Asia Real Estate 2013 Forecast

Transcription

1 Asia Real Estate 2013 Forecast

2 Content Introduction Section 1 - Asia Real Estate 2013 Forecast Office: Driven by cost-savings and the continued flight to quality Residential: Cities with pent-up demand will do well Retail: Powered by growing urbanisation Industrial: Intra-regional demand spilled over from China Section 2 - Markets Greater China Beijing, China Chengdu, China Guangzhou, China Shanghai, China Hong Kong Taipei, Taiwan Colliers International is delighted to present the Asia Real Estate Forecast for The summary section of the paper provides the top-down analysis on the key trends in macroenvironment in Asia as well as the prospective trend on the major property sectors in the region. The country section covers major cities in Asia with property forecast and projections on both rental and capital values for As a snapshot, one of the notable trends in 2013 is that real estate prices will remain positive in More occupiers are expected to go for acquisition rather than leasing amid the continued surge in rentals. Office tenants would take the supply cycle in individual cities as an opportunity to upgrade themselves to better quality premises. I trust you will find the results of this paper of interest. North Asia Tokyo, Japan Seoul, South Korea Southeast Asia Jakarta, Indonesia Kuala Lumpur, Malaysia Karachi, Pakistan Manila, Philippines Singapore Bangkok, Thailand Ho Chi Minh City, Vietnam Hanoi, Vietnam India & Central Asia Bengaluru, India Chennai, India Mumbai, India NCR (Delhi, Noida and Guragon), India Kazakhstan

3 Asia Real Estate 2013 Forecast Colliers International 5 Asia Real Estate 2013 Forecast Real estate prices for 2013 remain positive In 2013, real estate prices in the region are predicted to stay in the upward trend not just because of the rising prices of commodities including some construction materials from the replacement cost angle but also the growth expectations in the region and the underlying demand from end-users, occupiers and investors. Looking at the prospective GDP growth in the region, China is going to be the key driver which is predicted to generate a significant positive spill-over to the rest of countries in Asia. Shortly after the conclusion of the 18th National People s Congress in 4Q 2012, economic growth of China in 2013 is predicted to be stronger. The main reason is that massive investment has been made in a number of infrastructure projects which will definitely drive growth. Meanwhile, the prevailing relaxed monetary policy is going to sustain in 2013 given the rate of price inflation has been staying at low level. Comparing 2013 to 2012, the only difference is that the growth rate of real estate prices is expected to taper off slightly from the range of 5-9% per year in 2012 to 2-5% per year in Renters become buyers; Yields to compress Further to the general fall of investment yields in 2012, the same is going to happen again in 2013 across the board but the degree of compression will be much slower between flat and 10 basis points. On the one hand, occupiers are expected to take advantage of the prevailing low-interest rate environment to acquire real estate for long-term occupation rather than leasing. On the other hand, investors who have previously been constrained by limited loanto-value ratios are expected to take on more risks in completing deals given the support by most banks and other lending institutions on both core and mezzanine real estate financing in 2013.

4 Asia Real Estate 2013 Forecast Colliers International 7 Offices: Driven by cost-savings and the continued flight to quality Breaking down by sector, the office sector is going to see more rental weakness primarily because of the impact arising from the current supply cycle. Although individual occupiers might take it as an opportunity to relocate and upgrade to better quality buildings, the introduction of new developments is going bring down the average overall rental rates at least over the short term. More significant downward pressure will be inevitable in cities having plentiful vacant space available for immediate occupation. For example, cities in India where existing vacancy is on the order of 15-20% are going to experience a rental correction of 2-3% in Meanwhile, Singapore will continue to see ample new developments coming on line. Rents are therefore predicted to be made competitive in order to lure tenants. Similarly, the growing new supply in Ho Chi Minh City and Hanoi will send office rents further down since the new projects, mostly located outside the city core, are anticipated to be pitched at rates significantly lower than those in the CBD. In 2013, the top three office performers in descending order are predicted to be Jakarta, Beijing and Bangkok. Similar to 2012, Jakarta will continue to steal the limelight with an anticipated 35% rent growth thanks to the buoyant leasing demand from overseas companies engaged in banking and finances. Beijing expects a rental growth of 10.9%, with many domestic firms and some MNCs continually seeking office spaces for relocation and expansion. Bangkok will edge up another 10% in 2013 primarily because of the lack of new supply in the CBD. However, the overall growth pace is going to be diluted by the forthcoming new supply and the deferred completions of a number of buildings to Office Rents 2013 Forecast *NCR denotes Delhi, NOIDA and Gurgaon

5 Asia Real Estate 2013 Forecast Colliers International 9 Residential: Cities with pent-up demand will do well Due to the strong underlying genuine demand, the flow of liquidity and the additional push from price inflation, residential real estate prices in most Asian cities showed different degrees of upsurge from flat growth to more than 26% in As a pre-emptive move to stop residential markets from developing into asset bubbles, individual governments have built up firewalls in terms of buying and lending restrictions to cool residential prices in their home markets. Due to the implementation of additional buyers stamp duty (ABSD) since late December 2011, Singapore was just one of the few cities in Asia recording negative price growth in Following suit, Hong Kong introduced buyers stamp duty (BSD) in 4Q 2012 to restrict non-local buying activity in the residential market. Although residential prices in Hong Kong managed to rise 3% in 2012, the market direction is predicted to reverse in 2013.

6 Asia Real Estate 2013 Forecast Colliers International 11 Residential Capital Values 2013 Forecast In Jakarta, demand for strata-title units has been growing since Potential upside risk remains in 2013 because of limited supply of stock particularly in the CBD and South Jakarta. Demand for residential properties in India has been buoyant but supply was tight in 2012 due to the deferred completions of new projects. If local banks soften their stance on financing to local developers, more new supply is expected to come along, thus slowing the prospective price growth to 8% in *NCR denotes Delhi, NOIDA and Gurgaon Nevertheless, residential markets in most Asian cities continue to look good thanks to the genuine demand from the local residents which have been growing due to natural birth rates and migration of residents into urban centres. Beijing will continue to see robust capital growth due to limited supply in the marketplace. Jakarta, Manila and the key cities in India are typical cases showing sustained growth in the residential market as they gradually recover from the global financial crisis (GFC) which happened in the second half of Other macro-reasons are their massive internal consumption base and the trend of sustained inflation. As a first-tier city in China, Guangzhou will continue to see its residential market being regulated by the prevailing buying restrictions. However, sales prices are predicted to edge up further by 5% due to the strong demand from end-users and a number of high-net-worth individuals.

7 Asia Real Estate 2013 Forecast Colliers International 13 Retail: Powered by growing urbanisation Closely linked to the trend of population growth and limited land supply in the urban core, retail rentals largely showed positive growth in New retail supply in the format of community shopping malls will come down the pipeline in decentralised locations outside the city core. Thanks to fundamental support by local residents, Jakarta will see another strong year in 2013 with rents potentially going up by 20% during the period. To most residents in Pakistan, shopping malls are essentially a new concept since there were virtually no shopping malls in Karachi five years ago. With the on-going structural change in the market, quality shopping mall developments in central locations have been gradually accepted by the community with the average rent nearly three times more expensive than stand-alone retail facilities. Rents are expected to gather additional growth momentum to rise over 10% in 2013.

8 Asia Real Estate 2013 Forecast Colliers International 15 Retail Rents 2013 Forecast Retail rents in the first-tier cities of China remain positive thanks to the continued increase in household income and the encouraging double-digit growth of retail sales. Demand from overseas labels remains keen on opening their flagship stores in the first-tier cities. With new supply due to be completed largely in non-traditional areas, rent growth is going to go flat or rise moderately by 1 to 3% in Chengdu, one of the major second-tier cities in China, will deliver exceptional performance thanks to the demand from new brands and the expansionary requirements from local retailers. Market sentiment will be further buoyed since the next Fortune Global Forum is going to be held in Chengdu in mid However, with more competitive stock due for completion in 2013, rent growth is predicted to taper off to 5% in In Hong Kong, rents will grow further in However, the pace of growth is expected to taper off to 9% since the discretionary spending by mainland visitors making up more than two-thirds of the total inbound tourists is forecast to slow in tandem with the performance of other asset markets in China. In Singapore, rents of prime retail shops will remain weak in 2013 further to some downward rental adjustment in The key challenges are the shrinkage of operating margins, growing competition and the shortage of labour amid the general slide of discretionary spending by local residents. Prospective rent fall in Vietnam is largely due to the forthcoming new supply in the outskirt areas where rents are more competitive than in the city centre.

9 Asia Real Estate 2013 Forecast Colliers International 17 Industrial: Intra-regional demand spilled over from China Largely above market expectations, the industrial logistics market showed positive growth on the leasing front in 2012 despite the challenges in the external environment including the sovereign debt issues in the euro-zone. It appears that the sector is going to perform again and deliver even stronger growth in 2013 if the economy in China can resume its growth momentum after the recent period of stabilisation. In our view, it is likely to happen as the government in China has made massive investment in a number of infrastructure projects since 3Q 2012 and is determined to revive the economy by boosting domestic consumption. Industrial logistics warehousing is going to benefit from the trend since private enterprises including those engaged in the fast-moving consumer goods (FMCG) sector will continue to outsource logistics functions to third-party logistics (3PL) operators to save costs. The industrial sector of Beijing in particular is going to be the star performer in Capital values are expected to increase 12.5% in 2013 due to the tight supply and sustained demand. Jakarta continues to look strong in 2013 although prospective buyers are becoming more resistant to the current price levels. In Bangkok, the volume of sales activity in the city area has been slow but prices are expected to be supported by end-users who have gradually turned their focus to the fringe areas of Bangkok. In Kuala Lumpur, industrial real estate looks positive due to the support by the government via grants and incentives. Capital values are expected to be supported by foreign companies from, for example, Singapore looking to relocate and set up their operations outside Kuala Lumpur. NCR in India again is anticipated to see further capital growth primarily due to the upgrading demand from manufacturers in light industries and the IT/ITes sector. Meanwhile, the industrial sector in Singapore was the star performer in 2012, with rents increasing by 10% and capital values surging by 26% during the year. However, the recent strong run-up in industrial property prices has prompted the Government to impose, with effect from 12 January 2013, a Seller s Stamp Duty (SSD) on industrial properties that are sold within three years of purchase. Given the sustained long-term investment demand, industrial capital values are expected to stay flat in In China, prospective capital growth for logistics warehouses in Guangzhou will be stronger than the other property sectors thanks to the support from purchasers who are planning to build manufacturing or machinery assembly facilities. In Shanghai, the local logistics warehousing sector will see more exciting growth thanks to increasing real estate requirements from overseas companies who are engaged in the specific industries (e.g. high-tech manufacturing) preferred by the government. Seoul and Taipei are predicted to undergo short-term downward adjustments in The industrial real estate sector in Seoul, primarily geared towards manufacturing industries, is predicted to remain weak since investors are sceptical of the demand for imports by the major economies in the west. The market in Taipei is going to be affected by the prevailing government s determination to open the market to other investors instead of being too dominated by local life insurance companies. Cities relying heavily on exports to mature economies in the US and the euro-zone will see a more significant downward adjustment on capital values in Industrial/Logistics Capital Values 2013 Forecast *NCR denotes Delhi, NOIDA and Gurgaon

10 Asia Real Estate 2013 Forecast I Beijing, China Colliers International 19 Beijing, China Office % 15.4% 10.9% 8.9% Residential % 26.1% 12.3% 16.7% Retail 3 6.5% 5.0% 4.6% 4.6% Industrial % 12% 9.4% 12.5% 1 Office refers to Grade A offices 2 Residential refers to luxury apartments 3 Retail refers to mid- to high-end shopping centers Greater China 4 Industrial refers to the logistics sector The world economy is projected to pick up gradually in 2013, with China remaining the global growth leader, given the cabinet reformat during the 18th National Congress, the accelerating development of key infrastructure projects outlined in the 12th Five- Year Plan, and the steady domestic economic growth. Demand for Beijing s office properties is expected to be stable in 2013, with many domestic firms and some MNCs continually seeking office spaces for relocation and expansion. The unbalance between tight supply and stable demand in the Grade A sector should be somewhat cushioned by several new completions in The overall vacancy rate is projected to edge up, due to relatively limited pre-commitment rates of the new supply, but should remain at a single-digit level of 5.5% by end Asset performance is expected to be relatively stable, too, with rental and capital values growing moderately. Due to limited availabilities and strong demand from end-users, some submarkets should continue to see yield compressions. The overall retail property market remained positive in 2012, with rental and capital values growing moderately, in spite of cautious spending attitude rising on the back of the volatile world economy and slowing domestic economics. In 2013, demand of retailers from the F&B, children s education, health & beauty as well as personal care sectors should remain strong whilst that of luxury product retailers should continue to weaken comparatively. Fixed rents and capital values are forecast to grow at a single-digit pace and yields are expected to remain flat throughout In spite of the central and local governments tightened policies and lending controls on the housing market, the overall residential sales market remained positive in The letting market was healthy too, with rental growth logged in at 21.1% YoY by end The continuation of the aforementioned policies will be the highlight in 2013, continually curbing speculative purchases and preventing excessive growth in property prices. Demand for owner-occupancy and housing condition upgrades in the overall residential property market is expected to remain stable, underpinning the price up-ticks. The growth momentum for Beijing s logistic property market continued in 2012, fueled by thriving business expansions in the 3PL and E-Commerce sectors. The disequilibrium of insufficient supply and strong demand for leasing and investment continued to lead to a further upward drift on both rental and capital values. The outlook of the property sector in 2013 should continue to be strong, with investment returns stabilising over the next months.

11 Asia Real Estate 2013 Forecast I Chengdu, China Asia Real Estate 2013 Forecast I Guangzhou, China Colliers International 21 Chengdu, China Office 1-2.0% 3.0% 6.0% 4.0% Residential Retail 2 8.0% 3.0% 5.0% 3.0% Industrial Guangzhou, China (% growth YoY) Rents Capital Values Rents Capital Values Office 1 7.0% 12.0% -3.0% 4.0% Residential % 3.0% 8.0% 5.0% Retail 3 1.0% 3.0% 1.0% 1.0% Industrial 4 5.0% 8.0% 3.0% 6.0% 1 1 Office refers to Grade A office Office refers to Grade A offices in the CBD 2 2 Residential refers to shopping centers Residential refers to the units in the luxury sector 3 Retail refers to shopping malls 4 Industrial refers to logistics warehouse and single and multi-storey facilities in industrial parks The office rental market saw a mild correction in 2012 since most multi-national corporations were largely cost cautious on their real estate budgets. However, sizeable local enterprises and state-owned companies engaged in energy, infrastructure and manufacturing looking for expansion are expected to take up the slack in Tenants will be taking the new supply coming on line as a market opportunity to upgrade from older to brand-new Grade A office developments with quality management. The retail sector continues to look positive in 2013 due to the double-digit growth (i.e. 16% YoY in mid-2012) of retail consumption in the city, the increasing number of new brands and the expansionary requirements from local retailers as well. However, the challenge to the market is the prospective completion of a batch of new supply with similar physical settings and targeted spending groups over the next 12 to 24 months. A number of retailers will be lured to brand new projects, thus leaving less convenient developments such as those located outside the 3rd Ring Road with slower rent growth next year. With the addition of new stock, the overall retail rent growth is predicted to slow to 5% in 2013 but retail capital values will be going up steadily on the order of 3% per year. The office rental trend in Guangzhou is going to reverse in 2013 due to the prospective supply coming on line roughly representing a doubling of the historical average completion rate, while there are no signs of expansion on the demand front. Prospective buyers are expected to be conservative in making their bids since sales prices have substantially increased in the past couple of years and the current investment yields have been compressed to about 2-3% per year. As such, it is our prediction that the potential upside for capital values will be largely capped at 4% in In the residential market, the prospective growth of capital values will be constrained by the prevailing buying restrictions. With the prospective launch of a few super-luxury developments, the average unit prices will be slightly higher. Although the volume is thin, sales prices could be supported by the prevailing strong demand from end-users and a number of high-net-worth individuals. In the retail sector, new malls coming on line in Guangzhou city will be limited due to the lack of development sites. Rent growth for existing malls will depend on the successful restructuring of tenant mix. Development of new malls in the suburban locations will be the on-going trend but unit rents are usually offered at lower rates. Sales transactions are generally confined to ground floor shops. As usual, it is a unique sector driven principally by local players. In the industrial sector, single-level facilities with high headroom at eight meters or above and site area on the order of 3,000 and 10,000 sq m will remain in the market favour in Rent growth is going to be steady at about 3% in 2013 due to the support from manufacturing and machinery assembly activity. Prospective capital growth will be the strongest among the other sectors since demand will be buoyed by purchasers who are planning to build for their own uses.

12 Colliers Asia Real Asia Estate Real 2013 Estate Forecast I 2013 Shanghai, I Shanghai China Asia Real Estate 2013 Forecast I Hong Kong Colliers International 23 Shanghai, China Hong Kong (% growth YoY) Rents Capital Values Rents Capital Values Office % 11.0% 6.5% 7.5% Residential 2 1.0% 3.0% 1.0% 3.0% Retail 3 1.1% 3.0% 1.1% 3.0% Industrial 6.4% 7.0% 4.0% 5.0% Logistics Industrial 2.8% 2.8% 2.5% 2.5% Workshop (% growth YoY) Rents Capital Values Rents Capital Values Office 1-3.0% 7.0% 5.0% 9.0% Residential 2-5.0% 3.0% -5.0% -10.0% Retail % 27.0% 9.0% 11.0% Industrial 4 6.0% 20.0% 5.0% 10.0% 1 Office refers to Grade A office 2 Residential refers to high-end units located in traditional luxury locations 3 Retail refers to ground-floor shops in traditional shopping locations 4 Industrial refers to factory and warehouses 1 Office refers to prime offices in the CBD 2 Residential refers to high-end units with unit prices at RMB40,000 per sq m or above 3 Retail refers to shopping malls in both core and decentralised locations In 2013, asking rents will be raised at better quality office buildings coming onto the market in However, the anticipated rent growth will be slower in 2013 in anticipation of slower demand growth and a batch of new supply comprising about half a million square metres and the completion of a few buildings being deferred to The office sales market is expected to perform well with the strongest growth among the other real estate sectors in 2013 thanks to the sustained buying interests from a number of local institutions and growing interest among domestic players. Given the projection that the prevailing buying and lending restrictions on the local residential sector are going to remain intact, both residential prices and rents are expected to see only mild growth on the order of 1-3% at best in As such, real estate capital values in other non-commercial sectors are predicted to enjoy the shift of investment capital and the benefits of a projected economic recovery in The on-going trend of retail sales in Shanghai remains solid. However, the retail real estate sector will be relatively flat in 2013 because of the supply cycle, thus putting a cap on both rents and capital values. In the industrial market, workshops, largely factories are going to stage a mild growth in 2013 but the local logistics warehousing sector will see more exciting growth due to growing real estate requirements from overseas companies. However, the challenge is always the availability of land for development although specific preferred industries such as high-tech manufacturing could receive special treatment from the local government on the procurement of industrial sites. Despite the general softening of rents, office yields were compressed further in 2012 due to inflation and capital flow from the local residential sector. Office rents will buck the downward trend in 2013 thanks to steady growing occupational demand in the legal sector and the continued support from mainland companies. Buying interests including both investors and end-users were immense for office developments in decentralised locations. In anticipation of further rent stabilisation in traditional CBD markets, sales prices in core areas are predicted to catch up in The cooling measures implemented by the government on the residential sector actually led to an immediate volume contraction in 4Q Upward price momentum stalled and housing rents fell 5% YoY as corporate tenants downgraded themselves to more affordable premises. Looking ahead, the current trend of capital growth is going to be sustained except in the residential sector which is predicted to consolidate by 10% as a result of the Buyers Stamp Duty (BSD). In the retail sector, rent growth is going to taper off in 2013 since retailers have become more realistic to make their offers more in line with the trend of retail sales. Capital values could see double-digit growth, again due to the strong investment demand. In the industrial sector, prospective rent growth is expected to stay steady in 2013 but capital growth is predicted to slow to about 10% after the distinct yield compression in However, quality logistics warehouses are anticipated to see outperforming growth due to the limited supply in the marketplace.

13 Asia Real Estate 2013 Forecast I Taipei, Taiwan Colliers International 25 Taipei, Taiwan Office 1-0.5% 5.7% 1.0% -5.0% Residential Retail Industrial 2 2.1% 6.3% 1.0% -5.0% 1 Office refers to premium Grade and Grade A offices in CBD 2 Industrial refers to hi-specs buildings in Neihu Technology Park Office capital values increased by an estimated 5.7% in 2012 notwithstanding that rents moved generally sideways during the period. The key reason was that most local life insurers determined to park their capital in office stock despite the sustained low investment yields. However, the current trend might be reversed in Further to the increase of the minimum yields on real-estate investments from to 2.125% in August 2012, the Financial Supervisory Commission (FSC) increased the rate to 2.875% in November 2012 in an attempt to curb short-term trading of commercial properties. Shortly after the announcement, investment sentiment for both the office and industrial sectors has turned cautious. Both office and industrial prices are predicted to soften in 2013 since market yields for offices are generally fetching 2.5%. More importantly, life insurers who used to be the main buyers in the commercial investment market now have virtually disappeared from the market. North Asia

14 Asia Real Estate 2013 Forecast I Tokyo, Japan Asia Real Estate 2013 Forecast I Seoul, South Korea Colliers International 27 Tokyo, Japan Seoul, South Korea Office 1 0.4% 1.2% 2.0% 0.3% Residential Retail Industrial 2 0.3% 0.2% 0.0% 0.0% Office 1 3.9% 2.7% 4.0% 3.0% Residential 2 3.4% 0.2% 4.0% 1.0% Retail Industrial 3 2.8% -6.5% 3.0% -5.0% 1 Office refers to Grade A developments in the CBD areas 2 Industrial refers to logistics warehouses 1 Office refers to prime offices in Seoul 2 Residential refers to residential properties in major areas in Seoul 3 Industrial refers to six major industrial area - Seongsu, Youngdeungpo, Namdong, Shihwa / Banwol, Pyeongtaek / Asan / Dangjin, Busan Noksan Although the pace of rent decline has been tapering off since 2008, the market continued to be challenged by the current supply cycle the year with the second largest completion since However, due to the completion rate of new developments on a quarterly basis, the current supply cycle saw its peak in 1Q Rents came down and bottomed in 3Q 2012 and started to rise in 4Q 2012 after an accumulated decline of nearly 40% since the global financial tsunami in In 2013, office rents are expected to increase slightly as there will be less new supply coming onto the market. The vacancy rate is expected to edge down from 8.5 to 7.8% in Due to the stock availability, it is our prediction that tenants will relocate to higher grade and better quality office developments, thus leading to a mild increase of rent and capital values in The industrial market in Tokyo is predicted to remain stable in 2013 thanks to the steady end-user demand from a batch of local logistics companies. Most of the leasing contracts are signed for a term of 5 to 10 years. Therefore, no dramatic changes are expected in the overall leasing market. In the sales market, more sales transactions are anticipated since two existing JREITs and two other new REITs are there in the marketplace to expand their portfolios for long-term investment. Office rents increased about 4% in 2012 thanks to the improvement of occupancy rates. Asking rents for newly completed developments were raised thanks to the upgrading demand from the financial services sector and a number of local conglomerates (e.g. Samsung and Daelim). As vendors provide less incentive, effective rents and capital values are predicted to increase 3 to 4% in On the supply front, prime office developments are made available for sale-and-leaseback by a range of domestic conglomerates for the purpose of strengthening their balance sheets. Investment funds including NPS, Korea Teachers Mutual Funds and Police Mutual Funds are expected to remain the key buyers in On the supply front, urban redevelopment projects in the CBD - Cheongjin District No. 1, Myeongdong District No. 3, Doryum District No. 24 and one prime office building, the FDI building in the YBD will come on stream in 2013, thus boosting the vacancy rate in the overall office market in Seoul. Domestic pension and mutual funds (e.g. NPS, Korea Teachers Mutual Funds) are expected to be the key buyers in In addition, investment activities are expected to remain upbeat since more quality properties will be available for sale-and-leaseback by a range of domestic conglomerates for the purpose of strengthening their balance sheets. In the residential sector, rent growth is going to be relatively steady on the order of 4% in However, buying interests are expected to remain weak notwithstanding the various stimulus packages implemented by the government to mitigate negative factors such as economic uncertainties and the high volume of new supply and so on. Most end-users would then resort to lease rather than to buy. The industrial sector looks gloomy despite the projection of steadily-rising rents. Most prospective buyers are generally sceptical about the prospective growth due to the weak prevailing demand in the manufacturing industries.

15 Asia Real Estate 2013 Forecast I Jakarta, Indonesia Colliers International 29 Jakarta, Indonesia Office % 31.6% 35.0% 20.7% Residential 2 3.2% 11.8% 5.5% 10.6% Retail % 2.1% 20.0% 3.2% Industrial % 24.5% 5.0% 10.5% 1 Office refers to prime offices in the CBD 2 Residential for lease refers to stock available to expatriates; Residential for sale refers to strata-title units 3 Retail for lease refers to shopping malls with a total floor area of 10,000 sq m or more; Retail for sale refers to strata-title units 4 Industrial refers to industrial estates located in greater Jakarta including sub-markets like Serang, Tangerang, Bogor, Bekasi and Karawang Jakarta saw very positive growth of real estate prices across the board in The office sector stole the limelight with 35 and 32% rent and capital growth, respectively. The same trend is expected to continue in 2013 thanks the buoyant leasing demand from overseas companies engaged in banking and financial industries. With very limited stock for sale, office capital values could edge up further but at a slower pace since capital values have increased by more than 60% over the past couple of years. Investment yields would settle in a range between 6 and 8% per year in The residential leasing market is popular among most expatriates but it is small in Jakarta, representing only 7% of the total stock in the market. However, rent growth is anticipated to pick up additional momentum to about 6% in 2013 due to limited stock availability. In the sales market, demand for strata-title units has been growing since early Given the ongoing trend and limited stock in the sub-markets like the CBD and South Jakarta, prices could go up by 11% in Retail rents for sizeable shopping malls increased 18% in However, capital values were slow due to the fact that market liquidity for strata-title retail units has been thin and prospective growth has been suffering from a lack of overseas retailers. As such, prospective retail capital growth is going to be limited at low single digits in Southeast Asia Industrial rents in Jakarta increased significantly by 18% in 2012 although that represents a small portion of the total industrial transactions. The sales market showed remarkable growth with prices rising by 25% during the year. Since industrialists show increasing resistance to the current price level, asking prices are anticipated to be reduced. It is our prediction that the overall industrial capital values will slow to 11% in 2013.

16 Asia Real Estate 2013 Forecast I Kuala Lumpur, Malaysia Asia Real Estate 2013 Forecast I Karachi, Pakistan Colliers International 31 Kuala Lumpur, Malaysia Karachi, Pakistan Office 1 0.0% 0.0% 0.0% 0.0% Residential 2 0.0% 0.0% 0.0% 0.0% Retail 3 5.0% 5.0% 0.0% 5.0% Industrial 4 7.5% 6.0% 5.0% 5.0% Office 1-0.5% 0.0% 2.0% 0.0% Residential % 5.0% 4.0% Retail % 0.0% 10.0% 7.0% Industrial Office refers to Grade A office buildings in Kuala Lumpur 2 Residential refers to luxury condominiums and serviced residences 3 Retail refers principally to shopping areas in Kuala Lumpur 4 Industrial refers principally to the rents of warehouses and capital values of the land prices in Greater Kuala Lumpur. 1 Office refers to prime office buildings in Karachi 2 Residential refers to the mass market and high-end residential units in Karachi 3 Retail refers to mall developments in Karachi With a stable economic outlook expected in Malaysia, supported by continued strong domestic consumption and investment, Kuala Lumpur foresees a cautious growth in the residential sector while all other real estate sectors may moderate. In the office sector, rents and capital values remain stable as supply continues to be projected into the market (2.5 million sq ft of office space in 2012 and about 4-5 million sq ft of office space in 2013). These future office developments are, in most cases, not pre-leased and landlords are looking for tenants to fill up these spaces. In the leasing sector, structural changes are seen by major tenants taking the opportunity to relocate and/or expand to better quality buildings within the city centre. Main tenants are from the oil & gas and finance sectors. The residential market sentiment in Kuala Lumpur has been upbeat since last year as residential property prices and new supply has further increased. However, rising supply and weak demand are expected to put further pressure on the condominium rental market. In contrast, the landed residential segment continues to show strong take-up levels and remains attractive to local investors. Kuala Lumpur functions as the retail and fashion hub for Malaysia and as tourism plays an important role in Kuala Lumpur s service-driven economy, the retail market in Kuala Lumpur is performing relatively well. Looking forward, the future supply of retail centres in the Klang Valley is expected to increase by 7.63 million sq ft between 2012 and 2014 which represents an average annual increase of 5-6% in total net lettable area (NLA) of shopping malls in the Klang Valley. Retail rents are expected to remain stable while healthy growth of 5% or more in capital value is expected in The Karachi office market continues to face challenging problems, including terrorism that has negatively influenced the buying interest of local and foreign investors in the office market. With an existing oversupply situation in the market and no actual new demand generated from local and foreign companies, rents for good quality office buildings in Karachi are forecast to rise slightly at an average of 2% in 2013 whereas, the capital values will remain flat. The majority of the tenants taking up space in these buildings are engaged in Fast Moving Consumer Goods (FMCGs), the oil and gas sector and the telecom industry. Supported by strong population growth and an intercity migration trend, healthy growth in the residential sector is expected in Nonetheless, due to the difficult economic conditions, the considerable drop in purchasing power among genuine homebuyers, there has been a shift of demand from luxury units to the more affordable housing sector. Rents are predicted to rise 5% while capital values will edge up 4% in the residential sector of Karachi in Retail shopping mall developments in Karachi are performing relatively well due to solid consumer spending and a shift of the population s preference towards one-stop shopping (i.e. mall development). Good quality malls catering to high-end foreign and local brands have been achieving an occupancy rate of above 75% on average - a clear sign showing healthy demand from foreign retailers in Karachi. Overall retail rents are predicted to increase 10% and capital values will grow 7% on average in Most of the industrial developments are led by the public sector. To help new entrepreneurs get started, the government provides various types of funding in the form of grants, loans and incentives for various industrial sectors. The most active industrial sectors are from the logistics and small and medium enterprises (SME) sectors. With a stable economic outlook, the industrial property market could potentially benefit from foreign firms, especially from Singapore, relocating or setting up their operations in well-established industrial parks that have good infrastructure, facilities and connectivity.

17 Asia Real Estate 2013 Forecast I Manila, Philippines Asia Real Estate 2013 Forecast I Singapore Colliers International 33 Manila, Philippines Singapore Office 1 9.8% 9.5% 6.5% 4.2% Residential % 8.3% 9.5% 6.2% Retail 3 4.0% Flat 4.4% Flat Industrial 4 3.3% Flat 3.2% Flat Office 1-7.0% -1.0% -5.0% 5.0% Residential 2-4.0% -5.0% -10.0% -5.0% Retail 3-3.0% 6.0% -5.0% 3.0% Industrial % 26.0% 5.0% Flat 1 Office refers to prime offices in the CBD 2 Residential refers to three-bedroom units located in the CBD 3 Retail refers to shopping malls and superstores located in the CBD 4 Industrial refers to logistics warehouses 1 Office refers to whole-block Grade A developments for lease and strata-titled units for sales 2 Residential refers to luxury non-landed private residential properties 3 Retail refers to ground-floor retail space for lease and strata-titled units for sales 4 All industrial rental and price indices recorded by the Urban Redevelopment Authority With strong demand from the business process outsourcing ( BPO ) sector for prime offices in the CBD area, office rents will see an increase by 9.8% at the end of this year. In 2013 the office rents are expected to slow to 6.5% since a batch of new supply comprising over one million sq m of floor area will be coming to Metro Manila in 2013 and Due to limited supply in Makati CBD, there will be a continued shift of leasing demand to the fringe areas such as Bonifacio Global City ( BGC ) where more stock is available at cheaper rents. Meanwhile, the sales market is expected to benefit from the sustained buying interests from both local and overseas companies. The residential market will continue to look strong in 2013 due to the anticipated economic growth in 2013 and the sustained occupational demand from expatriates. However, prospective growth of rents and prices are expected to slow to 9.5 and 6.2%, respectively, since there will be 2,800 new units coming onto the market, representing 12% growth YoY. Retail sales remain robust due to the strong consumer spending and the increasing population in the Philippines. Besides the CBDs, more shopping malls and superstores are also expected in the second and third-tier cities. Moreover, the strip-mall concept is likewise a growing trend. Retail rents will generally track with the economy with rents growing between 4 and 5% next year. Industrial rents are expected to stay relatively flat next year. Growth in the industrial segment remains restricted due to the high electricity costs and weak global demand. Moreover, electronic products, a major source of Philippine industrial exports, have performed passively over the last few years. Thus, the outlook on industrial rents in 2013 is that they will remain relatively neutral. However, an increase in Japanese companies scouting for industrial properties has been observed, which might indicate a relocation trend by these foreign companies to the Philippines. Weighed down by the sluggish global economy, Singapore s economic growth is expected to slow to 1-3% in Demand for office space from the sentiment driven financial services industry is hence expected to remain under the weight of economic uncertainties. Nonetheless, a more diverse occupier demand that extends beyond the financial services sector including broad-based services firms such as those in the professional and legal services industries, insurance and commodity segments is expected to provide support to the sector, thus moderating the rent decline to 5% in Overall capital values of office space could hold stable with only marginal downsides in 2013 on the back of healthy fundamentals in the stratatitled office market given the low interest rate environment and continued limited supply of prime strata-titled office space. Recent anti-speculation measures imposed in the residential and industrial sectors will continue to divert some investment capital to the office market. The record level of housing transactions and reacceleration of property prices fuelled by the pro-buying environment of low interest rates and excess liquidity led the Government to introduce more cooling measures in January This seventh round of cooling measures is calibrated to dampen investment demand, rein in soaring prices and discourage buyers from overextending themselves. Among other things, the Additional Buyer s Stamp Duty (ABSD) rates for the purchase of residential properties were raised between five and seven percentage points. Loan-to-Value limits on housing loans granted by financial institutions were also lowered for individuals with at least one outstanding housing loan, as well as for non-individual borrowers such as companies. In addition, the minimum cash down payment for individuals applying for a second or subsequent home mortgages was raised from 10 to 25%. The pool of potential buyers will shrink as some will be priced out due to the curbs, while others will stay on the side to assess the impact on the market and their planned investments. Foreign buyers, who form the main base for the purchases of luxury residential properties in Singapore, will be affected by the increased ABSD to 15%. However, Singapore remains attractive as it is stable, safe from natural disasters, provides good protection of property rights, and has little currency risk. Hence, while some foreigners could be deterred, there will still be those who view the latest measures as another one-time tax on property that they are willing to pay. Overall, foreign participation is expected to slide from current levels but prices of luxury non-landed residential properties are expected to remain relatively stable with a marginally slip of 5% in In 2013, consumer sentiment could be lifted by the latest round of Quantitative Easing (QE3) by the United States Federal Reserve. Retail sales will also be augmented by healthy tourist arrivals on the back of new and reinvented visitor attractions in Singapore. Yet discretionary spending by local residents may slide given the weak economic outlook. Also, despite the retail sector s expected resilience, retailers and F&B operators have to face the growing challenges brought about by increased competition and operational challenges such as staff shortages. All of these will have a bearing on the demand for retail space. As such, rents of prime ground floor retail space in the Orchard Road district are forecast to see some downward pressure to the tune of up to 5% as competition of tenants between malls stiffens in The sales market will tell a different story. The sales momentum of strata-titled retail space is expected to continue in Capital values are projected to continue to trend upwards as interest for existing and new strata-titled retail space from investors and end-users are expected to remain healthy.

18 Asia Real Estate 2013 Forecast I Singapore Asia Real Estate 2013 Forecast I Bangkok, Thailand Colliers International 35 Bangkok, Thailand Office % 8.5% 10.0% 8.0% Residential % 10.0% 5.0% 5.0% Retail 3 5.0% 5.0% 5.0% 5.0% Industrial % 7.0% 10.0% 7.0% 1 Office refers to Grade A office buildings located in the CBD 2 Residential refers to the high-end sector in the city 3 Retail refers principally to shopping centres in the city 4 Industrial refers to logistic warehouses Since there will be no office developments scheduled for completion in the Bangkok CBD during 2012 and 2013, the current upward trend for both rents and capital values is expected to be sustained in Office investment yields will be largely steady in the range of from 5 to 7% in 2013 in anticipation of the continued support of a number of local end-users and investors. In the residential sector, prospective rent and capital growth will be slowed by the plentiful supply of completed schemes notwithstanding that a number of new residential developments currently under construction will be deferred by a general lack of construction workers. Real estate buyers comprising mainly locals will continue to support the market, particularly the projects along the mass transit line in the city area. The industrial sector is truly the star performer in 2012, with rents increasing by 10% and capital values surging by 26% during the year. The unabated growth in industrial property prices has been supported by healthy buying activity from end-users and investors. The recent strong run-up in industrial property prices has prompted the Government to impose, with effect from 12 January 2013, a Seller s Stamp Duty (SSD) on industrial properties that are sold within three years of purchase. The measure aims to discourage short-term speculative activity and rein in industrial property prices. Unlike speculators, it is expected that end-users and investors with a longer investment horizon are unlikely to be adversely affected by the SSD and will continue to provide some support to the strata sales market which is also expected to continue to benefit from the low interest rate and high liquidity environment. Nonetheless, buyers are still expected to be cautious and price sensitive due to a combination of factors including the latest Government measure, the persistent global economic headwinds and higher competition for tenants arising from recent moves to evict unauthorised industrial space users and from the spate of new strata-titled industrial projects sold over the past few years. In the light of the above, the industrial property market is expected to be more stable in 2013, with industrial capital values expected to remain relatively stable with minimal fluctuations in Industrial rents are also projected to rise at a slower pace. With a general increase in domestic household income and the ongoing growth of retail sales, retail real estate in Bangkok continues to look positive in Another growing trend is the gradual completion of residential projects in the suburban locations of Bangkok, thus underpinning the demand for shopping and retail facilities in those areas. Industrial real estate rents and capital values will be edging up steadily in 2013 but the sector will be relatively quiet in terms of the level of transactional activity particularly in the city area where existing industrial premises have been completed for more than 15 years. Overseas companies (e.g. Japanese and European) would rather go to the fringe areas of Bangkok to search for industrial sites with landed area on the order of 10,000 sq m or more.

19 Asia Real Estate 2013 Forecast I Ho Chi Minh City, Vietnam Asia Real Estate 2013 Forecast I Hanoi, Vietnam Colliers International 37 Ho Chi Minh City, Vietnam Hanoi, Vietnam Office 1-7.0% 0.0% -6.0% 1.0% Residential 2-8.0% 7.0% -6.0% 2.0% Retail % 3.0% -8.0% -4.0% Industrial Office 1-6.0% 0.0% 17.0% -9.0% Residential 2-9.0% 6.0% -9.0% -1.0% Retail % 4.0% -10.0% -2.0% Industrial Office refers to office developments located in District 1, 2, 3, 4, 5, 7, 10, 11, Tan Binh 2 Residential refers to residential developments located in District 1, 2, 3, 4, 5, 6, 7, 8, 10, 11, Tan Binh, Binh Thanh, Binh Tan 3 Retail refers to retail developments located in District 1, 2, 3, 4, 5, 7, 10, 11, Tan Binh 1 Office refers to office developments in CBD (Hoan Kiem, Hai Ba Trung, Ba Dinh) and satellite areas in the West (Cau Giay) 2 Residential refers to residential developments in CBD (Hoan Kiem, Hai Ba Trung, Ba Dinh) and satellite areas in the West (Cau Giay) 3 Retail refers to retail developments in CBD (Hoan Kiem, Hai Ba Trung, Ba Dinh) and satellite areas in the West (Cau Giay) In the office sector, rents are predicted to edge down by 6% in 2013 in addition to the 7% decline in Office supply in the central areas remains limited since the CBD in the city is small. New projects coming on line are primarily located in the fringe districts. However, completion of individual projects have either been deferred or suspended since developers continue to face the challenge of financing their cash flows. Although the government has relaxed interest rate controls, banks remain hesitant to lend to developers other than the large and well-established local developers. Asian investors from Japan, Korea and Thailand in particular have been looking at this as distressed opportunities. In the residential sector, there will be an increase in new supply in 2013, thus putting some downward pressure on rents. However, capital values remain on the rise notwithstanding the projection that the growth pace will be tapering off to 2% in In the office sector, rents remain firm on the order of USD50 per sq m per month. However, the overall rent level will continue to be suppressed by the introduction of more new developments in the outskirt areas such as Cau Giay district in the west where rents are significantly lower than those in the CBD. Developments recently completed include Keangnam Hanoi Landmark Tower and Indochina Plaza Hanoi. Office rentals are predicted to come down by 17% in On the sales front, capital values are going to edge down by 9% since investors are generally challenged by the difficulty of getting access to bank financing. In the residential sector, rents are anticipated to remain in a downward trend in Again, capital values will be dampened by the large, new, luxury supply coming on line in In the retail sector, rental performance will remain negative in 2013 since there will be an increase of new supply in the fringe areas. The most successful developments are located in the CBD with Trang Tien Plaza shopping mall - a renovated development which is scheduled to come onto the market in In the retail sector, new development coming on line is limited after the launch of Vincom Centre A, the prime shopping centre located in the city centre, and two other projects outside the CBD. Rental offers in the brand new retail developments in the outskirt satellite areas are competitive as vendors are determined to fill their developments. It is our view that retail rents and capital values will edge further down in 2013 before a rebound by 2014 at the earliest.

20 Asia Real Estate 2013 Forecast I Bengaluru, India Colliers International 39 Bengaluru, India Office 1-3.0% 5.0% Flat Flat Residential 2 4.0% 15.0% Flat 8.0% Retail Industrial Office refers to prime offices in the CBD 2 Residential refers to the high-end sector Due to the significant contraction in the overall absorption rate and the continued relocation of tenants from the CBD to decentralised areas, office rents in Bengaluru declined 3% in On the demand front, it is going to be driven by the IT/ITes sector. New supply will be essentially offered for lease. In anticipation of a more balanced situation between demand and supply in the coming months, both office rents and capital values are expected to stay largely flat in Prospective buyers will be generally cautious in making their offers. India & Central Asia The high-end residential sector in Bengaluru has been performing well with an encouraging 15% capital growth in 2012 thanks to the growing size of the population and the migration of residents into the urban core. The current tight supply situation will remain there due to the deferred completions of a number of new projects. As such, residential prices will see further growth of 8% in Going forward, the supply level will gradually increase since local banks have softened their stance in offering financing to developers.

21 Asia Real Estate 2013 Forecast I Chennai, India Asia Real Estate 2013 Forecast I NCR, India Colliers International 41 Chennai, India NCR, India (% growth YoY) Rents Capital Values Rents Capital Values Office 1 1.0% 0.0% -2.0% -2.0% Residential % 21.0% Flat 8.0% Retail Industrial Office 1-1.0% 0.0% -3.0% Flat Residential % 24.0% 5.0% 12.0% Retail Industrial 3 3.0% 5.0% 5.0% 5.0% 1 Office refers to prime offices in the CBD 2 Residential refers to the high-end sector NCR = Delhi, Noida and Guragon 1 Office refers to prime offices in the CBD 2 Residential refers to the high-end sector 3 Industrial refers to warehouses, factories and offices of light industries Office leasing demand in Chennai showed signs of slowing down in the second half of 2012 although the overall office rent managed to edge up by 1% throughout the year. In view of the overall slowdown in economic growth and the sustained trend of cost-savings initiatives adopted by most occupiers, office rent growth will be capped. The existing vacancy on the order of 20% and the forthcoming new supply estimated to be about 4 million sq ft per year are expected to send office rents down by 2% in Given the fact that Chennai is the capital city of the Indian state, demand in the residential sector remained strong. Although the growth pace is expected to taper off to 8% in 2013, the sales market of small-to-medium size units will continue to be underpinned by genuine end-users among middle-income households. Attributed to the increasing supply of office developments outside the CBD, the average office rent in NCR fell 1% in With the on-going trend of tenants moving to decentralised areas, vacancy in prime offices in the CBD will increase while rents will fall further by 3% in Demand fundamentals in the residential sector remain healthy. However, with a general lack of supply, both residential rents and capital values increased 21 and 24%, respectively in The growth momentum is going to slow in In the industrial sector, the market outlook continues to look positive thanks to the demand from light industry (IT/ITes). The Government of India has been supportive in upgrading the local infrastructure to the international standards. The ongoing trend is that industrial facilities have been developed by end-users for self-occupation purposes.

22 Asia Real Estate 2013 Forecast I Mumbai, India Asia Real Estate 2013 Forecast I Kazakhstan Colliers International 43 Mumbai, India Kazakhstan Office 1-4.0% 0.0% -3.0% -3.0% Residential 2 1.0% 9.0% 0.0% 5.0% Retail Industrial Office 1 0.0% 0.0% 0.0% 0.0% Residential 2 0.0% 5.0% 0.0% 5.0% Retail % 0.0% 10.0% 0.0% Industrial 4 0.0% 0.0% 0.0% 0.0% 1 Office refers to prime offices in the CBD 2 Residential refers to the high-end sector 1 Office refers to Class A & B office buildings within the CBD 2 Residential refers to all units in business and premium class 3 Retail refers to shopping centres 4 Industrial refers to premises in industrial zones In the office sector, leasing demand slowed considerably in 2012 with overall contraction of rents by 4%. In an attempt to save costs, tenants have been relocating out of the CBD, thus leaving more vacant space in the core areas. Going forward, both rents and capital values are predicted to fall 3% in In the residential sector, prices are currently perceived to be at a peak as prospective buyers turn cautious. In addition to the 9% capital growth in 2012, the market is anticipated to go sideways due to the increasing level of new supply in Office rents are likely to continue staying flat in 2013 thanks with growing demand from a number of local companies in finance and mining & resources sector as well as from international companies represented in Kazakhstan. In the sales market, there has been buying interest in office premises with sizes ranging from 500 to 1,000 sq m. These were mainly detached buildings not designed specifically for office use but located within the prime areas of the city. The asking price per square metre was in the range of USD1,600-3,000 per sq m. The residential market remained stable which was supported by positive social-economic development trends in Kazakhstan. In June 2012, the government developed a new state multi-purpose residential programme, Affordable Housing The main goal of the programme is to provide residents with affordable housing. This programme aims to develop 1 million sq m of rental housing by 2014 and increase construction volume up to 10 million sq m by The sales prices in the primary and secondary markets are expected to see a moderate growth of 5% as most projects in 2008 were suspended or put on hold. The retail market in Kazakhstan has been staying on an upward trend for many years. Investors have been encouraged by the steady ongoing rent growth of about 10% per year. Assuming the successful completion of all planned, new retail developments, supply will likely increase by 120% by second half of Industrial rents in Kazakhstan remained flat in 2012 with supply of quality premises being limited. The government has started attending to these problems by putting more resources into infrastructure and companies outsourcing their logistics functions will receive support from the government. However, the industrial market will remain flat in 2013 until a further improvement of infrastructure connectivity in the city.