Asia Pacific Property Digest Q Real estate activity on track for Asia Pacific

Transcription

1 Asia Pacific Property Digest Q3 217 Real estate activity on track for Asia Pacific

2 4 Feature Articles 4 Sound fundamentals 8 What tech companies want for their offices 9 Co-working: a new way of working? 1 Co-living: next big trend in real estate? 11 The future of Korea logistics 13 Office 14 Hong Kong 15 Beijing 16 Shanghai 17 Shenzhen 18 Taipei 19 Tokyo 2 Osaka 21 Seoul 22 Singapore 23 Bangkok 24 Jakarta 25 Kuala Lumpur 26 Manila 27 Ho Chi Minh City 28 Delhi 29 Mumbai 3 Bengaluru 31 Sydney 32 Melbourne 33 Brisbane 34 Auckland 35 Retail 36 Hong Kong 37 Beijing 38 Shanghai 39 Shenzhen 4 Tokyo 41 Seoul 42 Singapore 43 Bangkok 44 Jakarta 45 Delhi 46 Sydney 47 Melbourne

3 Editor's Note The global economic outlook remains fairly robust with all major markets growing, and that is flowing on to us here in Asia Pacific. We observed strong office rental growth in Singapore, Bangalore, Melbourne and Sydney, supported by broad-based demand. Investors continue to pursue quality assets with recent transactions including the sale of a stake in The Center in Hong Kong for a record-setting USD 5.2 billion, and Asia Square Tower 2 changing hands for USD 2.1 billion. You can view this report online at I hope you enjoy reading this report and as always, we welcome your feedback on our reports and service. Thanks, Dr Megan Walters Head of Research Asia Pacific 49 Residential 5 Hong Kong 51 Beijing 52 Shanghai 53 Singapore 54 Bangkok 55 Jakarta 56 Sydney 57 Melbourne Industrial 6 Hong Kong 61 Beijing 62 Shanghai 63 Tokyo 64 Singapore 65 Sydney 66 Melbourne Hotel 68 Hong Kong 69 Beijing 7 Shanghai 71 Tokyo 72 Singapore 73 Bangkok 74 Jakarta 75 Sydney

4 4 Features ASIA PACIFIC ECONOMY Sound fundamentals For the first time in a decade, all OECD countries are on track to record growth this year, highlighting the increasing synchronisation of major economies. Strong performances from the likes of China, Japan and the Eurozone have seen growth projections for many large economies being upgraded despite ongoing uncertainties stemming from protectionism, monetary policy normalisation and geopolitical environment. In this region, growth generally remains solid as domestic demand is holding up and export-oriented economies are benefitting from an upturn in global demand. Central banks in the region, which still have room to maintain an accommodative stance, are in no rush to increase interest rates and the divergence from the US Fed is likely to persist in the short term as it moves forward with reducing its balance sheet and hiking rates. Healthy trade performance Exports for many countries in the region have enjoyed a run of strong growth, benefitting from improved intra-regional trade and global demand. Among the world s ten largest exporting nations, South Korea recorded the largest growth during the first eight months of the year according to WTO data despite strained relations with its largest trade partner China. A rosier trade environment has also underpinned robust growth in Japan, with September exports marking the tenth straight month of growth. As the global economy appears to be on solid footing, a resilient trade performance is likely to persist across much of the region. Healthy employment supports consumer spending There have been more encouraging signs that the retail market in Hong Kong has turned the corner as inbound tourism and private consumption have helped underpin six straight months of positive gains in retail sales through August. Rising tourist arrivals has also aided Singapore s retail sales performance; however, a significant drop in tourists due to tensions with China had the reverse effect in South Korea. Fortunately, these two countries recently agreed to normalise relations which should lead to a gradual improvement in visitor arrivals. In China, consumer spending continues to take place at a brisk double-digit pace. Monetary policy remains steady Central banks in the region maintain an accommodative stance and no major shifts in policy stance are expected for the rest of the year. Prime Minister Abe s definitive win in the recent snap election should see the ultra-loose monetary policy in Japan continue for the foreseeable future, while the US policy is likely to stay on course following the appointment of Jerome Powell as the next Fed chair. Healthy momentum Robust growth prospects for Asia Pacific will see it remain a key pillar of an expanding global economy. The outlook remains solid for China while Japan may also surprise on the upside amid improving consumer confidence and private investment. Reforms in India have dented short-term growth but the effects are expected to dissipate and the country should return to stronger growth next year. Southeast Asia s economies should maintain a healthy pace of expansion in part supported by external demand.

5 Figure 1: Outlook for Major Economies Country Real GDP Growth (y-o-y change) 217F 218F China Outlook Infrastructure spending, buoyant consumption and robust service sector to underpin growth; structural rebalancing to present challenges. 5 Features Japan Healthy trade performance and business investment, but subdued wage growth likely to dampen consumer spending recovery. India Growth to pick up supported by consumption alongside higher infrastructure investment. South Korea Australia Resilient exports while expansionary fiscal policy may boost growth. Geopolitical tensions remain a risk. Patchy domestic demand amid moderation in residential activity and soft mining investment. Exports to shore up growth. Indonesia Domestic consumption and ongoing infrastructure spending to maintain steady growth. Hong Kong Solid domestic demand but slower growth due to softening external demand. Singapore Healthy export performance but growth to moderate. Investment may receive a boost from government spending and measures. Source: Oxford Economics, November 217 ASIA PACIFIC PROPERTY MARKET Sustained momentum Solid fundamentals continue to sustain momentum in the commercial real estate market and with one quarter to go, 217 is turning out to be another solid year. Office leasing activity continues to be buoyant as corporate occupiers are actively seeking space to fulfil their requirements, while investor appetite remains unabated, with two landmark deals closing in recent months. BlackRock sold Asia Square Tower 2 in Singapore to CapitaLand for USD 2.1 billion, while CK Asset sold its stake in The Center in Hong Kong to a consortium of Chinese and Hong Kong investors for a record-setting USD 5.2 billion. Office leasing volumes show resilience Overall leasing activity edged up 3% y-o-y in Asia Pacific in 3Q and with a mixed performance persisting. Delhi remained the regional leader for leasing volumes; however, Tokyo, Manila and Melbourne also saw strong levels of leasing. Taipei and Seoul continued to see soft demand. Tech and financial firms continued to stand out while co-working operators were actively leasing space. In contrast, 3Q net absorption was up a robust 35% y-o-y, with strong take-up recorded in markets such as Bengaluru, Delhi and Shanghai. Domestic financials, tech and professional services continued to support leasing activity across Greater China markets. Tenants moving into recently completed buildings contributed to healthy absorption in Singapore while broad-based demand was buoyed by an improving economy. Jakarta also recorded a notable increase in net absorption. The tech industry is becoming an important and growing source of demand in the city. Steady stream of supply Over 6% of all Asia Pacific markets saw new completions in 3Q and the total volume of supply rose by 16% y-o-y. There was one small completion in Melbourne and two completions in Tokyo - both with high commitment rates. Hong Kong saw three new buildings complete outside of core areas, while a number of smaller completions were recorded in Shanghai. Most Southeast Asian markets saw new buildings enter the market including three in Manila, two in Jakarta and one in Singapore. Despite stock additions, vacancy rates continued to decline in more than half of the Asia Pacific markets during 3Q, with those in Hanoi and Guangzhou having dropped the most over the quarter. With a healthy level of new supply expected by year-end, regional vacancy is anticipated to edge up, led by higher rates in markets such as Jakarta and Manila. Singapore leads rental growth In aggregate, Asia Pacific rents increased about 1.1% q-o-q and 3.6% y-o-y. The strongest quarterly growth was recorded in Singapore as landlords of high-quality buildings increased rents and some scaled

6 6 Features back incentives, while Sydney maintained its position atop the annual growth ranking. Supply again pressured Shanghai rents, while domestic leasing activity provided modest uplift to Beijing rents. In Tokyo, quarterly rent growth was flat again as landlords remain fixed on securing tenants ahead of a supply wave. A tight vacancy environment and ongoing demand from PRC firms pushed Hong Kong Central rents higher. A focus on experience for the retail sector Select F&B segments such as casual dining, and snack and beverage operators continued to open new outlets in China s Tier 1 cities. In Shanghai, international casual and sportswear retailers remained popular while cosmetics gained traction among landlords due to high margins and rental affordability. In Beijing, affordable luxury brands were in demand. F&B remained a central driver of leasing in Hong Kong while some cosmetic brands were also active. Retail sales in Singapore recorded further gains and suggest improved consumer sentiment; however, this has not trickled through to new demand as retailers focus on enhancing existing operations rather than opening stores. CBD retail space remains the most sought after in Australia given the high foot traffic. Food operators, which are a key demand source, appear apprehensive about expanding their networks, while some fashion tenants are looking to reduce store counts and costs. Strong demand momentum holding up for logistics properties The 3PL industry remained the primary demand driver in China and Tokyo, along with retailers and/or manufacturing firms. Despite signs of recovery in external trade, leasing activity remained quiet in Hong Kong with some 3PLs downsizing for cost saving purpose. The recent uplift in economic, manufacturing and trade performance helped to support leasing of logistics space in Singapore. The Sydney and Melbourne markets saw elevated prelease activity, and demand from retail and e-commerce related users have buoyed occupier activity. Policies continue to prioritise stable markets in China Governments across China continued to keep a tight grip on policy levers to maintain stability, while new measures were announced to promote the leasing market. Under a restrictive policy environment and limited supply, highend sales levels in Shanghai remained low, while in Beijing market conditions held generally stable. New launches in the primary market continued to record strong sales in Hong Kong with subscription rates often outpacing the numbers of units available. A solid recovery continued in Singapore with further improvement in sentiment underpinning higher activity. Investment activity strengthens Investment volumes across Asia Pacific commercial real estate markets in the first nine months of 217 came in at USD 95.8 billion, up 11% from the same period a year ago. In 3Q17, volumes totalled USD 35 billion, up 6% y-o-y and 12% q-o-q. Singapore, Hong Kong, Australia and India led performance in 3Q17, but transactional activity in Japan, China and South Korea were all lower y-o-y. Japan accounted for close to 3% of the total regional volumes in the first nine months, followed by China and Australia. By sector, the office sector accounted for around 4% of total transactional activity regionally during the quarter, with the rest comprising of industrial, retail and hotels. Cross-border investment volumes remained healthy in the first nine months, accounting for 3% of total transaction Figure 2: Office Rental & Capital Value Changes, Yearly % Changes, 3Q17 y-o-y % Sydney Melbourne Rental Values Hong Kong Manila Capital Values Singapore Figures relate to the major submarket in each city (Real Estate Intelligence Service), 3Q17 Bangkok Tokyo Beijing Figure 3: Direct Commercial Real Estate Investment 28-3Q17 USD Billion Figures refer to transactions over USD 5 million in office, retail, hotels and industrial. (Real Estate Intelligence Service), 3Q17 volumes. Two of the biggest cross-border purchases in 3Q17 involved assets in Hong Kong. Inter-regional purchasers remained active, particularly in India, China and Australia, and accounted for one-third of all cross-border purchaser activity in the first nine months. Strong investor demand underpins capital value growth Asia Pacific capital value growth picked up to about 2% q-o-q. Singapore recorded a sharper increase in capital values driven by bullish bids in the land sales market and the conclusion of the mega Asia Square Tower 2 deal. Record pricing in land sales and strata sales markets continued to push up Hong Kong capital values. Healthy fundamentals to maintain On the investment front, the weight of capital seeking to access the sector is still significant, and despite being deep in the cycle, investors are actively looking for new Mumbai Shanghai Seoul Jakarta YTD 217 $95.8 bill 11% y-o-y YTD 217 Japan China Australia Hong Kong South Korea Singapore Other

7 Figure 4: Rental Property Clocks, 3Q17 Grade A Office Taipei, Kuala Lumpur Wellington Beijing Hong Kong, Tokyo Auckland Shanghai Prime Retail Auckland, Beijing Wellington, Tokyo* 7 Features Manila Sydney, Melbourne Osaka Guangzhou, Canberra Bengaluru Ho Chi Minh City Growth Slowing Rents Rising Bangkok, Singapore Delhi Chennai Mumbai Perth Rents Falling Decline Slowing Jakarta Seoul Hanoi Brisbane, Adelaide *Clock positions for the office sector relate to the main submarket in each city. Manila, Kuala Lumpur, Jakarta Shanghai Mumbai Bangkok, Delhi Growth Slowing Rents Rising Bengaluru Chennai *High Street Shops/Multi-level High Street Rents Falling Decline Slowing Hong Kong* Seoul* Singapore Guangzhou, Melbourne (Regional), Sydney (Regional), SE Queensland (Regional) Prime Residential Prime Industrial Bangkok Jakarta Kuala Lumpur Tokyo Auckland Beijing Wellington Guangzhou Manila Hong Kong, Beijing, Shanghai Growth Slowing Rents Rising Rents Falling Decline Slowing Sydney, Shanghai, Manila Growth Slowing Rents Rising Rents Falling Decline Slowing Melbourne Singapore (Logistics) Singapore* Singapore (Business Park), Hong Kong Brisbane *Luxurious *Logistics space (Hong Kong, Shanghai, Beijing, Greater Tokyo) (Real Estate Intelligence Service), 3Q17 ways to deploy funds, which should see volumes reaching our full-year target of USD 13 billion in 217. Regional leasing volumes this year are likely to be at a similar level as 216, with the potential to surprise on the upside as activity improves towards year-end. We expect relatively stable conditions next year, although there are some pockets of uncertainty about the 218 outlook which present downside risks, such as possible headwinds in the IT sector in India. About the author Dr Megan Walters joined JLL in 21 and in October 216 was appointed as Head of Research Asia Pacific. In this role, Megan leads a team of 16 professional researchers in the region, which forms part of a network of over 4 researchers in 65 countries around the globe.

8 8 Features What tech companies want for their offices The technology sector is one of the most important occupier categories in Asia Pacific. For example, the region is now home to seven of the 22 global fintech unicorns startups valued at more than USD 1 billion. The e-commerce industry has been a major contributor to office leasing demand and is projected to grow substantially in the near term. Over the last few years, we ve seen tech firms moving into Grade A office space in prime locations. The first of our tech series reports, Tech firm office location choice how does it work in Asia Pacific?, examined the Silicon Valley-like pockets that have popped up across Asia in cities such as Shenzhen and Bengaluru. Just as financial services companies cluster near stock exchanges, tech companies are also forming clusters. The tech sector and their office needs What do tech companies consider when deciding to locate their office? Let s take a look: A reliable power supply: When you re storing large volumes of data onsite and housing a large number of server racks, an unstable power supply is not an option. Room to grow: It s no secret that tech is one of the fastest growing sectors. Tech firms frequently need more space as headcounts increase, and large floor plates provide the flexibility and room to grow your team and expand your business. Good transport links: Would you work for a company whose office is in a remote area with limited transport options? Chances are, you wouldn t. Time spent commuting to work is unproductive. Prioritising your employee s quality of life is key to keeping them engaged and productive, so ensure that your office building is easily accessible via public transport. What else matters? Attracting top talent: The importance of hiring and retaining top talent is the key to the success of tech firms. The location of the office is critical since it s where employees will spend much of their working life. Therefore Grade A offices and business parks with better facilities and located in prime districts are now the top options for many tech companies as they add allure and prestige. We now see tech firms occupying more than 2 per cent of Grade A space in markets such as New Delhi, Mumbai, Bengaluru, Chennai, as well as Tokyo, Bangkok, Manila and Sydney. Co-working boosts collaboration: Tech firms thrive on innovation, and co-working creates an environment that supports collaboration, openness, knowledge sharing, innovation, and user experience. We ve seen the number of co-working tenants worldwide increasing steadily. And this figure is expected to reach 3.8 million in 22 according to research from Small Business Labs. Startups and entrepreneurs typically favour co-working as a cost-efficient workplace solution as it is flexible and fosters collaboration. But it s also becoming an attractive option for larger technology companies drawn to co-working s potential to enhance teamwork and innovation within their organisations. The tech sector is growing fast in Asia Pacific and many of these companies are now facing challenges when choosing office locations. As a real estate professional, you have plenty on your plate from dealing with rising labour and operational costs, skills gaps, lack of supportive government policies, as well as infrastructural challenges. For more, download our latest tech report. About the author Christopher Clausen is an Associate Director, Asia Pacific Research for JLL, based in Hong Kong. He regularly writes on the Asia Pacific office markets. In his current role, Christopher leverages his local market research background and works closely with local market Research teams to control and improve the quality of their methodologies, analysis and reporting.

9 9 Features Co-working: a new way of working? Working styles have changed considerably over the last decade. There has been a movement away from the traditional partitioned desks and closed offices, mainly for senior personnel, towards open-plan offices and now to agile work spaces and unassigned desks. Area Leased by CBD Melbourne 35K Brisbane 13K Area Leased Nationally 212 8K 213 5K K The lack of rigidity in the workplace lately has not only become commonplace, but it is now desired and expected by existing and incoming employees, due to it facilitating approachability of all seniority levels within an organisation and well as collaborative environments. Sydney 5K Research Perth 6K Canberra 3K Adelaide 1K K K 217 4K The community-style workplace is also attractive to small businesses which would normally work out of closed-off suites or home offices. The co-working environment presents an opportunity for these small industries and businesses to grow at a heightened pace than in alternate spaces due to exposure to ideas, similar businesses and funding sources. Both small and large businesses attracted to co-working spaces Strong demand for co-working space is represented by the fact that not only small business and start-ups have taken space in co-working offices, as initially expected, but that large multinational companies like Microsoft and Google, for example, are current tenants in WeWork s Sydney offices. In global terms, the growth of co-working spaces is showing no signs of stagnating. WeWork, one of the world s largest coworking providers was listed as the eleventh largest occupier of space in New York City in WeWork also has a significant footprint in San Francisco and London, alongside current plans to expand into China biggest-office-tenants-in-216/ Since 21, co-working providers have contributed 97,1 sqm positive net absorption to the six Australian CBD markets, representing 13.8 per cent of total net absorption over this time period (74,8 sqm). The majority of this activity has been concentrated in the last five years, with 86 per cent of that net absorption recorded since 214 (comprising only of moves > 1, sqm). This recent surge in take up of co-working space is attributable to not only this rising trend of co-working but has also been sustained by demand from small and large businesses due to its practicality and flexibility. However, whether this current pace of expansion of these providers is sustainable in the long term is contentious. Over the last seven years, Sydney CBD has seen the strongest take-up activity of cowork providers (46.7 per cent), experiencing About the author Rosie Cooper is a Market Research Analyst for JLL, based in Sydney, Australia. Her primary focus is coverage over the major office markets within the Sydney region for our Real Estate Intelligence Service (REIS). She has been with the firm since 217. positive net absorption of these companies of 45,4 sqm. Melbourne CBD has followed close behind with 28,9 sqm (39.7 per cent) of positive net occupier take-up over the past seven years. A trend towards co-working appears to have been established. Historically, most co-working operators tenants consisted of start-ups a sector with high business failure rates when the economy slows. However, larger co-working operators are reporting that a high proportion of the space is being leased by established listed companies. We believe that that large organisations are seeking flexibility in their workplace solutions. The importance of the corporate office will not be diminished, but a strategy for co-working and suburban office is important for attracting and retaining a diverse and highly skilled workforce.

10 1 Features Co-living: next big trend in real estate? Co-living is a form of housing where residents share living space and a set of interests and values. It is part of a modern, urban lifestyle that values openness and sharing, and aligns with the general shift toward ridesharing/carsharing and coworking. In particular, co-living can be seen as an extension of the co-working trend that sees people share office space and common facilities in order to save costs and share ideas. Co-living houses may offer short-term accommodation and host regular events for residents, many of which are students, startup founders or employees, young professionals, as well as artists and creatives. In a sense, it is student accommodation for grown-ups. China is a trailblazer in this space in Asia. YOU+ International Youth Community already offers rooms of between 22 to 5 sqm to young people in Guangzhou and Beijing. The trend is also catching on in other markets. Campus Hong Kong operates a co-living facility after converting 48 one-bedroom apartments into fourbed dormitory rooms. In India, there are currently four startups that focus on coliving operating out of Gurgaon, and two based out of Bengaluru. Singapore has been slightly lagging, but Ascott, CapitaLand s wholly-owned serviced residence arm, unveiled the lyf brand last year and partnered with the Singapore Management University to field test co-living concepts. Why are we seeing more co-living space? Co-living in adult dorms appeals to the millennial generation, who are more open to the idea of social networking and the sharing economy. Not surprisingly, we see very strong interest in the co-living concept in cities with growing wave of millennial workers and travellers, and hubs that attract technopreneurs, startups and the creative industries. Co-living is also inspired by the co-working phenomenon in Asia over the past few years. Some operators now extended beyond co-working to bring together work and lifestyle under one roof. For example, Beijing-based real estate startup 5Lmeet opened a centre in Beijing that includes an open office and amenities such as, gym, restaurants and event space. Rising accommodation costs also play a part. Many singles, students or young workers find conventional apartments out of their reach because of high rents, deposits and furnishing costs. Although pricings of co-living space are quite diverse, they are generally more affordable. The size of co-living space also compares favourably with small flats coming to the market micro-apartments as small as 2 sqm has marketability in Hong Kong. Co-living space providers differentiate by: Location is important, either in the city centre with a ready catchment of business travellers or close to university and technology hubs. YOU+, the most famous co-living start-up in China, will open two new communities in the Haidian district of Beijing, the location of two of China s top universities and of the Zhongguancun technology hub. Many co-living hubs are furnished and have communal facilities for residents to connect and collaborate. These spaces can be easily converted into zones for social activities such as talks, music and cooking sessions, or workshops. Some hubs further distinguish themselves by locating in lofts or heritage buildings. For example, lyf@smu in Singapore located within a conservation building in the 19s, with fun colours and quirky design elements. Many investors already actively pursue options in the market to create flexible coliving facilities. Given limited opportunities on the market and tight pricing, we expect value-add specialists, in particular, to devote more resources towards opportunities in co-living space. About the author Myles Huang is a Director of Research in Asia Pacific Capital Markets. He monitors trends in direct commercial real estate transactions in Asia Pacific, as well as coordinates the production of the quarterly Capital Markets In Focus report and other thoughtleadership papers relating to the regional real estate investment market. He has been with the firm for over ten years.

11 11 Features The future of Korea logistics South Korea is pushing hard to create inner city logistics centres. In its recently announced initiative, e-logis Town, the government has opted to renovate old, obsolete truck terminals instead of building from scratch. These terminals will be remodelled into small-scale modern logistics hubs suitable for e-commerce, B2C delivery and quick delivery schedules. Current West Truck Terminal West Truck Terminal after renovation Within the six locations which the government has chosen to redevelop, three locations are situated in Seoul: Korea Truck Terminal (86, sqm) in Seocho-Gu, West Truck Terminal (98,895 sqm) in Yangcheon- Gu, Siheung Distribution Center (156,71 sqm) in Geumcheon-Gu. Many experts believe these areas are ideal for inner city logistics hubs due to their superb accessibility to districts and wellestablished transportation infrastructure around these locations. According to the government roadmap of e-logis Town, these locations are beyond ordinary shipping yards. They have the potential to transform into futuristic logistics hubs armed with robots and IoT technologies. These hubs will be a centralisation location integrating and connecting distribution, logistics and technology industries. Government officials anticipate more than USD 2 million can be saved on logistics costs thanks to shorter distances. With half day deliveries achievable due to diversified distribution channels, it will enable more direct trades. In addition, delivery couriers taking advantage of new IT technology would benefit from a shortened delivery time to customers. Recent media has shed light on this new government scheme which could present new investment opportunities for domestic and overseas investors seeking high yields, with a handful of these locations highlighted in highly quoted IB analyst report: Why did foreigners buy IFC by HI Investment & Securities. However, this high profile plan is raising concerns as these centres need to compete with existing distribution centres like Gunpo Integrated Freight Terminal, which is located close to these six places. Furthermore, the highly anticipated Bucheon Ojung logistics (459,987 sqm) centre just came online, boosting existing logistics capacity even further. Many critics argue that the mastermind behind this plan, the Ministry of Land, Infrastructure and Transport, should revaluate overall demand thoroughly and come up with concrete measures on how these six locations can coexist with other logistics centres given that many local e-commerce businesses already have their own their distribution centres near Seoul. About the author Sungmin Park is the Head of Research for JLL in Korea. He is responsible for conducting research on market trends in commercial real estate in Korea and providing up-to-date market intelligence to international and domestic clients. Nevertheless, the future of these logistics centres appears to be bright with the growth of the e-commerce sector. According to Shinyoung Securities, over the last 15 years, online retail has grown 2 times whereas offline sales have merely risen two-fold over the same period. With this trend continuing in 218, online retail sales are expected to reach USD 1 billion, representing 3 percent of total retail sales according to Shinyoung Securities. The rapid growth of e-commerce is likely to continue in the immediate future, driving demand for new logistics centres in the future. Beyond slashing their prices, many online retailers differentiate themselves from other e-commerce players by offering same-day delivery services, meaning that they need to expand their inner city logistics capabilities. Thanks to e-logis Town, I may soon see all of my favourite items delivered to my doorstep within a few hours.

12 Real Estate Services jll.com/asiapacific More than 16 researchers waiting to deliver the data of your dreams. 217 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

13 Office

14 Hong Kong 14 Office Capital values reach new record high against strong pricing in the strata-titled sales market. Denis Ma, Head of Research, Hong Kong 6.9% sq ft per month, net effective on NLA HKD Growth Slowing Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for Central F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q17. are for the overall market Percent PRC demand slows ahead of the National People s Congress Pre-commitments amounted to 24,6 sq ft as MNCs sought more cost-effective space outside of the city s traditional core office areas. Upcoming projects in Hong Kong East and Kowloon East also continued to garner strong tenant interest. In Central, PRC demand eased to account for just 23% of the total floor area leased as tenants adopted a wait-and-see attitude ahead of the National People s Congress in October. As a result, the occupier market shrunk by 47,3 sq ft as lease expiries outpaced new lettings. URA to sell a commercial development site in Sheung Wan The URA released site C of the Peel Street/Graham Street development project in Sheung Wan for sale via tender with a closing date in October. The site has an area of about 28,9 sq ft and a maximum buildable gross floor area of 433,516 sq ft for office, hotel and retail purposes. The Town Planning Board approved a proposed change for a Comprehensive Development Area site in Tsuen Wan (TWTL 393) to include office and retail elements. The site, located at Yeung Uk Road, can potentially yield about 237,9 sq ft of office floor space by 22. Records continue to tumble in the strata-titled sales market A tight vacancy environment boosted rents in the overall market by.8% q-o-q. Wanchai/Causeway Bay posted the strongest growth, up 1.4% q-o-q, boosted by Central tenants seeking cost-saving options. The 79th floor at The Center in Central was reportedly sold for HKD 738. million (HKD 55,854 per sq ft), setting a new record high in terms of unit rate for the office sector. Capital values continued to advance across the board, with Central as the best performing submarket. Outlook: Capital values still have scope to trend higher With leasing demand forecasted to remain stable over the near term and more new office supply on the way, we expect rent growth to continue to ease through the remainder of 217 before retreating in the range of -5% in 218. However, sustained PRC demand should see the Central office market buck the trend, to grow in the range of 5-1% in 217 and -5% in 218. Supply-demand imbalance, long-term growth opportunities and a healthy yield spread over inflation adjusted risk-free rates should continue to draw investors even as the rental market shows signs of softening. As a result, capital values are expected to continue to edge higher over the near term, in the range of 15-2% in 217 and -5% in 218. Investment yields are forecasted to further compress over the next 12 months. Note: Hong Kong Office refers to Hong Kong s overall Grade A office market.

15 Beijing -3.% sqm per month, net effective on GFA RMB 385 Rents Stable Rents between highand low-quality buildings diverge, as quality buildings draw more pent-up demand. Joe Zhou, Head of Research, China 15 Office Recent completions drive upgrade demand Recent high-quality completions continued to enable upgrade demand, fuelled mainly by domestic companies. Established firms from across China remained interested in setting up offices in Beijing to extend their national footprint. CBD landlords were keen on securing finance and professional services tenants who are able to afford higher office rentals, while lower-margin industries eyed lower-rent opportunities in non-core areas or decentralised submarkets. Market tightens following no new supply Vacancy rates fell slightly in most submarkets as no new supply entered the market. The four new completions from the previous quarter continued to perform well, recording a combined net take-up of 5, sqm in 3Q17. Less than 2% of the space at these buildings was available for lease as at end-3q17. Soho office building for sale in the CBD There was a noticeable divergence in rents between high-quality and lowquality buildings in the quarter, as demand for high-quality buildings continued to attract pent-up demand over the latter. Landlords of the majority of recent completions also managed to raise rents significantly after reaching high occupancy levels. Beijing-based developer Soho put Guanghualu Soho 2 up for sale. Such opportunities in the CBD are rare and the building quickly received interest from multiple domestic and foreign investors. Outlook: Lize completions will offer new, decentralised options over the next twelve months are expected to be concentrated in Lize, an emerging decentralised office submarket. The rental flexibility of landlords is likely to be tested as they attempt to attract tenants to an unproven area and strive to replicate the relatively quick success of the maturing Wangjing submarket. Landlords of lower-end Grade A buildings in the CBD will be in close competition with landlords of future CBD Core area projects who are offering rental discounts to secure commitment. Landlords of international Grade A buildings are largely expected to be able to maintain rent levels due to their high-quality and stable occupancy rates. Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the CBD F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q17. are for the overall market Percent Note: Beijing Office refers to Beijing s overall Grade A office market.

16 Shanghai 16 Office Co-working operators continue to expand aggressively, and even anchor some new projects. Daniel Yao, National Director - Research, Shanghai -2.% sqm per day, net effective on GFA RMB 1.4 Rents Falling Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the CBD. Thousand sqm F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q17. are for the CBD Percent Strong upgrade demand fills new Grade A space Leasing demand in the CBD continued to be led by domestic financial services companies, particularly those in the asset management and securities sectors. TMT companies also contributed to take-up as they continued to upgrade and expand. Co-working operators expanded in the CBD, as some high-profile operators secured multiple locations. The decentralised market remained active, with Pudong demand feeling the effects as some companies looking to save costs considered decentralised options. Firms upgrading and expanding from older Grade A and B buildings drove demand for new space, while also leading to heightened vacancy in older buildings. Pudong Expo area sees wave of new completion No new completions in the CBD. Despite moderate leasing activity in the CBD, vacancy edged up.1 percentage points q-o-q to 12.5% due to decentralisation. In the decentralised market, nine projects with a total GFA of 397, sqm reached completion, of which eight were located in the Pudong Expo area. As the majority of those buildings are reserved either partially or completely for self-use, overall decentralised vacancy fell by 1.5 percentage points to 24.2% despite the new supply. Robust demand supports rental growth in the decentralised market While the CBD saw moderate leasing, older properties felt rental pressure as space was vacated by tenants upgrading and expanding. As a result, overall CBD rents recorded a slight decline of.3% q-o-q. Meanwhile, rents in the decentralised market - and particularly in fringe CBD areas - continued to gain momentum, with rents rising 1.3% q-o-q. En bloc office sales were driven by domestic funds and asset management companies. Major sales transactions included Hui Yin Center, Cura International Building and Wentong Building. Outlook: CBD rents to feel pressure for the remainder of the year Even with several projects delayed to 218, new Grade A supply as at YTD September has already reached a record of nearly 2 million sqm. While leasing activity has remained robust - especially in the decentralised submarket - new space will take time to be absorbed, and we expect rental growth to remain subdued over the next six months. The decentralised submarket is continuing to gain momentum, especially in fringe CBD areas such as the Railway Station and the North Bund. Rental growth in these submarkets is expected to continue to outperform that of the CBD over the next 12 months. Note: Shanghai Office refers to Shanghai s overall Grade A office market consisting of Pudong, Puxi and decentralised areas.

17 Shenzhen.3% sqm per month, net on GFA RMB 29 Rents Stable Shenzhen receives a boost from new setups, led by the strong finance and tech segments. Silvia Zeng, Head of Research, South China 17 Office Demand from new setups; Futian CBD preferred destination Overall demand remained stable with total net absorption of about 9, sqm, of which Futian accounted for 7%. Supported by rapid economic growth and a healthy business atmosphere, companies continue to be attracted to Shenzhen. Demand from the financial sector increased in the quarter on the back of positive optimism about the future of the Houhai Headquarter zone; this area has seen more setups and visibly improved facilities. In emerging areas, enquires from banks continued to drive activity. Healthy absorption leads to lower vacancy SCT Centre (about 3, sqm) was completed in Luohu in the quarter, pushing total Grade A office stock to around 6 million sqm. The overall vacancy rate decreased by about 1 percentage point q-o-q to 16%, largely owing to net absorption in Futian and Nanshan. Active investment demand for self-use space In 3Q17, rentals remained stable from the previous quarter. Although vacancy rates in Futian and Nanshan edged down, landlords maintained a conservative attitude towards the leasing market in consideration of the large volume of new supply due in the upcoming quarters. There were investment enquiries from occupiers for self-use space, mainly domestic financial institutions, and this supported capital values which rose 1% q-o-q. Outlook: Finance and tech firms to remain active Leasing demand is set to grow with finance and technology firms expected to continue expanding amidst healthy economic growth. Activity in the owneroccupier segment is also likely to rise with the completion of new headquarter buildings. In spite of the positive demand outlook, a robust supply pipeline will see over 1 million sqm of new supply entering the market in the next 12 months. As such, the overall vacancy rate is anticipated to move higher, which may prompt some landlords to lower rents, resulting in overall Grade A office rents declining in the range of 2-4% Rental Value base: 4Q13 = 1 Financial Indicators are for Futian. Thousand sqm 1,6 1,4 1,2 1, F Take-Up (net) Capital Value 18F Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q17. are for the overall market Percent Note: Shenzhen Office refers to Shenzhen s overall Grade A office market.

18 Taipei 18 Office Leasing moderates while investment rebounds. Jamie Chang, Head of Research, Taiwan -.2% ping per month, net on GFA NTD 3,112 Rents Stable Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for Xinyi F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q17. are for the overall market. Percent Owner-occupation supports take-up The majority of new leases signed in the quarter were for small units, continuing the recent trend. Several finance, high-tech and biomedical/pharmaceutical businesses were observed to be surrendering space in the quarter. As such, negative net absorption was recorded across all submarkets except for the Non-Core CBD which was buoyed by a large owner-occupation. Overall net take-up reached 24,3 ping in 3Q17. One project completes The new completion, Taiwan Cooperative Bank Headquarters, provided 32,639 ping of office space of which 27,9 ping is for self-use. The overall vacancy rate edged up by.8 percentage points q-o-q to 8.7% due to new supply and tenants giving back space. Rentals remain flat as landlords and tenants being cautious Cautious business sentiment and competition for tenants saw most landlords hold rents stable. As a result, overall rents remained relatively flat at NTD 2,643 per ping per month. Quarterly investment volumes reached NTD 19.5 billion, increasing about 5% q-o-q and y-o-y. However, due to slow investment activity in the previous two quarters, total investment volumes as at YTD September 217 reached only NTD 37.2 billion, the second lowest level for this period in the past nine years. Outlook: More leasing deals expected to close by year-end Occupiers are likely to remain cautious with ongoing concerns about operating costs prolonging lease negotiation processes. However, a preference by occupiers and landlords to finalise negotiations in the same calendar year, along with increased availability of high-quality space from upcoming completions is likely to see more deals signed by year-end. The new, highquality buildings are likely to attract tenants intending to consolidate operations or looking to upgrade. Investment activity has been slow due to a lack of product that meets investors desired returns. This situation is likely to persist and push institutional investors to look at alternative investment options such as public infrastructure, development of public-owned land, medical care facilities and retirement homes. Note: Taipei Office refers to Taipei s overall Grade A office market.

19 Tokyo 2.1% tsubo per month, gross on NLA JPY 36,65 Growth Slowing Rental growth decelerates as vacancy rises; investment activity continues to be robust. Takeshi Akagi, Head of Research, Japan 19 Office New completions stimulate relocation demand The September Tankan Survey indicated that business sentiment of large manufacturers reached its highest level in ten years. However, there was a slight deterioration in sentiment about the outlook partly due to a labour shortage. Tight labour market conditions persisted with the unemployment rate and job-toapplicant ratio in August at 2.8% and 1.52, respectively. Relocation demand was observed to come from various business sectors including information and communication, manufacturing and professional services. In line with this, enquiries for upcoming supply was strong, coming from the aforementioned sectors and also real estate leasing services firms. Net absorption in 3Q17 was a strong 92, sqm. Vacancy rises to 3% for the first time in two years With the completion of Akasaka Intercity Air (82, sqm, NLA) and Jingumae Tower Building (22, sqm, NLA), new supply totalled 13, sqm in 3Q17, increasing stock by 1.3% q-o-q and 4.8% y-o-y. Occupiers in the former office building included GSK, Accenture and Saison Information Systems, and in the latter, Beams and Furla Japan. The vacancy rate stood at 3.% at end-3q17, increasing 1 bps q-o-q. This marked the fourth consecutive quarterly rise. An increase in vacancy in Shinagawa offset positive absorption across the CBD, especially from Roppongi. Rents and capital values continue to grow, albeit modestly Rents averaged JPY 36,65 per tsubo per month at end-3q17, increasing.2% q-o-q and 2.1% y-o-y. This marked 22 straight quarters of growth, although the pace slowed for the third consecutive quarter. Growth, albeit moderate, continued in submarkets including Akasaka/Roppongi and Otemachi/Marunouchi. Capital values registered growth of.1% q-o-q and 3.2% y-o-y. The office sector continued to attract investors, both domestic and foreign. A noteworthy sales transaction in the quarter was Mori Hills Reit acquiring a stake of Toranomon Hills Mori Tower for JPY 5.7 billion (NOI cap rate of 3.4%). Outlook: Rent and capital value growth to moderate further According to Oxford Economics, real GDP is expected to grow 1.7% in 217 and 1.6% in 218. Uncertainty related to geopolitical tensions pose a risk to the outlook. Healthy demand for new and existing space should see the vacancy rate remain stable around 3% by end-217. Low vacancy should support modest rent growth. In the investment market, capital value growth is expected to moderate further given limited rent growth and stable cap rates. Note: Tokyo Office refers to Tokyo s overall Grade A office market. Thousand sqm Rental Value Capital Value base: 4Q13 = F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q Percent

20 Osaka 2 Office Rents continue to rise; investment activity picks up. Yuto Ohigashi, Associate Director - Research, Japan 7.3% tsubo per month, gross on NLA JPY 18,253 Rents Rising Rental Value Capital Value base: 4Q13 = 1 Thousand sqm F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q Percent Information and communication sector drives net take-up According to the September Tankan Survey, the diffusion index which measures business sentiment of large manufacturers registered 2, increasing 6 points from the previous survey in June, and indicating improvement for the fourth consecutive quarter. The labour market remained tight with July s unemployment rate at a low 3.1% and the jobs-to-applicant ratio at Relocation demand continued to come from business sectors including information and communication, financial and insurance, and health and social work. Healthy demand coupled with new supply in Kyobashi, resulted in net absorption in 3Q17 registering a strong 33, sqm. Vacancy remains below 3% Shin MID Osaka Kyobashi Building (32, sqm, NLA) completed in 3Q17. This redevelopment project was completed at the former Panasonic Osaka Kyobashi site, with occupiers including K-Opticom. K-Opticom will consolidate multiple offices including one in Nakanoshima Dai Building. The vacancy rate stood at 2.6% at end-3q17, decreasing 1 bps q-o-q and 12 bps y-o-y. Rent and capital value growth moderates Rents averaged JPY 18,253 per tsubo per month at end-3q17, increasing 1.1% q-o-q and 7.3% y-o-y. Rental growth was registered for the thirteenth straight quarter. Rental growth was driven by submarkets including Midosuji and Umeda. Capital values registered growth of 1.3% q-o-q and 15.3% y-o-y, reflecting rent growth and stable cap rates. There were no Grade A sales transactions in 3Q17 despite growing interest in Osaka; investors are increasingly looking outside of Tokyo for opportunities. Outlook: Rent and capital value growth to slow down According to Oxford Economics, real GDP is expected to grow.2% in 217 and.4% in 218. Healthy demand and limited supply are expected to see the vacancy rate remain below 5% and this should support further rental growth in the remainder of 217. In the investment market, capital values are expected to grow, reflecting rent growth and further cap rate compression. Note: Osaka Office refers to Osaka s 2-Ku s Grade A office market.

21 Seoul -5.% pyung per month, net effective on GFA KRW 92,515 Decline Slowing Soft demand trend persists with major tenants moving into owner-occupied stock. Sungmin Park, Head of Research, South Korea 21 Office Major move-outs push net absorption into negative territory Overall net absorption was recorded at -4,2 pyung in 3Q17, mostly due to departures of Hana Bank and its affiliates (total 17,3 pyung) in the CBD into their remodelled headquarter building in the same district. On a positive note, Shinhan Bank (2, pyung) and Lotte Card (1,5 pyung) signed new leases for space in Booyoung Taepyungro Building in the CBD. In Gangnam, positive take-up in Meritz Tower, Posco Center and Kyobo Tower were offset by major move-outs such as Descente and Samsung affiliates from Capital Tower and Samsung Life Seocho Tower, respectively. Vacancy stands still amidst lacklustre leasing activity Seoul vacancy increased 3 bps q-o-q to 11.5% due to a slowdown in leasing activity and higher vacancy in some key buildings located in the CBD. Yeouido saw a slight improvement in vacancy due to an increase in occupied space at KTB building, whereas Gangnam vacancy remained relatively unchanged q-o-q. No new supply was completed in the three major districts during the quarter. Mixed rental trends; investment volumes slow Overall rents increased.8% q-o-q, driven by positive rental growth in Gangnam (1.3%) and the CBD (1.1%). Yeouido rents declined 1.2% q-o-q, reflecting lingering vacancy and subdued demand in the district. The most notable investment transaction concluded during the quarter was the sale of NC Tower 2 (GFA 8,119 pyung) which traded from NC Soft to IGIS Asset Management for KRW 117 billion. International investors have become more cautious due to increasing geopolitical tensions in the Korean peninsula. Outlook: Demand to improve but rental growth limited Further departures to owner-occupied stock are expected but this trend should conclude in early 218. Overall leasing demand should improve relative to recent years; however, new completions including Centropolis in the CBD and KTCU in Yeouido are likely to see overall vacancy remain elevated. Gangnam is set to maintain its position as the rental outperformer due to low vacancy, limited supply and a robust IT sector. Rental growth is likely to be limited in both the CBD and Yeouido due to lingering vacancy Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the CBD. Thousand sqm F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q17. are for the overall market. Percent Note: Seoul Office refers to Seoul s Grade A office market.

22 Singapore 22 Office Recovery on firm footing as rents and capital values rise for a second consecutive quarter at an accelerated pace. Tay Huey Ying, Head of Research, Singapore 2.7% sq ft per month, gross effective on NLA SGD 8.86 Rents Rising Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the CBD. Thousand sqm F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q17. are for the CBD Percent Improving business sentiment driving increased occupier activity Occupiers are aware that the leasing market is turning in favour of landlords and that it is in their interest to act fast to secure space. Some have committed to space ahead of their lease expiries. These are taking place amid improving business sentiment that is underpinned by a brightened economic outlook. Occupier demand remained broad based in the quarter. Co-working operators remained a growing source of demand as they sought to ramp up their presence in Singapore and secure a foothold in this new business. New supply peak with the completion of Marina One The completion of Marina One (about 1.9 million sq ft) in 3Q17 increased CBD stock by 6.7% to 31.2 million sq ft. New supply has therefore peaked and will taper down and dry up by 219. The overall CBD physical vacancy rate rose due to the injection of Marina One into stock as tenants who committed to space have yet to move in. If this building was excluded from the calculation, the vacancy level remained unchanged from 2Q17. Growth in rents and capital values accelerates Overall CBD rents grew for the second consecutive quarter and at a faster q-o-q pace in 3Q17 than in 2Q17, lifted mainly by high occupancy in quality buildings, especially those in the Marina Bay area. The substantial commitments in newly completed buildings such as Marina One and UIC Building have alleviated some pressure for landlords. Investor interest stayed strong as evidenced by the conclusion of the mega SGD 2.9 billion Asia Square Tower 2 deal and the bullish top bid received for the Beach Road Government Land Sale commercial site. These deals drove a sharper increase in capital values than the preceding quarter. Yields held relatively stable at the previous quarter s level. Outlook: Growth momentum to continue Fuelled by a positive economic outlook, businesses could potentially seek more office space and add to demand. This, coupled with limited supply in 218, is expected to provide the impetus for rents to continue to trend upwards. Investor interest in quality assets is expected to stay buoyed by the strengthening leasing market. The gradual increase in the US Federal Reserve s interest rates is foreseen to have minimal dampening effects on capital values, which we expect should continue to grow. Note: Singapore Office refers to Singapore s CBD Grade A office market in Marina Bay, Raffles Place, Shenton Way, and Marina Centre.

23 Bangkok 1.7% sqm per month, gross on NLA THB 831 Rents Rising Limited supply and robust demand should put upward pressure on rents as vacancy remains near historically low levels. Andrew Gulbrandson, Head of Research, Thailand 23 Office Strong net take-up as occupiers relocate to new buildings Net absorption totalled more than 32, sqm in 3Q17, a significant turnaround relative to the negative figure observed in 2Q17. Newly opened Gaysorn Tower represented a large portion of new demand in the quarter, with a precommitment rate of 85% on opening. Notable leasing transactions in the quarter came from a variety of occupier sectors including consumer goods, IT and telecommunications, and hospitality. Many occupiers will be relocating to buildings completed in the last two years. Gaysorn Tower completes; the vacancy rate continues declining Gaysorn Tower completed in the quarter, adding 32, sqm of space to the market, bringing total stock to 1.95 million sqm. The building is expected to receive LEED Gold certification and has secured occupiers from a range of industries, as well as marquee companies such as Facebook and LINE Corporation. As a result of healthy demand, the vacancy rate declined to 7.8% in 3Q17, down from 8.% in the previous quarter. Yields compress as rising land prices drive capital values higher Average gross rents in the CBA increased by.1% q-o-q and 1.7% y-o-y. As new supply has remained relatively limited, landlords have generally been in a strong position to negotiate with occupiers. Rising land prices and healthy investor interest continued to drive capital values higher. In 3Q17, capital values increased by.9% q-o-q, compressing market yields slightly q-o-q to 6.5%. Outlook: Limited supply, healthy demand should drive rents up Only one new project is expected to complete over the next 12 months. The 3, sqm-krungsri Ploenchit Tower will serve as a new headquarters for Krungsri / Bank of Ayudhaya. On completion, the building will draw some of the bank s business units out of for-lease buildings; however, we expect the shortterm impact on vacancy to be limted as these upcoming voids are already being marketed. As vacancy tightens, we expect rental rates to continue to rise. That said, some landlords may offer competitive renewal rates to lock-in existing occupiers for longer periods, in anticipation of a large supply boom anticipated for This behavior may put downward pressure on average rents despite the market being very much controlled by landlords at this time. Thousand sqm Rental Value Capital Value base: 4Q13 = F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q Percent Note: Bangkok Office refers to Bangkok s Central Business Area (CBA) Grade A office market.

24 Jakarta 24 Office Strong leasing activity from tech firms. James Taylor, Head of Research, Indonesia -11.5% sqm per annum, net effective on NLA IDR 3,489,761 Rents Falling Thousand sqm Rental Value Capital Value base: 4Q13 = F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q Percent Technology firms continue expanding Online marketplaces, fintech and other technology firms were actively looking to lease new space during the quarter. Tech firms signed more than half of the new leasing deals agreed on in 3Q17, and there is a sense that this emerging sector is well positioned to pick up some of the slack from downsizing in commodities sectors. While net absorption levels were healthy for two consecutive quarters, demand remained patchy. Demand remains strongest for buildings with excellent locations such as the Sudirman Central Business District (SCBD) or those with relatively affordable rents. One Grade A completion in 3Q17 One Grade A building was completed in 3Q17. Telkom Landmark 2 is the second phase of the existing Telkom Landmark building located on Jalan Gatot Subroto in the CBD. The project is partially occupied by Telkomsel, with the unoccupied space available for lease. More than 23, sqm of Grade A space has been completed as at YTD September 217, and depending on the timing of upcoming supply we could still see a record supply year in 217. Despite improving demand, the sheer volume of recent supply is such that the Grade A vacancy rate now stands at 3%. Rents continue compressing Many landlords continue to be flexible on rents in order to capture demand. Single-digit quarterly rental declines have been the norm since mid-215 and 3Q17 saw a continuation of this trend with Grade A CBD rents falling by 3.1% q-o-q. Few en bloc sales transactions have historically closed in Jakarta as the market is tightly held and no deals were recorded in 3Q17. However, several key development projects are in the pipeline. Japanese developers Mori and Mitsubishi Estates have projects on Sudirman and Rasuna Said respectively; both of which are in the early stages of development. Outlook: Record supply volumes offset by improving demand The technology sector and upgrade demand are likely to continue to be the driving forces behind Grade A net absorption over the next 12 months. Well-located projects with good access to infrastructure and amenities are likely to continue to outperform the market. A packed supply pipeline is such that record supply volumes are likely to continue impacting vacancy rates and rents are expected to continue compressing in 218. En bloc transactions are likely to be limited and the most likely entry point for overseas investors is development sites; those with good access to existing and upcoming infrastructure are expected to remain popular. Note: Jakarta Office refers to Jakarta s CBD Grade A office market.

25 Kuala Lumpur -.3% sq ft per month, gross on NLA MYR 6.2 Rents Stable There is moderate leasing demand across Kuala Lumpur. James Short, Head of Markets, Malaysia 25 Office Demand continues to improve Overall leasing demand remained stable in 3Q17. Moderate take-up was observed in both the Kuala Lumpur City and Decentralised submarkets with demand coming from a diverse range of businesses. Co-working operators, both domestic and international, are continuing to expand in the market. Overall vacancy edges lower amid mild take-up No major supply was completed in either submarket and Kuala Lumpur office stock remained at 49.4 million sq ft. The remaining completion expected for the year will come on line in the CBD. Vacancy rates decreased marginally in both submarkets against an absence of new supply and the general air of optimism in the market due to improved economic indicators. Rents continue to rise in KLC and correct in DC Rents in Kuala Lumpur office buildings remained largely unchanged. However, landlords of select office buildings raised rents due to increased confidence in the market and their buildings positioning - especially since applications for MSC status were frozen earlier this year. Rents in the Decentralised submarket corrected as landlords of some buildings prepared for direct competition with upcoming offices. One sales transaction took place in Kuala Lumpur City with Vista Tower (551,875 sq ft, NLA) being sold to AmanahRaya-Kenedix REIT by an entity related to BlackRock for a total consideration of MYR 455 million. Vista Tower is a 63-storey office tower with an occupancy rate of 74.4% as at 31 July 217, and the reported net yield was 6.5%. Outlook: Renewed optimism as business climate improves The outlook for the remainder of the year is generally positive on the back of improving economic indicators and the stabilisation of oil prices. Although overall leasing demand and the investment market are expected to remain stable moving forward, there is still some concern over the large incoming supply pipeline. While there is an impending threat of oversupply in the market in the next 12 months, the moderate pre-commitment rates shown by some projects will likely result in the vacancy rate remaining stable. Likewise, these conditions should also be conducive to overall rental growth in both submarkets. Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the Kuala Lumpur City Centre F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q17. are for Kuala Lumpur City Centre Percent Note: Kuala Lumpur Office refers to Kuala Lumpur s Grade A office market consisting of Kuala Lumpur City Centre (KLC) and Decentralised (DC) submarkets.

26 Manila 26 Office Broader sources of demand underpin stable growth of rents. Claro dg. Cordero, Jr., Head of Research, Philippines 4.1% sqm per month, net effective on NLA PHP 1,5 Growth Slowing Thousand sqm Rental Value Capital Value base: 4Q13 = F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q Percent Net absorption increases as demand broadens Net take-up was recorded at 86,1 sqm in 3Q17, up 2.7% q-o-q and supported by relatively stable demand for office space. The sources of demand have diversified following a temporary slowdown in take-up from offshoring and outsourcing (O&O) firms. The majority of demand in Makati CBD and BGC came from online gaming, e-commerce, manufacturing and consulting firms, along with lease renewals from O&O firms. An e-commerce firm took up 2,1 sqm of space in BGC, while an online gaming firm leased 1,2 sqm in Makati CBD. Supply slippage persists Three office developments were completed in 3Q17, adding 62,2 sqm of office space to total existing stock. One completed building was The Curve by Irmo, Inc. The LEED-certified office tower is located within e-square, a special economic zone in BGC. The completion date for five developments, expected to be finished in 3Q17, was moved to 4Q17. The slowdown in office completions can be attributed to the lack of skilled construction workers in the country. Steady demand along with limited new supply helped keep the vacancy rate low at 2.3% in 3Q17. Capital value growth surpasses rent growth Rents in Makati CBD and BGC areas maintained stable growth in 3Q17, increasing.9% q-o-q and 4.1% y-o-y to reach PHP 1,5 per sqm per month. Growth was underpinned by stable demand for office space despite an observed slowdown of O&O leasing activity. Capital values recorded positive growth of 1.4% q-o-q and 7.7% y-o-y in 3Q17, while investment yields contracted further to 8.9%, down about 3 bps y-o-y as capital values increased faster than rents. Outlook: Large upcoming supply to temper rent growth Eight office developments are scheduled for completion in 4Q17, adding approximately 21, sqm of office space to total stock. This additional office stock is likely to slow rent growth. According to S&P, investor interest in the country remains intact as the current administration has sustained the previous administration s macroeconomic policies and complemented them with new reforms. It is expected that the Philippines is likely to attract more foreign investment, consequently increasing office demand in the country. Note: Manila s Office refers to Makati CBD and BGC Grade A office market.

27 Ho Chi Minh City 3.2% sqm per month, net effective on NLA USD 39.8 Rents Rising Strong demand helps to absorb new supply. Trang Le, Head of Research, Vietnam 27 Office Occupancy decreases slightly A healthy level of demand was observed during 3Q17 with nearly 27, sqm of Grade A space absorbed, mainly recorded at the newly completed building. Nonetheless, existing buildings continued to record good occupancy rates in excess of 9%. As a result of an aggressive pre-leasing strategy, a high pre-commitment rate was recorded at the new building and this helped to limit downward pressure on the market occupancy rate. Saigon Centre completes, adding 32, sqm to stock Saigon Centre Phase II completed during the quarter and was the first new building to enter the market since Vietcombank Tower opened in 215. Despite this, the vacancy rate only registered a modest increase of 17 bps q-o-q or 5 bps y-o-y to 5.7% due the high level of occupier interest in the building. Deutsches Haus is scheduled to complete in 4Q17 and will push total supply for 217 to 58,4 sqm. This new building along with Saigon Centre Phase II will set the new benchmark for Grade A space in the market. Rents rise in both old and new buildings The average rent for Grade A office space was USD 39.8 per sqm per month in 3Q17, an increase of 2.8% q-o-q and 3.2% y-o-y. The rise was driven by increased rents at existing buildings and high rents at Saigon Centre Phase II. No major sales transactions were recorded in the quarter. Outlook: Upbeat market conditions expected to persist The outlook for demand in the Grade A office market is positive given strong economic fundamentals. Net absorption should remain at a healthy level as space at the recently completed Saigon Centre Phase II and the upcoming Deutsches Haus are taken up. Relocation and new set-up activity should continue to be key drivers of demand. Strong demand and the availability of high-quality space is expected to underpin a further increase in rents. Thousand sqm Rental Value base: 4Q13 = F 18F Take-Up (net) Vacancy Rate Percent For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q17. Note: Ho Chi Minh City Office refers to Ho Chi Minh City s Grade A office market.

28 Delhi 28 Office Net absorption hits a six-quarter high, underpinned by strong take-up at new completions. Rohan Sharma, Associate Director - Research, India -.6% sq ft per month, gross on GFA INR 139 Rents Rising Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the SBD. Thousand sqm 1,4 1,2 1, F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q17. are for the overall market. Percent Stronger leasing activity Gross leasing volumes showed a substantial increase in the quarter, largely driven by requirements from technology occupiers. Firms from manufacturing, industrial, consulting, e-commerce and serviced office sectors were also active in leasing space. Net absorption in the CBD rose to a 12-quarter high while quality new completions drove take-up in the SBD. In Gurgaon, net take-up rebounded strongly from 2Q17. Noida saw net absorption decline by 4% q-o-q due to limited available space in quality IT buildings. Supply additions at a ten-quarter high; Gurgaon leads the way New project completions and refurbished projects added 2.9 million sq ft of office space in the quarter. Ten projects were completed in Gurgaon, adding 2.2 million sq ft. The vacancy rate rose 4 bps q-o-q to 3.7%. However, the vacancy rate remained low in prime office corridors and high-quality office buildings amid ongoing churn due to lease expiries and relocations. Rents and capital values marginally up in Gurgaon In Gurgaon, rents rose on account of gains in DLF Cybercity and in prominent SEZ projects, along with rent growth in Golf Course Extension Road and Sohna Road. Relative rent stability prevailed in the SBD and Noida, while a minor rental correction was observed in the CBD. Capital values rose sharply in the quarter, driven by premium assets in key office corridors. The DLF-GIC portfolio transaction which completed in the quarter set the benchmark for future deals for quality leased assets. As a result, overall yields were down by 2 bps q-o-q. Outlook: Pre-commitments to support net absorption We anticipate that IT-business process management firms may pursue a relocation/consolidation oriented strategy, with increased automation demanding an operational realignment. Demand is likely to be driven by captive back-offices of global financial institutions, high-end analytics and software development firms, and from consulting, financial services, manufacturing/industrial and e-commerce sectors. Rent growth is expected to be driven by high-quality buildings with high occupancy levels and select upcoming projects. Capital value growth is likely to slightly outpace rent growth with further yield compression anticipated. Note: Delhi Office refers to Delhi NCR s overall Grade A office market.

29 Mumbai -.7% sq ft per month, gross on GFA INR 21 Rents Rising Co-working space steadily gaining prominence in Mumbai. Subash Bhola, Director - Research, India 29 Office New completions bolster take-up In 3Q17, net absorption increased 25% q-o-q to 1.6 million sq ft. The contribution of pre-commitment in buildings that became operational in 3Q17 remained high at.77 million sq ft. Co-working, pharmaceutics, BFSI back offices and FMCG companies drove demand. Upcoming office buildings in the Navi Mumbai submarket attracted pre-commitments. IT tenants are cautiously evaluating their expansion plans for Grade A office space. It is important to mention that select MNCs from trading and media industries signed deals to operate select business functions in co-working space. Four large buildings become operational during the quarter In 3Q17, four projects became operational, providing a total area of 1.7 million sq ft and with a combined pre-commitment rate of 45%. Developers of projects with notable pre-commitments were seen speeding up construction to meet delivery timelines. Mumbai s total stock grew by 1.6% q-o-q to 11.1 million sq ft. Developers are looking at the SBDs to launch commercial/non-it projects, as the projected growth for the IT industry is expected to be lukewarm compared to previous estimates. Financial indicators in 3Q17 relatively unchanged On an overall basis, financial indicators remained generally stable q-o-q. However, select suburban submarkets saw marginal upward rental movement. The majority of lease renewals and most new transactions were closed slightly above the previous quarter s market average. In the CBD, rents continued to decline, causing yields to decrease slightly y-o-y. However, the eastern and western submarkets witnessed capital value appreciation of.5% q-o-q. Outlook: Generally stable demand in the short term IT tenants are moving slower on executing their expansions plans. However, companies from other established sectors such as manufacturing and pharmaceuticals should support demand. Over a longer time frame, automation and artificial intelligence may present challenges to IT/ITeS and back office activity. Supply levels are likely to be higher next year and projects nearing completions have healthy pre-commitment levels. Cost-conscious tenants including IT/ ITeS occupiers will continue to take up office space in the Suburbs, supporting steadily rising rents and capital values, especially in non-it areas. Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the SBD BKC F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q17. are for the overall market Percent Note: Mumbai Office refers to Mumbai s overall Grade A market.

30 Bengaluru 3 Office Absorption strengthens, driven by strong demand from corporates. Trivita Roy, Associate Director - Research, India 6.% sq ft per month, gross on GFA INR 76.6 Rents Rising Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the SBD. Thousand sqm 1,2 1, F 18F Take-Up (net) Vacancy Rate Percent Strong pre-commitments to new supply boost net take-up Demand strengthened amid strong interest from corporate occupiers. Net absorption increased to 2.5 million sq ft in 3Q17, with pre-commitments to new completions being the primary contributor to take-up. The SBD remained the most preferred submarket and accounted for 73% of total absorption in the quarter. Key occupiers who leased space in 3Q17 included Atos, LM Wind, Itron and E&Y. Vacancy edges higher Six buildings started operations in 3Q17, adding 3.2 million sq ft to total stock, which stood at 16.9 million sq ft at end-3q17. Several of the buildings that were completed achieved occupancy rates in excess of 8%. The vacancy rate increased to 3.4% in 3Q17 from 2.9% in 2Q17, due to vacant space at the newly completed buildings. Healthy rental growth across the city In 3Q17, low vacancy and strong demand supported a rise in rents, increasing in the range of 2-4.5% q-o-q across the city. Sustained demand from investors and strong rental growth lifted capital values in 3Q17. Despite strong investor interest, there was limited transaction activity and it was mostly related to strata-titled sales. Outlook: Strong commitments to new supply to keep vacancy low Recently launched projects witnessed a fast pace of construction in 3Q17 and this has strengthened the supply pipeline in 218. This situation should help slightly alleviate the tight market conditions by providing tenants with more options. Rents are likely to show strong growth in the next year, especially in the SBD, as occupiers continue to lease space at high rents. Ongoing demand for quality assets with good occupancy levels is likely to result in modest yield compression. For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q17. are for the overall market. Note: : Bengaluru Office refers to Bengaluru s overall Grade A office market.

31 Sydney 22.9% sqm per annum, gross effective on NLA AUD 927 Growth Slowing Strong tenant demand for good quality space is exerting downward pressure on prime grade vacancy rates. Andrew Ballantyne, Head of Research, Australia 31 Office Pre-lease activity bolsters 3Q17 net absorption The majority of leasing activity (>1, sqm) in 3Q17 was concentrated in the professional services, finance and insurance sectors. Law firms were active over the quarter, with two firms relocating into premium grade office towers. Net absorption totalled 41,4 sqm over the quarter. This strong figure was bolstered by Commonwealth Bank of Australia (CBA) moving into pre-leased space at Darling Square (27,83 sqm). Westpac also expanded back into space at 275 Kent Street (16,131 sqm). Positive tenant demand for premium grade space The commercial component of Darling Square (27,83 sqm) reached practical completion in 3Q17. The asset was 1% pre-committed by CBA. The building forms part of a larger mixed-use precinct which will include residential, student accommodation, public space and retail. Sydney CBD vacancy fell by.4 percentage points to 6.% in 3Q17 the lowest level since 1Q8. Positive demand for premium grade office space has resulted in a sharp contraction in the vacancy rate from 14.7% in 4Q16 to 7.3% in 3Q17. Wynyard Place sale the largest transaction in 217 A 49.9% stake of Wynyard Place, 1 Carrington Street was sold by Brookfield to AMP Capital (25%) and UniSuper (24.9%) for a total of AUD million in 3Q17. Brookfield retains a 5.1% stake in the building. This is the largest transaction in the Australian office market as at YTD September 217. Net face rents continued to rise and incentives trended lower (albeit at a decreasing rate) across both prime and secondary stock. Sydney CBD prime (22.9%) and secondary (21.5%) gross effective rental growth has been the strongest of the 19 Australian office markets we track. Outlook: The yield compression cycle is approaching its end Sydney CBD office withdrawals for 217 (15,4 sqm) will be the highest figure since 1997, and is equivalent to 3.% of Sydney CBD office stock. The majority of these withdrawals were related to the Sydney Metro infrastructure project and the Quay Quarter Tower office development. The prime yield compression cycle is expected to end in 217. Sydney CBD prime yields are forecast to range between 4.5%-5.25% by year-end, which will be the tightest CBD yield range in Australia. Thousand sqm Rental Value Capital Value base: 4Q13 = F 18F Take-Up (net) Vacancy Rate For 212 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q Percent Note: Sydney Office refers to Sydney s CBD office market (all grades).

32 Melbourne 32 Office Strong demand shifts to Melbourne s non-cbd markets in 3Q17. Annabel McFarlane, Director - Research, Melbourne 14.8% sqm per annum, gross effective on NLA AUD 495 Growth Slowing Rental Value Capital Value base: 4Q13 = 1 Thousand sqm F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q Percent CBD net absorption moderates in 3Q17 following strong 1H17 Contractions and consolidations dulled the impact of expansions in Melbourne s CBD office market with positive net absorption totalling 5,7 sqm in 3Q17. This was the 14th consecutive quarter of positive net absorption. Net absorption totalled 1,9 sqm as at YTD 3Q17 and is well-above average, which over the last decade has totalled 68,5 sqm per annum. Demand accelerated in non-cbd markets in 3Q17. Melbourne s fringe office market recorded the strongest quarter of net absorption since 3Q1 (22,6 sqm) with 2,5 sqm of take-up in the Yarra precinct. Melbourne s SES market recorded the strongest quarter of net absorption in over a decade (39,5 sqm). Limited supply contributes to declining vacancy CBD vacancy edged down to 6.9%, the lowest level in four years. No new supply has been added to the market since early 217. Nine projects are currently under construction and expected to add 355,9 sqm to the market by 22. These assets are close to 7% pre-committed. Fringe and SES vacancy declined sharply to 6.9% and 1.7% respectively. Supply in the fringe market is concentrated in the Yarra precinct. A small project completed at 21 Goodwood Street, Richmond (2,5 sqm). Six (4,5 sqm) of twelve (8,39 sqm) projects under construction or with plans approved are in the Yarra precinct. There will be no new supply in the SES market until late 218. Limited supply and strong demand support higher effective rents Yields for Melbourne s CBD secondary and non-cbd assets tightened further. Melbourne s CBD prime office market yields stabilised (4.75%-5.75%) but CBD secondary yields tightened at the softer end (5.25%-6.25%). Yields tightened further across prime and secondary fringe, and SES markets. Melbourne is in the midst of a rental upswing. CBD prime and secondary gross effective rents have increased by 14.8% and 7.6% y-o-y respectively. Prime fringe rental growth (11.5% y-o-y) has been strong as withdrawals of assets for conversion to other uses have impacted the market. SES prime market is benefiting from the hiatus in supply, with rents up 6.2% y-o-y. Outlook: Demand to come off near-record levels of last 18 months Melbourne s CBD office market is in a period of low supply. Vacancy is expected to remain well-below average throughout 218 and increase as supply comes on stream to create a more balanced market in CBD office market yields are at record lows and minimal further tightening is expected. A number of major sales transactions are expected to complete in 4Q17. Note: Melbourne Office refers to Melbourne s CBD office market (all grades).

33 Brisbane -1.4% sqm per annum, gross effective on NLA AUD 386 Decline Slowing The Brisbane CBD s recovery suffers a setback in 3Q17, with the first quarter of negative net absorption since 4Q14. Leigh Warner, National Director - Research, Australia 33 Office Negative net absorption is recorded for the first time since 4Q14 Net absorption in 3Q17 was -18,4 sqm, largely a result of the state government consolidating into existing office space. As of YTD September 217, net absorption reached 13,9 sqm. Demand for premium grade space has been relatively strong this year, with net absorption of 23,8 sqm as at YTD September 217. Tenants are taking advantage of the competitive effective rental rates being offered in the premium market. Despite negative net absorption, vacancy only rises slightly Vacancy rose slightly to 15.8% in 3Q17 from 15.5% the previous quarter. Prime vacancy continued to decline to 11.8% because of solid demand for premium buildings. The withdrawal of Forestry House (14, sqm) was the main reason that vacancy did not rise very much in 3Q17. The state government was occupying the entire building and consolidated their departments into existing office space. Forestry House and the building adjacent, Queensland Health Building, are being withdrawn by owner Ashe Morgan to undertake a major refurbishment. 16 Ann Street the only sales transaction in 3Q17 CorVal Partners sold 16 Ann Street to Singapore s Alpha Investment Partners for AUD million. The building had a WALE of 9. years and transacted at an equivalent yield of 5.84%. Prime gross effective rents continued to fall because of a rise in incentives in the quarter. Gross face rents increased to AUD 79 per sqm per annum, with average incentives also rising to 38.%. Outlook: Vacancy likely to remain relatively flat in 218 Brisbane CBD vacancy is expected to be 15.3% by end-218. The major moves from the CBD to the Near City next year, by Aurecon and Aurizon, will likely offset positive demand expected from an improving Queensland economy. The yield compression cycle is expected to be at, or close to, its peak in Brisbane. However, softening of yields is not expected over the next 12 months Rental Value Capital Value base: 4Q13 = 1 Thousand sqm F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q Percent Note: Brisbane Office refers to Brisbane s CBD office market (all grades).

34 Auckland 34 Office Strong pre-commitments and limited available space in existing stock underpin continued rental growth, albeit at a slower pace. Tom Barclay, Head of Research, New Zealand 2.6% sqm per annum, net on NLA NZD 488 Growth Slowing Thousand sqm Rental Value Capital Value base: 4Q13 = F 18F Take-Up (net) Vacancy Rate For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q Percent Tenant demand remains robust White collar job growth and strong net migration drove the expansion of the overall occupier footprint. Demand continued to be skewed towards the prime end of the market, as a preference for quality persists. Demand has been strongest in the CBD waterfront and Wynyard areas, where the majority of prime stock is located. Demand for secondary stock is less pronounced, driving an increase in available space in midtown. Prime vacancy remains minimal Vacancy within the top end of the market is limited, with premium vacancy sitting below 1 percent as of end-3q17. Available space will start to increase as the Commercial Bay reshuffle plays out. Vacancy across secondary stock has been increasing, driven by occupier s relocation into Grade A and premium space. Many of these tenants are leaving the core CBD in favour of Wynyard/Victoria Quarter, where they can obtain prime space with larger floor plates. Tighter lending restrictions having little effect on offshore investors Lending restrictions have slowed transaction activity in the sub NZD 1 million price band, particularly for properties with development angles. Institutional investors remained active, including involvement in the recent sale of 25 Queen Street for NZD 174 million. The average prime yield firmed marginally in 3Q17, driven by a slight compression of lower end yields. The average yield was 6.5% at end-3q17, 5 bps lower than 2Q17. Prime yields are forecast to firm marginally further over 4Q17, although this will be dependent on transactional evidence. Outlook: Prime vacancy to remain low Vacancy at the top end of the market is forecast to remain at structurally low levels over the next 12 months. Several smaller projects are due to reach completion; however, all are heavily pre-leased, offering little relief to the market. With occupiers taking the opportunity to upgrade to higher quality space, secondary vacancy is on the rise. This presents opportunities to reposition some assets for a change of use or refurbishment. Note: Auckland Office refers to Auckland s CBD and Viaduct Harbour office markets.

35 Retail

36 Hong Kong Market nears bottom against a recovery in inbound tourism and retail sales. Terence Chan, Head of Retail, Hong Kong -13.6% sq ft per month, net on GFA HKD Decline Slowing 36 Retail RV (High Street Shop) CV (High Street Shop) RV (Premium Prime Shopping Centre) RV (Overall Prime Shopping Centre) base: 4Q13 = 1 Thousand sqm F 18F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. Visitor arrivals and retail sales continue to pick up Total visitor arrivals increased by.5% y-o-y in July-August, slightly slower than the 1.% growth recorded in 2Q17. Growth was weighed down by a 2.3% y-o-y slip in same-day visitor arrivals from China. Nevertheless, supported by a 1.2% y-o-y jump in jewellery and watch sales, total retail sales rose 3.3% y-o-y in July-August. Leasing activity was largely dominated by renewals as landlords slashed rents to retain tenants ahead of the year-end holiday season. Mass retailers, notably F&B and cosmetic retailers, took advantage of the pullback in rentals to undertake expansion. Three retail projects slated for completion in the coming months No new prime shopping centres were completed in 3Q17. The extension of Maritime Square (already over 9% pre-leased) along with two other new projects including Ocean PopWalk in Tseung Kwan O and Lee Garden Three in Causeway Bay remain on schedule to complete by the end of the year. Rental correction moderates for high street shops High street shop rentals continued their slide, down 2.6% q-o-q in 3Q17, with larger-sized shops with large lump-sum rentals in prime shopping locations under the greatest pressure. The weak performance in a select number of individual malls dragged rents in overall prime shopping centres down by.1% q-o-q. Several large-scale en bloc sales transactions were recorded during the quarter, including the sale of KCP, a shopping centre in Kowloon City (64, sq ft) reportedly for HKD 5 billion via equity transfer to an investor with China ties. The vendor will have realised a gain of around HKD 3.52 billion over the course of nine years. Outlook: Investors still on the lookout for bargains With high street shop rents already down 8.8% through the first three quarters of this year and landlords still willing to lower rents further, we ve revised our fullyear forecast and now expect rents to decline in the range of 1-15%. However, we hold our forecast for prime shopping centre rentals to slide -5% in 217 as landlords continue to adjust the trade mix in their portfolios. Still, we remain optimistic that we are getting closer to the bottom of the market. Retail properties have drawn increased investor interest against improving demand drivers for the leasing market and record-high prices in other segments of the local property market. Still, we ve revised our forecast for capital values to fall in the range of 1%-15% in 217, in tandem with high street rentals. Note: Hong Kong Retail refers to Hong Kong s overall prime shopping centres and high street retail markets.

37 Beijing 1.3% sqm per month, net effective on NLA RMB 889 Growth Slowing Demand for new and fresh tenants remains strong as competition continues to intensify. Joe Zhou, Head of Research, China Several segments within F&B drive demand Alibaba s Hema Supermarket opened its second fresh concept store in Beijing to drive more people to its online store. A former luxury flagship building at Taikoo Li re-opened as an outdoor fine-dining destination, tapping into growing appetite for outdoor F&B options. Hot milk tea retailer Hey Tea opened its first two stores in Beijing. Landlords are welcoming affordable luxury retailers due to their high sales-persqm ratio. Others are looking for ways to differentiate their malls in the market by considering less traditional tenants, such as co-working operators or more niche fitness providers. Recently opened malls fill up fast There was no new supply in the quarter. Recently launched malls filled up quickly. Huaxi Live Hi-up in West Beijing and China World Mall New Zone in East Beijing reached occupancy rates of above 9% in the quarter, drawing footfall away from nearby malls. Guiyou Department Store near the CBD closed for renovations. It is set to open as a mini shopping centre by year-end. The landlord is currently upgrading the project s facilities to support several F&B and entertainment stores to cater to demand from nearby white-collar workers. Beijing Hualian purchases a retail centre Urban and Suburban malls registered growth of.3% and.7% q-o-q respectively, holding the rental trend relatively stable. Some core malls have started to reach their rental ceilings with at least one Wangfujing landlord reducing rents in the quarter. CapitaLand (Retail China Trust) announced the sale of CapitaMall Anzhen, a 43,443-sqm mall outside of the North Third Ring Road in Beijing, to Beijing Hualian Group (BHG). BHG currently operates the centre as a department store under a long-term master-lease. Outlook: 4Q17 set to be a peak supply quarter Hongkong Land s WF Central in Wangfujing Pedestrian Street is the highestprofile project expected to come online by year-end, when some 7, sqm of new supply is scheduled to enter the market. However, newly announced policies affecting construction and fit-out plans may delay openings. Demand for market differentiators and experience-oriented tenants will remain strong as competition continues to intensify. Landlords are likely to look to upgrade to affordable luxury retailers where suitable to achieve higher rents. Suburban mall rental growth should continue to outpace Urban mall growth. Note: Beijing Retail refers to Beijing s Urban retail market. Thousand sqm Q Q14 4Q15 4Q16 4Q17 4Q18 Rental Value Capital Value base: 4Q13 = F 18F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q Retail

38 Shanghai Improving sentiment supports faster pace of rental growth. Joe Zhou, Head of Research, China 3.5% sqm per day, net on NLA RMB 52.2 Rents Rising 38 Retail Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the Prime market F 18F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. are for the Prime market. Strong leasing from cosmetics and casual dining brands International sportswear and casual clothing brands maintained their expansion momentum, while landlords welcomed demand from cosmetics brands for their high margins and rental affordability. Casual dining and beverage shops aggressively expanded even as some brands turned to ever-more creative promotions to stand out in a competitive marketplace. The quarter saw further expansion by grocery chains such as M&G Shop and Kule Chaowan. Such stores offer a broad variety of popular consumer goods and seasonal items, and landlords expect them to help diversify tenant mix and extend visitor dwell times. Five projects complete in 217 s most active quarter so far F&B focused Feng Sheng Li opened in West Nanjing Road; SOHO Bund opened in the Bund area targeting white collar professionals; community mall KiNG88 debuted in Changning; Capital Square opened in Zhabei with a heavy emphasis on F&B; and the much anticipated MixC opened in Minhang with high occupancy. Overall supply for the quarter was 342,7 sqm. Vacancy in prime areas rose slightly to 1.7% as SOHO Bund and Feng Sheng Li reached the market with opening rates below the market average. Decentralised vacancy decreased from 9.7% in 2Q17 to 8.5% despite the quarter s supply wave, as occupancy rose in existing malls such as Chamtime Plaza. Rental growth further accelerates Prime open-market ground floor base rents increased by 3.5% y-o-y to RMB 52.2 per sqm per day. Decentralised rents rose 4.4% y-o-y to RMB 2.3 per sqm per day. Rental growth was especially driven by improving performances in East Nanjing Road and Huaihai Road, which benefitted from strong street facing retail and mall repositioning exercises. Investors remain drawn to the Shanghai retail market s relatively strong fundamentals, but a lack of tradable assets meant 3Q17 was a quiet quarter for transactions. Outlook: Supply pressures to lead to rising competition F&B, health and children s brands should remain major demand drivers. Retail concepts integrating online and offline strategies will emerge as a growth hotspot and continue to expand into popular community malls. Large supply should put downward pressure on occupancy and rents in saturated markets such as Minhang over the next six months. As landlords of aging retail properties carry out renovation and repositioning exercises, malls with experienced operators, balanced tenant profiles and strong connectivity will remain major drivers of rental growth. Note: Shanghai Retail refers to Shanghai s overall prime and decentralised retail markets.

39 Shenzhen 2.6% sqm per month, net on NLA RMB 1,26 Rents Stable Resident movements underpin gradual decentralisation trend. Silvia Zeng, Head of Research, South China Mid-market retailers active in emerging precincts In 3Q17, positive demand growth was observed in prime suburban locations, which majorly came from the expansion of mid and mass market brands. Meanwhile, luxury and high-end retailers continued to be cautious about store openings. The largest portion of leasing transactions was once again from the F&B segment. With a growing number of young families, children-related retailers continued to open stores in both urban and suburban areas. First prime mall in Nanshan High-tech Park completes MixC World, the second MixC in Shenzhen, opened during the quarter in Nanshan High-tech Park. The addition of this new 23, sqm-mall pushed overall stock to 4.2 million sqm. In 3Q17, some landlords in the suburbs actively introduced domestic brands and chain-restaurants to improve occupancy. Coupled with the stable performance of malls in core precincts, the city-wide vacancy rate declined by 1 percentage point q-o-q to 5%. Price gap limits investment transaction activity Amid reduced vacancy in mature areas, landlords in these areas had stronger bargaining power and this saw rental growth in mature areas outpacing peripheral areas. On the contrary, landlords of non-core properties were willing to offer concessions to attract retailers. Overall rents saw marginal growth. There was sustained investor interest amidst ongoing healthy economic conditions and a stable retail environment. However, the widening gap between vendors and buyers expectations on price limited investment opportunities. No sales transactions were recorded in 3Q17. Outlook: Unique and popular brands to be favoured Retailer sentiment is expected to stabilise in the next 12 months with demand underpinned by mid-market, fast fashion and F&B operators. Landlords are expected to put a greater focus on the shopping experience to attract more footfall. An additional 1 million sqm of new supply is projected to come online in the next 12 months and this is likely to result in higher vacancy. Although healthy leasing demand is predicted, the rising presence of F&B and experienceoriented tenants, which have lower rental affordability than traditional retailers is likely to lead to slower rental growth. Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the Urban market. 1, F 18F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q Retail Note: Shenzhen Retail refers to Shenzhen s overall prime retail market.

40 Tokyo Rent growth stalls as it nears record high level; investment volumes constrained by a lack of available product. Takeshi Akagi, Head of Research, Japan 1.5% tsubo per month, gross on NLA JPY 79,49 Growth Slowing 4 Retail y-o-y (%) Rental Value Capital Value base: 4Q13 = 1 Retail Sales Q12 2Q13 2Q14 2Q15 2Q16 2Q17 Sales Growth of Large-scale Retail Stores in Tokyo Source: Ministry of Economy, Trade and Industry Sustained retailer demand Household spending in Japan picked up in August, rising.6% y-o-y, and this followed a.2% decline in July. Department store sales also increased on the back of positive women s apparel and cosmetics goods sales. Visitor arrivals continued at a record pace and underpinned a 26.7% y-o-y increase in tourist consumption during 3Q17. Demand continued to be healthy in 3Q17, coming from international retailers and F&B operators looking to open new stores or to relocate to better locations. New openings in the quarter included Chloe s new store on Ginza Chuo-dori and Longchamp s relocation to Omotesando from Kita Aoyama. In addition, Issey Miyake opened a new shop on Renga-dori and Sixpad opened on Aoyama-dori. Maronnier x Namiki Yomiuri Project revealed No new supply entered the market in 3Q17 and vacant space in the prime retail market in Tokyo continued to be extremely limited. The plans for the Marronier x Namiki Yomiuri Project were announced in 3Q17. Located in Namoki-dori 3-chome, the 1-storey project with a GFA of 14, sqm is due to open in the Spring of 219. This building will house Muji s global flagship store and its first hotel in Japan. This project will be built jointly by Yomiuri Shimbun, Mitsui Fudosan, Ryohin Keikakuji and UDS. Rents and capital values remain stable Rents averaged JPY 79,49 per tsubo per month in 3Q17, stable q-o-q and increasing 1.5% y-o-y. Rental growth stalled for the first time in 2 quarters. Capital values decreased.1% q-o-q but were.4% higher than a year earlier. In the investment market, strong interest continued but deal volume was constrained by a lack of assets for sale. Outlook: Rents and capital values approaching the peak Private consumption is expected to continue to recover amid a tight labour market and rising incomes. According to Oxford Economics, private consumption is anticipated to grow 1.5% in 217 and 1.1% in 218. Meanwhile, tourist consumption should increase and aid retail sales. Despite limited vacant space and healthy demand, rents are projected to remain relatively stable at near record high levels. Capital values are also likely to see limited movement as yields hold steady. Note: Tokyo Retail refers to Tokyo s prime retail markets of Ginza and Omotesando.

41 Seoul.4% pyung per month, net on NLA KRW 1,98,91 Rents Falling Patchy performance continues amidst a reversal in consumer sentiment and rise in vacancy. Sungmin Park, Head of Research, Korea Mixed demand picture; core locations holding up Consumer sentiment declined in the quarter due to escalating geopolitical tensions between the US and North Korea. Foreign tourist arrivals continued to exhibit weakness, down by 33.2% y-o-y in August due to a downturn in the number of Chinese tourists. However, demand remained relatively healthy for key high streets and shopping malls across Seoul, except for those in the Gangnam area. Garosugil was the most active high street area with new leases being signed by retailers such as glo (84 pyung) and Sale 5 (44 pyung). IFC Mall, which is undertaking a major tenant mix adjustment exercise, will see 35 new brands open stores early next year, largely dominated by local F&B brands. Vacancy rises due to poor performance of Gangnam area High street vacancy increased 36 bps q-o-q to 11.3% as there were several departures including Mixxo (37 pyung) and Kumkang (15 pyung) in Gangnamdaero, and Louis Vuitton (114 pyung) in Cheongdam. Shopping mall vacancy also rose, up 2.4% q-o-q, driven by IFC Mall and Times Square, which are reshuffling tenant mixes. No new supply completed during the quarter. Outside of Seoul, Starfield Goyang (GFA 364,8 sqm) opened in August. The mall is jointly owned by NPS and Shinsegae, and is known to be the largest shopping centre in northwestern Korea. Rents decline due to muted retailer sentiment and higher vacancy High street rents experienced a slight decline of.2% q-o-q, impacted by weaker consumer sentiment and increased vacancy in Cheongdam and Gangnamdaero. For shopping malls, rental growth was flat amid weak retail sales. Yields continued to be stable during the quarter at around 4.% for shopping malls and 3.4% for prime high street locations. Outlook: Improvement in retail sales to support retail sector Although geopolitical tensions are expected to persist, the Korean economy is expected to see a resilient performance supported by robust exports which should be bolstered by an improving global economy. The Korean government is making an effort towards normalising relations with China. We anticipate this should feed through to a gradual improvement in group tours from China, and in turn, benefit the retail sector. Investment sentiment is likely to be impacted by tension on the Korean Peninsula, especially for foreign investors. However, transaction volumes are expected to only dip marginally as the retail sector is largely dominated by domestic players, who are unlikely to be swayed by the current environment. Note: Seoul Retail refers to Seoul s prime retail market. y-o-y (%) Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for Myeondong. Retail Sales Q12 2Q13 2Q14 2Q15 2Q16 2Q17 Source: Statistics Korea Sales Growth of Large-scale Retail Stores in Seoul 41 Retail

42 Singapore Improving consumer sentiment and spending offer some hope for Singapore retailers. Angelia Phua, Director - Research, Singapore -3.5% sq ft per month, gross effective on NLA SGD Decline Slowing 42 Retail Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for Orchard Road F 18F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. are for the overall market. Impact of stronger consumer sentiment yet to be felt by retailers Total retail sales in July, excluding motor vehicles, saw a fifth consecutive month of increase on a y-o-y basis at 1.9%, supported by the growth in sales of watches and jewellery, and department stores. This strongly suggests that consumer confidence, private consumption and tourist spending, in particular, are supporting retail sales. However, the positive sentiment has yet to trickle down to most retailers or their demand for retail space. Instead, retailers are focusing on renewing their retail experience by renovating their existing physical outlets, and improving their range of products and services to differentiate themselves from potential e-commerce competitors. Sustained interest in prime suburban retail assets DUO Galleria opened in the quarter, adding about 56, sq ft of retail space to the Marina submarket. The occupancy rate was above 7% at end-3q17, of which more than 6% was allotted to F&B. The quarter also saw the closure of Century Square in the Suburban submarket for refurbishment, which resulted in the withdrawal of about 2, sq ft of retail space. Despite completion of renovation works due only in 2H18, the mall which stands in close proximity to two other major retail developments, has already secured pre-commitments for about 6% of its space. Less pronounced rental decline in line with occupier demand Rents corrected at a slower pace in 3Q17. Comparing the three submarkets, the rental decline in Marina continued to be the steepest as occupier demand remained largely tepid with only a select number of retail assets able to draw in the weekend crowd. Despite the decline in investment sales and volumes from the previous quarter s high, 3Q17 recorded 12 transactions of which 11 were for shophouses. Interest for these conservation shophouses continues to be fuelled by funds, foreign investors and high-net worth individuals who deem them suitable as long-term investment assets. Outlook: Slight improvements in sight While occupier demand continues to face challenges from the stiffer competition in the retail market, increased tourist arrivals and spending, as well as the gradual improvement in consumer sentiment, have provided some hope for the retail market. We expect rental declines to taper and then rents to rise marginally in the coming year. Capital values are expected to move largely in line with rents resulting in yields remaining moderately stable. Note: Singapore Retail refers to Singapore s Orchard, Marina and Suburban retail markets.

43 Bangkok.6% sqm per month, gross on NLA THB 2,481 International retail brands continue to expand Rents Rising As newly-renovated space opened in several retail centres across the city, many internationally-renowned fashion and accessories brands expanded their footprint in 3Q17. Notable brand expansion included Tory Burch, Ermenegildo Zegna and Marie France Van Damme. Net absorption totalled nearly 6, sqm in 3Q17, driven in large part by the completion of newly renovated space at CentralWorld and a handful of other centres. New greenfield projects remain scarce while vacancy is stable No new prime retail centres completed in 3Q17. Total retail stock remained unchanged at 3.15 million sqm. Positive net absorption in the quarter caused the vacancy rate to decline to 4.7% in 3Q17 from 4.9% in the previous quarter. Vacancy rates have remained comfortably stable in the range of 4-5% since 213. Market yields stable q-o-q but are compressing in the longer run Net effective rents increased by.1% q-o-q and.6% y-o-y in 3Q17. A moderate rental growth trend has been supported by gradually increasing consumer confidence and increasing international tourist arrivals. Capital values increased by.1% q-o-q and 4.3% y-o-y in 3Q17. Rising land prices and ongoing capital expenditure to renovate existing assets are driving growth. Meanwhile, market yields were unchanged q-o-q but compressed by nearly 5 bps y-o-y. Outlook: Major asset enhancements to continue ICONSIAM by Siam Piwat is the only new prime shopping centre expected to complete in 218. The 215, sqm-project on the Chao Phraya riverfront will host a wide variety of domestic and foreign luxury and mass market retailers. We expect the vacancy rate to hover around 5% over the next 12 months as a number of centres continue renovation activity. Based on the reputation of Siam Piwat, we expect ICONSIAM to open fully let or very nearly so, keeping vacancy stable in late 218. Capital expenditure in Bangkok by leading developers will continue to focus on asset enhancement in order to maintain and/or improve competitiveness in the hotly contested market, with CPN, Siam Piwat and The Mall Group all undertaking (or planning to undertake) renovations at a number of centres. Greenfield investment should continue in resort markets and provincial capitals. Ongoing investment is expected to continue to drive capital values higher, potentially putting downward pressure on yields. Note: Bangkok Retail refers to Bangkok s Prime retail market. Thousand sqm Competition is driving significant capital expenditure on existing assets, creating new opportunities for tenants and better experiences for customers Rental Value Capital Value Andrew Gulbrandson, Head of Research, Thailand base: 4Q13 = F 18F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q Retail

44 Jakarta Aeon Mall completes at Jakarta Garden City. James Taylor, Head of Research, Indonesia 3.3% sqm per annum, net effective on NLA IDR 6,182,769 Rents Rising 44 Retail Thousand sqm Rental Value Capital Value base: 4Q13 = F 18F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. Prime malls enjoy healthy footfall Some prime malls offering attractive tenant mixes enjoy strong foot traffic seven days a week. While consumers part with their cash in restaurants, bars, entertainment facilities and at selected fast fashion stores, other retailers struggle in the face of changing consumer preferences and the rise of e-commerce. Certain mid-tier malls with less attractive tenant mixes struggled in 3Q17. Given the above, prime malls maintained healthy occupancy levels in 3Q17 with some landlords repositioning and adjusting tenant mixes usually to accommodate the tenant types preferred by consumers; primarily F&B and entertainment. One prime retail project completes Aeon s latest offering was completed in 3Q17 in Jakarta Garden City; a township just within DKI Jakarta city limits in the northeast of the city. This 6, sqmproject came to market with extremely healthy commitment levels and is part of Aeon s aggressive expansion plans for Greater Jakarta. Now that Aeon Mall has been completed, only one additional prime retail completion remains in the pipeline over the five-year forecast horizon. Rents unchanged q-o-q While demand remains healthy from certain retailer types, F&B tenants are primarily located on non-prime floors in malls (often the basement or upper floors), and as such, pay lower rents. Likewise, entertainment tenants usually take up larger units and their status as anchor or mini-anchor tenants means that rental levels may be lower than average. Given the relatively attractive supply-demand dynamics, most landlords have been unwilling to offload assets and there are essentially no en bloc deals in recent history. The moratorium on standalone retail development in DKI Jakarta has also limited investment market supply. No investment deals were closed in 3Q17. Outlook: No prime malls to be completed in 218 Demand from F&B and entertainment is likely to remain strong and some landlords may rejig tenant mixes to accommodate such tenants. Those landlords which are able to adjust to customer preferences are likely to be best placed to attract visitors. No further completions are expected over the next 12 months. We may see some minor, single-digit rental increments and occupancy is likely to remain high. Investor interest is likely to be strong, but history indicates that any whole-asset sales in DKI Jakarta are extremely unlikely over the next 12 months. Note: Jakarta Retail refers to Jakarta s overall prime retail market.

45 Delhi 2.% sq ft per month, gross on GFA INR 253 Rents Rising New completions and stabilising malls push net absorption to a sevenquarter high. Ashutosh Limaye, Head of Research, India New malls see positive retailer response The new project completions were instrumental in net absorption reaching a healthy level as established prime malls are operating at high occupancy rates, which is inhibiting the growth plans of global and well-known domestic brands. The response to the luxury mall that became operational in the Prime South reinforced the strength of this submarket in being the first choice for most global retailers entering the country. The long delayed completion in the Suburban submarket received a surprisingly healthy response, highlighting the demand for quality space by retailers looking to enter underserved retail precincts. New completion in Prime South and Suburban submarkets DLF Emporio YPCC became operational in the Prime South, and after a lengthy delay, Omaxe Connaught Place started operations in Greater Noida. In 3Q17, overall vacancy dropped by 5 bps q-o-q to 2.5% amidst healthy net absorption. Rents and capital values rise in Prime South Overall rental growth was 1.2% q-o-q in 3Q17. Growth was driven by the Prime South, with the new luxury mall commanding above market average rents. Capital values in the Prime South grew at a faster pace than rents and resulted in yield compression of 5 bps q-o-q. GIC s purchase of a stake in DLF s rental portfolio, which included two malls in the Prime South, set a new pricing benchmark. Outlook: Fast fashion, F&B and entertainment operators to be active We expect prominent single-brand retailers, both global and domestic, especially in the fashion, F&B, entertainment and hypermarket categories, to actively seek space in quality retail stock and select upcoming projects. Increased activity is likely to be evident in the food retailing category where 1% foreign direct investment is permitted, with Amazon showing interest. With pre-leasing seen in only a few of the upcoming quality projects in the Prime Others and Suburban submarkets, we expect completion delays due to a lack of retailer interest, which may affect projected supply and net absorption levels. Thousand sqm Rental Value base: 4Q13 = 1 Financial Indicators are for the Prime South. Capital Value F 18F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. are for the overall market. 45 Retail Outlook: Delhi Retail refers to Delhi NCR s overall prime retail market.

46 Sydney Rising mortgage interest rates, a spike in utility prices and persistent low wage growth are weighing on household budgets. Andrew Quillfeldt, Director Research, Australia.6% sqm per annum, net on GLA AUD 1,945 Rents Stable 46 Retail Rental Value base: 4Q13 = 1 Financial Indicators are for regional shopping centres. Thousand sqm F 18F For 212 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. Tenant retention a key strategy for landlords as demand slows Retail spending in New South Wales trended towards the national average. F&B operators remained key drivers of take-up, but at a moderate pace relative to 1H17. Both Amazon and Kaufland are preparing their Australian expansions which have impacted some retailers confidence and expansion strategies. Sydney is still the key destination for international retailers, particularly within the CBD and strong performing regional malls. UK department store Debenhams committed to space on the corner of Pitt Street and Market Street, while French sports retailer Decathlon will open their first Australian store in Tempe. Over 3Q17, retailers Costco, H&M and Sephora all opened stores. Four malls and two redevelopments complete An extensive AUD 24 million redevelopment was completed at Macarthur Square in Campbelltown. The retail area was extended 12,781 sqm to 17,1 sqm. A 33,5 sqm-extension project to create a northern wing of Narellan Town Centre also completed in 3Q17. Vacancy moved higher in 1H17 across regional, sub-regional and neighbourhood shopping mall categories, but decreased in the CBD. Tenant retention and performance monitoring of retailers were noted in institutional landlords reports as key strategies to avoid the risk of lease expiry. Pop-up retail opportunities in regional centres are gaining momentum, with a number of landlords embracing short-term leases. Investor demand soft for secondary assets; solid for top centres Transaction activity was relatively strong in 3Q17 with seven assets being exchanged totalling AUD 47. million. AMP Capital s acquisition of Marketown Shopping Centre for AUD million was the largest transaction. The weighted average yield compressed 1 bps q-o-q to 5.26%. The CBD, subregional and neighbourhood sub-sectors mid-point yield sharpened further. Low rental growth was recorded across all retail categories in 3Q17. Annual growth rates ranged between.6% and 2.%. Anecdotal feedback suggests leasing incentives have also risen in the past two quarters. Outlook: Yields to stabilise across all retail sub-sectors Supply is likely to be above the long-term average in 217 as landlords continue to focus on redevelopment and refurbishment projects to improve book values and secure new tenants with strong lease covenants. Structural changes in consumer spending patterns and increased competition between retailers will continue to see retailers optimise their online platforms and improve in-store offerings. Note: Sydney Retail refers to Sydney s overall retail market.

47 Melbourne.5% sqm per annum, net on GLA AUD 1,49 Rents Stable Melbourne is a key focus for retailer expansions and flagship stores, which will support occupancy in prime shopping centres and locations. Andrew Quillfeldt, Director Research, Australia Redevelopments remain a key tactic to attract and retain tenants Retail spending growth in Victoria outperformed in August 217, increasing by 3.8% y-o-y. The population grew by 2.4% in the year to March 217 the highest rate on record. Strong population growth and above trend employment growth acted to support discretionary spending, although this was partly offset by factors such as low wage growth and a slowdown in house price appreciation. Increased competition and prolonged discounting campaigns have reduced some retailer s profit margins. Secondary malls are facing greater vacancy risk as some retailers look to consolidate their store network by upgrading to more productive centres or relocating to newly refurbished centres. Despite the focus on refurbishment, supply is below trend Three sub-regional malls completed refurbishment and extension projects over 3Q17, two of which are new centres. Kmart has anchored all three of these centres. In response, many landlords are redeveloping their centres or remixing their tenancy profile. F&B remained a main focus for landlords in their redevelopment plans. Entertainment and value-add features to consumer shopping experience are being pursued by some retailers and landlords as a way to increase dwell time. Rental growth is muted in 3Q17 consistent with national trends The CBD prime and CBD super-prime were the only retail sub-sectors to record growth in 3Q17. The CBD remains a favourable destination for new and expanding retailers. International retailer, Debenhams launched their first Australian store at St. Collins Lane in September 217. All retail sub-categories recorded annual rental growth below the rate of inflation (1.9% in 2Q17). Retail yields sharpened further over 3Q17, but the pace of compression slowed. GPT Group s acquisition of the remaining 25% share in Highpoint shopping centre provided transactional evidence of further yield tightening in the regional sub-sector, particularly for prime assets. Investor demand continued to weaken for non-core assets resulting in a wider yield range for the CBD, sub-regional and bulky goods sub-sectors. Outlook: Retailers likely to be cautious The rental outlook remains subdued across Australia, including for Melbourne, based on growing industry competition, limited price inflation and moderating retail spending growth. Although the performance of shopping centres varies within each category, on average, no growth in rents is expected in 218. Strong buyer appetite for core retail assets continues to support value growth. However, a rising bond rate and subdued leasing metrics suggest further yield compression is unlikely beyond 217. Note: Melbourne Retail refers to Melbourne s overall retail market. Thousand sqm Rental Value base: 4Q13 = 1 Financial Indicators are for regional shopping centres F 18F For 212 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q Retail

48 Real Estate Services jll.com/asiapacific The data to back up your real estate decisions. 217 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

49 Residential

50 Hong Kong A high sales rate in the primary market suggests underlying demand remains strong. Ingrid Cheh, Associate Director - Research, Hong Kong.9% sq ft per month, net on SA HKD 42.4 Growth Slowing 5 Residential Units Rental Value base: 4Q13 = 1 Capital Value Still plenty of demand in the primary market New mass residential projects launched during 3Q17 were generally wellreceived. Parc City in Tsuen Wan hit the headlines, with all 953 units sold within two weeks of being launched. Leasing activity was underpinned by renewals with demand largely driven by tenants from the banking and retail industries in traditional luxury residential districts. Beyond Hong Kong Island, decentralised districts such as Mongkok and Tung Chung also attracted interest from tenants seeking relocation options. Government to release three sites for sale in 4Q17 According to the latest quarterly land sale programme, the government has earmarked three residential sites in Kwun Tong, Sheung Shui and Kowloon Tong for sale in 4Q17, capable of yielding 1,9 flats. A total of 99 luxury units are expected to be issued with Occupation Permits in 3Q17, including two projects situated in the New Territories; namely, The Bloomsway (33 units) in Tuen Mun and Le Cap (22 units) in Shatin. Capital and rental values continue to grow The investment market saw 26 properties priced over HKD 1 million changing hands in 3Q17, down 38.1% q-o-q and 33.3% y-o-y. Total considerations were also down 21.% q-o-q and 13.1% y-o-y, largely owing to fewer luxury sales in the primary sales market. Several notable investment transactions in the high-end segment of the market pushed luxury capital values higher, up 3.2% q-o-q. Luxury rents rose 1.5% q-o-q, largely bolstered by seasonal demand F 18F Outlook: Market bears to remain in hibernation With the interest rate rises already largely factored into purchasing decisions, demand in the primary sales market is expected to remain strong despite an expanding supply pipeline. With many PRC developers still looking for development opportunities, we forecast capital values to grow in the range of 1-15% for the full year and -5% in 218. For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. In view of the upcoming quiet leasing season, rentals are expected to level out, growing in the range of -5% for the full year. Meanwhile, slowly rising vacancy in the high-end segment of the market could see rentals face further declines in 218, down in the range of -5%. Note: Hong Kong Residential refers to Hong Kong s overall luxury residential market.

51 Beijing 4.7% sqm per month, gross on GFA RMB Rents Rising Policies continue to prioritise a stable housing market, weighing on price growth. Joe Zhou, Head of Research, China Policy restrictions on price, huge supply drive sales Luxury apartment sales transaction volumes were up 9.2% q-o-q, while high-end villa sales transaction volumes were flat q-o-q. Sales from a wellknown luxury apartment project contributed half of the sales volume for luxury apartments. Beijing issued measures on joint-ownership at end-3q17, allowing homebuyers to share property ownership with the municipal government. The move aims to limit speculation in the housing market and keep price growth at bay. New luxury apartment supply surges 43% q-o-q Following increasing government pressure, developers were more active in launching projects; seven luxury apartment projects received pre-sales certifications for 826 units, up from 192 units in the previous quarter. Many projects entered the market at much lower-than-expected prices, due to the price restrictions. Four existing villa projects released new supply, adding 96 units to the market. However, with no new high-end villa projects launching in the quarter, supply was down 72% q-o-q and 8% y-o-y. Luxury apartment primary capital values growth turns negative Primary capital value growth for luxury apartments registered -2.6% q-o-q. Many older projects lowered prices to compete with the large amount of new supply that entered the market in 3Q17. Meanwhile, primary capital values growth for high-end villas was flat q-o-q. Although second-hand prices in the mass-market declined significantly, secondary capital values growth for luxury apartments and high-end villas remained flat at.1% and.5% q-o-q, respectively. High-end property owners preferred to maintain their existing asking prices and wait for willing buyers. Outlook: Beijing to support leasing market, affordable housing To further develop the leasing market, housing authorities announced measures to better protect renters rights, including the establishment of an online platform to facilitate more transparent monitoring and supervision of leasing activity in the market. Beijing announced plans to prioritise land supply for joint-ownership housing, with an aim to launch 25, units over the next five years. Therefore, we expect there to be less land supply available for luxury housing projects in the future. Units Q13 9, 8, 7, 6, 5, 4, 3, 2, 1, 4Q14 4Q15 4Q16 4Q17 4Q18 Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the overall Luxury market F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. are for the overall market. 18F 51 Residential Note: Beijing Residential refers to Beijing s overall luxury and high-end residential market.

52 Shanghai High-end inventory declines despite a slowdown in sales. Joe Zhou, Head of Research, China.5% sqm per month, gross on GFA RMB Growth Slowing 52 Residential Units ,5 6, 5,5 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Rental Value base: 4Q13 = 1 Capital Value F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. 18F Tight policy continues to weigh on overall sales volumes The policy environment remained tight as some commercial banks stopped offering discounts on mortgage rates and raised down payment requirements for first-time buyers. The quarter ended on a subdued note with sales volumes down 51% y-o-y in September, and down 59% q-o-q for 3Q17. In the high-end market, demand from local upgraders remained stable, though restrictive policy and limited supply kept sales volumes subdued. High-end sales in 3Q17 declined to 186 units, a decrease of 63% q-o-q and 82% y-o-y. High-end inventory fell 7% q-o-q, but the clear-up period rose to about 15 months. Supply down as developers delay new launches New supply declined in both the mass and high-end markets. Many developers delayed launching new units as they awaited a more favourable policy environment. In addition, strict controls on pre-sales permits has also curbed new supply. There were no new high-end launches in the quarter. Developers remained cautious in the land sales market as most residential-use land plots were sold at the reserve price. High accommodation values combined with financing restrictions has continued to squeeze developers margins. Stable job market leads to steady rental growth High-end prices rose a further.5% q-o-q as developers remained confident, supply was limited and local upgraders generated solid demand. Rental values similarly rose.5% q-o-q as Shanghai s robust job market generated steady demand from both local and non-local white collar employees. There were no investment transactions in 3Q17. That said, developers and investors remained keen to acquire en bloc residential buildings or serviced apartments in core areas, as land plots for new development are scarce. Outlook: Housing policy to keep firm over the next twelve months The Shanghai government zoned land for lease-only apartments to cater to nonlocal residents. So far, such land plots have only been sold to government backed developers, at prices well below the residential average. Impacts on the leasing market over the next year will be limited as most projects are still in planning stages. We maintain our expectation that a continued tight policy stance should put pressure on sales volumes and new supply. However, sales prices are likely to keep rising over the next twelve months as developers maintain leverage to raise prices due to low inventory levels. Additionally, stable leasing demand is expected to result in moderate rental increases. Note: Shanghai Residential refers to Shanghai s high-end residential market.

53 Singapore Positive outlook sustains price recovery. -4.1% sq ft per month, gross on GFA SGD 4.65 Rents Stable Ong Teck Hui, National Director - Research, Singapore Healthy demand as sentiment remains positive Resale transaction volumes in prime districts declined about 15% q-o-q but rose 32% y-o-y. New sale transactions more than doubled q-o-q and y-o-y, mainly due to strong responses for projects like Martin Modern and Sophia Hills. The 45-unit Martin Modern was the only new launch in prime districts. The perception that the market is close to its bottom continues to entice buyers. The increased interest among buyers is sustaining transaction volumes. Reduced supply of newly completed units in the short term The completion of several projects led to an increase in stock in 3Q17, resulting in a rise in the vacancy rate. In the near term, supply is likely to taper off, with a drop in the vacancy rate expected as demand improves. In the medium term, supply is expected to pick up with the release of three prime residential sites under the government land sales programme. These sites could yield about 1,3 residential units in prime districts upon completion. Buoyant residential collective sales market There were seven collective sales in 3Q17, which amounted to SGD 2.1 billion, a significant increase from the SGD 1.51 billion registered in 1H17. Capital values of prime residential properties continued to rise, in keeping with the market recovery. Leasing activity increased with rents rising slightly. Business conditions improved while there were fewer units available for lease because some owners placed their units on the sales market, prompted by rising prices. Outlook: Prices and rents are expected to continue increasing A clearer market recovery should strengthen market confidence, sustain demand and lead to an increase in prices. The recovery in rents is expected to continue on the back of improved economic and business conditions, and a reduction in completed supply and leasing stock RV (Luxury) CV (Luxury) RV (Prime) CV (Prime) base: 4Q13 = 1 Units 5, 4, 3, 2, 1, F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. 18F 53 Residential Note: Singapore Residential refers to Singapore s overall prime and luxury residential markets.

54 Bangkok A large number of new projects launch in 3Q17 and many record strong pre-sales. Andrew Gulbrandson, Head of Research, Thailand 2.5% sqm per month, gross on NLA THB 526 Growth Slowing 54 Residential Units , 9, 8, 7, 6, 5, 4, 3, 2, 1, Rental Value base: 4Q13 = 1 Capital Value F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. 18F New condominium launches well-received Eight new condominium projects were launched during 3Q17 and achieved a combined pre-sales rate of 61% at quarter-end. Projects in the high-end and luxury segments recorded pre-sales rates ranging from 15-8%, while new ultra-luxury projects recorded pre-sales of 15-4%. Most of the new launches were located in the Central East submarket, where more freehold development sites are available. Three new condominiums add more than 1,4 units Five condominium projects - one ultra-luxury, one luxury and three high-end - were scheduled to complete in 3Q17, but two were delayed. The three new projects that completed added more than 1,4 units to the market while the two delayed projects, now expected to complete in 4Q17, will add 18 new units. No new luxury apartment buildings were launched in the quarter. The lack of new apartment projects is the result of high land prices and better investment yields offered by other development types, such as condominium and retail. The vacancy rate in the luxury apartment sector increased by 4 bps q-o-q to 7.7%. Healthy demand for prime CBA sites draws record prices In 3Q17, condominium net effective rents increased by.3% q-o-q and 2.5% y-o-y. Apartment net effective rents were stable. Capital values rose in line with rents, with market yields remaining stable at 4.7%. Lucky Living Co., Ltd. purchased a land plot near the Asoke-Sukhumvit intersection at THB 5, per sqm to develop an ultra-luxury condominium. The purchase represents the highest per sqm price paid for a development site in the CBA. At the same time, Supalai PCL purchased a site formerly belonging to the Australian Embassy for THB 4.6 billion, making it the single largest development site transaction ever in the CBA. Outlook: Strong demand amid limited availability in new projects More than 6,8 condominium units are expected to complete over the next 12 months and with more than two-thirds located in the Central East submarket. More than 85% of units in the 12-month supply pipeline have been pre-sold. We expect many of these projects to sell out by the time they complete (if not already sold-out). Domestic demand is expected to remain healthy for well-located and wellappointed projects. That said, in order for developers to continue growing, new sources of demand need to be found. As a result, local developers are increasingly turning to foreign buyers as a significant portion of demand for higher-end projects in the CBA. Note: Bangkok Residential refers to Bangkok s Central high-end and luxury residential market.

55 Jakarta Certain unit types and developments selling well..8 % sqm per annum, net effective on NLA IDR 3,431,76 Rents Stable James Taylor, Head of Research, Indonesia Smaller, cheaper units more attractive to buyers While the market has not seen wholesale improvements since the downturn in 215, some projects have sold well in recent quarters. Developers who are able to offer smaller unit sizes and cheaper prices in strategic locations have been able to capture demand and this continued in 3Q17. The serviced apartment market remained relatively stable in 3Q17. The market vacancy rate is a touch under 25% but this is likely to rise once this year s new projects are completed in 4Q17. Serviced apartment demand continues to be driven by embassies and corporates. One new higher end launch in 3Q17 Fifty Seven Promenade was launched for sale in the quarter. This project is developed by Intiland and is centrally located. Its good location, desirable unit types and prices are likely to be attractive to buyers in the current market. Several higher end condominiums completed in South Jakarta in 3Q17 but no serviced apartments entered the market. However, two serviced apartment projects are in the immediate pipeline with Ascott Sudirman and a serviced apartment tower at the District 8 development due for completion this year. Serviced apartment rents and condominium prices unmoved Rents in the serviced apartment market have remained relatively flat for some time and this trend continued in 3Q17 as rents edged down by.4% q-o-q. Luxury condominium prices remained relatively flat amid a period of sustained weak demand. Some minor increments were recorded in lower end projects. GIC entered a joint venture to develop the Fifty Seven Promenade project in Central Jakarta. GIC s affiliate took roughly a one-third stake in the first phase of the project. In September, CapitaLand s serviced residence business unit, The Ascott Limited, announced the purchase of Ascott Sudirman Jakarta. This 192- unit project is part of the Ciputra World 2 development in the CBD. Outlook: Luxury condominium demand to remain weak We expect the strongest condominium demand to be for projects offering smaller, cheaper units in strategic locations. We do not expect luxury sales to pick up to pre-215 levels as long as luxury and super luxury taxes remain in their current format. Indonesians should remain the primary source of demand as regulations surrounding foreign ownership remain restrictive. Our outlook on prices remains unchanged. Condominium prices have now remained largely flat for a number of quarters. However, as the market begins to improve we may begin to see some small increments by the end of 217. The lower-to-mid end market segments may see the most significant growth. Note: Jakarta Residential refers to Jakarta s luxury condominium and serviced apartment markets. Units Q Q14 4Q15 4Q16 4Q17 4Q18 Rental Value base: 4Q13 = 1 Capital Value F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. 18F 55 Residential

56 Sydney 56 Residential y-o-y (%) Units Capital value growth moderates, as new projects reach completion. Nevertheless, market balance still appears relatively strong , 14, 12, 1, -5 2Q12 8, 6, 4, 2, Leigh Warner, Head of Residential Research, Australia, Corelogic 2Q13 2Q14 2Q15 2Q16 Price Growth Completed Currently Marketing Plans Submitted 22 Under Construction Plans Approved 2Q17 6.1% Demand slows slightly per week, 2 bedrooms AUD 7 Rents Rising Annual sales volumes declined by 1.2% between 2Q16 and 2Q17. This fall is less than in other markets, which suggests underlying demand in Sydney is still catching up on a decade of under-supply. The effects of tighter macro-prudential settings, greater tax imposts on foreign buyers and tighter Chinese capital restrictions are also being felt on investor demand, but owner-occupier demand remains robust. Inner Sydney vacancy remains tight Vacancy remained tight at 1.9% in August 217. Despite a high volume of recent completions, historic under-supply means the market remains below historic average vacancy levels. There are 14, apartments under construction and due for completion between 217 and 222. The majority of projects in the pipeline are still awaiting development approval and we expect a substantial number of projects to be deferred into the next cycle or abandoned. Price growth positive, but continues to moderate Apartment prices increased by 3.9% y-o-y in 2Q17. In the last five years, capital value growth has been the growth engine of investor returns in Sydney. However, the total return mix is becoming more balanced. Gross yields tightened to 3.8% in 2Q17 from 3.9% in 1Q17. Yields may start to rise in the near future as capital value growth moderates and rents continue to rise steadily. Outlook: Market returning closer to balance beyond 217 A tight vacancy environment suggests there is still capacity to absorb much of the upcoming supply. However, we expect the market to reach balance beyond 217 and we should see price growth flatten or turn moderately negative. Tighter macro-prudential settings, particularly on investors, is seeing demand fall. Softer demand conditions should also continue to contribute to the moderation of the market in 218. Projects with 5 units or more. Note: Sydney Residential refers to Inner Sydney apartments. Price and yield data sourced from CoreLogic, rental data from Housing New South Wales and vacancy data from the Real Estate Institute of New South Wales.

57 Melbourne 5.1% per week, 2 bedrooms AUD 41 Rents Rising Despite a high number of recent and upcoming completions, the Melbourne market continues to perform well. Leigh Warner, Head of Residential Research, Australia Stamp duty changes dampen investor demand Annual sales volumes significantly dropped between 2Q16 and 2Q17. This reflects waning demand from investors due to tightened lending conditions, increased tax imposts and tighter Chinese capital restrictions. While population growth is fuelling owner-occupier demand, investor demand for inner-city apartments will be further dampened by the removal of off-theplan stamp duty concessions from July 217. Vacancy declines despite large supply pipeline Inner Melbourne vacancy reached its lowest point since 29 at 1.9% in August. This is despite over 9, apartments completing as at YTD September 217, with multiple CBD towers completing in 3Q17. Approximately 15, apartments remain under construction in Inner Melbourne, with a further 18, being marketed. Many approved projects are not likely to proceed in the short term due to high pre-sale requirements from banks. Few new planning submissions were made during the quarter. Capital growth picks up, yields remain stable Melbourne yields remained steady at 4.1% in 2Q17, sitting between Sydney (3.8%) and Brisbane (4.9%). Rental growth was strong in two-bedroom (5.1% y-o-y) and three-bedroom (4.8%) apartment configurations, with both above their five-year annual averages. One-bedroom apartments recorded 2.9% y-o-y growth, slightly below their five-year average growth of 3.1%. Capital value growth remains the key investor focus in Melbourne. Annual capital value growth picked up to 2.% y-o-y in 2Q17, but remains below Melbourne s five-year annual average of 3.%. Outlook: Recent and upcoming completions set to test the market While few settlement issues have been reported, re-sale and rental values in areas undergoing high amounts of completions are likely to come under pressure. However, continued strong population growth should fuel owneroccupier demand and support broader apartment prices. With tighter financing constraints from banks, a limited number of projects are anticipated to proceed to construction and completions are likely to fall. Projects that do commence are likely to contain fewer apartments and be owner-occupier oriented. y-o-y (%) Units , 2, 15, 1, 5, 2Q12 2Q13 2Q14 2Q15 2Q16 Price Growth, Corelogic Completed Currently Marketing Plans Submitted Projects with 5 units or more. 22 Under Construction Plans Approved 2Q17 57 Residential Note Melbourne residential refers to Inner Melbourne apartments. Price, sales volume and yield data for Greater Melbourne sourced from CoreLogic, rental data sourced from Department of Human Services Victoria and Inner Melbourne vacancy data from REIV.

58 Real Estate Services Insights you need to make real estate decisions that matter. jll.com/asiapacific 217 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

59 Industrial

60 Hong Kong Possible revitalisation policy redux brings industrial properties back into the focus of investors. Denis Ma, Head of Research, Hong Kong.6% sq ft per month, net on GFA HKD 13. Rents Rising 6 Industrial Thousand sqm Rental Value base: 4Q13 = 1 Capital Value F 18F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. Uptick in new lettings but expansion requirements remain thin Strong demand from China saw total exports and imports grow 7.3% and 6.6% y-o-y, respectively, in July-August. Airfreight cargo and container throughput also increased, up 1.6% and 2.5% y-o-y, respectively, over the same twomonth period. Leasing activity picked up during the quarter but was underpinned by renewals and relocation requirements. Sagawa Express moved from ATL Logistics Centre in Kwai Chung to Goodman Interlink (96, sq ft) in Tsing Yi while DHL relocated in-house to 49, sq ft in the same facility. Vacancy rises against new supply China Merchants Logistics Centre obtained its Occupation Permit in September, providing about 1.5 million sq ft of ramp-access warehousing space. The addition of six vacant floors at China Merchants Logistics Centre pushed the overall vacancy rate up from 2.2% in 2Q17 to 3.6% in 3Q17. Excluding the influence of new supply, the vacancy rate actually tightened marginally to 2.%. Possible revitalisation policy redux lifts capital values Sustained demand for lift access facilities helped push overall warehouse rents up.7% q-o-q in 3Q17, outpacing the.3% growth recorded in 2Q17. The government s announcement of its intent to review the industrial building revitalisation policy boosted investment interest in industrial buildings. Padded by transactions in the broader industrial market, capital values of prime warehouses increased by 2.9% q-o-q. Outlook: Rents rise amid recovery in external trading sector The leasing market should see demand from 3PLs gradually strengthen on the back of the recovering external trading sector. However, the upward pressure on rents could potentially be reduced by more cost-conscious tenants moving into tin sheds. All in all, we expect warehouse rents to grow -5% in 217 and -5% in 218. The cooling measures in the residential market, coupled with the government s possible relaunch of the revitalisation policy could attract stronger demand for industrial properties. As such, capital values of warehouses are expected to trend higher, up in the range of 5-1% in 217 and -5% in 218. Note: Hong Kong Industrial refers to Hong Kong s industrial warehouse market.

61 Beijing 2.% sqm per day, net effective on GFA RMB 1.16 Growth Slowing Stable demand in a tight market continues to support an increasing rental growth rate. Joe Zhou, Head of Research, China 3PLs remain most active, followed by manufacturers Leasing demand was stable as mature submarkets continued to lease out vacant space at a brisk pace. Some leasing transactions were also seen in emerging locations due to lower rental levels. 3PL and manufacturing firms spurred demand. A retail fashion distributor expanded its presence in the southwestern Pinggu District, while a logistics provider leased space in Beijing Airport Logistics Park. An MNC automaker also leased a large amount of space in an emerging location. Vacancy further declines due to no new stock Total stock remained unchanged at 2 million sqm as no new projects have entered the leasing market for two quarters. No primary land plots for warehouse use were transacted in 3Q17. A significant leasing transaction in an emerging area facility outside the zoned logistics area helped push the vacancy rate further down to 1.7% by end-3q17. Rents sustain their rising trend Landlords of facilities in mature submarkets still had the power to slightly increase their asking rents in the quarter due to their generally low vacancy rates and consistent leasing enquiries. Overall rents increased to RMB 1.16 per sqm per day, up 1.3% q-o-q on a chain-linked basis. No en bloc sales transactions were recorded in the quarter. However, Beijing and surrounding areas continued to attract interest from both developers and investors. We expect to see more acquisitions in the future, especially in the secondary market. Outlook: Vacancy rate to stay low in 218 Strong demand in mature submarkets and gradually decreasing vacant space in emerging locations should help mitigate a significant increase in vacancy, which is expected to rise modestly to above 2% by end-217 despite more than 88, sqm of new supply in 4Q17. Overall vacancy will further increase but remain at a low level in 218, when new supply is expected to peak at more than 3, sqm. However, there may be some delays as a result of a change in government policy. We expect rental growth in 218 to be slower than in 217. Thousand sqm Q Q14 4Q15 4Q16 4Q17 4Q18 Rental Value base: 4Q13 = 1 Capital Value F 18F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q Industrial Note: Beijing Industrial refers to Beijing s prime non-bonded logistics market.

62 Shanghai Investment interest from both domestic and foreign parties continues to rise. Stuart Ross, Head of Industrial, China 1.8% sqm per day, net on GFA RMB 1.32 Rents Rising 62 Industrial Thousand sqm Rental Value Capital Value base: 4Q13 = 1 Financial Indicators are for the Non-bonded market F For 213 to 216, completions are year-end annual. For 217, completions are YTD, while future supply is for 4Q17. 18F Net absorption reaches 75, sqm despite no completions After rapid leasing in new facilities boosted absorption in 2Q17, demand from 3PLs and retailers kept take-up at a still-strong 75, sqm in 3Q17. Buildings delivered in 1Q17 s supply wave continued to make leasing progress despite locations in less mature submarkets. Two completions from 1Q17 alone accounted for 5, sqm of the quarter s take-up. With almost no vacancy in most of the popular West Shanghai submarket, tenants looked instead to facilities in Baoshan, Fengxian, and Jinshan. These once quiet submarkets are becoming popular with firms that prioritise proximity to customers in Shanghai. Vacancy down on strong demand and no new supply No new supply was completed in the quarter, leaving total non-bonded stock at 5.1 million sqm. We do not anticipate any new supply in the market for the rest of the year. No new supply and strong leasing demand led non-bonded vacancy to decline 1.5 percentage points to 7.6%. Vacancy in the emerging Jinshan submarket declined from 28% to 9% as space was taken at a fast pace. Western Shanghai vacancy remained extremely limited with only small leases taking place. Rental growth accelerates Non-bonded rents edged up.6% q-o-q to RMB 1.32 per sqm per day, rising at a slightly faster pace than the previous quarter. Strong demand and the absence of new supply gave landlords greater confidence to raise rents. Invesco paid RMB 2 billion to buy a portfolio of logistics assets from ESR, including facilities in Fengxian district and the satellite markets of Kunshan and Taicang. Yields have continued compressing as a result of increasing interest from both foreign and domestic investors. Outlook: Rents set to continue rising Several projects originally scheduled for 217 have been delayed to 218, reducing supply pressures such that vacancy should end the year in the midsingle digits. Vacancy is likely to rise slightly as supply picks up again in 218, but is unlikely to rise above 1%. Rents should continue to grow through 217 and into 218. West Shanghai landlords maintain considerable leverage to increase rents given persistent low vacancy. Landlords in East Shanghai are becoming more confident to raise rents in the near term, though they may become cautious again in 218 as their submarkets will bear the most supply pressure. Note: Shanghai Industrial refers to Shanghai s modern warehouse market.

63 Tokyo Investors continue to look for opportunities in the logistics sector. 1.4% tsubo per month, gross on NLA JPY 4,199 Growth Slowing Takeshi Akagi, Head of Research, Japan Solid demand amid major new supply Industrial production in July and August swung between positive and negative territory registering a decrease of.8%, and an increase 2.1% y-o-y respectively. Exports and imports continued to improve, rising for the ninth and eighth straight months respectively in August Robust demand continued to come from online retailers, 3PLs and manufacturers, and this helped absorb the relatively large volume of new supply in 3Q17. Net absorption totalled a strong 37, sqm in 3Q Vacancy rises but remains below 5% New supply totalled 47, sqm in 3Q17, increasing total stock by 5.2% q-o-q. The Bay area saw the 171, sqm-tokyo Ryutsu Center Butsuryu Building B complete, while the Tokyo Inland area saw DPL Tsukuba Ami and Sosila Yokohama Kohoku add 236, sqm to stock in the Inland area Q13 4Q14 4Q15 4Q16 4Q17 4Q18 Rental Value Capital Value The vacancy rate stood at 4.2% at end-3q17, increasing 1 bps q-o-q and decreasing 38 bps y-o-y. In the Bay area vacancy was recorded at 1.6%, a decline of 1 bps q-o-q and 26 bps y-o-y; whereas Tokyo Inland it reached 5.9%, up 18 bps q-o-q and 46 bps y-o-y. Rent growth accelerates in both Tokyo Bay and Tokyo Inland Rents averaged JPY 4,199 per tsubo per month, increasing 1.6% q-o-q and 1.4% y-o-y. This was the strongest quarterly growth in the past ten quarters. Rent growth was largely driven by the Bay area which rose 2.7% q-o-q, and in particular by new buildings in good locations. Capital values continued to grow, albeit at a slower pace than in 2Q17. Logistics assets continue to attract investor interest, in particular relatively new players that traditionally invest in office space. A notable transaction in the quarter was Japan Logistics Fund s acquisition of Yokohama Machida Logistics Centre for JPY 25.4 billion (NOI cap rate of 3.8%), a remarkably low yield for a property located in the Inland area. Outlook: Cap rates to compress further According to Oxford Economics, trade-oriented indicators are expected to continue to grow in the remainder of 217. However, the geopolitical climate across the globe poses a risk to the outlook. Demand is expected to hold up but rents are likely to be under pressure amid a historically high level of supply in the pipeline over the next two years. In the investment market, with sustained investor interest, cap rates are expected to still have room for further compression. base: 4Q13 = 1 Thousand sqm 3, 2,5 2, 1,5 1, F 18F For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q Industrial Note: Tokyo Industrial refers to Greater Tokyo s prime logistics market.

64 Singapore A picture of stability as demand catches up with supply. Doreen Goh, Associate Director - Research, Singapore -.2% sq ft per month, gross effective on NLA SGD 3.71 Rents Stable 64 Industrial Thousand sqm Rental Value base: 4Q13 = 1 Capital Value F 18F Take-Up (net) Vacancy Rate Percent Steady demand with some expansion activity Underpinned by the improved macroeconomic environment, the leasing market remained active in 3Q17. This is evident from the 89 rental records captured by the Urban Redevelopment Authority s Real Estate Information System (URA REALIS) in 3Q17, compared to 2Q17 s 6 deals. Demand for business park space continued to stem from qualifying firms from the science, technology and media industries. Apart from renewals, some firms like Google and Oracle were understood to have taken up more space for expansion needs. Vacancy falls for fifth straight quarter The stock of business park space was relatively unchanged in 3Q17, as there remained no known completions or major withdrawals. Amid the dearth of new supply and tenants physical occupation of their new premises, the business park vacancy rate fell for the fifth consecutive quarter. For example, e-commerce platform Shopee moved into its new 37,674 sq ftpremises at the Ascent in Singapore Science Park 1 during the quarter. Stable yields, as rents and capital values hold steady Business park rents remained stable in 3Q17. Similar to the previous quarter, rental growth in 3Q17 was curbed by landlords lowering of rental expectations for older and underperforming assets. Underpinned by the continued rental stability, en bloc capital values of business park properties remained unchanged in 3Q17. As such, yields of business park properties stayed flat during the quarter. Outlook: Firmer rent growth on steady demand and low supply We maintain the view that the vacancy rate will decline further in 218, underpinned by limited new supply and space absorption. Against this backdrop, we envisage business park rents to exhibit firmer growth in 218. This would in turn support capital values, which are foreseen to mirror the rental trend, thereby translating into relatively stable yields. For 213 to 216, take-up, completions and vacancy rates are year-end annual. For 217, take-up, completions and vacancy rate are YTD, while future supply is for 4Q17. Note: Singapore Industrial refers to Singapore s island-wide Business Park market.

65 Sydney 3.5% sqm per annum, net on GFA AUD 116 Rents Rising Robust rental growth amid sustained take-up and growing constraints limiting new development opportunities. Andrew Ballantyne, Head of Research, Australia Leasing in first three quarters surpasses 1-year annual average Gross take-up as at YTD September was concentrated in the four traditional occupier industries: retail trade (33%); wholesale trade (31%); transport, postal and warehousing (15%); and manufacturing (14%). Occupiers with larger space requirements have moved to the pre-lease market where there is more competition between landlords to secure tenants. New build take-up accounted for 62% of take-up activity as at YTD September 217. largely pre-committed Four projects completed in the quarter totalling 52,2 sqm, all of which were in Outer Central West. A further 141,3 sqm of projects are under construction and expected to complete in 4Q17. This would bring the construction completions in Sydney to 476,4 sqm for 217. In the first three quarters of 217, the Outer South West recorded the largest volume of completions, with 164,6 sqm of floor space reaching practical completion. This was followed by the Outer Central West (152,4 sqm) and Outer North West (18,1 sqm). Rental growth above expectation Prime quarterly rental growth was recorded at 3.1% in North, 1.4% in Inner West and 1.2% in South. Low vacancy led to strong rental growth in the secondary markets: Outer South West (3.8% q-o-q), Inner West (2.7%), North (2.%) and South (1.9%). Investment volumes decreased in the quarter due to a lack of assets for sale. Approximately AUD 179 million in sales took place across nine transactions. Outlook: Yield compression cycle nearing an end Given the heightened level of take-up activity, we forecast a sustained period of robust supply for the market. Approximately 543, sqm in projects have been approved (363,8 sqm) or commenced (18, sqm) with an anticipated completion in 218. It is broadly expected that the market is at the end of the yield compression cycle. Global bond pricing and yields are likely to impact investor sentiment and pricing. Minor decompression is forecast in 217 but we expect yields to be broadly flat over the next months. Thousand sqm ,2 1, Rental Value base: 4Q13 = 1 Financial Indicators are for Outer Central West. Capital Value F 18F Take-up (gross) For 213 to 216, take-up and completions are year-end annual. For 217, take-up and completions are YTD, while future supply is for 4Q Industrial Sydney Industrial refers to Sydney s industrial markets (all grades).

66 Melbourne The strong supply cycle picks up again in the quarter. Annabel McFarlane, Director Research, Melbourne 1.9% sqm per annum, net on GFA AUD 87 Rents Rising 66 Industrial Thousand sqm , Rental Value base: 4Q13 = 1 Financial Indicators are for South East. Capital Value F Take-up (gross) 18F For 213 to 216, take-up and completions are year-end annual. For 217, take-up and completions are YTD, while future supply is for 4Q17. Industrial take-up activity moderates following strong 1H17 Demand was driven by take up of existing vacant space as opposed to pre-lease activity and four out of six transactions were located in the West. The transport and logistics sector dominated take-up in the quarter. The largest take-up of space was by Amazon who leased 24,387 sqm of space at 29 National Drive, Dandenong in the South East precinct. This is Amazon s first commitment to distribution/warehouse space in the Australian market. Melbourne is in the midst of a supply upswing Supply picked up in 3Q17. Seventeen projects completed adding 336,4 sqm to the market. There are 18 projects totalling 43,3 sqm in the West (57%) and East (43%) under construction with completion expected by end-218. Four projects completed in the quarter with three pre-committed (92% by GFA). The largest was the construction of a 6, sqm-warehouse for Blue Star Logistics at Hume Highway Somerton in the North. Rent and land value growth edges up in most precincts Strong occupier demand over the year has led to an increase in rents. Service land values have also increased sharply in some precincts. Investment volumes increased once again in 3Q17, with AUD million of transactions recorded. The quarter result was bolstered by two portfolio transactions which included Melbourne industrial assets. The portfolios were the South Australian Motor Accident Commission to Blackstone and Mirvac to Morgan Stanley Altona. Outlook: Limited availability of serviced land in some precincts Supply for full-year 217 is projected to be robust with over 614,8 sqm (already completed or under construction) expected to be added to the market. There is currently 278,4 sqm of space under construction and projected to complete this year. If supply is to complete as projected, it will be the largest annual addition to supply since 28. We believe the yield compression cycle is approaching the end and pricing is broadly expected to be at its peak. Note: Melbourne Industrial refers Melbourne s industrial market (all grades).

67 Hotel

68 Hong Kong Healthy tourism numbers from China bode well for the Hong Kong market. David Marriott, Senior Vice President - Hotels & Hospitality Group, Greater China RevPAR Growth Y-O-Y 4.6% YTD August 217 HKD 2,588 Stage in RevPAR Cycle RevPAR Rising Luxury Hotel Trading Performance ADR / RevPAR (HKD) No. of rooms 4, 1 3, , 7 2,5 6 2, 5 1, , , 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Feb 12 Aug 12 Feb 13 ADR Aug 13 Feb 14 Aug 14 Source: STR Global, JLL Note: MAA - Moving Annual Average Feb 15 RevPAR Major Additions to Hotel Supply Aug 15 Feb Additions to Supply Aug 16 Feb 17 Aug 17 Occupancy 17F 18F Occupancy (%) Persistent growth in visitor arrivals, proving 2Q17 not an anomaly Overnight visitation from mainland China remained relatively steady in August 217, with marginal growth of 2.5% y-o-y. This is a continuation of the recovery trend which began in December 216. However, the 1.9% y-o-y growth registered as at YTD August 217 remains soft in relation to the near 1% decline of mainland Chinese visitor arrivals over 215 and 216. As such, the tourism sector still remains cautious about the sustainability of the recovery under way. New supply moderating in anticipation of 218 pipeline Following the launch of the Kerry Hotel in April this year, the city now has 27 luxury hotels, up from 26 in 214 and 19 in 27, according to STR Global. Hong Kong will embrace a new wave of luxury hotels later in 217 when The Murray, Hong Kong, a Niccolo Hotel, opens with 336 rooms; followed by the 398-room Rosewood Hong Kong; the 129-room St Regis Hong Kong next year; and the 46-room Fullerton Hong Kong Hotel Ocean Park in 22. Trading performance continues to record improvement Revenue Per Available Room (RevPAR) growth was recorded across all monitored segments as at YTD August 217, led by the midscale and economy hotel segment (up 6.5% y-o-y). Luxury hotels also recorded RevPAR improvement compared to the same period in 216 (up 4.6% y-o-y). RevPAR was essentially driven by occupancy rises with the luxury segment up by 6.% y-o-y to 79.7%. As a driver of occupancy growth, a small decline of 1.3% y-o-y was registered in the Average Daily Rate (ADR) at HKD 3,25. Outlook: Mainland China driving inbound tourism growth The long haul corporate market has not shown any major signs of growth with the bulk of meetings, incentives, conventions and exhibitions demand coming from regional businesses. Shenzhen and Shanghai are stiff competitors for hosting large-scale events. As a result of a number of new luxury entrants to the Hong Kong market, market-wide ADR is set to increase and occupancy should also follow suit. Source: Industry sources, JLL 68 Hotels Note: Hong Kong Hotels refers to Hong Kong luxury hotel market.

69 Beijing Occupancy and ADR performance improves. RevPAR Growth Y-O-Y 4.8% YTD August 217 RMB Stage in RevPAR Cycle RevPAR Rising David Marriott, Senior Vice President - Hotels & Hospitality Group, Greater China International visitation continues to decline Total visitor arrivals to Beijing declined by 5.8% y-o-y to 2.2 million as at YTD July 217. The decline was mainly attributed to the sharp drop in Korean visitors, which recorded a 41.3% y-o-y fall due to political tensions between the two countries. On a positive note, it is expected that a 144-hour visa exemption policy will be implemented at end-217, which should help to boost international visitation and alleviate the shortfall from a decrease in Korean tourists. Future projects extending to Beijing s emerging areas Three international branded hotels opened in Beijing in the first three quarters of 217, including the 45-room Hotel Jen, 119-room Bvlgari Hotel Beijing and 22-room Pan Pacific Beijing. A further 6 rooms are expected to enter the market by year-end. Room additions in 218 are expected to be slightly more than witnessed in recent years at almost 2,5 keys. However, some projects may be delayed. Occupancy driving hotel performance As at YTD August 217, occupancy for upscale hotels increased by 4.1% y-o-y to 73.9%, while Average Daily Rates (ADR) increased by.7% to RMB 1,18. Driven by a higher occupancy rate, Revenue Per Available Room (RevPAR) increased by 4.8% y-o-y to RMB On a moving annual average basis, August 217 saw ADR increasing by 2.% y-o-y to RMB 1,12. Occupancy likewise registered improvement, growing by 3.8% y-o-y. Outlook: Hotel to office conversion is underway in core areas Hotel trading performance is expected to improve over the next 12 months. The positioning and limited key count of upcoming luxury projects are expected to drive ADR growth market wide. Additionally, due to a shortage of Grade A office buildings, some developers are converting hotel properties to office buildings in the core areas of Beijing. This situation should help alleviate supply pressures and support trading performance. Upscale Hotel Trading Performance ADR / RevPAR (RMB) No. of rooms 1,2 1, , 3,5 3, 2,5 2, 1,5 1, 5 Feb 12 Aug 12 Feb 13 ADR Aug 13 Feb 14 Aug 14 Feb 15 RevPAR Source: STR Global, JLL Note: MAA - Moving Annual Average Major Additions to Hotel Supply Aug 15 Feb 16 Aug 16 Feb 17 Aug 17 Occupancy F 18F Additions to Supply Source: Yearbook of China Tourism Statistics,Industry sources, JLL Occupancy (%) Note: Beijing Hotels refers to Beijing s upscale hotel market. 69 Hotels

70 Shanghai Large supply additions in key submarkets to put pressure on performance. David Marriott, Senior Vice President - Hotels & Hospitality Group, Greater China RevPAR Growth Y-O-Y 4.5% YTD August 217 RMB 778 Stage in RevPAR Cycle RevPAR Rising Upscale Hotel Trading Performance ADR / RevPAR (RMB) No. of rooms 1,2 1, , 2, 1, Feb 12 Aug 12 Feb 13 ADR Aug 13 Feb 14 Aug 14 Source: STR Global, JLL Note: MAA - Moving Annual Average 8, 7, 6, 5, 4, Feb 15 RevPAR Major Additions to Hotel Supply Source: STR Global, JLL Additions to Supply Aug 15 Feb 16 Aug 16 Feb 17 Aug 17 Occupancy F 18F Occupancy (%) Shanghai continues to attract international visitation As at YTD July 217, data from the Shanghai Tourism Bureau showed 4.2 million international visitor arrivals which amount to an increase of 3% y-o-y. The rise can be mainly attributed to strong growth in visitor arrivals from Japan and the USA, rising 16.1% and 5.3% y-o-y, respectively. However, Korean visitation continued to fall due to ongoing tensions between the two countries. Downtown Puxi sees additional luxury brand presence The first three quarters of 217 saw more than 1 hotels with close to 3,5 rooms commence trading. Six of these hotels are positioned in the upscale segment. Notable openings included the 374-room W Hotel Shanghai The Bund and the 491-room St. Regis Shanghai Jingan. Notable hotels expected to enter the market over the remainder of 217, include Bvlgari Shanghai, Bellagio by MGM Shanghai, The Middle House and the Sukhothai Hotel. All new luxury offerings are located in the downtown Puxi area. Demand remains the key driver of RevPAR growth As at YTD August 217, occupancy continued to improve, growing 2.6 percentage points y-o-y to 73.9%. Average Daily Rate (ADR) remained stable with a slight rise of.8% y-o-y to RMB 1,52. As a result, Revenue Per Available Room (RevPAR) climbed 4.5% y-o-y to RMB 778. On a moving annual average basis, August 217 occupancy showed an upward trend by increasing 2.8 percentage points y-o-y. ADR remained flat over the year, decreasing by a slight.6% to RMB 1,55. Improvements in occupancy drove a RevPAR growth of 3.2% y-o-y to RMB 786. Outlook: Oversupply a big concern in select submarkets Continual development of the city s business and entertainment infrastructure will help generate demand for hotels and support overall trading performance. However, in submarkets such as Hongqiao, Putuo and Pudong districts, supply is expected to outpace demand in the near term, exerting pressure on performance. Strong competition from local restaurants, including those which offer a Michelin experience, are expected to present challenges to hotel restaurants and require them to review their offerings/experience to attract/retain customers. 7 Hotels Note: Shanghai Hotels refers to Shanghai s Upscale hotel market.

71 Tokyo Improvement in trading performance supported by growing inbound demand. RevPAR Growth Y-O-Y 6.% YTD August 217 JPY 46,762 Stage in RevPAR Cycle RevPAR Rising Tom Sawayanagi, Head of Hotels & Hospitality Group, Japan Inbound visitors build a solid base for lodging demand A total of 26.5 million visitor nights were spent in Tokyo as at YTD June 217. International accommodation guests, which account for 35% of total guests who spent on accommodation in Tokyo, increased by 14% y-o-y to 9.2 million. Domestic guests also increased by 3% to 17.3 million. Inbound visitation grew by 17.3% y-o-y to 16.4 million as at YTD July 217; however, demand for hotel rooms in Tokyo did not grow at the same pace. This may be due to a hike in room rates driven by high occupancy, which caused demand to shift to satellite cities for lower room rates with repeat visitors diversifying away from Tokyo. No major openings of four or five-star hotels in 3Q17 There were no new luxury hotel openings in 3Q17. There are several luxury hotel openings in the pipeline in anticipation of the 22 Tokyo Olympic demand. In 218, three four-star hotels namely Hyatt Centric Ginza Tokyo, Pullman Tamachi and the Strings Hotel Shinjuku are expected to enter. Other major projects include the redevelopment of Hotel Okura in 219 and the Four Seasons Otemachi in 22. Increase in ADR and occupancy support strong RevPAR performance The Tokyo hotel market saw an improvement in performance, as reflected by a 6.% y-o-y Revenue per Available Room (RevPAR) increase as at YTD August 217. This is attributed to both Average Daily Rate (ADR) and occupancy growth of 2.3% and 3.6% y-o-y, respectively. There were no hotel sales transactions in the luxury hotel sector in Tokyo during 3Q17. As performance growth has been slowing down since 2H16, many buyers are now cautious to pay a premium, while sellers remain hopeful for RevPAR growth. This situation has led to an expectation gap between buyers and sellers. Outlook: Healthy performance expected to continue Inbound visitation should show steady growth and it is likely to reach the government s target of 4 million visitations by 22. The aforementioned new supply will have a positive impact on Tokyo s luxury hotel market as hotel operators will put an emphasis on marketing to promote the city. RevPAR is expected to grow steadily supported by ADR growth. The hotel investment market is expected to continue to see few, albeit highvalue transactions over the next 12 months as both hotel owners and investors maintain a wait-and-see attitude. Note: Tokyo Hotels refers to Tokyo s luxury hotel market. Luxury Hotel Trading Performance ADR / RevPAR (JPY) No. of rooms 6, 55, 5, 45, 4, 35, 3, 25, 2, 15, 1, 5, 1, Feb 12 Aug 12 Feb 13 ADR Aug 13 Feb 14 Aug 14 Source: STR Global, JLL Note: MAA - Moving Annual Average Feb 15 RevPAR Major Additions to Hotel Supply Aug 15 Feb 16 Aug 16 Feb 17 Occupancy F Additions to Supply Source: Industry sources, JLL Aug F Occupancy (%) 71 Hotels

72 Singapore Trading performance decline slows down, as arrivals growth form a strong base for hotel demand. Scott Hetherington, CEO - Hotels & Hospitality Group, Asia RevPAR Growth Y-O-Y -3.6% YTD August 217 SGD 36 Stage in RevPAR Cycle Decline Slowing Luxury Hotel Trading Performance ADR / RevPAR (SGD) No. of rooms Feb 12 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Aug 12 Feb 13 ADR Aug 13 Feb 14 Aug 14 RevPAR Source: STR Global, JLL Note: MAA - Moving Annual Average Additions to Supply Feb 15 Major Additions to Hotel Supply Aug 15 Feb 16 Aug 16 Occupancy Feb 17 Aug F 18F Source: Industry sources, JLL Occupancy (%) Continued arrivals growth underpins hotel demand Singapore is likely to see another record-breaking year for international arrivals in 217. As at YTD July 217, arrivals totalled 1.1 million, a 3.8% y-o-y increase. Singapore emerged as the second most visited destination in Asia Pacific, and top for tourist spending in 216 according to the MasterCard Global Destination Cities. Key source markets continued to drive arrivals, with all registering growth except for Malaysia (-.5% y-o-y) and Japan (-1.5%). Leading growth markets were India (+14.4% y-o-y), Vietnam (+12.5%) and USA (+9.9%). China remained Singapore s top source market, comprising 18.7% of total visitor arrivals. Significant incoming supply in 4Q17, but slowing thereafter There were no new openings in 3Q17. However, an additional 4,88 rooms are expected to enter the market from 4Q17 through 22. Significant incoming supply is expected in 4Q17 with nine openings offering 2,676 keys. These include the Sofitel Singapore City Centre, InterContinental Robertson Quay, Courtyard by Marriott Singapore Novena, Andaz Singapore and Yotel Orchard Road. Novotel and Mercure Singapore on Stevens are also expected to open by end-217 with 782 rooms. RevPAR decline slows as ADR fall eases As at YTD August 217, occupancy for luxury hotels fell 3.2% y-o-y to 77.3%. Average Daily Rate (ADR) reached SGD 396, a fall of.5% y-o-y. As a result, Revenue Per Available Room (RevPAR) declined by 3.6% y-o-y to SGD 36. On a moving annual average basis, RevPAR likewise registered a decrease of 4.4% y-o-y from SGD 323 in August 216 to SGD 39 in August 217. Outlook: Strong arrivals and tapering supply to drive performance After large supply additions in 4Q17, stock growth is likely to slow down. While trading performance may be soft in the near term, continued visitor arrivals growth should provide a strong base for hotel demand. The absorption of incoming supply should reduce pressure on ADR and occupancy. In August 217, the Singapore Tourism Board and Economic Development Board unveiled a new unified tourism brand, labelled Passion Made Possible, marketing Singapore for both tourism and business purposes. The improved marketing efforts target both leisure and corporate sectors, and bodes well for the hotel sector. 72 Hotels Note: Singapore Hotels refers to Singapore s luxury hotel market.

73 Bangkok RevPAR Growth Y-O-Y 5.7% YTD August 217 THB 4,64 Stage in RevPAR Cycle RevPAR Rising Improvement in hotel performance, with tourist arrivals driving demand for accommodation. Mike Batchelor, Managing Director - Hotels & Hospitality Group, Singapore Growth in arrivals underpinned by recovery of Chinese visitors International arrivals reached 15.6 million as at YTD August 217, representing a 5.% y-o-y growth. The number of Chinese arrivals to Thailand has shown signs of recovery since 2Q17, with visitor arrivals as at YTD August 217 nearing the same level as the same period last year. According to government data, Mainland China continued to be the largest source market as at YTD July 217, followed by Japan, South Korea and India. Arrivals from Mainland China saw a contraction of 5.3% y-o-y while the remaining top four source markets saw growth. Arrivals from South Korea led growth, expanding by 2.1% y-o-y, followed by India at 17.4% y-o-y. No new openings in 3Q17 Following supply additions of almost 1,2 rooms during 1H17, 3Q17 saw no new additions. Nevertheless, approximately 1,3 hotel rooms are planned to be added in 4Q17. If all projects materialise, Bangkok will see a similar level of room additions as in 216. Future openings in the luxury segment include the 231-key Lancaster Bangkok in 4Q17, followed by the 154-key The Bangkok Edition by Ritz-Carlton and the 17-key Waldorf Astoria Bangkok in 218. Despite key openings in the luxury segment, future room additions until end-22 should remain concentrated in the upscale segment. Continued improvement in hotel performance As at YTD August 217, the Bangkok luxury market continued to perform well with Revenue Per Available Room (RevPAR) registering 5.7% y-o-y growth to THB 4,64. The growth in RevPAR was driven by both Average Daily Rate (ADR) and occupancy, which saw y-o-y improvements of 2.1% to THB 6,83 and 3.5% to 76.3%, respectively. On a moving annual average basis, RevPAR continued its growth trend increasing 6.8% y-o-y to THB 4,589 in August 217, mainly driven by growth in occupancy. Outlook: Increasing tourist arrivals to absorb oncoming supply Bangkok is expected to see a large increase in hotel supply with 5,6 rooms to be added by end-218. The continual growth trend in tourist arrivals should be further supported by a recovery in Chinese visitors. This is expected to translate to demand for accommodation, which will absorb the oncoming room supply. The ongoing infrastructure improvements including extensions of the mass rapid transit systems and expansions of Don Mueang and Suvarnabhumi International Airports will further support higher arrivals. Note: Bangkok Hotels refers to Bangkok s luxury hotel market. Luxury Hotel Trading Performance ADR / RevPAR (THB) No. of rooms 7, 6, 5, 4, 3, 2, 1, Feb 12 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Aug 12 Feb 13 ADR Aug 13 Feb 14 Aug 14 Source: STR Global, JLL Note: MAA - Moving Annual Average Feb 15 RevPAR Major Additions to Hotel Supply Additions to Supply Source: Industry Sources, JLL Aug 15 Feb 16 Aug 16 Feb 17 Aug 17 Occupancy F F Occupancy (%) 73 Hotels

74 Jakarta Rising occupancy supported by increasing visitor arrivals; however, ADR falls. Scott Hetherington, CEO - Hotels & Hospitality Group, Asia RevPAR Growth Y-O-Y.8% YTD August 217 USD 84 Stage in RevPAR Cycle RevPAR Stable Luxury and Upscale Hotel Trading Performance ADR / RevPAR (USD) No. of rooms , 3,5 3, 2,5 2, 1,5 1, 5 Feb 12 Aug 12 Feb 13 ADR Aug 13 Feb 14 Aug 14 Feb 15 RevPAR Source: STR Global, JLL Note: MAA - Moving Annual Average Aug 15 Major Additions to Hotel Supply Feb 16 Aug 16 Feb 17 Aug 17 Occupancy F 18F Additions to Supply Occupancy (%) Jakarta remains a key business gateway and popular stopover International visitor arrivals to Jakarta continued to grow, reaching 1.2 million as at YTD June 217, an increase of 11.1% y-o-y. Jakarta remains a key business gateway into Indonesia and corporate travellers constitute the majority of tourism demand. Jakarta is the main hub and corporate headquarters for Indonesian and multinational corporations. Jakarta is also a popular stopover for international visitors travelling to tourist destinations in Indonesia such as Bali, Lombok and Yogyakarta. Incoming supply pressures remain a concern Approximately 432 rooms in three hotels have opened in Jakarta as at September 217. The new openings included the 24-room HARRIS Vertu Jakarta, the 12-room Yello Hotel Manggarai and the 9-room Amaris Hotel Mampang. The 227-room Alila SCBD is expected to open before end-217. A significant influx of new supply is expected in 218, when approximately 2,8 new hotel rooms are expected to open. Improving occupancy offset by falling ADR As at YTD August 217, occupancy for upscale hotels in Jakarta increased by 5.9% y-o-y to 53.4%. However, Average Daily Rate (ADR) fell by 4.8% y-o-y to USD 157, resulting in only marginal Revenue Per Available Room (RevPAR) growth of.8%. With regard to the moving monthly average, RevPAR declined from USD 93 in August 216 to USD 85 in August 217, a fall of 7.6% y-o-y. Outlook: Increasing foreign investment to underpin demand The significant amount of upcoming hotel supply should add pressure to hotel trading performance in Jakarta. As such, hotels are likely to reduce rates to support occupancy. However, foreign investment in the country is expected to increase as businesses are drawn to the growing economy and the government promotes development of the tourism industry. These factors should underpin demand for quality accommodation by both corporate and leisure travellers. Source: Industry sources, JLL 74 Hotels Note: Jakarta Hotels refers to Jakarta s upscale hotel market.

75 Sydney RevPAR Growth Y-O-Y 9.8% YTD August 217 AUD 226 Stage in RevPAR Cycle RevPAR Rising Sydney s trading metrics continue to thrive amidst limited new supply and rising demand. Troy Craig, Managing Director Hotels & Hospitality Group, Australia Corporate demand and tourism growth fuel high occupancy Sydney observed record occupancy on a moving annual average basis in August 217, reaching 89.5%. The opening of the International Convention Centre Sydney as well as the implementation of annual events by the New South Wales government, such as Vivid Sydney, have increased demand in traditionally weaker months. No new supply The 59-room Sofitel Sydney Darling Harbour, located adjacent to the International Convention Centre Sydney, is scheduled to open in October 217. Room stock growth is anticipated to average 4.1% per annum between 217 and 222, with notable additions including the Crown Hotel at Barangaroo (352 rooms), W Hotel Darling Harbour (59 rooms) and the Four Points by Sheraton Sydney, Central Park (297 rooms). Strong fundamentals support positive trading performance As at YTD August 217, occupancy levels have increased 2.1% y-o-y to 89.4% and coupled with Average Daily Rate (ADR) growth of 7.5%, has resulted in considerable Revenue Per Available Room (RevPAR) growth of 9.8% to AUD 226. As a result of the high occupancy and ADR, on a moving annual average basis, RevPAR for the 12 months ended August 217 was a record high AUD 233. Outlook: Accommodation market expected to strengthen Stable occupancy and anticipated increases in ADR are expected to continue to push RevPAR upwards. While a relatively large number of rooms are anticipated to enter the Sydney market in the next three years, it is expected that continued strong demand further bolstered by the recent opening of the International Convention Centre Sydney should offset the new supply. Marketwide Hotel Trading Performance ADR / RevPAR (AUD) No. of rooms Feb 12 Aug 12 Feb 13 ADR (MAA) Aug 13 Feb 14 Aug 14 Note: MAA- Moving Annual Average Source: STR Global, JLL Feb 15 RevPAR (MAA) Major Additions to Hotel Supply Aug 15 Feb 16 Aug 16 Feb 17 Aug Occupancy (%) Occupancy (MAA) F 18F Additions to Supply Source: Australian Bureau of Statistics, JLL Note: Sydney Hotels refers to all grades of accommodation and includes both hotels and serviced apartments. 75 Hotels

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

77 Real Estate Services jll.com/asiapacific The data to back up your real estate decisions. 217 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

78 Real Estate Services The best investment opportunities for the most ambitious investors. jll.com/theinvestor 217 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.