CBRE RESEARCH ASIA PACIFIC REAL ESTATE MARKET OUTLOOK

ASIA PACIFIC REAL ESTATE MARKET OUTLOOK

TABLE OF CONTENT PAGE 06 Executive Summary PAGE 07 Economic Outlook External factors present greatest challenge PAGE 09 Office Sector Greater focus on workplace strategies PAGE 12 Residential Sector Condominium developers court foreign buyers 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 3

TABLE OF CONTENT PAGE 16 Retail Sector Landlords prioritise placemaking PAGE 19 Industrial & Logistics Sector E-commerce provides opportunities PAGE 22 Capital Markets PAGE 25 Risks and Opportunities Demand continues for prime sites 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 4

2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK INFOGRAPHIC SUMMARY This report was prepared by [INPUT REGIONAL TEAM], which forms part of CBRE Research a network of preeminent researchers who collaborate to provide real estate market research and econometric forecasting to real estate. Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

EXECUTIVE SUMMARY The overall economic outlook for Thailand looks set to mirror that of the past year, with the Bank of Thailand (BOT) maintaining its economic growth forecasts of 3.2% for 2016 and 2017. EXTERNAL FACTORS POST GREATEST CHALLENGES TO THAI ECONOMY The prospect of protectionist US trade policies towards China represents one of the major risks to the Thai economy over 2017, with a lower volume of Chinese exports to the US in turn reducing Thai shipments of raw and manufactured products to China for re-export. GREATER FOREIGN INVESTMENT While no fundamental shift in the dominance of prominent local developers is set to occur over 2017, market interest shown by foreign groups in Thailand, combined with cautious domestic bank lending, has created a favourable environment for increased activity from overseas investors and a clear catalyst for greater inbound investment in the Thai property market over the year. DEMAND FOR PRIME LAND SITES TO CONTINUE CBRE Research believes that the price of prime Central Business District (CBD) land in Bangkok will continue to increase as downtown condominium demand continues to remain strong with prices projected to increase further over 2017. CBRE Research is confident that the land price record will be broken again in each CBD location. 2017 will continue to see a rise in interest in the acquisition of value added opportunities, principally in the form of older properties in need of renovation. Offices, hotels and apartment buildings will be most actively sought by prospective purchasers. RESIDENTIAL BUYERS MORE SELECTIVE, DEVELOPERS TO INCREASE OVERSEAS PROJECT MARKETING CBRE believes demand for high-end and above condominium projects will remain strong over 2017 although buyers will become more selective. Demand will continue to be driven largely by Thai buyers, accounting for 85% of the buyers. We expect developers will continue to explore overseas sales opportunities, building on the success of projects actively marketed internationally in 2016, with units priced below THB10 million proving popular among international buyers. Thailand has the added benefit of no punitive stamp duties for foreign nationals, unlike markets such as Singapore and Hong Kong, which serves to heighten the appeal of Bangkok property. GROWTH IN OFFICE RENTS CBRE Research expects rents to continue to rise over 2017 as healthy demand and limited new supply act as drivers to growth. Take-up rate is anticipated to remain strong at the level of 200,000 square metres per year. CBRE observed rising occupier interest in workplace strategies. Pre-leasing demand will continue for highquality office projects. CBRE believes that overall occupancy will continue to grow and that office rents will rise in the region of 5-10% over the coming 12 months. RETAIL LANDLORDS TO FOCUS ON PLACEMAKING, BANGKOK S PROFILE AS FOOD DESTINATION Retail landlords will continue to focus on placemaking, aiming to create destination experiences that cannot be replicated by online sales. Competition will be fierce and only the strongest centres in each location will prove viable moving forward. The expanding food and beverage sector is going some way to support this, with Bangkok building a reputation as a food destination, in addition to becoming a luxury retail hotspot, regionally. Leading restaurants Nahm and Gaggan were both featured in the coveted The World s Top 50 Restaurants list in 2016, with the latter further recognised as the top restaurant in Asia. GROWTH IN CLMV REGION AND E-COMMERCE BODE WELL FOR LOGISTICS SECTOR Due to Thailand s geographical location at the centre of CLMV region, CBRE Research believes that Thailand has the potential to develop into a regional logistics hub, capitalising on high regional GDP growth rates. While currently accounting for a small proportion of overall retail sales, the continued growth of Thai e- commerce will create greater demand for logistics space. Online retailers typically require three times the physical space of a conventional retailer, due to greater product offerings, larger inventory and the need to facilitate reverse logistics, where customers return goods. 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 6

Economic Outlook

ECONOMIC OUTLOOK EXTERNAL FACTORS PRESENT GREATEST CHALLENGE The Bank of Thailand's Monetary Policy Committee (MPC) has maintained its economic growth forecasts of 3.2% for 2016 and 2017 respectively, noting that downside risks to the Thai economy largely come from external factors. The prospect of protectionist US trade policies towards China represents one of the major risks to the Thai economy over 2017, with a lower volume of Chinese exports to the US in turn reducing Thai shipments of raw and manufactured products to China for re-export. Exports to the CLMV region (Cambodia, Laos, Myanmar and Vietnam) are expected to increase, following a lower volume of trade than anticipated over 2016. Public sector spending will remain an important source of growth moving forward, with the Government having approved a THB190 billion supplementary budget late last year, expected to be passed by Parliament by early February 2017, possibly raising the deficit to GDP ratio to 3.3%. This would be in addition to the existing THB390 billion available under the existing 2.7% ratio. The Ministry of Finance has estimated that THB220 billion, allocated for infrastructure development, will be fed into the economy in 2017. The Ministry has further instructed government bodies to front-load investment spending, scheduled over the next two years, in 2017 to boost the country's growth against a backdrop of weak private sector investment. While the recent clampdown on zero dollar tour operators will affect overall arrivals in 2017, CBRE Research does not expect this to have a significant impact on tourism s overall contribution to the economy, currently comprising 10% of total GDP. The Thai Baht (THB) is expected to weaken against the US Dollar (USD) over the first half of 2017 as a result of likely hikes in US interest rates. Private consumer spending is set to increase over 2017 driven by a rise in the minimum wage, improved farming income, the end of repayments under the first car scheme and a restructuring of income tax brackets. 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 8

Office Sector

OFFICE SECTOR GREATER FOCUS ON WORKPLACE STRATEGIES OVERVIEW The Bangkok office market performed well over the course of 2016, with limited new supply and healthy take-up driving rental growth and further reducing already low vacancy rates. Office rents rose by an average of 6.5% last year, with Grade A and B rents rising by around 8% and 5%, respectively. Bhiraj Tower at EmQuartier was able to achieve a rental rate of THB 1,000 per square metre per month for a small, standard specification unit, becoming the second Bangkok office building to pass the THB1,000 per square metre mark. Park Ventures Ecoplex, which originally broke the THB1,000 per square metre rent level back in 2013, went on to set a new market record of THB1,300 per square metre, again for a small, standard specification unit. A total of 140,000 square metres of new office space was completed over 2016, bringing total Bangkok office supply to 8.55 million square metres, representing a year-on-year increase of 1.3%. The office market saw its first wave of obsolescence, with the demolition of both Kian Gwan One and Vanissa Building removing 28,000 square metres from Bangkok s leasable office stock. CBRE Research expects this trend to continue as owners of dated buildings consider options against a backdrop of central land price appreciation and rising rents. Despite an increase in supply, the overall occupancy rate increased to 92.3% over 2016. Total net take-up reached 195,000 square metres, a slight reduction from 2015, but sufficient to reduce overall vacancy levels by 0.9 percentage points year-on-year. Pre-leasing demand continued to be strong, with Gaysorn Tower and M Tower, both slated for completion in Q2 2017, building on the success of FYI Center in securing significant commitments from tenants over 6 months prior to completion. 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 10

OFFICE SECTOR OUTLOOK CBRE Research expects rents to continue to rise over 2017 as healthy demand and limited new supply act as drivers to growth. Figure 1: Bangkok Office Market CBRE forecasts take-up to be in the region of 200,000 square metres for 2017, representing a slight increase from 2016, with the expansion of existing occupiers, across a broad range of industries, likely to be the principal demand driver, rather than new market entrants. Pre-leasing demand will continue for high-quality office projects scheduled to be completed over the course of the year, a trend first noted in 2015, prior to which significant tenant commitments in advance of a building s completion were rare. Proximity to mass transit, building design and specifications will continue to be key requirements for occupiers, with demand for floor plate efficiency likely to become a growing tenant priority moving forward. Source: CBRE Research, February 2017 Figure 2: New Office Supply by Area sq.m. CBD Non CBD 250,000 200,000 150,000 CBRE observed rising occupier interest in workplace strategies, with companies focusing on plans to attract and retain superior employees and to help enhance their productivity. 100,000 50,000 0 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F These plans include reconfiguring work spaces to create environments conducive to more collaboration between employees. CBRE expects policies such as 'hot desking' will become increasingly prevalent over the course of the year. Source: CBRE Research, February 2017 Figure 3: Average Achieved Rents for Bangkok Office Space CBRE believes that overall occupancy will continue to grow and that office rents will rise in the region of 5-10% over the coming 12 months. Only 485,000 square metres of office space is due for completion through to 2019 although developers have earmarked considerable land holdings for office projects, able to hold up to one million square metres of leasable office space. Source: CBRE Research, February 2017 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 11

Residential Sector

RESIDENTIAL SECTOR CONDOMINIUM DEVELOPERS COURT FOREIGN BUYERS MORTGAGE RESTRICTIONS TO CHALLENGE LOW- TO-MIDDLE-INCOME END-USERS Sales and new launches slowed in Q4 2016, with the lowerend of the market still affected by restrictions on mortgage lending caused by high levels of personal debt. CBRE Research believes that the outlook for the end-user driven residential market will be steady in 2017 and will be dependent on buyers ability to borrow money. CBRE is not concerned about the effect of a possible rise in interest rates, but more worried about access to mortgage finance. CBRE does not believe that the planned new mass transit lines will act as a significant catalyst for sales as people will typically only buy residential units along the routes once considerable construction progress has been made. 2017 will see the market continue to be dominated by large developers that will, in many cases, compete directly with each other, especially in the upper-end market. Given the largely subdued economic outlook and forecast continued restrictions on the availability of mortgage finance, it is hard to see significantly more low to mid-end residential units being sold in 2017 than 2016. DEMAND FOR LUXURY CONDOMINIUMS TO REMAIN STRONG, MID-MARKET CHALLENGED The market softened overall in 2016 with 55,000 new condominium units, at all price ranges and locations, being launched compared to 58,000 in 2015. The situation in the midtown and suburban market continued to be a peak in completions at a time of weakening demand, with the main challenge for this market segment being developers ability to convert offplan sales, with down-payments often as low as 10%, to transfers of title on completion when buyers must pay the balance. 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 13

RESIDENTIAL SECTOR The risk of purchasers default is high due to the possibility of speculative off-plan buyers being unable to resell or unwilling to complete payment walking away from the development and leaving developers with built-butunsold inventory. Despite slower sales, prices for off-plan primary (developer) sales in the downtown area are at record levels with 17 projects (3 completed, 14 under construction) achieving prices of over THB300,000 per square metre on multiple units. Thai buyers accounted for more than 85% of transactions for new properties based on sales by CBRE. While we expect luxury residential projects to continue to be driven by domestic demand, developers have demonstrated a renewed interest in appointing overseas agents to encourage international sales. CBRE Research expects this trend to become increasingly prevalent over 2017, with units priced below THB10 million proving popular among international buyers. Bangkok further benefits from no punitive foreign purchase taxes unlike a number of other popular residential investment markets such as Hong Kong and Singapore which apply additional significant stamp duties on units purchased by foreign nationals. In the downtown market, a number of planned Q4 2016 launches were delayed and developers will be under pressure to launch in Q1 2017 as they have already acquired the land. There is still demand for downtown, high-end projects, but high prices driven by the rising cost of land rather than higher profit margins means that buyers are selective. Developers need to prove to buyers that projects really are luxury in terms of specification and design if they want to sell at prices of over THB300,000 per square metre. The Ritz-Carlton Residences, Bangkok achieved a number of individual sales in excess of THB400,000 per square metre over 2016, with Marque Sukhumvit becoming the first project on Sukhumvit to obtain a sale above the THB400,000 mark as of the fourth quarter. While these transactions do not reflect the average price per square metre achieved across the aforementioned projects, such sales are encouraging Sansiri has recently reported an average sales price in excess of THB500,000 per square metre at 98 Wireless Road. Overall CBRE expects that developers will be more cautious and seek signs of solid levels of demand before launching new projects. Prices for new downtown projects will remain high and will likely increase in line with any rises in land prices. The outlook for 2017 will be mixed. There will be demand for some new one-bedroom midtown and suburban projects, but only in certain untapped locations, with luxury residential sales focused around Sukhumvit, Sathorn and Central Lumpini. Sales will take longer as CBRE believes there will be less speculator interest in the market and demand will be driven more by end-users. There will continue to be a notable disparity in prices for existing projects, especially older ones, driven more by the quality, age and unit size rather than the location. In some cases, new projects in downtown locations will continue to achieve prices more than four times higher than 20-year-old condominium projects in the same area. Opportunity for price appreciation in existing condominium buildings will be in those which are well maintained and well located. 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 14

RESIDENTIAL SECTOR APARTMENTS (SINGLE-OWNERSHIP) AND CONDOMINIUMS (MULTI-OWNERSHIP FOR THE EXPATRIATES RENTAL MARKET) WILL BE CHALLENGED BY BANGKOK CHANGING EXPAT PROFILE CBRE believes that the growth in the number of expatriates will slow over 2017 and that the composition will change, with more Chinese expatriates with lower housing budget. This means that it is unlikely that there will be any increases in lump sum housing budgets and vacancy may rise in buildings which have not been renovated. This will be particularly true in older condominium developments where the condition of both common areas and unit interiors will deter tenants. With limited new apartment supply, the main competition will come from rental units in condominiums. SERVICED APARTMENTS CHALLENGED BY LIMITED GROWTH IN TOURIST ARRIVALS AND HOTEL COMPETITION The end of zero dollar tours will not hurt the daily rate market for serviced apartments as room rates are above the level of this segment. Daily rates will move in tandem with hotel rates where the combination of new supply and slower arrival growth will mean less chance of rate increases. The long-term market will be affected by slower growth in expatriate numbers and the change in the composition of nationalities of foreign residents. CBRE Research believes occupancy will be relatively stable, but there will be little chance of increasing room rates over the course of 2017. Supply will be limited over 2017, with a total of around 530 units set to bring overall supply to 16,500 units over the year. Figure 4: Price Projection Source: CBRE Research, February 2017 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 15

Retail Sector

RETAIL SECTOR LANDLORDS PRIORITISE PLACEMAKING Slow retail sales caused by household debt and low confidence held back the retail sector over 2016. In the first nine months of the year, CPN, Thailand s largest retail developer, reported same store rental growth of only 2%. Competition remained strong and there were only a limited number of shopping centres where developers were able to raise rents, by changing the tenant mix, such as Mega Bangna. There may be a bounce in the December numbers because of the government offering a THB15,000 tax allowance for items purchased in that month (14-31 December 2016), but this will only have a short-term effect and will likely draw demand from January 2017. Demand for luxury goods from tourists will likely continue, with the prices of high-end goods in Thailand often competitive with alternative destinations regionally. CBRE does not expect that developers will start construction on new major projects until they see a reasonable increase in retail sales, with ICONSIAM, comprising 87,500 square metres, being the only significant retail scheme due for completion in 2017. The overall performance in 2017 will be that of slow growth, but there will be considerable differences between shopping centres, with clear winners in each catchment area, as sales will not be evenly distributed between all projects. 2017 will see major retail landlords strengthen their market positions, with malls in secondary locations likely to suffer from a lack of tenant demand, with stores unable to enhance their retail offerings risking obsolescence. Department stores, traditionally key anchor tenants of major Bangkok retail schemes, are proving an increasingly dated retail format and some community malls will find it challenging to sustain footfall and occupancy over 2017. 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 17

RETAIL SECTOR CBRE Research expects to continue to see big box retailers expand the proportion of space within their stores leased to third parties and, in turn, reduce their physical footprint. While the online retail market still accounts for a small proportion of overall retail sales, CBRE expects to see a continued expansion of the sector over the course of 2017. Key to increasing competiveness of shopping centres will be a continued focus on place making, with retail landlords needing to enhance the overall variety of entertainment and event offerings. The expanding food and beverage sector also supports placemaking efforts. Bangkok has been building its reputation as a food destination, with a number of leading restaurants heightening their regional profiles over the course of 2016. Although overall occupancy will remain high and possibly improve when renovations in currently vacant properties are completed, CBRE expects rental growth to be limited in some shopping centres over 2017. Figure 5: Retail Supply, Take-up and Occupancy Rate sq.m. Total Supply Total Take-up Occupancy Rate 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 2010 2011 2012 2013 2014 2015 2016 Source: CBRE Research, February 2017 Occupancy 100% 98% 96% 94% 92% 90% 88% 86% 84% 82% Figure 6: Existing and Future Supply sq.m. Existing Supply New Supply 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Source: CBRE Research, February 2017 2010 2011 2012 2013 2014 2015 2016 2017F* 2018F & Beyond* 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 18

Industrial and Logistics Sector

INDUSTRIAL AND LOGISTICS SECTOR E-COMMERCE PROVIDES OPPORTUNITIES The Thai industrial property market continued to suffer from a stagnant global and domestic economy over 2016. Thailand Q3 2016 exports of goods increased by 1.9% year-on-year, the first positive growth after seven quarters of decline. Manufacturing exports, which accounted for 88% of the total exports of goods, grew by 3.6% year-onyear. Exports to the United States and European Union grew by 7% year-on-year and 2.7% year-on-year, respectively, while exports to China contracted by 0.4% year-on-year over the third quarter. Regional trade underperformed over 2016, with exports to CLMV (Cambodia, Myanmar, Laos and Vietnam) falling by 1.8% year-on-year and exports to ASEAN countries stalling at -0.04% as of Q3 2016. In the first eleven months of 2016, Foreign Direct Investment (FDI) to the manufacturing sector dropped by 40% year-on-year. The value of Board of Investment (BoI) approvals in the five focused sectors that drive demand for serviced industrial land plots on estates and parks fell by 28.7% year-on-year over the same period. The industrial sector continues to be challenged by external factors such as the global growth in protectionism hurting prospects for increasing exports over 2017. Analysts are predicting limited growth in domestic vehicle sales which will restrict capacity growth in the vehicle manufacturing sector. Against this background, it is hard to be optimistic about growth prospects for serviced industrial land plot sales or demand for ready-built factories. The Eastern Economic Corridor (EEC) is expected to increase investment on the Eastern Seaboard where there is potential for targeted industries to benefit from agglomeration economies. 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 20

INDUSTRIAL AND LOGISTICS SECTOR The EEC spans the provinces of Chon Buri, Rayong and Chachoengsao, which will be designated as a high-tech industry cluster. The 10 targeted industries for the EEC are next-generation cars; smart electronics; affluent, medical and wellness tourism; agriculture and biotechnology; food; robotics for industry; logistics and aviation; biofuels and biochemicals; digital; and medical services. The logistics sector has better potential, with the need for more efficient domestic distribution and the potential from e-commence and last mile logistics, acting as potential catalysts for the market going forward. Thailand s internet retail to total retail sales ratio is still low compared to that of other countries although the continued growth in Thai e-commerce will create greater demand for logistics space. Online retailers typically require three times the physical space of a conventional retailer, due to a higher variety of product offerings, larger inventory and the need to facilitate reverse logistics. Overall CBRE does not think that land prices or rentals will rise and, in the case of ready-built factories, there is a risk that they may fall in some locations. Figure 7: Net Flow of Foreign Direct Investment USD million 12,000 10,000 8,000 6,000 4,000 2,000 0 (2,000) Total FDI in Other Sectors Total FDI in Manufacturing Sector (4,000) 2010 2011 2012 2013 2014 2015 Jan-Nov 2015 Jan-Nov 2016 Source: Board of Investment Thailand 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 21

Capital Markets

CAPITAL MARKETS DEMAND CONTINUES FOR PRIME SITES DEMAND FOR INCOME PRODUCING PROPERTIES STRONG, FEW WILLING VENDORS There is still strong demand for any kind of quality income producing asset, but few owners are willing to sell and those that do have tended to sell to a vendor sponsored REIT. REITs and public listed property funds continue in many cases to be controlled by the original property owners. The past two years have witnessed only one sizable arms-length commercial property sale over the THB1 billion mark, with Sun Towers, a Grade B Non-CBD building being sold for THB4.5 billion in 2015. Bangkok s prime shopping malls largely dominated by prominent local companies, with transactions more limited that the office sector. With so few transactions, reporting on yields is difficult. The Thai ten-year bond yield has risen to 2.7% from a low of 1.6% in April 2016. CBRE thinks that the potential for rental growth will suppress any short-term rise in yields for prime office property, with residential rental yields for individual condominium units likely falling in the context of rising sales prices. INBOUND CAPITAL LIKELY TO INCREASE Increasingly cautious bank lending to developers over the past 12 months has led to an increase in Thai developers seeking international capital, with predominately Japanese companies having entered into a new wave of partnerships with local firms over 2016. These aim to build on the success of previous projects such as those undertaken by Mitsui Fudosan and Mitsubishi Estate in collaboration with local partners. Chinese groups, by far the most active investors across Asia and accounting for over a quarter of total outbound Asian capital into global real estate, are also showing a growing interest in Thailand both in terms of Bangkok and resort locations. 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 23

CAPITAL MARKETS While no fundamental shift in the dominance of prominent local developers is set to occur in the near future, CBRE Research believes that market interest shown by foreign groups in Thailand, combined with cautious domestic bank lending, could act as a catalyst for greater inbound investment over the course of 2017. PRIME LAND PRICES WILL CONTINUE TO CLIMB CBRE believes that there is still demand for prime CBD sites and that new land price records will be set over 2017 although land price inflation will be more subdued in the midtown and suburban areas. INCREASED DEMAND FOR VALUE ADDED OPPORTUNITIES 2017 will continue to see a rise in interest in the acquisition of value added opportunities, principally in the form of older properties in need of renovation. Offices, hotels and apartment buildings will be most actively sought by prospective purchasers. While CBRE expects the clamp down on zero dollar tours to lead to a number of underperforming hotels to be offered for sale, the initial offer prices are likely to prohibit a significant volume of sales in the short term. The proposed new tax on property, which would have been based on capital value, has been postponed with no date announced for its implementation. This tax would have penalised owners of vacant land and its delay removes an incentive to sell. Figure 8: Average Total Return (Capital Gain + Dividend Yield), Q1 - Q3 2016 60% 40% 20% 0% -20% -40% -60% CPTGF SPF IMPACT TTLPF FUTUREPF LHSC POPF CPNCG QHOP TLGF QHPF SSPF LHHOTEL CRYSTAL AMATAR CPNRF LUXF MJLF QHHR GOLDPF PPF SPWPF MIPF LHPF CTARAF WHAPF TIF1 URBNPF M-PAT HPF BKKCP UNIPF TFUND M-II SSTSS TCIF TGROWTH DTCPF THIF TRIF ERWPF KPNPF TLOGIS SIRIP SSTPF M-STOR TU-PF TLHPF TREIT WHABT GVREIT WHART MNIT SBPF MIT MNIT2 MONTRI TNPF MNRF Source: The Stock Exchange of Thailand 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 24

Risks and Opportunities

RISKS AND OPPORTUNITIES CBRE Research expects a number of opportunities to arise in 2017, in a range of sectors, as outlined below. LUXURY SEGMENT AND OVERSEAS RESIDENTIAL SALES OPPORTUNITIES CBRE is confident that domestic demand for luxury residential condominiums will be strong over 2017, although the wider market will be more competitive and, in turn, buyers more selective. Successful international sales of Thai property over 2016 will lead to developers expanding their overseas marketing activities, with foreign buyers most attracted by units priced below THB10 million. PRIME LAND PRICE OPPORTUNITIES CBRE Research believes that the price of the prime CBD land in Bangkok will continue to increase as downtown condominium sales prices continue to hit record levels over 2017 and as office rents rise. CBRE Research is confident that the land price record will be broken again. NEW MASS-TRANSIT OPPORTUNITIES Under the government s infrastructure development, the continued expansion of mass transit lines will likely drive further land speculation along planned routes. Residential developers will continue to acquire land along these routes, based on government infrastructure plans, although they will typically delay project launches until construction progress of the line has commenced. Similar to buyers of individual units, they will typically wait to see significant construction progress of the line before committing to purchase. 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 26

RISKS AND OPPORTUNITIES OFFICE DEVELOPMENT OPPORTUNITIES CBRE believes that a continued rise in office occupancy and rents will act as a potential catalyst for office development activity, in the context of only 485,000 square metres of office space due for completion through to 2019. E-COMMERCE LOGISTICS OPPORTUNITIES While currently accounting for a small proportion of overall retail sales, the continued growth of Thai e- commerce will create greater demand for logistics space. This presents industrial landlords with the opportunity to benefit from on-line retailers requirements for distribution space of up to three times that of a conventional retailer. While regional trade underperformed over the course of 2016, the strong growth prospects for the region afford Thailand the opportunity to capitalise on increased demand from neighbouring economies. RISKS A slower than expected economy over 2017, due to external factors, would negatively affect all types of Bangkok property. A fall in Thai exports would weaken demand for industrial property. Slower than expected GDP growth would harm the continued expansion of existing office occupiers, which is currently the main driver of demand for new space. GROWTH OF CLMV AND AEC OPPORTUNITIES Due to Thailand s geographical location at the centre of CLMV (Cambodia, Laos, Myanmar and Vietnam) region, CBRE Research believes that Thailand has the potential to develop into a regional logistics hub. A weaker economy would further challenge the performance of the already fragile retail sector and reduce demand for low to mid-end residential property. 2017 CBRE, Inc. 2017 ASIA PACIFIC REAL ESTATE MARKET OUTLOOK BANGKOK 27

For more information about this regional major report, please contact: RESEARCH James Pitchon Executive Director james.pitchon@cbre.co.th Chotika Tungsirisurp Senior Manager chotika.tungsirisurp@cbre.co.th Chris Hobden Senior Manager chris.hobden@cbre.co.th Thatchanan Siddhijai Senior Analyst thatchanan.siddhijai@cbre.co.th Tornbonkot Patcharaprakiti Senior Analyst tornbonkot.patcharaprakiti@cbre.co.th Ratha Techasopapan Analyst ratha.techasopapan@cbre.co.th For more information regarding global research, please contact: Nick Axford, Ph.D. Global Head of Research nick.axford@cbre.com Richard Barkham, Ph.D., MRICS Global Chief Economist richard.barkham@cbre.com Spencer Levy Head of Research, Americas spencer.levy@cbre.com Henry Chin, Ph.D Head of Research, Asia Pacific henry.chin@cbre.com.hk Neil Blake, Ph.D. Head of Research, EMEA neil.blake@cbre.com Follow CBRE This report was prepared by the CBRE Thailand Research Team, which forms part of CBRE Research-a network of preeminent researchers who collaborate to provide real estate market research and econometric forecasting to real estate investors and occupiers around the globe. All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including projections, has been obtained from materials and sources believed to be reliable at the date of publication. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. Readers are responsible for independently assessing the relevance, accuracy, completeness and currency of the information of this publication. This report is presented for information purposes only exclusively for CBRE clients and professionals, and is not to be used or considered as an offer or the solicitation of an offer to sell or buy or subscribe for securities or other financial instruments. All rights to the material are reserved and none of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party without prior express written permission of CBRE. Any unauthorized publication or redistribution of CBRE research reports is prohibited. CBRE will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on information in this publication. To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at reports www.cbre.com/research-and-reports 2017 CBRE, Inc.