Asia Pacific Capital Markets in Focus - JLL · 1 Asia Pacific Capital Markets in Focus Deal...

1

Asia Pacific Capital Markets in Focus

Deal pipeline building for remainder of the year April 2016

Highlights/

Outlook

Market

Conditions

Market

Fundamentals

Macro

Environment

Fast Facts -5%

Asia Pacific Commercial Real Estate Investment Volumes

Q1 2016

Total Transactions (US$ bn)

• Q1 AP investment volumes declined 5% y-o-y to USD 23.7bn, with Japan down and China stable.

Australia and Korea were outperformers; Hong Kong performed well against a low base in Q1 2015.

• Cross-border investors remained active and accounted for 22% of total volumes.

• Intra-regional capital flow within AP was almost four times higher than inter-regional capital flow

as investors look for opportunities and growth prospects within the region.

Office | Financial and technology firms continued to drive leasing activity.

Retail | Demand coming from mass market brands and F&B operators.

Industrial | 3PLs & e-commerce supports rents.

Residential | Small price falls in Hong Kong and Singapore and slower price growth in Australia.

Polarised market conditions between Tier 1 and Tier 2 Chinese cities.

Hotel | Diverse trading performance. Strongest showing in Tokyo and Australia.

• China is the only major country to be upgraded by the IMF in its World Economic Outlook.

Forecast global growth for 2016 is cut by 0.2 percentage points due to financial market risks.

• Low interest rates projected for most AP countries this year despite the gradual US monetary

policy normalisation. Japan’s rates can potentially move further into negative territory.

Key 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

Auckland | Nick Hargreaves | +64 9 914 9761

Asia Pacific Capital Markets in Focus | Q1 2016 Report prepared by Dr Megan Walters and Myles Huang

Stuart Crow

24

Q1 2016 vs. Q1 2015

Change

• Transaction volumes off slightly in Japan due to uncertainty after the introduction of negative

interest rates - however rising activity pipeline.

• Deal availability has increased with hotel and logistics deals in the market.

• Pipeline of larger assets coming through in several markets.

• Local capital appears to be active in most major markets.

mailto:[email protected]














2

Asia Pacific | Investment Deal Highlights

SBF Centre strata units

LaSalle Logiport REIT

8 assets (IPO)

Dah Sing Financial

Centre

Jongno Tower

SYDNEY

MELBOURNE

SINGAPORE

MUMBAI

SEOUL

HONG KONG

BEIJING

SHANGHAI

TOKYO

Waterfront Place

Block E & G

Woolworths

Headquarters

Asia Pacific Capital Markets in Focus | Q1 2016

Seller Far East Organisation

Buyer Scor Reinsurance

SGD 85m (USD 61m)

Seller Samsung Life and

Youngbo Buyer Alpha

Investment Partners

KRW 384bn (USD 320m)

Seller ARA

Buyer Pramerica Real

Estate Investors

RMB 760m (USD 115m)

Seller Sea Group

Buyer China Everbright

Holdings Company Ltd

HKD 10bn (USD 1.29bn)

Seller Mirvac Group

Buyer Inmark Asset

Management

AUD 336m (USD 243m)

Total value

JPY 160bn (USD 1.4bn)

PERTH

Syswin Building

Seller Syswin Group

Buyer Rail Capital

RMB 630m (USD 96m)

Building 10 (658 Church

Street)

Seller Frasers Property Group

Buyer Blackrock Asset

Management

AUD 46m (USD 33m)

Equinox Business Park

Seller Essar Group

Buyer RMZ Corp – QIA JV

INR 24bn (USD 355m)

DELHI

Exchange Tower

Seller Vicinity Centres

Buyer Primewest

AUD 110m (USD 79m)

Tokyo

Akihiko Mizuno

Outlook

Market

Conditions

Market

Fundamentals

Macro

Environment

• Steady demand from both domestic and

international investors, however deal flow

has fallen due to fewer large transactions

and more refinancing activity.

• Tokyo ranked for a 3rd year as the number

one market of choice in AP for investors

(ULI).

• Limited deal availability but fund

terminations expected in 2016 will support

transaction volumes.

• Negative interest rates will stimulate more

debt and equity investment across the

spectrum as investors seek high yield

assets.

• Investment volumes were down 26% y-o-y in

Q1 2016 due to a number of deals being

pulled from the market to be refinanced.

• Cross-border transaction volumes totaled

US$ 3.2bn. Interestingly, cross-border

investor were net sellers of real-estate, by a

factor of two to one.

• J-REITs remain active. LaSalle completed

an IPO of 8 logistics assets with a value of

117 billion yen (c. US$ 1.0bn).

• Cap rates have continued to shift lower in

line with cheaper funding costs. Sellers are

holding firm on their price expectations for

the time being.

Office | Rent growth remains above trend with

limited spare capacity in the leasing market.

Retail | Affordable luxury brands and service-based

retailers looking for space in prime locations.

Industrial | 3PLs (including retailers and

manufacturers) and e-commerce firms continued to

expand.

Residential | Average price of a condominium rose

9.3% in 2015 to the highest price level since 1991.

Hotel | Growing inbound tourism (19.7 million

visitors in 2015) is buoying the occupancy rates and

strong RevPAR growth in Tokyo and Osaka.

• Oxford Economics forecasts 2016 GDP

growth of 0.8% (0.5% in 2015) on slow

domestic and external demand.

• Japan's parliament approved a record

budget of US$ 851.5bn for fiscal 2016.

• Stable headline CPI due to the fall in energy

prices. CPI excluding fresh food and energy

however was up 0.8% y-o-y in February.

• The BoJ applied negative interest rates on

banks’ excess reserves starting February in

order to stave off deflation concerns.

• The Yen climbed to 110 against the dollar in

April, the strongest level since 2014.

Notable

Transactions

• Deal flow is limited as vendors prefer to pursue refinancing

/ availability of cheap debt

• The prices of condominiums trail behind top global cities

• Stronger investors’ appetites in hotels but owners may

choose to hold assets to benefit from improving cash-flow

3

Fast Facts

2.6-3.0 2.6-3.2 4.2-5.3

Transactional Yield Ranges (%) Japan Commercial Real Estate Investment Volumes

Grade A Office Retail Industrial Q1 2016 Total Transactions

(US$ bn)

Japan Market Statistics 6-12 Month Outlook

-0.07 10-yr JGB bond yield (% p.a.),

1Q16

Deal availability No. of foreign buyers Cap rate trend

Tokyo Office (CBD)

Source: JLL (REIS)

9.6

LaSalle Logiport REIT 8 assets portfolio (IPO)

Industrial | Total value USD 1.4bn

Nikko Building | Office | USD 119m | Net Yield 3.4%

Seller SPC of Deutsche Bank | Buyer Daiwa Office

Investment Corporation

Kyobashi Square | Office | USD 104m | Net Yield 3.0%

Seller SPC of AXA Investment Managers and Sumitomo

Mitsui Trust Realty | Buyer Kintetsu Real Estate

Chiba Port Square| Mixed use | USD 87m

Seller SPC of Oxley Holdings | Buyer Greenland/Laox

Asia Pacific Capital Markets in Focus | Q1 2016 Sources: JLL, Japan Government

No.10

Rent and capital value growth

-26% Q1 2016 vs. Q1 2015

Change

Tokyo’s Asia Pacific ranking

Real estate investment relative to size

Sydney

Simon Storry

• Finance market volatility has driven superfunds and

insurers to target securely leased investments in offices

• Demand for Sydney retail assets remains robust, but

stock availability has reduced

• Several major core logistics assets will come to market

5.0-6.5 4.5-7.25 6.25-7.5

Australia Commercial Real Estate Investment Volumes

Office Retail

Australia Market Statistics 6-12 Month Outlook

Deal availability No. of foreign buyers

4

• Offshore core investors should continue

to be attracted due to good quality assets,

and yield spreads to other core markets.

• Solid pipeline of major transactions for

H1 2016, with both individual asset

offerings and portfolios coming to market.

• Strong demand for office assets

reflecting investor confidence in the

leasing market. Softening demand for

secondary non-core retail assets.

• Prime yields should remain stable in

2016 across the commercial market, due

to low inflation and low nominal interest

rates.

• Investment activity in Australia was up 44%

y-o-y (AUD terms) for Q1, buoyed by strong

demand from wholesale and superannuation

funds as well as offshore buyers.

• Strong office investment activity as investors

competed for core assets. Several large

industrial transactions are due to settle in Q2.

• The most active Asia Pacific investor groups

in the market come from Singapore, Korea,

China and Hong Kong.

• Office and industrial yields were stable (retail

yield compressed slightly) in Q1, as recent

transaction evidence was reflected in current

yield levels.

Office | Sydney is at the forefront of the leasing

market recovery. Employment growth and positive

business conditions are driving tenant demand.

Retail | International retailers continued to expand.

Sydney is expected to lead the rental recovery.

Industrial | Strong activity in the new build market.

Stable rents in prime space.

Residential | Prices have fallen q-o-q in some

suburbs and sales volumes have continued to trend

down, due to a strong supply pipeline out to 2018.

Hotel | Rising occupancy levels and room rates.

Growing demand from various segments including

corporate, cruise and inbound.

• Consensus Economics forecasts slightly

stronger GDP growth (2.6% & 2.9%) over

2016-2017.

• The Reserve Bank restated in its 1 March

meeting that low inflation may provide

scope for further monetary easing.

• The AUD has strengthened to a nine-month

high of US$0.76 in March. The RBA is

concerned that a rising exchange rate could

slow the rebalancing of the economy.

• Retail spending growth remains reasonably

solid. Retail turnover in New South Wales

grew by 4.6% y-o-y in February.

Industrial

Woolworths Limited National Headquarters

Office | USD 243m | Seller Mirvac Group

Buyer Inmark Asset Management

151 Castlereagh Street | Office | USD 87m

Seller 151 Property Group (Blackstone) | Buyer

Deutsche Asset Management

M4 Greystanes Industrial Park | Industrial

USD 55m | Seller Deka Immobilien Investment | Buyer

Ascendas Logistics Trust 2

Sydney Office (CBD)

Source: JLL (REIS)

Outlook

Market

Conditions

Market

Fundamentals

Macro

Environment

Notable

Transactions

Fast Facts


-50

Sources: JLL, Reserve Bank of Australia

Transactional Yield Ranges (%)

2.0 Cash rate (% p.a.), 1Q16 Cap rate trend

Q1 2016 Total Transactions

(US$ bn)

+32% 3.3 Q1 2016 vs. Q1 2015

Change

Monetary easing

since 4Q14 (bps) Asia Pacific Capital Markets in Focus | Q1 2016

No.1 Sydney’s Asia Pacific ranking


Melbourne

Robert Anderson

• An active market provides institutions an opportunity to

review their portfolio of office assets

• More sales and leaseback in industrial. Corporates are

taking advantage of the strong market conditions to put

the capital back into their businesses

5.25-7.5 4.75-7.5

Australia Commercial Real Estate Investment Volumes

Office Retail

Australia Market Statistics 6-12 Month Outlook


5

• Transactional activity over the coming

quarters to involve large non core office

assets, small portfolios of core plus

industrial assets, as well as sale and

leaseback corporate activity in industrial.

• Vendors will have the potential to

capitalise on strong pricing from

investment mandates.

• A number of sales in the pipeline are

expected to continue to confirm the current

yield range.

• Capital growth in 2016-2017 is projected to

be comparatively minimal.

• International investors are actively buying.

Blackrock secured a fully occupied office

building in order to benefit from the

improving leasing market expected over

the next few years.

• Available assets in the market include A-

grade city fringe office assets, core plus

industrial assets, bulky good stores.

• A number of investors have brought their

industrial assets to the market following

the GIC and Frasers Property portfolio

transaction in H2 2015.

• Yields were generally stable in Q1.

Office | Expansion by public administration and

finance companies helped to offset downsizing by

mining and resources companies.

Retail | New international retailers continued to

grow their store network in Melbourne.

Industrial | Demand was led by the retail trade

sector.

Residential | Large level of recent stock completion

and a solid supply pipeline with a peak expected

over 2017-2018 period.

Hotel | RevPAR growth to continue in the next few

years but the supply pipeline is growing.

• The Victorian economy grew by 4.6% over

the year to Dec 2015, the strongest annual

increase of any state.

• Retail turnover in Victoria increased by

4.8% y-o-y in February, and continued to

track above the national average (3.3%).

• Slower price and rent growth for

apartments in inner city precincts.

• There has been a notable shift from the

construction of larger residential towers

located across inner Melbourne to lower

density smaller developments in

Melbourne’s fringe markets.

Industrial

Oxford Cold Storage Portfolio | Industrial

USD 152m | Seller AB Oxford

Buyer Logos Property

Building 10 (658 Church Street) | Office

USD 33m | Seller Frasers Property Group

Buyer Blackrock Asset Management

Melbourne Office (CBD)

Source: JLL (REIS)

Outlook

Market

Conditions

Market

Fundamentals

Macro

Environment

Notable

Transactions

Fast Facts

Sources: JLL, Australia Government



(US$ bn) Q1 2016 vs. Q1 2015

Change

6.25-7.5


No.3 Melbourne’s Asia Pacific ranking


2.57 10-yr AGS bond yield (% p.a.),

1Q16


+32% 3.3

Hong Kong

Joseph Tsang

• Office sales will continue to achieve strong pricings

• More end-user purchases across all sectors

• Mass residential market correcting; luxury prices buoyant

• Soft industrial market after the expiry of revitalisation

policies

2.5-3.0 2.8-3.2 3.0-3.5

Hong Kong Commercial Real Estate Investment Volumes

Office Retail

Hong Kong Market Statistics 6-12 Month Outlook


6

• The investment market should continue to

see en-bloc deals of office buildings over

the near-term.

• More assets should come to market.

Current high pricing level will prompt

developers to sell non-core commercial

assets to lock in profits and shore up their

balance sheet , in view of quiet primary

residential sales market.

• Due to rising US interest rates and a more

challenging rental outlook in 2017-18, we

expect potential yield expansion (up to 20

bps) over the next 2 years.

• Transaction volumes more than doubled y-o-y

in Q1 2016, as Chinese investors acquiring en

bloc assets showed no signs of abating.

• China Everbright purchased Dah Sing

Financial Centre for HKD 10bn with plan to

relocate/consolidate its offices to several floors.

• Link REIT acquired the Trade and Industry

Department Tower in Mongkok for HKD 5.9bn

and intended for office and retail use.

• En-bloc office sales continued to achieve

strong pricings, but some vendors were willing

to slash prices in recent retail transactions.

• Yield remained stable in Q1.

Office | Slow leasing activity amid a tight vacancy

environment. Insurers and Chinese companies

accounted for most new lettings.

Retail | Some retailers may opt to surrender leases

early in view of challenging market conditions.

Industrial | Relocation requirements by 3PLs

continued to drive new leasing activity.

Residential | Quiet leasing markets and secondary

home sales came to a standstill. Mass residential

CVs declined 3.6% y-o-y in February.

Hotel | Occupancy rates and room rates both

trending lower.

• The government is forecasting real GDP

growth of 1-2% this year (2.4% in 2015)

due to subdued exports and the prospect

of rising interest rates.

• As Mainland tourists account for nearly

80% of overall arrivals, falling tourist

arrivals from China will pressure tourism-

related sectors and retail sales.

• Housing market correction due to rising

interest rates, limited affordability and the

cooling measures remaining in place.

• HK$ interest rates should rise in tandem

with the US via the currency peg.

Industrial

Hong Kong Office (Central)

Source: JLL (REIS)

Dah Sing Financial Centre | Office | USD 1.29bn

Seller Sea Group | Buyer China Everbright Holdings Company Ltd

Trade and Industry Department Tower | Office USD 762m | Seller The Hong Kong Government Buyer Link REIT


Outlook

Market

Conditions

Market

Fundamentals

Macro

Environment

Notable

Transactions

Fast Facts

Sources: JLL, Monetary Authority of Hong Kong


5.0 Prime lending rate (% p.a.),

1Q16


(US$ bn)

+186% 2.9 Q1 2016 vs. Q1 2015

Change

No.5 Hong Kong’s Asia Pacific ranking



Shanghai & Beijing

Johnny Shao

3.6.-5.5 4.0-6.0 5.5-6.5

China Commercial Real Estate Investment Volumes

Office Retail

China Market Statistics 6-12 Month Outlook

4.35 Lending rate: 1-year

(% p.a.), 1Q16


7

• Transaction volumes in China was up 10% y-

o-y in Q1. The large price gap between buyers'

& sellers' expectation resulted in a scarcity of

assets. However, a number of deals are

currently under negotiation.

• No shortage of fund availability, due to the

currently low cost of debt and ample liquidity.

• To date small/medium size developers do not

appear to face any refinancing pressure.

• Business park investment is in demand, and

entity-level transactions continued to be the

major industrial investment activity.

• Low yield on stabilized transactions.

Office | Smaller, city-level banks were the most

active occupier category in Shanghai while

technology companies were active in Beijing.

Retail | Affordable luxury retailers and fast fashion

brands sustained their pace of expansion.

Industrial | Demand coming from 3PLs, e-

commerce and auto makers. Stable rents.

Residential | Shanghai increased down payments

for second home purchase and put more

restrictions on non-local residents buying a home.

Hotels | Strong demand from the corporate sector.

The opening of the Shanghai Disney Resort is

expected to generate healthy lodging demand.

• Recent stimulus measures are gaining traction

and China’s economic data should further

improve in the months ahead.

• 2016 GDP growth is projected at 6.5%

(Consensus Economics). The two-speed

economy should continue in the next few years.

• Further cut s in bank required reserve ratios and

interest rates (-165 bps since 2014) are expected.

• China cut the deed tax for first home purchases

in February to boost sales and reduce inventory.

• The RMB is expected to fall against the USD in

2016, but remain stable in trade-weighted terms.

Industrial

Shanghai Office (CBD)

Source: JLL (REIS)

Shanghai Waterfront Place Block E & G | Office | USD115m Seller ARA | Buyer Pramerica Real Estate Investors Beijing Syswin Building | Office | USD 96m Seller Syswin Group | Buyer Rail Capital


Outlook

Market

Conditions

Market

Fundamentals

Macro

Environment

Notable

Transactions

Fast Facts

-125

• Investment activity should remain at a

similar level to last year. Local investors

and self-use buyers will remain active,

• The long-term structural trend of Chinese

capital going global will continue. E.g.

Chinese insurers are becoming more

sophisticated with their outbound

strategies.

• A scarcity of assets on the market and

higher rental expectations may lead

investors to drive further yield compression

of core and core-plus assets.

Sources: JLL, PBOC, IMA Asia



(US$ bn)

+10% 2.8 Q1 2016 vs. Q1 2015

Change

Monetary easing

since 4Q14 (bps)

No.9 Shanghai’s Asia Pacific ranking


• Domestic capital is evolving to take advantage of

China’s investment market dynamics

• CBD assets will be highly sought after once available

• Polarised real estate investment market between

Tier-1 and Tier-2 cities


8

Singapore • Prices look compelling compared to other global cities,

presenting value opportunities

• Luxury residential prices seem to be bottoming out,

attracting strong interest from PERE funds

• Slowing rate of rental decline with evidence of a market

floor emerging

• Asset prices have come off from peak

levels and look compelling compared to

other global cities.

• Strong equity interest from PERE funds

and HNW individuals, despite near-term

weakness in market fundamentals.

• Niche sectors such as data centres and

self-storage facilities are much sought after

by investors.

• Yields are expected to remain stable

supported by benign interest rates and

deep liquidity.

• Singapore’s investment volumes was down

66% y-o-y in Q1 due to a lack of big-ticket

transactions.

• The largest strata-title transaction was the

bulk purchase of a strata development by

Scor Reinsurance (reportedly for self-use).

• There are a couple of large assets (CBD

en-bloc offices and some strata-title prime

offices) on the market, where pricing gap is

closing which may see increased

transaction activity over coming quarters

• Low debt funding costs. Flat yields in all

sectors in Q1.

Office | Slow expansion in the finance, insurance

and business services sectors limit net new

demand.

Retail | Subdued consumer spending and a labour

shortage continued to dampen retailer confidence.

Industrial | R&D and IT firms continued to support

business park demand. Patchy demand for logistics

space.

Residential | Luxury prices seem to be bottoming

out while mass market condo prices are still

correcting.

Hotel | The Singapore tourism sector is expected to

grow by up to 3% in 2016.

• Real GDP is forecast by the government

to grow 1-3% this year (2.0% in 2015).

Weak global outlook will be a drag on

growth.

• The government expects CPI inflation for

2016 of -1% and 0% (-0.5% in 2015).

• The government raised public

expenditure by S$5bn (7.3% y-o-y) to

boost growth.

• Visitor arrivals is forecast to grow by up

to 3% (15.7 million persons) and tourist

spending to grow 0-2% in 2016.

3.5-4.2 4.0-5.0 5.9-6.4

Singapore Commercial Real Estate Investment Volumes

Office Retail

SBF Centre strata units | Office (under development)

USD 60.9m | Seller Far East Organisation

Buyer Scor Reinsurance

Harper Kitchen | Industrial (for redevelopment)

USD 36m | Seller Yeap family

Buyer a consortium led by the Nanshan Group

Singapore Market Statistics 6-12 Month Outlook


Greg Hyland

Industrial

Singapore Office (CBD)

Source: JLL (REIS)


All-in bank lending rate (%

p.a.), 1Q16

Outlook

Market

Conditions Macro

Environment

Market

Fundamentals

Notable

Transactions

Fast Facts

Sources: JLL, Singapore Government


2.8-3.2


(US$ bn)

-66% 0.7 Q1 2016 vs. Q1 2015

Change

No.6 Singapore’s Asia Pacific ranking



Seoul

Steven Craig

• Assets on the market (CBD office, hotels, industrial

portfolio) will appeal to buyers across the spectrum

• Strong growth of e-commerce sector supports demand for

modern, large scale distribution centers

• High availability of Seoul Grade B office assets but they

come with near term vacancy risk

4.25-5.0 4.0-6.0 7.0-7.5

South Korea Commercial Real Estate Investment Volumes

Office Retail

Korea Market Statistics 6-12 Month Outlook

1.5 BOK base rate (% p.a.),

1Q16


9

• Stronger volumes y-o-y on the back of

increasing deal availability.

• Several good quality large assets on

market are likely to lead transaction

activity in 2016. A Seoul Grade A office

and a hotel portfolio are in the bidder

selection process. Two industrial /

logistics portfolios are also on offer.

• Yields are expected to remain stable.

Capital values may fall slightly as buyers

are hesitant due to record prices.

• South Korea investment volumes tripled

y-o-y in Q1 to USD 2.3bn. The office

sector saw the strongest activity.

• The pricing gap between buyers and

sellers expectations seems to be

narrowing.

• Some landlords are looking to solidify

profits and more corporations are trying

to sell their offices in order to improve

balance sheet.

• Domestic investors (i.e. pension funds)

remained active purchasers.

• Yields remained stable in Q1.

Office | Weakness in the economy continues to

undermine leasing activity in Seoul.

Retail | Foreign tourists are driving increase in

sales of duty free goods and cosmetics.

Industrial | Strong demand for both lease and self-

owned facilities from e-commerce companies.

Residential | Stable apartment prices. Slowing

transaction volumes on tighter mortgage policies.

Hotel | Rising Chinese demand (45% of overall

visitor arrivals in 2015), but rates for hotels are

expected to remain compressed in the short term.

• The Bank of Korea (BOK) trimmed its

2016 real GDP growth projections to 3%.

• The weak external environment, in

particular due to sluggish demand in

China, weighs on South Korea’s export-

oriented economy.

• Contraction in manufacturing, dragged

down by weaknesses in key exports such

as semiconductors and cars.

• Policy rate at a record low of 1.5% but

low CPI inflation projections at 1.4%

provides room for 1-2 more cuts to help

domestic demand.

Industrial

Seoul Office (CBD)

Source: JLL (REIS)

Jongno Tower | Office USD 320m

Seller Samsung Life (86.7%) and Youngbo (13.3%)

Buyer IGIS Asset Management (Alpha Investment

Partners)

Samsung SDS Yeoksam Multi Campus HQ

Office | USD 105m | Seller Samsung SDS

Buyer NPS

Samsung Life Donggyodong Building | Office

USD 49m | Seller Samsung Life

Buyer Vestas Asset Management (Invesco)


Outlook

Market

Conditions Macro

Environment

Market

Fundamentals

Notable

Transactions

Fast Facts

-50 Monetary easing

since 4Q14 (bps)

Sources: JLL, Bank of Korea



(US$ bn)

+207% 2.3 Q1 2016 vs. Q1 2015

Change

Seoul real estate investment volumes

(2013-15) divided by current city GDP

2.4%


Mumbai & Delhi

Shobhit Agarwal

• Long term partnerships (JVs / Platforms) among

investors and developers are in focus

• New Real Estate Bill will increase transparency in

residential real estate

• Warehousing and Logistics gaining attention on the back

of GST Bill

8.5-10.5 9-11 10-11

India Commercial Real Estate Investment Volumes

Office Retail

India Market Statistics 6-12 Month Outlook


10

• Investment transactions are expected to

be strong this year, judging from the

current deal pipeline and level of interest.

• Given strong supply, smaller developers

could face a liquidity crunch, projects in

advanced stages of construction may be

available for sale.

• With REITs, a host of domestic

developers are likely to look at divesting

strategic stakes in their leased portfolio.

• Generally stable yield over the next 12

months.

• India’s real estate investment volumes

fell by 19% y-o-y to US$ 0.7bn due to a

lack of quality assets available.

• A notable deal for the quarter was GIC

acquiring a 50% stake in Viviana Mall,

Mumbai for about US$ 150m. This was

one of the biggest retail transactions in

recent years which also attracted strong

interest from other PERE funds.

• Continuing interest from PERE funds for

acquiring superior-grade leased assets

(projects in IT/ITeS Parks and IT SEZs).

• Yields remained stable in Q1.

Office | IT, consulting and financial services firms

remain key sources of demand.

Retail | F&B and apparel remain the most active

retailer categories.

Industrial | GST, E-Commerce and cold storage to

drive increase in grade A warehousing space.

Residential | A reduction for first time buyers on

interest repayment for loans, announced in the

2016-17 Budget, will boost the demand for housing

at the lower end of the market.

Hotel | Demand driven by the corporate segment

but leisure tourism is also growing. Future supply is

likely to be absorbed over the medium to long term.

• Forecast GDP growth in the 7-8% range

in Fiscal Year 2016-17, with slightly

stronger investment but weaker

consumption and external demand.

• India’s central bank cut the repo rate by

25 bps at its April meeting, and signaled

possibility of further easing this year.

• CPI inflation slowed sharply in February

after rising for six consecutive months.

• The 2016-17 Union Budget announced in

end-March removed REITs from the

dividend tax regime, which will increase

the appeal of REITs to retail investors.

Industrial

Mumbai Office (SBD BKC)

Source: JLL (REIS)


Outlook

Market

Conditions Macro

Environment

Market

Fundamentals

Notable

Transactions

Fast Facts

-125

Mumbai

Equinox Business Park | Office

USD 355m | Seller Essar Group Buyer RMZ

Corp – QIA JV

GIC acquires 50% stake in Viviana Mall | Retail

USD 148m | Seller Sheth Corporation | Buyer GIC


6.5 Repo rate (% p.a.),

1Q16

Sources: JLL, Reserve bank of India


(US$ bn)

+205% 0.7 Q1 2016 vs. Q4 2015

Change (INR terms)

Monetary easing

since 4Q14 (bps)

0.2% Mumbai real estate investment volumes

(2013-15) divided by current city GDP


Auckland

Nick Hargreaves

• A landlord favorable market is driving rental growth

across the city

• Auckland remains a gateway for international capital

entering the New Zealand market

6.3 – 7.3 4.5 – 8.2 6.5 – 7.8

New Zealand Commercial Real Estate Investment Volumes

Office Retail

New Zealand Market Statistics 6-12 Month Outlook

2.25 Deal availability No. of foreign buyers Cap rate trend

11

• Transactional volumes are forecast to

remain high over 2016 particularly in the

NZD 5M to NZD 20M price bracket.

• The office sector should remain the most

active commercial real estate sector.

• Yields are forecast to firm further in 2016

due to a combination of heated investor

competition, limited prime stock and record

low cost of capital.

• Auckland will retain the bulk of transactional

activity but investors will look further afield

over 2016 for investment opportunities.

• Three major completions occurred in

Wynyard Quarter through 1Q16 adding

approximately 33,000 sqm of space to the

market, which has satisfied some of the

pent-up demand for prime office space.

• Yields have firmed across all sectors into

2016 on the back of high demand for

investment grade property in relation to a

relatively small asset pool available on the

market.

• Investors are increasingly considering non-

core and value-add opportunities to satisfy

yield requirements.

Office | Resilient economic conditions and

increasing white collar employment have supported

robust demand for CBD space pushing some

tenants to fringe locations.

Retail | Sharp increase in prime Queen Street

rentals as more international tenants come to town.

Industrial | Vacancy is at a 10 year low which has

triggered development activity.

Residential | Prices volatile due to new regulations

and large amount of unsold inventory.

Hotel | Record international visitor numbers over to

the summer ending March 2016 (3.26M) has

underpinned the performance of the Hotel sector.

Cider Building , 4 Williamson Avenue | Office

USD 65m | Seller Progressive Enterprises

Buyer Oyster Group

Doubletree, Queenstown | Hotel

USD 56m | Seller Hongshen Tao | Buyer Shanghai

Pengxin Group

585 Great South Road| Office | USD 29m

Seller Goodman Property Trust | Buyer Private

Industrial


Cash rate: (% p.a.),

1Q16

Outlook

Market

Conditions Macro

Environment

Market

Fundamentals

Notable

Transactions

Fast Facts

-100

• The dairy sector faces significant

challenges at present, however

economic growth will be supported by

tourism and construction activity over

2016. The economy is currently growing

at approximately 2.5%.

• The RBNZ cut the official cash interest

rate by 25 bps year-to-date to 2.25%.

• A booming housing market has recently

prompted the government to announce a

new capital gains tax on residential

property if it is bought and sold within

two years.


(US$ bn)

0.2

Sources: JLL, Oxford Economics


Rental and Capital

Value Growth - Office

-44% Q1 2016 vs. Q1 2015

Change

Auckland Office (CBD)

Source: JLL (REIS)

Monetary easing

since 4Q14 (bps)

No.2 Auckland’s Asia Pacific ranking


12

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suffered by any party resulting from reliance on this publication.

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