ASIA PACIFIC HEAD OF RESEARCH
NICHOLAS HOLT
15TH OCTOBER 2015
AGENDA
MACROECONOMIC BACKDROP
CAPITAL MARKETS TRENDS
HOW THE OFFICE IS CHANGING
INFRASTRUCTURE
THE EMERGING MARKETS SLOWDOWN
RECENT GROWTH DRIVERS
Emerging Market
Commodity exporting
Manufacturing led
FUTURE GROWTH DRIVERS
Advanced economies
Commodity importing
Services / Tech led
US GROWTH ENGINE
3.9% GDP Growth
(year to Q2)
CAPITAL MARKETS TRENDS
Some emerging markets to see drop in outbound capital
More proactive US buyers
European opportunist money
More interest in specialist sectors
Deregulation
PRIME OFFICE YIELDS (END ‘15 ESTIMATE)
0.00%2.00%4.00%6.00%8.00%
10.00%12.00%
Beng
aluru
Mumb
aiDe
lhiMe
xico C
itySh
angh
aiBe
ijing
Melbo
urne
Sydn
eyCh
icago
Was
hingto
n DC
Los A
ngele
sFra
nkfur
tSa
n Fran
cisco
New
York
City
Madr
idTo
kyo
Singa
pore
Lond
onPa
risHo
ng Ko
ng
Source: Knight Frank / Newmark Grubb Knight Frank
CROSS BORDER INVESTORS PROMINENT IN INDIA, SG AND MALAYSIA INVESTMENT INTO REAL ESTATE H1 ‘15 ($M)
Source: Knight Frank / Real Capital Analytics
H1 2015 Domestic Foreign % Foreign US $777,728 $42,456 5% UK $169,691 $38,710 19% CHINA $106,011 $17,902 14% JAPAN $104,284 $3,800 4% AUSTRALIA $74,919 $5,575 7% HONG KONG $6,872 $1,560 18% NEW ZEALAND $6,121 $1,170 16% SINGAPORE $2,954 $2,259 43% SOUTH KOREA $1,903 $842 31% MALAYSIA $1,005 $1,454 59% THAILAND $1,468 $175 11% INDIA $493 $998 67%
TOP TEN OFFICE RENTAL GROWTH TO 2018
Source: Knight Frank / Newmark Grubb Knight Frank
1 6
2 7
3 8
4 9
5 10
22% 14%
21% 13%
20% 12%
16% 10%
16% 9%
MADRID LONDON
MUMBAI LOS ANGELES
SAN FRANCISCO HONG KONG
MELBOURNE PARIS
BENGALURU CHICAGO
HOW THE OFFICE IS CHANGING
COOL OFFICES
Courting ‘Millennials’
Desks out / sofas in
Growing fast in popularity
IMPACT ON DENSITIES? Typical space allocation per worker
Source: Knight Frank / Newmark Grubb Knight Frank
SHANGHAI NEW YORK PARIS LONDON SYDNEY MUMBAI
160 150 150 120 120
75
100
SINGAPORE
INFRASTRUCTURE 1: TRANSPORT
Airport: Dubai, Beijing, Singapore, Hong Kong Intercity rail: Japan, SE Asia Metro: Across most markets
INFRASTRUCTURE 2: INDIA
Delhi / Mumbai Industrial Corridor
920 miles long, 186 miles wide
New rail, sea ports, airports, and 100 smart cities
INFRASTRUCTURE 3: ONE BELT ONE ROAD
China : One Belt One Road
New Silk Road Economic Belt
21st-Century Maritime Silk Road
SUMMARY
Growth shifting from emerging to mature markets with global cities to continue to attract significant investment capital
Office markets are changing in terms of tenant profile, design and fit-out, responding to the needs of businesses and employees
Infrastructure is supporting the development of the Global Cities and will provide opportunities for investment going forward
PRIME YIELDS: INDIAN CITIES AHEAD OF NEW YORK & LONDON
0.00%2.00%4.00%6.00%8.00%
10.00%12.00%
Beng
aluru
Mumb
aiDe
lhiMe
xico C
itySh
angh
aiBe
ijing
Melbo
urne
Sydn
eyCh
icago
Was
hingto
n DC
Los A
ngele
sFra
nkfur
tSa
n Fran
cisco
New
York
City
Madr
idTo
kyo
Singa
pore
Lond
onPa
risHo
ng Ko
ng
Source: Knight Frank / Newmark Grubb Knight Frank
CURRENT RENTALS: MUMBAI AND DELHI ARE LOWER THAN THE 2007 PEAK
Source: Knight Frank / Newmark Grubb Knight Frank
-60.0%-40.0%-20.0%
0.0%20.0%40.0%60.0%80.0%
Beijin
g
San F
rancis
co
Melbo
urne
Sydn
ey
Lond
on
Was
hingto
n DC
Beng
aluru
Mexic
o City
Shan
ghai
Los A
ngele
s
Frank
furt
Hong
Kong
New
York
City
Chica
go
Paris
Mumb
ai
Delhi
Toky
o
Madr
id
Singa
pore
FUTURE RENTAL GROWTH: MUMBAI & BENGALURU AMONG TOP 5
Source: Knight Frank / Newmark Grubb Knight Frank
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%Ma
drid
Mumb
ai
San F
rancis
co
Melbo
urne
Beng
aluru
Lond
on
Los A
ngele
s
Hong
Kong
Paris
Chica
go
Was
hingto
n DC
Sydn
ey
Shan
ghai
New
York
City
Toky
o
Delhi
Frank
furt
Mexic
o City
Beijin
g
Singa
pore
DMIC AMONGST THE TOP 5
Source: Knight Frank / Newmark Grubb Knight Frank
Tripling industrial output and quadrupling exports in the next 5 years Global IT majors to help transformation of Smart Cities on this corridor Delhi to become an economic anchor of North India
CAPITAL FLOWS
Foreign investment in Indian Real Estate double of the domestic flow REIT to give a further push to commercial real estate; Could attract investments worth $100 bn in the next few years
ROBUST OUTLOOK FOR COMMERCIAL REAL ESTATE
Strong demand from e-commerce and start-ups High yields and rental growth a perfect combination for investment Heightened foreign interest coupled with improving regulatory landscape Robust economic growth, focus on infrastructure and ease of doing business