Asia Pacific Property Digest Second Quarter Subdued Leasing, Strengthening Investment

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1 Asia Pacific Property Digest Second Quarter 213 Subdued Leasing, Strengthening Investment

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3 Asia Pacific Property Digest Second Quarter Dear Reader, Halfway through 213, we continue to see mixed economic and property market performance in Asia Pacific. While leasing activity has slowed, investment volumes have strengthened. You can view this report on-line at where you will also find our other research outputs. The AP research team hopes that you find this publication valuable. Happy reading! Best regards, Dr Jane Murray Head of Research Asia Pacific Feature Article Asia Pacific Economy and Property Market 4 Office Hong Kong 8 Beijing 9 Shanghai 1 Guangzhou 11 Taipei 12 Tokyo 13 Osaka 14 Seoul 15 Singapore 16 Bangkok 17 Kuala Lumpur 18 Jakarta 19 Manila 2 Ho Chi Minh City 21 Delhi 22 Mumbai 23 Bangalore 24 Sydney 25 Melbourne 26 Perth 27 Auckland 28 Retail Hong Kong 29 Beijing 3 Shanghai 31 Guangzhou 32 Tokyo 33 Singapore 34 Bangkok 35 Kuala Lumpur 36 Jakarta 37 Delhi 38 Mumbai 39 Sydney 4 Melbourne 41 Residential Hong Kong 42 Beijing 43 Shanghai 44 Singapore 45 Bangkok 46 Kuala Lumpur 47 Jakarta 48 Manila 49 Industrial Hong Kong 5 Beijing 51 Shanghai 52 Tokyo 53 Singapore 54 Sydney 55 Melbourne 56 Hotels Hong Kong 57 Beijing 58 Shanghai 59 Tokyo 6 Singapore 61 Bangkok 62 Kuala Lumpur 63 Jakarta 64 Sydney 65

4 4 Asia Pacific Property Digest Second Quarter 213 Economy Asia Pacific Economy Mixed economic performance Dr Jane Murray Head of Research Asia Pacific The tide turns for China and Japan The first half of 213 has seen some significant changes across Asia Pacific in terms of relative economic performance. The tide has started to turn in different directions for the region s two biggest economies. China is slowing as its government looks to transition to a consumptionled growth model. Conversely, Japan is picking up after its government announced a huge stimulus programme in April to reignite the economy after two decades of stagnation although the success of Abenomics in the long run is still far from certain. Southeast Asia s economic performance has been generally resilient, particularly in Indonesia and the Philippines. Meanwhile, India, Australia, Hong Kong and Singapore are running at below-trend growth. Figure 2: Outlook for Major Economies Country Real GDP Growth (%) 213F Real GDP Growth (%) 214F Figure 1: Regional Growth Expected to Strengthen in 2H13 GDP Growth Rates y-o-y (%) China Philippines Indonesia Vietnam India* F Malaysia Source: IHS Global Insight, July 213 *India GDP on a fiscal year basis Outlook China and 214 growth to be significantly below the 1-year average (1.5%). Slow transition away from investment- and credit-driven growth. Government spending on infrastructure and low-cost-housing should help to prevent a hard landing. Japan Growth should accelerate in 2H13 on the back of stronger domestic spending. Gradual uptrend in exports supported by yen weakening. 214 growth tempered by implementation of a consumption tax. India* Tepid recovery on both domestic and external fronts in fiscal ; stronger growth next year helped by monetary easing and currency depreciation. Ongoing risks include high inflation, external deficit and reform challenges. Australia Below-trend growth in due to slowing resource investment and contraction in the public sector. Subdued consumer spending but sustained currency depreciation should assist the competitiveness of exporters. South Korea Slight uptick in exports in 2H13, stronger next year. Generally subdued consumer spending due to high levels of household debt and relatively weak consumer confidence. Indonesia Growth to remain resilient, benefitting from strong domestic demand. Inflation to remain above 8% in 2H13 after a recent fuel subsidy reduction but should ease gradually next year. Singapore Gradual recovery in exports. Subdued retail sales this year and next. Slowing labour force growth to act as a constraint to faster growth. Hong Kong Domestic demand to support growth while exports gradually pick up after mid-213. Continued growth in mainland Chinese visitors has sustained strong retail sales. Slow activity in property market due to curbs in place. Thailand Hong Kong Taiwan New Zealand Australia Singapore Japan South Korea * India GDP on a fiscal year basis Source: IHS Global Insight, July 213; Jones Lang LaSalle

5 Asia Pacific Property Digest Second Quarter Incoming data are mixed Double-digit retail sales growth continues in Greater China and retail sales are relatively healthy in emerging Southeast Asia. Elsewhere in the region, retail sales remain lacklustre. The manufacturing sector has seen renewed weaknesses across most of the region, while exports are still declining or growing slowly on a y-o-y basis in most of the major export markets. Varied inflation and interest rate picture Inflationary pressure has picked up in some countries. CPI inflation edged up in June in China and India due to higher food prices, and spiked in Indonesia after the government recently scaled back fuel subsidies. Indonesia became the first AP country to raise rates this year, by a total of 75 bps in June and July. On the other hand, India, Australia, South Korea, Thailand and Vietnam have cut rates this year to bolster growth. Regional growth continues to outpace rest of the world Risks to the outlook include ongoing Eurozone and US weaknesses, domestic policy challenges in various AP countries and potential Figure 3: Varied Inflation Picture Across Asia Pacific y-o-y (%) India Indonesia Vietnam Hong Kong Philippines F Singapore Source: IHS Global Insight, July 213 Thailand inflationary impacts. That said, export demand from the US and Europe is projected to gradually strengthen from 214, while the domestic sector remains relatively strong in most countries with low unemployment. As such, the Asia Pacific economy is forecast to grow two to three times faster than the rest of the world this year and next. China Australia Malaysia South Korea New Zealand Taiwan Japan Economy and Property Market Asia Pacific Property Market Slow leasing, investment strengthens further The region s property markets continued to show mixed trends in 2Q13, with a sharp divergence between leasing and investment activity. Expansion by corporate occupiers remains subdued and retail leasing has also slowed in a number of markets over the last year. Conversely, investment activity continues to strengthen, with commercial transaction volumes showing a strong year-on-year increase in 2Q. Consistent with these trends, we ve seen yields holding firm or compressing further in most markets as capital values have outpaced rents. Slow leasing activity on the back of ongoing corporate caution During 2Q13, Grade A office supply additions in the region s Tier I markets were up 15% y-o-y to 1.5 million sqm, with roughly 4% of the total in India, 2% in China and the rest mostly in emerging Southeast Asia and Australia. For the quarter, aggregate net absorption declined 26% y-o-y and was around 2% below the 3-year quarterly average. China and India accounted for nearly 8% of the total take-up. Financial centres remain weak, with limited take-up in Hong Kong and Singapore mainly coming from small non-financial occupiers. Take-up in Tokyo turned slightly negative in 2Q due to some major tenants contracting into better quality buildings. China saw slow leasing activity from MNCs, although domestic firms continued to commit to space in Shanghai while less CBD space has been returned than expected in Beijing. In India, slow expansion by MNCs was largely offset by steady demand from IT/ITES firms. Generally steady take-up was seen in emerging Southeast Asia. Most Australian markets experienced limited or negative net absorption on the back of corporate cost savings. Rents grow modestly in most cities. Falls in Beijing, Australia During 2Q13, net effective rents were flat or grew slightly in most AP markets. Jakarta continued to see the largest rental increase (9.8% q-o-q) due to strong underlying demand and a lack of quality space. Rents rose in Hong Kong for the first time since 2Q11 (1.5% q-o-q) and edged up in Singapore for the first time since 3Q11 (.6% q-o-q) due to limited leasing options in both cities. Rents rose by 1.2% q-o-q in Tokyo, while small rental increases were also seen in Seoul, Shanghai, Bangkok and Manila. Rents in Beijing declined further ( 1.6% q-o-q) on weak demand, albeit easing from a drop of 3.7% q-o-q in 1Q. Rents fell in most Australian cities, with the largest quarterly fall in Melbourne ( 6.4%), followed by Sydney, Brisbane and Perth ( 3 to 3.5%). Over the last twelve months, Jakarta has been the clear regional outperformer with annual rental growth of 37% while most other markets have seen single-digit increases. Hong Kong and Singapore registered rental declines of 3 4% over the last year, while Melbourne recorded the largest annual decline across the region of 1.6%.

6 Jakarta Bangkok Seoul Hong Kong Shanghai Manila Tokyo Singapore Mumbai Beijing Sydney Melbourne 6 Asia Pacific Property Digest Second Quarter 213 Property Market We expect 213 regional net absorption to be around 1 15% below 212 levels as a result of ongoing corporate caution, and to pick up moderately in 214. Over the short term, rental growth is likely to be limited in most markets, while Beijing and most Australian markets including Sydney and Melbourne should see small declines. Single digit rental growth is generally expected for the full year 213, with the strongest growth in Jakarta. Industrial demand underpinned by retailers Retailers continued to drive leasing demand for industrial space, while the export-related segment remained subdued as manufacturing activity remains weak in major markets. Rental growth continued at a moderate pace (.5 to 3.% q-o-q) in most markets, with the largest quarterly growth seen in Beijing (2.8% q-o-q). Moderate rental growth is projected for most centres this year. Retailer demand healthy, although some signs of slowing In 2Q13, consumer confidence was generally buoyant in emerging Asia and improving in advanced countries. Retailers are still expanding in Greater China (although slower expansion by some luxury brands) and emerging Southeast Asia is increasingly on their radar screens. Rents grew more slowly across the region in 2Q (.5 to 2.5% q-o-q) with the exceptions of India, Singapore and Australia, which saw mostly flat rents (marginal declines in Sydney and Melbourne). Rental growth was the strongest in Jakarta (2.5% q-o-q), followed by Beijing and Hong Kong. In 2H13, retailer demand for space is likely to remain relatively healthy in most locations, and most markets are expected to see further growth in rents, albeit moderate. Residential leasing demand in line with the office sector In 2Q13, leasing demand moderated in China and remained subdued in Hong Kong and Singapore, but was stronger in the Southeast Asian markets of Jakarta and Manila. Rents in most markets either remained flat or rose moderately (.5 to 4% q-o-q). Residential takeup should remain generally in line with trends in the office sector, with mostly flat rents or small increases in most markets. A strong quarter for investment activity In 2Q13, regional investment activity reached USD 33 billion, up 18% year-on-year, with Japan, Australia and China accounting for the bulk of activity. In 1H13, volumes totalled USD 6 billion, up 21% on 1H12. Japan again led the way and accounted for close to one-third of regional activity in USD terms. Volumes were up 78% y-o-y, the strongest growth recorded for any of the major investment markets globally. Around 85% of purchases in the quarter were by domestic buyers and activity was boosted by a resurgence in IPO activity by J-REITs. In Australia, volumes were up 28% y-o-y with continued demand from both offshore and domestic institutional investors and pension funds. China bounced back from a slower first quarter, up 65% q-o-q. Volumes in Hong Kong were down about 5% (q-o-q and y-o-y) after the imposition of higher stamp duty in February, and volumes in Singapore also eased 18% on a yearly basis. Capital values continued to increase moderately in most AP markets during 2Q13, although Beijing and some Australian markets saw small quarterly declines (.5 to 2.%) on the back of falling rents. Jakarta again recorded the largest q-o-q and y-o-y increases (1.2% and 46% respectively). Capital values were largely flat in Hong Kong but edged up by 1.9% q-o-q in Singapore, supported largely by local investors. Figure 4: Office Rental & Changes, 2Q13 Quarterly % Changes Figure 5: Strengthening Real Estate Investment Direct Commercial Real Estate Transactions, 26 1H13 q-o-q % USD Billion H13 $6 bill 21% y-o-y H13 s s Japan Australia China Hong Kong Singapore South Korea Other Figures relate to the major submarket in each city (Real Estate Intelligence Service), 2Q13 Figures refer to transactions over USD 5 million in office, retail, hotels and industrial (Real Estate Intelligence Service), 2Q13

7 Asia Pacific Property Digest Second Quarter Figure 6: Rental Property Clocks, 2Q13 Grade A Office Guangzhou Adelaide Perth Brisbane Prime Retail Hong Kong Guangzhou Property Market Jakarta Manila Bangalore Delhi, Mumbai Tokyo Chennai Growth Slowing Rents Rising Taipei, Bangkok Wellington Seoul, Shanghai Rents Falling Decline Slowing Sydney Hanoi Auckland, Canberra Ho Chi Minh City Hong Kong, Kuala Lumpur, Singapore, Osaka Beijing, Melbourne *Regional Beijing Kuala Lumpur Manila Jakarta Bangkok Mumbai, Tokyo Growth Slowing Rents Rising Delhi Bangalore Shanghai Chennai Rents Falling Decline Slowing Melbourne* Auckland, Wellington, Sydney* Singapore, SE Queensland* Prime Residential Guangzhou Shanghai Beijing Bangkok Kuala Lumpur Industrial Hong Kong Singapore (Conventional) Melbourne Brisbane Sydney Manila Jakarta Growth Slowing Rents Rising Rents Falling Decline Slowing Shanghai Singapore (Business Park) Beijing Growth Slowing Rents Rising Rents Falling Decline Slowing Hong Kong Tokyo Singapore* Manila Auckland, Wellington *For Luxurious Residential Properties (Real Estate Intelligence Service), 2Q13 *Business Parks (Singapore) & Conventional (Singapore) Logistics Space (Hong Kong, Shanghai, Beijing, Tokyo Bay Area) Rents and capital values still increasing, but slower growth Corporates are likely to remain cautious in the short-term due to cost concerns, although leasing activity should begin to strengthen next year in line with improving economic conditions. Investor sentiment should remain buoyant over the short term despite some jitters about higher global interest rates. However, some of the larger markets could slow from their strong 1H13 results. As a result, we maintain a conservative 213 forecast of USD 11 billion for regional investment volumes, with the potential for upside. In most markets and sectors, we expect generally limited increases in rents and capital values for 2H13, and growth rates of typically less than 1% in 214. Further moderate yield compression is likely. The office and retail sectors should generally deliver higher returns than the residential sector, which should continue to see cooling measures by various governments. About the Author Dr Jane Murray joined Jones Lang LaSalle in 1998 and in 25 was appointed as Head of Research Asia Pacific. In this role, Jane leads a team of over 1 professional researchers in the region, which forms part of a network of around 3 researchers in 6 countries around the globe. The Asia Pacific Research team produces a range of outputs to assist the clients of the Firm with their decision making, including comprehensive market monitoring and analysis across major institutional-grade real estate markets in the region; forecasts of key real estate indicators; consultancy projects; thought leading research papers on topical issues as well as regular publications.

8 8 Asia Pacific Property Digest Second Quarter 213 Hong Kong: Office 2 Leasing at Hysan Place and 28 Hennessy Road accelerates Central rents grow for the first time in a quarter since 3Q11 Investment activity remains subdued Hong Kong: Office Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Leasing activity in the overall market remained thin in 2Q13. Although net take-up amounted to 254,9 sq ft (net), a significant improvement on the 113,9 sq ft (net) achieved in 1Q13, about a third of was attributed to the realisation of pre-sales in the newly completed King Sang Commercial Centre in Kwun Tong. in the leasing market continued to be underpinned by smaller requirements (i.e. less than 5, sq ft). Cost-savings remained as a key issue for tenants though a notable improvement in tenant affordability was also observed, especially from the banking and finance sector. Wanchai/Causeway Bay posted the strongest net take-up among the five major submarkets, reaching 17,1 sq ft (net) on the back of strong leasing in Hysan Place and 28 Hennessy Road, securing tenants affected by the planned redevelopment of Sunning Plaza. Net take-up in Central amounted to 4,7 sq ft (net) Percent Sun Hung Kai Properties (SHKP) Kin Sang Commercial Centre (9, sq ft, net) in Kwun Tong was the only new Grade A office completed in 2Q13. The redevelopment of the former New World Centre in Tsimshatsui into a mixed-used project comprising a hotel, office, retail, and service apartment elements, was added to the supply schedule. The office component (322, sq ft, net) is expected to be completed in 217. Wong s International and SHKP, meanwhile, reportedly reached an agreement with the Lands Department on a land premium of about HKD 4, per sq ft (gross) to modify the land lease at 18 Wai Yip Street in Kwun Tong from industrial to office use. The site will add about 36, sq ft (net) to the market upon its completion Take-Up (net) Future 13F Vacancy Rate For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H13. Underpinned by growth in Central and Wanchai/Causeway Bay, rents grew by 1.4% q-o-q in 2Q13 in the overall market, bringing growth in 1H13 up to 1.7%. Although growth decelerated in the non-core area submarkets, rents in Central grew by 1.5% q-o-q, recording growth for the first time in a quarter since 3Q11. The higher stamp duty charges and lower loan-to-value ratios announced in February continued to affect investment volumes. However, capital values still edged up by.4% q-o-q though down from 2.4% q-o-q in 1Q13. Buyer interest was largely focused on upcoming strata-titled developments in emerging office locations. Global Trade Square in Wong Chuk Hang, for example, which went on sale in late April was achieving prices in the range of HKD 8,5-11,9 per sq ft (gross). Last Peak ^ net effective, on NFA HKD 59. psf pm Rents rising 7 The growing likelihood of interest rates moving higher, as the US Federal Reserve beings tapering its quantitative easing program later this year, is likely to affect activity in both the office leasing and investment markets over the near term. Amid uncertainties in US monetary policy and a slowing mainland China economy, the city s business sector is likely to expand at a slow rate, leading to modest rental growth at best, while investors are likely to demand higher returns on property investments placing greater pressure on capital values. Note: Hong Kong Office refers to Hong Kong s Overall Grade A office market.

9 Asia Pacific Property Digest Second Quarter Beijing: Office Two new completions add 81, sqm to the market stock Rents edge down for the second consecutive quarter Two en bloc transactions completed in the quarter 26 Mixed signals continued to come from the leasing market in 2Q13. The automotive and IT sectors remained strong, whereas international financial and professional service firms continued to display a degree of caution. Net absorption totalled 84, sqm, up q-o-q but down on the historical average. Net take-up in existing buildings (not including newly completed self-use projects) reached 43, sqm, up marginally q-o-q. The average vacancy rate continued to edge downwards, reaching 4.4% in 2Q13, the lowest level in 13 years. All submarkets, with the exception of East Chang an are now experiencing vacancy rates below 5%. Two new projects were completed in 2Q13. Fortune Capital Centre (39,6 sqm) in Finance Street entered the leasing market with pre-committed tenants including China Construction Bank and a local asset management company. The remaining space in this building, as with many other projects in Finance Street, is likely to be taken up by domestic state-owned enterprises. Raycom Tower D (41, sqm) in Zhongguancun will be used for self-use by domestic IT firm, SOHU Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 1,5 3 Beijing: Office With many lease expiries expected in 213 and an uncertain macro economy, a number of landlords have offered concessions to tenants in order avoid a high vacancy scenario. As such, rents decreased for the second consecutive quarter in 2Q13 (.5% q-o-q to RMB 335 per sqm per month) after falling by 2.% q-o-q in 1Q13. This decrease was less pronounced than that seen in the first quarter, indicating that a market free-fall is unlikely. The CBD experienced the sharpest rental decline on a submarket level ( 1.6% q-o-q to RMB 364 per sqm per month). Two en bloc transactions were completed in 2Q13. Guang an Centre Building 1 in Finance Street was sold to Beijing Huarong Investment Company for RMB 52, per sqm and No. 4 Building at the Yue Tan Centre, also in Finance Street, was purchased by China Merchants Bank for RMB 55, per sqm. Finance Street Holdings was the vendor in both of these deals. Yields held steady at 6.6% in the second quarter as negative rental growth appears to be stabilising. 1,25 1, F Take-Up (net) Future Vacancy Rate For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H Percent Recent statistics suggest that China s economic growth is likely to slow further for the rest of this year, suggesting that a noticeable rebound in office demand is unlikely. However, low vacancy rates are expected to prevent rentals from free-falling in Beijing. We expect tenants to remain generally cautious towards expansion and cost-saving is expected to remain a key theme. One more project is expected to be completed in the remainder of the year. Fortune Plaza Phase III (15, sqm) is set to be the first new completion in the CBD since 1Q11. Last Peak ^ net effective, on GFA RMB 335 psm pm Rents falling 2 Note: Beijing Office refers to Beijing s Overall Grade A office market.

10 1 Asia Pacific Property Digest Second Quarter 213 Shanghai: Office Shanghai: Office Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 More tenants consider relocation from the CBD to decentralised areas Domestic companies active in Pudong, supporting moderate rental growth Investment demand for office assets remains strong The CBD leasing market remained quiet in the quarter, with most leasing transactions completed for renewal. In Puxi, the most active tenants came from the pharmaceutical and luxury retail industries. For example, GlaxoSmithKline expanded in-house by about 1, sqm in The Headquarters Building and Ralph Lauren moved from Chong Hing Finance Center to Verdant Place, leasing one whole floor. In Pudong, domestic companies from the financial services sector maintained a strong level of demand. For example, a newly-established fund from Bank of Nanjing leased about 3, sqm in Aurora Plaza. Meanwhile, demand from MNC companies remained weak in Pudong with most activity in the quarter coming from renewals. Some MNC tenants in the manufacturing sector relocated from the Pudong core-cbd to decentralised areas in Puxi in order to save on costs. Tenants in both Puxi and Pudong CBD submarkets are increasingly considering relocation to decentralised areas for lower rents One new CBD building, Jing An Kerry Centre Tower 3, was completed in 2Q13 in Puxi, adding 65,497 sqm of Premium Grade A office space to the market. The occupancy rate in the building was 8% upon completion. In the decentralised market, one new project, Baohua Center (44,586 sqm), was completed in Puxi in the quarter F Take-Up (net) Future Vacancy Rate For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H Percent Bolstered by renewal demand, rents remained flat in Puxi in 2Q13 at RMB 9. per sqm per day. In Pudong, limited available space and strong demand from domestic companies continued to fuel rental growth in the Lujiazui CBD. As a result, rents increased by 1.3% q-o-q in Pudong. Puxi Premium Grade A rents remained flat at RMB 1.8 per sqm per day while average rents for Pudong Premium Grade A space grew by 1.6% q-o-q to RMB 1.7 per sqm per day. In the decentralised market, as demand remained strong in the quarter, rents continued to grow steadily, rising by 1.% q-o-q. Due to healthy market fundamentals, institutional funds showed strong interest in allocating money to Shanghai s office sector. Properties with strong cash flow in mature locations remained the favoured investment targets. For example, Central Plaza in Huangpu District was purchased by Carlyle from Forterra Trust in 2Q13 for RMB 1.67 billion. Last Peak ^net effective, on GFA RMB 9. psm per day Rents stable 2 Looking forward, we expect the leasing market in Puxi to stay quiet for 2H13, with most transaction deals continuing to be for renewal. With growing competition from decentralised areas, Puxi CBD rents are expected to drop slightly in the remainder of the year. In Pudong, we expect that demand from domestic tenants and very limited supply should support landlords confidence. Rents are expected to rise at a moderate pace in Pudong through the end of the year. Note: Shanghai Office refers to Shanghai s Overall Grade A office market consisting of Pudong and Puxi CBD and decentralised areas.

11 Asia Pacific Property Digest Second Quarter Guangzhou: Office Renewals and cost-saving relocations dominate demand Rental growth accelerates despite rising vacancy Primary and secondary markets record strong sales growth 16 The slowing international economy and increasing uncertainty over China s economic outlook is weakening demand for expansion and upgrades. In 2Q13, office demand was largely dominated by renewals and cost-saving relocations. The demand for costsavings drove some companies to migrate from other areas to the Yuexiu submarket. Among Zhujiang New Town (ZJNT) buildings in the pre-leasing stage, landlords are increasing incentives and lowering asking rents. In spite of this, some ZJNT office tenants are hesitant to renew or expand in place due to what they perceive to be temporary discounts. These cost-sensitive tenants predict a sharp increase in ZJNT rentals at the end of a typical three-year lease. For the same reasons, tenants currently in Tianhe CBD or Yuexiu submarkets prefer to renew or expand in place rather than face potentially sharp future rent hikes in ZJNT Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Guangzhou: Office During 2Q13, 23,6 sqm of new supply entered the market. The subdued leasing momentum resulted in only 84,1 sqm of net absorption, thus pushing the vacancy rate up to 15.1% in 2Q13 from 11.8% in 1Q13. Total Grade A office stock grew to 3.7 million sqm with the completion of Pearl River Town (161,5 sqm) and One Bravo (7, sqm), both of which are located in ZJNT. Construction delays and a weak leasing environment resulted in a low precommitment rate at Pearl River Town. On the other hand, supported by the relatively higher owner-occupier demand, the partially strata-titled One Bravo achieved a 5% pre-commitment rate upon completion Percent Although overall leasing activity remained relatively weak, rental growth was supported by a rise in renewals and cost-saving relocations, which tightened vacancy rates in the Tianhe CBD and Yuexiu submarkets. Growth of average rents accelerated from.7% q-o-q in 1Q13 to 1.3% q-o-q in 2Q13, resulting in RMB per sqm per month, on GFA. The sales market was active in the primary and secondary strata-titled markets in the Tianhe CBD and Yuexiu submarkets. Driven by the rapid rise in unit prices across the ZJNT primary market, many domestic firms and investors were forced to seek lower priced investment-grade assets in older submarkets. As a result, average capital values rose by 2.7% q-o-q to RMB 34,2 per sqm (GFA) in 2Q13. In the short term, we foresee that uncertainties in China s economy should continue to soften expansion demand. Most MNCs are likely to remain hesitant to increase headcounts and should remain firm on their real estate budget. Over the next 12 months, the stock of Grade A office space is expected to increase by 331,4 sqm. Due to demand by large domestic companies that remain active in upgrading their space and setting up new offices in Guangzhou, coupled with declining vacancy in existing premises, we have revised upward our previous rental outlook and expect a stable rental level for the remainder of 213. For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completion and vacancy rates are as at 1H13, while future supply is for 2H13. Last Trough ^ net, on GFA Take-Up (net) Future RMB psm pm Rents rising 2 13F Vacancy Rate Note: Guangzhou Office refers to Guangzhou s Overall Grade A office market.

12 12 Asia Pacific Property Digest Second Quarter 213 Taipei: Office Taipei: Office Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Take-up declines as global economic uncertainties weigh on demand Overall rents rise, driven by buildings with low vacancy Investment volumes fall sharply as investors take a wait-and-see attitude Total take-up declined from 16, ping in 1Q13 to 3,7 ping in 2Q13. The majority of take-up was due to a multinational insurance company leasing 2,7 ping of office space in the Non-Core submarket. Despite the lower take-up, overall vacancy decreased by.7 percentage points q-o-q to 1.3%. No new supply was completed in 2Q13 but there are three properties in the pipeline due for completion in 2H13 which will add 27, ping to the market stock. The owner-occupied Taiwan Life Headquarters building, which was previously expected to complete in 2Q13, has now postponed completion to 3Q13. Meanwhile, the Hungtai Nanjing and United Entertainment Center projects will add 2, ping of additional office space later this year Percent Most corporate tenants renewed their expiring leases rather than exploring their options in the market, as vacancy remains low in most established buildings and landlords of recently completed buildings raised asking rents. Overall rents increased slightly in the quarter by.5% q-o-q to NTD 2,444 per ping per month, mainly attributable to rental increases in buildings with high occupancy. In 2Q13, investment volumes in the commercial property market declined sharply by 37% q-o-q to NTD 16 billion, nearly half the 2Q12 level. Most potential investors are taking a wait-and-see attitude, whilst capital-rich insurers continue to be prohibited from most real estate investments Take-Up (net) Future For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H13. 13F Vacancy Rate 16 Efforts to improve cross-straits trade relations and lower service sector trade barriers should encourage more Mainland Chinese businesses to setup in Taiwan, and in turn boost demand for office space. Finance, tourism, retail and health-care related industries are expected to benefit the most from improved cross-strait ties. By end-214, additional metro rapid transit service routes are scheduled to become operational. It is anticipated that the improved transit access will push many corporate tenants to explore alternative Grade B or other classes of office space in the peripheral areas along these routes. Overall rents in 2H13 are expected to grow at a similar pace as 1H13, supported by higher rents in established buildings with low vacancy and above average asking rents for recently completed buildings. Gradually improving leasing demand and readily available capital are likely to support growth in capital values. Last Trough NTD 2,444 per ping pm Rents rising 5 ^ net, on GFA Note: Taipei Office refers to Taipei s Overall Grade A office market.

13 Asia Pacific Property Digest Second Quarter Tokyo: Office Vacancy rate rises for the fourth consecutive quarter, up 2 bps to 4.6% Rents increase.7% q-o-q, driven by Otemachi/Marunouchi Investment yields remain flat as capital values grow in line with rents 12 The vacancy rate at end-2q13 was 4.6%, an increase of 2 bps q-o-q or 11 bps y-o-y. This was the fourth consecutive quarterly increase. By submarket, the largest rise was in Akasaka/Roppongi. Net absorption was recorded at -18, sqm in 2Q13, compared with 19, sqm in 1Q13 and 279, sqm in 2Q12. This was the first negative result since 21, due in part to no new supply in the quarter. Tenant consolidation and downsizing from various industries, including foreign financial institutions, also contributed to negative absorption. A bright spot in the market was domestic IT and manufacturing firms, which increased their demand for new leases and expansions. Major relocations during the quarter included software company TDC s relocation to Shinjuku Bunka Quint Building for expansion, Apple s relocation from Tokyo Opera City in Shinjuku to Roppongi Hills Mori Tower and manufacturer Oracle s partial relocation from Aoyama to Akasaka Center Building. Moreover, new announcements of planned relocations in the quarter included manufacturer UACJ relocating to Tokyo Sankei Building in Otemachi for a business merger, Abeam Consulting relocating to Marunouchi Eiraku Building for consolidation in 3Q13 and FPG relocating to JP Tower for expansion in 4Q13. There was no new supply completed in 2Q13. The Nihonbashimuromachi 3-chome district redevelopment project was announced in the quarter. This project is an office-led green development (GFA: 166, sqm) and is expected to complete in 219. In 2Q13, average rents (including service charges) increased by.7% q-o-q or 3.1% y-o-y to JPY 31,494 per tsubo per month, the fifth straight quarterly rise. By submarket, Otemachi/Marunouchi registered an increase of.6% q-o-q amid declining vacancy, while Akasaka/Roppongi saw a marginal decline of 1.2% q-o-q as vacancy rates inched higher. Average capital values rose at a similar pace to rents and resulted in investment yields remaining flat. A notable transaction was Hulic acquiring Kamiyacho Central Place for JPY 5 billion or JPY 1.5 million per sqm (NLA). The 33, sqm (NLA) building was built in base: 4Q8 = Q8 4Q9 4Q1 4Q11 4Q12 4Q F Take-Up (net) Future Vacancy Rate For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H Percent Tokyo: Office 12-month Outlook The economy expanded by 4.1% q-o-q in annualised terms in 1Q13, partly benefitting from improved market sentiment as a result of a government stimulus enacted during the first quarter. With further improvements in the economy and market sentiment expected, this should translate into higher demand. Coupled with limited new supply, we expect vacancy to trend lower and support rental growth. Capital values are expected to grow faster than rents, causing investment yields compress. Last Trough ^ gross, on NLA JPY 31,494 per tsubo per month Rents rising 5 Note: Tokyo Office refers to Tokyo s 5 Kus Grade A office market.

14 14 Asia Pacific Property Digest Second Quarter 213 Osaka: Office Osaka: Office base: 4Q8 = Q8 4Q9 4Q1 4Q11 4Q12 4Q F Take-Up (net) Future Vacancy Rate For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H Percent Grand Front Osaka completes adding 145, sqm to market stock Rents decrease slightly despite major new supply Hankyu REIT acquires an office building for JPY 1.2 billion The vacancy rate was 12.4% at end-2q13, an increase of 62 bps q-o-q and 71 bps y-o-y. The significant rise was a reflection of a large amount of new supply that entered the market with low occupancy during the quarter, namely Grand Front Osaka. However, relatively new buildings located in the Umeda Station south area saw a decline in vacancy. Net absorption totalled 36, sqm in 2Q13, compared with 21, sqm in 1Q13 and 3, sqm in 2Q12. Net absorption in 1H13 was supported by relatively new buildings located in the Umeda Station area. Tenant movements in 2Q13 included Hitachi relocating to Nakanoshima Festival Tower from Dojima Axis Building and FP Corporation relocating to Daibiru Honkan Building from outside the CBD. Moreover, new relocations announced in the quarter included Orient Watch relocating to Epson Osaka Building and Altima Corp relocating to Osaka Mitsui & Co. Building in 3Q13 to improve business efficiency. New supply totalled 145, sqm (NLA) in 2Q13, increasing the total stock by 9.9% q-o-q. New supply came from Grand Front Osaka, one of the largest development projects in the Osaka CBD, which offered two Grade A office buildings. The commitment rate at completion averaged about 2%, with tenants including Santen Pharmaceutical, Xserver and Ashisuto. The outline for the Umeda 1-chome 1 Project was announced. This project includes the redevelopment of the Daihanshin Building and the Shin-Hankyu Building on a 257,-sqm site fronting Osaka Station. Upon completion in 223, the project will offer a 133, sqm (GFA) mixed-use high-rise building. Average rents (inclusive of service charges) decreased.7% q-o-q or 1.3% y-o-y to JPY 15,635 per tsubo per month in 2Q13. This marked the eighth consecutive quarter of decline. Considering the large volume of new supply in the quarter, the rental decline was less than expected as landlords maintained asking rents. A major transaction in 2Q13 included Hankyu REIT acquiring the Hankyu Corporation head office for JPY 1.2 billion or an NOI cap rate of 5.7%. The 27, sqm office building was completed in Last Peak ^ gross, on NLA JPY 15,635 per tsubo per month Decline slowing 8 12-month Outlook Looking ahead, improving market sentiment and economic conditions are expected to underpin demand. Coupled with limited new supply, this should put downward pressure on vacancy rates over the next 12 months. With concerns of a sharp decline in rents due to a large amount of new completions abating, rents are expected to show signs of recovery as vacancy declines. A recovery in capital values is likely to precede a rise in rents and should put downward pressure on investment yields. Note: Osaka Office refers to Osaka s 2 Kus Grade A office market.

15 Asia Pacific Property Digest Second Quarter Seoul: Office N-Tower completes and adds 51,4 sqm to market stock Effective rents rise.5% q-o-q, driven by gains in the CBD Yield compression accelerates on strong investment activity Overall net absorption in 2Q13 slowed to 17,9 sqm on soft demand across all three submarkets. Of the three submarkets, the CBD saw the strongest net absorption (17, sqm) in the quarter. Notable leasing activity in the CBD included Fujitsu moving to the Kyobo building (5, sqm), Hyundai Construction occupying space at 11 Pine Avenue (5, sqm) and SK Telecom entering Ferrum Tower (3, sqm). In Yoido, net absorption (16, sqm) was led by relatively strong take-up at IFC Two as several new tenants entered the building. New tenants included Sharp Gain Korea, LaSalle Investment Management and Sean Partners. The ongoing relocation of Samsung SDS to Jamsil and Korea Trade Net s departure from Asem Tower to Panggyo, pushed Gangnam s net absorption ( 15,3 sqm) into negative territory. The overall vacancy rate in Seoul rose by.5% q-o-q to 11.%, with the CBD recording the largest increase at 1.% q-o-q to 11.7%. N-Tower (GFA 51,4 sqm), situated on the western fringe of the CBD, completed in the quarter and was 1% vacant. The ownership dispute related to State Tower Gwanghwamun, which completed in 1Q13, was resolved and it re-entered the leasing market. Overall net effective rents rose.5% q-o-q, driven by gains in the CBD as both Yoido ( 1.3% q-o-q) and Gangnam (.5% q-o-q) recorded declines. The rental decline in Yoido was due to a combination of lower asking rents and higher incentives. In the CBD, overall effective rents increased by 1.8% q-o-q. Landlords of corporate-owned buildings appeared to be less reactive to the market vacancy situation and raised rents. Two major CBD transactions took place in 2Q13 and contributed to yield compression accelerating to 23 bps q-o-q. The sale-and-leaseback of Daewoo E&C building to Deutsche Asset & Wealth Management concluded early in the quarter for KRW billion. At the end of June, Pramerica sold Twin Tree to IGIS Asset Management for KRW billion. base: 4Q8 = Q8 4Q9 4Q1 4Q11 4Q12 4Q Take-Up (net) Future 13F Vacancy Rate, completions and vacancy rates are for Grade A. For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H Percent Seoul: Office Tenant demand is likely to improve and may support a pickup in absorption before year end, led by demand at newly completed buildings and several sizeable occupancy requirements currently in the market. However, the expected completions of the Federation of Korean Industries building (GFA 169, sqm) in Yoido in 3Q13 and Gran Seoul (GFA 175, sqm) in the CBD in 4Q13 are likely to push the overall vacancy rate higher. With more available space, rents may see a slight decline as landlords try to fill vacant space. The sale of Pine Avenue Tower B by Kims I&D is currently pending but if it proceeds, it may transact at a record price (on a GFA rate basis). Further yield compression therefore appears imminent, although likely at a more modest rate than witnessed in 2Q13. Last Peak ^ Grade A net effective, on NLA KRW 165,11 per pyung pm Rents stable 17 Note: Seoul Office refers to Seoul s Overall Grade A office market.

16 16 Asia Pacific Property Digest Second Quarter 213 Singapore: Office 12 remains stable with support from small-space occupiers Rents continue to stabilise with select buildings reporting slightly higher rents Capital values continue a positive growth trend on healthy demand Singapore: Office Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Office demand remained stable in 2Q13, with limited take-up activity among large tenants. However, leasing activity continued to be supported by the take-up of space by small tenants, with the majority from the professional services sector. Newer developments such as Asia Square Tower 1 and Marina Bay Financial Centre Tower 3 retained their appeal as some units on higher floors were taken up during the quarter. Net absorption in Raffles Place was 18,5 sq ft in 2Q13, easing from 21,3 sq ft in 1Q13. Entebe Shipping took up space of 1,7 sq ft in One Raffles Place during 2Q13, while Vulpes Investment Management leased 3,2 sq ft of space in nearby One George Street Without any new completions, vacancy rates have fallen on the back of positive net absorption. In Raffles Place, the vacancy rate declined by 12 bps q-o-q to settle at 6.% in 2Q Percent Average rents in Raffles Place grew marginally by.6% q-o-q to SGD 9. per sq ft per month in 2Q13, marking the first rise in seven quarters. While office rents largely remained unchanged in the overall market, tenants leasing space in some buildings close to full occupancy were reportedly settling for slightly higher rents F Take-Up (net) Future Vacancy Rate 2 2 Average capital values in Raffles Place rose by a moderated 1.9% q-o-q in 2Q13, down from the 3.6% q-o-q seen in 1Q13. The moderated growth nevertheless caused yields to stabilise at around 3.3%. Sales of strata-titled office assets in the CBD continued at a healthy pace, likely attributed to the limited supply of existing prime office assets and investors expectation of positive rental reversions in coming years. For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H13. for small office space is expected to continue supporting stable office demand, sustaining a healthy occupancy rate in existing office developments. However, Raffles Place occupancy rates could see a decline around end-213 upon the completion of Asia Square Tower 2. Last Peak ^ gross effective, on NLA SGD 9. psf pm Rents stable 7 Rents are likely to grow marginally as stable demand could face slight pressure from the potential relocation of tenants out of the CBD. Capital values are likely to continue on a slower growth trend, allowing office yields to continue stabilising. This may be justified by investors digesting the news of the U.S. Federal Reserve potentially tapering off its bond purchases earlier than expected, which would see lending rates rise and lead to more cautious bids being placed on office assets. Note: Singapore Office refers to Singapore s CBD Grade A office market in Raffles Place, Shenton Way and Marina Centre.

17 Asia Pacific Property Digest Second Quarter Bangkok: Office Vacancy continues to decline amid strong demand Rents rise further due to a lack of new supply Capital values increase as yields remain at 7.3% 11 1 Take-up of Bangkok Grade A office space remained strong in 2Q13, with 13,6 sqm of net absorption, albeit a decrease of 17.9% y-o-y. Recent completions, Park Venture and Sathorn Square, continued to secure high occupancy rates as new tenants physically occupied their pre-committed space. Business sentiment and investor confidence remained high as tenants continued to expand and/or relocate their businesses. Major leasing activity in the quarter included the relocation of Jubilee Diamond (2, sqm) to GPF Witthayu Towers and UOB Asset Management (2,2 sqm) to Asia Centre. As a result of strong leasing demand and relocation activity in the quarter, the vacancy rate declined to 14.% in 2Q13, a 1.% decrease q-o-q. Over the course of 213, the rate is expected to fall steadily on continued economic expansion and the country s positive economic outlook Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Bangkok: Office The supply of Grade A office space remained unchanged in 2Q13 at 1,316, sqm, with no new supply completed in the CBD. Future supply will remain relatively limited in the Bangkok CBD. No new Grade A office space is expected to complete until 215, when Magnolia Ratchadamri Boulevard and AIA Sathorn Tower complete, which will add 6, sqm and 38,5 sqm respectively to the overall stock. Average gross rents increased by 1.2% q-o-q to THB 727 per sqm per month in 2Q13 amid no supply. Capital values rose by 2.% q-o-q to THB 91,15 per sqm, in line with rental growth as yields remained at 7.3%. Investment interest in Bangkok office property remains high. Nevertheless, no investment transactions of Grade A office space were recorded in 2Q13 as the amount of investment grade office space available for sale remains relatively limited. Investment transactions of office buildings are likely to be via property funds until the end of 213, when the Securities and Exchange Commission (SEC) will cease permitting the establishment of new funds. Real Estate Investment Trusts (REITs) will then provide an alternative investment vehicle to that of existing property funds F Take-Up (net) Future Vacancy Rate For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H Percent The tightening supply of Grade A office space in the CBD should support rising rents as demand for office space continues to strengthen over the short to medium term. In line with rising rents, capital values should continue to increase, while interest in investment grade office space is expected to remain high. Last Trough THB 727 psm pm Rents rising 6 ^ gross, on NLA Note: Bangkok Office refers to Bangkok s CBD Grade A office market.

18 18 Asia Pacific Property Digest Second Quarter 213 Kuala Lumpur: Office 11 mainly driven by relocations and expansions of oil & gas companies Average rental rates in the City Centre broadly stable The Grade A investment market remains inactive Kuala Lumpur: Office Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Source: Jones Lang Wootton 3 24 The average vacancy rate in the City Centre decreased marginally from 17.6% in 1Q13 to 17.3% in 2Q13, due to positive net absorption of 68,4 sq ft. Notable leasing activity registered in 2Q13 included the expansion of Petronas Lubricants International at Integra Tower and the new set up of Triden Suite at Menara Binjai, both within the City Centre. The slowdown in leasing activity in 2Q13 was partly attributable to the general election which was held in May 213, as some prospective tenants and businesses deferred their expansion and relocation plans. The total existing stock of Grade A office space in the City Centre remained unchanged at 23.5 million sq ft in 2Q13. The completion of Menara Hap Seng 2, a 3 storey office building (NLA of 32, sq ft) located at Jalan Tengah, has been deferred to 214. No new completions are expected in 2H Source: Jones Lang Wootton For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H13. Last Trough ^gross, on NLA Take-Up (net) Future MYR 6.3 psf pm Rents rising 4 13F Vacancy Rate Percent Average gross rents remained stable q-o-q in 2Q13 at MYR 6.3 per sq ft per month but increased y-o-y by 3.6%. Despite the concern of an oversupply, landlords generally maintained their asking rental rates. However, landlords of buildings with higher vacancies offered longer rent free periods and other incentives in order to keep existing tenants and also attract new ones. No Grade A office buildings in the City Centre transacted in 2Q13 as many investors continued to adopt a wait-and-see attitude. No new supply is expected to enter the City Centre office market in 2H13 and this should eleviate some pressures from the current demand-supply imbalance. for office space is expected to improve towards the end of 213, with more leasing activity expected to take place as Malaysia continues to enjoy reasonable economic growth. Landlords of buildings with higher vacancy are likely to continue to be pressured into reducing their rental expectations but are unlikely to lower rents significantly due to rising, albeit marginal, building maintenance and operation costs. However, some landlords that currently offer rent free periods and other incentives are likely to continue doing so in a bid to attract prospective tenants. Capital values are generally expected to remain stable in light of the current oversupply environment. The investment market is likely to be driven by local investors, particularly property funds, whilst foreign investors generally remain passive. Note: Kuala Lumpur Office refers to Kuala Lumpur City and Decentralised areas Grade A office market.

19 Asia Pacific Property Digest Second Quarter Jakarta: Office Tenant demand remains high amid strong optimism about the outlook Rental growth accelerates as landlords become more aggressive on rents Investor interest in prime assets continues to grow Leasing demand for corporate expansion continued to grow in line with the positive performance of the economy and business environment. However, take-up growth was constrained by limited available stock in the market. As such, the opening of DBS Tower in 2Q13 resulted in net take-up surging to 12,2 sqm. Notable leasing activity included DBS Bank and Regus Serviced Office taking up space in the newly completed DBS Tower as well as Berau Coal Company and a global law firm taking up space in Sampoerna Strategic Square building. Overall vacancy increased to 4.7% in 2Q13, due to gradual move-ins at DBS Tower. However, available space in DBS Tower is less than 3% of the total leasable area. Aside from existing tenant expansion, the growth of serviced office providers also contributed a significant portion of demand in recent quarters. A number of local and international serviced office providers aggressively increased their portfolios, with most focusing on the Sudirman, Senayan and Kuningan submarkets. DBS Tower at Ciputra World Jakarta finally completed and became operational in 2Q13. The building added 58,24 sqm (NLA) to the Grade A office stock in Jakarta. With the completion of DBS Tower, the existing stock of Grade A office space increased to 1.29 million sqm by end-2q13. The development pipeline of premium grade office buildings in Jakarta is relatively limited. Between now and 216, only two new projects are expected to enter the market International Finance Centre 2 and Wisma Mulia 2. base: 4Q8 = Q8 4Q9 4Q1 4Q11 4Q12 4Q Percent Jakarta: Office With limited available space, landlords were aggressive in their rental offerings. Overall net effective rents increased by 9.8% q-o-q or 37.3% y-o-y in 2Q13. Investment activity in Jakarta has been very limited and dominated by strata-titled deals rather than en bloc transactions. Recently, a Hong Kong developer reportedly acquired a plot of development land in the Sudirman submarket; the plot is intended for premium grade office development. With high interest on the investment front, solid demand and low vacancy rates, capital values moved higher and at a faster pace than rents. As a result, yields compressed further to 7.6% in 2Q Take-Up (net) Future 13F Vacancy Rate For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H13. 5 Economic and business prospects look strong over the next 12 months. As such, we expect the office market in Jakarta to continue enjoying healthy demand growth from robust corporate expansion. Meanwhile, limited available space and extremely low additional supply next year are likely to keep vacancy rates at historic lows. This could become a strong reason for landlords to maintain higher rent offerings. Along with the increase in rents and capital values, we also expect to see further yield compression in 213. Last Trough ^ net effective, on NLA USD 39 psm pa Rents rising 11 Note: Jakarta Office refers to Jakarta s CBD Grade A office market.

20 2 Asia Pacific Property Digest Second Quarter 213 Manila: Office 13 Net absorption improves due to healthy pre-commitments in new buildings Stable demand from various industries supports rental growth Strong investment interest drives higher capital value growth Manila: Office Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Leasing demand in the Makati CBD and Bonifacio Global City (BGC) remained stable during 2Q13, largely driven by sustained demand from the offshoring and outsourcing (O&O) industry. Other significant contributors to demand for office space during the quarter included the professional services, energy and electronics sectors. Total net take-up in 2Q13 was 48,3 sqm, significantly higher than the 1Q13 level of 7, sqm. The improved net absorption was due mainly to the healthy precommitment levels in newly completed developments. Nonetheless, the average vacancy rate inched up by 4 bps to 4.2% in 2Q13. Notable lease transactions during 2Q13 included an O&O firm taking up 1,5 sqm in The Enterprise Center in the Makati CBD, another O&O firm leasing 1,4 sqm of office space in Net Lima and an energy firm pre-committing to 3,4 sqm in the upcoming W Fifth Avenue office development F Take-Up (net) Future Vacancy Rate Percent Three new office developments the Glorietta BPO 1 in the Makati CBD, Clipp Center and Ecotower in BGC added 58,8 sqm of office space to the total existing stock. Average rents in 2Q13 grew by 1.2% q-o-q to PHP 9,657 per sqm per annum. Healthy leasing demand has led to an increase in rentals for a majority of the Grade A office buildings in the market. Average capital value growth outpaced rentals, rising by 4.1% q-o-q to PHP 91,46 per sqm in 2Q13. Consequently, investment yields declined to 1.6% during the quarter. Investors remained keen on the market as evidenced by the high level of enquiries. Investor demand was supported by the recent credit rating upgrade of the Philippines to investment grade. For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H13. Last Trough ^ net effective, on NLA PHP 9,657 psm pa Rents rising 14 Upcoming office supply in the Makati CBD and BGC is expected to reach 332, sqm over the next 12 months. The majority of this future supply is expected to complete during 3Q13 and will be mostly focused in BGC. The large volume of supply is likely to push the average vacancy rate higher. Nevertheless, the sustained entry and expansion of O&O firms in the country is forecast to buoy demand for office space in the coming quarters. The positive growth prospects of the country, as reflected by the robust 1Q13 GDP growth rate, should support rental and capital value growth moving forward. On the other hand, the improving US economy may cause potential re-channelling of investment funds back to the US from emerging markets such as the Philippines. Note: Manila Office refers to the Makati CBD and Bonifacio Global City Grade A office market.

21 Asia Pacific Property Digest Second Quarter Ho Chi Minh City: Office Net absorption moves into negative territory for the first time since 29 Average rents remain stable from the previous quarter The investment market remains quiet with no transactions Office demand remained weak in 2Q13 with some tenants downsizing workspaces in an attempt to reduce fixed costs and this resulted in net absorption moving into negative territory for the first time since 3Q9. The leasing market remained quiet during the quarter with no notable activity. High quality Grade B office completions in 2Q13 also contributed to reduced demand for Grade A offices, as some tenants were attracted to their good locations and affordability. Negative net absorption pushed the overall vacancy rate higher by 6 bps q-o-q. Occupancy rates in recently completed buildings ranged between 5 65% while more established buildings continued to record high occupancy rates over 96%. No new completions were recorded in 2Q13, leaving total Grade A stock unchanged at 22,6 sqm. Le Meridien Saigon and Saigon One Tower, two Grade A office projects that are in the final stages of construction, had their launch dates delayed. Progress on Grade B projects under construction was better, partly due to the smaller scale of the developments. Despite subdued demand in the market, average rents remained relatively stable from the previous quarter at USD 36.4 per sqm per month (USD 437 per sqm per annum). However, the Grade B office market saw a slight decline in average rents and as a result, the rental gap with the Grade A office market widened. The Grade A investment market was quiet during 2Q13 with no investment deals recorded. However, there were reportedly some investment transactions involving offices of other grades in the quarter. Average valuation-based Grade A office market yields are estimated in the range of 8 9%. Office demand is expected to remain quiet over the second half of 213, due to a subdued macroeconomic environment. Nevertheless, net absorption might slowly rise in the first half of 214, supported by pre-commitment space in upcoming supply. The unfavourable market conditions may continue to delay the progress and completion of buildings currently under construction. As a result, total office stock is likely to remain unchanged until the first half of 214, when Le Meridien Saigon is due to be complete. The subdued outlook for both demand and supply is likely to see average rents remain stable over the next 12 months. base: 4Q8 = Q8 4Q9 4Q1 4Q11 4Q12 4Q13 For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H13. Last Peak ^ net effective, on NLA Take-Up (net) Future USD 437 psm pa Decline slowing 19 13F Vacancy Rate Percent Ho Chi Minh City: Office NA Note: Ho Chi Minh City Office refers to Ho Chi Minh City s CBD Grade A office market.

22 22 Asia Pacific Property Digest Second Quarter 213 Delhi: Office 12 Net absorption rises significantly to 1.7 million sq ft Rents increase across all submarkets Noida witnesses the strongest growth in capital values Delhi: Office Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Financial Indicators are for CBD In 2Q13, leasing activity strengthened partly due to strong pre-commitments in new stock. However, occupier exits had a moderating effect on overall absorption levels. Net take-up increased 14% q-o-q to 1.7 million sq ft during 2Q13. However, quarterly absorption was negative in both the CBD and SBD submarkets, due to occupier exits and sluggish leasing activity. Net absorption in Gurgaon increased 15% q-o-q, the result of robust leasing activity. In Noida, healthy leasing in existing stock and precommitments in new completions contributed to take-up reaching a 2 quarter high. Substantial new completions during 2Q13 resulted in the overall vacancy rate rising by 26 bps q-o-q to 27%, in spite of the highest net absorption in four quarters. Notable transactions included Audi leasing 6, sq ft in DLF Capitol Point in the CBD and Systra leasing 8,63 sq ft in Great Eastern Centre in the SBD. In Gurgaon, Convergys leased 227,317 sq ft in Park View Business Tower, Dupont leased 123, sq ft in DLF Building 5C and CNBC-TV18 leased 1, sq ft in the newly completed Spire Edge Multitenant Block. In Noida, Samsung Engineering leased 35, sq ft in Technology Zone Towers A and B Percent New completions in 2Q13 totalled 4.6 million sq ft, the highest level in five years. Of the ten projects that became operational during the quarter, five are located in Gurgaon, four in Noida and one in the SBD. Five of these projects are IT special economic zone (SEZ) towers, four IT and the remaining non-it. 4 are for CBD + SBD. For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H13. (CBD) Take-Up (net) Future Last Trough INR 245 psf pm Growth slowing 12 Rental information is for CBD only. ^ gross, on GFA 13F Vacancy Rate 4 In 2Q13, rental growth in Gurgaon slowed from the previous quarter to 1.6% q-o-q, while in Noida rents increased by 2.8% q-o-q after five quarters of stagnation. Capital value growth slowed q-o-q across all submarkets except for Noida, where growth was recorded at 3.5% q-o-q. The q-o-q growth was 1.3% in Gurgaon, 1.1% in the CBD and.6% in the SBD. Yields declined q-o-q in the CBD and Noida submarkets by 1 bps. An improved business environment and signs of a global recovery are expected to stimulate demand in the office market. Going forward, occupier consolidation and relocation strategies are likely to drive demand in the suburban office markets. Large IT occupiers expanding/consolidating are expected to favour SEZs. Modest rental growth is expected, although growth in the established office corridors may be higher. Capital values are expected to rise in tandem with improving investor sentiment and yields are likely to compress in select submarkets. Note: Delhi Office refers to Overall NCR Grade A office market.

23 Asia Pacific Property Digest Second Quarter Mumbai: Office Net absorption rises 2% q-o-q to 2 million sq ft SBD BKC and Western Suburbs see a marginal increase in rents Capital values remain stable across most submarkets 12 Net absorption increased by 2% q-o-q to 2 million sq ft in 2Q13. There was a notable trend of tenants upgrading from lower-grade facilities to Grade A office space for consolidation. Projects that became operational in the quarter saw healthy precommitment levels amid strong demand from the pharmaceuticals, IT and banking, financial services, and insurance (BFSI) industries. The CBD continued to witness tenants relocating to other submarkets to take advantage of lower rents and modern amenities. The overall vacancy rate was 23.8% at end-2q13. The city s most notable leasing transactions included Axis Bank s lease of 211, sq ft at Building 2 of Gigaplex IT Park and Cognizant s lease of 23, sq ft in Mindspace IT SEZ, both in Airoli. Other key deals included Johnson & Johnson s lease of 1, sq ft at Arena Spaces in Andheri and Oracle s lease of 5, sq ft at First International Financial Place in BKC Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Financial Indicators are for CBD. Mumbai: Office Seven projects came on stream in 2Q13 and added 1.6 million sq ft of office space, pushing Mumbai s total stock to 88.7 million sq ft. Mumbai s major completions in 2Q13 included the upper floors of Urmi Estate with 68, sq ft in Lower Parel, Kalpataru Prime in Thane with 32, sq ft and Building 2 of Gigaplex in Airoli with 4, sq ft. Buildings that became operational in the quarter witnessed healthy pre-commitments with an average level of 55%, which contributed to a decline in vacancy rates. With the exceptions of the SBD North, SBD BKC and Western Suburbs, rents and capital values remained stable across most of Mumbai s submarkets. SBD BKC and Western Suburbs witnessed rental growth in the range of 1 2% q-o-q, while SBD North s capital values inched up by 1% q-o-q. The second quarter was characterised by a higher number of leasing deal closures than in the previous quarter. However, rents were under pressure as select projects with high vacancy and new supply gave occupiers many options to choose from F Take-Up (net) Future Vacancy Rate are for CBD + SBD Percent is expected to gradually rise in the second half of 213 with improving market sentiment. Companies in the IT and financial services industries are likely to continue to drive demand. The Reserve Bank of India is in the process of offering more banking licenses which should aid an expansion of the financial services industry. At the same time the depreciation of the Indian rupee could provide a boost to services industries such as IT that cater to foreign markets. We expect rents and capital values to remain relatively stable in 3Q13 before slowly appreciating thereafter. For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H13. (CBD) Last Peak Rental information is for CBD only. ^ gross, on GFA INR 243 psf pm Decline slowing 4 Note: Mumbai Office refers to Mumbai s Overall Grade A office market.

24 24 Asia Pacific Property Digest Second Quarter 213 Bangalore: Office Bangalore: Office Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Financial Indicators are for CBD The SBD accounts for the majority of absorption Rents remain stable across all submarkets due to steady demand Capital values increase marginally across all submarkets The Bangalore office market saw an improvement in leasing activity during 2Q13, with a total transaction volume of 1.6 million sq ft against 816,4 sq ft during 1Q13. Net absorption during the quarter was 2. million sq ft against 58, sq ft during 1Q13. Stable demand was instrumental in limiting the rise in overall vacancy to 6.8% in 2Q13 from 6.3% during 1Q13. The IT/ITeS sector accounted for the majority of leasing, with major companies taking up space in the quarter including: Ocwen Financial Corporation, Matteos, Alstom, Disney, TRS Rentele Co, Amazon, Infotech Enterprises, STS Technologies, Xerox Innovation, AIG, Repucom, Ogilvy & Mather, Fidelity Information Services India, Honeywell, Synergy and TP Vision. Bangalore saw the completion of seven projects totalling 2.5 million sq ft in 2Q13. The projects were Divyashree Technopolis Block B, Pritech Park Phase II Block 11 and 12, Global Village Technology Park Phase III Tower 3, Kalyani Platina Oak, Kalyani Platina Crystal and Nagarjuna Garnet. As a result of the new completions, total stock increased to 7.4 million sq ft Percent In 2Q13, average rents for office space remained unchanged across all submarkets of the city. In the CBD, rents were INR 83 per sq ft per month, while in the SBD they were INR 49 per sq ft per month. Rents in the Whitefield and Electronic City submarkets were INR 33 and INR 26 per sq ft per month, respectively F Take-Up (net) Future Vacancy Rate Capital values increased marginally across all submarkets, with growth of 1% q-o-q in the Whitefield and Electronic City submarkets. Capital values in the CBD and SBD were INR 9,55 per sq ft and INR 5,1 per sq ft, respectively. are for CBD + SBD. For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H13. Market sentiment seems to have improved but occupiers still remain cautious. Selective expansions by major occupier categories (e.g. manufacturing, IT and financial services), along with a controlled supply pipeline at relatively attractive rental rates should help the office market see healthy absorption of space in 2H13. Rents are expected to appreciate marginally across all submarkets in the second half of 213, due to limited supply and improved demand from IT occupiers. (CBD) Last Trough INR 83 psf pm Growth Slowing 11 Rental information is for CBD only. ^ gross, on GFA Note: Bangalore Office refers to Bangalore s Overall Grade A office market.

25 Asia Pacific Property Digest Second Quarter Sydney: Office The Sydney CBD records the fourth consecutive quarter of negative absorption Face rents increase but incentives negatively impact gross effective rents 12 assets transact, totalling AUD million The Sydney CBD office sector recorded a fourth consecutive quarter of negative absorption in 2Q13, totalling 4,2 sqm. Relocations by ANZ and Freehills into 161 Castlereagh Street in April both had a significant impact. Freehills vacated over 2,1 sqm at their previous address at 19 Martin Place, while ANZ offered over 1,4 sqm in sublease space as they consolidated from multiple CBD sites. Expansion moves in the quarter from Boston Consulting Group (4,9 sqm), Serco (2,4 sqm) and Thiess (2,2 sqm) were balanced by contractions from Clayton Utz (3,2 sqm) and St George (3,6 sqm). Headline vacancy increased.8 percentage points to 1.2%, with Prime vacancy increasing by 1.3 percentage points to 11.3%. This was the first time the Sydney CBD reached a double-digit vacancy rate since midway through Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Sydney: Office The recently completed 55,6 sqm tower at 161 Castlereagh Street was the first completion in the Sydney CBD since December 211. This, coupled with a refurbishment of 1,8 sqm of office space at Cumberland Street took 1H13 supply to 57,4 sqm. A further 31,1 sqm will be added to total stock by the end of the year when 8 Chifley Square and two smaller projects reach practical completion. is expected to be similar in 214, before significant space will come online in 215 as the first of the International Towers at the Barangaroo redevelopment is completed. In 2Q13, average Prime net face rents increased 2.2% q-o-q to AUD 787 per sqm per annum. However, average incentives increased 2 percentage points to 29% (or 35 months free on a 1-year lease) as landlords competed for tenants due to softer demand conditions. The increase in incentives deflated average Prime gross effective rents by 2.1% q-o-q to AUD 68 per sqm per annum. The secondary rental market was relatively stable in the quarter. Despite softening tenant demand, investors are very active within the Sydney CBD. Two portfolio deals dominated the AUD million that transacted. The New South Wales state government sold a portfolio of assets to Cromwell Property Group, included in this deal were three Sydney CBD assets totalling AUD 316 million. Mirvac purchased a portfolio of assets from GE Real Estate Investments Australia, which included five CBD offices totalling AUD 183 million. Prime grade yields were stable in the quarter remaining at 6.% 7.5% while average Secondary yields tightened by 25 basis points at the lower end to 7.25% 8.25%. Overall softer tenant demand is expected to result in further corporate rationalisation and put downward pressure on net absorption over the remainder of 213 and result in higher vacancy. This is expected to see landlords maintain elevated incentives and limit net face rental growth. Positive investment demand and the high volume of undeployed capital earmarked for the Australian office markets is expected to result in tightening yields through the remainder of 213 and For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H13. Last Peak ^ gross effective, on NLA F Take-Up (gross) Future AUD 68 psm pa Rents falling 3 Vacancy Rate Percent Note: Sydney Office refers to the Sydney CBD office market (all grades).

26 26 Asia Pacific Property Digest Second Quarter 213 Melbourne: Office Melbourne: Office Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Net absorption is -1,7 sqm in 1H13 Rising incentives pushes gross effective rents lower by 5% q-o-q Prime equivalent yields tighten at the upper end The Melbourne CBD recorded negative net absorption of 6,2 sqm in 2Q13, the sixth consecutive negative quarter. A sharp rise in sublease availability was the main driver, up by a further 18,1 sqm over the quarter. The Melbourne CBD recorded the largest increase in sublease availability nationally during the second quarter. The most notable units of tenant space to come to the market in 2Q13 were Places Victoria (4,8 sqm), AEGIS (4, sqm) and AECOM (2,2 sqm). There is currently 9,9 sqm of sublease space available, equating to 2.1% of total stock, the highest figure since Net absorption forecasts for the full year 213 still remain positive, driven by the centralisation of non-cbd tenants who continue to take advantage of attractive leasing terms offered in core locations For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H Take-Up (net) Future Last Peak ^ gross effective, on NLA AUD 381 psm pa Rents falling 5 13F Vacancy Rate Percent Two projects totalling 66,158 sqm reached practical completion in 2Q Collins Street (39,2 sqm) will be partly occupied by Marsh Mercer (25,728 sqm). BHP Billiton (13,8 sqm) is the major tenant at 171 Collins Street, with Evans & Partners and McGrath Nicol also pre-committing (1,6 sqm). A further 223, sqm remains under construction, anticipated to come online by mid-215, of which 76% is pre-committed. Upward pressure on incentives saw Prime gross effective rents decrease 5% over the quarter to AUD 381 per sqm per annum. Incentives moved out from an average of around 24% to 28%, and are now above peak levels recorded during the Global Financial Crisis. There continues to be a lack of expansionary requirements, with the bulk of the market driven by lease expiries. Some landlords with large amounts of vacancy are offering higher levels of incentives, while trying to maintain face rents. Driven by the weight of capital, Prime equivalent yields tightened at the upper end and now range from 6.25% to 8.%. In 1H13, AUD 1.3 billion has been traded across 13 transactions. Volumes over the first half of 213 are 43% ahead of the entire 212 total, and the strongest 1H total on record. 12 Month Outlook The demand environment will remain challenging over the remainder of 213. Lead indicators in the office sector are weak, with many occupiers in a holding pattern until after the September election. Headline vacancy rates are forecast to remain in double digits over the medium term as we continue to see an increase in tenant space released and backfill space come to the market. While demand for Prime core product remains very strong in the Melbourne CBD, a lack of openly marketed stock may have an impact on transactional volumes going forward. The weight of capital combined with a lack of supply is likely to maintain downward pressure at the upper end of the Prime yield range going forward. Note: Melbourne Office refers Melbourne s CBD office market (all grades).

27 Asia Pacific Property Digest Second Quarter Perth: Office Vacancy rises for a fifth consecutive quarter Net rental growth declines while incentives increase Four sales totalling AUD 1.1 billion transact in 2Q13 In 2Q13, sub-lease space accounted for 4.4% of total vacant stock. Negative net absorption in 2Q13 was recorded at 19,8 sqm, translating to a 14 basis point increase in vacancy to 7.9%. However, the Perth CBD remains the tightest major office market in Australia, with Melbourne s CBD in comparison placed second at 1%. Four sizeable pre-commitment announcements were made in the quarter. They were Legal Aid s pre-lease of 6, sqm at 32 St Georges Terrace (or 43% of that development s NLA); and Deloitte (6,3 sqm), Corrs Chambers Westgarth (4,2 sqm) and part of Brookfield Multiplex (2,1 sqm) committing to 37% of Brookfield Place Tower Two. No new supply reached completion in the first half of 213 and only one development (3,1 sqm) will be completed in the next six months. Confirmed completions in 214 are a slightly higher 18,4 sqm across two projects. Approximately 67% of supply over the next 18 months has been pre-leased. A new long term construction cycle has commenced. Building started in 2Q13 at Brookfield Place Tower Two (34, sqm), 32 St Georges Terrace (14, sqm) and Kings Square buildings One (21,5 sqm), Two (19,1 sqm) and Three (3,9 sqm). With these and the Old Treasury (3,2 sqm) due for completion in 215, that year is positioned as one of the highest on record for new supply. Prime gross effective rents decreased by 1.3% in 2Q13 to AUD 784 per sqm per annum, following a two-month increase in Prime grade incentives to 14 months net rent-free (on a ten-year lease). Similarly, capital values are trending downward, with the decrease of 1.1% recorded in the quarter contributing to a decline of.9% over the 12 months to June. Four transactions (including two portfolios) were finalised in 2Q13. Highlights included Raine Square s purchase by an unlisted Charter Hall property trust for AUD 458 million. The sale reflected an equivalent yield of 7.27%. A portfolio comprising buildings One, Two and Three at Kings Square also sold. An unlisted DEXUS property fund (5%) and the listed DEXUS Property Group (5%) paid a combined AUD million for the development sites. base: 4Q8 = Q8 4Q9 4Q1 4Q11 4Q12 4Q Take Up (net) Future 13F Vacancy Rate For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H Percent Perth: Office Net absorption is anticipated to record a negative total for the calendar year 213, significantly below the positive ten-year average (41, sqm). Vacancy is forecast to rise to 8.4% by December, a rate that is notably higher than the ten-year average of 5.8%. Rents are likely to remain under downward pressure over the second half of 213. Increasing amounts of well-appointed sub-lease space is entering the market and business expansion appears curtailed by the move from investment to production in the mining sector and uncertainty surrounding the federal election. Last Peak ^ gross effective, on NLA AUD 784 psm pa Rents stable 4 Note: Perth CBD Office refers to the Perth CBD office market (all grades).

28 28 Asia Pacific Property Digest Second Quarter 213 Auckland: Office 11 Tenants continue to favour Premium grade office space Rents trend higher, up 6.5% y-o-y Improving market fundamentals see yields decline by 25 bps Auckland: Office base: 4Q8 = Q8 4Q9 4Q1 4Q11 4Q12 4Q13 For 28 to 212, take-up, completions and vacancy rates are year end annual. For 213, take-up, completions and vacancy rates are as at 1H13, while future supply is for 2H13. Last Peak ^ net face, on NLA NZD 49 psm pa Rents rising F Take-Up (net) Future Vacancy Rate Percent Improving economic and business fundamentals helped bolster Auckland s CBD office market in 1H13. Occupier demand as represented by net absorption was 7,3 sqm for the period. A closer inspection reveals that there was a clear preference for quality, with Prime office recording 12,6 sqm of absorption while Secondary grade office saw negative absorption of 6,4 sqm. In line with these numbers, Premium grade stock continued to receive solid enquiries. Premium grade office vacancy over the last six months firmed 1.5 percentage points to reach 4.9% while the overall office vacancy increased.5 percentage points to 1.5%. Given the continuing movement towards quality, we expect Prime grade vacancy to decline further. Total office stock in the CBD moved higher over the second quarter of 213, as the refurbishment of the ANZ Building on 23 Albert Street reached practical completion, releasing 15, sqm of office space back into the Auckland CBD market. ASB Bank s Wynyard Quarter head office is on track to be completed and occupied in 3Q13. While several potential development sites are available, these remain dormant due to financial limitations and/or lack of occupier commitment. Plans for further development of Wynyard Quarter near Auckland s waterfront are still in their early stages, but Fonterra has signalled a pre-commitment to lease office space that will allow them to consolidate from several areas around Auckland into one main office location. Strong demand, low lending rates and tight supply has resulted in both average rental rates and capital values continuing to trend higher. Average rents for Prime space at end-2q13 were NZD 49 per sqm per annum, an increase of 6.5% y-o-y. Reflecting the popularity of Premium grade buildings, capital values for Prime office have increased 13.3% y-o-y. Average yields for Prime and Secondary stock continued to firm in the quarter, with both grades seeing a 25 basis points decline from 4Q12, reaching 7.9% and 9.5% respectively. With an improving economic environment and business confidence, we expect further improvement in the Auckland CBD office market, especially for prime assets. The lack of new development and increasing occupier demand is likely to result in a gradual strengthening of the market place. Looking forward, we expect further contraction in the Auckland CBD vacancy, rising capital values, and firming yields especially for Prime grade assets. Note: Auckland Office refers to Auckland s CBD and Viaduct Harbour office markets.

29 Asia Pacific Property Digest Second Quarter Hong Kong: Retail 28 Sales of gold products helps boost retail sales Retail rents continue to climb higher, reaching a record high level Capital values for High Street shops fall Retail sales continued to display strength in 2Q13, growing by 16.7% y-o-y in April May compared to 13.9% y-o-y in 1Q13. The stronger growth was led by a surge in the sale of jewellery and watches, which were up by 51.4% y-o-y in April May, due mainly to the correction in gold prices which saw the sale of gold related jewellery soar. However, total tourist arrivals grew at a slightly slower 12.6% y-o-y in April May, compared to 13.5% y-o-y in 1Q13. Due to the sustained growth in retail sales, most retailers remained cautiously optimistic towards their expansion plans. However, some retailers found the current rental level stretching their profitability and opted to relocate to decentralised locations instead. The Kai Tak Cruise Terminal commenced operations in mid-june. Marketing of the retail space in the terminal (6,278 sq ft) aimed mainly at duty free and food and beverages retailers also commenced during the quarter. New World Centre Palace Mall (141,439 sq ft) will be demolished in 214 after SOGO s current lease ends. It will be redeveloped together with the former New World Centre, which was demolished in 21, into a new mixed-use project comprising a hotel, serviced apartments, offices and retailing elements. The development is expected to complete in 217. Sustained leasing demand and tight vacancy helped Prime shopping centre rents continue to trend higher and set new record highs in 2Q13. Rents for Premium Prime shopping centres grew by 1.8% q-o-q, while Overall Prime shopping centres grew by 1.4% q-o-q. High Street shop rents grew by 1.5% q-o-q during the quarter. The investment market remained quiet as investors reacted to the higher stamp duties, adopting a wait-and-see attitude. Consequently, capital values for High Street shops decreased mildly, down by.5% q-o-q. The summer holidays should help boost domestic consumption and bring more tourists to Hong Kong in 3Q13. According to the Hong Kong Tourism Board, the number of tourists visiting between June and August is expected to grow in the range of 5 8% y-o-y, led by tourist arrivals from Mainland China. Bolstered by the strong demand from Mainland tourists, retail sales are expected to post double digit growth in 213 compared to 9.8% in 212. On the back of strong retail sales growth, we anticipate retail rents should continue to rise in 213, but more slowly at around 5%. However, with capital values still near their all-time highs and growing expectations of interest rates rising, now weighing on minds of investors, we believe there remains considerable downside pressure on the capital values of High Street shops over the near term. Note: Hong Kong Retail refers to Hong Kong s Overall Prime Shopping Centre and High Street retail markets. 8 4Q8 4Q9 4Q1 4Q11 4Q12 4Q13 RV (High Street Shop) CV (High Street Shop) RV (Premium Prime Shopping Centres) RV (Overall Prime Shopping Centres) base: 4Q8 = For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. (High Street Shops) HKD 727. psf pm Rents rising 17 Last Trough ^ net, on GFA (Premium Prime Shopping Centres) HKD 29.4 psf pm Rents rising 17 Last Trough ^ net, on LFA (Overall Prime Shopping Centres) HKD 153. psf pm Rents rising 15 Last Trough ^ net, on LFA Note: Prime shopping centres basket is revamped in 4Q12 High Street Shops Premium Prime Shopping Centres Overall Prime Shopping Centres F Future High Street Shops Hong Kong: Retail Perth: Office

30 3 Asia Pacific Property Digest Second Quarter 213 Beijing: Retail 16 Net absorption of 51, sqm despite no new completions Rental growth largely stable q-o-q A pick-up in sales market momentum with two en bloc transactions Beijing: Retail base: 4Q8 = Q8 4Q9 4Q1 4Q11 4Q12 4Q13 1, For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Last Trough ^ net effective, on NLA RMB 788 psm pm Rents rising F Future Despite no new project launches in the urban market, net absorption was recorded at 51, sqm in 2Q13. By market segment, F&B operators targeting the mass market were the most aggressive players looking for expansion opportunities. Luxury brands remained conservative and fast fashion retailers opened stores in decentralised or suburban areas in the quarter since prime malls were less willing to offer additional space for these low-margin retailers. In contrast, niche fashion brands from overseas were welcomed by shopping mall landlords. In addition, various kidsrelated and electronics stores also opened in 2Q13. No new projects were completed in the urban market in the quarter. The vacancy rate in urban malls continued to decrease, falling by 1.1 percentage points q-o-q to 8.4% and the vacancy rate in core malls decreased by 1.4 percentage points q-o-q to 6.%; both of which reflected the lowest levels since 29. China World Mall Phase III, Parkview Green, Capita Crystal and Yintai Parklife saw significant vacancy decreases in the quarter. Sales of luxury goods remained relatively subdued. A few high-end positioned malls located in non-core locations were hit the hardest. However, some mature high tier malls in core locations and boasting solid reputations were more resistant to the downturn in the luxury market. Shopping malls targeting the mass market continued to perform well and attracted more shoppers from department stores. The average rent in both the urban and core markets increased by 1.6% q-o-q. Two en bloc transactions were recorded in the retail market in 2Q13. Guangyao Dongfang acquired Zhongguancun Plaza (148, sqm) for RMB 2.2 billion while Hsin Chong purchased New Times Plaza near Beijing West Railway Station based on a valuation of RMB 1.7 billion (consideration of RMB 78 million), which includes a 38, sqm retail podium, small office home office (SOHO) units and car parking spaces. Market yields held steady at 6.5% for urban and 6.3% for core malls in 2Q13. We expect rental growth in Beijing s urban market in 213 to be marginally lower than that seen in 212 due to retail sales growth remaining more subdued than expected. Strong sales in mass market malls are likely to be the main driver of growth in 213. Developers of new projects are expected to strive for high pre-commitment before opening. The vacancy rate in the urban market is estimated to be lower than 1% at end-213. Several projects which are understood to be looking for interested buyers remained unsold. These projects, once sold, are expected to create some extra momentum for the investment market. Note: Beijing Retail refers to Beijing s Urban Prime retail market.

31 Asia Pacific Property Digest Second Quarter Shanghai: Retail One prime and one decentralised mall open in 2Q13 Prime shopping mall rents increase 1.1% q-o-q New World Development purchases a shopping mall for RMB 1.25 billion Retailers are still keen to expand in the Shanghai market. The most aggressive expansion is in the F&B trade, reflecting a rising demand for lifestyle and leisure offerings in shopping centres. Among fashion tenants, most expansion was in the midmarket range, with slower expansion at the high-end. Korean retailers were particularly active with many new and planned openings. For instance, Caffé Bene, a coffee chain store, and Innisfree, a cosmetics brand, both set up new stores within Hongkou Plaza. Meanwhile, E-land group also continued to expand, with sub-brands Mixxo (fashion) opening in Superbrand Mall in the quarter and Ashley Steakhouse (F&B) set to open in 3Q13. Elsewhere, the Nanjing East Road submarket continued to lose some of its appeal among retailers in the quarter, evidenced by increasing vacancy rates in several malls in that submarket, as local consumers turned to other shopping districts. Vacancy rates rose slightly in 2Q13 in the prime market to 5.5% but decreased to 5.8% in the decentralised market. Vacant space left by big box electronics retailers in previous quarters was finally filled by food courts and services in several malls. For instance, Lotus International Plaza and Laya Plaza improved their occupancy rates by signing new F&B tenants into space vacated by electronics brands. Newly completed properties opened with high occupancy. In Pudong, ifc Mall Phase II (1, sqm) launched in Pudong with a high occupancy rate, targeting luxury consumers with a tenant mix focused on F&B and jewellery. Developed by Greenland Group and operated by Chia Tai Group, Touch Mall (36, sqm) opened in a decentralised area along the Xuhui riverfront. It opened at 7% occupancy, with a large weighting of fashion and F&B tenants. base: 4Q8 = 1 Financial Indicators are for shopping malls only Q8 4Q9 4Q1 4Q11 4Q12 4Q Shanghai: Retail Perth: Office In prime areas, open-market ground floor base rents for shopping malls rose by 1.1% q-o-q to RMB 49. per sqm per day, while decentralised rents rose 1.3% q-o-q to RMB 19.2 per sqm per day. In the investment market, Hong Kong-based New World Development Group purchased Hongxin Fashion Plaza (43,66 sqm) in Changning District at a total price of RMB 1.25 billion or RMB 28,63 per sqm on a GFA basis. The project will be renovated into a New World Deparment Store F Future For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Physical indicators are for shopping malls only. Existing, mature properties are still easily able to replace any store that closes. Since these mature malls have a long waiting list of potential replacement tenants, occupancy will remain high. Expanding retailers will remain selective about location decisions, and will gravitate towards well-located properties backed by strong and experienced retail asset managers. The pre-commitment rate for upcoming prime projects remains quite high, at 93% for those projects set to deliver in 3Q13 and 62% for projects to open at the end of the year. Meanwhile some of the newly built decentralised projects are facing challenges in attracting tenants, as their precommitment rates did not show significant growth in the quarter. Last Trough ^ net, on NLA RMB 49. psm per day Rents rising 16 Note: Shanghai Retail refers to Shanghai s Overall Prime retail market.

32 32 Asia Pacific Property Digest Second Quarter 213 Guangzhou: Retail Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Leasing slows in the face of a slowing domestic economy Rental levels at most existing malls remain stable Capital values remain unchanged in the quarter In the April-May period retail sales saw faster growth of 16.7% y-o-y, 4.8 percentage points faster than the previous year, rising to RMB 17.7 billion. Although sales were up, the leasing market faced subdued momentum as retailers expressed concern over China s slowing economy. Many mid-range retailers showed their ability to adapt by consolidating underperforming operations in non-core locations and relocating to mature submarkets, Tianhe CBD in particular. Some foreign retailers are still expanding into Guangzhou, choosing to take space in mature shopping malls that can guarantee good foot traffic. Reflecting this trend, Italian retailers Moschino and Etro made their first commitments to the Guangzhou market at Le Perle in the Huanshi East retail area. Guangzhou: Retail In 2Q13, the retail market recorded 43, sqm in net absorption, the lowest volume since 2Q12. The absorption in the quarter was due largely to the new letting in Panyu district s Aoyuan Plaza and the new completion in the quarter. As a result, overall vacancy declined to 3.% in 2Q13 from 3.2% in 1Q13. Mall of The World (Central Zone) was the only new completion in 2Q13 with most of its retail space occupied by food and beverage operators. Connected with the Mall of The World (North Zone), Seasons Mall Phase II, Guangzhou IFC, and Phase II and III of G.T. Land Plaza, these combine to create a 4, sqm underground mall targeted at white-collar workers in Zhujiang New Town Future 13F For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. In the quarter, retail properties despite being near full occupancy, achieved only minor growth in rental values. Due to a more cautious approach by retail brands, rents in non-core areas remained flat, leading some landlords to downgrade their positioning by leasing to local low-end retailers. Therefore, rents rose slower than 1Q13, edging up by.6% q-o-q to an average of RMB 45.7 per sqm per month (on GFA) in 2Q13. Considering the large amount of pending supply and weakening demand, investors expressed concern over the risk of acquiring retail assets. Capital values remained unchanged at RMB 59,1 per sqm (on GFA) in 2Q13. Last Trough ^ net, on GFA RMB 45.7 psm pm Growth slowing 16 We expect the next 12 months to transition to a tenant s market due to a slowing economy and softening expansion demand from retail brands. To combat vacancy in non-core shopping centres, landlords are expected to fill vacant space with lower tier tenants. In contrast, we anticipate mature shopping centres are likely to continue to upgrade their tenant mix. However, with 524, sqm of new supply scheduled to complete within the next 12 months, it should push vacancy higher. We anticipate the pace of rental growth to slow in 2H13, achieving 3 4% y-o-y for the full year 213. Note: Guangzhou Retail refers to Guangzhou s Overall Prime retail market.

33 Asia Pacific Property Digest Second Quarter Tokyo: Retail Luxury spending rises as consumer sentiment improves Rents grow for the third consecutive quarter as vacancy declines Investment yields compress for the second consecutive quarter 12 Consumer confidence continues to improve, benefitting from a government stimulus plan aimed at boosting the domestic economy and creating jobs. Sales at large-scale retail stores in Tokyo increased.1% y-o-y during 1Q13 while sales of luxury goods at department stores in Tokyo increased 24.1% y-o-y during May 213, posting doubledigit growth for the fifth consecutive month. Retail sales are benefiting from improved consumer sentiment, higher foreign visitor arrivals and consumption moved forward in anticipation of a higher sales tax in 214. Given these factors, retailers continued to exhibit strong demand for Prime retail space. Leasing activity on the ground floor was limited due to a lack of available space. However, there was activity on higher floors in particular from food and beverage operators. On the fringes of the Prime retail submarket, Lanvin opened its second street-side shop occupying three floors (ground, first and basement) at Ginza 4-chome and Opening Ceremony opened its first street-side shop occupying four floors of Cubricks along Cat Street, a back street of Omotesando. Oak Omotesando, the redevelopment of the Mori Hanae Building, opened in April 213. This mixed-use building completed with nine storeys above ground and a GFA of 14, sqm; retail shops are offered on the ground and first floors. Tenants include Emporio Armani, Coach, Nespresso Boutique and The Three Dots. The Jingumae 6-chome Project was announced in June and is scheduled to complete in the spring of 215 on a 2,2 sqm site located in an area adjacent to Omotesando. The anchor tenant for the project will be Bride s Word. Rents averaged JPY 65,893 per tsubo per month in 2Q13, increasing.5% q-o-q and 4.4% y-o-y. This represented the third consecutive quarter of modest growth, largely reflecting rental increases on higher floors in both Ginza and Omotesando. Investment yields averaged 4.1% in 2Q13, the second consecutive quarter of compression. A notable investment during the quarter was the sale of Shibuya Flag, a 6, sqm (NLA) retail building located in the Shibuya area adjacent to Omotesando. The building was acquired by Mori Trust Sogo REIT for JPY 32.4 billion or an NOI yield of 4.2%. 6 4Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Tokyo Retail Sales y-o-y (%) Q8 1Q9 1Q1 1Q11 1Q12 1Q13 Sales Growth of Large-Scale Retail Stores in Tokyo Source: Ministry of Economy, Trade and Industry Tokyo: Retail Perth: Office 12-month Outlook Government stimulus measures, increasing visitor arrivals and an anticipated sales tax increase in 214, are likely to stimulate consumption and underpin demand for Prime retail space over the next 12 months. Moreover, seasonal factors should also increase demand towards year-end. Meanwhile, supply is expected to remain limited for the foreseeable future. Therefore, vacancy is expected to decrease further and support a modest growth of rents. Last Trough ^ gross on NLA JPY 65,893 per tsubo per month Rent rising 3 Note: Tokyo Retail refers to Tokyo s Ginza and Omotesando Prime retail markets.

34 34 Asia Pacific Property Digest Second Quarter 213 Singapore: Retail Singapore: Retail base: 4Q8 = Q8 4Q9 4Q1 4Q11 4Q12 4Q F Future For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Leasing interest resilient despite growing concerns over a labour shortage Rents largely stable in the face of subdued retail spending Capital values edge up amid strong investment demand Occupancy rates remained stable in 2Q13, due to sustained interest for Prime space from new-to-market retailers. With a limited supply pipeline for the Primary submarket, quality space is taken up quickly, as evidenced by the strong pre-commitment rate at the upcoming Orchard Gateway development (8% pre-committed). In May, retail sales (excluding motor sales) increased slightly by.9% m-o-m, largely due to a double digit increase of 17.1% in telecommunications apparatus and computers sales. When compared y-o-y, retail sales increased by 3.1%, driven by higher sales in telecommunications apparatus and computers, watches and jewellery, and food and beverages (F&B). The muted increase in May s retail sales could be partly attributable to seasonable factors, as this is a transition month between the cool and warm seasons. In the tourism sector, the draw of the nation s two integrated resorts could be waning as both visitor arrivals and expenditure figures displayed slower growth in 1Q13. Preliminary figures released by the Singapore Tourism Board (STB) reflected a weaker 6.4% y-o-y growth in visitor arrivals in 2Q13, contrasting the double-digit growth rates (2.2% y-o-y in 21 and 13.1% y-o-y in 211) in the preceding two years. JEM shopping mall opened with full occupancy in 2Q13, adding 572,6 sq ft of retail space to the Suburban submarket. The Marina submarket also showed signs of revitalisation, as Phase I of Suntec City mall (187, sq ft) reopened with two strong anchor tenants, UNIQLO and H&M, and over 85% occupancy. The remaining tenants are set to open in 3Q13. These changes highlight the positive outlook for the submarket as many retailers have leased quality space in the belief that rents would rise in the near future, as the rejuvenation efforts gradually come to an end. Rents remained largely stable in 2Q13, supported by healthy leasing activity, particularly for new malls. Capital values edged up across all submarkets as demand remained strong in the strata-titled market. Strong interest was observed in the en bloc sales market, according to Jones Lang LaSalle intelligence. This could be attributable to the retail sector being relatively free from the restrictive cooling measures. Last Trough ^ gross, on NLA SGD 37.7 psf pm Rents stable 13 Growing regional competition from international retailers looking for new markets including Malaysia and Indonesia may take the focus off Singapore and reduce demand in the near future. The further lowering of foreign dependency ratios is expected to impact retail and F&B businesses, at least in the short term. Meanwhile, the Monetary Authority of Singapore s introduction of the Total Debt Serving Ratio (TDSR) framework, which requires financial institutions to take into consideration borrowers other outstanding debt obligations (e.g. credit card debt) when granting property loans, may weaken investor demand as potential investors adopt a waitand-see attitude toward property purchases. However, the current low unemployment rate and a forecasted improvement in the local economy should support demand and provide a more stable rental environment and a subsequent strengthening of capital values in the remaining quarters of 213. Note: Singapore Retail refers to Singapore s Prime, Suburban and Marina retail markets.

35 Asia Pacific Property Digest Second Quarter Bangkok: Retail Strong leasing activity by international brands continues Gross rents increase by.4% q-o-q Capital values continue to rise and market yields remain at 12.8% Growing domestic demand and rising tourist numbers resulted in strong leasing demand from retailers, both those existing and wishing to expand, and newcomers. At Siam Paragon, Prada expanded its current store space while Giorgio Armani will open a new store as it re-enters the Thailand market. Fashion and accessories and F&B retailers were the main drivers of strong leasing demand. The vacancy rate in 2Q13 was 7.6%, up 1.8% y-o-y (and up.8% from 2H12) due to on-going renovations at major prime projects such as Siam Paragon and Gaysorn Plaza. No new prime projects were completed in 2Q13. Mercury Tower and Empire Tower, prime grade office buildings, are now being renovated and their retail space expanded. Renovations are expected to complete in 213 and 214 respectively. A new community mall, Siam Square One (74,1 sqm) is expected to complete in 3Q13. In 4Q13, four projects totalling 12, sqm are expected to complete with two of them being expansions of existing malls, Central World Plaza and Paradise Park. The other two projects include a neighbourhood mall named The Cube (1, sqm) and a CBD shopping centre called Central Embassy (7, sqm). Strong demand for both expansion and from newcomers, coupled with limited available space in prime retail centres drove average rents higher in 2Q13 with average gross rents up by.4% q-o-q to THB 2,274 per sqm per month. Capital values rose by.5% q-o-q to THB 166,914 per sqm, reflecting strong investment interest in retail property. Market yields remained stable at 12.8%. Two large deals were concluded in 2Q13. CP ALL, a subsidiary of Charoen Phokphand Group, acquired retailer Siam Makro from its parent company SHV Nederland NV (SHV) in a transaction valued at THB 189 billion, which will allow CP ALL to open Makro stores throughout Thailand and in much of Asia. The other deal was the establishment of the Crystal Design Center property fund with a size of THB 4.13 billion, which will grant 3-year leasehold rights to the former owner of land and buildings sold to the fund. The outlook for the Bangkok retail market over the rest of 213 appears sound given growing domestic demand, rising tourist numbers and strong leasing demand, especially from international retailers. New space of 21,3 sqm is in the pipeline and scheduled to complete by end-213. Some future projects such as Central Embassy and Emquartier are reportedly more than 8% pre-committed. The vacancy rate is expected to rise only in the short term while tenants are fitting-out and decline relatively quickly when operations are started. Rents are expected to continue to increase given strong leasing demand while rising capital values should keep yields stable. base: 4Q8 = Q8 4Q9 4Q1 4Q11 4Q12 4Q13 1, For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Last Trough ^ gross, on NLA THB 2,274 psm pm Rent rising F Future Bangkok: Retail Perth: Office Note: Bangkok Retail refers to Bangkok s Prime retail market.

36 36 Asia Pacific Property Digest Second Quarter 213 Kuala Lumpur: Retail Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Source: Jones Lang Wootton Vacancy declines on higher leasing activity Rents increase marginally underpinned by good demand Healthy investor demand but no sales transactions Retailer demand improved in 2Q13, with the average vacancy rate recording a q-o-q decline of.7 percentage points to 5.9%. The decline in the City Centre vacancy rate was partly due to the withdrawal of Sunway Putra Mall for a refurbishment. The mall registered a high vacancy rate in 1H13 as tenants exited prior the temporary closure. Apart from that, other notable activity in the City Centre was registered at Sogo where Japanese-based retailer Uniqlo leased 15, sq ft of space. In the Suburbs, steady demand was mainly attributable to local retailers taking pockets of space within small suburban retail centres. Availability within popular regional malls such as 1 Utama and Mid Valley Megamall continued to be scarce and at relatively high rentals, making it unaffordable to local retailers. Kuala Lumpur: Retail Source: Jones Lang Wootton For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Last Trough ^ gross, on NLA F Future MYR 31.6 psf pm Rents rising 16 There were no completions recorded in either the City Centre or Suburbs in the quarter. However, in the City Centre two retail centres were withdrawn from the existing stock. Sunway Putra Mall (57,171 sq ft) was closed down to undergo a major asset enhancement initiative, which is scheduled to take up to 24 months. PIKOM ICT Mall (22, sq ft) was vacated and is reportedly in the midst of being sold to a local company, which has plans to refurbish and rebrand the mall beginning in 3Q13. Capital values were stable during the second quarter and in spite of good investor interest, no sales transactions were recorded due to the disconnect on pricing expectations between vendors and purchasers. Improving retailer and consumer sentiment aided a marginal rise in average gross rentals in both the City Centre and Suburbs to MYR 31.6 per sq ft and MYR 23.8 per sq ft per month, respectively. Stock in the City Centre is expected to remain unchanged in 2H13 as no new supply is due for completion. In the Suburbs, two retail centres, namely Cheras Sentral and the redevelopment of the former Jaya Shopping Centre in Petaling Jaya, are expected to complete in 2H13 and add 71, sq ft of new retail stock. is expected to hold up as consumer spending remains healthy and vacancy rates continue to decline, especially in the City Centre where supply is limited in the short term. In the Suburbs, the average vacancy rate is likely to remain stable underpinned by a considerable amount of the incoming retail space being already preleased to retailers. Rentals and capital values are expected to increase marginally in the next twelve months, supported by good retailer demand. Note: Kuala Lumpur Retail refers to Kuala Lumpur s Overall Prime shopping centre market.

37 Asia Pacific Property Digest Second Quarter Jakarta: Retail Aggressive expansion by international retailers supports healthy demand Rents grow positively on the back of robust enquiries Capital values rise and put downward pressure on yields During the quarter, international retailers continued to open new stores; Lotte Department Store, H&M and Uniqlo all opened their first stores in Indonesia. Robust consumption remained the key driver for growth in the retail sector, supported by increasing purchasing power and the growing number of affluent consumers in the capital city. Net take-up grew significantly in the quarter with the opening of Lotte Shopping Avenue and Pondok Indah Street Gallery. In 2Q13, net absorption totalled 67,9 sqm, more than triple the amount of the previous quarter. The food and beverage sector and lifestyle fashion stores were the largest contributors of demand during 2Q13. These two categories have dominated leasing activity over the last few quarters, as many new shopping malls adopted lifestyle concepts. Meanwhile, largescale retailers, such as department stores, supermarkets, cinemas, international-chain fitness clubs and home furnishing stores, remained to be key demand generators. Notable openings in 2Q13 included Galleries Lafayette in Pacific Place and Lotte Department Store in Lotte Shopping Avenue. The large increase in supply put upward pressure on vacancy rates during 2Q13, rising from 4.9% in 1Q13 to 6.4%. Two major retail projects completed and opened for trading during the quarter. Lotte Shopping Avenue or LOVE (previously known as the Ciputra World Jakarta Shopping Centre) and Pondok Indah Street Gallery together added 93, sqm of new supply to the prime retail market in Jakarta. With the completion of LOVE and Pondok Indah Street Gallery, prime stock in Jakarta increased to 1.37 million sqm by end-2q13. Another major development, St. Moritz Mall in West Jakarta, is scheduled to open later this year. In spite of healthy demand and robust leasing enquiries, the retail market has yet to experience a substantial rental increase. In view of rising competition, landlords remained focused on attracting tenants to take up space and visitors to increase footfalls at their malls. Modest rental growth was attributed to the low level of retail productivity due to the growing number of shopping malls competing for customers. Tenants focused their efforts on revenue and keeping costs lows. Net effective rents in 2Q13 grew by 2.5% q-o-q, while service charges remained unchanged. Capital values in 2Q13 increased by 5.2% q-o-q on the back of higher land prices in prime submarkets. As such, yields declined to 1.8% at end-2q13. base: 4Q7 4Q8 = Q8 4Q9 4Q1 4Q11 4Q12 4Q F Future For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Jakarta: Retail Perth: Office Despite a large amount of additional stock from LOVE and Pondok Indah Street Gallery, and significant upcoming supply from St. Moritz, more than 75% of total space in these three projects has been pre-committed and this rate is expected to rise as these malls become fully operational. Strong demand, driven by robust retailer expansion, is expected to push vacancy lower over the next 12 months. As such, rents and capital values are projected to grow at a faster pace next year. Last Trough ^ net effective, on NLA IDR 4,84,18 5,13,894 psm pa Rents rising 59 Note: Jakarta Retail refers to Jakarta s Overall Prime retail market.

38 38 Asia Pacific Property Digest Second Quarter 213 Delhi: Retail Delhi: Retail Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Financial Indicators are for Prime South. 4 Negative net absorption for the first time in 32 quarters Rents rise in the Prime South and Prime Others submarkets Yields remain stable as capital values grow in line with rents In 2Q13, sluggish leasing in operational stock contributed to net absorption recording a negative result. Moments Mall in the Prime Others submarket underwent a re-branding and repositioning initiative which resulted in negative net absorption in the submarket, despite a new mall completing with a high pre-commitment rate. Tenant repositioning by mall operators and lease expirations also resulted in negative take-up in the Prime South. The Suburbs recorded positive net absorption on account of moderate leasing in existing stock and pre-commitment in a new completion. Overall take-up was at a 32 quarter low and as a result, overall vacancy rose by 14 bps q-o-q to 25.3% at end-2q13. Within the Prime South, Burberry Brit and Croma each leased 5, sq ft in Select Citywalk, while Sephora leased 5, sq ft in DLF Promenade and Michael Kors leased 2, sq ft in DLF Emporio in Vasant Kunj. House of Technology leased 4, sq ft in the newly completed TDI Town Square and Jumbo Electronics leased 3, sq ft in Pacific Mall, both in the Prime Others submarket. The Suburbs submarket saw Wee Store and Dwar s Open World each lease 3, sq ft in MGF Metropolis in Gurgaon. Premier Fitness Club and Spa leased 8, sq ft in Shopprix Mall in Noida, while Bed-n-Bath Studio leased 2,5 sq ft in Pacific Mall in Ghaziabad are for all micro-markets. For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. (Prime South) Last Trough INR 245 psf pm Growth slowing 1 Rental information is for the Prime South only. ^ gross, on GFA Future 13F Two completions were recorded in 2Q13 I Mall (3, sq ft) in the Greater Noida precinct in the Suburbs submarket and TDI Town Square (1, sq ft) in Nehru Place in the Prime Others. Average rents rose by less than 1% q-o-q in both the Prime South and Prime Others submarkets. With prime operational malls being favoured by retailers, mall management of such shopping centres quoted higher asking rents. Capital value growth followed a similar trend to rents, rising less than 1% q-o-q in most submarkets. With domestic consumption expected to remain resilient, retailers are likely to continue chasing deals in under-construction projects that offer good design, branding and professional management. Upcoming completions in precincts with low organised retail penetration have seen healthy pre-commitments and are likely to contribute towards net absorption in the coming quarters. Sustained retailer interest in the Prime South submarket and an active churn may cause rents to rise. An increase in the amount of occupied stock may spur rent increments in the other submarkets, but at a slower pace. Capital values may show slightly higher growth compared to rents, possibly leading to further yield compression in the retail market. Note: Delhi Retail refers to Delhi s Overall retail market.

39 Asia Pacific Property Digest Second Quarter Mumbai: Retail Net absorption rises to the highest level in five quarters Rents rise in the range of 1-2% q-o-q across all submarkets Capital values grow at a similar pace as rents, holding yields firm 11 In 2Q13, net absorption was notably higher on q-o-q basis, reaching 439,6 sq ft or the highest level in the past 5 quarters. The majority of net absorption was due to precommitments in new completions. However, unoccupied space in new supply outpaced absorption and resulted in the vacancy rate rising by 15 bps q-o-q to 22.8%. In 2Q13, High Streets saw a modest level of demand with established areas such as Colaba and Bandra continuing to attract retailers, while Borivali and Ghatkopar showed improvement. The Suburbs witnessed healthy leasing activity, supported by its good blend of residential, office and retail space. This submarket accounted for the majority of area leased by retailers. The second quarter was characterised by food and beverage brands expanding their presence in several pockets of the city. Notable leases recorded in the quarter included: Being Human leasing 2,234 sq ft at Infiniti Mall in Malad, Cotton World leasing 1,297 sq ft at Oberoi Mall in Goregaon, Reliance Footprints leasing 2,643 sq ft at Magnet Mall in Bhandup, and Reliance Trendz leasing 9,8 sq ft at Viva City Mall in Thane. Viva City Mall commenced operations in 2Q13 with an area of 92, sq ft and saw a moderate volume of pre-commitments Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Financial Indicators are for Prime South. 4 3 Mumbai: Retail Perth: Office Rents and capital values appreciated in the range of 1-2% q-o-q across all submarkets. A noted change in the quarter was that the Prime North submarket witnessed an appreciation of rents and capital values, albeit minor, after remaining stable for the previous six quarters. On a y-o-y basis, market yields for the Prime South & Prime North compressed marginally by 1 bps. Net absorption is likely to remain subdued with upcoming supply likely to see low levels of pre-commitment. However, Viva City Mall which began operations in the quarter is likely to see further leasing activity in upcoming quarters. We anticipate leasing activity in 1H14 to slow on the back of the national election. Furthermore, the government s implementation of FDI policy into the retail sector has been slow and has led to retailers being cautious about the progress going forward. Rents and capital values are likely to remain relatively stable in all submarkets over the next 12 months. 2 1 are for all micro-markets. For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. (Prime South) Last Trough INR 246 psf pm Rents rising Rental information is for the Prime South only. ^ gross, on GFA 9 Future 13F Note: Mumbai Retail refers to Mumbai s Overall retail market.

40 4 Asia Pacific Property Digest Second Quarter 213 Sydney: Retail Financial Indicators 12 Vacancy rates rise but remain relatively low Rents decline y-o-y across all retail formats The bulky goods yield range widens further Sydney: Retail base: 4Q8 = Q8 4Q9 4Q1 4Q11 4Q12 4Q For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Last Peak ^ net, on GFA AUD 1948 psm pa Rents falling 7 Future 13F Consumer sentiment has remained resilient, driven by an increase in household wealth and lower interest rates. However, retail turnover growth slowed in the three months ended May 213. New South Wales total retail turnover growth rose 2.2% y-o-y in May 213, broadly in line with the national average (2.3% y-o-y), although clothing, footwear and personal accessory retailing has outperformed by a notable margin (NSW 5.9% y-o-y compared to.2% y-o-y for Australia). Leasing demand from domestic retailers is still relatively soft. The average retail vacancy rate for the Sydney market rose by.7 percentage points to 2.3% in 1H13. International retailers continue to provide landlords with some level of support as they expand into the local market, but the introduction of this new competition adds to a range of factors already challenging existing domestic retailers. The depreciation of the AUD in 2Q13 likely added pressure to some retailers margins by raising the cost of imports/inventory, but there are likely to be stronger positive effects if it stimulates inbound tourism and slows the rate of outbound overseas travel. As at 2Q13, the number of residents travelling overseas outnumbered inbound arrivals by approximately 1.4 to 1. Gross supply of retail space in Sydney has been slowly falling since 21 (199,1 sqm), with just 114,2 sqm completing in 212 and just 82, sqm due in 213 (either already completed or currently under construction). is likely to remain constrained in the short term with few new projects commencing construction. The two largest regional shopping centre extensions currently under construction are AMP s Macquarie Shopping Centre (31,8 sqm) and Westfield s Westfield Miranda (17,7 sqm). Rents fell slightly on average in bulky goods and sub-regional centres in 2Q13 but were unchanged across all other retail formats. On an annual basis, all retail formats have recorded a decline of between.3% and 1.5%, reflecting the easing of vacancy rates over the same period. Investment activity remains robust, although buyers are still selective towards high quality assets with a positive growth outlook. Challenger acquired a half share interest in a major portfolio from Federation Centres in 2Q13 for AUD 62 million. The portfolio comprised six assets including three located in NSW; two regional centres (Centro Roselands and Centro Bankstown) and one neighbourhood centre (Lennox). Yields in Sydney were stable in regional, sub-regional and neighbourhood formats in 2Q13. Sydney CBD yields tightened to 5.25% 7.5% from 5.25% 7.75%. The bulky goods yields range widened to 8.5% 11.5% from 8.75% 11.25%. The drivers of retail spending remain supportive of a recovery. However, retailers are likely to face some margin pressure and continue to face a very competitive operating environment. Rental growth is likely to remain subdued over the next twelve months, but yields are likely to firm reflecting greater competition for quality assets as investment opportunities become more limited. NA Note: Sydney Retail refers to Sydney s Overall retail market.

41 Asia Pacific Property Digest Second Quarter Melbourne: Retail Vacancy rises as leasing demand softens Average specialty tenants rents decline by.7% q-o-q Blackstone buys Greensborough Plaza for AUD 36 million Financial Indicators 12 Retail turnover growth in Victoria slowed to.8% y-o-y in May 213. Growth in clothing, footwear and personal accessory ( 4.1% y-o-y.) and department store retailing ( 1.5% y-o-y) both remained a drag on overall spending growth and continued to weigh on leasing demand. The average Melbourne retail vacancy rate rose to 2.7% in 1H13 from 2.1% in December 212, and is elevated by historical standards. The increase was consistent across all monitored retail formats reflecting broad-based softening of demand from domestic fashion retailers. Landlords continue to attract new international retailers to partially offset this impact. For example, Japanese fast fashion retailer UNIQLO committed to their first Australian store in 2Q13 at Emporium Melbourne. In contrast to the trend in the Sydney market, the supply pipeline has been gradually building up since 21. As at 2Q13, 313,3 sqm of space is either completed or under construction and due to complete in 213. However, the forward pipeline of projects is low and we expect there should be a sharp drop off in supply from 214 onwards. New project starts are likely to be limited to the refurbishment and expansion of a select number of large dominant shopping centres that can support additional retail space. Just one project started in 2Q13, the retail component (5,3 sqm) of 567 Collins Street, a 26 storey office development in the Melbourne CBD. The two largest projects under construction in Melbourne include: Lend Lease s Craigieburn Central (55, sqm) scheduled for completion in 2H13 and Emporium Melbourne (45,9 sqm), a centre jointly owned by Colonial First State Retail Property Trust and GIC Real Estate, that is scheduled for completion in 1Q14. base: 4Q8 = Q8 4Q9 4Q1 4Q11 4Q12 4Q Melbourne: Retail Perth: Office Rising vacancy levels have resulted in further declines in average specialty store rents across all retail formats except super Prime CBD and neighbourhood centres in 2Q13. Rents fell by.7% y-o-y. Investment activity in Melbourne was strong in 2Q13 with total volumes reaching AUD 615 million. The largest sale was Lend Lease s Greensborough Plaza for AUD 36 million, which was acquired by Blackstone. Prime equivalent yields were stable across all the retail formats in 2Q13 and have been stable for three years Future 13F For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Retail turnover growth in Victoria is forecast to rise from 214 onwards and be in line with a broader pick up in the state economy. We expect rental growth should remain constrained over the next 12 months before recovering modestly thereafter, as demand conditions improve and supply becomes more limited. In contrast to the subdued rental outlook, the investment market is likely to remain strong with a range of large institutions actively seeking large stable retail assets and portfolios. Last Peak ^ net, on GFA AUD 1469 psm pa Rents falling 2 NA Note: Melbourne Retail refers to Melbourne s Overall retail market.

42 42 Asia Pacific Property Digest Second Quarter 213 Hong Kong: Residential Hong Kong: Residential base: 4Q8 = 1 Units Q8 4Q9 4Q1 4Q11 4Q12 4Q13 1, F Future For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Market activity remains soft on the back of policy measures Luxury rents hold firm as the market enters its traditional peak season Capital values stabilise despite a further dip in transaction volumes Following the latest round of restrictive policy measures implemented in the first quarter, demand for luxury properties remained soft with sales volumes contracting further in 2Q13. Preliminary data showed only 44 properties priced above HKD 5 million being transacted during the quarter, down 71% y-o-y and 33% q-o-q. Nevertheless, a house in SCape, a residential development in Island South, was sold for HKD 45 million (HKD 77,519 per sq ft on saleable area), reportedly to a Mainland Chinese buyer. This was the biggest transaction since the government introduced the buyer s stamp duty and doubling the ad valorem stamp duty in October 212 and February 213, respectively. The mass market also saw a drop in sales volumes with the number of residential sale and purchase agreements falling to a monthly average of 3,814 transactions in 2Q13, down from the monthly average of 5,424 transactions in 1Q13. With the Residential Properties (First-hand Sales) Ordinance coming into full effect on 29 April, which sets out disclosure requirements on sales information, the primary sales market was quiet in 2Q13 as developers took time preparing new marketing materials. Swire Properties Dunbar Place in Ho Man Tin was the only luxury project launched for sale during the quarter, with 21 out of 53 units being sold, at an average price of about HKD 21, per sq ft on saleable area. The leasing market turned slightly more active towards the second half of 2Q13 as it entered its traditional peak season. Leasing demand was largely driven by expatriate relocations into the city from non-financial sector companies and downgrading demand from expatriates in the financial sector. Three luxury projects, providing a combined 24 units, were scheduled to be complete in 2Q13. Of these, 16 units were from Henderson Land s Double Cove in Ma On Shan. After contracting for two consecutive quarters, capital values stabilised, edging up by.3% q-o-q in 2Q13. However, the growth in capital values was off very thin volumes. Meanwhile, the leasing market entered a seasonally active period, helping to stabilise rents. Last Peak ^ net, on GFA HKD 35.6 psf pm Rents stable 7 The possibility of the US tapering its quantitative easing programme later this year and ending it by mid-214 is likely to see interest rates edging up gradually in the near future. In view of the rising concern over a potential rate hike and current restrictive measures, potential buyers are expected to become more cautious towards entering the market. Hence, transaction volumes are likely to stay at low levels over the next 12 months. As demand continues to soften, capital values are expected to see some downward adjustments. Nonetheless, as long as the low interest rate environment remains intact, a collapse in prices is unlikely. On the leasing side, the expectation of an improving economy from 2H13 onwards may lend support to leasing demand with luxury rents to largely hold flat. Note: Hong Kong Residential refers to Hong Kong s Overall Luxury residential market.

43 Asia Pacific Property Digest Second Quarter Beijing: Residential Primary apartment sales decrease sharply due to restrictive measures Apartment rents edge up by.7% q-o-q High-end apartment prices grow despite curb measures High-end apartment primary sales volumes totalled 2,199 units in 2Q13, down 29.1% compared to 1Q13. The transaction volumes decrease was mainly due to tightening measures including the capital gains tax issued in March. However, a number of high-end apartment projects still witnessed good sales performances in 2Q13. The Beijing local government continued to adopt new tightening measures to contain residential price growth. On 13 June, Beijing required residential units with unit sizes larger than 14 sqm (GFA) or commercial units to complete more construction work to obtain a pre-sale license. High-rise buildings now need to complete 5% of above ground construction, while low-rise buildings need to complete all above ground construction before pre-sale permits are issued. In the residential leasing market, several serviced apartments saw vacancy rate increases in 2Q13. The strict implementation of the new capital gains tax encouraged some developers to hold their apartment units for lease, increasing the availability of luxury apartments in the leasing market. The tightening measures issued in 1Q13 forced many developers to suspend their launch plans. Meanwhile, the local government has been controlling pre-sale approvals to restrict average home prices in Beijing. Only three high-end apartment projects, Wangjing Jinmao Palace, Jin Mao Yue and Beijing Fangxiang, obtained presale approvals in 2Q13. base: 4Q8 = 1 Units Q8 4Q9 4Q1 4Q11 4Q12 4Q13 12, 9, 6, No new serviced apartments were completed in the quarter. Lee Garden was closed for refurbishment in 2Q13, and 187 serviced apartment units were withdrawn from leasing stock. Thailand based serviced apartment operator Shama announced that they will open another project in Beijing in 215, after their first project, Shama Chang An, was strata-title sold in 29. The average high-end apartment transaction price in the primary sales market rose 6.7% q-o-q to RMB 45,3 per sqm in 2Q13. Several projects entered the sales market at relatively high prices upon completion, pulling average prices up. 3, F Future For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Beijing: Residential There has been increasing concern amongst the expatriate community over the air quality in Beijing and anecdotal evidence suggests that some foreign workers are leaving town for this reason. Some serviced apartments in the CBD area saw vacancy rates rise and landlords began to be flexible on rents in order to maintain occupancy rates. Beijing s tightening policies will likely reduce primary sales market supply, particularly for high-end projects. The high-end apartment sales volume is expected to remain at relatively low levels in 2H13. In addition to strict price-cap regulations in Beijing, the recent credit crunch may speed up cash flow deterioration for small sized developers. The high-end apartment primary sales market may see a minor q-o-q price correction in 2H13 although capital values are likely to grow y-o-y. Last Trough ^ gross, on GFA RMB psm pm Rents rising 14 Note: Beijing Residential refers to Beijing s Overall Luxury and High-end residential market.

44 44 Asia Pacific Property Digest Second Quarter 213 Shanghai: Residential 14 Primary sales volumes retreat after a short-lived boom in March Serviced apartment rents fall by.6% q-o-q as leasing demand softens High-end sales prices edge up and are expected to remain stable through end-213 Shanghai: Residential base: 4Q8 = 1 Unit Q8 4Q9 4Q1 4Q11 4Q12 4Q13 6, 5, 4, 3, 2, 1, Future For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. 13F On the regulatory side, the highly-anticipated 2% capital gains tax on secondary sales had not yet been implemented in Shanghai as of end-2q13. Buying momentum in the quarter moderated after a short-lived sales boom in March as buyers had previously rushed to the market, believing that the capital gains tax would soon be put into effect. Primary sales volumes in April declined by 41% m-o-m, followed by an increase of 3% and 23% in May and June, respectively. As a result, sales volumes of commodity housing in the primary market were down 3% in 2Q13 from a quarter ago. In the high-end segment, as Home Purchase Restrictions (HPRs) remained in place and price discounts nearly vanished, sales volumes remained subdued with just 35 units sold during the quarter, declining slightly by 1% q-o-q. In the leasing market, demand from expatriates softened in 2Q13. MNCs mostly remained cautious about deploying new expatriates due to the weaker economic outlook. With leasing demand softening, the completion of new serviced apartments in the market pushed up the overall vacancy rate by 2 percentage points to 13.4% in 2Q13. Developed by Keppel Land, the long-awaited 8 Park Avenue in Jing an District finally launched its second phase by offering 26 units for sale in June. By the end of 2Q13, 46 units were sold with transaction prices averaging RMB 69,18 per sqm. The Paragon in Luwan District, developed by CapitaLand, launched 92 new units in 2Q13. In the serviced apartment market, The Residences at Mandarin Oriental in Pudong Lujiazui opened with 21 luxury apartments for lease, while Kerry Residences completed its renovation of 133 units in 2Q13. Primary sales prices of high-end apartments continued to creep up as a handful of projects raised prices slightly after achieving stronger-than-expected sales. However, most projects kept their sales prices unchanged due to weaker sales momentum. On a like-for-like basis, high-end sales prices posted a.3% q-o-q increase in 2Q13. In the leasing market, in light of weakening demand and rising competition from new completions, some older projects lowered rents to attract tenants. As such, average rents for serviced apartments in Shanghai decreased by.6% q-o-q. In the investment market, Ascott Residence Trust incorporated Citadines Biyun Shanghai in Pudong from its fund management business for a total consideration of RMB 321 million, which translated into an average price of RMB 2,2 per sqm. Last Trough ^ gross, on GFA RMB psm pm Rents rising 14 Under the current policy regime, buying sentiment in the primary market is expected to remain stable in the second half of 213. Similarly, the high-end sales market is likely to remain subdued while sales prices should remain largely unchanged in 2H13. In the leasing market, demand for serviced apartments is unlikely to see any noticeable improvement given the weaker economic outlook. With several new projects set to come on line, rental growth is expected to be minimal in the remainder of the year. Note: Shanghai Residential refers to Shanghai s High-end residential market.

45 Asia Pacific Property Digest Second Quarter Singapore: Residential Resale activity remains weak on the back of recent government policy Growth in Luxury Prime rents keep pace with inflation Luxury Prime capital values amid rising interest rate risk Condominium resale transactions in the Prime market continued on a downward trend, albeit at a slower rate. Sales volumes fell 3.3% q-o-q from 177 to 171 units in 2Q13, compared to a 61% drop in 1Q13. The effects from the property cooling measures remain, with foreign demand for Prime condominiums fairly muted. In addition to the seven rounds of cooling measures, the Monetary Authority of Singapore (MAS) recently announced an overarching total debt servicing framework for the property market. A Total Debt Servicing Ratio (TDSR) has been implemented to reign in the overall credit of consumers. We expect prices and transaction volumes are likely to dip in the near term as a result of tightening credit availability. Preliminary figures from the Building and Construction Authority of Singapore showed that two projects with a total of 27 units were completed in 2Q13, a drop of 43% from the revised figure of 364 completed units in 1Q13. With a total of 44 residential units, the largest project to complete was Loft@Stevens at the Stevens Road/Robin Close area. The other development, Duchess Royale, just off Farrer and Bukit Timah Road has a total of 13 completed units Q8 4Q9 4Q1 4Q11 4Q12 4Q13 RV (Prime) CV (Prime) RV (Luxury) CV (Luxury) base: 4Q8 = 1 4, Gross rents in the Luxury and Typical Prime market rose.6% and.8% q-o-q respectively to SGD 4.8 and 4. per sq ft per month after a few quarters of tepid growth. This was just enough to offset the effects of inflation over the quarter and provided property owners with a positive real return. According to URA REALIS, a total of 2,5 non-landed rental contracts were inked in April and May 213 in the Prime market. This reflects a monthly rental demand of 125 units, a slight improvement from the monthly demand of 1,31 units in 1Q13. Capital values in the Luxury and Typical Prime market have fallen.6% and remained flat q-o-q respectively, following the cooling measures implemented in January 213. Yields for Singapore 1-year Government Securities (SGS) bonds surged about 9 basis points from 1.6% in March to 2.5% as of 28 June, and came close to Typical Prime property yields of 2.9% and surpassed the 2.1% level in the Luxury Prime market. Units 3, 2, 1, F Future For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Singapore: Residential Based on feedback from our business lines and clients, we see continued interest in fixed rate mortgages and, as reported in last quarter s publication, a growing number of property buyers are looking to lock in fixed repayment rates to hedge against any rate increases. Higher holding costs together with a rising Singapore Interbank Offered Rate (SIBOR) are expected to have a negative impact on demand and prices in the high-end residential market. We expect a dip in prices of 4 6% in the Luxury Prime market and of 2 4% in the Typical Prime market in light of these reasons and the most recent policy introduced. Last Peak ^ gross, on GFA SGD 4.8 psf pm Decline slowing 8 Note: Singapore Residential refers to Singapore s Overall Prime and Luxury residential markets.

46 46 Asia Pacific Property Digest Second Quarter 213 Bangkok: Residential Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Steady demand driven by expatriate relocations Rents rise by.8% q-o-q on limited new supply Capital values increase while yields remain at 4.9% Four new projects were launched in 2Q13. Klass Langsuan, a low-rise luxury condominium project with 11 units by Langsuan Asset was completely sold out within a day of launch, and another project by Langsuan Asset, namely Klass Silom, reported a high pre-sales rate of 8%. The Bangkok Sathorn, by Land & Houses Plc, is the only luxury condominium project that opened for pre-sale in mid-quarter, with the sales rate reported to be 2%. The latest high-end project launched, the Eternity Sukhumvit 8 by Nirun Group Co Ltd, was reported to have a pre-sales rate of 1%. The leasing market was very active in 2Q13 compared with previous quarters and the number of transactions was high due to the relocation of many Bangkok expatriates. The apartment vacancy rate decreased to 7.% with total supply remaining low. Bangkok: Residential Units 4, 3, 2, 1, F Future For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. The delay in one project completion in the quarter resulted in the number of condominium units completed being lower than expected. One luxury and two high-end projects came on stream, namely The Room Sukhumvit 21, The Crest Sukhumvit 24 and Mode Sukhumvit 61, adding 458 units to the existing stock and bringing the total to 26,197 units as of 2Q13. The four aforementioned new luxury and high-end projects launched for sale in 2Q13 added 885 units to the supply pipeline for the period As most developers chose to focus on other types of residential projects, there were no new Grade A apartments launched in the CBD and Sukhumvit submarkets, resulting in the total apartment supply remaining at 5,41 units. Gross rents of condominium increased slightly by.8% q-o-q to THB 57 per sqm per month due to the large number of new units completed. Apartment rents gross rose slightly by.1% q-o-q to THB 344 per sqm per month. Capital values rose at a slower pace compared with previous quarters at.5% q-o-q and reached THB 19,424 per sqm. With the increase in rents outpacing the increase in capital values, market yields increased by 11 bps q-o-q to 4.9%. Last Trough ^ gross, on NLA THB 57 psm pm Rents rising 6 In May 213, the Bank of Thailand reduced the monetary policy rate to 2.5% in an attempt to stimulate the Thai economy. The property market is expected to remain healthy over the next 12 months as the rate cut should sustain current levels of demand in the luxury and high-end condominium sectors, causing prices and rents to continue to increase, though with slower growth due to the large supply scheduled to complete in 2H13. However, in light of recent concerns about overheating in the market, commercial banks are tightening restrictions for both mortgage loan applicants and project-finance loans. Hence, demand in the luxury and high-end condominium sectors should remain active but with slower growth in 1H14 due to the more stringent loan conditions. Note: Bangkok Residential refers to Bangkok s Central High-end and Luxury residential market.

47 Asia Pacific Property Digest Second Quarter Kuala Lumpur: Residential Alia Tower and MK 28 reach completion, adding 683 units to stock Average rental rates decline marginally by.3% q-o-q Capital values remain stable while yields hold firm Developers of high-end projects continued to offer new concepts and features in a bid to differentiate their products. The Ruma Residence by Aseana Properties Limited and Ireka Land, located within the prestigious KLCC locality in the city centre, is a branded residence which will be designed and managed by Urban Resort Concepts (URC). This one acre freehold development comprises one 37-storey tower with 253 hotel suites and 2 residential units. The unit prices range between MYR 1,7 and MYR 1,8 per sq ft (after discounts). The development has achieved a 24% sales rate since launching at end-1q13 but due to the high pricing, only 5% of the units have been launched in Malaysia (the remaining units are to be launched overseas). M City is a freehold mixed-use development located east of the City Centre comprising retail space, small office home office (SOHO) units and serviced residences. The 35-storey serviced residential building comprises 544 units and was launched in 2Q13 but marketing activities began in early-212. The majority of unit sizes range between 56 and 1,18 sq ft and are generally considered small, making it more affordable and attractive to local investors. The average price of units sold was MYR 1,4 per sq ft and it has achieved a 6% sales rate. The developer, Mah Sing Group, offered incentives such as a 5% price discount, developer interest bearing scheme and free maintenance for the first year Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Source: Jones Lang Wootton Financial Indicators are for the Prime market. 4, 3, Stock increased to 23,792 units with the completion of 683 units within two projects, Alia Tower, of Setia Sky Residence (25 units) and MK28 (478 units). In 2Q13, gross rental rates decreased marginally by.3% q-o-q to MYR 3.2 per sq ft per month. Rentals have been under downward pressure and landlords of some developments that are adjacent to construction sites have reduced their asking rental rates in a bid to secure tenants. Capital values remained stable q-o-q at MYR 74 per sq ft. Market yields remained relatively firm at 4.7%. for high-end condominiums is anticipated to remain soft in 2H13. Developers are expected to continue to focus on affordability (medium price range), with condominium launches likely to outpace landed houses. Some developers of high-end projects, such as Bolton, IMC, Tropicana and Sunrise, may continue to hold back their launches until the market improves. Developers are likely to require a higher level of pre-sales before officially launching and will try to make their high-end units affordable by reducing the size. In view of rising development costs, developers are likely to push prices higher. With abundant liquidity in the market, developers will continue to work with banks to reduce entry costs by offering low down payments, price discounts, free legal fees for sale and purchase agreements, and free maintenance to drive sales. Units 2, 1, Source: Jones Lang Wootton For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Last Peak ^ gross, on NLA F MYR 3.2 psf pm Rents decreasing 19 Future Kuala Lumpur: Residential Note: Kuala Lumpur Residential refers to Luxury / Prime residential markets for supply and demand indicators and the Prime market for rental, price and yield indicators.

48 48 Asia Pacific Property Digest Second Quarter 213 Jakarta: Residential Jakarta: Residential base: 4Q8 = 1 Units Q8 4Q9 4Q1 4Q11 4Q12 4Q F Future For 28 to 212 completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Sustained leasing demand underpins rising apartment occupancy Apartment rents rise 4.2% q-o-q Capital values rise faster than rents, pushing apartment yields lower Leasing demand in the apartment market remained positive, supported by enquiries from the corporate segment as well as from foreign embassies. From the corporate segment, demand from oil and gas companies as well as mining and professional services companies helped to generate take-up during the quarter. 35 apartment units were taken up in 2Q13. Most of the quarterly demand was concentrated in the Senayan, Kuningan and Kebayoran Baru submarkets. With positive take-up, occupancy in Jakarta s luxury apartments steadily rose from 87% in 1Q13 to 88.5% by end-2q13. Sales in the luxury condominium market were robust, supported by the low interest rate environment and strong increase in land prices, which triggered growing investment demand for prime assets. Sales in the luxury condominium market during 2Q13 were concentrated in projects such as Ciputra World Jakarta and Pakubuwono. Overall, net take-up in 2Q13 totalled 9 units. No apartment projects were concluded in 2Q13. As such, the total existing stock in the leasing market remained at 2,327 units. In the luxury condominium market, one project, The Residence at Dharmawangsa 2, completed with 88 units. As such, total stock increased to 6,679 units. Another three high-end condominium projects (MyHome Apartment, The Grove Suites and The Grove Empyreal & Masterpiece) are scheduled for completion this year. These projects will add 727 units to the strata-titled market. Meanwhile, only one rental apartment project (Ciputra World Jakarta Serviced Apartment) is scheduled for completion later this year. Positive demand growth in the apartment market helped push rents higher over the quarter. Landlords of good quality apartments with high occupancy imposed higher rents for new tenants. Along with the increase in occupancy and healthy demand levels, net effective rents rose further by 4.2% q-o-q in 2Q13. Net effective rents for luxury apartments in Jakarta during 2Q13 averaged USD 221 per sqm per annum, reflecting growth of 16% over 2Q12. Meanwhile, capital values rose by 9.% q-o-q, leading to further yield compression. By end-2q13, yields were estimated at 8.6%. Last Trough ^ net effective, on NLA USD 221 psm pa Rents rising 7 in the luxury apartment market is expected to remain strong in 2H13, driven by the growth in corporate leasing and inbound business trips from overseas. Apartment rents are projected to grow in the range of 15-16% in 2H13 because of steady demand and higher occupancy in established projects. The strata condominium market should also see positive growth, a result of the low interest rate environment and growing demand for prestige city living. Sales are projected to strengthen, led by quality projects attached to international luxury hotels. As more people perceive residential properties as an attractive investment offering good rental income and prestige, capital values should also improve. Note: Jakarta Residential refers to Jakarta s Overall Prime residential market.

49 Asia Pacific Property Digest Second Quarter Manila: Residential Vacancy eases to 4.2% due to healthy leasing demand Sustained expansion of O&O firms and MNCs buoys rental growth Local investor demand supports healthy investment market activity The leasing market for luxury residential condominiums in the Makati CBD and Bonifacio Global City (BGC) remained robust in 2Q13, supported by sustained demand from expatriates at MNCs and offshoring and outsourcing (O&O) firms. Healthy leasing demand helped push the average vacancy rate lower to 4.2% in 2Q13. Net absorption was recorded at 141 units in 2Q13 compared to 2,87 units in 1Q13, as there was no new supply completed during the quarter. The investment market was relatively active for both existing and pre-sale developments. Sales take-up of upcoming residential projects such as The Proscenium by Rockwell Land Corporation, which was launched late last year, rose steadily during 2Q13. Overall, a bullish economy and upbeat investor sentiment about the local property market buoyed investments in the residential market in the quarter Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 No new developments completed in 2Q13. Projects slated to finish during the quarter were delayed to the latter half of 213. Nonetheless, Alveo Land Corporation officially launched the first residential tower in Circuit Makati, Solstice Tower. The company first announced its plans for the project during 1Q13. Solstice Tower is scheduled to complete in 218. Meanwhile, Arthaland Corporation recently announced its latest addition to the Arya Residences development, the Arya Villas in BGC. Units 12, 1, 8, 6, Net effective rents in the luxury residential market rose in 2Q13 to PHP 8,196 per sqm per annum, up by.7% q-o-q. The uptick in rents was mainly due to slightly higher asking rents in select existing residential developments. Capital values increased at a similar pace to rents, reaching PHP 119,98 per sqm while yields remained firm at 6.9% in 2Q13. The continuous entry and expansion of MNCs and O&O firms, coupled with the increasing number of expatriates are forecast to boost market demand for high-end residential condominiums in the Makati CBD and BGC. In addition, leasing activity in BGC should strengthen as the bulk of upcoming supply of office developments, which cater to O&O firms and MNCs, is expected to come from the district. Meanwhile, average rents and capital values are expected to slightly rise, due in part to the healthy activity in the residential market. 4, 2, Future 13F For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Manila: Residential With more than 8, units slated to complete in the second half of 213, annual supply in the Makati CBD and BGC is likely to reach a record-high of 1,2 units if all projects are delivered on schedule. Consequently, the large supply coming on stream in 2H13 may lead to higher vacancy rates in the latter half of the year. Last Trough ^ net effective, on NLA PHP 8,196 psm pa Rents rising 3 Note: Manila Residential refers to the Makati CBD and Fringe Residential Condominium markets.

50 5 Asia Pacific Property Digest Second Quarter 213 Hong Kong: Industrial Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Low vacancy rates and high asking rents limit leasing activity Rents continue to reach all-time highs on the back of low vacancy rates Investment volumes remain subdued with no major warehouse transactions The external trading sector remained highly volatile with the total value of imports and exports growing by 4.6% y-o-y and 3.8% y-o-y, respectively, in the April-May period. Growth in trade continued to be driven by air-freight cargo, which grew by 3.3% y-o-y over the same period while sea-freight cargo contracted by 1.3% y-o-y. Low vacancy rates and high asking rents resulted in a slower leasing market in 2Q13. The few new lettings recorded during the quarter were largely underpinned by 3PL operators; OM Log (Asia), China Merchants Americold Logistics (HK) and SL Warehouse, among those active in the leasing market during the quarter. No new supply was completed in Hong Kong s warehouse market in 2Q13. Hong Kong: Industrial For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Last Trough ^ net, on GFA F Future HKD 9.8 psf pm Growth slowing 14 Mapletree Investments acquired a logistics development site in Tsing Yi through a government tender for HKD 1.69 billion (accommodation value HKD 1,85 per sq ft). The unit rate paid was 51% higher than the amount paid by China Merchants for a similar sized site located nearby back in February 212. The site has a maximum developable GFA of 914,93 sq ft and is likely to be complete by 216/217. With vacancy remaining at extremely low levels, landlords continued to push rents higher from their already record high levels. The strongest growth was recorded in the Hong Kong Island and Kowloon submarkets where the previous redevelopment and refurbishment of older buildings has reduced tenant options. Capital values continued to hold up well despite the sharp drop in transaction volumes. Although buyers initially indicated that they would not absorb the higher stamp duty charges, capital values continued to edge higher. The few buyers in the market were buying for self-occupation. In the most notable transaction, Mekim, a distributor of health care products, acquired the whole of the 7/F in Sunshine Kowloon Bay Cargo Centre in Kowloon Bay for HKD 21 million (HKD 3,13 per sq ft). Despite the current volatility in external trade markets, we expect demand for warehousing space to remain intact over the next 12 months. With vacancy rates likely to remain at a low level, we remain confident that rents will grow in our forecasted range of 5 1% in 213. The resilience of capital values through 2Q13 has prompted us to revise our full-year forecast for capital values upwards. Although we still believe that there is growing upward pressure on property yields, capital values are likely to be able to hold steady, so long as rents continue to trend higher. Against this backdrop, we no longer forecast a correction in capital values in 213. Moreover, we expect capital values to continue to edge higher over the next 12 months but at a slower rate than rents. Note: Hong Kong Industrial refers to Hong Kong s Industrial Warehouse market.

51 Asia Pacific Property Digest Second Quarter Beijing: Industrial Overall vacancy rate declines to 2.3% as absorption exceeds supply Average market rental growth accelerates to 2.8% q-o-q Capital values increase 2.8% q-o-q amid a stable market yield Although retail sales growth has decelerated somewhat, the first five months of 213 recorded 9.1% y-o-y growth, leading to resilient demand for non-bonded warehouse space from companies servicing the Beijing retail market. Net absorption was relatively stable at 24, sqm, an increase of only 6 sqm from 1Q13. One fully pre-leased new project in Jinma Industrial Park (JIP) accounted for 11, sqm of net take-up. Net absorption was mostly reflective of increased occupancy at existing projects, whereas it was largely supply driven in 1Q13. Active occupiers came from a variety of industries including automotive, cosmetics, the heating, ventilation and air conditioning industry and electronics. The Beijing Airport Logistics Park (BALP) accounted for over 6% of total space leased in 2Q13. The vacancy rate declined nearly 9 basis points q-o-q. Only one submarket, Tongzhou Logistics Park (TLP), recorded an increase in vacant space. The TLP vacancy rate increased to 8.% from 1.5% in 1Q13 as an e-commerce company moved to a neighbouring area Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Only one of the three projects scheduled for 2Q13 completion handed over space to tenants. Green Logistics Phase 3B added 11, sqm to JIP. The 81,3 sqm GLP ACL Phase 2 has acquired all of the necessary permits and is now targeting an early 3Q13 completion. Meanwhile Beijing Bailiwei Phase 3 delayed to 4Q13. Net absorption at phases 1 and 2 has been more gradual than for new supply in the BALP and TLP. Market conditions continued to favour landlords as space available for lease remained scarce. Meanwhile tenants from several industries continued to look for space to service the largest retail market in China. Thus, rental growth gathered significant momentum increasing 2.8% q-o-q (5.4% y-o-y) to RMB 1.8 per sqm per day. Rentals were flat q-o-q in 1Q13. There was not much change in yield expectations, thus capital values grew in line with rentals, recording growth of 2.8% q-o-q to reach RMB 5,25 per sqm. Several developers were actively seeking land for logistics developments but preference continues to be given to higher economic value add property types. The outlook for China s external trade market remains subdued but the size and growth of the local retail market should bolster demand for non-bonded warehouses in and around Beijing. Therefore we expect the overall market vacancy rate to remain below 5%. Rental growth is expected to largely maintain its momentum over the next 12 months. Yupei is expected to complete a 92, sqm project in Yongledian, an up and coming submarket where we expect to see more development going forward. Pre-leasing at this project as well as GLP ACL Phase 2 in BALP has been quite strong For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. Last Trough ^ net effective, on GFA F RMB 1.8 psm per day Rents rising 14 Future Beijing: Industrial Note: Beijing Industrial refers to Beijing s Prime logistics market.

52 52 Asia Pacific Property Digest Second Quarter 213 Shanghai: Industrial Shanghai: Industrial Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = Last Trough ^net effective, on GFA For 28 to 212, completions are year end annual. For 213, completions are as at 1H13, while future supply is for 2H13. RMB 1.21 per sqm per day Rents rising 14 Future 13F Two new completions add 56, sqm to the market stock Rental growth slows in Shanghai but remains strong in Kunshan Strong investor interest but there is a shortage of tradable assets Inquiry levels in 2Q13 were down from a year ago but remained at a similar level to the previous quarter. Retailers remained cautious, due in part to a recent slowdown in national retail sales growth. However, e-commerce firms remained a bright spot with a large volume of inquiries in the quarter. Many of these firms have large space requirements and are looking to lease large contiguous spaces or even buy land for development, often in satellite cities like Kunshan or Jiaxing. was also strong among third party logistics providers (3PLs), who represent a range of clients from industries including machinery, food producers, and apparel. was stable from manufacturers in the quarter. For example, the Swedish firm Atlas Copco leased 8, sqm in Goodman s Pudong Airport project. Despite the new leases, Shanghai vacancy edged up 1 percentage point to 7.9%, largely as a result of one new project which was delivered fully vacant in the Lingang submarket. was stable in Kunshan and Jiaxing, where vacancy levels remained flat as no new major leases were signed in 2Q13. Two non-bonded projects were completed in Shanghai. Furniture-maker Markor Home finished a 14, sqm warehouse in Songjiang, which was fully leased to China Salt upon completion. GLP completed a 42, sqm project in Lingang, part of which is under negotiation from an MNC. No new bonded projects were completed in the quarter. The next bonded project proposed for Shanghai is a GLP facility planned for the Waigaoqiao area in 217. The lack of new supply in the near term reflects continued pessimism among developers in Shanghai s bonded logistics market, where demand continues to suffer from weak export growth. Amid low inquiries and low transaction volumes, rental growth in Shanghai grew by a modest 1.1% q-o-q, with non-bonded rents rising to RMB 1.25 per sqm per day. Rental growth remained stronger in Kunshan, where historically low vacancy allowed rents to rise 2.7% q-o-q to RMB.94 per sqm per day. Rents in Jiaxing remained flat at RMB.91 per sqm per day. Non-bonded supply is expected to be large for Shanghai through end-213. Five projects are scheduled to be completed in 2H13. Though demand remains weaker than last year, strong demand in West Shanghai and other popular areas is likely to support stable rental growth this year. Over the next few years, satellite cities will account for a growing share of non-bonded logistics stock in the Greater Shanghai region. Kunshan, Jiaxing, and Taicang only have a quarter of the region s existing stock, but account for about 4% of planned future supply through 216. Note: Shanghai Industrial refers to the logistics market of both Shanghai and the three satellite cities in the Greater Shanghai region: Kunshan, Jiaxing, and Taicang.

53 Asia Pacific Property Digest Second Quarter Tokyo: Industrial 3PL operators and online retailers absorb the new supply in inland Tokyo Positive rental growth continues Nippon Prologis Reit acquires nine assets for JPY billion Freight traffic volumes in Tokyo Bay totalled 1.4 million TEUs in 1Q13, increasing 9.7% q-o-q and 2.1% y-o-y, in part reflecting stronger private consumption and a recovery in external demand. Meanwhile, industrial production improved in the four months ended May, supported by advances in the external environment as well as resilient domestic demand. Gains in the domestic economy are largely a result of government stimulus measures enacted earlier in the year. for new leases and expansions from 3PL players and online retailers continued to be robust in 2Q13. A scarcity of supply persists in the Tokyo Bay area and contributed to higher leasing activity in the inland Tokyo area where there was ample new supply. Leasing transactions in the quarter included Nippon Record Centre occupying Atsugi Logistics Centre (52, sqm), Mitsui-Soko Logistics leasing Iwatsuki Logistics Centre (13, sqm) and five companies including 3PLs taking up GLP Misato III (total 48, sqm). All of these distribution centres are located in inland Tokyo and completed during 2Q Q8 4Q9 4Q1 4Q11 4Q12 4Q13 Arrow indicates 12-month outlook base: 4Q8 = 1 Container Throughput There was no new supply completed in the Tokyo Bay area in 2Q13. However, inland Tokyo saw significant new supply with the completions of Kawagoe II Logistics Centre (GFA 55, sqm) and the Tokorozawa Logistics Centre (GFA 68, sqm), in addition to Atsugi Logistics Centre (GFA 52, sqm), GLP Misato II (GFA 95, sqm) and Iwatsuki Logistics Centre (GFA 28, sqm) referred to above. The Heiwajima Distribution Centre project was announced in 2Q13. This 84, sqm (GFA) modern distribution centre will have eight storeys with office space offered on the top floor and is due for completion in 214. The logistics space has been leased entirely to the co-developer, NTT Logisco. Rents averaged JPY 5,857 per tsubo per month in 2Q13, an increase of.3% q-o-q and.8% y-o-y. Rental growth was positive for the eighth consecutive quarter, reflecting an increase at the lower end of the monitored space. In 2Q13, Nippon Prologis Reit acquired a portfolio of nine assets for JPY billion from Prologis. The Ota Tokyo (GFA 75, sqm) located in the Tokyo Bay area was acquired for JPY 29.5 billion. Other assets located in Greater Tokyo included Prologis Park Zama 2 (GFA 99, sqm) acquired for JPY 21.9 billion, Prologis Funabashi 5 (GFA 45, sqm) acquired for JPY 9.5 billion and Prologis Park Narita 1 (GFA 64, sqm) acquired for JPY 8.42 billion. Moreover, the Katsushima ABC Warehouse (GFA 71, sqm) and the Katsushima 3-ku Warehouse (9,9 sqm) were acquired by Tokyotokeiba from Takaragumi for a total of JPY 15 billion. These assets were acquired for possible redevelopment because of their prime location as a logistics hub. 12-month Outlook Looking forward, robust demand from 3PLs and online retailers is expected to persist on the back of stronger private consumption and recovering external demand, in particular from the US and Asian countries. Meanwhile, new supply is expected to be limited for the foreseeable future. Therefore, rents are expected to sustain a positive growth trend over the next 12 months. TEUs (Million) Q8 1Q9 1Q1 1Q11 1Q12 1Q13 TEUs shipped per quarter Source: Bureau of Port and Harbour, Tokyo Metropolitan Government Last Trough ^ gross, on NLA JPY 5,857 per tsubo per month Rents rising 8 NA Tokyo: Industrial Note: Tokyo Industrial refers to Tokyo s Industrial Logistics market. Compiled in collaboration with Ichigo Real Estate Services Co., Ltd.

54 54 Asia Pacific Property Digest Second Quarter 213 Singapore: Industrial Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Long-term demand may decline due to rising competition from projects in Johore Rents stabilise as landlords maintain asking rents after renovations Capital values rise despite economic uncertainties Manufacturing output in May increased by 2.1% y-o-y with growth in the biomedical, electronics and general manufacturing industries. Long-term demand for factory space is being threatened by the emergence of industrial sites in the Iskandar area in Johore, Malaysia. Based on discussions with our business lines and the Singapore International Chamber of Commerce (SICC), it is understood that an increasing number of single-user factory occupiers are moving their operations to Iskandar due to the lower cost of labour and land. To free up valuable space, the Singapore government has set aside funds to help firms relocate on the premise that the land on which their current production is located is intensified. This transition will take time and occupiers who need space in the near term have caused the number of leases inked for Multiple-user space to rise significantly in the April-May period to 947, compared to 824 in the same period last year A 98,45 sq ft built-to-suit Business Park facility at Nepal Park was completed and fully leased to Unilever as a training and business centre in 2Q13. In the Multiple-user submarket, completions increased substantially by 84% q-o-q to 495,139 sq ft. Singapore: Industrial F 5 For 28 to 212, completions are year end annual. For 213, take-up and completions are as at 1H13, while future supply is for 2H13. Take-Up (net) Future Last Trough ^ gross effective, on NLA SGD 3.6 psf pm Rents stable 4 Vacancy Rate Percent Average gross rents for the Multiple-user submarket rose.7% q-o-q to SGD 1.9 per sq ft per month as landlords of higher quality buildings maintained their high asking rents. Business Park gross rents also increased.7% q-o-q to SGD 3.6 per sq ft per month as landlords undertook building renovations and asset enhancement initiatives to achieve rental growth. The effects of the Seller Stamp Duty (SSD) introduced in January 213 appear to have tapered off, with transaction volumes and capital values rising in the quarter. Capital values for the Multiple-user submarket increased by 2.8% q-o-q to SGD 44 per sq ft. With the growth in capital values surpassing rents, investment yields compressed 1 bps to 4.1%. In Business Parks, capital values rose.8% q-o-q to SGD 65 per sq ft and market yields remained unchanged at 5.5%. With the supply pipeline expected to grow over the next 12 months, it may take longer for space to be filled as the economic outlook remains uncertain and muted. The appreciation of the Singapore dollar against major global currencies is expected to hamper demand for local exports and, coupled with the difficulty in finding local workers and the resulting higher costs, demand for industrial space is expected to be subdued as companies hold back on expansion. One bright spot for the Business Park submarket is the growing demand for data centre space. According to third party research, a growing number of technology companies in Singapore plan on expanding their data centre presence over the next 18 months. This should bode well for spaces such as International Business Park which already house technology tenants such as Adobe and Softlayer. Note: Singapore Industrial refers to Singapore s island-wide Business Park and Multiple-user markets.

55 Asia Pacific Property Digest Second Quarter Sydney: Industrial Tenant demand improves, with 179,1 sqm of gross take-up Average Prime rents rise, led by South Sydney and the Outer North West Active investment market with eight sales totalling AUD million After the quiet first quarter of 213, tenant demand improved moderately in 2Q13. A total of 179,1 sqm of gross take-up was recorded over 15 tenant moves. Pre-lease and design & construct activity picked up with seven moves recorded in the quarter (87,4 sqm), albeit with a shrinking size cohort. Gross take-up into existing stock totalled 91,7 sqm in 2Q13, with the largest of these occurring in the Outer South West and the Inner West submarkets. While this uptick in pre-lease activity is a positive sign for developers, anecdotally developers are offering larger incentives to tenants due to competition in the pre-lease market. A total of 56,8 sqm of new stock was completed in 2Q13, in line with 1Q13 supply totals (52,1 sqm). This result will be bolstered by stronger supply in 2H13 with a further 351,3 sqm under construction expected to reach completion. However, the 46,2 sqm of expected additions in 213 will be below the five-year annual average of 515,8 sqm. Speculative construction is continuing in Sydney. Of the four projects completed in 2Q13, only 4% of the space was pre-absorbed. Overall pre-commitment levels in 213 are expected to be around 72% which will be the lowest pre-commitment level recorded in Sydney since 28. base: 4Q8 = 1 Financial Indicators are for Outer Central West Q8 4Q9 4Q1 4Q11 4Q12 4Q13 1, Average Prime grade net face rents recorded marginal growth across Sydney in 2Q13, led by positive rental uplift in the South Sydney and the Outer North West submarkets. Prime face rents increased.6% q-o-q to average AUD 13 per sqm per annum taking Sydney s year-on-year Prime rental growth across all markets to 2.6%. This is in line with the most recent headline inflation rate of 2.5% in 1Q13. Average Secondary grade net face rents also recorded a marginal increase of.6% q-o-q to now average AUD 113 per sqm per annum. Across Sydney, the Prime yield range remained unchanged at 7.75% 9.% in 2Q13. The Secondary yield tightened 25 basis points in the upper end as investor appetite continues. In 2Q13, there were eight transactions totalling AUD million. As a percentage of New South Wales total annual commercial transaction volumes, industrial sales currently account for 22%, very close to the 5 year average of 26%. 12 Month Outlook Tenant demand is expected to be subdued over the short-term. Exporters are likely to recalibrate business operations to the new lower AUD and both on-line and bricks-andmortar retailers will also need to adapt. Net face rents are expected to remain flat but further incentive increases are likely. Yields are expected to tighten further across both the Prime and Secondary grades as both foreign and domestic investors seek welltenanted, investment-grade assets. 2 For 28 to 212, completions are year end annual. For 213, take-up and completions are as at 1H13, while future supply is for 2H13. Last Peak ^ net, on GFA F Take-Up (gross) Future AUD 113 psm pa Rents rising 5 Sydney: Industrial Note: Sydney Industrial refers Sydney s industrial market (all grades).

56 56 Asia Pacific Property Digest Second Quarter 213 Melbourne: Industrial Q8 4Q9 4Q1 4Q11 4Q12 4Q13 base: 4Q8 = 1 Financial Indicators are for West Prime. 1, 8 15 major projects under construction totalling 27, sqm Existing rents increase in the North and South East submarkets Six sales transactions totalling AUD 12 million The demand environment remains challenging with subdued leasing activity recorded during the second quarter. Four transactions totalling 61,3 sqm were recorded, 53% down on the previous quarter and the lowest result since 3Q11. Leasing activity of existing space remains low and the majority of take-up continues to be captured in the pre-lease and design & construct market. The South East submarket has recorded low levels of occupier activity over the first half of 213, while the West has accounted for 77% of take-up for the year to date. The most notable transactions during the second quarter included Booth Transport (12, sqm), Superpop (7,5 sqm) and BMW Australia (6, sqm). Over the first six months of 213,196,8 sqm of new industrial space was completed, of which 87% was pre-committed. A further 153,6 sqm is anticipated to come online over the remainder of 213, nearly half of which is pre-committed. Major projects to reach practical completion over the first half of the year included Derrmiut (3, sqm) at 169 Australis Drive and Truganina at 5 Distribution Drive, which has 24, sqm pre-committed to Toll. There was also a 13,5 sqm facility completed at Boundary Road and a further 12, sqm built speculatively. Melbourne: Industrial For 28 to 212, completions are year end annual. For 213, take-up and completions are as at 1H13, while future supply is for 2H13. Last Trough ^ net, on GFA F Take-Up (gross) Future AUD 73 psm pa Rents stable 12 Pre-lease rents fell by 4.1% q-o-q in the North (AUD 82 per sqm per annum), as land releases near the airport have encouraged developers in the North to be more competitive with the West. Existing rents increased by 2.1% q-o-q in the North (AUD 71 per sqm per annum) and 1.4% q-o-q in the South East submarket (AUD 82 per sqm p.a). Rents were stable in the West (AUD 73 per sqm per annum) and City Fringe submarkets (AUD 125 per sqm per annum). Land values for an average standard services allotment (2, sqm) during the quarter were also mostly unchanged with a slight increase in the South East - Clayton (1.9%) and Oakleigh (4.1%). This was driven by strong demand for smaller lots in these two submarkets. Transaction activity improved during the quarter with six major investment sales totalling AUD 12 million. Prime investment yields have tightened 25 basis points at the lower end of the Prime yield range across the West, North and South East submarkets. City Fringe yields tightened 5 basis points at the lower end of the Prime yield range, with land values the main driver. 12 Month Outlook Looking ahead, the demand outlook is patchy, with below average levels of take-up expected over the remainder of the year. Occupancy rates reported by A-REITs remain very high and the lack of spare space within existing stock is placing a growing requirement for new developments. However, supply will remain pre-lease led, which will continue to support high occupancy rates. There are 15 projects totalling 24,5 sqm with plans approved that could complete in 214. NA Note: Melbourne Industrial refers Melbourne s industrial market (all grades).

57 Asia Pacific Property Digest Second Quarter Hong Kong: Hotels Visitor arrivals from China continue to rise y-o-y Major hotel projects postponed to 3Q13 Luxury hotel trading performance remains flat Luxury Hotel Trading Performance 4, 1 As at YTD May 213, total visitor arrivals to Hong Kong rose by 13.2%, although the majority of the growth has been fueled by Chinese travellers according to the Hong Kong Tourism Board. Out of the top ten source markets (excluding China), Taiwan and Indonesia were the only two markets that exhibited growth, albeit marginal with all other major markets experiencing declines y-o-y. Japanese inbound visitation continued to be negatively affected by the territorial disputes between Japan and China as visitor arrivals declined by 2.9% y-o-y. Visitation from long haul markets such as the United States and Europe have decreased on the back of a weaker conferencing season and softening corporate demand. However, overall demand to Hong Kong remains robust as weakness in the corporate sector is supported by strong leisure demand from China. ADR/RevPAR (HKD) 3, 2, 1, Source: STR Global ADR Occupancy (%) RevPAR YTD May12May13 YTD Occupancy (%) Although the 548-room Dorsett Regency in Tseun Wan and the 91-room Mira Moon were scheduled to open in 2Q13, it is understood that both projects have been delayed and are likely to open in 3Q13. As a result, no major hotels opened in Hong Kong in 2Q13. According to STR Global, trading performance for luxury hotels in Hong Kong remained stable as at YTD May 213 with occupancy declining by.4 percentage points and Average Daily Rate (ADR) increasing by.7% over the same period last year. While luxury hotels continue to maintain RevPAR levels, hotels in the midscale market are beginning to see declines in RevPAR as supply that entered the markets in Sha Tin and Tseung Kwan O in 212 erodes their market share. Although visitation from China continues to be strong, visitation from the majority of short and long haul markets is beginning to experience declines as evidenced by the latest data released by the Hong Kong Tourism Board. Trading performance has also exhibited signs of weakness as at YTD May 213 but gaps in corporate and Meetings, Incentives, Conventions and Exhibitions (MICE) demand are expected to be supplemented by strong Chinese leisure demand that typically arises in the third quarter of 213. Given the benign supply scenario in Hong Kong, hotel trading performance in the upscale and luxury markets is expected to remain stable. Major Additions to Hotel No. of rooms 5, 4, 3, 2, 1, F 15F Additions to Future Source: Industry sources, Hong Kong Tourism Board, Jones Lang LaSalle RevPAR Occupancy Stable ADR Hong Kong: Hotels Note: Hong Kong Hotels refers to Hong Kong s Luxury hotel market.

58 58 Asia Pacific Property Digest Second Quarter 213 Beijing: Hotels Upscale Hotel Trading Performance 2, 1 International arrivals to Beijing continue to decline International branded hotels are focusing development in suburban areas RevPAR continues to underperform y-o-y ADR/RevPAR (RMB) ADR Occupancy (%) Source: STR Global Major Additions to Hotel No. of rooms 1,5 1, 5 12, 1, 8, 6, 4, 2, RevPAR Source: Industry sources, Jones Lang LaSalle YTD May12May13 YTD F 15F Additions to Future Occupancy (%) International visitor arrivals to Beijing declined by 13.4% y-o-y to 1.8 million visitors as at YTD May 213, according to the latest statistics from the Beijing Tourism Administration. Visitors from the United States, South Korea and Germany were the top three source markets. Visitation from Japan continued to show a decline from 1Q13, recording a y-o-y decrease of 53.8% due to territorial disputes and political issues between both countries. There were two major events held in Beijing in 2Q13. The China (Beijing) International Fair for Trade in Service and the 9th China (Beijing) International Garden Expo took place over May and June. However, these events did not attract as many international visitors as previous years, indicating a possible slowdown in Meetings, Incentives, Conventions and Exhibitions (MICE) visitors. Global economic uncertainty and the haze conditions in Beijing were some of the factors resulting in a reduction in international and domestic travel. Anti-corruption policy introduced in China has had a negative impact on MICE travel with governmental budget tightening in travel and food and beverage related activities. Between 28 and 211, a substantial amount of new hotel supply was added to the market. Post-Olympic Games in 28, the market has been experiencing room rate pressure due to the significant hotel additions. New hotel development slowed in 212, with less than 1, rooms added to supply. In 213, approximately 2,594 hotel rooms are expected to open, a 7.9% y-o-y increase from 212 if all rooms materialise. To date, 389 rooms have opened in 1H13 and 2,25 rooms are expected to open in 2H13. Future hotel supply is being developed in suburban areas of Beijing, such as Daxing, Yanqing, Huairou and Tongzhou. There were two major hotel openings in the first five months of the year, namely the 1-room Hotel Eclat Parkview Green and the 289-room Conrad in East 3rd Ring. As at YTD May 213, occupancy of upscale hotels in Beijing registered 61.7%, representing a decline of 2.8 percentage points y-o-y whilst Average Daily Rate (ADR) declined by 5.1% y-o-y to reach RMB 1,37. As a result, RevPAR showed a decline of 9.3% y-o-y to RMB 64. This can be attributed to the weak visitor arrivals during the quarter. The slowdown in the domestic economy and political issues with Japan continue to affect the number of international arrivals into Beijing. However, domestic visitation remains strong as reflected by the steady increase in domestic inbound arrivals. Corporate travel may come under some pressure as a result of the Chinese banking sector tightening bias which began in May. However it is too early to gauge the implication on overall travel trends. Beijing: Hotels RevPAR Occupancy Declining ADR Note: Beijing Hotels refers to Beijing s Upscale hotel market.

59 Asia Pacific Property Digest Second Quarter Shanghai: Hotels International arrivals in Shanghai continue to fall Two international branded luxury hotel openings in 2Q13 RevPAR declines due to weaker inbound visitation Upscale Hotel Trading Performance 2, 1 International visitor arrivals to Shanghai showed a decline of 9.8% y-o-y to 3. million visitors while domestic visitor arrivals remained stable as at YTD May 213, according to the latest statistics released by the Shanghai Municipal Tourism Administration. There were several international and local events held in Shanghai during 2Q13 including the 16th Shanghai International Film Festival, China (Shanghai) International Technology Fair and the Bund Global Financial Summit. Visitors from Japan, the United States and South Korea continue to be the top three international source markets to Shanghai but overall inbound visitation has shown declines. Political tensions between Japan and China resulted in a reduction of Japanese visitors during the quarter. In addition, inbound tourists were also concerned over the H7N9 bird flu outbreak across China. In 213, internationally branded hotel rooms in Shanghai are expected to grow y-o-y by 9.7% or 4,77 rooms. There were two major hotel openings in 2Q13, namely the 58-room Jingan Shangri-La and the 362-room Mandarin Oriental Pudong. Hotels which are scheduled to open in 2H13 include the Banyan Tree, Pullman, Renaissance, Sofitel and Wyndham. ADR/RevPAR (RMB) 1,5 1, ADR Occupancy (%) Source: STR Global Major Additions to Hotel 1, 8, YTD May12 May13 YTD RevPAR Occupancy (%) As at YTD May 213, upscale hotels experienced a.6 percentage point y-o-y increase in occupancy to register 57.5% while Average Daily Rate (ADR) declined by 3.2% y-o-y to reach RMB 1,84. As a result, RevPAR was recorded at RMB 623, a decline of 2.1% y-o-y due to the decrease in visitor arrivals and to some extent the opening of two luxury hotels during the quarter. International visitor arrivals to Shanghai are likely to increase during the rest of 213, while y-o-y growth in domestic arrivals is expected to remain stable at 7.5%. The substantial amount of new supply in 213 is likely to put pressure on hotel trading performance especially as many of these new hotels are located in the emerging submarkets of Shanghai and as a result are likely to be competitive on rates. Hotel trading performance and capital values could also be impacted by uncertainties in the global and domestic economy, government initiatives on the real estate industry and the volume of hotel developments in the medium to long term. No. of rooms 6, 4, 2, F 14F 15F Additions to Future Source: Industry sources, Jones Lang LaSalle RevPAR Occupancy Declining ADR Shanghai: Hotels Note: Shanghai Hotels refers to Shanghai s Upscale hotel market.

60 6 Asia Pacific Property Digest Second Quarter 213 Tokyo: Hotels Luxury Hotel Trading Performance 5, 1 Occupancy exceeds 75%, above the last peak in 27 No major four or five-star hotel openings in the quarter RevPAR growth likely to drive ADR in the short term ADR/RevPAR (JPY) 4, 3, 2, 1, Source: STR Global ADR Occupancy (%) Major Additions to Hotel RevPAR YTD May12May13 YTD Occupancy (%) International visitor arrivals to Japan have shown a y-o-y increase of 2.9% to 3.3 million as at YTD May 213. Visitors from China, the third largest source market to Japan, recorded a 28.2% y-o-y decrease in the same period due to tensions between the two countries regarding a territorial issue. In contrast, visitor arrivals from South Korea increased by 38.3%, which can be attributed to the Korean Won appreciation. Domestic accommodation demand has shown a strong recovery since the earthquake in March 211. The weakened Japanese Yen and the commencement of operations of several low cost carriers based in Narita and Kansai flying into major Japanese cities such as Sapporo, Fukuoka, and Naha in 212 also led to an increase in domestic tourism. There is also an upward trend in consumer spending as stock prices have appreciated since December 212. While foreign currency exchange rates against the Japanese Yen and stock prices on the Nikkei Stock Exchange have been volatile, consumer spending has improved. There were no major hotel openings in 2Q13. There are no four or five-star hotel openings scheduled to open over the balance of the year with the exception of the Tokyo Marriott Hotel, which is a rebranding from the 248-room Gotenyama Garden Hotel LaForet and is scheduled to open in December 213. No. of rooms F 15F Additions to Future Source: Industry sources, Jones Lang LaSalle Hotel trading performance in Tokyo continues to show improvement as reflected by the y-o-y Revenue per Available Room (RevPAR) increase of 15.1% to JPY 3,57 as at YTD May 213. This can be attributed to the growth in occupancy and Average Daily Rate (ADR) during the first five months of the year. While there were no hotel transactions in the luxury hotel sector in Tokyo during the quarter, the 89-room Hilton Tokyo Bay, a full-service hotel located adjacent to Tokyo Disney Resort in Urayasu Chiba, was sold for JPY 26.5 billion or JPY 32.2 million per key in April 213. The purchaser was Japan Hotel REIT, one of the two J-REITs which actively invest in hotel assets. Domestic and international demand is expected to continue on the growth trajectory, given the steady increase in visitors since the earthquake in March 211. RevPAR growth in the short term is likely to be driven by ADR as occupancy has stabilised at 75% as at YTD May 213. However, the volatility of stock prices and foreign currency exchange rates against the Japanese Yen may be a downside risk that could impact consumer spending. Tokyo: Hotels RevPAR Occupancy Rising ADR Note: Tokyo Hotels refers to Tokyo s Luxury hotel market.

61 Asia Pacific Property Digest Second Quarter Singapore: Hotels Visitor arrivals increase by 6.6% y-o-y in 1Q13 Hotel openings are primarily in the economy and midscale sectors Hotel trading performance shows marginal growth as at YTD May 213 In 1Q13, visitor arrivals to Singapore recorded an increase of 6.6% y-o-y to reach 3.8 million, according to the latest statistics from Singapore Tourism Board (STB). In 1Q13, inbound visitation to the city remained healthy albeit growth was at a slower rate than previous years. According to the Ministry of Trade and Industry s speech at the Tourism Industry Conference 213, visitor arrival growth is estimated to moderate to 3% to 4% annually in the next decade, which is in line with the historical average over the past 1 years. The STB also estimates that tourism receipts are likely to grow by a compounded annual rate of 4% to 6% in the next decade. According to the latest global rankings by the International Congress and Convention Association, Singapore was the only Asian city in the Top Ten Convention Cities in the World in 212, affirming the city s position as a Meetings, Incentives, Conventions and Exhibitions (MICE) destination. In 2Q13, an estimated 887 hotel rooms primarily in the economy and midscale sectors opened. Major hotel openings comprised the 38-room BIG Hotel, the 384-room Ramada Singapore, the 125-room Changi Cove Hotel and the 7-room Amaris Hotel. In 2H13, new international hotel brands are expected to open including Holiday Inn Express, Sofitel So and Westin. As at YTD May 213, the luxury hotel market occupancy was maintained at a healthy level of 85%, while Average Daily Rate (ADR) showed a marginal increase of 1.7% y-o-y to SGD 417, resulting in a y-o-y RevPAR growth of 1.8% to record SGD 354. In contrast, the upscale and midscale sectors have shown declines in RevPAR primarily due to the opening of several midscale hotels during the quarter. In April 213, contracts were exchanged on the sale of the 336-room Park Hotel Clarke Quay to Ascendas Hospitality Trust. The purchase consideration of SGD 3 million represented the largest single hotel transaction in Singapore in recent history. The hotel will continue to be operated by Park Hotel Group under a lease structure of 1 years, with the option of extension for an additional five years upon mutual consent by both parties. In May 213, the 49-room Berjaya Hotel was sold for SGD 5 million, amounting to approximately SGD 1.2 million per key. The high transaction prices are reflective of a strong investor interest for Singapore hotels. ADR/RevPAR (SGD) Luxury Hotel Trading Performance YTD YTD May12May13 ADR RevPAR Occupancy (%) Source: STR Global Major Additions to Hotel 7, 6, 5, No. of rooms Source: Industry sources, Jones Lang LaSalle , 3, 2, 1, F 15F Additions to Future Occupancy (%) We anticipate modest growth in visitor arrivals in light of the 3.7% y-o-y Gross Domestic Product (GDP) growth in 2Q13 according to advanced estimates from the Ministry of Trade and Industry Singapore. Hotel trading performance is likely to show minimal increases due to modest growth in demand and the 8.3% y-o-y increase in upcoming supply for the full year 213. Nevertheless, Singapore continues to improve its tourism offerings with the anticipated opening of the Singapore Sports Hub and the National Art Gallery in 214. RevPAR Occupancy Stable ADR Singapore: Hotels Note: Singapore Hotels refers to Singapore s Luxury hotel market.

62 62 Asia Pacific Property Digest Second Quarter 213 Bangkok: Hotels ADR/RevPAR (THB) Luxury Hotel Trading Performance Source: STR Global Major Additions to Hotel No. of rooms 6, 5, 4, 3, 2, 1, 5, 4, 3, 2, 1, ADR Occupancy (%) RevPAR Source: Industry sources, Jones Lang LaSalle YTD May12May13 YTD F 14F 15F Additions to Future Occupancy (%) Asian countries continue to be the main source markets to Bangkok Significant amount of new supply due to delayed openings ADR remains flat as new room supply increases In the first five months of 213, Bangkok welcomed 7.2 million visitors, representing a 25% y-o-y growth. The strong increase in visitor arrivals was driven by political stability and the continued surge in Chinese visitor arrivals to the city. Inbound tourism originating from China, Japan and India remain important source markets. Inbound tourism from China recorded a remarkable increase of 97.7% y-o-y at YTD May 213, partly due to the popular Chinese movie Lost in Thailand which helped to promote the city. There was also a notable increase of 1.4% of visitors from Vietnam at YTD May 213. VietJet Air, a Vietnamese low-cost carrier, launched two new flights from Ho Chi Minh City and Hanoi to Bangkok in 1H13, improving connectivity between Vietnam and Bangkok. In 2Q13, there were several new hotels adding approximately 1,5 new rooms to the market. The majority of new hotels were in the upscale segment including the 281-room Centara Watergate Pavilion Hotel Bangkok and the 3-room Holiday Sukhumvit 22. The 177-room Imperial Tara Hotel was renovated and rebranded as the DoubleTree by Hilton Hotel Sukhumvit Bangkok in May 213. We anticipate a further 2,374 rooms to open in 2H13, of which 2,224 rooms or 93.7% will be in the luxury and upscale segments. While hotel developments continue to be concentrated in Sukhumvit, an increasing number of hotels are being added in suburban areas. For instance, the 15-room Centara Central Station Hotel in Hua Lumpong and 176-room Mercure Bangkok in Makkasan will be opening in 2H13. The expansion of the Bangkok Mass Transit System has improved accessibility within the city and has encouraged the development of hotels in peripheral locations. Over 2H13, the upcoming hotel supply includes Hotel Indigo, Hilton Sukhumvit and Ramada Plaza. The Amari Atrium Bangkok will undergo a major overhaul in October 213 and reopen as Thailand s first AVANI in 214. Bangkok s hotel trading performance benefited from the significant increase in visitor arrivals in 1H13. As at YTD May 213, Average Daily Rate (ADR) for luxury hotels increased by a marginal 1.2% y-o-y to THB 5,832, while occupancy rose by 3.7 percentage points to 68.4%, resulting in a Revenue per Available Room (RevPAR) increase of 6.9% to THB 3,987. Bangkok: Hotels RevPAR Occupancy Rising ADR According to the Global Destination Cities forecast, Bangkok is expected to be the world s number one destination for international tourists in 213, with approximately 16 million visitors. Visitor arrivals are expected to continue on the growth trajectory as the Tourism Authority of Thailand actively promotes the city s tourism appeal through multiple campaigns such as the promotion of medical tourism in the China market (excluding Hong Kong and Taiwan). There might be some pressure on room rates and the hotel market will remain competitive as there are a significant number of hotels in the pipeline. Bangkok hotels refer to Bangkok s Luxury hotel market.

63 Asia Pacific Property Digest Second Quarter Kuala Lumpur: Hotels Visitor arrivals growth slows, in light of recent parliamentary elections The Aloft at Kuala Lumpur Sentral opens in March 213 Luxury hotel trading performance grows on rising occupancy According to Tourism Malaysia, visitor arrivals to Malaysia during 1Q13 experienced double digit growth. However, growth likely slowed in 2Q13 due to parliamentary elections held in May. Hotel markets such as Kuala Lumpur, which rely on corporate demand, tend to experience slower periods of demand prior to a major election. This is especially true in this situation since the Barisan Nasional, which has been the ruling party since independence, was expected to be strongly contested by the leading opposition party. for Kuala Lumpur luxury hotels originates mostly from domestic and regional sources, in particular Singapore and Thailand. The strong presence of multinational corporations in Kuala Lumpur also leads to a larger share of long haul market visitations (e.g. the United States and Australia) relative to the rest of Malaysia. The most recent hotel opening in Kuala Lumpur was the 482-room Aloft, which debuted in March and is located adjacent to Kuala Lumpur Sentral train station, the city s main transport hub. Other hotels expected to open by the end of 213 include the 255-room Hilton Garden Inn at Puchong and the 513-room Pullman Hotel located west of Mid Valley City. The 157-unit Ascott Serviced Apartments is also scheduled for opening at Kuala Lumpur Sentral. Trading performance for luxury hotels in Kuala Lumpur has shown marginal growth on the back of improving occupancy according to statistics from MIHR Consulting. In 2Q13, limited office net take-up coupled with the uncertainty surrounding the Malaysian parliamentary elections undermined any significant growth in the luxury hotel market. As at YTD May 213, occupancy has grown 1.7 percentage points whilst Average Daily Rate (ADR) has increased by a marginal.1% resulting in RevPAR growth of 2.5% y-o-y. It is expected that hotels in the upscale sector have registered declines in RevPAR as new supply which entered in late 212 has yet to be absorbed by the market. ADR/RevPAR (MYR) Luxury Hotel Trading Performance Source: MIHR Consulting Sdn Bhd Major Additions to Hotel No. of rooms , 1,5 1, ADR Occupancy (%) F 15F Additions to RevPAR Source: Industry sources, Jones Lang LaSalle YTD May12 YTD May Future Occupancy (%) Although global economic uncertainty persists, the re-election of the Barisan Nasional is expected to provide political stability in Malaysia in the immediate future. It is expected that business and investor confidence should pick up by year end, underpinned by initiatives implemented by the ruling party, such as the creation of new jobs and lower private and corporate income tax. Hotel trading performance is expected to remain stable or experience marginal growth, given the level of new supply that is expected to enter the market in the short term. RevPAR Occupancy Stable ADR Kuala Lumpur: Hotels Note: Kuala Lumpur Hotels refers to Kuala Lumpur s Luxury hotel market.

64 64 Asia Pacific Property Digest Second Quarter 213 Jakarta: Hotels ADR/RevPAR (USD) Upscale Hotel Trading Performance ADR Occupancy (%) Source: STR Global Major Additions to Hotel No. of rooms , 5, 4, 3, 2, 1, YTD May12May13 YTD RevPAR Source: Industry sources, Jones Lang LaSalle F 14F 15F Additions to Future Occupancy (%) Direct foreign arrivals grow 5.6% y-o-y as at YTD May 213 Only one major hotel opening in 2Q13 ADR surges while occupancy shows moderate growth In 212, direct foreign arrivals to Jakarta via the Soekarno-Hatta International Airport (SHIA) were recorded at 2.1 million, representing a 6.3% y-o-y increase. As at YTD May 213, direct foreign arrivals to Jakarta registered a 5.6% y-o-y increment to 87,418 visitors with the top source markets being Malaysia, China, Japan, Singapore and South Korea. Domestic passenger traffic to and from Jakarta registered an increase of 11.5% to 19.7 million passengers in 212 over 211 but recorded a modest 2.1% decline as at YTD May 213. Jakarta continues to be dependent on domestic demand, especially from the corporate and Meetings, Incentives, Conventions, and Exhibitions (MICE) segments. The three-star Serela Kartini in Central Jakarta was the sole opening during 2Q13, which added 153 rooms to the market. The upcoming pipeline comprises 1,6 rooms for the rest of the year, an 8.9% y-o-y increase over 212 if all rooms materialise. In 213, the forecasted hotel supply is dominated by midscale and economy hotels with Accor s select service brand, ibis, having the largest pipeline. The 18-room Raffles Jakarta at Ciputra World 1 is the only luxury hotel scheduled to open in late 213. In the short to medium term, the budget hotel sector boom is likely to continue with room supply having doubled in 212 and is anticipated to grow at the same pace in 213. Driven by domestic operators, Aston and Santika remain the leading budget hotel operators in Jakarta and Indonesia with rapid expansions. As at YTD May 213, occupancy recorded a 2.9 percentage point increase to 67.5% while Average Daily Rates (ADR) registered a 14.1% y-o-y growth to USD 168, resulting in a 17.4% y-o-y increase in Revenue per Available Room (RevPAR) to USD 114. The robust trading performance can be attributed to strong domestic demand and positive business sentiment. In contrast, hotels in the midscale sector recorded declines in occupancy and moderate increments in ADR, possibly due to the 13.2% growth in midscale hotel supply in 212 which has not been fully absorbed by the market. Moving forward, domestic and international corporate demand is likely to remain strong, in view of the efforts by the government to attract multinational companies and as demand for office space continues on the growth trajectory. There is also positive sentiment on the upcoming elections in 214. With limited additions to hotel room supply in 213, we anticipate market occupancy to stabilise while ADR growth is likely to remain strong in the upscale hotel market. A minimum wage increment coupled with a fuel price hike in late June is expected to contribute to ADR growth as the costs may be passed on to hotel guests with contracts having been finalised earlier in the year. Jakarta: Hotels RevPAR Occupancy Rising ADR Note: Jakarta Hotels refers to Jakarta s Upscale hotel market.

65 Asia Pacific Property Digest Second Quarter Sydney: Hotels Total visitor nights declines 3.1% y-o-y in 1Q13 Limited new hotel openings during the first quarter Three hotel transactions in Sydney in 2Q13 A total of 23.9 million visitor nights were spent in the Sydney Tourism Region (city and surrounds) in 1Q13, representing a decline of 3.1% compared to the same period in 212. Domestic visitor nights declined 17.7% to 5.5 million, whereas international visitor nights recorded 2.3% growth to 18.4 million. Declines were most evident in the domestic business and visiting friends and relatives segments, whereas domestic and international holiday travel increased. The New South Wales government has given Crown Limited the approval to go to the next stage in developing Crown Sydney at Barangaroo. The proposed AUD 1.5 billion luxury resort and VIP-only casino on the city s harbourside is expected to open in 219. Notable openings during 2Q13 include the 3-room extension of the Sebel Pier One. Three accommodation developments are currently under construction and due for completion in 213 and 214. These include a 9-room boutique hotel in Pyrmont, 38-unit serviced apartment and the high-end 1-room Baillies Sydney in the Rocks. Two proposed projects are likely to commence in the short term including the conversion of an office building into a midscale hotel (282 rooms) and the extension of an existing property in two stages (2 rooms and 231 rooms). As at YTD May 213, occupancy levels in Sydney remained stable at 85.4% while Average Daily Rate (ADR) improved marginally by 2.8% to AUD 216 resulting in Revenue per Available Room (RevPAR) growth of 2.8% to AUD 184. Hotel trading performance was particularly strong in February and April 213, with trading boosted by cruise and inbound tourism in February and good take-up by the domestic holiday segment during the Easter school holiday period. Major transactions in 2Q13 included the Stamford Plaza Double Bay (April 213, AUD 57 million), Ibis King Street Wharf (April 213) and the Diamant Sydney (April 213). No sales prices were disclosed on the last two sales. ADR/RevPAR (AUD) Marketwide Hotel Trading Performance ADR RevPAR Occupancy (%) Source: Australian Bureau of Statistics, STR Global Major Additions to Hotel No. of rooms YTD YTD May12May Source: Australian Bureau of Statistics Jones Lang LaSalle F 14F 15F Additions to Future Occupancy (%) The outlook for Sydney s accommodation market remains positive following the robust recovery which has been evident over the past three years, with nominal RevPAR having surpassed the 28-peak. Growth is expected to accelerate through the remainder of 213 and 214, given the relatively benign supply outlook and more stable demand environment. RevPAR Occupancy Rising ADR Sydney: Hotels Note: Sydney Hotels refers to all grades of accommodation and includes both hotels and serviced apartments.

66 66 Asia Pacific Property Digest Second Quarter 213 With Over1 Researchers On The Ground In 5 Markets, We Help You Stay Ahead Comprehensive Data, Forecasts, Reports, Presentations, Hotline To find out more, please contact: Dr Jane Murray Head of Research Asia Pacific [email protected] Roddy Allan REIS Asia Pacific [email protected]

67 Jones Lang LaSalle Research - Asia Pacific ASIA PACIFIC Dr Jane Murray Head of Research Asia Pacific [email protected] GREATER CHINA Michael Klibaner Head of Research Greater China [email protected] Marcos Chan Head of Research Beijing [email protected] Shanghai Joe Zhou Head of Research Shanghai [email protected] Guangzhou Silvia Zeng Senior Manager, Research [email protected] Chengdu Frank Ma Head of Research Chengdu [email protected] Qingdao Celia Chen Senior Analyst, Research ext 817 [email protected] Tianjin Durrell Mack Head of Research - Tianjin [email protected] Chongqing Jasmine Ma Deputy Head of Research and Consulting Chongqing [email protected] Shenyang Cedric Wang Senior Manager, Research and Consulting [email protected] Wuhan Daisy Hu Research [email protected] Taipei Jamie Chang Research Associate [email protected] Macau Alvin Mak Senior Manager [email protected] NORTH ASIA Japan Takeshi Akagi Head of Research Japan [email protected] South Korea Yongmin Lee Assistant Manager, Research South Korea [email protected] SOUTH EAST ASIA Singapore Dr Chua Yang Liang Head of Research South East Asia and Singapore [email protected] Indonesia Anton Sitorus Head of Research Indonesia [email protected] The Philippines Claro Cordero Head of Research Philippines [email protected] Thailand Dan Tantisunthorn Head of Research Thailand [email protected] Vietnam Chris Murphy Head of Research - Vietnam [email protected] Malaysia (Jones Lang Wootton in association with Jones Lang LaSalle) Malathi Thevendran Executive Director Research [email protected] WEST ASIA India Ashutosh Limaye Head Research & REIS [email protected] AUSTRALASIA David Rees Head of Research Australasia [email protected] New Zealand Justin Kean Head of Research [email protected]

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