Australian Real Estate Quarterly Review. The implications of lower for longer Q3/2016

Australian Real Estate Quarterly Review The implications of lower for longer Q3/2016

In summary Investment climate Conditions supportive in FY17 As we move into FY17 the key themes of global uncertainty and low interest yields are supportive of investment demand for real estate. Occupier markets are firming on positive business conditions and resilient jobt growth. Page 3 Lower for longer Implications for investors The realisation that interest rates and inflation may stay lower for longer has profound implications for real estate investment, including that investors are reducing the level of returns they expect. Page 4 Transactions - Activity eases after strong year Investment activity stabilised in Q2 2016, partly due to limited office stock being brought to market. Cross border flows appear to be easing and the sharp declines in yields seen in 2015 appear to be tapering. Page 7 Performance Property performing well. What next? A-REITs outperformed the main asset classes in Q2 2016. On an annual basis, A-REITs and unlisted property delivered the strongest returns of 24.6% and 13.4% respectively in FY16. Page 8 Office markets - Rising tide of demand lifts markets Positive office demand across the east coast markets is steadily absorbing the remaining pockets of available space. Combined with significant withdrawals of stock, a number of markets are positioned for rental growth. Page 9 Industrial Improving demand a positive sign Improving levels of take-up are a positive sign for industrial markets with rental growth occuring in some inner city markets. However competitive precommitment deals are keeping growth in the outer metro areas flat. Page 11 Retail Divergent growth outlook The outlook is for divergent growth in retail sales across the country in FY17 with Sydney and Melbourne experiencing much stronger growth than other locations. Page 12 2

Investment climate Conditions supportive in FY17 As we move into FY17 the key themes of global uncertainty and low interest yields are supporting investment demand for real estate. Occupier markets are firming on positive business conditions and resilient jobs growth. Key assumptions about the outlook include: NSW and Victoria will solidly outperform other states based on population growth and infrastructure spending (Figure 1). QLD is forecast to improve next year and WA will lag Official cash rates are likely to fall by a further 25 to 50 basis points Residential construction activity is expected to slow and could be a key risk to growth if it slows more sharply than forecast (Figure 2) Employment growth is positive, but the rate of growth is slowing mildly with a continued shift from full time to part time jobs Service sector activity, (such as in education, health, IT, tourism and business) will remain a growth driver for the economy. Growth will be higher for small to medium businesses than large Brexit is assumed to have little economic impact on Australia, with effects more likely to be geopolitical. The reduced majority of the Australian Federal government is seen as having limited impact, but much depends on confidence The property markets of Sydney and Melbourne should show positive occupier demand in FY17, with mixed demand elsewehere The global uncertainty we have seen this year emanating from China, Europe and the Middle East has served to highlight the attractiveness of Australian commercial real estate. Yields are expected to remain at low levels for a considerable time unless there is an external shock or disruption to capital flows. Figure 1. NSW and VIC lead the other states Final demand p.a. NSW VIC QLD WA 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% Jun-16 Jun-17 Jun-18 Jun-19 Source: Deloitte Access Economics (DAE) Figure 2. Dwelling commencements 000 per annum Dwelling commencements Standard bank variable mortgage rate 220 10.0% 200 9.0% 8.0% 180 7.0% 160 6.0% 140 5.0% 120 4.0% 100 3.0% Jun-05 Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Jun-19 Source: Deloitte Access Economics (DAE) Table 1. Australian economic forecasts: Q2 2016 Jun-16 Jun-17 Jun-18 Real GDP %pa 3.4% 2.3% 2.6% Final demand %pa 0.6% 0.8% 1.8% Employment %pa 1.9% 1.2% 1.4% Imports %pa -5.4% 2.0% 2.3% Retail sales %pa (real) 2.0% 1.8% 3.0% CPI %pa 0.9% 1.6% 2.2% 90 Day bill % 1.9% 1.5% 1.5% 10yr Bond % 2.0% 2.3% 2.5% AUD/USD 0.74 0.69 0.69 Source: DEXUS Research (based on DAE) 3

Lower for longer Implications for investors Figure 3. Bond yield forecasts revised down The realisation that interest rates and inflation may stay lower for longer has profound implications for real estate investment, including that investors are reducing the level of returns they expect. Interest rates likely to be cyclically low Interest rates in Australia have declined to record lows. Recent events such as a slowing Chinese economy, Brexit and downgrades to global growth forecasts by the International Monetary Fund have caused economists to markedly revise down bond yield forecasts (Figure 3). Behind these downward revisions is a popular view that official cash rates could fall further given the a declining terms of trade and the prospect of an easing in housing construction. The outlook for inflation is also subdued given spare capacity in the economy and weak wages growth (Figure 4). All this points to an extended period where short term interest rates remain low. The conditions which could change this view seem mild and appear to be developing only slowly. The most likely catalyst for higher interest rates would be US cash rates rising (possiblly from late 2017), or Australia absorbing excess mining boom capacity faster than expected. Source: Bloomberg, Deloitte Access Economics (DAE) Figure 4. Inflation and wages growth - Australia Per annum CPI Wages growth 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16 Source: Deloitte Access Economics (DAE) Bond yields are moving structurally lower It is anticipated that bond yields will remain relatively low both cyclically (short term) and structurally (long term). In the short term bond yields should be constrained by: slow economic growth prospects, low inflation, and fiscal restraint by governments which limits issuance of new bonds. 4

Forecasts by economists at NAB, WBC and UBS for 10 year bond yields (currently 2.0%) to average below 3.3% over the next five years reinforce this point. With bond yields at record lows it is reasonable to expect yields to move higher in the medium to long term. But the new normalised level will almost certainly entail lower bond yields than investors have historically been used to. UBS estimate that the neutral cash rate in Australia has fallen to between 3.0% and 4.0% (down from circa 5.5% pre-gfc). Allowing for a term spread, this estimate implies a normalised 10 year bond yield of around 4.0%. Figure 5. Nominal and real bond yields % Generic Aus Govt 10 yr bond Aus Govt Indexed Bonds Yield 10 Year 16% 14% 12% 10% 8% 6% 4% 2% 0% Jun-88 Dec-91 Jun-95 Dec-98 Jun-02 Dec-05 Jun-09 Dec-12 Jun-16 Source: RBA, DEXUS Research Figure 6. Yield spreads, offices vs other assets There is nothing radically new about bond yields trending lower over time. Australian (and global) bond yields have structurally declined over the past three decades (Figure 5). Reasons for the structural decline include: % 7% 6% 5% 4% 3% 2% 1% 10yr bond vs office Equities vs office Real bond vs office slower population growth in the developed world, 0% -1% -2% Jun-96 Jun-98 Jun-00 Jun-02 Jun-04 Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16 an ageing population, and increasing demand for high yielding assets Source: Bloomberg, DEXUS Research In summary, Australian interest rates and bond yields are expected to remain low for at least the next three years before normalising to levels which are low by historical standards. What does it mean for property? The lower for longer environment is likely to support investment demand for real estate in the short term as investors seek secure income yields. Office yields, for example, are still at wide spreads to bond yields after both have fallen in recent years (Figure 6). Expected returns for real estate investments are likely to be lower than the experience of the past decade. This continues a long-running trend. For example valuation discount rates have stepped down by more than one percent each decade for the past 30 years, and it is now happening again (Figure 7). 5

In the absence of an external shock or interruption to foreign capital flows, low interest rate yields seem likely to extend the current value cycle, leading to a further appreciation in real estate values. Caveats and further implications A lower for longer view on interest rates must necessarily be matched by a realistic (lower) rental growth outlook for real estate investments aligned with a slower growth economy. Investors should try to avoid the over-exuberance which may eventuate from a period of cyclically low interest rates and a temporary compression of risk premiums. In the past market peaks and troughs (Figures 7 and 8) have formed based on fluctuations in cost of capital. Investors should still allow for reversion of real estate yields over the medium/long term (Figure 8). Structurally lower expected returns do not necessarily equate to structurally lower yields if growth expectations are also lower. Hence it is important to adopt conservative terminal valuation assumptions on new investments. Figure 7. Sydney office valuation discount rates % 10 year bond Val Discount rate 14% 11.6% 12% 10.4% 10% 8.7% 8% 7.6% 6% 4% 2% 0% FY92 FY96 FY00 FY04 FY08 FY12 FY16 FY20 FY24 Source: PCA, IPD/MSCI, DEXUS Research Figure 8. Prime Sydney CBD office yield Average prime yield 8.0% 7.5% 7.0% 6.5% 6.0% 6.63% 5.5% 5.63% 5.0% 5.38% 4.5% 4.0% FY95 FY97 FY99 FY01 FY03 FY05 FY07 FY09 FY11 FY13 FY15 Source: JLL Research In this lower for longer environment, a selective approach to acquisitions is warranted, with realistic and disciplined valuation assumptions. It is also an opportunity dispose of off-strategy assets to take advantage of strong investment demand. 6

Transactions Activity eases after strong year Figure 9. Transaction volumes quarterly Investment activity stabilised in Q2 2016, partly due to limited office stock being brought to market. Cross border flows appear to be easing and the sharp declines in yields seen in 2015 appear to be tapering. Total transaction volumes for the June quarter 2016 were $5.54 billion, up from the previous quarter, however down from a year ago. The largest sale for the quarter was the Vicinity Centres portfolio sale, which incorporated the sale of three shopping centres for a price of $613million. The largest individual sale was 1 Shelley Street Sydney, selling for $525 million to Morgan Stanley Real Estate Investing (MSREI) and Charter Hall Core Plus Office Fund. The yield was reported to be in the vicinity of 5.30% with an IRR of 7.0%. The remaining 25% of 420 George Street Sydney sold on an estimated IRR of 7.2% (assuming growth of 4.0%). While foreign investors remain active at the upper end of the market, their share of transactions eased to 39% (YTD) after capturing 41% share last year, with local players appearing to be more competitive this year. Privates and unlisted funds have been very active, with A-REITs decreasing their activity over the past quarter. Some major domestic players have sought higher returns by selling core-stable assets to redeploy capital into value-add opportunities and development. Strong pricing on core stock is also leading to growth in the values of riskier assets as investors move up the risk curve. Investment yields across the main CBDs held relatively steady in the quarter indicating that the recent yield tightening cycle might be tapering. While some further tightening is likely in the short term given low interest rates, the extent is expected to be marginal as investors focus on headline returns. Source: DEXUS Research Transaction Database, JLL Research Figure 10. Average prime yields all sectors Source: JLL Research, ABS, DEXUS Research Table 2. Q2 2016 Top transactions Price ($m) Asset/portfolio Buyer 613.3 Vicinity Shopping Centres Blackstone 336.5 1 Shelley St, Sydney MSREI/CPOF 250.0 JPM Industrial Portfolio ADPF 235.0 3 and 5 Rider Blvd, Rhodes 228.0 Toombul Shopping Centre Mirvac 188.0 300 Queen St, Brisbane 150.0 166.0 140.3 101.0 420 George Street, Sydney (25%) 209 Kings Way, Sth Melbourne 650 Chapel St, South Yarra 181 Miller St, North Sydney Altis Property ARA Asset Management Investa Commercial Property Fund Growthpoint Properties Australia Newmark Capital Transport for NSW Source: DEXUS Research Transaction Database, JLL Research 7

Performance Property continues to perform well Figure 11. A-REIT vs Bond returns Real estate is providing solid returns - although it is prudent to expect these to moderate in the year ahead. A-REITs and unlisted property delivered total returns over the past year of 24.6% and 13.4%, respectively. Both listed and unlisted property outperformed the broader equity and fixed interest indices over the past year, despite equities experiencing a solid last quarter. Strong income returns, combined with capital growth from yield tightening, delivered a favourable performance for the two property sectors. The A-REIT sector returned 9.2% over the quarter and 24.6% for the year to June 2016. A-REITs have benefited from a sharp increase in bond pricing (lower bond yields) and continue to be favoured as defensive assets given uncertain global conditions. However the sector is trading at a high premium to NTA, which is likely to moderate returns going forward. Unlisted property returns have benefited from strong capital gains over the past 18 months. The office sector has outperformed the industrial and retail sectors for almost 12 months due to capital growth from both tightening yields and rental growth, although the latter has been confined to the Sydney and Melbourne markets. Unlisted returns are expected to ease if yields stabilise at low levels in the year ahead. The equity markets have been subject to significant volatility following the Brexit referendum, but are largely now back above pre- Brexit levels. Interestingly, the Brexit event had a much less negative effect on both Australian and global markets than the China slowing shock in February 2016. Going forward, the equities market seems more reasonably priced relative to other assets and returns may well improve over the next couple of quarters. Returns on fixed interest have improved to a stronger than expected return of 7.0% for the year to June 2016 with bond yields at new lows. Source: RBA, Bloomberg, DEXUS Research Figure 12. Unlisted property returns by sector Source: Mercer/IPD, DEXUS Research, NAV pre fee Qtr. % 1 yr %p.a 3 yr %p.a A-REITs 9.2 24.6 18.5 Unlisted property Australian fixed interest Australian cash Australian shares 1.6 13.4 11.1 Source Table 3. Index returns to 30 June 2016 S&P/ASX 200 Property Accumulation Index Mercer/IPD Aust. Pooled Fund Index* 2.9 7.0 6.2 BACM0 Index 0.6 2.2 2.5 BAUBIL Index 3.9 0.6 7.7 S&P/ASX 200 Accumulation The indices are copyrighted by and proprietary to the relevant issuers: Mercer/IPD Unlisted Index; Standard and Poor s Australian Securities Exchange Accumulation Index; Bloomberg/UBS Composite and Bank Bill Indices. *NAV Pre-fee 8

Office markets Rising tide of demand lifts markets Figure 13. Office net absorption by market Positive office demand across the east coast markets is steadily absorbing the remaining pockets of available space. Combined with significant withdrawals of older stock, a number of markets are positioned for rental growth. Occupier demand in Sydney and Melbourne has surged ahead (Figure 13). Brisbane demand continues positive with the Tatts move into the CBD bolstering the Q2 2016 number. Demand in Perth is still weak. Source: JLL Research, DEXUS Research Figure 14. Change in vacancy rates during FY16 Lead indicators for demand are mildly positive, pointing to further absorption of space in the year ahead - albeit moderating from last years level. The latest NAB Business Survey, revealing positive business conditions and confidence, and recent gains in equity markets, bode well for office demand. Employment growth in NSW and VIC remains positive, however the ANZ job ads series has levelled out, indicating that jobs growth may slow in FY17. On the supply side, most markets are now close to, or have passed, the peak of this supply cycle. Limited new supply, combined with withdrawals, is expected to lead to a tightening in vacancy for the majority of east coast markets in FY17 and FY18. In Sydney, a lack of available secondary space points to a strong outlook for secondary assets. As expected, a pronounced flight to quality is leading to rapid take-up of prime and Premium space with 60,000sqm of premium space absorbed in the CBD Core in FY16. The Premium space available at Barangaroo is providing only limited competition to many of the buildings in the core due to its location and floorplate. Effective rental growth has varied across the markets, with Perth, Brisbane and Adelaide the weakest (see table 4). If vacancy rates decline to well below 6% in Sydney and below 7% in Melbourne, as predicted, then incentives should push lower leading to effective growth in east coast markets. Source: JLL Research, DEXUS Research Table 4. Q2 2016 office snapshot Vacancy % Prime net face rental growth % p.a. Prime net eff. rental growth % p.a. Parramatta 4.4 0.9 1.3 Sydney 7.1 7.0 17.1 Melbourne 8.0 3.1 1.9 Macquarie Park 8.2 2.1 4.5 North Sydney 10.3 7.7 8.4 Canberra 13.2 1.1 2.6 Adelaide 16.2 0.2 2.0 Brisbane 16.6 0.6-3.5 Perth 24.6-3.6-20.1 Source: JLL Research, DEXUS Research 9

Office market wrap Market Sydney Comments Sydney is performing strongly with vacancy remaining tight at 7.1% and annual net absorption tracking at two and a half times the long run average. Solid demand and low vacancy has led to a fall in incentives, with prime gross effective rents increasing by 12.2% over the year. With supply tapering, vacancy should decline in the year ahead leading to a strong outlook both for secondary stock driven by withdrawals, and for prime/premium stock driven by a flight to quality. Direction of trend for next 12 months Vacancy -1.0 Rents 1.0 Incentives -1.0 North Sydney North Sydney demand was slightly negative this quarter, however vacancy tightened to 10.3% due to stock withdrawn for residential conversion or office redevelopment. Improving occupier demand, a relatively benign supply pipeline and further withdrawals should lead to lower vacancy and an uplift in rentals in the short to medium term. Vacancy -1.0 Rents 1.0 Macquarie Park After a period of positive demand for Macquarie Park, demand softened in the second half of FY16. Vacancy remained relatively steady at 8.2%. Prime face and effective rents saw only moderate growth over the year, but are expected to show upside in FY17 given the relatively benign supply pipeline and anticipated return to positive demand. Vacancy -1.0 Rents 1.0 Parramatta Parramatta experienced a fall in vacancy in Q2-16 to 20 year lows of 4.4%. Prime effective rents have seen little-to-no growth, possibly due to rents being high relative to other suburban markets. Incentives remain steady at 22%. The market is expected to perform solidly over the short term, given limited availability of prime space and government decentralisation. Supply risks will mount in the medium to long term with the exit of CBA, although most new supply should be pre-committed. Vacancy -1.0 Rents 1.0 Melbourne Melbourne recorded the strongest net absorption of the CBD office markets, and saw vacancy tighten to 8.0%. Despite the solid demand, incentives have remained stubbornly high, with modest growth in prime effective rents driven by increases in face rents. Over the next 12 months prime effective rents are expected to pick up for small to medium sized tenancies, but less so for larger tenants due to competition with pre-committing new supply. Vacancy -1.0 Rents 1.0 Incentives -1.0 Brisbane Demand continued to recover in Brisbane with positive net absorption of c27,400sqm in Q2-16 buoyed by the Tattersalls move. Prime gross face rents have remained weak, and incentives elevated, as a result of new supply and high quality backfill contributing to the high vacancy rate of 16.6%. Rental growth is expected to improve over the medium term as vacancy levels move back towards the long run average with a flight to quality absorbing prime space. Vacancy 0.0 Rents 0.0 Perth Demand in Perth remains weak with vacancy rates hitting 20 year highs of 24.6%. This has placed significant pressure on rents, with prime incentives rising to 47%, and prime net effective rents declining by 20% over the year. Another weak year is expected in FY17 after which conditions are forecast to slowly improve in the absence of new supply. The longer term outlook for Perth is for the market to return to more sustainable growth similar to pre-mining boom levels. Vacancy 0.0 Rents -1.0 Yields 0.0 Adelaide Adelaide experienced a positive quarter of net absorption, however vacancy rates remain elevated at 16.2%. The high levels of vacancy have kept prime rents in check and held incentives firm at 30%. Rental growth is expected to remain weak in the short term due to subdued demand growth. Vacancy 2.0 Rents 0.0 Yields 0.0 Canberra Canberra experienced negative net absorption in Q1-16 however vacancy remained relatively steady at 13.2% due to stock withdrawn for alternate uses. Rental growth has been limited and incentives steady. Going forward the demand outlook is subdued but positive given Federal government cost control and the growth outlook is moderate at best. Vacancy -1.0 Rents 2.0 10

Industrial markets Improving demand a positive sign Improving levels of take-up are a positive sign for industrial markets with rental growth occurring in some inner city markets. However competitive precommitment deals are keeping growth in the outer metropolitan areas flat. Demand has varied by state in the first half of 2016. Sydney and Melbourne have recorded strong demand on the back of strong economic growth. Demand is expected to remain positive in the short term due to positive retail and wholesale activity. Sydney and Melbourne will continue to lead, Brisbane is seeing signs of improvement and Perth will lag. Figure 15. Outer West Sydney annual take-up (year to June) 000sqm 450 400 350 10 yr avge 260,000sqm 300 250 200 150 100 50 0 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Source: JLL Research, DEXUS Research Figure 16. Upper prime industrial cap rates Rents remain largely stable however there is some mild upward pressure in land constrained markets including South Sydney, Inner West Sydney and South-East Melbourne. Over time outer metropolitan markets will benefit from outbound migration of tenants. Consequently growth is anticipated in outer markets in the medium term as the yield tightening cycle tapers and economic rents rise. The key themes this quarter include: Land sales are increasing and pushing up land values, particularly for smaller lots, as owner occupiers take advantage of low interest rates Older industrial stock (15 to 25 years old) faces occupancy risks as major tenants consider attractive deals on new stock Investment demand remains strong for quality industrial assets, however with the exception of several portfolio transactions in 2016, prime investment stock remains limited WALE appears to be the most attractive factor for many investors as recent transactions indicate that investors are prepared to accept lower quality assets provided the WALE is long Source: JLL Research, DEXUS Research Table 5. Q2 2016 industrial snapshot Ave prime cap rate change from Q2 2015 Existing prime net face rental growth % p.a. Outer West Sydney -0.38-0.9 Southern Brisbane -0.25-1.5 East Perth -0.75-4.8 South Sydney -0.50 5.4 West Melbourne -0.50 0.0 Source: JLL Research, DEXUS Research 11

Retail Divergent growth outlook The outlook is for divergent growth in retail sales across the country in FY17 with Sydney and Melbourne experiencing much stronger growth than other locations. Retail sales growth has been easing nationally, but mainly in locations outside of Sydney and Melbourne (Figure 20). NSW and Victoria recorded solid retail sales growth rates of 4.5% and 5.5% in the past 12 months compared to less than 1.0% in the mining states of QLD and WA. Consumer confidence is important, but remains a relatively neutral factor despite events such as Brexit and a swing away from the sitting government in the Federal election. Going forward, issues such as job security and house prices may sway confidence in either direction. Retail margins are being supported by low inflation, low interest rates and low wages growth, which all act to keep cost growth down. At a category level pharmaceuticals and cosmetics as well as clothing, footwear and accessories are currently the best performers. Household goods growth is positive but slowing. Key themes this quarter include: Aldi opening its first four stores in Perth in early June, with up to 70 stores planned for WA H&M continuing its expansion into more regional locations, annoucing plans for stores at Wollongong (NSW) and Toowoomba (QLD) following a new store in Newcastle (NSW) The shift to online retailing continues with IKEA announcing plans for an online platform and Coles opening their first dark store in Melbourne Underperforming retailers such as Target and Woolworths have announced restructures including Target going back to basics and rumours that Steinhoff International is in talks with Woolworths to buy Big W and selected Masters sites Figure 20. Retail sales growth to May 2016 % per annum Last Year This year 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% NSW VIC QLD WA Australia Source: ABS, DEXUS Research Figure 21. Retail growth by category (YOY) Pharmaceuticals and cosmetics Clothing, footwear and accessories Liquor Household goods Dept stores Cafes, restaurants and takeaway Supermarkets and grocery stores 0% 2% 4% 6% 8% p.a. Source: ABS (May 2016), DEXUS Research Table 6. Q2 2016 retail snapshot Specialty rent growth since Q2 2015 % p.a. Ave cap rate change from Q2 2015 (%) YOY state retail turnover (May 16) % p.a. Sydney 4.6 Regional 0.00-0.38 Sub-regional 0.38-0.75 Neighbourhood 0.75-1.13 Melbourne 5.4 Regional 1.00-0.38 Sub-regional 0.13-0.25 Neighbourhood 0.38-0.38 South East QLD 0.5 Regional 0.00-0.25 Sub-regional 0.00-0.25 Neighbourhood 0.00-0.50 Source: JLL Research, ABS, DEXUS Research 12

To discuss any information in this report please contact: Peter Studley GM Research DEXUS Property Group +61 2 9017 1345 peter.studley@dexus.com Lee Cikuts Research Manager DEXUS Property Group +61 2 9017 1268 lee.cikuts@dexus.com Kimberley Slow Research Manager DEXUS Property Group +61 2 9017 1287 kimberley.slow@dexus.com Yolanda Torres Research and Information Manager DEXUS Property Group +61 2 9017 1347 Yolanda.torres@dexus.com Date of issue: July 2016 This report makes reference to historical property data sourced from JLL Research (unless otherwise stated), current as at Q2/2016. JLL accepts no liability for damages suffered by any party resulting from their use of this document. All analysis and views of future market conditions are solely those of DEXUS Property Group. Issued by DEXUS Funds Management Limited ABN 24 060 920 783, Australian Financial Services Licence holder. This is not an offer of securities or financial product advice. The repayment and performance of an investment is not guaranteed by DEXUS Funds Management Limited, any of its related bodies corporate or any other person or organisation. This document is provided in good faith and is not intended to create any legal liability on the part of DEXUS Funds Management Limited. This economic and property analysis is for information only and DEXUS Funds Management Limited specifically disclaims any responsibility for any use of the information contained by any third party. Opinions expressed are our present opinions only, reflecting prevailing market conditions, and are subject to change. In preparing this publication, we have obtained information from sources we believe to be reliable, but do not offer any guarantees as to its accuracy or completeness. This publication is only intended for the information of professional, business or experienced investors. www.dexus.com 13