Singapore Office and Retail Market Overview

Transcription

1 38 Mapletree Commercial Trust Singapore Office and Retail Market Overview BY COLLIERS INTERNATIONAL CONSULTANCY & VALUATION (SINGAPORE) PTE LTD 1 MACRO-ECONOMIC OVERVIEW 1.1 Macro-Economic Performance in the past year Singapore s real Gross Domestic Product ( GDP ) grew by 3.9% year-on-year ( YoY ) in, higher than the 2.5% YoY expansion in. The improvement in GDP growth was supported by strong expansion in the services producing industries, particularly the finance & insurance, as well as wholesale & retail trade sectors. After a slow start to the year, Singapore s economic performance gained pace in the second half of, bolstered by signs of recovery in the mature economies of the Eurozone and the U.S. Amid a faster than expected expansion in the manufacturing sector in the first three months of 214, Singapore s GDP growth amounted to 4.9% YoY in 1Q 214, similar to the annual growth achieved in 4Q. For the whole of, the Consumer Price Index ( CPI ) increased by 2.4%, lower than the 4.6% increase in. The largest contributor to CPI inflation was housing costs, which increased by 2.6% in, primarily due to higher rents from accomodations. Increases in food prices also contributed to the overall CPI, moving up 2.1% due to costlier prepared meals and ingredients. Driven by the higher price of cars during the year, transport cost rose by 2.3%, while the recreation & others category increased by 2.7% as a result of higher salaries for foreign maids. With the cost of accomodation, food, recreation and healthcare remaining on an uptrend in the first three months of 214, the CPI continued to increase 1.% YoY in 1Q Retail Sales and Tourism The retail sales index (excluding motor vehicles) and the tourism statistics provide a macro indication of the health of the retail industry and its drivers in Singapore. In, Singapore s retail sales index (excluding motor vehicles) was fairly muted, gaining 1.1% YoY, slower than the 1.7% YoY seen in. The uncertainty in the economic recovery of several countries in the Eurozone and the U.S. as well as weaknesses in the externally-oriented sectors such as manufacturing and wholesale in the first half of, had dampened consumer sentiment. In 1Q 214, retail sales increased by a marginal.7% YoY. This is a slight improvement from the.6% growth in 1Q.

2 Annual Report /14 39 In terms of visitor arrivals, chalked up a then-record 14.5 million visitor arrivals to Singapore after increasing 9.8% from 211, drawing to the upper limit of the Government s projection of 13.5 to 14.5 million. The latest preliminary statistics from the Singapore Tourism Board ( STB ) showed that Singapore welcomed some 15.6 million visitors in, an increase of 7.6% YoY. While the increase in was slower than the growth in, the growth nonetheless demonstrated that Singapore remains an attractive destination for both business and recreational tourists, as visitor arrivals had set a new record, exceeding the upper range of the Government s target of about 14.8 million to 15.5 million for. 1.2 Economic Outlook for 214 Supported by a sustained but slow recovery in the U.S. and Eurozone economies, the global economic outlook is expected to improve moderately in 214. With the global economy on the road to recovery, externally-oriented sectors such as manufacturing and wholesale trade are likely to drive growth during the year. In light of these improving conditions, the Ministry of Trade and Industry ( MTI ) projected Singapore s economic growth to be between 2.% and 4.% for 214, even though challenging manpower conditions continue to exist in labour intensive oriented sectors. At the same time, the Monetary Authority of Singapore ( MAS ) projected its headline inflation outlook to range between 1.5% and 2.5% for 214, in view of decreased cost pressures from accommodation and private road transport. 2 OFFICE PROPERTY MARKET OVERVIEW 2.1 Islandwide Existing Supply 1 The stock of office space in Singapore stood at 8.2 million sq ft as of 1Q 214, up 2.3% from 78.4 million sq ft as of 1Q. The bulk (or 52.2%) of the space was located in the Central Business District ( CBD ) 2 followed by the City Fringe (39.5%) and Suburban (8.3%) area. Major office developments completed over the past 12 months included Asia Square Tower 2 (.7 million sq ft) at Marina View in the CBD, The Metropolis (1. million sq ft) along North Buona Vista Drive in the City Fringe and Jem s office tower (.3 million sq ft) at Jurong Gateway in the Suburban area. Out of the 41.9 million sq ft office stock in the CBD, about 14.5% are Premium Grade 3 office space, 32.% and 23.% are of Grade A 4 and Grade B 5 quality respectively while the remaining 3.5% are of other grades All existing supply and stock is stated in terms of Net Lettable Area ( NLA ). 2. The CBD comprises the Raffles Place/New Downtown, Shenton Way/Tanjong Pagar, City Hall/Marina Centre, Orchard and Bugis/ Beach Road micro-markets. 3. The Premium Grade office buildings are new buildings with the highest quality specifications in the Raffles Place/New Downtown area. 4. The Grade A office buildings are good-quality buildings with well sought-after specifications in strategic locations that are well served by amenities and transport nodes. 5. The Grade B office buildings are average quality buildings in locations that are reasonably served by some amenities and transportation nodes. 6. Other Grades refer to the remaining office space in Singapore which is not included in the Premium Grade, Grade A and Grade B categories.

3 4 Mapletree Commercial Trust Singapore Office and Retail Market Overview BY COLLIERS INTERNATIONAL CONSULTANCY & VALUATION (SINGAPORE) PTE LTD In the City Fringe, Grade A stock made up a mere 8.7% of the total 31.7 million sq ft of office space in this micro-market. Grade B office stock formed 6.3% while the rest comprised space of other grades. Potential Supply of Office Space from 2Q (as of 1Q 214) 4,5 4, Office Space by Location & Grades (as of 1Q 214) Net Floor Area ( sq ft) 45, 4, 35, 3, 25, 2, 15, 1, 5, Net Floor Area ( sq ft) 3,5 3, 2,5 2, 1,5 1, 5 214F 215F 216F 217F Completed CBD City Fringe Suburban!"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&(*&&4$% Potential Supply 7 CBD City Fringe Suburban Premium Grade A Grade B Others!"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7 Colliers International Research estimates that 8.1 million sq ft of new office space is expected to be completed from 2Q 214 to Including the 161, sq ft of net completions in 1Q 214, this reflects an annual average of some 2.1 million sq ft of office space from 214 (full year) to 217. The majority (or 75.2%) of the new office space to be completed between 2Q 214 and 217 will materialise in the CBD. Potential supply in the City Fringe accounts for 12.9% while the remaining 11.9% is located in the Suburban area Demand & Occupancy With the gradual recovery in the global economy, an increasing number of foreign companies are setting up or expanding their operations in Singapore, participating in Asia s growth momentum. Demand for office space over the past 12 months was mainly driven by companies in the financial, insurance, legal, information & communications industries, as well as the commodity, energy and resources sectors. This supported a net absorption of about 1.3 million sq ft of office space in and another 65, sq ft in 1Q 214. Healthy take-up lifted the islandwide office occupancy rate from 9.6% as of December to a 4½ year high of 91.2% as of June. However, due to the addition of slightly over 2. million sq ft of new office space over the nine month period from July to March 214, which outpaced the corresponding net new demand of about 883, sq ft, the average occupancy rate for islandwide office space eased to 9.% as of March All potential supply is stated in terms of NLA. 8. Potential supply includes space under construction and planned but the actual level of new supply could change due to changes in the status of planned projects.

4 Annual Report /14 41 Islandwide Net New Demand & Occupancy Rate of Office Space Net Floor Area ( sq ft) 2,5 2, 1,5 1, Net New Demand Occupancy Rate 92% 91% 9% 89% 88% 87% 86% Occupancy Rate (%)!"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7 Comparatively, Grade A and B office space across the island were able to achieve higher occupancy rates as of 1Q 214. The average occupancy rates for office space in the CBD and City Fringe by grades are shown in the following table: Office Occupancy Rates in the CBD and City Fringe by Grades as of 1Q 214 Grade A Grade B CBD 96.9% 95.7% City Fringe 96.2% 97.%!"#$%&'(-"../&$(123&$243/"24.(!/2546"$&(*&&4$% Rents Improving global economic conditions supported office space demand and guided rents back to a recovery path in. The Urban Redevelopment Authority ( URA ) office rental index climbed for the first time in 2Q after five quarters of contraction. The office rental recovery continued for the rest of albeit at a slow pace. Nonetheless, for the whole of, overall islandwide office rents still managed to amass a growth of 1.3% YoY, thereby annulling the 1.3% rental fall in. The recovery in islandwide office rents accelerated to 2.4% quarter-on-quarter ( QoQ ) in 1Q 214 as landlords revised their rent expectations upwards, particularly in the CBD and City Fringe areas, amid healthy leasing interest and limited new supply in the next two years. Islandwide Office Rental Index 19 Index (4Q98 =1) !"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7

5 42 Mapletree Commercial Trust Singapore Office and Retail Market Overview BY COLLIERS INTERNATIONAL CONSULTANCY & VALUATION (SINGAPORE) PTE LTD In line with the islandwide trend, Grade A and B office rents in the CBD and City Fringe also bottomed-out in 2Q and have been on a uptrend since then. The average monthly gross rents for office space in the CBD and City Fringe by grades are as follows: Average Monthly Gross Rents for Office Space in the CBD and City Fringe by Grades as of 1Q 214 (S$ per sq ft) Grade A QoQ YoY CBD $ % 6.4% City Fringe $ % 4.1% Grade B QoQ YoY CBD $ % 6.8% City Fringe $7. 2.6% 7.9% Weighed down by the impact of the TDSR and the traditional festive lull period at the start of the year, prices of office space recorded a moderate increase of.5% QoQ in 1Q 214, despite the acceleration in office rental growth over the same period. Islandwide Office Price Index Index (4Q98 =1) !"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7!"#$%&'(-"../&$(123&$243/"24.(!/2546"$&(*&&4$% Capital Values Underpinned by recovering rents, office capital values also strengthened in as continued end-user demand and investors search for alternative investment options after property cooling measures were implemented in the residential and industrial sectors. However, there was a noticeable slowdown in the growth rate in the second half of following the imposition of the Total Debt Servicing Ratio ( TDSR ) framework on 29 June which resulted in a moderation in the sales activities of strata-titled office space as investors/buyers re-evaluated their purchase decisions. Nonetheless, overall URA islandwide office price index still recorded a 5.2% growth for, an improvement from the 1.4% growth recorded in. Grade A office capital values in the CBD and City Fringe have generally moved in line with the islandwide trend. As of 1Q 214, the average capital value of Grade A office space in the CBD and City Fringe can be found in the following table: Average Capital Values for Office Space in the CBD and City Fringe as of 1Q 214 (S$ per sq ft) Grade A QoQ YoY CBD $2,121 % 2.% City Fringe $1,395 % 1.5%!"#$%&'(-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7 As of 1Q 214, the average yield for Grade A office space in the CBD stood at 4.%, up from 3.8% in 1Q.

6 Annual Report / Investment Sales The office investment sales market has been relatively quiet in. Based on Colliers International s estimates, about S$.9 billion worth of office investment deals (including collective and en-bloc sale of office buildings, en-bloc sale of strata-titled office space and sale of equity stake/shares) were closed during the year. This is down from some S$4.4 billion in due to the price standoff between sellers and buyers. The gap in buyers and sellers expectations in was exacerbated by property sellers pricing in future rental hikes in their selling prices, following the recovery in office rents in. The office investment sales market started 214 on a positive note with the sale of Westgate Tower in Jurong East. Cumulatively, an estimated S$.6 million worth of office investment deals has been sealed in 1Q 214. This is double the S$.3 million amassed in the same period a year ago. 2.2 ABHP Micro-market 9 The ABHP micro-market is situated within the City Fringe area and encompasses the Alexandra, Buona Vista, Harbourfront and Pasir Panjang areas. Bank of America Merrill Lynch HarbourFront and PSA Building are office developments located in the ABHP micro-market Existing Supply The stock of office space in the ABHP micromarket amounted to about 5.1 million sq ft as of 1Q 214, contributing some 6.4% to the islandwide office stock of 8.2 million sq ft. A record 1.1 million sq ft of space was added to the office stock in the subject locality in due largely to the completion of The Metropolis (1. million sq ft) at North Buona Vista Drive and the office block at Nexus@onenorth (91,5 sq ft) in 2H. Net new office supply tapered to 73, sq ft in 1Q 214 with the completion of only one mixed office and business park development, Nucleos (56,7 sq ft) at Biopolis Road. Out of the total office stock in the ABHP micromarket, an estimated 44.2% and 22.3% are Grade A and B space respectively, while the remaining belong to other grades Potential Supply Colliers International Research estimates that 1. million sq ft of new office space is expected to be completed in the City Fringe from 2Q 214 to 217, out of which only about.1 million sq ft are sited within the ABHP micro-market Demand & Occupancy Net absorption of office space in the ABHP micro-market has recorded a healthy 248, sq ft in. Demand for office space in the subject micro-market are mainly driven by companies looking for cost efficient space solutions in close proximity to the CBD as well as financial institutions setting up secondary office space outside the CBD to comply with the MAS guidelines on business continuity planning. Despite the positive take-up of office space, the average occupancy rate for office space in the subject micro-market fell from 97.9% in to 81.7% in due to the net addition of 1.1 million sq ft of space from The Metropolis and Nexus@one-north, which outpaced the net new demand over the same period. However, the reported occupancy rate of 81.7% in did not take into account all of the committed space at The Metropolis 1, as not all of the committed tenants had moved into building and started operations by the end of. 9. This micro-market is situated within the City Fringe area and encompasses the Alexandra, Buona Vista, Harbourfront and Pasir Panjang areas. 1. As of December, The Metropolis was about 91.% committed.

7 44 Mapletree Commercial Trust Singapore Office and Retail Market Overview BY COLLIERS INTERNATIONAL CONSULTANCY & VALUATION (SINGAPORE) PTE LTD Net New Supply, Net New Demand & Occupancy Rate of Office Space in the ABHP Micro-Market Net Floor Area ( sq ft) 1,2 1, Net New Supply Net New Demand Occupancy Rate 1% 95% 9% 85% 8% 75% 7% Occupancy Rate (%)!"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7 The overall occupancy rate in the subject micro-market strengthened to 84.4% by 1Q 214 as tenants continue to move into the space newly completed in, thereby recording a net absorption of 198, sq ft in 1Q Rents The average monthly gross rents of Grade A office space in the City Fringe, which encompasses the ABHP micro-market, held firm at S$7.6 per sq ft in the first six months of, amid improving global economic conditions and firming demand. Thereafter, rents for Grade A offices in the City Fringe rose for the first time in 3Q since the previous peak in 4Q 211. The average monthly gross rents for Grade A office space in the City Fringe recovered by a total 2.1% in to S$7.76 per sq ft per month by the end of December. Similarly, the average gross monthly rents of Grade B office space in the City Fringe turned around from 3Q and managed to record a full year growth of 5.1% in to end the year at S$6.82 per sq ft per month. In line with the islandwide trend, Grade A and B office rents in the City Fringe continued to recover 1.9% and 2.6% QoQ in 1Q 214 to reach S$7.91 per sq ft per month and S$7. per sq ft per month, respectively, as of March 214. Average Monthly Gross Rents of Office Space by Grades in the City Fringe Monthly Gross Rents ($ per sq ft) $1. $9. $8. $7. $6. $5. $4. $ As of 1Q 214, the median 11 monthly gross rent for office space in the ABHP micro-market, which is based on actual rental records captured by URA s Real Estate Information System (Realis), stood at S$6.9 per sq ft. Median Monthly Gross Rent for Office Space in the ABHP micro-market as of 1Q 214 (S$ per sq ft) ABHP micro-market 21 Grade A 211 Grade B Median Rents QoQ YoY $ %.7%!"#$%&'(-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7!"#$%&'(-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7 11. Median rents are dependent on the number and type of transactions that occur during the quarter. This in turn depends on factors such as the location and age of the building, as well as the floor level, facing and size of the unit.

8 Annual Report / Tanjong Pagar Micro-market Mapletree Anson is a Grade A office building located in the Tanjong Pagar micro-market. The Tanjong Pagar micro-market is situated within the CBD and encompasses the Anson, Cecil, Maxwell and Tanjong Pagar areas Existing Supply The stock of office space in the Tanjong Pagar micro-market amounted to about 11. million sq ft as of 1Q 214 and accounted for some 13.7% of the islandwide office stock of 8.2 million sq ft. The lack of new office completion in the subject micro-market, coupled with ongoing rejuvenation works at major office buildings like Robinson Towers and The Corporate Office led to a net withdrawal of 142, sq ft of office space in this micro-market in. Out of the total office stock in the Tanjong Pagar micro-market, an estimated 13.8% and 27.8% are Grade A and B space respectively while the rest were space of other grades Potential Supply Colliers International Research estimates that 2.2 million sq ft of new office space is expected to be completed in the Tanjong Pagar micromarket from 2Q 214 to 217. This makes up 27.2% of the 8.1 million sq ft office space expected to be completed islandwide Demand & Occupancy Supported by the gradual recovery in global economic conditions in, which led to an improvement in business sentiments, the Tanjong Pagar micro-market saw the net absorption of some 23, sq ft of office space. The positive net take-up, amid the continued net withdrawal of office stock, helped to lift the overall occupancy rate of office space in the Tanjong Pagar micromarket to 88.2% as of December from 86.9% as of December. Due to the proximity of the Tanjong Pagar micromarket to the core business and financial district in the Raffles Place/New Downtown micro-market as well as the ongoing urban regeneration of the locality, the Tanjong Pagar micro-market was able to attract companies in the financial, insurance, information & communications, trading and food & beverage sectors. In particular, Grade A office buildings, which have newer and higher-specifications, have managed to attract and retain tenants. However, the overall occupancy rate of office space in the Tanjong Pagar micro-market inched down to 87.4% in 1Q 214 as about 65, sq ft of space was returned when some tenants relocated out of the older office buildings in the micro-market to newer office developments in the New Downtown and City Fringe area. Net New Supply, Net New Demand & Occupancy Rate of Office Space in the Tanjong Pagar Micro-Market Net Floor Area ( sq ft) 1,2 1, % 95% 9% 85% 8% Occupancy Rate (%) Net Floor Area ( sq ft) % Net New Supply Net New Demand Occupancy Rate % 95% 9% 85% 8% 75% Occupancy Rate (%)!"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7

9 46 Mapletree Commercial Trust Singapore Office and Retail Market Overview BY COLLIERS INTERNATIONAL CONSULTANCY & VALUATION (SINGAPORE) PTE LTD Rents With the pick-up in leasing activities, the average monthly gross rents of Grade A office space in the Tanjong Pagar micro-market bottomed-out at S$7.83 per sq ft in 2Q and has been on a route to recovery since then. For the whole of, the average monthly gross rents of Grade A office space in the Tanjong Pagar micro-market grew by 4.4% to end the year at S$8.28 per sq ft. The average monthly gross rents of Grade A office space in the Tanjong Pagar micro-market continued to increase 3.% QoQ in 1Q 214 to S$8.53 per sq ft by March 214. Based on leasing transactions in, there is a distinct difference in the rents commanded by newer office buildings with Grade A specifications against other office buildings with lower specifications in the Tanjong Pagar micro-market. Office buildings with small floor plates and built in the 197s to 198s, make up a significant proportion of the existing office space in the Tanjong Pagar micro-market. These Average Monthly Gross Rents of Grade A Office Space in the Tanjong Pagar Micro-Market Monthly Gross Rents ($ per sq ft) $11. $1. $9. $8. $7. $6. $5. $4. $ buildings would command even lower rents. As of 1Q 214, Grade B office rents in the Tanjong Pagar micro-market averaged S$7.64 per sq ft. This is 11.6% lower than that of Grade A quality buildings in the same locality. The average monthly gross rent for Grade A and B office space in the Tanjong Pagar micro-market as of 1Q 214 is summarised in the following table. Average Monthly Gross Rents for Office Space in the Tanjong Pagar Micro-Market By Grades as of 1Q 214 (S$ per sq ft) 2.4 Market Outlook Grade A QoQ YoY Tanjong Pagar $ % 8.9% Grade B QoQ YoY Tanjong Pagar $ % 8.2%!"#$%&'(-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7 Global economic conditions are expected to continue to improve in 214 with the U.S. and Eurozone economies finally turning the corner since the global financial crisis in 28. As Asia continues to offer greater growth opportunities compared to mature markets in Europe and North America, more foreign companies, including those in the trading, brokerage and e-commerce industries, have recently opened or are looking to open new offices in Singapore to ride on the global recovery wave. This will support the continued absorption of office space.!"#$%&'(-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7

10 Annual Report /14 47 However, while rents are poised for continued uptrend in 214, the uncertain global turn of events, coupled with the increasing cost of doing business locally, continues to be a nagging concern for firms wanting to expand or set foot in Singapore. This could cap the overall islandwide rental growth rate at about 1% for the whole of 214. In particular, given the development in infrastructure, as well as improved offerings from new and upcoming office buildings in the ABHP micro-market, the healthy appetite for decentralised office space is expected to continue in the ensuing years. This will help to keep rents in the ABHP micro-market on an uptrend in 214, assuming that the global economic conditions do not deteriorate. In the Tanjong Pagar micro-market, supported by a broad base of demand from diverse commercial segments, office rents are also projected to continue strengthening, in line with the 1% islandwide growth rate in RETAIL PROPERTY MARKET OVERVIEW 3.1 Islandwide Existing Supply According to newly available statistics from the URA as of 1Q 214, Singapore has an islandwide retail stock 12 of 61.5 million sq ft. This is a slight.3% increase from the total retail stock of 61.3 million sq ft as at the end of. A majority of 68.7% of the existing supply was located in the Central Region (comprising the Orchard Planning Area, the Downtown Core Planning Area as well as the Rest of Central Area and Fringe of Central Region), while the remaining 31.3% was located in the Outside Central Region. Islandwide Distrbution of Retail Space* as of 1Q % Downtown Core 31.3% Outside Central Region 12.2% Orchard Islandwide Stock* 61.5 million sq ft 16.7% Rest of Central Area 29.3% Fringe Area * URA s retail space statistics include space for F&B and entertainment use.the numbers may not add up to 1% due to rounding differences.!"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7 12. URA s data now includes all retail space, inclusive of food and beverage (F&B), entertainment as well as health and fitness outlets spanning the last three years. Previously, the URA only provided data on shop space which did not include these integral elements of Singapore s modern retail sector.

11 48 Mapletree Commercial Trust Singapore Office and Retail Market Overview BY COLLIERS INTERNATIONAL CONSULTANCY & VALUATION (SINGAPORE) PTE LTD The City Fringe, where VivoCity and Alexandra Retail Centre are located, has a total of 18. million sq ft of retail space as at 1Q 214, comprising some 29.3% of all retail space islandwide. After increasing by 452, sq ft in, the total supply of retail space surged by 1.3 million sq ft in. In 1Q 214, islandwide stock of retail space grew by around 25, sq ft. In the City Fringe, the total supply of retail space increased by 86, sq ft for the whole year in, before rising by around 183, sq ft in 1Q 214. Islandwide Net New Supply of Retail Space* Net Floor Area ( sq ft) 1,4 1,2 1, * URA s retail space statistics include space for F&B and entertainment use.!"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&( *&&4$% Potential Supply There is an ample pipeline supply of new malls islandwide in the next few years. Based on the latest list of known projects under development published by the URA as of 1Q 214 and Colliers International s estimates, approximately 4.2 million sq ft of new net lettable retail space (including space for F&B and entertainment uses) is expected to be completed from 2Q 214 to 217. Including the completions in 1Q 214, this reflects an annual average of some 1.2 million sq ft of retail space from 214 (full year) to 217. In the City Fringe, about 833, sq ft of new net lettable retail space (including space for F&B and entertainment uses) is expected to be completed in the same period. In the nine months from April to December 214, new retail completions would include the redevelopment of Lion City Hotel into One KM and the retail units at Paya Lebar Square. Potential Supply of Retail Space* from 2Q (as of 1Q 214) Net Floor Area ( sq ft) 3, 2,5 2, 1,5 1, Completed Downtown Core Orchard Rest of Central Area Fringe Area Outside Central Region * Includes F&B and entertainment space!"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&( *&&4$%7

12 Annual Report / Demand & Occupancy The net new demand for all retail space, based on newly available data from URA, accounted for 1.5 million sq ft in, up from 49, sq ft absorbed in. This resulted in the islandwide occupancy rate strengthening from 95.% in to 95.5% in. Much of the net increase in occupied space during the year was due to the openings of the fully- or almost fully-tenanted Jem and Westgate at Jurong East and Bedok Mall at Bedok Central. The completion of these new malls also introduced new retail operators and concepts to suburban locations. The department store, Robinsons Orchard, was a most notable opening in the premier shopping belt of Orchard Road in, setting up store at The Heeren. Spanning 186, sq ft over six storeys, over 38 new brands have been brought into Singapore s retail scene, of which 28 brands are exclusive to Robinsons Orchard. In 1Q 214, net new demand registered a negative 635, sq ft due to the attrition of retail operators and the relinquishing of space. At the same time, the completion of new retail developments resulted in a lower occupancy rate of 94.2%. At the beginning of 214, international lifestyle and fashion brands have also been taking the opportunity to establish or expand their presence in reputable malls or premier locations. Fashion brand, H&M, re-opened its flagship store at Grange Road in January, while Christian Dior Parfums opened one new boutique at Ion Orchard and another at The Shoppes at Marina Bay Sands in February. In the City Fringe, the occupancy rate was at a fairly healthy level at 92.8% in 1Q 214, notwithstanding the completion of the retail mall at the Singapore Sports Hub. Kallang Wave, the new retail mall in the Singapore Sports Hub, is currently more than 8% pre-leased with hypermarket FairPrice Xtra, food court chain Foodfare and climbing-wall operator Climb Central, Uniqlo, H&M, Forever 21 and Harvey Norman among its tenants. Once these retail operators have completed their fit-out and start operations, the occupancy level in the City Fringe is expected to improve. Islandwide Net New Demand & Occupancy Rate of Retail Space* Net Floor Area ( sq ft) 2, 1,5 1, , Net New Demand Occupancy Rate 96% 95% 94% 93% 92% 91% 9% Occupancy Rate (%) * URA s retail space statistics include space for F&B and entertainment use.!"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&( *&&4$%7

13 5 Mapletree Commercial Trust Singapore Office and Retail Market Overview BY COLLIERS INTERNATIONAL CONSULTANCY & VALUATION (SINGAPORE) PTE LTD Rents For the whole of, rents for prime retail space in the premier shopping belt of Orchard Road fell by a moderate 2.1%, according to Colliers International s research. The interest by local entrepreneurs and international brands to open new stores and F&B outlets or to expand has kept rents fairly resilient in Orchard Road, despite tenants growing resistence to further rent increases as well as the stronger competition posed by suburban malls. At the same time, monthly rents for prime retail space in the Regional Centres remained firm with a slight increase of.1% for the entire year. In the first three months of the year, the average monthly prime ground floor gross rents in Orchard Road rose by a very slight.1% QoQ to $36.5 per sq ft. Similarly, in the Regional Centres, the average monthly gross rents of prime space also increased by.1% QoQ to $33.5 per sq ft. Average Monthly Gross Rents of Prime Ground Floor Retail Space in the Orchard Road and Regional Centres Monthly Gross Rents (S$ per sq ft) $45 $4 $35 $3 $25 $ Orchard Road Regional Centres!"#$%&'(-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7 The URA rental index of retail space in the Central Region softened by.9% in, as overall rental increases have tapered off due to tenants resistance to higher rents amid increased competition among retail developments and higher operating costs. As of 4Q, retail rents had increased by 1.5% in the six months from 2Q, reversing the QoQ falls of 1.1% and 1.2% in 1Q and 2Q, respectively. The opening of new and refurbished malls with new pre-committed tenants in the second half of the year might have partially contributed to the turnaround in rents in the second half of. The rental index for retail space in the Central Region in the first three months of 214, registered a slight decrease of.3% when compared to 4Q. This rental trend was similar in the City Fringe, which is a sub-sector of the Central Region. In the second half of, retail space rents in the area turned positive with an increase of 2.1%, surpassing the 1.4% fall in the first half of the year. Overall, rental growth in the City Fringe was.6% for. In 1Q 214, the rental index for retail space in the City Fringe had increased by.3% when compared to 4Q, bucking the trend in the Central Region during the quarter. Rental Indices of Retail Space* Index (4Q98 =1) Central Region City Fringe * URA s retail space statistics include space for F&B and entertainment use.!"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&( *&&4$%7

14 Annual Report / Capital Values Price Indices of Retail Space* The URA price index for the Central Region increased by 4.6% in. It was in effect a year of two halves with the price uptrend supported by keen buying interests from end-users and investors in strata-titled retail space in the first half of. Prices of retail space rose 1.4% and 2.3% in 1Q and 2Q respectively, before tapering off to.8% in the six months ending in December. The pace of increase had slowed significantly due to the imposition of the TDSR announced in late June, weakening buyers ability to borrow and purchase. Index (4Q98 =1) Central Region City Fringe * URA s retail space statistics include space for F&B and entertainment use.!"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&( *&&4$%7 In the first quarter of 214, the URA price index for the Central Region remained unchanged from the end of. In the City Fringe, the price index for retail space rose by 2.7% in the first half of, before the rate of growth narrowed to.6% in the second half of. This was due to the launch and subsequent sales of retail units at Alexandra Central in early, before a lack of new launches and the effects of the TDSR were felt in the City Fringe in the later half of. In 1Q 214, the retail price index in the City Fringe had increased by a marginal.3% when compared to 4Q. 3.2 ABHP Micro-market Existing & Potential Supply Based on available statistics from the URA as of 1Q 214, the ABHP micro-market has 2.2 million sq ft of retail space. Contributing 3.6% of the total islandwide retail stock, the micromarket includes Singapore s largest shopping mall VivoCity at 1,41,3 sq ft. Based on the latest list of known projects under development published by the URA as of 1Q 214 and Colliers International s estimates, approximately 5,5 sq ft of new net lettable retail space is expected to be completed from 2Q 214 to 217, comprising mainly of ancillary retail space in the micro-market. This represents an annual average of around 13,5 sq ft over the four years from 214 (full year) to This micro-market is situated within the City Fringe area and encompasses the Alexandra, Buona Vista, Harbourfront and Pasir Panjang areas.

15 52 Mapletree Commercial Trust Singapore Office and Retail Market Overview BY COLLIERS INTERNATIONAL CONSULTANCY & VALUATION (SINGAPORE) PTE LTD Net New Supply, Net New Demand & Occupancy Rate of Retail Space* in the ABHP Micro-Market Net New Supply Net New Demand Occupancy Rate 98% 97% 96% 95% 94% 93% 92% 91% 9% * URA s retail space statistics include space for F&B and entertainment use.!"#$%&'()*+,-"../&$(123&$243/"24.(!/2546"$&(*&&4$% Demand & Occupancy The occupancy rate for the ABHP micro-market slipped 1.4 percentage points YoY to average 96.4% as at the end of, as net new supply of 88,4 sq ft outpaced net new demand of 56,3 sq ft during the year. In 1Q 214, the occupancy rate of retail space in the micro-market improved slightly to 96.7%, following a net new absorption of 4,9 sq ft and a corresponding space withdrawal of 1,2 sq ft. The new take up could be due to the opening of new F&B outlets and shops in the micro-market, as retail operators seek to take advantage of the catchment of shoppers and diners in the micro-market. This would include tourists and visitors heading for the attractions on the nearby Sentosa island, working population from the commercial buildings in the area, as well as residents in the Harbourfront, Telok Blangah and Pasir Panjang localities. The completion of the Circle Line of the mass rapid transit ( MRT ) network in 211 has further enhanced connectivity and improved the overall flow of shoppers into the micro-market Rents The ABHP micro-market forms part of the City Fringe, and according to Colliers International s research, the average monthly gross rents of prime ground floor retail space in the City Fringe have generally been strengthening in a stable manner from 3Q 29. Overcoming the weaker consumer sentiment as a result of the effects of the global financial crisis, shopping malls in the City Fringe area were able to tap on the generally affluent residential catchment population in their proximity. In, the average rent for prime retail space in the City Fringe strengthened by a moderate 1.8% from S$23.3 per sq ft per month from the end of to S$23.44 per sq ft per month as of the end of December. In 1Q 214, the average rent for prime retail space strengthened by a further 2.8% QoQ to S$24.1 per sq ft per month, as various malls in the City Fringe recorded slight rent increases due to a visible increase in popularity and footfalls. Average Monthly Gross Rents of Prime Ground Floor Retail Space in the City Fringe $24.5 $24. $23.5 $23. $22.5 $ Net Floor Area ( sq ft) Occupancy Rate (%) Monthly Gross Rents (S$ per sq ft)!"#$%&'(-"../&$(123&$243/"24.(!/2546"$&(*&&4$%7

16 Annual Report / Market Outlook In 214, the Singapore Tourism Board projects visitor arrivals to grow to between 16.3 and 16.8 million, with tourism receipts forecasted to be in the range of S$23.8 billion to S$24.6 billion. With visitor arrivals expected to grow by between 5.2% and 8.4% this year, the drive to take advantage of space opportunities by local retail and F&B enterprises as well as international brands remains compelling. Retail sales should improve in 214 as external conditions bolster the domestic economy and encourage continued increases in visitor arrivals, even though prevailing problems of labour shortages and high occupational costs remain. On the supply front, an influx of new retail offerings is expected with an estimated 2.1 million sq ft of new lettable retail space coming on board in the remaining nine months of 214. The opening of modern retail facilities in the City Fringe such as OneKM might boost rents in the area, however, rental escalation should be kept in check by the existing substantial stock of older strata-titled retail space. As such, monthly rents for prime ground floor retail space in the City Fringe should remain fairly stable, hovering between -1% and 1% in LIMITING CONDITIONS The content of this report is for information only and should not be relied upon as a substitute for professional advice, which should be sought from Colliers International prior to acting in reliance upon any such information. The opinions, estimates and information given herein or otherwise in relation hereto are made by Colliers International and affiliated companies in their best judgement, in the utmost good faith and are as far as possible based on data or sources which they believe to be reliable in the context hereto. Notwithstanding, Colliers International disclaims any liability in respect of any claim, which may arise from any errors or omissions or from providing such advice, opinion, judgement or information. All rights are reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopied, recorded or otherwise, without the prior written permission of Colliers International. Retail rents for the ABHP micro-market is expected to also remain stable with a moderate upside of 2% to 3% in 214, as there is no new supply in 214 and no significant source of retail supply in the next few years. At the same time, the micro-market is expected to benefit from visitor and tourist shopper traffic heading for the attractions on Sentosa Island, office workers from commercial buildings in the area, and from the regular catchment from the residences in the vicinity.