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Domestic and offshore buyers support deal momentum

Market Conditions Asia Pacific transaction volumes in Q1 were stable y-o-y at USD 25.3 billion. Volumes in Japan and Singapore were up y-o-y, stable in China and fell y-o-y across Australia and Hong Kong. Cross-border investment volumes accounted for 35% of total volumes. Inter-regional purchasers accounted for about 67% of cross-border purchases in Q1. Yields on core assets trended down marginally during Q1.

Highlights From Stuart Crow, Head of Capital Markets, Asia Pacific •  Investment activity in 2017 is likely to remain stable given solid appetite from institutional

investors, strong fund raising activity and a low interest rate environment. • Tighter government controls over capital outflows may limit Chinese outbound investment

in the near-term, particularly for large-sized deals which could take longer to conclude. • With real interest rates stable, core real estate yields can continue to stay low and yields in

some markets even have the potential to compress further when compared to their long-term ranges.

Fast facts

Asia Pacific commercial real

estate investment volumes

25.3 Q1 2017

Total transactions (US$ billion)

+1% Q1 2017 vs Q1 2016 change

Market Fundamentals Office | A number of occupier categories supported momentum in leasing activity. Retail | A continued focus on F&B. Industrial | 3PLs and e-commerce firms drove demand. Residential | Hong Kong’s primary market gathered momentum while China imposed new policy restrictions to cool speculation during Q1. Hotel | Diverse trading performance. Japan is still the top pick in the regional hospitality scene.

Macro Environment The IMF April forecast predicts Asia Pacific’s economic growth to be above 5% in 2017-18. Growth forecasts were upgraded for Japan and China, reflecting stronger-than-expected momentum. Expected fiscal stimulus under the new US administration will boost global demand, but political uncertainties in the Eurozone and restructuring in China remain risks to the downside. Market consensus is for at least three rate hikes this year, taking the Fed funds rate to between 1.50% and 1.75% by end-2017.

Capital Markets in Focus Q1 2017

Contacts Asia Pacific | Stuart Crow | +65 6494 3888 AP Research | Megan Walters | +65 6494 3649 Tokyo | Akihiko Mizuno | +81 3 5501 9947 Sydney | Simon Storry | +61 2 9220 8439 Melbourne | Robert Anderson | +61 3 9672 6588 Beijing | Kevin Qin | +86 10 5922 1191

Shanghai | Johnny Shao | +86 21 6133 5807 Hong Kong | Joseph Tsang | +852 2846 5231 Singapore | Greg Hyland | +65 6494 3876 Seoul | Steven Craig | +822 3704 8806 Delhi & Mumbai | Shobhit Agarwal | +91 22 2482 8488 ACM Research | Myles Huang | +852 2846 5017

ASIA PACIFIC

Zung Fu Aberdeen Garage Building

Shinagawa Seaside West Tower

T Tower (LG U+ Tower)

SYDNEY

MELBOURNE

SINGAPORE

MUMBAI

SEOUL

HONG KONG

BEIJING SHANGHAI

Seller Zung Fu Company Ltd Buyer Empire Group HKD 1.56bn (USD 201m)

Seller Midas Asset Management Buyer PGIM Real Estate KRW 189bn (USD 164m)

Seller HK Shanghai Alliance Buyer BlackRock RMB 1.4bn (USD 199m)

Honeywell Portfolio

DELHI

Seller SPC of GIC Buyer Global One Real Estate Investment JPY 24bn (USD 211m)

Seller IL&FS Investment Buyer Xander Finance INR 3.0bn (USD 45m)

PwC Building

Seller DBS Group Holdings Buyer Manulife Financial Corporation SGD 747m (USD 528m)

World Trade Centre

Seller Abacus Property Group, KKR, Riverlee Buyer Local Private AUD 268m (USD 203m)

Asia Pacific Capital Markets in Focus | Q1 2017

Seller Blackstone Buyer Investec Australia Property Fund AUD 160m (USD 121m)

Express Trade Tower 1

Investment Deal Highlights Q1 2017

Puxi Central Park

TOKYO

ASIA PACIFIC


Outlook Market Conditions

Market Fundamentals

Macro Environment •  2017 transaction volumes (in Yen terms) will likely

fall short of last year by 5-10%. •  There remains a large gap in price expectations

between buyers and sellers. Domestic owners are unwilling to sell because of reinvestment challenges.

•  Deals under negotiation involve multi-family residential and retail portfolios.

•  Investor interest in residential properties continues. Dutch pension fund manager PGGM will commit €210m to IDERA’s third Japan-focused residential vehicle.

•  Marginal yield compression could be seen this year.

•  Japan’s transaction volumes in Q1 were up 16% y-o-y and accounted for 44% of total regional volumes. Most activity took place in non-core office areas as opportunities were rare in central locations of Tokyo.

•  Domestic buyers dominated, but offshore investors were also seen. For example, CapitaLand bought four assets for JPY 49.7bn (US$ 441m).

•  Property investors benefited from favourable credit conditions. Debts are available with very favourable conditions (e.g. spreads are at around 50 bps for five-year senior loans with over 70% LTV).

Office | Broad based demand with expansions but generally stable rents in Tokyo. Retail | Demand from international retailers slowed in Tokyo’s prime areas. Industrial | Strong demand from e-commerce retailers and 3PL continued. Residential | Condominium demand has eased but still lots of institutional demand for multifamily units. Hotel | Slow trading performance as occupancy has already reached a high level.

•  Oxford Economics forecasts GDP to grow by 1.2% annually in 2017 and 2018, on the back of stronger exports and business spending.

•  Implied inflation rates on 10-year inflation adjusted bonds have picked up to over 60 bps (from 30 bps six months ago). However, the Bank of Japan (BoJ) will need more reassurance around the inflation outlook.

•  The BoJ is now placing more emphasis on yield curve controls rather than the pace of asset purchases.

•  The US rate hike should place further downward pressure on the Japanese yen and allow for more flexible policy decisions moving forward.

Notable Transactions

“Limited opportunities in the office market is luring investors to other sectors such as industrial and non-core areas in Tokyo. Suburban offices are attracting a wider pool of investors, and there are opportunities in the residential sector.” – Akihiko Mizuno, Head of Capital Markets, Japan

Fast Facts

2.6-3.0 2.6-3.5 3.8-5.0 Transactional Yield Ranges (%) Japan Commercial Real Estate Investment Volumes

Grade A Office Retail Industrial

Japan Market Statistics 6-12 Month Outlook

10-yr JGB bond yield (% p.a.), 1Q17 Deal availability No. of foreign buyers Cap rate trend

Tokyo Office (CBD) | Source: JLL (REIS)

Mioka Shopping Centre Retail | USD 276m Seller SPC of Listed Company Buyer SPC of LaSalle Investment Management Shinagawa Seaside West Tower Office | USD 211m | Net Yield 3.7% Seller SPC of GIC Buyer Global One Real Estate Investment

Sources: JLL, Japan Government

Office rent and capital value (y-o-y growth)

Up / down / side arrows show expectation of market conditions.

All-in bank lending rate (% p.a.), 1Q17

Q1 2017 Total Transactions (USD bn)

Q1 2017 vs. Q1 2016 Change

11.1 +16%

0.6 0



Market Fundamentals

Macro Environment •  We expect high transaction volumes over 2017, with

offshore capital inflow to remain a supportive driver of investment volumes.

•  Many investors are looking to purchase high-yielding, long-WALE assets given the current pressure on investment returns.

•  New pricing benchmarks will stimulate vendor motivation in the office sector.

•  Corporates are looking to capitalise on market strength by unlocking capital tied to assets in the industrial sector.

•  While property yields in core sectors have compressed below 2007 levels, the spread between property yields and the real risk-free rate remains wider than historical benchmarks.

•  Australia’s investment volumes in Q1 fell 28% y-o-y, due to a traditional seasonal lull and a shortage of product coupled with no major real estate portfolio deals.

•  Competition for prime grade investment product remained strong, with a significant proportion of demand from offshore capital sources.

•  Cross-border investors accounted for 37% of Q1 volumes. Chinese buyers were less active, but other Asian groups continued to acquire stabilised core assets.

•  While a positive spread exists between yield and cost of debt, lending criteria has tightened and debt costs have risen.

Office | CBD rents rose in Q1 due to competition for space and a shortage of contiguous options. Retail | Strong competition between existing domestic retailers and new international retailers. Industrial | Steady leasing activity in Q1. Residential | Price growth in Greater Sydney’s apartments is moderating as further lending restrictions and a slowdown in foreign investors has reduced demand. Hotel | Occupancy is expected to remain in the high 80% range in the coming years, further strengthening RevPAR.

•  The Reserve Bank held the policy rate at 1.5% at its March meeting, as it balanced the need to boost growth against a build-up of risks in the housing market.

•  The banking regulator has tightened rules on interest-only mortgage lending, in view of rising home prices and household indebtedness.

•  While a narrowing of the interest rate differential between the US and Australia should exert downward pressure on the AUD exchange rate, a confluence of factors such as rising commodity prices should help to support the AUD.


“A number of large campaigns that will commence in Q2 will provide fresh insight into pricing levels in Sydney and Melbourne. Convenience-based sub-regional shopping centres will be a key target for many investors. Sale and leaseback deals are a key focus for industrial users.” – Simon Storry, Head of International Investments, Australia

Fast Facts

4.75-6.0 4.5-6.25 5.25-7.25 Transactional Yield Ranges (%) Australia Commercial Real Estate Investment Volumes

Office Retail Industrial

Australia Market Statistics 6-12 Month Outlook

All-in bank lending rate (% p.a.), 1Q17 Deal availability No. of foreign buyers Cap rate trend

SydneyOffice(CBD)|Source:JLL(REIS)

Honeywell Portfolio Office & High Tech | USD 121million Yield 7.0-7.5% Seller Blackstone Buyer Investec Australia Property Fund 8 Spring Street, Sydney Office | USD 53 million Seller Heathley Diversified Property Fund Buyer Australian Prime Property Fund Commercial / Abu Dhabi Investment Authority

Sources: JLL, Reserve Bank of Australia



Cash rate (% p.a.), 1Q17

1.5 3.9


Q1 2017 vs. Q1 2016 Change

2.4 -28%



Market Fundamentals

Macro Environment •  Investors may be looking to buy industrial

with rezoning potential. Population growth will see land value increase strongly when land is rezoned.

•  Sub-regional shopping centres still show relative pricing value. Bulky goods centres may be volatile because of its exposure to the residential market.

•  The acquisition of the World Trade Centre in Melbourne for AUD 267.5 million represents the largest sale in Q1. This show more re-trading opportunities as vendors capitalise on market strength.

•  Cap rates on secondary CBD office assets have compressed to within historical norms. Yields of neighbourhood centres show the narrowest spread to risk-free rates in comparison to the long-term average.

Office | Cyclical rental upswing with prime gross effective rents increasing by 4.2% in Q1. Retail | Competition between existing domestic and new international retailers remains strong. Industrial | Leasing activity was steady in Q1. Residential | Unit prices across Greater Melbourne edged up over the 12 months to December 2016 with 0.2% annual growth recorded. Hotel | Supply increases are likely to result in some downward pressure on occupancy levels to the low 80% range.

•  Australian retail sales fell unexpectedly in February, despite ongoing house price appreciation and stable consumer sentiment. Sales fell in Victoria by 0.3% during the month, as compared with gains of 0.4% in New South Wales.

•  Rental vacancy in Inner Melbourne remained at 2.2% in February 2017 after declining throughout 2016. There is still a significant pipeline of units in Inner Melbourne with 20,583 units currently under construction.


“Now is the right time to divest from prime Grade A offices, with pricings at a historically high level, and to re-cycle capital into industrial assets. Domestic investors are focusing on commercial assets with value-added or repositioning potential.” – Robert Anderson, Regional Director, Sales and Investments, Victoria, Australia

Fast Facts

5.0-6.5 4.25-7.0 6.0-7.5 Transactional Yield Ranges (%) Australia Commercial Real Estate Investment Volumes


Australia Market Statistics 6-12 Month Outlook

10-yr AGS bond yield (% p.a.), 1Q17 Deal availability No. of foreign buyers Cap rate trend

Melbourne Office (CBD) | Source: JLL (REIS)

World Trade Centre Office | USD 203m Seller Abacus Property Group, KKR, Riverlee Buyer Local Private

Sources: JLL, Australia Government



90-day bank bill yield (% p.a.), 1Q17

1.8 2.6


Q1 2017 vs. Q1 2016 Change

2.4 -28%



Market Fundamentals

Macro Environment •  We expect a stable investment market this

year despite China’s tighter capital controls. Ongoing low interest rates will induce more investors to seek Hong Kong properties.

•  We project an annual increase of 10% in office capital values, given strong pricing in strata titled office and land sales markets.

•  Further capital value growth is expected after a handful of strata title office properties transacted at record high unit prices in Q1. The government’s land tender for the Murray Road Carpark site in Central, will likely reset land price benchmarks.

•  Investment volumes were down by 6% from Q4 but investors continued to chase all types of assets including retail, industrial and hotels.

•  A local investor bought a portion of the Po Wing Building on a core retail street. Zung Fu Aberdeen Garage Building was sold at USD 201m to a local buyer. Henderson Land also sold Newton Place Hotel for USD 296m.

•  Mainland Chinese developers drove strong land sales activity. China’s HNA Group bought two more residential sites in Q1 (average land cost of HK$13,415 psf). Logan and KWG purchased a site in Ap Lei Chau (HK$ 22,118 psf AV).

Office | The tight supply situation continued to support rents and capital values. The vacancy rate in Central was 1.5% in Q4. Retail | Rental correction slows down for high street shops and prime shopping malls. Industrial | Primarily relocation demand, driven by 3PLs looking to reduce costs. Residential | Developers offer attractive discounts and cash rebates to lure buyers following the higher stamp duty in place. Hotel | Market conditions remained weak but there were signs that RevPAR might be bottoming out.

•  Retail sales declined 3.2% y-o-y in the first two months of 2017, constrained by the lack of growth in tourist spending.

•  The government announced a 15% stamp duty on multiple flat buyers who used one legal document as a loophole, after home prices rose for the 11th consecutive month to a record high in February.

•  HIBOR rates have already edged higher in line with the US rate hike. Local banks are unlikely to raise lending rates amid stiff competition for mortgage business.


“Continuing low interest rates are attracting investors to pursue all types of assets. Cap rates are trending further downward on the back of capital value growth.” – Joseph Tsang, Managing Director and Head of Capital Markets, Hong Kong

Fast Facts

2.0-2.5 2.0-2.8 2.8-3.3 Transactional Yield Ranges (%) Hong Kong Commercial Real Estate Investment Volumes


Hong Kong Market Statistics 6-12 Month Outlook

HIBOR rate, 3-month (% p.a.), 1Q17 Deal availability No. of foreign buyers Cap rate trend

Hong Kong Office (Central) | Source: JLL (REIS)

Zung Fu Aberdeen Garage Building Industrial | USD 201m Seller Zung Fu Company Limited Buyer Empire Group Po Wing Building (G/F, 1/F, 2/F) Retail | USD 60m | Initial Yield 3.8% Seller Local Investor Buyer Local Investor

Sources: JLL, Monetary Authority of Hong Kong




2.7 0.9


Q1 2017 vs. Q1 2016 Change

2.6 -27%



Market Fundamentals

Macro Environment •  The investment market may be quieter in

2017, as the past year witnessed a very high amount of stock on the market.

•  That said, assets that were not successfully closed in 2016 will continue into 2017. There are also a number of assets on the market that are within PE funds due for expiry.

•  Some landlords may be looking to obtain funds via issuing asset-backed securities instead of selling their assets.

•  Investment activity in China was up sightly by 4% y-o-y, as a large number of deals were concluded in Q4 and throughout 2016.

•  Offshore buyers were more active than last year. Foreign funds purchased two Grade B office assets in Shanghai fringe CBD / decentralised areas.

•  Investors targeted under-performing retail projects. A local firm bought the retail part of Poly Greenland Plaza to convert to office space.

•  A UK fund purchased GraceLand International Hotel in Shanghai to convert to serviced apartments. Investors in Beijing can no longer purchase hotels and then sell them strata title.

Office | Traditional financial institutions, e.g. banks, drove activity in Shanghai and Beijing. Retail | F&B operators and children’s brands remain the main demand drivers. Industrial | We observed muted leasing market activity as most 3PLs adopted a wait-and-see attitude. Residential | Beijing announced new regulations prohibiting residential projects to be constructed on commercial land, which may bring more office projects to the market. Hotels | Strong corporate demand continues to buoy the hotel sector.

•  China's premier Li Keqiang announced in the government work report that this year’s growth target has been set at “around 6.5%” and the inflation target at 3.0%.

•  The central bank raised repo rates in February and March.

•  More cities imposed tighter restrictions on home purchases in March in order to curb price rises in the housing market.


“Investors are focusing on CBD fringe / decentralised offices with good quality and accessibility. We’re seeing domestic investor interest in retail podiums in core locations, as well as smaller ones that can be converted to co-working spaces.” – Johnny Shao, Head of Capital Markets, Shanghai and East China

Fast Facts

3.5-4.9 3.0-5.2 5.0-6.0 Transactional Yield Ranges (%) China Commercial Real Estate Investment Volumes


China Market Statistics 6-12 Month Outlook

10-yr CNY bond yield

(% p.a.), 1Q17 Deal availability No. of foreign buyers Cap rate trend

Shanghai Office (CBD) | Source: JLL (REIS)

Shanghai Baolong Tower Office USD 189m | Yield 4.0% Seller AEW Capital Buyer Ascendas-Singbridge Puxi Central Park Office USD 189 million | Yield 3.6% Seller HK Shanghai Alliance Buyer BlackRock (JLL deal)

Sources: JLL, PBOC



All-in bank lending rate

(% p.a.), 1Q17

4.6 3.3 Lending rate:

1-year (% p.a.), 1Q17

4.35


Q1 2017 vs. Q1 2016 Change

3.2 +4%



Market Fundamentals

Macro Environment •  Buyers are looking to bargain hunt but we

expect stable transaction volumes this year because of the high base of comparison in 2016.

•  Assets on the market (e.g. Asia Square 2) will provide products for core funds and likely reset pricing benchmarks.

•  The level of interest for new projects is strong as observed from the number of bidders for good projects (e.g. Jurong Point mall) by local and foreign groups.

•  Industrial REITs may sell assets to reduce leverage.

•  Stable asset yields are expected this year.

•  Deal volumes in Q1 almost tripled on a yearly basis to USD 2.0bn, supported by a few large office deals. The largest transaction being Manulife Financial buying PwC Building for self-use from DBS for self-use for SGD 747m.

•  Investors from Greater China were active. GSH Plaza was sold to a Chinese buyer, and a 70% stake in Tripleone Somerset was sold to Hong Kong’s Shun Tak Holdings.

•  The all-in-cost of capital for property investors remained low. Banks are willing to lend up to 50–60% for development and completed assets with margins stable at 150–200 bps.

Office | Tech and professional services firms underpinned leasing demand. Rents showed signs of stabilising as commitment rates at upcoming supply improved. Retail | Subdued occupier demand saw rents correct further, especially in the Marina submarket. Industrial | Soft rents amid substantial completions coupled with weak demand. Residential | Developers sold unsold luxury residential units via sales of shares to avoid the additional conveyance duties imposed in March. Hotel | Stronger visitor arrivals and occupancy but lower room rates put pressure on RevPAR.

•  The Singapore government forecasts real GDP to grow 1-3% in 2017, and expects the manufacturing sector to benefit from a sustained pickup in worldwide demand.

•  Local financial markets should have fully priced in the US rate hike. 3-month and 6-month SIBOR base rates have spiked by about 50 bps since last November to 0.94% and 1.25% respectively.

•  On 10 March, the government reduced seller stamp duties and relaxed rules on total debt servicing ratio caps, the first loosening measures since 2010.


“Buyers are looking to bargain hunt, now that Singapore’s property cycle is bottoming out. Overseas funds are looking at core and value-added opportunities. The new stamp duty rule may limit block sales of unsold luxury residential units by developers.” – Greg Hyland, Head of Capital Markets, Singapore

Fast Facts

3.2-4.0 3.9-4.5 5.9-6.5 Transactional Yield Ranges (%) Singapore Commercial Real Estate Investment Volumes


Singapore Market Statistics 6-12 Month Outlook

SIBOR rate, 3-month (% p.a.),1Q17 Deal availability No. of foreign buyers Cap rate trend

SingaporeOffice(CBD)|Source:JLL(REIS)

PwC Building Office | USD 527m Seller DBS Group Holdings Ltd Buyer Manulife Financial Corporation GSH Plaza Office | USD 512m Seller GSH Corporation Limited / Vibrant Group / TYJ Group Pte Ltd / DBS2 Land Buyer Fullshare Holdings

Sources: JLL, Singapore Government




2.9 1.0


Q1 2017 vs. Q1 2016 Change

2.0 +189%



Market Fundamentals

Macro Environment •  Lower deal volume is projected this year after

several high profile transactions in 2016. •  More quality offerings including three Grade A

office properties in the CBD and one in Gangnam, which will likely attract a number of bidders.

•  More office assets should become available this year and next, with some five-year vehicles vintage 2008-2012 expiring.

•  Yields may be close to bottoming out. Changes in borrowing costs will be a key determinant of trend in yields.

•  Deal volumes in South Korea were down 4% y-o-y, and fell short of a record US$ 7.4bn worth of transaction volumes in Q4.

•  Domestic investors displayed strong investment appetites, focusing on core and core plus assets with long WALE.

•  Foreign investors focus on strategies with value-added deals.

•  Seoul office rents fell as landlords compete for tenants.

•  Some Korean corporates sold non-core buildings in order to focus on their core business.

Office | Seoul office rents declined as landlords competed for tenants. Retail | The declining number of Chinese group tours are beginning to impact sales in core retail locations. Industrial | Exports rose for the fifth straight month in March. Residential | Weakening economic growth and concerns of oversupply slowed housing market. Hotel | Fewer Chinese tourist numbers in Korea and an oversupplied market may continue to keep investors at bay.

•  Oxford Economics forecasts South Korean’s real GDP to grow by 2.4% in 2017. Exports should continue to improve but consumer sentiment may be affected by the presidential elections on 9th May.

•  The policy environment remains supportive of growth. The Bank of Korea left its key interest rate unchanged at a record low of 1.25% since June 2016.


“Investors would be wise to focus on brand new logistics assets and pass over older facilities, as tenants increasingly migrate from old to new facilities. Yields have likely bottomed out. Changes in borrowing costs will be a key determinant of trends in yields.” – Steven Craig, Managing Director, South Korea

Fast Facts

4.0-4.75 4.0-4.75 6.0-8.0 Transactional Yield Ranges (%) South Korea Commercial Real Estate Investment Volumes


Korea Market Statistics 6-12 Month Outlook

BOK base rate (% p.a.), 4Q16 Deal availability No. of foreign buyers Cap rate trend

SeoulOffice(CBD)|Source:JLL(REIS)

T Tower (LG U+ Tower) Office | USD 164m | Yield 6.5% Seller Midas Asset Management Buyer PGIM Real Estate

Sources: JLL, Bank of Korea




3.5 1.25


Q1 2017 vs. Q1 2016 Change

2.6 -4%



Market Fundamentals

Macro Environment •  Higher transaction volumes are expected this

year. International investors are more confident about India’s investment prospects as Prime Minister Modi now controls both houses of Parliament and is able to push forward reforms more quickly.

•  Fund managers with international experience have started to enter India, and have set up equity platforms with Grade A developers with good corporate governance.

•  There is a likelihood of yield to further compress, given the level of investor interest.

•  Q1 saw a rush of private equity deals, as investors from Singapore and Mauritius will no longer be completely exempted from India’s capital gains tax starting from 1 April 2017.

•  Funds and sovereign wealth funds with low costs of capital have indicated interest in building core assets. For example, Blackstone planned to acquire stakes in real estate firm K. Raheja Corp’s commercial office portfolio in Mumbai, Pune and Hyderabad.

Office | IT/ITeS companies continued to drive leasing demand across Tier 1 India markets. Retail | Leasing activity was hindered by a shortage of available space in top prime malls. Industrial | GST, e-commerce and cold storage drove an increase in Grade A warehousing space. Residential | The demonetisation programme resulted in a “cash crunch” and sluggish sales in Q4. Hotel | The corporate segment continues to drive demand. Future supply is expected within the Mumbai International Airport Hospitality district.

•  Oxford Economics estimated a substantial hit to the economy from demonetisation in the short-term. However, growth is expected to recover in H2 as pent-up consumption demand comes through.

•  The central bank has kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.25%.

•  Monetary policy is expected to remain on a “neutral stance”, consistent with the medium-term target for CPI inflation of 4% within a band of +/- 2%.


“REITs should start to be launched by the second half of 2017. We foresee continued financing for new launches, or upcoming residential projects of developers with good track records. Good quality retail assets at good valuation will likely attract investors.” – Shobhit Agarwal, Managing Director Capital Markets, India

Fast Facts

8.5-10.5 9.0-11.0 10.0-11.0 Transactional Yield Ranges (%) India Commercial Real Estate Investment Volumes


India Market Statistics 6-12 Month Outlook

Repo rate (% p.a.), 1Q17 Deal availability No. of foreign buyers Cap rate trend

MumbaiOffice(SBDBKC)|Source:JLL(REIS)

Express Trade Tower 1 Office | USD 45m Seller IL&FS Investment Buyer Xander Finance

Sources: JLL, Reserve bank of India



Lease rental discounting rate (% p.a.), 1Q17

8.5-9.0 6.25


Q1 2017 vs. Q1 2016 Change

0.05 -93%



Market Fundamentals

Macro Environment •  Investors are interested in countries such as

Vietnam, Philippines and Indonesia for logistics and retail assets to tap into growing consumption and the rising income levels.

•  More commercial assets in Thailand could also transact as the trend of more property funds convert to REITs pick-ups, allowing for higher gearing and capacity for acquisitions.

•  Continued interest in the office market and residential markets is likely to tempered by falling rents/occupancy (office) and slow luxury market sales (condominiums) in Jakarta.

•  Greenfield development remains a preferred choice for investors to tap into a growing population and rising urbanisation in Indonesia.

•  We have seen a huge increase in interest from international investors and developers in the emerging logistics sector.

•  Growing interest from large-scale mainland Chinese groups looking to tap into Indonesia’s attractive economic and demographic profile.

•  Local developers and international players especially those from within the region should remain active investors.

Office | Offshoring and outsourcing buoyed demand in Manila. E-commerce stood out in Jakarta while business services and tech firms were active in Kuala Lumpur. Retail | Online retailers (largely domestic) continued to open brick-and-mortar stores. Industrial | Growing industrial sector with key international occupiers commencing operations. Residential | In Jakarta, improving sentiment in the luxury segment has yet to flow through to better sales activity. Hotel | Several countries impacted by travel advisories.

•  As exports surged in Q1 2017, more investors are taking an interest in Southeast Asia as a growing manufacturing hub that is taking over China’s market share.

•  Investors are focused on sectors that leverage on domestic demand and the rising in middle income consumption, such as retail and logistics.

•  However, given the nascent stage of development in Southeast Asia, opportunities for development are more common than asset sales.


“Chinese players have been increasing investment in Indonesian property, as part of China’s One Belt One Road initiative. We’ve seen growing interest from large-scale mainland Chinese groups looking to tap into Indonesia’s attractive economic and demographic profile.” – Kieran O’Flynn, Associate Director Capital Markets, Indonesia

Fast Facts

7.0-8.0 6.5-7.5 9.0-10.0 Transactional Yield Ranges for Indonesia (%) ASEAN 5 Real Estate Investment Volumes


Central Bank Interest Rates (%) 6-12 Month Outlook for Indonesia

Deal availability No. of foreign buyers Cap rate trend

Jakarta (CBD) | Source: JLL (REIS)

Development of a township project with an area of 70 hectares in East Jakarta Residential and Commercial Joint venture between Astra Land Indonesia and Mitra Sindo Makmur

Sources: JLL, Central Banks’ websites



Thailand 1.5

Vietnam 4.5

Malaysia, Philippines

3.0 Indonesia 4.75


Q1 2017 vs. Q1 2016 Change

1.0 +8%

9 Raffles Place #39-00 Republic Plaza Singapore 048619 tel +65 6220 3888 fax +65 6438 3361 www.joneslanglasalle.com.sg

Crow

Head of Capital Markets Asia Pacific +65 6494 3888 [email protected]

Huang

Director Asia Pacific Capital Markets Research +852 2846 5017 [email protected]

Authors

JLL Asia Pacific

www.joneslanglasalle.com.sg Copyright © Jones Lang LaSalle 2017 This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of Jones Lang LaSalle IP, Inc. The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation ismade, or warranty given, in respect of the accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them. Jones Lang LaSalle does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.

Walters (PhD)

Head of Research Asia Pacific +65 6949 3649 [email protected]

Stuart Megan Myles

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