Speakers

David Ji

Director, Head of Research & Consultancy, Greater China

Thomas Lam Senior Director, Head of Valuation & Consultancy

Global Cities Opportunities

The Skyscraper Index

0

50

100

150

200

250

300

Prime Rent (US$ / sq ft / year)

Source: Knight Frank, Newmark Grubb Knight Frank, Sumitomo Mitsui Trust Research Institute

Note: Q4 2014 to Q2 2015

The Skyscraper Index: Office Rental Growth (In

the past 6 months)

0%

2%

4%

6%

8%

10%

12%

Source: Knight Frank, Newmark Grubb Knight Frank, Sumitomo Mitsui Trust Research Institute

Note: Q4 2014 to Q2 2015

Prime Yields

0%

1%

2%

3%

4%

5%

6%

7%

Prime Yield (%)

Source: Knight Frank, Newmark Grubb Knight Frank, Sumitomo Mitsui Trust Research Institute

Office Rental Growth (2007-2015)

-40%

-20%

0%

20%

40%

60%

80%

Source: Knight Frank, Newmark Grubb Knight Frank, Sumitomo Mitsui Trust Research Institute

Note: Forecast figures until end of 2015

Office Rental Growth Forecast (2015-2018)

-5%

0%

5%

10%

15%

20%

25%

Source: Knight Frank, Newmark Grubb Knight Frank, Sumitomo Mitsui Trust Research Institute

Five future trends in capital markets

• Specialist property growth in demand

• Property income – long or short?

• Deregulation helps global capital flows

• Mixed-use projects allow investors to spread risk

• US and Chinese outbound capital continues to grow

Strong Dollar Drives U.S. Commercial Investment Abroad

Source: Real Capital Analytics

Note: Based on office, industrial, retail and hotels. Excludes development sites.

0

10

20

30

40

50

60

70

80

90

2007 2008 2009 2010 2011 2012 2013 2014 2015H1

US$ billion

US Outward Investment in Past 2 years

Source: Real Capital Analytics

80%

15%

5%

Europe Asia Pacific Other markets

New Trends in Hong Kong, Shanghai and Beijing: CBD Expansion

Shanghai:

Underground city

Beijing:

New airport

Hong Kong:

The new CBDs

HONG KONG GRADE-A OFFICE MARKET

Grade-A Office Rents

0

20

40

60

80

100

120

140

160

180

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Core area Non-core areaHK$ per sq ft

Source: Knight Frank Research

Grade-A Office Vacancy Rate

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Core area Non-core area

Source: Knight Frank Research

Chinese Firms Become Key Demand Driver

0%

5%

10%

15%

20%

25%

2008 2014

Share of Existing Central Office Space Leased by Chinese firms

In 2015, around 40-50% of

new lettings in Central

involve Chinese firms

Source: Knight Frank Research

Central Grade-A Office Stock Distribution by Age

57.5%

8.7%

17.7%

12.4%

3.7%

Above 25 years 21-25 years 16-20 years 10-15 years Less than 10 years

Source: Knight Frank Research

Major Future Grade-A Office Supply

-

5

10

15

20

Central Kowloon East Island East Tsim Sha Tsui Wanchai/CausewayBay

million sq ft

New supply (2017-2020) New supply (2015-2016) Existing stock

Source: Rating and Valuation Department / Knight Frank

Grade-A Office Stock in Core Districts of Selected Financial Centres

0

50

100

150

200

250

Hong Kong Singapore Sydney London Manhattan, NewYork

Internal floor area

(million sq ft)

Source: Knight Frank Research

Overlaying Historic Take-up against Future Supply

0

1

2

3

4

5

6

7

8

Internal floor area

(million sq ft)

Average completion 95-03

= 2.6 million sq ft

Average take-up 95-14

= 2.0 million sq ft

Average completion 04-08

= 2.1 million sq ft

Average completion 09-14

= 1.2 million sq ft

Shortfall ~ 2 million sq ft

*Preliminary figure

Source: Rating and Valuation Department / Knight Frank

Average completion

= 1.7 million sq ft

Shortage of Grade-A Office Space (2016-2020)

Shortage = an additional 2 million sq ft

(equivalent to the total office space of Two IFC)

Source: Knight Frank Research

1. Central Harbourfront

Development

The project could provide a maximum of

about 970,000 sq ft of Grade-A office space.

Around 480,000 sq ft of Grade-A office space

may be completed by 2020.

2. Kowloon East CBD2

Kowloon East CBD2 could provide a maximum office space of 42.6 million sq ft, only less than 10% is likely to be delivered by 2020.

The West Kowloon Cultural District will supply

around 1,160,000 sq ft of office space

Three Grade-A office buildings will be built on the

West Kowloon Terminus station, total GFA of

around 2.8 million sq ft to market by 2020.

West Kowloon Cultural District

West

Kowloon

Terminus

3. West Kowloon District

The Wan Chai waterfront sites could provide around 2.0 million sq ft of prime office space.

4. Wan Chai government

offices relocation

Q & A