KENEDIX MARKET REPORT

KENEDIX MARKET REPORT Dec. 212 Contents 1. Hot Topic 1 2. Market View 3. Real Estate Investment Market 7. J-REIT Market 8. Office Market 9. Residential Market 1 7. Logistics/Retail 11 Hot Topic Macroeconomic Conditions ~An Economic Recovery is Expected through 213~ The real GDP growth rate (vs. previous quarter, seasonally adjusted) of -.9% (-3.% annualized) for July-September announced November 12 showed significant negative growth. A look at contributing factors shows that domestic demand fell by.2% and foreign demand by.7%, with the major cause being a decrease in exports amid economic slowdowns in major foreign markets and the appreciation of the yen on international currency markets, although faltering personal consumption also was a factor driving down GDP. In response to the massive negative growth in GDP in the period July- September, many research institutes are revising their 212 GDP growth rate forecasts downward. A look at the November ESP forecast announced by the Japan Center for Economic Research (a consensus forecast by about private-sector economists, released monthly) shows a downward revision to the forecast for Q 212. However, forecasts for Q1 213 and beyond remain largely unchanged. This is because the general view is that the GDP growth rate will be strong in 213 due to factors including reconstruction demand in response to the Great East Japan Earthquake providing underpinning i for the economy, expectations of a recovery in overseas economies in 213, and forecasts of a last-minute rise in demand prior to the planned April 21 increase in consumption tax. Fig.1 Real GDP Growth Rate 12 (%) Actual Oct-12 survey 1 8 2-2 - - -8 Nov-12 survey Dec-12 survey -1 Q1 Q2 Q3 Q Q1 Q2 Q3 Q Q1 Q2 Q3 Q Q1 211 212 213 21 1 Source: Prepared by Kenedix based on The Cabinet Office, ESP Forecast made by Japan Center for Economic Research

Hot Topic Investors Risk Tolerance Appears to be Rising The October 212 edition of The Japanese Real Estate Investor Survey released semiannually by the Japan Real Estate Institute shows decreases in investors expected yields across a wide range of properties and areas. Among office buildings, while expected yields in the Marunouchi/Otemachi area of Tokyo, an important market indicator, remained largely unchanged from the previous half at.%, those in the Nihonbashi, Toranomon, Akasaka, Nishi-Shinjuku, Shibuya, Ueno, and Osaki areas fell by.1% point from the previous half. Even in the Marunouchi/Otemachi area, the average expected yield fell by.1% point from the previous half, to.% (the figures announced in the survey are median values). The number of investors tolerant of somewhat lower yields appears to be increasing. Expected yields on rental residential properties remain in the decreasing trend that began in April 21. Expected yields on single-room units in the eastern Tokyo area have fallen for six consecutive halves, while those on (low-rise) high-end multifamily have fallen for the first time in four halves. Yields are decreasing in most of the leading provincial cities as well, indicating that investor interest is spreading to those cities too. The market recovery has been slower for retail facilities than for other assets. However, for this period, yields decreased in multiple areas. Yields on suburban shopping centers in Tokyo have fallen for three consecutive halves, and yields on suburban shopping centers in Sendai, Nagoya, Kyoto, Kobe, and Fukuoka have fallen as well. Yields on urban shopping centers are decreasing in Sendai, Chiba, and Kobe. Logistics facilities are a category of assets currently attracting attention from investors. Yields on such facilities, whether single-tenant or multi-tenant, tenant are decreasing in nearly all areas. Also, many areas (including the Nagoya coastal area, the Osaka coastal area, the Tama area of Tokyo, and northern Nagoya) show a relatively large decrease of.2% point. Fig.2 Real Estate Investor s Expected Yield 8 7 (%) Office Building Tokyo (Marunouchi/Otemachi) Osaka Nagoya Fukuoka 8 (%) 7 Residential Property 3 3 7 8 9 1 11 12 Tokyo (Jonan) Osaka Nagoya Fukuoka 3 7 8 9 1 11 12 Retail Property 9 (%) Tokyo (Suburban) Osaka (Suburban) Logistics Facility 8 Tokyo (Urban) Osaka (Urban) 8 (%) Tokyo (Coastal area) Nagoya (Coastal Area) Osaka (Coastal Area) Tokyo (Inland) 7 7 3 3 7 8 9 1 11 12 Source: Japan Real Estate Institute 1/8 /9 1/9 /1 1/1 /11 1/11 /12 1/12 2

Hot Topic Appetite for Investment in Offices Again Increases The Japan Real Estate Institute s survey of real-estate investors also collects data on investors most recent stances toward real-estate investment. The percentage of respondents stating that they had made real-estate investments in standard studio over the past six months had increased over two consecutive halves, rising to a high level of %. Still, the percentage indicating that they would invest in single-room residential properties over the coming year decreased. The percentages of investors reporting that they would invest in office building have increased. While until now expected yields on rental residential properties have continued to decrease as investors have sought out such properties, from now on it appears likely that investors interest in office properties will increase. Though, while appetite for investment in grade-a office buildings is high, the survey s results imply that this appetite is not leading to actual investment. Also, appetite for investment in warehouse/distribution center is rising gradually, and appetite for investment in retail facilities (downtown retail property and suburban shopping centers) also appears to be in the process of recovering. Fig.3 Acquired Property in Past Months (Proportion of Investors, multiple selection allowed) % % Oct-11 Apr-12 Oct-12 3% 2% 1% % Source: Japan Real Estate Institute Fig. Property Type of Possibility to Invest in Next 12 Months (Proportion of Investors, multiple selection allowed) 7% % Oct-11 Apr-12 Oct-12 % % 3% 2% 1% % Source: Japan Real Estate Institute The TSE REIT Index Continues to Rise After bottoming out in June, the TSE REIT index has been rising, exceeding the important 1,-point in September. It remains strong despite some minor adjustments in underlying conditions. While Topix has risen by only.2% since the end of June 212, the TSE REIT index has outperformed it substantially, rising by 1.2% over the same period. A look at trading volume by investor type shows continual net buying by banks and investment trusts since July. While net selling by foreign investors was seen in August, in September and October they too returned to net buying. While this could be seen as speculative buying due to macroeconomic factors such as a shift to domestic-demand-related stocks due to the strong yen and expectations of monetary easing, it also could be considered a reflection of positive fundamentals such as expectations of improvement in the rental office market and improving fund-raising conditions in the real-estate sector. 3

Hot Topic Fig. Trading Volume of Real Estate Investment Trust by Investor Type (JPY in billion) Foreigners Individuals Business Companies Investment Trusts Banks Insurance Companies Proprietar TSE REIT Index (RHS) 3 2 1-1 -2-3 - 1/11 /11 7/11 1/11 1/12 /12 7/12 1/12 Source: Prepared by Kenedix based on Tokyo Stock Exchange 1,2 1,1 1,1 1 1, 1, 9 9 8 8 A Succession of Equity Financing through J-REITs As the J-REIT market remains strong, there is a succession of new REIT listings and capital increases through public offerings. The Daiwa House REIT was listed on November 28, 212, and listing of GLP Investment Corporation is planned for December 21. Each of these listings is valued at more than JPY 1 billion. The value of equity financing through J-REITs in 212 is estimated at approximately 1.3 times the 211 figure (based on figures announced as of the end of November 212) as new listings have resumed for the first time in about four and one-half years. Tokyu Land Corp. and Hulic are aiming to list new REITs in 213, and it has been reported that the AEON Group and the Prologis (USA) also will list a REIT. As such, listing of new REITs appears likely to continue in 213 as well. The movement toward establishment of private REITs also continues. Diamond Realty Management Inc., an affiliate of Mitsubishi Corp., registered a new investment corporation in July, as did Goldman Sachs Asset Management in August. Fig. Equity Finance Trend by J-REIT (JPY in billion) 3 Fig.7 Newly Listing REIT and Private REIT (212 Second Half) Private REIT 2 2 1 1 Volume (LHS) Number of Cases (RHS) 21 H2 211 H1 211 H2 212H1 212H2 Source: Prepared by Kenedix based on public announcement by J-REIT Date Fund Name Asset Management Company Amount of Asset ( bn) 212/7/3 DREAM Private REIT Diamond Realty Management 31.7 212/8/1 Japan Private REIT Goldman Sachs Asset Management 1. 1 New Listing Name Asset Management Company Asset size at IPO ( bn) Asset Type 212/11/28 Daiwa House REIT Investment Corporation Daiwa House REIT Management 11. Industry/Retail 212/12/21 GLP Investment Corporation GLP Japan Advisors 28.7 Industry Source: Prepared by Kenedix based on public announcement by J-REIT and Media news

Market View Market View Probing the 213 Office Market As the end of 212 approaches, perhaps it can be said that the real-estate market, which had remained sluggish since the financial crisis, showed signs of a clear recovery in 212 despiteatemporary p delay in the recovering trend due to the effects of the Great East Japan Earthquake. However, from a look at the survey of real-estate investors mentioned above it would appear at first glance that the market conditions for office buildings still have not recovered, as expected yields on office properties remain largely unchanged. On the other hand, at an underlying level the number of investors turning their attention to investments in offices is increasing. For these reasons, we would like to probe the outlook for the office market in 213 from the two aspects of the investment market and the leasing market. Pi Primary Factors BhidV Behind Variation in Office Building Pi Prices Fig.8 shows trends in the rates of change in appraised value, capitalization rates (on an appraisal basis), and NOI (annualized) for properties in REIT portfolios for which the relevant data are available on a continual basis (from March 2 through August 212 for offices and from March 27 through August 212 for residential properties). In both asset categories appraised value fell rapidly beginning H2 28, but while the capitalization rate for residential properties rose massively at the same time as the drop in appraised value, the capitalization rate for office buildings rose only in H1 29. On the other hand, alookatnoi conditions shows that while NOI on residential properties has fallen since H2 28 it rose temporarily in H2 21. Although it subsequently dropped again, the extent of this drop has been limited. In the case of office buildings, the decrease in NOI began in H2 29, one year later than the drop in appraised value. The rate of decrease grew subsequently, peaking in H2 211. In other words, in the case of office buildings only the massive drop in appraised value in H2 28 can be said to be an effect of the rise in capitalization rate, while the decrease in NOI can be said to be the main cause of the small decreases in appraised value that continued subsequently. From the above, it would appear thatt the effect of NOI on price variations is stronger in the caseof office buildings than residential properties. In H2 212, both office buildings and residential properties showed decreases in capitalization rates. While appraised values rose at that time for residential properties, they did not rise for office buildings, due to the effects of the drop in NOI. There are signs of an underlying bottoming out of office-building rents, centered on prime properties, so that in 213 rents are expected to rise. Since expectations of rising rents are linked directly to improving appetite for investment in office buildings, it can be hoped that the rental office market will improve in accordance with expectations. Fig.8 The Factor of the Movement of Appraisal Value (Asset hold by J-REIT, % change from previous half period) Office Appraisal value Cap Rate NOI.. 2.. -2. 8. (%).. 2.. -2. Residential -. -. -8. Source: Prepared by Kenedix based on public announcement by J-REIT -. Appraisal value Cap Rate -. NOI -8.

Market View 212 Rental Office Market According to Mori Building, the supply of space in office buildings in 212 is forecast to reach 1.81 million square meters. The massive supply of space from large-scale buildings led to a significant increase in the vacancy rate, which recorded a record high average vacancy rate of 9.3% in June (according to Miki Shoji, for the five central wards). However, the vacancy rate has been in a decreasing trend since then, and it can be said that the market has not worsened to the extent feared. New demand (change in floor area in use) in 212 has been high at approximately 18 thousand tsubo (9 thousand square meters) as of November (in the five central wards, according to Kenedix estimates based on figures released by Miki Shoji). Asking about tenants reasons for relocating shows that many relocations involve office consolidation or centralization, and it appears that many are strategic relocations taking advantage of the current historically low rent levels. However, relocations to consolidated offices alone would not result in true new demand. Possible primary factors behind the high level of new demand include (i) true new demand for reasons such as expansion of floor space, (ii) the possibility that secondary vacancies have not yet materialized, and (iii) relocations to better locations from the surrounding 18 wards. As for the first reason, we have heard that there are unexpectedly large numbers of expansions of floor space within a building. With regard to the second of these reasons, since Miki Shoji counts a space as vacant when activities to attract tenants begin, it would appear that in some cases even after a tenant has relocated to a new office building its previous space is not recognized as a vacancy if activities to attract tenants does not begin due to reasons such as lengthy construction work to return the space to its original condition. Existing Medium-Sized and Medium-Large Buildings are Strong Fig.1 shows vacancy rates by property size as announced by Sanko Estate (for the five central wards of Tokyo). While the vacancy rate has increased rapidly in 212 for large-scale buildings due to the effects of new supply, it clearly is decreasing for medium/large-scale buildings (those with typical floor plate of 1-2 tsubo (33- square meters)). While it would seem from this data that new demand is arising to some extent, there appears to be demand for existing medium/large-scale buildings in particular. While the reason is unclear, conceivable possibilities include such buildings capturing demand for both office upgrades and downgrades, companies preferring affordable existing buildings to high-priced new large buildings, and secondary or tertiary vacancies not yet having materialized. Outlook for 213 New supply of office buildings in the 23 wards of Tokyo in 213 appears likely to be at a very low level, even historically speaking, of 7 thousand square meters. Since pressure from new supply will decrease rapidly, if underlying strong demand continues then it can be expected that vacant space in new buildings will decrease steadily. Also, concerns about secondary vacancies in existing buildings probably will not become too severe. However, this most likely depends on the assumption that macroeconomic conditions will recover prior to spring 213. The possibility cannot be denied that if macroeconomic conditions turn out worse than expected, then new demand could decrease. Fig.9 Office Supply Fig.1 Vacancy Rate by Size (Central Wards in Tokyo) 2. (million sqm) 2 2. 1% 12% 1% Large-scale Medium/large-scale Medium-scale Small-scale 1. 8% 1. %. % 2%. 1 2 3 7 8 9 1 11 12 13 1 1 1 Source: Mori Building % 1/ 11/ 9/ 7/7 /8 3/9 1/1 11/1 9/11 7/12 Note: Large-scale:>2 tsubo/floor, Medium/large-scale: 1-2 tsubo/floor, Medium-scale: -1 tsubo/floor, Small-scale: 2- tsubo/floor Source: Sanko Estate

Real Estate Investment Market Real-estate transaction volume decreases According to DTZ, the value of commercial realestate transactions in Q3 212 fell by 2% year on year to approximately JPY 217 billion. While transaction volume had been in an increasing trend in Q1 and Q2, due in part to new J-REIT offerings, in Q3 the value of J-REIT acquisitions too fell by % year on year. While hotel transactions increased in Q3, hotels are not includedindtzfigures,soinfactthedecrease probably is more moderate than it appears. Types of investor are broadening One conceivable reason for the difficulty in increasing transaction volume is the continuing shortage of properties suitable for investment. At the same time, types of investors appear to be broadening. For example, AVIVA and Secured Capital have implemented additional fund offerings and the Japanese subsidiary of Australia s Goodman has announced a joint investment with the Abu Dhabi Investment Council (ADIC) on the scale of JPY 8 billion. Goldman Sachs established its own private REIT in August as well. In Q 212, in addition to new listings of two REITs and capital increases through a public offering, numerous large-scale transactions already have surfaced as well. For this reason, it appears likely that transaction value will increase substantially, so that the value of transactions over the whole year probably will be at roughly the same level as in 211. Commercial Property Transaction (billion in yen) 1,2 Transaction volume (LHS) 1, 8 2 Source: DTZ Property Transaction by J-REIT 3 % change YoY (RHS) (JPY in billion) Disposition Aquisition 3 2 2 1 1 Source: Prepared by Kenedix based on data of J-REIT % % 3% 2% 1% % -1% Q1 Q2 Q3 Q Q1 Q2 Q3 Q Q1 Q2 Q3 Q Q1 Q2 Q3 29 21 211 212 Significant ifi Deals Name Asset Type Buyer Prefecture Price ( bn) GFS (sqm) Date COMODIO Shiodome Office Nippon Building Fund Tokyo 28.8 28,79 Jul-12 Olinas Mall, Olinas Core Retail CapitaMalls Asia Tokyo 22.8, Jul-12 Aliake Prime Building Hotel Ascendas Hospitality Trust Tokyo 1. 33,17 Jul-12 Yakuin Business Garden Office Japan Prime Realty Fukuoka 1.9 22,28 Aug-12 Toshin Building Office NTT Urban Development Tokyo 2. 27,87 Sep-12 Yokohama Machida IC Logistics Center Logistics SPC which was invested by Mitsui& Co., Realty Management Tokyo -,93 Sep-12 mozo Wonder City Retail Japan Retail Fund Aichi 2.7 233, Oct-12 Portas Sakai Hotel Hotel SPC which was invested by Agora Hospitality group Osaka - 2,378 Oct-12 D-project Urayasu Ⅱ Logistics Daiwa House REIT Chiba 21. 72,32 Nov-12 D-project Hachioji Logistics Daiwa House REIT Tokyo 12. 8,78 Nov-12 Building which was former Shinsei Bank Heed Office Office Joint Project with Kenedix, Tokyu Land and Development Bank of Japan Tokyo - 2,23 Dec-12 7 Source: Prepared by Kenedix based on Nikkei Real Estate Market Report, other news report

J-REIT Market J-REIT index outperforms Topix In July 212, both Topix and the TSE REIT index fell. However, since August they have maintained positive monthly performance over four consecutive months. A look at performance from July through the end of November shows the boom in the real-estate sector clearly, as Topix rose by 1.%, the TSE REIT index by 11.3%, and the TSE real-estate equities index by 12. %. A yield spread of.% The yield spread calculated based on the TSE REIT index as of the end of November 212 was.%. This reflects a decrease of approximately.% points compared to the end of June, and the yield spread fell below.% during this period. While the yield on 1-year JGBs fell over this period as well, it fell by less than the decrease in the J-REIT dividend yield. J-REIT Index & Stock Market Index (21=1) 1 12 1 8 Topix TSE REIT Topix Real Estate 1/1 /1 9/1 1/11 /11 9/11 1/12 /12 9/12 Source: Souce Bloomberg beg( (As sof 3 th November oe 212) Yield Spread TSE REIT Dividend Yield JGB 1 Yeild Yield Gap Residential and retail/logistics REIT indices rising Performance of REIT indices by asset type showed increases of 9.7% in the office index, 1.9% in the residential index, and 12.8% in the retail/logistics index, resulting in underperformance of the office index (July November 212). Performance of the office index appears to have got off to a bad start in July. Thiscanbe surmised to have resulted from the fact that it was announced in July that the average vacancy rate in the five central wards of Tokyo had reached its highest level on record at the end of June. Since August the office index too shows a bullish trend. US REIT index has been bearish The U.S. REIT index, which had demonstrated strong performance in H1 212, has been bearish since H2. On the other hand, REIT markets in countries other than the U.S. were strong, with increases of 11.3% in Japan, 1.% in Singapore, and 9.% in Australia during July November 212. The yield spread based on each index as of the end of November was 1.8% in the U.S., 1.9% in the U.K., 2.1% in Australia, and.1% in Singapore. 2 1/1 /1 7/1 1/1 1/11 /11 7/11 1/11 1/12 /12 7/12 1/12 Source: Bloomberg g( (As of 3 th November 212) J-REIT Index by Asset Class (Feb. 21=1) 1 1 12 1 TSE REIT Index REIT Residential Index REIT Office Index REIT Ret&Logi Index 8 2/1 8/1 2/11 8/11 2/12 8/12 Source: Bloomberg (As of 3 th November 212) Key Country REIT Index (Jan. 21=1) 18 1 1 12 1 8 JPN US UK AU Singapore 1/1 7/1 1/11 7/11 1/12 7/12 Source: Bloomberg (As of 3 th November 212) 8

Office market : Tokyo A tug of war between steady new demand and secondary vacancies After peaking at 9.3% at the end of June 212, the average vacancy rate in the five central wards of Tokyo has fallen to 8.7% at the end of November 212 (Miki Shoji). During this period, the vacancy rate continued to fall through October and new demand reached 71 thousand sqm. However, the vacancy rate rose slightly in November, by.2% point over the preceding month. The main cause of this increase appears to be the fact that vacancies in spaces vacated by tenants who had relocated to newly constructed office buildings were counted because marketing activities already have begun for such spaces. This can be said to be a typical example of secondary vacancies surfacing in the statistics after a delay. Supply pressure will decrease in 213 In H2 212 vacancies are being filled steadily as the volume of new supply is low. However, vacancies at the end of November had risen by 1.7% point from the previous month, an indication that the underlying pace of concluding leases on newly constructed buildings had slowed. Conceivable reasons include less flexibility in setting rents as occupancy rates increased to some degree or a decrease in large groupings of vacant floor space. While new supply will decrease massively in 213, the office buildings to be supplied include many large-scale offices. It appears that tenants already have been decided on for roughly -% of the spaces in leading buildings, so that new supply will be less likely to become a major factor causing vacancy rates to rise. Vacancy rate in grade-a buildings starts to fall The vacancy rate in grade-a office buildings at the end of September 212 had fallen by 1.% point from the previous quarter to 9.3% (CBRE). This appears to be due to a gradual decrease in vacant floor space in newly completed large-scale office buildings. Average assumed achievable rent on grade-a office buildings remains unchanged from the previous quarter at JPY 29,9/tsubo. Asking rents continue to fall Asking rents by size in September 212 fell in all classes. A look at year-on-year changes shows that in the total-floor-area class of -1, tsubo asking rents fell by 3.%, while they fell by.9% in the 1,-3, tsubo class and 7.9% in the class of 3, tsubo or more. As such, the larger the size of the space the higher the rate of decrease. While some predict that rents will bottom out against a background of strong demand, unfortunately there is no clear trend at present. In the future factors such as macroeconomic trends, how secondary vacancies are filled, and the timing of their surfacing in the market are likely to play increasingly important roles. Vacancy Rate & Asking Rent Rate 2 (thousand yen / tsubo) (%) 2 1 1 Asking Rent Rate (LHS) Vacancy Rate (RHS) 2 3 7 8 9 1 11 12 Note: Tokyo Business area (chiyoda-ku, chuo-ku, Minato-ku, Shinjuku-ku, Shibuya-ku) Source: Miki Shoji Co., ltd. (Monthly, As of November 212) Vacancy Rate of Newly Built Bldg & Existing Bldg (%) (%) 3 2 1 Newly Built Bldg (LHS) Existing Bldg (RHS) 2 3 7 8 9 1 11 12 Note: Tokyo Business area (chiyoda-ku, chuo-ku, Minato-ku, Shinjuku-ku, Shibuya-ku) Source: Miki Shoji Co., ltd. (Monthly, As of November 212) Vacancy Rate & Asking Rent Rate for Grade A 3 2 1 (thousand yen / tsubo) Average Assumed Achievable Rent (LHS) Vacancy Rate (RHS) 7 8 9 1 11 12 Source: CBRE (Quarterly, As of September 212) Asking Rent Rate by building size 3 (thousand yen / tsubo) 2 2 1 1 8 2 1 8 2 12.% 1.% 8.%.%.% 2.%.% -1, tsubo 1,-3, tsubo 3, tsubo or more 1 /7 12/7 /8 12/8 /9 12/9 /1 12/1 /11 12/11 /12 Note: Tokyo 23 wards, Source: CBRE (Quarterly, As of September 212) 9

Residential Market Actual population seems to have increased Population decreased statistically this quarter. This appears to be an effect of the change in the basic resident register system that took effect beginning July 9 (while the alien registration system was abolished and the basic resident register applied to foreign residents, it appears that there are some cases of foreign residents failing to register on the basic resident register). For example, from July through October the population in Tokyo of foreign residents from 1 leading nations decreased by 1, people, but this appears mainly to be an effect of the change in systems. The estimated population of Tokyo fell by approximately 13, over the period June-September, a decrease smaller than the decrease in the population of foreign residents, and this would appear to indicate that the actual population has increased. Occupancy rate at rental apartment in greater Tokyo area maintains a high level The occupancy rate at rental apartment in the greater Tokyo area held in J-REIT portfolios was 9.3% as of the end of October 212. While the rate has been on the increase since bottoming out in August, it still is at a level down.3% points year on year. However, at this level it can be described as maintaining a high rate. Observers are looking forward to the trends in the high season at the end of the calendar and fiscal years. Asking rent in central Tokyo is turning to rise According to the IPD/Recruit Residential Index Monthly Report, rents on rental apartment (on an asking-rent basis) in the greater Tokyo area hit bottom around summer 211 and have begun rising again since then. However, there is some minor variation in trends by region. While rents appear to be in a clear rising trend in the 23 wards of Tokyo, they are decreasing, albeit by small degrees, in Kanagawa, Saitama, and Chiba. Newly supplied properties are driving up asking rents Rents on rental apartment located in central Tokyo and held in investors portfolios can be dividedid d it into those in wards where asking rents are rising, due to the effects of new supply of high-grade apartment, and those where they are not. While the effects of new supply are strong in Shinjuku and Shibuya wards, average asking rents are decreasing together with a decrease in offerings of newly constructed apartment. At the same time, asking rents continue to decrease in Chuo Ward, an area where the effect of new supply is almost nonexistent. The downward trend in rents in Chiyoda Ward appears to be coming to a halt. Population in Major Cities Sep-11 Jun-12 Sep-12 QoQ YoY Tokyo 13,18,98 13,227,91 13,21,8-12,8 3,9 Tokyo 23 ward 8,9,873 9,3,238 8,99,199-8,39 31,387 Central wards in Tokyo 912,33 923,93 922,9797-73,77 Nagoya city 2,2,817 2,28,298 2,2,81-1,7 1,818 Osaka city 2,7,72 2,7,23 2,77,23 1,18,873 Fukuoka city 1,78,882 1,89,12 1,91,82 2,7 8,2 Source: Respective city Occupancy Rate for Rental Apartment (Hold by J-REIT) 98 (%) (%) 9 9 92 9 Occupancy Rate (LHS) YoY % change (RHS) 88 -. 1/ 1/ 1/ 1/7 1/8 1/9 1/1 1/11 1/12 Note: Occupancy rate=occupancy area / rentable area, in the greater Tokyo area Source: Prepared Kenedix based on data of major residential REIT (AS of October 212) Rent for Rental Apartment (Greater Tokyo Area, by Area) 12 11 11 1 1 9 9 Tokyo 23 wards Saitama Over All Greater Tokyo Area Kanagawa Chiba 1/ 7/ 1/7 7/7 1/8 7/8 1/9 7/9 1/1 7/1 1/11 7/11 1/12 7/12 Note: Asking Rent Rate (As of October 212) Source: Prepared by Kenedix based on IPD/RECRUIT Residential Index Monthly Report Rent for Rental Apartment (Central Ward in Tokyo) 1 1 1 13 (thousand yen/tsubo) Chuo-ku Minato-ku Shibuya-ku Shinjuku-ku Chiyoda-ku 1 12 1/1 /1 7/1 1/1 1/11 /11 7/11 1/11 1/12 /12 7/12 Note: Asking Rent Rate (As of September 212) Source: Leasing Management Consulting.. 2.. -2.

Logistics / Retail Vacancy rates in logistics facilities rose for the first time in five quarters The vacancy rate in large-scale, multi-tenant logistics facilities in the greater Tokyo area rose by 1.% points from the previous quarter to.%, its first increase in five quarters (CBRE). One property completed ltdthis quarter appears to have begun operation at less than full occupancy. The vacancy rate appears to have increased in existing properties as well, due to factors such as termination of short-term leases. However, the vacancy rate can be said to remain at a low level of.% or less. New supply and new demandd bth both are at highh levels According to Ichigo Real Estate Service, new supply over the period May-July 212 was high at 2, sqm. However, new demand also was strong at 223, sqm, so that the vacancy rate increased only slightly. Prologis announced that Prologis Park Zama 2 (total floor area: 11, sqm), completed in August, had % occupancy upon completion of construction, and this appears to have been one factor pushing up the vacancy rate. However, in November it was announced that its occupancy rate had risen to approximately 9%. This can be seen as a sign of the steady demand for logistics facilities. Demand along main streets appears strong From statistics on asking rents in commercial areas in central Tokyo it appears that it cannot be said unconditionally that if rents are rising then the market is improving. Asking rents on firstfloor retail stores decreased in Q2 212 in the four areas other than Shinjuku. However, due to a certain level of demand for stores along main streets such as Ginza and Omotesando actual rents in those areas appear strong. Rather, asking rents appear to be falling as the number of properties offered in areas other than prime locations is increasing. A weakening trend in personal consumption Shopping-center sales in June and July fell year on year, and while they temporarily showed yearon-year increases in August they fell again year on year in September and October. Over the same period department-store sales continued to decrease year on year, and retail sales as a whole appeared to be sluggish. In addition to worsening business confidence, continued low temperatures during the summer and high temperatures in the fall appear to have weakened sales, centered on apparel. Asking Rent & Vacancy Rate for Logistics (thousand yen) 7. Asking Rent Rate (LHS) Vacancy Rate for Existing Facility (RHS) Average Vacancy Rate (RHS)... 3. 7 8 9 1 11 12 Source: CBRE (Quarterly for Vacancy Rate, Half-yearly for Rent Rate) Supply-Demand Balance in Tokyo Area for Logistics (thousand sqm) 3 2 1 Source: Ichigo Real Estate t Service Co, Ltd. New Supply 2% 1% 1% % % New Demand Asking Rent Rate for Retail Property (ground floor) 3 (thousand yen) 2 Ginza Omotesando Shinjuku Shibuya Ikebukuro 1 9Q 1Q1 1Q2 1Q3 1Q 11Q1 11Q2 11Q3 11Q 12Q1 12Q2 Source: Nikkei Real Estate Market report (Quarterly, As of Q2 212) Retail Sales (YOY % change) 1. 1... -. -1. Existing Shopping Center Overall Retail Sales Department Store -1. 1/8 7/8 1/9 7/9 1/1 7/1 1/11 7/11 1/12 7/12 Source: Japan Council of Shopping Centers, Japan Department Stores Association, The Ministry of Economy, Trade and Industry (As of October 212) 11

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