A CUSHMAN & WAKEFIELD QUARTERLY RESEARCH PUBLICATION

O C T- D E C /20 17

ASIA PACIFICOFFICE OVERVIEW

Q4

DATAINTO

ACTION

2018 OCCUPIERCONDITIONS

INDIA

GREATER CHINA

KOREA

TAIWAN

VIETNAM

JAPAN

PHILIPPINES

THAILAND

MALAYSIA

INDONESIA

AUSTRALIA

NEW ZEALAND

ChongqingShenyangShenzhenTianjinChengdu

Hong Kong*BeijingGuangzhouShanghai

Seoul

Taipei

Tokyo

Manila

Hanoi

Ho Chi Minh CityBangkok

Brisbane

Canberra

MelbourneSydney

Kuala Lumpur

Jakarta

AhmedabadDelhi-NCRKolkataMumbai

BengaluruChennaiHyderabadPune

INDIADemand is diversifying, but the tech sector is still strong. Banking, financial and professional services are gaining prominence

Space constraints continue in Bengaluru and Hyderabad, pre-leasing is on the rise; rents in tighter markets are up by more than 15% in 2017

Coworking gains momentum, growing corporate demand for swing space options

CHINARobust growth in demand, annual absorption is up by 20% in 2017

Continued interest in decentralized markets and large volumes of new supply are attracting occupiers and investors

Service sector employment growth and government initiatives to boost several cities in 2018

Rentals solid in tier 1 cities, a mixed picture will continue in tier 2 markets

TAIPEIHigher new supply in 2018, tenant relocations are gathering pace, rentals are likely to grow in H2 2018 as vacancies start to decline

AUSTRALIAMajority of new supply is already pre-leased, office vacancies are falling to multi-decade lows in Sydney and Melbourne, strong rental growth is expected in 2018

Flight to quality drives relocations in Brisbane, occupier market to gain traction in 2018

JAKARTALargest ever annual supply in 2018, further rental correction is likely, relocations will continue

KUALA LUMPURWeaker demand, flat to moderating rents, freeze on new office approvals will not correct supply glut over the next 2-3 years

MANILAOffice rents continue to rally on the back of stable demand and higher rents in newer properties; vacancies are moving up, highest ever new supply in 2018

SINGAPORECoworking operators are expanding amidst growing competitionLeasing demand strengthening, rental growth to accelerate in 2018

Q4 APAC OCCUPIER OVERVIEW

15

9

7

Tenant Favorable

Landlord Favorable

Neutral

SEOULRising vacancies, relocations and consolidations to continue in 2018, coworking operators are rapidly expanding

HO CHI MINH CITYExtremely low vacancies in Ho Chi Minh City, double digit rental growth expected in 2018

BANGKOKLimited new supply in CBD, rental growth will continue in 2018, supply constraints will ease starting in H2 2019

TOKYOStrong pre-leasing demand, asking rents are softening while vacancies decline, supply surge to continue beyond 2020, competition among landlords will intensify

HONG KONGStrong PRC demand and limited availability pushed Greater Central rents to a global record high

Time to look east for bigger requirements as evidenced by increasing pre-leasing activity at upcoming/newly completed Grade A office developments in both Hong Kong East and Kowloon East

Meanwhile, coworking space operators are scaling up to capture market share amid growing demand from corporates

* Hong Kong - Kowloon - Tenant FavorableHong Kong - Central - Landlord Favorable

2 3

ASIA PACIFIC OFFICE OVERVIEW | Q4A CUSHMAN & WAKEFIELD QUARTERLY RESEARCH PUBLICATION

SINGAPORE

Singapore

KEY TAKEAWAYS

Upswing continuesSeveral Asian economies have exceeded expectations in the fourth quarter, ending the year on a high note. Growth in China was faster than expected during Q4 and for the full year, the country accelerated for the first time since 2010. Strong growth in exports, consumption, the service sector and resilient property markets have fueled the economy to grow 6.9%, defying concerns that tightening curbs on industry and credit would impact growth. Growth in Japan, although lower than previous quarters, was at its longest stretch in nearly 30 years, suggesting that the economy is on a better footing than in the bubble years of the late 1980s. Indonesia, Malaysia and Taiwan have also recorded the fastest growth in recent times on the back of rising exports. Meanwhile, in India, the impact of goods and services tax seems to be waning out but trade deficit is widening to its highest levels in nearly five years due to rising oil prices. Singapore has also slowed due to a contraction in the manufacturing sector. China’s central bank has raised interest rates following the hike by the US Federal Reserve; India, Indonesia and Japan have held out for the time being.

2017 powers to a strong finish, primed for a stronger 2018 The office market has sustained a strong upward momentum during the fourth quarter, thus ending the year on a high note. Annual absorption gains were significant at 10%, driven by robust leasing activity in Chinese tier 1 cities followed by tech cities in India, Manila, Tokyo and Sydney. Coworking has become a major demand driver, leasing more than 5.0 million sf. (msf) over the last 12 months.

Relocations and consolidations driven by new supply, growing requirements from start-up companies and e-commerce players, and rapid expansion of flexible space providers have sustained strong leasing activity in China during the quarter. Demand for larger back-end facilities has continued in India with tenants actively seeking options to optimize their portfolios. There were more than 50 transactions of 100,000+ sf. during the year, with a majority coming from the tech sector followed by financial and professional services. Tight vacancies in hot markets such as Bengaluru and Hyderabad have forced clients like Deloitte and Amazon to pre-lease more than 2.0 msf. each during the quarter. Meanwhile, relocations have gathered pace in Tokyo and tenants are actively exploring newer properties. Clients like Google, Mixi and Anderson Mori & Tomotsune have recently pre-leased to relocate their headquarters. On the other hand, office vacancies in Sydney and Melbourne have reached their lowest since 2008 on the back of strong tenant demand.

Tight vacancies are driving strong rental growth in several markets across the region. Average rent in Hong Kong continued to climb higher on the back of a red-hot Greater Central rental market, which is now the world's costliest. Rents in Singapore have been growing rapidly for the last two quarters, in line with declining vacancies. Similarly, Melbourne and Sydney have shown strong rental growth (YoY). Rents in Bengaluru, Hyderabad and Ho Chi Minh city have also grown steadily during the year as vacancies dropped to 7% levels. On the contrary, high quality new supply has continued to push up rents in Manila albeit at a slower pace. Meanwhile, generous incentives are on offer in supply heavy markets such as Tokyo and Jakarta.a

ASIA PACIFIC OVERVIEW STATISTICS

RENTAL RATESRanking

Q4 2016

Q3 2017

Q4 2017

US$/sf/mo

1 1 1 Hong Kong 11.83

2 2 2 Tokyo 8.76

4 3 3 Singapore 6.81

3 4 4 Delhi - CBD 6.46

6 5 5 Sydney 5.67

5 6 6 Beijing 5.55

7 7 7 Ho Chi Minh City 4.88

8 8 8 Mumbai - SBD 4.32

9 9 9 Shanghai 3.96

11 10 10 Shenzhen 3.77

10 11 11 Mumbai - CBD 3.63

12 12 12 Seoul 3.53

13 13 13 Melbourne 3.26

14 14 14 Hanoi 2.78

16 15 15 Brisbane 2.74

17 17 16 Bangkok 2.70

15 16 17 Jakarta 2.58

19 19 18 Guangzhou 2.54

18 18 19 Taipei 2.50

21 20 20 Canberra 2.16

20 21 21 Gurgaon - CBD 2.15

22 22 22 Manila 1.80

23 23 23 Kuala Lumpur 1.74

24 24 24 Chengdu 1.52

26 25 25 Bengaluru 1.17

25 26 26 Pune 1.12

27 27 27 Chennai 0.96

29 28 28 Hyderabad 0.90

28 29 29 Kolkata 0.83

30 30 30 Ahmedabad 0.67

VACANCY RATESRanking

Q4 2016

Q3 2017

Q4 2017

Percentage

3 1 2.6%

2 2 3.0%

8 6 4.0%

11 4 4.9%

6 5 5.2%

7 9 5.5%

12 10 7.4%

4 18 7.4%

10 11

1 Gurgaon - CBD

2 Tokyo

3 Melbourne

4 Sydney

5 Bengaluru

8 Singapore

6 Hyderabad

7 Ho Chi Minh City

9 Hong Kong* 7.6%

5 8 10 Bangkok 7.6%

9 7 11 Beijing 7.7%

1 3 12 Manila 7.8%

22 16 13 Guangzhou 8.0%

16 12 14 Pune 8.4%

15 15 15 Canberra 8.5%

17 13 16 Chennai 9.0%

13 14 17 Mumbai - CBD 9.2%

14 17 18 Taipei 9.5%

18 19 19 Seoul 10.2%

25 22 20 Delhi - CBD 12.4%

21 21 21 Shenzhen 12.6%

19 20 22 Brisbane 12.9%

24 23 23 Hanoi 13.4%

20 24 24 Shanghai 14.0%

26 26 25 Mumbai - SBD 16.2%

23 25 26 Kuala Lumpur 17.7%

27 27 27 Jakarta 26.0%

29 28 28 Chengdu 32.8%

30 29 29 Ahmedabad 36.8%

28 30 30 Kolkata 38.3%

Tech is supercharging office demand As Asian economies continue to evolve, the tech sector is growing at a rapid pace, adding nearly half a million jobs per annum. Favorable demographics, new technologies spawning start-ups and funds chasing the next unicorn are driving its momentum across the region. In 2017, the tech sector accounted for more than 40% of the major leases inked in the region. Besides, the traditionally dominant markets of India and China, the tech invasion has taken over cities like Singapore, Sydney and Southeast Asia over the last two years. For example, tech giants like Facebook, Google, LinkedIn, Expedia and Apple have taken over Martin Place in Sydney's CBD, which was once dominated by major banks. Similarly, in Singapore, which has seen the likes of Microsoft, Facebook, Airbnb and LinkedIn securing new leases for regional headquarters. Southeast Asia is also fast becoming the new battleground for tech stalwarts trying to dominate the nascent start-up ecosystem with massive investments. Companies like Google, Alibaba, Tencent and Softbank are pouring in large capital and business experience into promising start-ups like GO-JEK, Lazada, Tokopedia and Grab. Companies are chasing promising markets like Philippines, Indonesia, Thailand and Vietnam, banking on prospects of rapid economic growth, rising consumption levels and an underpenetrated internet economy. Manila, Jakarta and Ho Chi Minh City are primed for tech growth standing out for availability of tech talent, lower rents and relatively more affordable cost of living. Meanwhile, in India, the tech sector is undergoing a transformation towards providing digitization and automated services as companies gear up for contract renewals of more than USD 50 billion in 2018. This bodes well for the outsourcing ecosystem in India which has faced some turbulence over the last two years. As such, we expect tech sector to continue supercharging office demand over the next three to five years.

4 5

ASIA PACIFIC OFFICE OVERVIEW | Q4A CUSHMAN & WAKEFIELD QUARTERLY RESEARCH PUBLICATION

5

*Hong Kong uses availability rate

Rental Growth (YoY)

DECREASING STABLE INCREASINGKolkata

Mumbai

Jakarta

Delhi-NCR

Kuala Lumpur

Delhi - CBD

Shanghai

Chennai

Gurgaon - CBD

Pune

Taipei

Tokyo

Seoul

Ahmedabad

Brisbane

Bangkok

Hanoi

Beijing

Chengdu

Hong Kong

Sydney

Canberra

Manila

Singapore

Bengaluru

Guangzhou

Melbourne

Shenzhen

Ho Chi Minh City

Hyderabad

Sorting order: Decreasing: High to Low, Increasing: Low to High

Projects Under Construction

TOP 10 MARKETS BOTTOM 10 MARKETS

Ranking Ranking

Q4 2016

Q3 2017

Q4 2017 sf

Q4 2016

Q3 2017

Q4 2017 sf

3 1 1 Shenzhen 86,042,892 16 19 19 Singapore 4,589,000

1 2 2 Shanghai 73,653,297 21 20 20 Melbourne 4,444,360

2 3 3 Beijing 72,568,233 18 21 21 Kuala Lumpur 2,859,021

12 4 4 Guangzhou 37,168,115 25 23 22 Hanoi 2,523,061

9 6 5 Delhi-NCR 31,761,261 19 22 23 Kolkata 2,139,860

6 7 6 Ahmedabad 29,616,556 28 25 24 Bangkok 1,917,432

4 5 7 Manila 27,343,286 24 28 25 Sydney 1,628,040

5 8 8 Bengaluru 24,178,599 23 24 26 Ho Chi Minh City 1,192,046

14 9 9 Hyderabad 23,132,000 26 26 27 Brisbane 513,438

7 10 10 Pune 21,665,015 27 27 28 Canberra 193,750

Construction Completions

QUARTERLY TRAILING 12 MONTHS ENDING

Ranking Ranking

Q4 2016

Q3 2017

Q4 2017 sf 2015 2016 2017 sf

5 NA 1 Beijing 4,142,508 1 1 1 Shanghai 15,075,910

17 1 2 Manila 4,016,743 5 11 2 Manila 11,153,084

9 8 3 Hyderabad 2,661,690 13 5 3 Shenzhen 9,153,542

NA 14 4 Jakarta 2,556,429 3 2 4 Beijing 8,108,919

1 13 5 Bengaluru 2,229,983 4 3 5 Bengaluru 6,564,979

3 11 6 Shenzhen 2,109,724 19 10 6 Hyderabad 5,587,064

NA 9 7 Chengdu 1,474,654 6 9 7 Jakarta 5,226,955

15 4 8 Mumbai 1,358,000 12 6 8 Mumbai 3,418,000

6 19 9 Chennai 1,025,180 9 23 9 Chengdu 3,290,888

19 NA 10 Pune 800,000 10 7 10 Tokyo 2,858,851

Vacancy Rates (%) Rental Rates (US$/sf/yr)

0 25 50

Kolkata

Ahmedabad

Chengdu

Delhi-NCR

Jakarta

Mumbai

Kuala Lumpur

Hanoi

Shenzhen

Chennai

Pune

Guangzhou

Manila

Bangkok

Ho Chi Minh City

Hyderabad

Bengaluru

EMERGING MARKETS

Shanghai

Brisbane

Seoul

Taipei

Canberra

Beijing

Hong Kong

Singapore

Sydney

Melbourne

Tokyo

CORE MARKETS

0 25 50

0 75 150

Ahmedabad

Kolkata

Hyderabad

Chennai

Pune

Bengaluru

Delhi-NCR

Chengdu

Kuala Lumpur

Manila

Mumbai

Guangzhou

Jakarta

Bangkok

Hanoi

Shenzhen

Ho Chi Minh City

EMERGING MARKETS

Canberra

Taipei

Brisbane

Melbourne

Seoul

Shanghai

Beijing

Sydney

Singapore

Tokyo

Hong Kong

CORE MARKETS

0 75 150

C O R E M A R K E T S A V E R A G E

61.71

E M E R G I N G M A R K E T S A V E R A G E

23.58

C O R E M A R K E T S A V E R A G E

8%

E M E R G I N G M A R K E T S A V E R A G E

16.7%

6 7

A CUSHMAN & WAKEFIELD QUARTERLY RESEARCH PUBLICATION ASIA PACIFIC OFFICE OVERVIEW | Q4

YTD Absorption and Supply

Availability and Space U/C

0.0

22.5

45.0

Southeast AsiaSouth AsiaNorth AsiaGreater ChinaAustralia

Supply

Absorption

0

175

350

Southeast AsiaSouth AsiaNorth AsiaGreater ChinaAustralia

Availability

Space U/C

Million sf

Million sf

Market coverage includes premium and Grade A properties in CBD and where relevant new prime centers that are well located, with office spaces that have higher design standards, large contiguous floor plates, managed professionally, are well leased to high quality tenants and suitable for institutional grade portfolios.

Under construction space includes all projects that have broken ground but not stalled as of the reporting quarter.

Construction completions include all new supply with projects that have completed and are ready/fit for possession.

Absorption refers to incremental new space take-up, and excludes renewals.

Occupancy costs include standardized market rents on net leasable area basis. Service charges are included if applicable.

Data for Australia are based on bi-annual numbers as available from PCA.

About The Data

ASIA PACIFICOFFICE OVERVIEW

Q4

DATAINTO

ACTION

Disclaimer:

Cushman & Wakefield (C&W) is known the world-over as an industry knowledge leader. Through the delivery of timely, accurate, high-quality research reports on the leading trends, markets around the world and business issues of the day, we aim to assist our clients in making property decisions that meet their objectives and enhance their competitive position. In addition to producing regular reports such as global rankings and local quarterly updates available on a regular basis, C&W also provides customized studies to meet specific information needs of owners, occupiers and investors.

Cushman & Wakefield is a leading global real estate services firm with 45,000 employees in more than 70 countries helping occupiers and investors optimize the value of their real estate. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.

©2018 Cushman & Wakefield, Inc. All rights reserved.

Cushman & Wakefield, Singapore3 Church Street#09-03 Samsung HubSingapore 049483www.cushmanwakefield.com

For more information about C&W Research, contact:

SIGRID ZIALCITA Managing Director, Research, Asia Pacific +(65) 6232 0875 sigrid.zialcita@ap.cushwake.com

8

A CUSHMAN & WAKEFIELD QUARTERLY RESEARCH PUBLICATION