to robust growth of capital values which rose 8.5% y-o-y in the quarter. Last Peak ^ net face, on NLA NZD 433 psm pa Rents rising 25 With no new supply likely to be developed in the CBD in the near term, a continued strengthening of office market fundamentals is expected to put landlords in a favourable position relative to tenants. Near structural vacancy levels in the Prime segment are likely to see the secondary market the main recipient of growing demand going forward. With a number of large investment deals completed over 214 along with improving investor sentiment and robust economic fundamentals, this should support a further compression in yields for both prime and secondary assets as the growth phase continues to gain pace. Note: Auckland Office refers to Auckland s CBD and Viaduct Harbour office markets.

35 Asia Pacific Property Digest Fourth Quarter Hong Kong: Retail 2 Total tourist arrivals show strong growth in October November Mild rental corrections in some fringe streets in core locations Investors continue to show interest in undervalued properties in non-core areas Driven by strong growth of tourist arrivals from Mainland China, up by 21.2% y-o-y in October November, total tourist arrivals increased by 14.1% y-o-y over the same period amidst the Occupy Central (or rather Occupy Hong Kong) protest. However, total retail sales were relatively weak in October, due to a visible decline in sales of jewellery and watches and a relatively lacklustre performance of items closely related to local consumption. Against this backdrop, some retailers were still keen on leasing shops in areas less affected by the protests. For example, an Italian lingerie retailer, La Perla, pre-leased all 4 storeys (7,83 sq ft) of a new development at Russell Street for around HKD 7 million per month. However, other retailers used the protests as a bargaining chip to negotiate for lower rents, especially for shops in core locations with lease expires during the quarter. The Tai Wai Station project was awarded to New World Development ( New World ) for HKD 2.9 billion. New World will build the entire development including the residential and commercial portions, whereby the ownership of the shopping centre would need to be returned to MTRC upon its completion. The project should be able to provide a 65, sq ft shopping centre, with expected completion in 218. The changing shopping patterns of Mainland shoppers together with the effects of the Occupy Hong Kong protest put further pressure on rents. Coupled with demand dwindling among some big-ticket item retailers, rental corrections were seen in some fringe streets in core locations. In the investment market, Fortune REIT acquired Laguna Plaza (163, sq ft) in Kwun Tong from CLSA for HKD 1.92 billion. Meanwhile, investors continued to target undervalued properties with upgrading opportunities. Due to the already low yields for properties in core locations, investors were no longer willing to chase yields down further, leading to a fall in capital values for High Street Shops in the quarter. Retail sales should post stronger growth in the next 12 months, although the anticorruption scheme and the changing shopping pattern of Mainland shoppers remain as downside risks. On a positive note, international retailers should remain keen on opening stores in Hong Kong given its mature retail market and the healthy growth of tourist arrivals. However, they will likely adopt a conservative approach in leasing negotiations. As such, we retain our forecast for rents for High Street Shops to correct by around 5% in 215. Low holding costs and stable local consumption should continue to draw investors towards investing in undervalued properties especially in non-core locations. Note: Hong Kong Retail refers to Hong Kong s Overall Prime Shopping Centres and High Street retail markets. 8 4Q1 4Q11 4Q12 4Q13 4Q14 4Q15 RV (High Street Shop) CV (High Street Shop) RV (Premium Prime Shopping Centres) RV (Overall Prime Shopping Centres) base: 4Q1 = For 21 to 214, completions are year-end annual. Future supply is for 215. (High Street Shops) HKD psf pm Rents falling 23 ^ net, on GFA (Premium Prime Shopping Centres) HKD 32.2 psf pm Growth slowing 23 ^ net, on LFA (Overall Prime Shopping Centres) HKD psf pm Growth slowing 21 ^ net, on LFA High Street Shops Premium Prime Shopping Centres Overall Prime Shopping Centres F Future High Street Shops Hong Kong: Retail Perth: Office

36 36 Asia Pacific Property Digest Fourth Quarter 214 Beijing: Retail Beijing: Retail base: 4Q1 = Q1 4Q11 4Q12 4Q13 4Q14 4Q For 21 to 214, completions are year-end annual. Future supply is for 215. ^net effective, on NLA RMB 856 psm pm Growth slowing F Future Five new projects open four in suburban areas Slower rental growth prevails as competition intensifies Market yields remain unchanged Core vacancy declined slightly to 4.9% in 4Q14 from 5.4% in 3Q14, as some properties upgraded their tenant mixes and helped brands enter new projects or expand their market presence. For example, Beijing Oriental Plaza welcomed Esprit and Sephora, and the property s very successful Coach store expanded. German brand Marc O Polo entered Beijing via three projects during the quarter. Despite slower growth in the luxury market, niche designers such as Celine and Kenzo committed to space in the Urban market; Vera Wang is also preparing to debut in Beijing at Taikoo Li North. Four of the quarter s five new project openings were in suburban areas beyond the Fifth Ring Road, representing a turning point in the suburban super-regional mall boom in Beijing. Largely focused on the mid-market, these modern properties added a grand total of 74, sqm of stock to the suburbs: Wanda Tongzhou and Livat (Inter IKEA) opened with nearly 1% commitment rates, while the massive 27, sqm- Paradise Walk managed a commitment rate of around 85% upon opening. Covering a more modest area of 5, sqm, Beijing One, a new department store in Tongzhou, opened to serve the local market. Meanwhile, located several blocks from landmark mall Taikoo Li in the Third Embassy Area, Yongli Mall officially opened with 9% commitment, following its soft opening several quarters ago; the project s ground-floor features F&B and a multi-brand luxury store. Rental growth remained subdued in 4Q14, with Urban chain-linked rents increasing by just 1.% q-o-q, similar to the previous quarter and representing a new normal of slower rental growth in Beijing. With strong competitors in some areas, pricing power was constrained. However, key properties, classified as the Core market, outperformed and registered rental growth of 1.4% q-o-q as these malls consolidated their market position as citywide destinations. Market yields remained unchanged; there was no indication of a change in investor sentiment and no major sales were transacted. Suburban projects are set to dominate future supply, with more large-scale projects to cement the presence of malls in the suburbs and represent opportunities for growth as these outer areas of the city continue to develop and draw larger crowds of customers. While rental growth is expected to be moderate, destination malls throughout the city will continue to explore upgrade opportunities and should enjoy above-average rental growth. Meanwhile, other new projects will enter high-profile city locations, including Spot on Wangfujing, and Tongying Centre, across the street from Taikoo Li. Note: Beijing Retail refers to Beijing s Urban retail market.

37 Asia Pacific Property Digest Fourth Quarter Shanghai: Retail Two core projects and two non-core projects open Rents rise marginally in core and non-core markets No major investment transactions as investors remain cautious In the high-end market, affordable luxury brands continued to expand. Michael Kors, for instance, has committed two new stores in River Mall and Grand Gateway. In the mid-range market, fast fashion brands accelerated their pace of expansion. In 4Q14, Zara replaced Lining on East Nanjing Road and opened its largest Shanghai flagship store with a total operating space of 2, sqm spanning four floors. Popular fast fashion brands are also present in almost all the newly opened shopping malls. Uniqlo opened 3 new stores in the Place, Chamtime and Injoy Plaza in Qingpu. In addition, H&M opened one new store in Chamtime Plaza and is scheduled to open another one in the Place by May. Meanwhile, domestic and Korean fast fashion brands remained active in the market. Spao, a sub-brand of E-Land Group, opened a 2,7 sqm store in Daning Life Hub. Vacancy increased slightly to 8.7% in the core areas as several properties had upper floor banquet style restaurants close down. Vacancy also increased to 7.3% in the non-core market as new malls entered the market with relatively high vacancy. There were no en bloc transactions in the quarter. Two core projects and two non-core projects opened in 4Q14. The south section of The Place, formerly known as The HQ, opened in Hongqiao. Fast fashion tenants filled the first two floors of the shopping mall, including Uniqlo, Zara, H&M and Urban Revivo. Nearby, Arch Walk held a soft opening. The mall featured an open-air garden theme with a large scale Japanese supermarket, Apita, in the basement. In the non-core market, Chamtime Plaza opened next to Line 2 Jinke Road Station in Pudong, anchored by Uniqlo and H&M. Bailian Group also opened a new shopping mall called Bailian Binjiang Shopping Centre in Yangpu district, featuring a variety of F&B options and a giant LED screen that extends from the second to the fifth floor. The mall is anchored by a Shanghai Gecheng KTV, a Shanghai International Cinema City on the top floor and ground floor tenants including Nautica, Scofield, Starbucks and Pizza Hut. In the core area, open-market ground floor base rents increased by 1.3% q-o-q to RMB 51.2 per sqm per day. Non-core rents rose.7% q-o-q to RMB 17.4 per sqm per day. In non-core areas, a large disparity exists between mature regional centres and newer properties, which have little pricing power. Landlords of recent openings are becoming increasingly generous on rental terms in order to achieve high occupancy. base: 4Q1 = 1 Financial Indicators are for the Core market Q1 4Q11 4Q12 4Q13 4Q14 4Q For 21 to 214, completions are year-end annual. Future supply is for 215. are for the Core market F Future Shanghai: Retail Perth: Office Retailers are expected to continue to look for expansion opportunities in Shanghai. Meanwhile, a large supply pipeline is anticipated to enter the non-core market in 215, with several projects located in some already crowded submarkets. As cautious sentiment is predicted to become a new normal, developers have become more generous on rental terms especially in immature areas. Higher quality suburban malls continue to emerge, attracting local residents who used to shop at malls closer to the city centre and imposing challenges to the newly opened non-core properties. While such projects will experience longer stabilisation periods, mature properties in key retail submarkets will continue to enjoy strong bargaining power. ^ net, on NLA RMB 51.2 psm per day Rents rising 11 Note: Shanghai Retail refers to Shanghai s Overall Core and Non-core retail markets.

38 38 Asia Pacific Property Digest Fourth Quarter 214 Guangzhou: Retail Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Stable leasing demand helps push overall vacancy lower Mature malls continue to drive rental growth Huaxia Life Insurance acquires stake in Aoyuan Plaza With slower retail sales growth in the first eleven months of 214 (12.3% y-o-y) compared to the same period in 213 (15.2%), most retailers maintained a cautious attitude towards expansion. Leasing activity continued to be driven by F&B and fast fashion retailers in 4Q14. Mid-tier international retailers continued to enter the market with new entrants in the quarter including Victoria s Secret, GAP and Etude House. Entering Guangzhou much later than its competitors, GAP is already planning further expansion in Guangzhou. A growing number of white collar workers in Zhujiang New Town (ZJNT) has improved retail market sentiment in the submarket. With an increasing number of F&B tenants, vacancy in ZJNT has trended lower in recent quarters. Strong demand from F&B tenants and the opening of a fully occupied Panyu Wanda Plaza pushed the overall market vacancy rate down 6 bps q-o-q to 3.3% in 4Q14. Guangzhou: Retail For 21 to 214, completions are year-end annual. Future supply is for 215. ^ net, on GFA RMB psm pm Growth slowing 22 Future 15F Panyu Wanda Plaza (GFA 9, sqm) opened in early November and is the third Wanda Plaza in Guangzhou. Upon its completion, total prime retail stock in Guangzhou reached 2.2 million sqm (GFA). Through tenant and trade mix adjustments, landlords of mature shopping malls were able to maintain positive rental growth. However, landlords of underperforming malls softened their rental stance in a bid to combat vacancy pressures. As a result, overall rents grew 1.% q-o-q to RMB per sqm per month (on GFA) in 4Q14. Investment market sentiment was largely unchanged in the quarter with potential buyers remaining concerned about a possible over-supply environment and as a result, capital values held broadly stable. On 1st December, Huaxia Life Insurance invested RMB 1 billion into Guangzhou Aoyu Real Estate for a 46% stake in Guangzhou Aoyuan Plaza (GFA 9, sqm) in the Panyu district. We believe the overall leasing market should remain largely stable over the next 12 months. However, new supply and tenant and trade mix adjustments in mature precincts should provide leasing opportunities for retailers who have been looking for suitable space in these core areas. New-to-market international brands, F&B operators and other services-based retailers are expected to continue to expand, albeit cautiously. In 215, we maintain a cautious view about the pace of rental growth in the overall market. Taking into consideration an expectation for stable retail sales growth and a large supply pipeline (GFA 588, sqm), landlords will have to be proactive in their strategies to attract popular retailers. Thus, landlord bargaining power may be limited. However, mature established malls are expected to continue to outperform and drive overall market rental growth. We retain our forecast for rents to rise in the range of 3 4% in 215. Note: Guangzhou Retail refers to Guangzhou s Overall Prime retail market.

39 Asia Pacific Property Digest Fourth Quarter Tokyo: Retail Kirarito Ginza opens alongside Ginza Chuo-dori Rents maintain positive growth trend amid limited supply Investment yields compress for third consecutive quarter 14 Personal consumption, including luxury spending, has shown signs of recovery. Sales at large-scale retail stores in Tokyo increased 2.3% y-o-y in November, the fourth consecutive month of increase, while luxury goods sales in department stores in Tokyo rose 3.3% y-o-y, the first positive growth since the sales tax hike in April. Tourist consumption (+13% q-o-q in 3Q14) continues to be a bright spot for the retail market as visitor arrivals reach record highs amid expanded tax exemptions for visitors, government-led tourism campaigns and yen depreciation. Although consumption is slowly recovering, demand in Tokyo s prime retail market has remained strong underpinned by sustained demand from luxury brands, fashion brands and food and beverage (F&B) operators. A notable new opening in the quarter was Vacheron Constantin s first directly operated store in Japan alongside Ginza Chuo Dori. Moreover, Tocca Hartmann and Samsonite Black Label both opened stores on the ground floor of Kirarito Ginza, a new commercial building that opened in the quarter. Also in 4Q14, Versace and Brunello Cucinelli committed to opening new stores at the Ginza 6-chome Takiyama-cho Building Site Project which is due for completion in 215. The 12-storey shopping complex Kirarito Ginza (GFA 17, 1 sqm) completed in the quarter on a site fronting Ginza Chuo-dori. Aside from the tenants previously mentioned, this complex is home to restaurant Din Tai Fung and numerous bridal shops. Ginza 6-chome Takiyama-cho Building Site Project was added to the development pipeline in the quarter. The four-storey building will offer retail space totalling 1, sqm on three floors and is due for completion in the autumn of 215. Rents in 4Q14 averaged JPY 69,195 per tsubo per month, registering modest growth for the ninth consecutive quarter amid tight demand-supply conditions. On an annual basis, rents rose 4.3% y-o-y in 214, relatively in line with the 4.8% growth recorded the previous year. Monetary easing by the Bank of Japan has pushed interest rates to historic lows and provided favourable conditions for fundraising, which in turn has increased competition for assets. Strong investor demand aided a rise in capital values which increased 2.7% q-o-q or 12.3% y-o-y in 4Q14. Meanwhile, investment yields compressed for the third consecutive quarter, decreasing to levels last seen in Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Tokyo Retail Sales y-o-y (%) Q9 2Q1 2Q11 2Q12 2Q13 Sales Growth of Large-Scale Retail Stores in Tokyo Source: Ministry of Economy, Trade and Industry 2Q14 Tokyo: Retail Perth: Office According to Oxford Economics, nominal private consumption is expected to accelerate in 215. Meanwhile, the number of visitor arrivals is likely to continue to grow. With robust demand expected to persist, available space is likely to remain scarce, thereby supporting the growth trend of rents. Strong demand from retailers has resulted in most upcoming supply in the prime market and adjacent areas in 215 being pre-committed. In the investment market, strong competition for assets is expected to continue amid favourable credit conditions, thereby likely placing further downward pressure on yields and accelerating the growth of capital values. ^ gross, on NLA JPY 69,195 per tsubo pm Rents rising 9 Note: Tokyo Retail refers to the Ginza and Omotesando Prime retail market.

40 4 Asia Pacific Property Digest Fourth Quarter 214 Singapore: Retail Singapore: Retail Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Financial Indicators are for Orchard Road Upbeat business sentiment and leasing interest underpin healthy occupancy Declining tourist arrivals and labour shortage put pressure on rents Capital values weaken amid seasonal decline in demand for retail properties Sustained leasing interest from new-to-market brands supported healthy occupancy levels. In the Primary submarket, demand remained strong in 4Q14. Although sales revenue of conventional retail trades (e.g. fashion apparel) continued to decline, sales revenue from F&B picked up and supported demand. Some malls, including ION Orchard and Wisma Atria, have been reportedly active in introducing more eatery outlets. For instance, Ben s Cookies, a famous food brand from England was brought to Singapore by JLL and opened its first store in the basement of Wisma Atria. Next door in ION Orchard, affordable French dining group Saveur opened their third Singapore outlet in October 214. Occupancy in the Marina submarket registered a slight q-o-q improvement in 4Q14, on the back of stronger occupancy and shopper traffic at the refurbished Suntec City Mall. Marina Bay Sands welcomed two new-to-market brands, Boggi Milano and Vilebrequin, both upscale fashion brands introduced by JLL. UK mid-tier fashion retailer Jack Wills opened its first Singapore outlet in the Raffles City Shopping Centre. In the Suburban submarket, a marginal decline in occupancy was witnessed in 4Q14. Large supply continued to cast a shadow over newly refurbished malls in outlying areas; however, many recently completed projects achieved close to full occupancy e.g. The Seletar Mall at 99.6% occupancy. 1 5 For 21 to 214, completions are year-end annual. Future supply is for 215. are for the Overall market. ^ gross, on NLA F SGD 38 psf pm Growth slowing 2 Future No new supply was added to the Primary or Secondary submarkets in 4Q14. The refurbishment of The Orchard Hotel Shopping Arcade in the Primary submarket was reportedly postposed to early 215. In the Marina submarket, Capitol Piazza and the extension of Marina Square, planned to open in 4Q14, had their openings deferred to 1Q15 due to construction delays. Total supply of 1.1 million sq ft came on stream in the Suburban submarket during 4Q14. included The Seletar Mall, Paya Lebar Square and the refurbished Eastpoint Mall. Rents in the Orchard submarket remained unchanged in the quarter, while those of the Suburban and Marina submarkets registered marginal declines of.5% and 1.1% q-o-q respectively. Weakening demand drivers of retail sales (e.g. visitor arrivals) alongside rising operating costs due a continued labour shortage are putting pressure on rents. Capital values in the Primary submarket remained stable, despite some less prominent malls with lower quality management facing downside risks. Notably, most sales transactions occurred in the Marina submarket. Rents should remain stable with possibly minor downward adjustments due to a continuing labour shortage that could cause a further hike in business costs. Capital values are likely to register a modest correction as both local and foreign investors are reportedly leaning towards other higher yielding assets on the back of rising interest rate risks. Nevertheless, an expected recovery in visitor arrivals and tourism receipts in the near term should support growth of retail sales and keep demand steady in the next 12-month period. Note: Singapore Retail refers to Singapore s Primary, Marina and Suburban retail markets.

41 Asia Pacific Property Digest Fourth Quarter Bangkok: Retail Two prime grade projects complete, adding 22, sqm to stock Rents continue rising amidst a stable political climate Both capital values and market yields rise 12 for prime grade retail space in Bangkok remained high in 4Q14 driven by strong consumer spending and as evidenced by high pre-commitment rates for prime grade completions in the quarter. Pre-commitments in new projects were from both domestic and international brands, including new-to-market retailers and brands reentering. New entrants in 4Q14 included two new fashion brands and one F&B outlet, which recently opened at Central Embassy and Siam Paragon respectively namely MAJE and The Kooples in the Fashion and Accessories segment at Central Embassy, and Laduree in the F&B segment at Siam Paragon. The vacancy rate edged down by.1% q-o-q to 4.7% in 4Q14. Two new projects completed in the quarter. HaHa Market was the only new prime grade shopping centre to open and this community mall brought 18, sqm of leasable retail space to the market. In addition, renovations at Central Plaza Bangna completed in the quarter, adding 4, sqm to the market and bringing the total prime retail stock to 2,644, sqm. Among the major projects expected to complete in 215 are EmQuartier, Central Westgate, Central Festival East Ville as well as the renovation of Central Plaza Pinklao. As the political situation has continued to be stable, domestic demand remained strong in 4Q14. This allowed landlords to continue raising rents, driving average gross ground floor rents higher by 2.6% q-o-q to THB 2,344 per sqm per month. Capital values rose slightly less than rents at 2.3% q-o-q and market yield expanded marginally over the previous quarter. The outlook for the retail market in 215 appears to be solid with growing domestic demand and consumption, as well as strong leasing activity, especially from international brands, as major supporting factors. Three prime projects including The EmQuartier, Central Westgate and Central Festival East Ville are expected to complete in 215, adding another 265, sqm to stock. Vacancy rates are expected to rise only in the short term, but decline relatively quickly as tenants move in and begin operating given the high level of pre-commitments at end-214. Rents should continue to rise due to strong leasing demand and relatively higher rental rates at new projects. The positive outlook going forward should push capital values higher while market yields should also increase slightly given rental growth is expected to outpace the growth in capital values. base: 4Q1 = Q1 4Q11 4Q12 4Q13 4Q14 4Q For 21 to 214, completions are year-end annual. Future supply is for 215. ^ gross, on NLA THB 2,344 psm pm Rents rising F Future Bangkok: Retail Perth: Office Note: Bangkok Retail refers to Bangkok s Prime retail market.

42 42 Asia Pacific Property Digest Fourth Quarter 214 Kuala Lumpur: Retail 12 Vacancy rises partly due to new supply Rents move higher in City Centre and Suburbs Investors grow slightly more cautious Kuala Lumpur: Retail base: 4Q1 = 1 Financial Indicators are for the City Centre Q1 4Q11 4Q12 4Q13 4Q14 4Q The average vacancy rate increased.8 percentage points q-o-q to 8.% in 4Q14, in spite of demand remaining fairly healthy. Vacancy of existing malls generally declined, as retailers continued to absorb available space in the market. However, space in newly completed malls still undergoing renovations pushed overall vacancy higher. In the City Centre, vacancy increased by 1.6 percentage points q-o-q, as tenants vacated Bukit Bintang Plaza because of a planned redevelopment and the newly completed Quill City Mall remained 35% vacant. In the Suburbs, the average vacancy rate increased marginally by.1 percentage points q-o-q to 7.3%. The newly completed IOI City Mall in Putrajaya opened with a healthy occupancy rate of more than 8%. International retailers continued to enter the market, with French fashion jewellery brand Agatha Paris opening in Pavilion KL, US-based personal care and home fragrance products retailer Bath & Body Works opening at Nu Sentral, and American junior-line apparel and accessories brand Aéropostale and Korean beauty product store Innisfree both opening their first outlets at Sunway Pyramid. Stock increased by 7.5% q-o-q to 2.96 million sqm following the completion of Quill City Mall (7,952 sqm) in the City Centre and IOI City Mall (134,71 sqm) in the Suburbs. On an annual basis, stock increased by 13.2% with the Suburbs accounting for 61% of the total. 1 For 21 to 214, completions are year-end annual. Future supply is for 215. are for the City Centre and Suburbs. ^ gross, on NLA F Future MYR 33.5 psf pm Rents stable 22 In 4Q14, rents in the City Centre and Suburbs continued to trend higher, increasing q-o-q by of 1.5% and.4% respectively. Investor sentiment was slightly more cautious in the quarter as the large amount of new supply created uncertainty about market sustainability. However, demand for select retail centres and locations remained strong. Capital values grew in the City Centre by 2.% q-o-q and remained stable in the Suburbs. On a y-o-y basis, growth in the City Centre and Suburbs were recorded at 4.2% and 3.7%, to register MYR 3,75 per sq ft and MYR 2,23 per sq ft, respectively. No sales transactions were recorded in 4Q14. Moving into 215, the retail sector is expected to continue experiencing a slowdown as consumers remain cautious in view of the rising cost of living and an uncertain economic outlook. The market is expected to experience a period of adjustment upon the implementation of the Goods and Services Tax (GST) in April 215, as spending further tightens due to the perceived increase in prices of goods and services. In general, vacancy rates are expected to continue a gradual rise. However, there should be pockets of demand even in the midst of growing competition. Rents are expected to experience stronger downward pressure as supply increases, however, select landlords are likely to marginally increase rents in the next twelve months. Investors are expected to still find Kuala Lumpur a relatively appealing investment market and seek opportunities to invest in prime retail assets. Note: Kuala Lumpur Retail refers to Kuala Lumpur s Overall shopping centre market.

43 Asia Pacific Property Digest Fourth Quarter Jakarta: Retail continues to improve with new-to-market retailers seeking space Rents largely stable as landlords focus on maintaining occupancy levels Limited investment activity with market yields remaining largely flat 13 Retail demand remained robust in 4Q14 despite the weakening of the Rupiah against the USD and high inflation. Uniqlo, Zara and Thai department store operator, Central Department Store, all opened in Grand Indonesia. The flagship Zara store is reputed to be the largest of its kind in Southeast Asia while the Uniqlo store represents the Japanese fast fashion brand s sixth store in Jakarta. Elsewhere in the city, Debenhams Department Store opened in Lippo Mall St Moritz. Several new-to-market international retailers, including Leica, Riviera, Tulisan, Tory Burch and Bath & Body Works, also opened their first stores in Indonesia in the quarter. Net absorption totalled around 8,3 sqm in 4Q14 and the vacancy rate fell to 3.8% by year-end. A moratorium on new mall development imposed by the Jakarta Provincial Government has meant limited supply in recent years. No new supply entered the market in 4Q14 meaning St Moritz Shopping Mall Phase I (5, sqm), completed in the third quarter, represented the only new completion in 214. As such, prime retail stock remained at 1.41 million sqm at year-end. Rising fuel prices (falling oil prices notwithstanding) due to the removal of fuel subsidies and resultant high inflation along with Rupiah depreciation meant that most landlords were unwilling to raise rents in 4Q14. The majority of prime retail landlords in Jakarta apply a flat IDR/USD exchange rate in their leases and only the few that have adopted a floating exchange rate saw rents increase in the final quarter. The net result was a.4% q-o-q increase. Historically, very few prime retail assets have been offered for sale in Jakarta and 4Q14 was no exception. s remained unchanged at IDR 49,344,61 per sqm at year-end and market yield remained largely stable at 11.%. Continued interest from high-profile, international luxury brands is expected in 215. Miu Miu and Prada were fitting out stores in Pacific Place in early 215 while Stella McCartney is expected to open in Plaza Indonesia in the first half of the year. F&B tenants expected to expand in the coming year include Paul Patisserie in Plaza Indonesia and Itacho Sushi and Union Bakery in Grand Indonesia. On the supply side, only Lippo Mall Puri St Moritz Phase II (8, sqm) is expected to enter the market during 215. The moratorium on mall construction imposed by local authorities is likely to continue to pressure retailers and developers to seek opportunities outside of Jakarta. Persisting strong demand and low, single digit vacancy rates are expected to drive modest rental growth in 215 and the investment market is expected to remain largely quiet with few assets entering the market. base: 4Q7 4Q1 = 1 Source: Jones JLL Lang LaSalle Q1 4Q11 4Q12 4Q13 4Q14 4Q Source: Jones JLL Lang LaSalle For 21 to 214, completions are year-end annual. Future supply is for 215. ^ net effective, on NLA IDR 4,84,18 5,42,116 psm pa Rents Growth rising slowing F Future Jakarta: Retail Perth: Office Note: Jakarta Retail refers to Jakarta s Overall Prime retail market.

44 44 Asia Pacific Property Digest Fourth Quarter 214 Delhi: Retail Delhi: Retail Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Financial Indicators are for the Prime South Net absorption at lowest level in over nine years Rents unchanged across all submarkets Capital values rise marginally in Prime South and Prime Others In 4Q14, large exits from a mall in the Suburbs submarket caused overall net absorption to decline to its lowest level in over nine years. New leasing activity was sluggish as retailers largely focused on firming up plans for 215. The delay in completion of some malls caused leasing volumes to remain low. Retailer exits on account of portfolio rationalisation, lease expiries and tenant mix adjustments also restrained gross leasing volumes and net absorption was lower across all submarkets on a q-o-q basis. Net take-up was marginally negative in Prime South while moderately positive in Prime Others. Net absorption in the Suburbs declined to its lowest level in 39 quarters and the overall vacancy rate rose by 3 bps q-o-q to 23.4%. Within the Prime South submarket, Peninsular Kitchen leased space in Vasant Kunj. In Saket, Sucre D orge & Cie and Wills Lifestyle leased space in Select Citywalk. In Prime Others, major leases included Fit Line and Store 99 leasing space in Moments Mall and Parma leasing space in TDI Paragon. In the Suburbs submarket, W and Monsoon Saloon & Spa each leased space in Ambience Mall in the Gurgaon precinct. Advance Clinic leased space in Great India Place in Noida and Pantaloons leased space in World Square Mall in Ghaziabad. Skitile Bowling arena took up space at Ansal Plaza in Greater Noida For 21 to 214, completions are year-end annual. Future supply is for 215. are for the Overall market. ^ gross, on GFA INR 247 psf pm Rents rising 16 Future 15F No projects became operational in 4Q14. In 4Q14, rents remained stable across all retail submarkets. The investment market continued to be quiet with activity predominantly driven by small investors. With limited availability of leased assets and most prominent malls being owned on an en bloc basis, there is a lack of quality retail assets available on the market for small investors. As such, capital values were generally stable except for small increases of less than 1% q-o-q in the Prime South and Prime Others submarkets. An improving domestic economy is likely to kick-start consumption and retailers are expected to be keen to tap into this potential demand. However, the availability of quality mall space will probably be a factor in limiting absorption volumes. Some upcoming retail projects which have shown moderate to healthy pre-commitments should support higher net absorption levels upon completion. However, delayed completions due to not receiving occupancy certificates or a slowdown in construction because of a lack of retailer interest may see net absorption volumes soften. Retailer interest is likely to be sustained in the Prime South submarket, with rents expected to show marginal growth. Rent increments in other retail markets are likely to be driven by individual projects that are performing well. Capital values may show slightly higher growth compared to rents, especially for leased assets, possibly leading to further yield compression. Note: Delhi Retail refers to Delhi s Overall retail market.

45 Asia Pacific Property Digest Fourth Quarter Mumbai: Retail Parle Square commences operations in Prime North Rents rise marginally in Prime South, stable elsewhere Capital values remain unchanged across all submarkets Net absorption declined during 4Q14 to 3,1 sq ft from 6,5 sq ft in the previous quarter. While leasing activity picked up across all submarkets, Prime South mostly witnessed an active churn of retailers. The Prime North submarket had net take-up of close to 26, sq ft, mostly contributed by pre-committed space at Parle Square mall which commenced operations in 4Q14. The Suburbs submarket, which has witnessed a rising penetration of organised retail in the last few quarters, saw more retailers opting to lease space in the quarter. However, increased leasing activity was offset by retailer exits from underperforming malls which are being refurbished. As a result, negative absorption was recorded in the quarter. Both domestic and foreign retailers were active during the quarter, suggesting a broad based improvement in market sentiment. Also, there was participation from a wider category of retailers than in previous quarters. Local retailers Reliance Digital and Big Bazaar along with international retailers Hamley s and British Brewing Co. leased space in the quarter. Parle Square mall (8, sq ft) became operational during 4Q14 in the Prime North submarket and increased the city s total retail stock to 19.2 million sq ft. This is the first mall to come on stream in this submarket in the last six years. This mall became operational with close to 5% occupancy. Overall, rents remained stable from the previous quarter, although on an annualised basis, rents increased slightly. The Prime North and Suburbs submarkets witnessed no change in rents from previous quarter. However, Prime South saw overall rents rise to INR 25 per sq ft per month, once again indicating the need for quality retail space in this vicinity given the current lack of vacant space. Capital values remained unchanged and overall market yields were stable at 11.2%. In 215, organised retail is likely to make further in-roads into suburban precincts of Panvel, Kalyan, Nalasopara and some other destinations that are largely underrepresented. Many domestic retailers that are facing stiff competition from foreign and other retailers in established markets should find these new locations very attractive. The next 12 months are likely to witness cases of stock withdrawal as some unsuccessful mall developers have expressed their intention to refurbish their buildings, either to accommodate office or residential tenants, or for mixed-use developments including a retail component. Rents are likely to rise across all submarkets as the lack of vacant space in successful malls, which have done well to attract high visitor traffic, is increasingly felt. base: 4Q1 = 1 Financial Indicators are for the Prime South Q1 4Q11 4Q12 4Q13 4Q14 4Q For 21 to 214, completions are year-end annual. Future supply is for 215. are for the Overall market. ^ gross, on GFA INR 25 psf pm Rents rising 15 Future 15F Mumbai: Retail Perth: Office Note: Mumbai Retail refers to Mumbai s Overall retail market.

46 46 Asia Pacific Property Digest Fourth Quarter 214 Sydney: Retail Financial Indicators Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Retail spending growth continues to strengthen Evidence of a rental recovery in select sub-sectors Investors focus on sub-regional, neighbourhood and mixed-use assets The pace of retail turnover growth in New South Wales (NSW) accelerated during 214, in particular over the latter half. The Australian Bureau of Statistics reported that retail turnover growth increased to 8.6% (year-on-year) in November 214, more than double the long-term 1-year average (4.%). Major international retailers expanded their store networks in the Sydney CBD in late 214, and have now starting to build a presence in suburban shopping centres. This trend is expected to continue in 215. Leasing demand remains strong for prime CBD space in Sydney, especially as international retailers expand their footprint within the CBD. As a result, the Sydney CBD vacancy rate decreased from 3.6% in 1H14 to 3.1% in 2H14, which helped to reduce the average vacancy rate (across all monitored sub-sectors) to 2.2% in 2H14. Sydney: Retail AMP Capital completed an AUD 44 million extension to Macquarie Centre (41,2 sqm), a regional shopping centre in Sydney s north, in early 4Q14. Many institutional landlords have commenced or are planning major redevelopment works at some of the key regional and sub-regional centres in Sydney, in order to enhance their offering and remain competitive. Retail completions increased to 134,6 sqm in 214, after reaching a trough in 213 (16,8 sqm). With around 495,5 sqm of retail projects currently under construction or with planning approval, and scheduled to complete over the next 24 months, new supply additions will increase in Future 15F For 21 to 214,completions are year-end annual. Future supply is for 215. Evidence of a rental recovery was observed in certain sub-sectors super-prime CBD, neighbourhood and bulky goods in 4Q14. Stronger retail spending growth has yet to translate into a substantial recovery in regional and sub-regional rents. Investment activity in Sydney remained strong over the fourth quarter (AUD 918 million). Of the AUD 1.94 billion to transact in NSW in 214, neighbourhood sales accounted for one-third of total transaction volumes, while sub-regional sales and other accounted for 25% and 29% respectively. The largest transaction in 214 was the sale of Birkenhead Point for AUD 31 million in October. Last Peak ^net, on NLA AUD 1,933 psm pa Rents stable 13 Stronger retail spending growth is likely to boost leasing demand and in turn rental growth over the next 12 months. The current investment market conditions (higher liquidity) are supportive of strong activity continuing into 215. Retail yields are expected to remain generally stable, or sharpen slightly, over the next 12 months, varying between sub-sectors. NA Note: Sydney Retail refers to Sydney s Overall retail market.

47 Asia Pacific Property Digest Fourth Quarter Melbourne: Retail Retail supply at cyclical low point Mixed rental trends emerge between retail sub-sectors Transaction activity reaches AUD 2.2 billion in 214 Financial Indicators 12 Retail spending growth continued to accelerate through 214, rising to 6.2% y-o-y in November 214. Victoria is the third strongest state in terms of retail spending growth, after New South Wales and Tasmania. Food, household goods and cafes, restaurants and take-away food retailing have been the major drivers of the rebound. Growth in clothing, footwear and personal accessory retailing rebounded through the middle of 214 but slowed in the second half. Leasing markets continue to be driven by the arrival of new international retailers that are now expanding beyond the CBD market presence into regional shopping centres. Redevelopments of major shopping centres are facilitating this trend. from domestic retailers is likely to gradually increase in certain categories, led by the improvement in trading conditions. completions declined significantly in 214 to 121, sqm after having risen steadily between 21 (61, sqm) and 213 (324,2 sqm). 214 marked the low point for the current construction cycle, with completions forecast to gradually rise in 215 and 216, based on projects currently under construction or with plans approved. Three small projects totalling 19,6 sqm completed in 4Q14. The largest project to complete in 214 was Emporium Melbourne (45,9 sqm), a joint venture between Novion Property Group (formerly CFS Retail Property Trust Group) and GIC. Project commencements in 214 (118,7 sqm) were in line with completions (121, sqm) resulting in a stable under construction pipeline (22,1 sqm at 4Q14). While only minor changes in rents were recorded in 214, performance varied between retail categories, partly reflecting diverse retail spending trends between retail categories. On a year-on-year basis, moderate rental uplift was recorded in the CBD, bulky goods and in sub-regional sub-sectors; while a modest contraction was recorded in the regional and neighbourhood sub-sectors. Investment transaction volumes in Victoria reached AUD 2.2 billion in 214, representing a record year for this market, and a 21% increase from 213. Transactions in 4Q14 totalled 412 million. As a result of growing competition for assets, yields compressed further in 4Q14 across each of the retail sub-sectors, except for sub-regional. base: 4Q1 = Q1 4Q11 4Q12 4Q13 4Q14 4Q Future 15F For 21 to 214,completions are year-end annual. Future supply is for 215. Melbourne: Retail Perth: Office The expansion of major international retailers should help to support leasing demand and new developments. Modest levels of new supply in 214 and 215, combined with stronger retail spending growth, should support a modest recovery in rental growth from 215 onwards. Investors appear to have priced in strong growth, as reflected in the yield tightening evident through 214. Despite ongoing competition for assets, the rate of yield compression is likely to moderate in 215 given the level already reached. Last Peak ^ net, on NLA AUD 1,462 psm pa Rents stable 8 NA Note: Melbourne Retail refers to Melbourne s Overall retail market.

48 48 Asia Pacific Property Digest Fourth Quarter 214 Hong Kong: Residential 14 New project launches in primary market continue to drive sales momentum Rents hold steady, supported by leasing activity in lower-end of luxury market Capital values trend higher on back of positive market sentiment Hong Kong: Residential base: 4Q1 = 1 Units Q1 4Q11 4Q12 4Q13 4Q14 4Q F Future For 21 to 214, completions are year-end annual. Future supply is for 215. Fewer transactions of luxury properties were recorded in 4Q14 compared with 3Q14, with preliminary data showing 89 properties priced above HKD 5 million being traded during the period, down 31.% q-o-q. However, the figure represents a 3.5% increase from a year earlier and is still higher than the 1-year (24 213) quarterly average of 73 transactions, reflecting still-upbeat market sentiment. The Occupy Central protest has not seemingly had any impact on project launches and sales. The primary sales market remained active as developers continued to offer flats at competitive pricing levels, to meet some of the pent-up demand from end-users that has been released onto the market since the relaxation of conditions associated with the Double Stamp Duty (DSD) policy in May 214. Besides sales at large-scale developments such as The Pavilia (developed by New World Development) and Dragons Range (jointly developed by Kerry Properties, Sino Land and Manhattan Group) hitting the headlines, Sun Hung Kai Properties luxury scheme, Deauville, in Tsuen Wan was also well-received. All of its 26 apartment units and 2 out of its 7 houses were sold within one day of being launched. In the investment market, an investor acquired the whole of Tower 1 (19 apartment units and 2 car parking spaces) at Providence Bay in Tai Po for HKD 33 million. Another notable transaction was the sale of a penthouse unit at The Arch in West Kowloon for HKD million or HKD 86,25 per sq ft, saleable; a record high in the development. Leasing activities showed further signs of stabilisation in 4Q14, following a period of seasonal pick-up in 3Q14. mainly arose from expatriates targeting properties requiring lower lump-sum payments. Ten luxury projects were scheduled to have been completed in 4Q14, providing 34 luxury units to the market. Capital values of luxury properties trended higher in 4Q14, up 1.2% q-o-q, as landlords in the secondary market held firm on asking prices. Luxury rents held steady, edging up by.4% q-o-q, despite ending the year down 4.1%. ^ net, on NFA HKD 43.4 psf pm Rents stable 13 Transaction levels are expected to hold up in 215, although sales momentum is expected to be largely driven by demand from first-time homebuyers and homeupgraders taking advantage of the relaxation of the DSD. We expect capital values to hold steady in the first half of 215, supported by positive sentiment in the overall market, although the forthcoming announcement of interest rate hikes could lead to a subsequent slowdown in demand. An expected increase in luxury supply could also weigh on prices. As such, the anticipated correction of 5% for luxury capital values in 215 is still expected to materialise in the latter half of the year. Meanwhile, leasing activity should gather momentum in 215 with the economy forecasted to grow by 3.1% y-o-y, according to Oxford Economics December forecast. While properties in the mid-range of the market should perform better than their traditional top-notch counterparts, the overall luxury market should still see positive rental growth of 5% over the forthcoming 12-month period. Note: Hong Kong Residential refers to Hong Kong s Overall Luxury residential market.

49 Real estate insights; Past, present and future Detailed historical data, forecasts and reporting for more than 5 cities in Asia Pacific. Subscribe to JLL s Real Estate Intelligence Service today. Contact Roddy Allan, Roddy.Allan@ap.jll.com Jones Lang LaSalle 215 Jones Lang LaSalle IP, Inc. All rights reserved.

50 Feasibility Studies Investment Strategy Expansion Strategy Benchmarking Reports Due Diligence Reporting We are your best resource Providing expert research consultancy services and economic, demographic and infrastructural insights to investors across office, hotels, retail, residential and industrial sectors. From bespoke consultancy to in-depth advisory, get in touch today. Contact: Dr Jane Murray, Jones Lang LaSalle 215 Jones Lang LaSalle IP, Inc. All rights reserved.

51 Asia Pacific Property Digest Fourth Quarter Beijing: Residential Luxury apartment sales rebound due to several hot-selling projects Rents relatively stable despite continued weakness in leasing demand Capital values increase for luxury apartments, but decrease for villas After People s Bank of China continued to loosen credit policies in late November, cutting benchmark lending rates and further liberalising deposit rates, 733 luxury apartment units were sold in 4Q14. Due to their lower-than-expected market prices and high quality, several projects, including Riverside Palace and Guo An Mansion, recorded high sales volumes. In contrast, 24 high-end villa units were transacted in October and November, 18.4% less than the number sold during 3Q14. Given their comparatively high prices, many newly launched high-priced villa projects were poorly received by the market in 4Q14. Meanwhile, the vacancy rate at several serviced apartments increased, as the number of foreigners relocating to other cities or returning home was greater than in 213; Beijing s pollution and the slowing global economy were cited as reasons for leaving the city. Higher occupancy at two refurbished projects, however, balanced the citywide vacancy rate, which held flat in 4Q Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Financial indicators are for the Overall luxury market. Six new luxury apartment projects and one existing project launched new phases, adding 615 units to the pre-sales market. Quality and reasonably priced projects proved most popular, with nearly all of the 143 units at Guo An Mansion reserved by end-4q14. Two new high-end villa projects and four existing villa projects also released new phases during the quarter, bringing another 385 units to the market in north-east Beijing. 15, 12, 9, Prices rose slightly at hot-selling projects, pushing up primary capital values for luxury apartments by 2.5% q-o-q. In contrast, poorly performing villa projects weighed on the market, dragging primary capital values down 1.6% q-o-q. Serviced apartment rents were flat, but due to the trend of shrinking housing budgets, large, high-rent units were difficult to lease out. High-end villa demand was weak, resulting in a.7% q-o-q decline in rents. Another batch of high-end projects is expected to enter the market in 215. Increasing supply combined with stable demand in the high-end residential market is expected to put pressure on prices. Considering that two new serviced apartment projects are scheduled to open by end-215 and demand from expatriates is unlikely to change much, we project an upward curve in vacancy and expect to see more serviced apartment operators increasing rents to cover rising operational costs. Units 6, 3, F Future For 21 to 214, completions are year-end annual. Future supply is for 215. are for the Overall luxury market. Beijing: Residential ^ gross, on GFA RMB psm pm Rents stable 4 Note: Beijing Residential refers to Beijing s Overall Luxury and High-end residential market.

52 52 Asia Pacific Property Digest Fourth Quarter 214 Shanghai: Residential Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 4, Sales volumes recover under supportive policies Serviced apartment rents flat due to weak demand High-end prices edge up as developers limit price discounts Following the announcement of mortgage policy easing on 3th September, 4Q14 saw more supportive measures implemented at the local level. Starting 2th November, Shanghai relaxed the threshold for ordinary commodity housing, effectively reducing transaction costs for homebuyers. In addition, the People s Bank of China cut the one-year benchmark lending rate by 4 basis points to 5.6%, further enhancing homebuyers affordability. The loosening policies largely improved market sentiment, fuelling a sales recovery towards the year-end. Sales volumes of commodity housing in the primary market surged 58% q-o-q to 3.5 million sqm in 4Q14, the highest level seen in 214. In the high-end segment, buying sentiment also picked up on the back of supportive policies. The fourth quarter saw 558 units of high-end apartments sold, up 63% from 3Q14, concluding the year with 1,366 units sold, down 3% y-o-y. In the leasing market, demand from expatriates remained subdued in 4Q14 due to a combination of the holiday season and MNCs hesitation to send new expatriates to China around the year-end. However, as total stock was reduced due to the withdrawal of Savills Residence Century Park in Pudong, the overall vacancy rate in the serviced apartment market edged down to14.4% in 4Q14. Shanghai: Residential Units 3, 2, 1, For 21 to 214, completions are year-end annual. Future supply is for 215. ^ gross, on GFA RMB psm pm Rents rising 2 Future 15F In the sales market, a total of 678 new units were put onto the sales market in 4Q14. Developed by Vanke, Emerald Riverside in Pudong launched its second batch of 171 units in November, of which 94 units were sold during the quarter at an average price of RMB 65,53 per sqm. The Star River Phase III in Pudong launched 252 units and sold 32 units in 4Q14 at an average price of RMB 67,427 per sqm. Developed by OTC, Suhe Creek in Zhabei District launched 13 commercial-titled apartment units in 4Q14, of which 9 units were sold with prices averaging RMB 59,66 per sqm. In addition, developed by Keppel Land, 8 Park Avenue in Jing an District obtained a pre-sales permit for another 16 units in 4Q14 although no transactions were recorded by quarter end. As market sentiment improved, some developers reduced their price discounts, although most projects prices remained largely unchanged. As a result, primary prices for high-end apartments edged up by.3% q-o-q in 4Q14. In the leasing market, most landlords kept rents unchanged in order to retain their existing tenants as leasing demand softened. Towards the year end, Shanghai s land sales market became spirited with a number of residential-use parcels achieving high land premiums. For example, Gree Real Estate acquired a residential parcel in Pudong at an accommodation value of RMB 65,832 per sqm, 127% higher than the reserve price. Developers reviving appetites for residential land acquisitions reflected their optimism towards Shanghai s high-end residential market over the medium and long term. Under the supportive policy environment, the recovery in demand is likely to extend into 215. However, the sales recovery in the high-end segment is expected to be more moderate than the mass market as HPRs, which remain in place in Shanghai, should continue to curb investment demand. As such, we expect average prices for the highend segment to increase moderately in 215. In the leasing market, demand is unlikely to see a quick upturn given a weaker economic outlook for China in 215. Note: Shanghai Residential refers to Shanghai s high-end residential market.

53 Asia Pacific Property Digest Fourth Quarter Singapore: Residential Weak demand due to seasonality and ongoing cooling measures Large supply pipeline putting pressure on rents Capital values in Prime market continue to soften Resale activity remained slow in 4Q14, with total resale transactions within Prime districts 9, 1 and 11 falling by 19.8% q-o-q to 198 units, according to preliminary estimates based on Urban Redevelopment Authority (URA) data. This is the second consecutive quarter of declining resale volumes, suggesting that the downtrend has not yet bottomed out. On a full-year basis, URA data suggests that 214 will see a decline of 33.1% y-o-y in resale volumes. Similarly, new sales volumes remained sluggish for the second straight quarter. Total new residential units sold declined 36.6% q-o-q to 9 units, after picking up during the previous two quarters. The slowdown in both resale and new sales demand is attributed to seasonality as well as the cooling measures. According to preliminary figures from the Building and Construction Authority of Singapore, 1,871 units within Prime districts 9, 1 and 11 were completed in 4Q14. This was almost a four-fold increase in the number of completions compared to 3Q14. The largest project that obtained a Temporary Occupation Permit in 4Q14 was d Leedon at King s Road, which contributed 1,715 units or more than 9% of total completions within the Prime districts. Two other smaller projects, The Boutiq with 13 units and Sarkies Green with 26 units, also obtained their Temporary Occupation Permits during the quarter Q1 4Q11 4Q12 4Q13 4Q14 4Q15 RV (Prime) CV (Prime) RV (Luxury) CV (Luxury) base: 4Q1 = 1 5, 4, 3, Rental volumes for October and November stood at 2,77 leasing contracts, with a total value of SGD million. Looking at 3Q14, there were 5,488 rental transactions at a total value of SGD million. Rental activity slowed in 4Q14 and sentiment is expected to remain soft amid strong upcoming supply. As newer projects have mainly smaller sized units, some older developments with bigger unit sizes witnessed firmer rents notwithstanding an overall softening in the rental market. Gross rents in the Typical Prime segment dropped 2.4% q-o-q to SGD 3.67 per sq ft per month in 4Q14, the fifth consecutive quarter of decline. Similarly, gross rents in the Luxury Prime segment decreased again, but by a greater margin, down 3.1% q-o-q to SGD 4.13 per sq ft per month in 4Q14. Despite slower rental activity, corporate landlords are still maintaing rents due to their holding power. Weak demand continued to impact capital values, with the Typical Prime segment declining 2.3% q-o-q to SGD 1,29 per sq ft in 4Q14 and the Luxury Prime segment falling by 2.5% q-o-q from SGD 2,22 per sq ft. Units 2, 1, F Future For 21 to 214, completions are year-end annual. Future supply is for 215. Singapore: Residential With supply in the pipeline expected to be greater than demand, rents in the Prime market should remain soft. Capital values are likely to face further downward pressure due to weak buying sentiment as cooling measures implemented by the government remain in place. However, new sales demand could continue to hold up for selective projects that are priced competitively. ^ gross, on GFA SGD 4.13 psf pm Decline slowing 14 Note: Singapore Residential refers to Singapore s Overall Prime and Luxury residential markets.

54 54 Asia Pacific Property Digest Fourth Quarter 214 Bangkok: Residential 12 Three new projects complete amid a decrease in demand Rents edge up owing to healthy demand for condominium rentals Capital values and market yields hold relatively stable Bangkok: Residential base: 4Q1 = 1 Units Q1 4Q11 4Q12 4Q13 4Q14 4Q15 4, 3, 2, 1, F Future For 21 to 214, completions are year-end annual. Future supply is for 215. decreased in 4Q14 as relatively fewer units there remained relatively few units for sale. Eight new projects were launched with an average of 71% of the total units being sold during the quarter apartment. Four luxury condominiums were launched in 4Q14. Sindhorn Residence, a 2-unit leasehold project near BTS Chidlom achieved a sales rate of 5% as at end-4q14. The 33-unit Issara Collection Sathorn achieved a sales rate of 15%. The 122-unit Circle Rein Sukhumvit 12 achieved a sales rate of 9%. The most high profile launch in the quarter, the 783-unit Ashton Asoke project near BTS Asoke and MRT Sukhumvit completely sold out within days of launch. Four high-end condominium projects were launched in the quarter. The Hudson Sathorn 7, a 49-unit project near BTS Chong Nonsi which achieved a sales rate of 2% as at end-214. The 376-unit The Room Sathorn St.Louis near BTS Surasak achieved a sales rate of 3%. The 288-unit Noble Recole Sukhumvit 19 near BTS Asoke and MRT Sukhumvit sold out completely within days of launching. The M Thonglor 1, a 173-unit project in Bangkok s Thong Lor neighbourhood achieved a sales rate of 2%. Eight high-end condominium projects were scheduled to complete in 4Q14 but five projects were delayed because of labour shortages. Therefore, only three new highend projects completed, including Rhythm Sathorn-Narathiwas, The Hudson Sathorn 7 and Condolette DWELL. These projects added 558 units to the existing stock, which currently stands at 29,84 units. The five high-end projects that were delayed represent 1,413 units and are now scheduled to complete by 1Q15. These include M Silom (161 units), Rhythm Sathorn (923 units), Focus at Ploenchit (134 units), Mirage Sukhumvit 27 (116 units) and Dazzle Sukhumvit 7 (79 units). In 4Q14, eight new luxury and high-end condominium projects comprising 2,24 units were launched, and are scheduled to complete between 216 and 218. No new luxury apartments were launched in 4Q14, thus the total apartment stock stands at 4,37 units. ^ gross, on NLA THB 514 psm pm Growth slowing 12 In 4Q14, condominium gross rents rose to THB 514 per sqm per month, a slight increase of.3% q-o-q and.9% y-o-y. Apartment rents rose by.6% q-o-q to THB 358 per sqm per month. Capital values edged upward by.1% q-o-q to THB 111,221 per sqm in 4Q14. The growth in net effective rents slightly outpaced capital values and market yields expanded marginally to 4.9%. The high-end and luxury residential property markets in Bangkok are expected to see healthy market conditions persist through 215, with healthy demand for the very top end of the market (e.g., Ashton Asoke) and with market-wide pre-sales rates expected to be at long-term averages or above. Note: Bangkok Residential refers to Bangkok s Central high-end and luxury residential market.

55 Asia Pacific Property Digest Fourth Quarter Kuala Lumpur: Residential Three projects launch nearly 1, units for sale Stable leasing demand holds rents steady Both capital values and yields hold firm 12 In 4Q14, Residence 338, Star Residences One and The Robertson South Tower comprising 12 units, 557 units and 418 units respectively were launched. Residence 338 is a freehold development located on Jalan U Thant that comprises 12 individual three storey units. Each unit is relatively large in size with areas ranging between 5, and 6, sq ft and are priced between MYR 1 million and MYR 11 million. These are the most expensive condominiums units launched in the Klang Valley. The developer, Bandar Park Sdn Bhd adopted a build-then-sell concept and achieved a 33% sales rate as at end-4q14. Star Residences One is a freehold development located on Jalan Yap Kwan Seng and comprises 557 units within a 57-storey tower. The unit sizes range between 625 and 2,262 sq ft and are priced at MYR 1,7 per sq ft. The development was soft launched in 4Q13 and the developer, Alpine Return Sdn Bhd (Symphony Life and UM Land), is providing a 5% price rebate, free legal fees on SPA and loan documentation, and registered a sales rate of 8% at its official launch in 4Q14. The Robertson South Tower is a freehold development located on Jalan Pudu and comprises 418 units within a 45-storey tower. The built-up areas are relatively small ranging between 527 and 1,227 sq ft, and the units are priced at MYR 1,3 per sq ft. The units are unfurnished and the developer, Gamuda Land, is offering a 3% price discount and free legal fees on SPA and loan documentation. The development has been marketed since mid-214 and had a 5% sales rate as at end-4q14. Damai 26@Embassy Row and Nobleton Crest, located on Jalan Ampang Hilir, comprising 18 units and 25 units respectively, completed in the quarter. Average gross rental rates and capital values held stable at MYR 3.25 per sq ft per month and MYR 728 per sq ft respectively, while average market yield remained stable at 4.6%. base: 4Q1 = 1 Financial Indicators are for the Prime market. Units Q1 4Q11 4Q12 4Q13 4Q14 4Q15 4, 3, 2, 1, F Future For 21 to 214, completions are year-end annual. Future supply is for 215. Kuala Lumpur: Residential for high-end developments is expected to continue to be soft in 215. The trend of soft launching and opening the units for booking and registration 6 to 12 months before the official launch is expected to persist. New launches are likely to be priced high in view of increased costs for land, raw materials, construction and labour. Developers are expected to aggressively market their projects to secure as many sales as possible before the implementation of the Goods and Services Tax (GST) in April 215. The new tax is likely to result in a general increase in prices for goods and services including building materials. Mass market homebuyers are expected to adopt a wait-and-see approach in 215. However, the high-end market is likely to be less impacted by the new tax due to the lower price sensitivity of buyers. Rents and capital values are generally expected to remain stable. However, newly completed, modern condominiums of better quality and design are expected to command higher prices, whereas rentals of newer developments are only expected to register marginal growth due to new supply, limited demand and a competitive leasing market climate. are for the Overall market. Last Peak ^ gross, on NLA MYR 3.25 psf pm Rents stable 25 Note: Kuala Lumpur Residential refers to Kuala Lumpur s Prime residential market

56 56 Asia Pacific Property Digest Fourth Quarter 214 Jakarta: Residential Jakarta: Residential base: 4Q1 = 1 Units Q1 4Q11 4Q12 4Q13 4Q14 4Q For 21 to 214, completions are year-end annual. Future supply is for 215. Last Peak ^ net effective, on NLA USD 219 psm pa Rents stable F Future Buyer sentiment remains positive with healthy pre-sales activity Most landlords reluctant to raise rents due to strong competition Capital values and yields largely stable for rental apartments is typically more subdued during the holiday season due to the associated slower business environment and fewer expatriate arrivals. The 15 units absorbed in 4Q14 (down from 56 in the third quarter) were largely attributable to take-up of space in Plaza Senayan and demand remained focused on quality apartments in prime CBD locations. With positive net take-up for the second successive quarter, the vacancy rate declined further to 11.7% by year-end. Despite a high interest rate environment and Rupiah depreciation, buyer sentiment in the strata condominium market remained positive in 4Q14. With no new supply for the past two years, total existing apartment stock in the leasing market remained at 2,327 units. Ascott Serviced Apartment in Ciputra World delayed its opening date to early 215. There was also no change in total condominium stock which stood at 7,3 units at year-end. However, several residential developments, Raffles Residence, The Grove and Pakubuwono House, are expected to bring a combined 1,498 units to the condominium market in 215. Stable demand for rental apartments meant that a small number of landlords were able to increase rents marginally in 4Q14. However, the majority of landlords were reluctant to raise rents given the tight competition from the condominium market, and as such overall rents crept up by.2% q-o-q. Local investors are the primary buyers in the sales market in Jakarta as they perceive luxury condominiums as an investment option that offers capital gains. The limited stock of luxury residential space can be viewed as an opportunity for developers to deliver new supply to the market as positive buyer sentiment persists. is expected to remain resilient and rents in the luxury apartment market are expected to continue to marginally increase over the next 12 months in line with the expected increase in business activity and the forecasted improvement in the economy. However, continuing competition from new condominium projects, as well as existing stock is likely to keep rental increases moderate. Buyer sentiment in the luxury condominium market is expected to continue to improve in the coming quarters as confidence in the new government grows. Sales of luxury condominiums are likely to be determined by project location and quality with affluent Indonesian buyers the primary purchasers. Note: Jakarta Residential refers to Jakarta s Overall Prime residential market.

57 Asia Pacific Property Digest Fourth Quarter Manila: Residential One development completes, adding more than 36 units to stock Stable leasing demand sustains positive rent growth Continued robust investment demand leads to lower yields Leasing demand in the luxury condominium market in Makati CBD and Bonifacio Global City (BGC) in the quarter remained healthy, backed by expatriate employees and high-income households despite large upcoming supply. Similarly, investment demand continued to tread positively supported by the healthy economic conditions and low interest rate environment. Pre-sales of some luxury developments launched in 213 and 214 continued to see stable take-up. Net absorption in the quarter increased to 535 units from 351 units in 3Q14. As a result, the average vacancy rate fell 5 bps q-o-q to 5.7%. One new development was completed in 4Q14, namely Grand Midori Tower 2 in Makati CBD, adding 367 units to total stock. Several developments that were initially scheduled to complete in 214 have been pushed back to 215. One of the luxury developments scheduled to complete during 214, Discovery Primea, is expected to be finished by early 215. The luxury development has 9 units with typical unit sizes close to 4 sqm Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 12, Rent growth in the quarter remained positive, as rents inched up by.8% q-o-q to PHP 8,676 per sqm per annum. On an annual basis, rent growth for 214 was recorded at 4.3%, an increase greater than the annual growth of 3.% recorded in 213. Persisting investor demand supported the growth of capital values by 1.4% q-o-q in 4Q14, resulting in average capital values of PHP 137,121 per sqm. Capital values increased faster than rents throughout the year. Consequently, investment yields tightened further in the quarter. The expanding offshoring & outsourcing industry as well as the positive outlook on the economy will likely continue to support leasing and investment demand, which in turn may support rent and capital value growth moving forward. Despite downward pressure on rent growth due to the large supply pipeline, rents are still expected to grow at a modest rate in the next several quarters. Upcoming projects in 215 are expected to contribute more than 13, units to stock. These projects are split between Makati CBD and BGC. The large upcoming supply is likely to result in an upward push on vacancy rates in 215. The Philippines central bank maintained its policy rates at 4.% and 6.% for overnight borrowing and overnight lending rates, respectively. The stable policy rates may keep interest rates from increasing considerably, thereby supporting investments in the residential market. Units 1, 8, 6, 4, 2, For 21 to 214, completions are year-end annual. Future supply is for 215. ^ net effective, on NLA PHP 8,676 psm pa Rents rising 9 Future 15F Manila: Residential Note: Manila Residential refers to the Makati CBD and Fringe Residential Condominium Market.

58 58 Asia Pacific Property Digest Fourth Quarter 214 Hong Kong: Industrial base: 4Q1 = Q1 4Q11 4Q12 4Q13 4Q14 4Q Warehousing demand underpinned by requirements from corporate end-users Tight vacancy supports rents rising to record high level En bloc purchases by investors help push capital values higher Improving trade with the US helped offset a slowdown in trade with the EU and Mainland China, contributing to the value of exports and imports growing by 1.5% y-o-y and 4.% y-o-y, respectively, in October November. During the same two-month period, air-freight cargo grew by 5.% y-o-y while container throughput retreated by 4.6% y-o-y, which if sustained, would mark the second consecutive quarter of contraction. 3PLs affected by the slowdown in external trade growth and thinning profit margins were less active in the leasing market with demand in 4Q14 largely underpinned by requirements from corporate end-users. New supply completed during the quarter pushed the market s overall vacancy rate up to 4.2%. However, 9% of the vacant space was concentrated in just two buildings SF Centre and Kowloon Godown while most prime warehouses continued to enjoy full occupancy. Tight vacancy and high asking rents in warehouses around the port area continued to push demand towards non-core locations. More sizeable new lettings recorded during the quarter included Shiseido and Meyer Pharmaceutical leasing several floors at Tai Hing Industrial Building in Tuen Mun. Goodear s new warehouse development in Tsing Yi SF Centre was issued its Occupation Permit in October, adding about 1.5 million sq ft of prime warehousing space to the market. No additional supply is scheduled for completion until China Merchants logistics development in Tsing Yi in late F Future Rents continued to reach record highs, driven by strong growth among cargo-lift access warehouses. For 21 to 214, completions are year-end annual. Future supply is for 215. Sales activity of buildings with revitalisation potential helped push capital values higher. Among notable en bloc transactions, Emperor Group purchased Toppy Tower for HKD 418 million via equity transfer while a local investor acquired Oriental Logistics Centre for HKD 75 million. Both buildings are located in Kwai Chung. Hong Kong: Industrial ^ net, on GFA HKD 11.3 psf pm Rents rising 2 Hong Kong s visible trade is expected to continue to gather momentum over the next 12 months and grow by 8.2% in 215, on the back of continued improvements across the US and other advanced economies. On the domestic front, the retail sector is forecasted to recover from its slightly disappointing performance in 214. With no new supply expected to be added to the market until late 216, vacancy in the overall market is expected to gradually tighten over the course of 215 while rents are expected to grow in the range of 5%. Although interest rates are expected to start increasing from mid-215, the positive yield spread over other industrial asset classes should continue to attract investors towards the warehouse market, pushing capital values higher and further compressing yields over the near term. Investors may show particularly strong interest in buildings with redevelopment/refurbishment potential given the upcoming expiry of the government s revitalisation policies in early-216. Note: Hong Kong Industrial refers to Hong Kong s Industrial Warehouse market.

59 Asia Pacific Property Digest Fourth Quarter Beijing: Industrial One new completion significantly pushes up overall vacancy Competition from nearby areas prevents rental growth Driven by bullish investors, capital values continue to climb Leasing activity in 4Q14 was very quiet. An e-commerce company focusing on fresh foods leased the remaining space at Yupei Beijing Tongzhou Logistics Park, bringing the project to full occupancy. Meanwhile, a small number of existing projects were left with sizeable vacant spaces after some tenants consolidated multiple distribution locations into a single warehouse. However, these spaces are expected to be leased soon, as potential tenants were negotiating with landlords at end-4q14. Despite the increase in the vacancy rate, available space remains limited. As such, several tenants continued to consider warehouses in areas surrounding Beijing. For example, Goodman signed a second agreement with BMW Brilliance Automotive to add 12,3 sqm of space at another built-to-suit facility in Goodman Citylink in Yanjiao, Hebei Province. Just one new project Bailiwei Phase III in Daxing was completed in 4Q14. Consistent with the recent trend to build multi-storey warehouses, this 56, sqm project is a three-storey building. Designed to maintain steady room temperatures, the basement is a key attraction for e-commerce tenants and retailers, especially those selling food and wine. The absence of pre-committed space at this project, however, substantially drove up the market s overall vacancy rate in 4Q14, pushing it up to 4.4% Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = Rental growth was flat q-o-q, as landlords remained limited by how much they could increase rents given the nearby competition from warehouses close to Beijing. No en bloc sales transactions were recorded during the quarter, but both investors and developers were actively combing the market for investment opportunities. Coupled with the limited tradable properties available, continued interest in the logistics market placed downward pressure on yields. Two projects, GLP Park Pinggu Phase I and Prologis DC 2, are scheduled to complete over the coming 12 months and add 17, sqm of new supply to the market. Prologis DC 2 is scheduled to open in late-215 and should push up vacancy by year-end. Third party logistics companies, which are offering their services to a range of retailers and manufacturers, are projected to continue driving demand. Market rents are expected to rise modestly as landlords take advantage of their few vacant spaces in the market to competitively increase asking rents For 21 to 214, completions are year-end annual. Future supply is for 215. ^net effective, on GFA F RMB 1.9 psm per day Rents stable 19 Future Beijing: Industrial Note: Beijing Industrial refers to Beijing s Prime non-bonded logistics market.

60 6 Asia Pacific Property Digest Fourth Quarter 214 Shanghai: Industrial Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = 1 Non-bonded vacancy remains elevated despite strong take-up Rental growth decelerates as lease-up times lengthen Interest from investors still upbeat, though no major deals observed The non-bonded market was active in 4Q14. Net absorption rose to over 1, sqm, up from 27, sqm in 3Q14. Manufacturers, retailers and 3PLs all took considerable space in either new completions or existing projects. Other players such as e-commerce firms and hypermarkets were active as well. Despite the q-o-q increase, net take-up in the quarter still came in below expectations, as existing projects put a combined 7, sqm of space back onto the market when tenants failed to renew leases, while a large project in Songjiang that launched unoccupied last quarter has not made any leasing progress. With a large multi-storey project completing in the quarter in Minhang with no pre-commitment, total non-bonded vacancy declined only slightly from last quarter s peak of 16.% to 15.6%. Vacancy in the bonded market remained flat in 4Q14 as no new major leases were signed. was stable, however, with manufacturers and 3PLs making inquiries for bonded space. 7 6 Two new non-bonded projects were completed in Shanghai. Vailog finished a threestorey warehouse in Minhang, adding about 46, sqm of space to West Shanghai. GLP completed a 55, sqm built-to-suit project for BMW, who will use the space for its after-market services covering the Asia Pacific region. Shanghai: Industrial For 21 to 214, completions are year-end annual. Future supply is for 215. ^net effective, on GFA RMB 1.26 psm per day Growth slowing 21 Future 15F Non-bonded rents were flat on a like-for-like basis at RMB 1.27 per sqm per day. As a large supply wave reached the market in 214 and vacancy rose significantly in some submarkets (notably Songjiang), landlords felt pressure to offer better incentives to their tenants. Coupled with a slowdown in asking rents, this led to a continuous deceleration of effective rental growth. Satellite city Kunshan had a banner year for rents in 214, rising 11.5% y-o-y on strong demand, limited supply, and a comfortable rental gap with Shanghai. Bonded rental growth slowed to.8% q-o-q as the one-off effects of the FTZ launch continued to ebb. After several quarters in which institutional investors deployed capital to logistics developers in China, no major transactions were observed in the quarter. However, new investors continued to look for acquisition or joint venture opportunities, attracted by the sector s relatively high yields. Rental growth is expected to be moderate in 215, as another wave of over 5, sqm of non-bonded space will be delivered in the next 12 months. There may be some upside potential, given that 215 s supply is relatively well-distributed around the city, and there is unlikely to be a repeat of the glut seen in some submarkets in 214. Rental growth in Kunshan is expected to slow down in 215, as rents in popular districts approach those of their Shanghai neighbours, and the city sees a record of over 3, sqm of new supply. Note: Shanghai Industrial refers to high-quality modern warehouses in Shanghai City.

61 Asia Pacific Property Digest Fourth Quarter Tokyo: Industrial Strong pre-commitments to new supply in Tokyo Bay area Rents in Tokyo Bay area continue to rise amid stable demand United Urban acquires MT Ariake I and II at an NOI yield of 5.2% The Industrial Production declined.5% m-o-m in November, reversing gains witnessed in the previous month (+.4%). Meanwhile, export volumes decreased 1.7% y-o-y in November, posting negative growth for the first time in three month and in part due to weak exports of ships and automotive products. In spite of a mixed performance of key economic indicators, demand remained strong in 4Q14 and continued to be driven by third-party logistics players, manufacturers, wholesalers and retailers as they absorbed space, particularly in new supply across Greater Tokyo. Noteworthy leases in the quarter included Oji Transportation leasing Yokohama Midori-ku Logistics Centre (GFA 43, sqm), Hitachi Transport System s leasing Yachiyo Logistics Centre (GFA 43, sqm) and Kokubu leasing D Project Itabashi Shinkashi (GFA 34, sqm). Pre-leasing deals announced in 4Q14 highlighted continued occupier demand for new modern distribution facilities. Tobu Unyu will occupy Landport Atsugi-Kaneda on completion in 215 and SBS Logicom will occupy Goodman Business Park Chiba East in Q1 4Q11 4Q12 4Q13 4Q14 4Q15 Arrow indicates 12-month outlook base: 4Q1 = 1 Financial Indicators are for the Tokyo Bay Area. Container Throughput 1.4 No new supply entered the Tokyo Bay area in 4Q14. However, Greater Tokyo saw several projects complete including the fully pre-committed Goodman Mizue (GFA 69, sqm), Yachiyo Distribution Centre (GFA 58, sqm) and Yokohama Midori Logistics Centre (GFA 43, sqm). Additions to the development pipeline in 4Q14 included Landport Kashiwa Shonan I (GFA 5, sqm), Narashino Akanehama III distribution centre (GFA 38, sqm) and Redwood Chibakita (GFA 31, sqm). These projects are all due for completion in 216. Rents sustained moderate growth (1.5% q-o-q) for the 14th straight quarter in 4Q14 and averaged JPY 6,125 per tsubo per month. Rentals were supported by robust demand and limited supply in Tokyo Bay area. For the full year 214, rent growth accelerated to 3.6% y-o-y from 1.4% y-o-y in 213, and marked the third consecutive year of growth. In 4Q14, J-REITs continued to acquire assets with a major deal in the Tokyo Bay area being United Urban s acquisition of the MT Ariake Centre I and II for JPY 8 billion (NOI yield 5.2%). United Urban s also acquired Logistics Higashi-Ogishima for JPY 8.3 billion (NOI yield 5.3%). Moreover, Hulic acquired IIF Chiba Network Centre for JPY 7.6 billion (NOI yield 5.2%). 12-month Outlook According to Oxford Economics, industrial production in 215 is expected to grow 1.9% y-o-y while private consumption and exports are forecast to rise.9% y-o-y 7.5% y-o-y, respectively. These conditions should underpin demand; however, ample new supply in the Inland areas might soften rental growth. TEUs (Million) Q9 3Q1 3Q11 3Q12 3Q13 3Q14 TEUs shipped per quarter Source: Bureau of Port and Harbour, Tokyo Metropolitan Government ^ gross, on NLA JPY 6,125 per tsubo pm Rents rising 14 Tokyo: Industrial NA Note: Tokyo Industrial refers to Tokyo s Prime logistics market. Compiled in collaboration with Ichigo Real Estate Services Co., Ltd.

62 62 Asia Pacific Property Digest Fourth Quarter 214 Singapore: Industrial Q1 4Q11 4Q12 4Q13 4Q14 4Q15 base: 4Q1 = for business park space sustained by science and IT industries Rents remain stable as select science clusters continue to grow Stable capital values as investment sentiment remains healthy Data released by the Economic Development Board revealed muted manufacturing activity towards end-214. October 214 saw manufacturing output rise.2% y-o-y led by biomedical, pharmaceutical and medical technology related industries. However, when the biomedical industry is excluded, output declined by 4.3% y-o-y. In November, manufacturing output continued its downward trend, contracting some 2.8% y-o-y as a result of the stark decrease in transport engineering as well as marine & offshore engineering. Leasing interest for business parks remained healthy and continued to stem from growth industries such as IT and select science sectors. Singapore s appeal as a regional corporate headquarter base for industrial companies and MNCs has provided long standing support to the leasing market. In addition, healthy pre-commitment rates of many new developments are expected to keep vacancy rates stable, at 14.6% for 4Q14, despite substantial supply due for completion in 4Q14. An estimated 7, sqm of Business Park space was completed in 4Q14, based on estimates by the Urban Redevelopment Authority. In 4Q14, two developments achieved completion Galaxis at Ayer Rajah Crescent and Equinix at One North. Singapore: Industrial F For 21 to 214, completions are year-end annual. Future supply is for 215. Take-Up (net) Future ^ gross effective, on NLA SGD 3.89 psf pm Rents stable 1 Vacancy Rate Percent Gross rents within business parks continued an upward in the quarter, increasing.5% q-o-q to SGD 3.89 per sq ft per month. Despite financial institutions keeping a cap on expansion plans, demand continues to be healthy, especially in the fields of R&D and IT. Capital values of business parks were unchanged at SGD 554 per sq ft in 4Q14 as sentiment remains healthy. In terms of investment activity, a handful of small and mid-scale acquisitions by REITs were noted, such as Soilbuild s acquisition of two factory buildings along Tuas Bay Drive for SGD 55 million, as well as Mapletree Logistics Trust s acquisition of a factory along Pandan Loop for SGD 34 million. Separately, 4Q14 also witnessed the divestment of stakes in two industrial properties to Keppel DC REIT, at 25 Serangoon North Avenue 5 and 25 Tampines Street 92, with an appraised value of SGD million and SGD 162 million respectively. In 4Q14, yields of business parks held stable at 6.1% as capital values growth kept pace with occupancy cost. for Business Park space is expected to stay stable in the near term, no doubt sporadic as growth prospects for the finance and science related industries differ. Market fundamentals remain sound and cost savings associated with these decentralised spaces continue to appeal to firms. In terms of supply in the pipeline, 215 is also expected to surpass that of 214 with the completion of major projects such as Mediapolis with more than 78, sqm and Fusionopolis at 88, sqm. Note: Singapore Industrial refers to Singapore s island-wide business park market.

63 Asia Pacific Property Digest Fourth Quarter Sydney: Industrial Pre-lease activity drives take-up to highest level in two years Varied rental performance among precincts Strong investor demand with AUD 87.5 million of sales transactions Tenant demand remained positive in 4Q14, driven largely by a resurgence in pre-lease activity which increased significantly in the second half of 214. Total gross take-up for the quarter reached 212,6 sqm with pre-lease and design & construction take-up accounting for 75% of the total (158,7 sqm). The majority of tenant demand was again predominantly within the Outer Central West and Outer North West precincts, accounting for 86% of all quarterly take-up (183,2 sqm). The largest major tenant move of the quarter was retailer Target taking up 36,2 sqm of sublease space at 6 2 Clunies Ross Street, Pemulway in the Outer Central West. Another significant tenant move occurred in the Outer North West with Swires Cold Storage committing to 33, sqm at Sydney Business Park in Marsden Park, after purchasing the land in July 214. Annual gross take-up reached 65,2 sqm in 214, similar to the 12-month level reached in 213 (63, sqm). completions in 4Q14 reached 121,1 sqm, rebounding from a subdued amount of 76,4 sqm in 3Q14. All but one completion occurred in the Outer Central West precinct, which has been the focal area of new supply in Sydney for the majority of the last decade. The largest project completion was GPT Group s 31,9 sqm distribution centre at Lot 21 Lockwood Road, Erskine Park, 1% pre-committed by TNT Express. Other significant completions included a new development for Australia Post in Chullora (Inner West) which added 18, sqm and a 16,8 sqm speculative warehouse in Eastern Creek (Outer Central West) developed by Goodman Group. base: 4Q1 = 1 Financial Indicators are for Outer Central West Q1 4Q11 4Q12 4Q13 4Q14 4Q Average prime net face rents increased marginally between.4%.5% over the quarter in the Inner West, North and Outer Central West while rents were stable in South Sydney and the Outer South West. The Outer North West was the only precinct where rents decreased (.5% q-o-q). Yields tightened in 4Q14 across the majority of precincts with 25 to 5 basis point compression recorded in all precincts with the exception of the Inner West. The aggregate prime yield range in the quarter was 6.5% 8.25%. Investment demand remained positive in 4Q14 with 27 transactions totalling AUD 87.5 million. 12 Month Outlook The decline in the Australian dollar is having a negative impact on online retail, which in turn, may affect the third-party logistics sector in the short-term. However, the uptick in domestic retail consumption has already spurred activity in the manufacturing sector where some tenants are likely to continue to look for opportunities to upgrade distribution facilities. Rental growth in South Sydney is expected to be modest, while rental growth in areas further west is expected to be softer. Investment demand for industrial assets should continue, with several portfolios coming to market in 215 expected to bolster transaction volumes. For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. ^ net, on GFA F Take-Up (gross) Future AUD 113 psm pa Rents rising 8 Sydney: Industrial Note: Sydney Industrial refers to Sydney s industrial market (all grades).

64 64 Asia Pacific Property Digest Fourth Quarter 214 Melbourne: Industrial base: 4Q1 = 1 Financial Indicators are for West Prime Q1 4Q11 4Q12 4Q13 4Q14 4Q F Take-Up (gross) Future For 21 to 214, take-up, completions and vacancy rates are year-end annual. Future supply is for 215. Subdued occupier activity leads to lowest quarterly take-up of 214 Rents stable in most precincts, small rise in North precinct Yields hold firm after reaching new pricing benchmarks Leasing activity was again subdued in 4Q14, with 56,2 sqm of gross take-up recorded across six occupier moves. This resulted in annual take-up in Melbourne reaching 476,4 sqm, 9% below the five-year average of 525,7 sqm. Tenant activity in the quarter occurred predominantly within the pre-lease and design & construction segments, accounting for 91% of the total. Also notable in 4Q14 was the average size cohort of leases, which averaged just 9,4 sqm, reflecting the trend recorded throughout 214 of developers catering for smaller space occupier who were looking to upgrade facilities. New supply totalled 129, sqm in 4Q14, capping a very strong development year in Melbourne. Annual supply reached 553,4 sqm, reflecting a 65% increase over the five-year annual average of 336,4 sqm. The majority of completions were located in the South East precinct in 4Q14. Over the year, most new supply was built in either the West precinct (47%) or the South East (44%), with a lower volume of projects in the North precinct (9%) making up the balance. The strong supply level in Melbourne is expected to continue in 215 with an additional 556,9 sqm either already under construction or with plans approved expected over the next 12 months. The investment market remained buoyant in 4Q14. A total of AUD million of assets transacted in the quarter, which elevated annual transaction volumes in Melbourne to AUD 1.1 billion. This is a 33% increase on 213 volumes and also represents the first occasion when annual transaction volumes have breached AUD 1. billion since 27. Yields held firm in the quarter after recording significant compression throughout 214. The weight of capital from large and mid-tier domestic funds has resulted in industrial asset pricing reaching new benchmark levels. The broader Melbourne industrial prime yield range is currently 7.% 8.25%. Rents were stable cross all most precincts in 4Q14, with the only change occurring in North precinct, where an increase of 2.4% q-o-q was recorded in the prime grade. Melbourne: Industrial AUD 73 psm pa 12 Month Outlook Underwhelming leasing demand is likely to hinder rental growth over the short-term. However, subdued rental growth, coupled with a healthy supply pipeline and significant proportion of speculative space expected to come online throughout 215 is likely to encourage tenant movement, with occupiers in secondary space exploring upgrade options. Positive investor demand is expected to continue in 215. This should place further pressure on asset pricing and result in further yield compression. Rents rising 18 ^ net, on GFA NA Note: Melbourne Industrial refers Melbourne s industrial market (all grades).

65 Asia Pacific Property Digest Fourth Quarter Hong Kong: Hotels Mainland China arrivals show strong growth despite political unrest New hotels consist of international and independent operators Trading performance remains strong largely due to robust rate growth The Occupy Central movement took place in October, causing disruption to business activities during the city s second-largest retail sales period. The political turmoil also overlapped with Mainland China s week-long National Day holiday, which has traditionally been a popular period for inbound Mainland visitation. Yet the slowdown expected in Mainland visitor arrivals did not materialise, based on statistics. For the month of October alone, total Mainland Chinese arrivals showed an 18.3% increase y-o-y, the highest growth in the month of October since 211. However, it was the short and long haul markets that suffered declines of 5.1% y-o-y and 2.6%, respectively, impacted by travel warnings. As at YTD November 214, total visitor arrivals continued to rise, recording a 12.4% increase from the same period the previous year. This is mainly driven by its leading source market, Mainland China, which registered a 16.3% y-o-y growth for the period. Inbound visitation figures from South Korea and Singapore have also improved by 16.9% and 8.9% y-o-y, respectively. As at September 214, Hong Kong had 24 hotels comprising 72,359 rooms, compared to 225 hotels with 7,17 rooms at end-213. New hotels opened in the first nine months of 214 consisted of a mix of international and independent operators. Notable new hotels include the internationally branded 548-room Dorsett Regency in Kwai Chung (1Q 214), the 248-room iclub Sheung Wan Hotel (2Q 214), the 338- room iclub Fortress Hill Hotel (3Q 214) and The Pottinger Hotel (2Q 214). In 215, approximately 2,6 rooms are expected to enter the market. Luxury Hotel Trading Performance ADR / RevPAR (HKD) Source: STR Global, JLL Note: Moving Annual Average Major Additions to Hotel No. of rooms 4, 3,5 3, 2,5 2, 1,5 1, 5 7, 6, 5, 4, 3, 2, May 9 Nov 9 May 1 Nov 1 May 11 Nov 11 ADR Occupancy (%) May 12 Nov 12 May 13 Nov 13 RevPAR May 14 Nov Occupancy (%) As at YTD November 214, occupancy for luxury hotels in Hong Kong improved by 1 percentage point to 78.3%, while Average Daily Rate (ADR) increased by 4.% y-o-y to HKD 3,686. As a result, Revenue per Available Room (RevPAR) registered a 5.3% y-o-y growth to HKD 2,886. Hong Kong hotels in the Upscale, Midscale & Economy sectors also showed improvements with RevPAR growth of 3.8% y-o-y for both. Going forward, we note that the Mainland Chinese demand has diversified, shifting away from midscale and budget tour groups that only spend on shopping towards more high-end leisure and corporate travellers. Despite anti-graft measures, the performance outlook is expected to remain stable with marginal improvements to ADR and occupancy expected as a result of steady support from leisure and MICE demand, demand, and the return of tour groups. 1, Additions to Source: Industry sources, JLL 14 15F Future RevPAR Occupancy Rising ADR Hong Kong: Hotels Note: Hong Kong Hotels refer to Hong Kong s Luxury hotel market.

66 66 Asia Pacific Property Digest Fourth Quarter 214 Beijing: Hotels Upscale Hotel Trading Performance ADR/RevPAR (RMB) ADR Occupancy (%) Source: STR Global, JLL Note: Moving Annual Average Major Additions to Hotel No. of rooms 1,6 1,4 1,2 1, , 2,5 2, 1,5 1, 5 May 9 Nov 9 May 1 Nov 1 May 11 Nov 11 May 12 Nov Additions to May 13 Nov 13 RevPAR Source: Yearbook of China Tourism Statistics, Industry sources, JLL 14 May 14 Nov F Future Occupancy (%) International visitor arrivals to Beijing continue to decline Rosewood Beijing and W Beijing Chang an open RevPAR registers slight decrease to RMB 683 As at YTD November 214, international visitor arrivals to Beijing declined by 5.6% y-o-y to 3.9 million according to the Beijing Statistics Bureau. Among the top three source markets to Beijing, the USA and Japan recorded y-o-y decreases of 3.6% and.7% respectively, while South Korea registered an increase of 1.9% y-o-y. Concerns over air pollution in Beijing as well as the appreciation of the Chinese Renminbi continue to contribute to the decline in international visitor arrivals. In addition, the fourth quarter of the year is typically a period of low seasonality for domestic tourism due to less business travellers during the holiday period. Apart from the Asia Pacific Economic Cooperation (APEC) meetings, the Meetings, Incentives, Conventions and Exhibitions (MICE) market was relatively slow in 4Q14. The MICE market has been impacted by the slowdown in the domestic economy as well as restrictions on government meetings. However, Beijing recorded strong inbound visitation during the week-long national holiday in October. In 4Q14, the 283-room Rosewood Beijing and the 349-room W Beijing Chang an opened as scheduled. The Rosewood Beijing is the first Rosewood hotel to debut in Mainland China. The 111-room Yanqi Hotel, which is part of the Sunrise Kempinski Hotel complex, opened during the APEC conference and was the main venue for the meetings. The Sunrise Kempinski Hotel consists of three hotels - the 36-room Kempinski Hotel, the 111-room Yanqi hotel by Kempinski and a 176-room boutique hotel by Kempinski. We note that the newly opened hotels are in the luxury sector, which places further rate pressure on existing hotels, in view of the austerity measures which restrict government officials from spending at luxury hotels. Beijing s upscale hotels continue to show improvements in occupancy but Average Daily Rate (ADR) remained weak throughout 214. As at YTD November 214, ADR declined by 6.1% y-o-y to RMB 972, while occupancy increased by 4 percentage points y-o-y to 7.2%, resulting in minimal changes to Revenue per Available Room (RevPAR). RevPAR was recorded at RMB 683 as at YTD November 214. The reduction in ADR can mainly be attributed to the increase in room supply and the impact of the austerity measures in Mainland China. On a moving annual average basis, occupancy levels have improved and reached 69.% as at November 214, while ADR has shown a downward trend since May 214 and was recorded at RMB 96. Beijing: Hotels RevPAR Occupancy Stable ADR Moving ahead, Mainland China s economy is entering a period of moderate growth as compared to its fast paced growth in previous years. In light of this, we also expect a slight demand shift from government and real estate to information technology and tertiary sectors as these sectors become more significant. Domestic tourism is likely to remain strong and individual leisure travellers are expected to increase in the next few years. However, air pollution is still a critical issue which deters international tourists and some domestic MICE visitors from visiting Beijing. Note: Beijing Hotels refers to Beijing s Upscale hotel market.

67 Asia Pacific Property Digest Fourth Quarter Shanghai: Hotels International visitor arrivals continue to increase No major international branded hotel openings RevPAR shows healthy growth, driven by occupancy According to the latest statistics released by the Shanghai Tourism Bureau, international visitor arrivals recorded a 4.8% y-o-y increase, reaching 7.3 million as at YTD November 214. Visitors from Macau, Hong Kong and Taiwan continue to grow, showing an increase of more than 1% y-o-y in each market. International visitor arrivals have shown a more gradual growth of 2.5%, registering 5.7 million visitors. Leisure inbound travel to Shanghai is on the upward trajectory. This has been encouraged by government promotions such as the recent one-month Shanghai Tourism Festival, which has attracted many leisure tourists to the city. According to the Shanghai Tourism Bureau, Shanghai received more than 8.8 million tourists during the week long National Day holidays, an increase of 15.8% from the previous year. Meetings, Incentives, Conventions and Exhibitions (MICE) demand has also seen an increase as some companies prefer to hold MICE events in Shanghai instead of Beijing, due to the air pollution and traffic congestions in Beijing. We note that none of the planned international branded hotels have opened in 4Q14. As at mid-december 214, the Nanxiang Holiday Inn, Marriott Shanghai Minhang, Courtyard Shanghai Changfeng Park, with a total room inventory of approximately 92 rooms, have yet to open. The new opening dates of these hotels have not been released publicly as at mid-december. As at YTD November 214, occupancy showed a 6.2 percentage point increase to 66.9% as compared to the same period last year. While Average Daily Rate continued to record a marginal decline of 1.1% y-o-y to RMB 1,57 as at YTD November 214, ADR levels are still above RMB 1,. As a result, Revenue per Available Room (RevPAR) improved by 9.% y-o-y to RMB 77. Improvements in occupancy levels can be attributed to an increase in MICE demand as some companies choose Shanghai over Beijing and also due to a lack of new hotel supply. On a moving annual average basis, RevPAR registered RMB 69 as at November 214. Upscale Hotel Trading Performance ADR/RevPAR (RMB) Source: STR Global, JLL Note: Moving Annual Average Major Additions to Hotel No. of rooms 1,4 1,2 1, , 8, 6, 4, 2, Feb-11 Aug-11 Feb-12 Aug-12 ADR Occupancy (%) Feb-13 Aug-13 Feb-14 RevPAR Additions to Aug-14 Source: Yearbook of China Tourism Statistics, Industry sources, JLL F Future Occupancy (%) Corporate demand from the Hongqiao Central Business District and Shanghai Pilot Free Trade Zone, and an increase in demand from the tertiary sector is likely to benefit the hotel industry. The government is committed to promoting Shanghai as a leisure destination and the opening of Shanghai Disneyland in 215 is also likely to boost visitation. However, the upcoming pipeline of hotels in Shanghai is a source of concern for the market. There are about 5, rooms from international branded hotels likely to enter the market in 215, some of which were initially expected to open in 214. This will undoubtedly increase competition and rates are expected to come under more pressure. RevPAR Occupancy Stable ADR Shanghai: Hotels Note: Shanghai Hotels refer to Shanghai s Upscale hotel market.

68 68 Asia Pacific Property Digest Fourth Quarter 214 Tokyo: Hotels Luxury Hotel Trading Performance ADR/RevPAR (JPY) Source: STR Global, JLL Note: Moving Annual Average Major Additions to Hotel No. of rooms 5, 4, 3, 2, 1, May 9 Nov 9 May 1 Nov 1 May 11 Nov 11 ADR Occupancy (%) Source: Industry sources, JLL May 12 Nov 12 May 13 Nov 13 RevPAR May 14 Nov F Additions to Future Occupancy (%) Occupancy remains above 8%, highest level in seven years 84-room luxury hotel Aman Tokyo opens ADR growth likely to drive RevPAR in the short term International visitor arrivals to Japan recorded an increase of 28.2% y-o-y to 12.2 million as at YTD November 214. This can be attributed to a significant growth in visitors arriving from Mainland China and Taiwan, which registered y-o-y increases of 82.2% and 27.% respectively. Visitor arrivals from Thailand and Malaysia also registered a robust growth of 46.2% and 42.% y-o-y respectively, partly due to the deregulation of tourism visas in place since July 213. From 3 September 214, the relaxation of multiple visas requirements commenced for Indonesia, Philippines and Vietnam. We expect visitor arrival growth from Indonesia, Philippines and Vietnam, similar to Thailand and Malaysia. Domestic accommodation demand continues to grow in both the corporate and leisure segments since Abenomics started in 213. A weakening Japanese Yen and the increase in low cost air carriers have also boosted domestic travel. The 84-room Aman Tokyo, positioned as a luxury hotel in Tokyo, soft-opened on 22 December 214. Aman Tokyo is scheduled to open officially in spring 215. There were no other major upscale and luxury hotel openings in 4Q14. The 329-room Millennium Mitsui Garden Ginza Tokyo, a limited service hotel, opened in December 214. This is the first Millennium branded hotel in Japan and it is co-branded with Mitsui Garden Hotels, a major limited-service hotel operator. In 215, there are no new upscale and luxury hotels in the pipeline. Luxury hotel trading performance in Tokyo continues to show improvement as reflected by the Revenue per Available Room (RevPAR) increase of 14.% y-o-y as at YTD November 214. This can be attributed to the growth in both occupancy (+3.2 percentage points) and Average Daily Rate (ADR) (+9.5%) as at YTD November 214. On a moving annual average, RevPAR has maintained a growth trajectory since 2Q12, reflecting the rebound in hotel trading performance since the March 211 earthquake. While there were no investment transactions in the luxury hotel sector in Tokyo during 4Q14, Ascott Residence Trust purchased the 26-room Best Western Shinjuku Astina Hotel Tokyo for JPY 8 billion (JPY 38.8 million per key). Tokyo: Hotels RevPAR Occupancy Rising ADR Domestic and international demand is expected to maintain upward momentum. This upward trend can be attributed to the improvement in economic sentiment under the Abe Cabinet and rise in international arrivals to record levels. RevPAR growth in the short term is likely to be driven by growth in ADR as occupancy has recovered and is at its highest level in seven years. The successful bid to host the 22 Olympic Games is expected to stimulate demand and underpin growth in Tokyo s room supply over the next few years. As new projects are being developed, existing hotels are likely to benefit from increasing ADR. Note: Tokyo Hotels refers to Tokyo s Luxury hotel market.

69 Asia Pacific Property Digest Fourth Quarter Singapore: Hotels Decline in top source markets weighs on overall visitor arrivals Patina, Dusit Thani and South Beach Hotel to debut in 215 ADR growth in short term is limited According to the Singapore Tourism Board, international visitor arrivals to Singapore declined by 3.4% y-o-y as at YTD November 214. The decline of Mainland Chinese visitors following the aftermath of the Malaysia Airlines incidents continues to weigh down on overall international visitor arrivals to Singapore. Visitors from Indonesia, Singapore s top source market, recorded a decline of 8.1% y-o-y in October and November. Since the opening of the Singapore Sports Hub in June 214, the facility has hosted several international and regional events including the World Club 1s Rugby and the WTA Finals, drawing international visitors into the city. Future events are expected to continue drawing international visitors. Luxury Hotel Trading Performance ADR/RevPAR (SGD) May 9 Nov 9 May 1 Nov 1 May 11 Nov 11 ADR Occupancy (%) Source: STR Global, JLL Note: Moving Annual Average May 12 Nov 12 May 13 Nov 13 RevPAR May 14 Nov Occupancy (%) Approximately 1,773 rooms have been added to the Singapore accommodation market in 214. Major additions include the 442-room Holiday Inn Express Clarke Quay, the 134-room Sofitel So Singapore, the 243-room One Farrer Hotel and Spa and the 52-room Hotel Jen Orchardgateway. Introducing its first Hotel Jen property in Singapore, the Shangri-La Group intends to replace its existing Traders hotels with the newly-launched brand. The hotel operator has also rebranded the existing Traders Hotel Singapore. Approximately 3,899 rooms are expected to enter the accommodation market in 215, comprising mostly upscale and midscale hotels. Some of the major hotel openings include the 654-room South Beach Hotel and Club, the 5-room Jurong Lake Hotel, the 3-room Park Hotel Farrer Park and the 157-room Patina Capitol Singapore, which will be the first Patina Hotel in Asia. Dusit Thani and Villa Samadhi are also likely to open in 215. As at YTD November 214, occupancy levels improved slightly by.2 percentage points to 8.7%, while Average Daily Rate (ADR) increased marginally by 2.8% to SGD 41 as compared to the same period in the previous year. As a result, Revenue per Available Room (RevPAR) gained 3.% y-o-y to reach SGD 331. On a moving annual average basis, RevPAR of luxury hotels was recorded at SGD 334 as occupancy and ADR levels remain stable. Major Additions to Hotel No. of rooms 6, 5, 4, 3, 2, 1, Additions to Source: Industry sources, JLL 14 15F Future Singapore s economy continues to grow, recording a 1.5% y-o-y increase in 4Q14 and is estimated to register a modest growth of about 2.8% y-o-y for 214, according to the Ministry of Trade and Finance. While Singapore remains one of the key commercial hubs in the region, cautious spending by corporates continues to put pressure on rate growth. With upcoming competition from new hotels in the midscale and upscale sectors, ADR growth is expected to be further compressed. Hence, the recovery of the top two source markets, Mainland China and Indonesia, is crucial to the sustenance of the leisure segment. The decline in visitation from both markets is expected to be temporary and both markets are likely to recover in the short to medium term. RevPAR Occupancy Stable ADR Singapore: Hotels Note: Singapore Hotels refers to Singapore s Luxury hotel market.

70 7 Asia Pacific Property Digest Fourth Quarter 214 Bangkok: Hotels Luxury Hotel Trading Performance ADR / RevPAR (THB) Source: STR Global, JLL Note: Moving Annual Average Major Additions to Hotel No. of rooms 7, 6, 5, 4, 3, 2, 1, 5, 4, 3, 2, 1, May 9 Nov 9 May 1 Nov 1 May 11 Nov 11 ADR Occupancy (%) Source: Industry sources, JLL May 12 Nov 12 May 13 Nov 13 RevPAR May 14 Nov F Additions to Future Occupancy (%) International visitor arrivals continue to decline New supply concentrated in midscale segment RevPAR declines due to decrease in occupancy levels According to the Tourism Authority of Thailand (TAT), international visitors to Bangkok as at YTD November 214 continued to decline as the country remains under martial law. International visitor arrivals to Bangkok recorded a 13.9% y-o-y decrease to 13.7 million as at YTD November 214. Bangkok s main source markets continue to be dominated by regional markets which have all shown a decline due to the political situation in Thailand. Tourist arrivals from the largest source market, Mainland China, declined by 16.8% y-o-y to approximately 2.6 million during the first eleven months of 214. The remaining top five source markets namely Japan, India, Russia and South Korea recorded decreases of 19.5%, 16.%, 12.5% and 14.9% respectively. As at YTD November 214, over 1,1 new rooms have opened across different segments. The majority of new supply is concentrated in the midscale segment, including the recently opened 184-key Holiday Inn Express Bangkok Sathorn, Le Meridien Suvarnabhumi Golf Resort and Spa (214 Keys), U Sathorn Bangkok (86 keys) and Grand Swiss Sukhumvit 11 (144 keys). The upcoming supply pipeline comprises 4, rooms expected to be operational by end-215 and 5% of the new supply is concentrated in the midscale segment. The majority of upcoming supply is planned in Sukhumvit, accounting for 37% of the total supply pipeline. The new brands coming online in 215 are Ritz-Carlton, Premier Inn, Avani, Park Hyatt and Lancaster. Hotel trading performance according to STR Global as at YTD November 214 indicates that Average Daily Rate (ADR) grew slightly by.1% y-o-y to THB 5,78. However, in terms of occupancy, the market witnessed a significant decline of 15.7 percentage points to 53% as at YTD November 214 from the same period the previous year. As a result, Revenue per Available Room (RevPAR) decreased by 22.8% y-o-y to THB 3,27. On a moving annual average basis, RevPAR continued to decline and reached THB 3,9 in November 214. This was largely due to the decline in occupancy levels to 53.3% in November 214. Bangkok: Hotels RevPAR Occupancy Rising ADR Bangkok retained its position as the Best Leisure Destination in the Asia-Pacific for the second consecutive year in 214, according to the annual reader s poll conducted by the Business Traveller Asia-Pacific magazine. The TAT has implemented several initiatives to encourage inbound visitation to Thailand. This includes a reduced fee for a three-month tourist visa for visitors from Mainland China and Taiwan, improving regional and international air connectivity and the launch of tourism campaigns such as Amazing Thailand: Happiness Within which focuses on safety for tourists. With strong support from the TAT and the new tourism initiatives, we expect a rebound in international visitation to Thailand in 215. Note: Bangkok hotels refer to Bangkok s Luxury hotel market.

71 Asia Pacific Property Digest Fourth Quarter Kuala Lumpur: Hotels Most major source markets register double-digit growth in visitor arrivals No major hotel openings RevPAR continues to improve, supported by increase in ADR Visitor arrivals to Malaysia have registered a growth of 9.6% from the previous year to 22.9 million as at YTD October 214, based on latest statistics available from Tourism Malaysia. Recent political uncertainties in Bangkok have diverted some visitor demand to Malaysia due to its close proximity. Most major source markets experienced double-digit growth from the previous year. The only decline in visitor arrivals was observed in that of Mainland China, in which the negativity surrounding the country s national airline carrier and the kidnapping incidents in Sabah could have attributed to. Singapore remains the leading source market contributing to 5.7% of total international visitor arrivals due to its close proximity and increased business collaboration in Johor. In 4Q14, there were no new hotel openings. In 214, approximately 739 rooms opened in Kuala Lumpur comprising midscale hotels located in suburban areas. From 215 to 218, JLL forecasts an estimated 4,7 rooms to enter the market, which will increase the room supply by about 11%. This comprises mostly of upscale and luxury hotels. Some of the notable international hotel brands entering the market in the next few years include St. Regis, Regent, W Hotel, Four Seasons, Clermont, Fairmont, Banyan Tree, Harrods, Swissotel and Kempinski, all of which currently do not have a presence in Kuala Lumpur. As at YTD November 214, occupancy declined marginally by.5 percentage points to 73.7% while Average Daily Rate (ADR) recorded growth of 3.9% y-o-y to MYR 492. Revenue per Available Room (RevPAR) showed an increase of 3.2% y-o-y to MYR 363. On a moving annual average basis, occupancy and ADR have remained stable, with RevPAR recorded at MYR 347 as at November 214. Trading performance of hotels in Kuala Lumpur has remained stable underpinned by strong corporate and Meetings, Incentives, Conventions and Exhibitions (MICE) demand particularly from its key trade partners as reflected by healthy growth in its major source markets. The decline in Mainland Chinese visitors has not had much impact on luxury and upscale hotel trading performance as these are mostly leisure visitors who stay at midscale and economy hotels. Luxury and Upscale Hotel Trading Performance ADR/RevPAR (MYR) Source: STR Global, JLL Note: Moving Annual Average Major Additions to Hotel No. of rooms May 9 1,8 1,5 1, Nov 9 May 1 Nov 1 May 11 Nov 11 ADR Occupancy (%) Source: Industry sources, JLL May 12 Nov 12 May 13 Nov 13 RevPAR May 14 Nov F Additions to Future Occupancy (%) The Malaysian government remains committed in promoting Kuala Lumpur as a major leisure, MICE and corporate destination through the Visit Malaysia 214 campaign, leading to an expected increase in inbound corporate travel over the coming years. This promotion of Kuala Lumpur, together with the completion of Kuala Lumpur International Airport 2 (KLIA 2) in May 214, should continue to lift demand along with the growth of its low cost carrier network, and to further develop Kuala Lumpur as a global tourism and aviation hub. Nevertheless, we expect increased pressure on hotel trading performance in the short to medium term as Kuala Lumpur may encounter an oversupply of new hotel rooms in the upscale and luxury sectors given the current pipeline of development. Further growth in Kuala Lumpur s hotel market is expected to be underpinned by robust economic growth in the longer term. RevPAR Occupancy Rising ADR Kuala Lumpur: Hotels Note: Kuala Lumpur Hotels refers to Kuala Lumpur s Luxury and Upscale hotel markets

72 72 Asia Pacific Property Digest Fourth Quarter 214 Jakarta: Hotels Upscale Hotel Trading Performance ADR/RevPAR (USD) Source: STR Global, JLL Note: Moving Annual Average Major Additions to Hotel No. of rooms May 9 6, 5, 4, 3, 2, 1, Nov 9 May 1 Nov 1 May 11 Nov 11 ADR Occupancy (%) Source: Industry sources, JLL May 12 Nov 12 May 13 Nov 13 RevPAR May Additions to Nov F Future Occupancy (%) Significant growth in visitor arrivals from Middle Eastern countries No new hotel openings Significant improvement in ADR in Indonesian Rupiah terms International visitor arrivals to Jakarta via the Soekarno-Hatta International Airport (SHIA) edged up 1.3% from the previous year to 1.9 million as at YTD October 214. The slower growth was due to the presidential elections which took place earlier in the year. Amongst the major source markets, Saudi Arabia registered the highest growth with a 29.7% y-o-y increase. Stronger promotional efforts by the government to boost Shari ah tourism have prompted a significant increase in visitor arrivals from Middle Eastern countries. Starting in January 215, the introduction of a visa exemption policy for five major source markets, including Australia, Mainland China, Japan, South Korea and Russia, will further boost the tourism market as Jakarta remains the key international gateway to the country. The anticipated growth in tourism and corporate travel demand will also benefit from further infrastructure investment and ongoing airport expansion. There were no new hotel openings in 4Q14. New hotel developments that were originally planned for opening in 4Q14 have been delayed to 215, and they are predominantly in the economy and midscale segments. As at end-214, Jakarta s accommodation market comprised approximately 32,372 rooms, signifying an 8.4% increase from the previous year. Midscale and economy hotel brands such as Ibis, Holiday Inn Express, DoubleTree by Hilton, Best Western and Mercure opened in 214. There were no new upscale and luxury hotel openings in 214. As at YTD November 214, occupancy declined by 1.7 percentage points to 64.5% while Average Daily Rates (ADR) fell 1.7% y-o-y to USD 182. The decline in ADR in US Dollar terms can be attributed to the depreciation of the Indonesian Rupiah. Comparatively, ADR showed a significant improvement of 11.6% y-o-y to IDR 2.2 million resulting in Revenue per Available Room (RevPAR) growth of 8.8% to IDR 1.4 million. In terms of moving annual average, RevPAR levels have been relatively stable, achieving levels above USD 115 in the twelve months ending November 214. Although Jakarta and Indonesia experienced a volatile season in 1H14 due to the presidential elections and a significant depreciation of the Indonesian Rupiah, the economy has exhibited resilience on the back of a robust domestic demand base. The outlook for 215 is relatively positive with projected growth in investments and exports ahead, even as new President Joko Widodo attempts to introduce economic reforms across the country. Jakarta: Hotels RevPAR Occupancy Stable ADR The government recently proposed plans to restrict lavish spending on hospitality by government officials, which will directly impact the hotel industry nationwide, particularly the luxury and upscale segments. Jakarta, being the capital city, is likely to be most adversely affected. In light of uncertainties arising from the new measures and the influx of new supply in 215, we expect hotel trading performance in Jakarta to be volatile in the short term. Nevertheless, Indonesia remains one of the largest economies in the world with a favourable demographic situation, and with Jakarta being the main hub of the country, it is likely to record faster GDP growth compared to the rest of the country, and this will directly benefit trading performance in the long term. Note: Jakarta Hotels refers to Jakarta s Upscale hotel market.

73 Asia Pacific Property Digest Fourth Quarter Sydney: Hotels Total visitor nights continues to rise and underpin demand No new hotel openings Sheraton on the Park sells for AUD 463 million A total of 64.1 million visitor nights were spent in Sydney Tourism Region (city and surrounds) as at YTD September 214, representing an increase of 4.8% compared to the same period in 213. Domestic visitor nights increased 6.9% y-o-y to 17.2 million and international nights by 4.% to 46.9 million. Increases were most evident in the domestic and international visiting friends and relatives segments, with domestic business and education, and international holiday and convention travel also rising. There were no new hotel openings in 4Q14. However, an extension of Swissotel Sydney was completed and added 1 rooms to the market, whilst The Langham reopened following an extensive refurbishment of all rooms and facilities which reintegrated 96 hotel rooms. We are aware of eight accommodation developments which are currently under construction and due for completion between 215 and 217: Central Park Kensington Lane Hotel (6 rooms), the conversion of 34 Hunter Street into the Tankstream Hotel (282 rooms), the conversion of 88 Liverpool Street Sydney into hotel accommodation (76 rooms), the Sydney International Convention Centre Hotel (59 rooms) which will operate as a Sofitel, the Greenland Primus Hotel at Bathurst Street (171 rooms), the Holiday Inn Darling Harbour extension (24 rooms), the Four Points by Sheraton Darling Harbour additional tower (231 rooms), and the Foveaux Hotel on the city periphery (92 rooms). We have also identified five proposed projects thought likely to commence in the short to medium term comprising the Posh Hotel Extension (15 rooms, 215), the conversion of 28 George Street (2 rooms, 217), the Crown Hotel Resort at Barangaroo (352 rooms, 219), Druids House at 32 Pitt Street (136 rooms), and an addition to the Aspire Hotel (21 rooms). As at YTD November 214, occupancy in Sydney remained strong at 87.4%, a modest growth of.9% over the same period last year. Average Daily Rate (ADR) improved considerably by 4.% y-o-y to AUD 225 resulting in revenue per available room (RevPAR) growth of 4.9% to AUD 197. Corporate and Meetings, Incentives, Conventions and Exhibitions (MICE) demand was boosted through the winter period by strong leisure travel due to numerous events including Vivid Sydney and the Handa Opera on Sydney Harbour. Starwood Hotels & Resorts sold The Sheraton on the Park to Sunshine Insurance Group Corporation (SIG) for AUD 463 million in 4Q14. Marketwide Hotel Trading Performance ADR/RevPAR (AUD) Source: STR Global, JLL Note: Moving Annual Average Major Additions to Hotel No. of rooms May Nov 9 May 1 Nov 1 May 11 Nov 11 ADR Occupancy (%) May 12 Nov 12 May 13 RevPAR Source: Australian Bureau of Statistics, JLL Nov 13 May 14 Nov F Additions to Future Occupancy (%) The outlook for Sydney s accommodation market remains strong following the recovery which has been evident over the past four years. Occupancy levels have returned to a very high level and ADR growth is strengthening in line with the benign supply outlook and stable demand environment. Growth has been evident across a variety of demand segments including corporate, cruise and inbound visitation. The closure of the Sydney Convention & Exhibition Centre in late 213 has had only a small impact on the overall market with a number of five-star hotels enjoying considerable demand-uplift throughout the year. Despite a lack of blockbuster events in the winter months, results throughout the year were strong and are anticipated to continue throughout 215. RevPAR Occupancy Rising ADR Sydney: Hotels Note: Sydney Hotels refers to all grades of accommodation and includes both hotels and serviced apartments.

74 Newly Launched, Tokyo Industrial With Over1 Researchers On The Ground In 5 Markets, We Help You Stay Ahead Comprehensive Data, Forecasts, Reports, Presentations, Hotline To find out more, please contact: Dr Jane Murray Head of Research Asia Pacific jane.murray@ap.jll.com Roddy Allan REIS Asia Pacific roddy.allan@ap.jll.com