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Asia PacificH1 2016 Office Overview and Forecasts
19th July 2016
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
AGENDAH1 2016 Recap
Economic Outlook
Office Forecasts 2016-17
Occupier Conditions
Investment Outlook
Q&A
4
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
CHINAGradual Transition
HONG KONGRental Growth in Greater Central
SEOULLackluster Demand
TOKYOGoing Strong
JAKARTADomestic Reforms; Infrastructure Push
SINGAPOREPrime Supply Changing Market Dynamics
MANILABPO Sector Drives Momentum
HCM CityHeating Up
INDIAOn the Upswing
SYDNEYBack on Solid Ground
MELBOURNEHealthy Occupier Demand
Asia Pacific – Resilience in Tough TimesH1 2016 Recap
Annual rental growth of
in Tokyo5.7 % highest
vacancy rate in Kolkata
42.3 % of new office space in Shanghai
5.0 million sf.
lowestvacancy rate in Manila
1.6 % Rental drop in Singapore since H1 2015
10.4 % Incentivesreduced to
in Sydney20-25 %
net absorption inBengaluru
4.4 million sf.
Source: Cushman & Wakefield Research
5
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Asia Pacific Economy2016 Real GDP Growth
Growth in Asia is Highest GloballyAmericas
2.1%Europe
1.6%APAC
5.2%
Thailand / New Zealand / S. Korea
3
Malaysia4
Indonesia5
Philippines / Vietnam / China6
India7
Japan / Hong Kong1
Singapore / Australia / Taiwan2
Leadership Changes
Source: Oxford Economics, IMF, Cushman & Wakefield Research
?6
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Critical IssuesAsia Pacific Economy
Extraordinarily
Expansionary Policies
Walking the Reform Talk
Lower Global Growth
Emerging ASEAN Markets
Poised for Take Off
No BREXIT Hangover
7
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Forecast Assumptions
ABOUT THE DATA
Data include Grade A properties in 30 major cities in Asia Pacific, tracked via C&W’s Site Solutions®
Australia : Adelaide, Brisbane, Melbourne, Perth and Sydney , China : Beijing, Chengdu, Guangzhou, Shanghai and Shenzhen , India : Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi and Pune , Indonesia : Jakarta , Japan : Tokyo , Malaysia : Kuala Lumpur , New Zealand : Auckland , Philippines : Manila , South Korea : Seoul , Taiwan : Taipei , Thailand : Bangkok , Vietnam : Hanoi and Ho Chi Minh City
Grade A properties are defined as prime office buildings with higher design standards and provide superior building services, and are well-leased to high-quality tenants and suitable for institutional-grade portfolios
8
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Adelaide Ahmedabad
Bangkok
Beijing
Bengaluru
Brisbane
ChengduChennai
New Delhi
Guangzhou
HanoiHo Chi Minh City
Hong Kong
Hyderabad
Jakarta
KolkataKuala Lumpur
Manila
Melbourne
Mumbai
Perth
Pune
Seoul
Shanghai
Shenzhen
Singapore
Sydney
Taipei
Tokyo
-3,000
0
3,000
6,000
9,000
12,000
15,000
18,000
21,000
24,000
27,000
30,000
0 20 40 60 80 100 120 140 160 180
Absorption2016-17
Core markets & Southeast Asia
Emerging markets - China and India
Office-Using Employment Growth (‘000s)
Abs
orpt
ion
(‘000
Sf.)
24
61
78
54 55 58
80
90 93
0
10
20
30
40
50
60
70
80
90
100
2009 2010 2011 2012 2013 2014 2015 2016 2017
sf (m
illion
s)
Absorption 2009-17
Absorption to Reach 8-year High in 2016
Continued Demand from Tech / Outsourcing
Absorption Vs Office-Using Employment Growth
Source: Cushman & Wakefield Research New Delhi refers to Delhi, Gurgaon and Noida markets *Projections for Australia includes all grades
9
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Highest New Supply 2016-17
Supply as a Share of Inventory
South Asia31%
Greater China48%
North Asia5%
Southeast Asia14%
Australia2%
Over 250 msf Under Construction
Inventory in China to Rise by 45% in 2 years
Above-Average Supply in
China, India and Parts of SE
Asia
2016-17 Supply
Source: Cushman & Wakefield Research New Delhi refers to Delhi, Gurgaon and Noida markets *Projections for Australia includes all grades
0%0%2%2%2%
6%8%8%8%9%
11%12%
14%15%15%
18%22%24%
28%28%
32%32%33%
35%36%
38%44%
55%67%
101%
0 0.2 0.4 0.6 0.8 1 1.2
AdelaidePerth
MelbourneBangkok
SeoulSydney
TaipeiHong Kong
TokyoBrisbane
Kuala LumpurHanoi
ChennaiNew Delhi
PuneSingaporeBengaluru
Mumbai (overall)Ho Chi Minh
JakartaGuangzhou
BeijingHyderabad
ManilaMumbai Core
AhmedabadShanghaiChengdu
KolkataShenzhen
10
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
49.3%43.0%43.0%
27.9%26.8%26.7%
23.0%21.4%
14.9%14.4%14.2%
10.4%9.6%
8.5%7.9%
4.1%3.9%
2.3%
20.8%18.0%
15.2%13.0%
12.5%12.0%
8.8%8.6%
7.6%7.0%
5.3%4.5%
0% 10% 20% 30% 40% 50%
AhmedabadKolkata
ChengduJakarta
New DelhiMumbai Core
HanoiMumbai (overall)
ShenzhenKuala Lumpur
GuangzhouPune
BengaluruChennai
HyderabadBangkok
ManilaHo Chi Minh
PerthBrisbaneShanghai
SeoulAdelaide
TaipeiBeijing
SingaporeMelbourneHong Kong
SydneyTokyo
13.2%
11.2%12.2%
11.5% 11.4% 11.2%
13.8%14.6%
0%
2%
4%
6%
8%
10%
12%
14%
16%
2010 2011 2012 2013 2014 2015 2016 2017
Vacancy Rate
2016 Vacancy Rate Vacancy RateAsia Pacific
Supply Outpacing Demand in 2016 – 17
17-18%
CORE MARKETS
EMERGING MARKETS
10-11%
New Delhi refers to Delhi, Gurgaon and Noida markets *Projections for Australia includes all grades
11
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Rental Growth2016-17
Rent Growth 2015-17 Rent Reversions
Rental growth slowing
Occupancy Cost Escalations Easing Gradually
13-1
5%
8-10
%
6-8%
3-5%
2010-13 2011-14 2012-15 2013-16
3-5%
2014-17
Source: Cushman & Wakefield Research
Cor
eE
mer
ging
New Delhi refers to Delhi, Gurgaon and Noida markets
-19%-8%
-6%-5%
-4%-3%
-2%-2%
2%4%4%5%5%
7%15%
20%21%
24%
-10%-3%
-1%0%
1%1%1%
3%6%
7%11%11%
-0.25 -0.2 -0.15 -0.1 -0.05 0 0.05 0.1 0.15 0.2 0.25 0.3
JakartaChengdu
Kuala LumpurKolkata
Mumbai (overall)Hanoi
New DelhiShenzhen
Ho Chi MinhMumbai Core
GuangzhouBangkok
AhmedabadManila
HyderabadPune
ChennaiBengaluru
SingaporeBeijing
PerthBrisbane
SeoulShanghaiAdelaide
TaipeiMelbourne
SydneyHong Kong
Tokyo
12
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Most Expensive Markets
Rank Country City Location Occupancy Cost (US$/sf/year)
1 UK London West End $186.10
2 Hong Kong Hong Kong Central $178.92
3 Hong Kong Hong Kong Wan Chai / Causeway Bay $111.60
4 USA Silicon Valley Palo Alto $110.40
5 Japan Tokyo CBD 5 Wards $105.12
6 USA New York Park Avenue $104.80
7 UK London London(City) $104.20
8 USA New York Midtown (Madison/5th Ave.) $103.67
9 Singapore Singapore Marina Bay $85.68
10 France Paris CBD $79.70
11 India New Delhi Connaught Place $77.43
12 USA San Francisco East SOMA $74.38
13 Russia Moscow CBD $69.70
14 Australia Sydney CBD $67.09
15 China Beijing CBD $65.16
* Includes service charges, data as of Q1 2016
* Asia Pacific markets are highlighted in red
13
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Rent Reversion2013-16 and 2014-17
EMER
GIN
GC
OR
E
2013-16 2014-17
*5-year rent rollovers in Australia
-20% -10% 0% 10% 20% 30% 40%
ChengduKuala LumpurMumbai Core
KolkataHanoi
JakartaHo Chi Minh
HyderabadGuangzhou
PuneMumbai (overall)
New DelhiChennaiBangkok
AhmedabadManila
BengaluruShenzhen
SingaporePerth
BeijingSeoul
BrisbaneAdelaide
TaipeiShanghai
MelbourneSydney
TokyoHong Kong
-30% -20% -10% 0% 10% 20% 30% 40%
JakartaChengdu
Kuala LumpurMumbai Core
KolkataHanoi
Ho Chi MinhNew Delhi
GuangzhouShenzhen
BangkokManila
HyderabadAhmedabad
PuneChennai
Mumbai (overall)Bengaluru
SingaporePerthSeoul
BrisbaneBeijingTaipei
ShanghaiAdelaide
MelbourneSydney
TokyoHong Kong
3-4%
4-5%
3-4%
6-7%
New Delhi refers to Delhi, Gurgaon and Noida markets
14
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Key Themes
Japan
Stable and Consistent South Korea
Muddling Through
China
Still Room to Grow Hong Kong
Bracing for Slower Growth
Singapore
Looking Beyond the Subdued Market
Indonesia
Gradual Liftoff India
The Cycle Turns Up
Philippines
Continuing to Shine
Vietnam
Ready for Take-off
Australia
The Only Way is Up
15
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Occupier Conditions2016-17
Source: Cushman & Wakefield Research
Tenant Favorable
Neutral
Landlord Favorable
Neutral to Landlord
Source: Cushman & Wakefield Research New Delhi refers to Delhi, Gurgaon and Noida markets
GREATER CHINASOUTH ASIA
SOUTHEAST ASIA
Seoul Tokyo
AUSTRALIA &NEW ZEALAND
NORTH ASIABeijing
Chengdu
GuangzhouShanghai
Shenzhen
Hong Kong
Taipei
Bangkok
Hanoi
Ho Chi Minh City
Manila
Kuala Lumpur
Jakarta
Singapore
Ahmedabad
Bengaluru Chennai
Hyderabad
Kolkata
Mumbai
New Delhi
Pune
AdelaideBrisbane
Perth Sydney
Melbourne
Auckland
*Hong Kong Greater Central is landlord favorable 16
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Co-working Spaces Continue to Gain Traction
32,300 sf in Shenzhen
93,700 sf in Hong Kong, 28,000 sf in
Shanghai and more in Sydney
22,000 sf in Singapore
15,600 sf in Ho Chi Minh City
8,000 sf in Ho Chi Minh City
6,500 sf in Ho Chi Minh City
About 11,000 sf in
Singapore
• Flexibility
• Community
• Networking Opportunities
• Plenty of Room to Grow
• Co-working as a Hedge
• Driving Innovation
Selling Points
17
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Key Takeaways2016-17
ECONOMY DEMAND SUPPLY RENTS
GDP GROWTH
HIGHEST GLOBALLY
5.1-5.3%IMPACT OF
BREXITWILL BE
CONTAINED
TECH / OUTSOURCING
SECTORWILL CONTINUE TO BE
THE GROWTH LEADER
ABSORPTION GAINS TO REACH
8-YEAR HIGH
HIGHER THAN AVERAGE SUPPLY IN
CHINA, INDIA & JAKARTA,
SINGAPORE
OVER
250MILLION SF
IN 2016-17
VACANCY TO EDGE UPCORE: 10 - 11%
EMERGING: 17 - 18%
OCCUPANCY COSTS
RISINGIN 50% OF THE
MARKETSin 2017
HIGHER SUPPLY LEADS TO
WEAKENING RENTS IN
JAKARTASINGAPORE
CO-WORKINGGAINS MOMENTUM
18
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Critical IssuesAPAC Investments
Outbound Investments Easing Restrictions
Brexit
Yield Compression
Rise of Middle East Capital
19
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
OutlookAsia Pacific Commercial Real Estate
0
26
52
78
104
130
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016P
US
$ bi
llion
H1 H2
Upside drivers in investment volumes• Diversification• Demand for safe haven assets• Search for yield• Sustained allocations• Reforms/Loosening measures
Opportunities in Hong Kong, South Korea and China areemerging as corporates and developers are selling their assetsto pare down debt and recycle capital. Chinese companies arealso keen to increase their presence in Hong Kong. Similarly,Singapore could see fresh inflows of capital, especially as itsoffice market negotiates the current rental down cycle.
Core markets Regional markets in Japan Rebounding land sales in China Emerging markets: India
Flat to -5.0%
Projected volumes
“
”
Limited assets for sale
Source: Real Capital Analytics, Cushman & Wakefield Research
20
H1 2016 Office Overview and Forecasts | Cushman & Wakefield
Landmark TransactionsAsia Pacific Office Sales
Location SINGAPORE SINGAPORE MUMBAI MELBOURNE HONG KONG
Property Asia Square Tower I Straits Trading Building Equinox Business Park Southern Cross Tower Dah Sing Financial Centre
Buyer Qatar Investment Authority Tahir RMZ Corp Blackstone China Everbright
Price US$2.5 billion US$411.8 million US$354.8 US$490.2 US$1.3 billion
Price/sf US$1,928 US$2,588 US$285 US$1,120 US$3,225
Yield 3.2% ∼2.2% 9-10% < 5.0% 2.4%
Source: Real Capital Analytics, Cushman & Wakefield Research
21
Asia PacificH1 2016 Office Overview and Forecasts