Global real estate forges ahead - JLL real estate forges ahead Global Market Perspective | Q1 2015...

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Global real estate forges ahead Global Market Perspective | Q1 2015 Global Market Perspective First Quarter 2015

Transcript of Global real estate forges ahead - JLL real estate forges ahead Global Market Perspective | Q1 2015...

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Global real estate forges ahead

Global Market Perspective | Q1 2015

Global Market Perspective First Quarter 2015

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Global Market Perspective, First Quarter 2015

Global real estate forges ahead

Positive signals from real estate investment, occupational and development markets

The major global real estate markets are in better shape than at any time since the Global Financial Crisis, with the

continued momentum in capital markets now supported by improving corporate occupier demand across all the main

global regions and property sectors. Abundant liquidity has pushed investment volumes back to the level of 2006, with

expectations of further growth during 2015. Meanwhile, rising construction levels and developer confidence underline

the strength of demand for modern space. Economic and geopolitical headwinds may affect future growth prospects

but, equally, 2015 offers the global real estate market upside potential on the back of a robust recovery in the U.S.

economy, lower oil prices, quantitative easing in the Eurozone, a resurgence of India and 6%-7% economic growth in

China.

Capital markets break new records

Records have been broken in the global capital markets over the past year. Asia Pacific volumes hit a new high in 2014

following a very strong final quarter; in the Americas they were also at near-record levels; and an exceptional Q4 in

Europe propelled full-year totals well beyond expectations. The largest single quarter that JLL has recorded, pushed

full-year 2014 global investment volumes to US$710 billion, a 20% increase on 2013.

Investors move up the risk curve

There is a notable growing interest in higher-yielding assets in smaller and second-tier locations, particularly in the U.S.

and Europe – in part due to intense competition and yield compression in prime markets, but also now due to

broadening and strengthening property market fundamentals. Investors are becoming more flexible and, in Asia, new

players are moving into markets like South Korea, India and Thailand.

Direct Commercial Real Estate Investment, 2006-2015

Source: JLL, January 2015

0

100

200

300

400

500

600

700

800

Americas EMEA Asia Pacific Global

US

$ bi

llion

s

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (F)

xx% Projected Change 2014-2015

5-10%

-5%*

15%

5-10%

*Flat in Euro terms

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Global Market Perspective, First Quarter 2015

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Further room for growth in 2015

The huge demand for direct real estate is continuing into 2015. Although the U.S. has ceased its QE programme, the

Eurozone and Japan are taking up the baton of providing ample liquidity to global markets. Interest rates in the U.S.

may move higher later in 2015, which would gain the attention of real estate investors in the world’s most liquid market.

JLL estimates that the rate of growth in global investment transactions will moderate to between 5%-10% in 2015;

however, this will still result in volumes of US$740-760 billion, matching the record levels of 2007.

Strengthening occupational markets

Overall corporate occupier activity is strengthening. The U.S. has seen its highest quarterly net absorption gains for

more than five years, underpinned by solid GDP, consumer spending and employment growth. Europe has witnessed

its largest quarterly take-up volumes for seven years, fuelled by a number of major corporate occupiers taking advantage

of favourable market opportunities. Meanwhile in Asia Pacific, Q4 leasing volumes were up 14% year-on-year.

Occupier activity will be more balanced in 2015

Occupier activity will be more balanced across industry sectors in 2015. For the past several quarters, technology and

energy firms have been the most active occupiers in global real estate markets. However, 2015 may be a year in which

activity in these sectors shows reduced cadence as oil prices plummet and as tech valuations are corrected. In this

context other industry sectors such as manufacturing, banking, consumer and healthcare will become more prominent.

Leasing volumes constrained in 2015 by shortages of quality space

Improved global economic growth, increasing expansionary demand and portfolio restructuring are expected to boost

office leasing volumes in 2015, but growth will be incremental and uneven. In many markets, activity will be constrained

by a scarcity of high-quality available stock. JLL expects higher levels of pre-letting, as well as growing demand for

secondary product.

Developers respond to tightening fundamentals

Development activity is continuing to increase as tenant expansion and tightening fundamentals further justify new

construction. Confidence among developers is likely to persist, but supply will remain in check in most markets and it will

be 2016/2017 before new office deliveries move perceptibly above the long-run average.

Prime Offices – Projected Changes in Values, 2015

*New York – Midtown, London – West End, Paris - CBD. Nominal rates in local currency.

Source: JLL, January 2015

+ 10-20%

+ 5-10%

+ 0-5%

- 0-5%

- 5-10%

Sydney, Beijing, Dubai, BostonChicago, Los Angeles, New York*San Francisco, London*

Tokyo

Capital ValuesRental Values

Hong Kong, Paris*, MadridToronto, Washington DC, Mexico CitySingapore, Stockholm, Seoul, Shanghai Frankfurt, Brussels

Mumbai, Sao Paulo

Tokyo, Madrid

Beijing, London*, Sydney Dubai, Boston, Chicago, Los Angeles New York*, San Francisco, Seoul

Toronto, Frankfurt, Washington DCMexico City, Paris*, Shanghai, BrusselsStockholm, Hong Kong, Singapore

Mumbai, Sao Paulo

Moscow Moscow

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Global Market Perspective, First Quarter 2015

Office rental growth accelerating

Rental growth is accelerating, with the annual rate of growth on prime office assets increasing from 1.7% in 2013 to 3.1%

in 2014 and another 4% rise projected for 2015. While Tokyo, Sydney, Beijing and London will be among the top-

performing rental markets in 2015, the highest ranks are likely to be dominated by the major U.S. markets (notably

Boston, Chicago, Los Angeles, New York and San Francisco).

Retail on a more stable footing

The sharp fall in oil prices, which has raised disposable incomes at a stroke, is likely to provide a welcome boost to the

global retail real estate sector. Following a slow recovery in 2014, the retail sector in the United States is expected to

build momentum in 2015 on the back of consumer tailwinds. In Europe, growth will probably be strongest in the UK,

Germany, Sweden, the CEE and Turkey, but recovering markets in Southern Europe are also now improving. The Asia

Pacific region is, in general, seeing healthy retailer demand, with the expansion of international fashion retailers

continuing to buoy demand in SEA and Australia.

Warehousing markets continue to tighten in the U.S and Europe

The logistics warehousing markets continue to benefit from e-commerce and significant network reconfiguration. The

U.S. national vacancy has fallen to only 6.9% (lower than the last cycle) boosting annual rental growth to 4%, with further

upside expected in 2015 as tenant demand increases. The European industrial vacancy is at an historic low with

virtually no large buildings being immediately available on the market. Warehousing construction is increasing,

particularly in the U.S, but new supply is still largely in check.

Global hotel investment reaches seven-year high

2014 was a robust year for hotel investment, with global transaction volumes exceeding US$58 billion, marking a seven-

year high. Single-asset deals climbed to the highest annual level on record. Investor confidence is high and the market

will continue to gain traction in 2015, with volumes expected to increase by another 15%. Investment funds and cash-

rich private equity firms will remain the most active buyers. The floodgates are opening up for Chinese outbound capital

– which rose by 80% in 2014 and looks set to increase by up to fivefold in 2015.

Institutional investor demand grows in Europe’s residential sectors

Improved economic growth and evolving demographics are fuelling demand in the U.S. rental apartment market, but with

construction deliveries exceeding long-run averages, rental growth is softening and apartment tenants may begin to

regain some leverage from landlords by 2016-2017. In Europe, institutional activity is strong in both Germany and the

Netherlands, while the number of investors announcing new funds to allocate to the sector in the UK is still growing. In

Asia, we are starting to see improving sentiment among buyers in Shanghai and Hong Kong, while Singapore should

also improve this year as ongoing price correction boosts affordability.

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Global Market Perspective, First Quarter 2015

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Global Market Perspective

Contents

Highlights........................................................................................................................................................................... 2

Global Economy ................................................................................................................................................................ 6

Real Estate Capital Markets ............................................................................................................................................. 8

Investment Volumes ............................................................................................................................................................ 8

Capital Values and Yields ................................................................................................................................................. 13

Corporate Occupiers ...................................................................................................................................................... 16

Global Real Estate Health Monitor ................................................................................................................................. 18

Office Markets ................................................................................................................................................................. 19

Office Demand Dynamics ................................................................................................................................................. 19

Office Supply Trends ......................................................................................................................................................... 22

Office Rental Trends ......................................................................................................................................................... 25

Retail Markets .................................................................................................................................................................. 27

Industrial Warehousing Markets .................................................................................................................................... 29

Hotel Markets ................................................................................................................................................................... 30

Residential Markets ........................................................................................................................................................ 33

Recent Key Investment Transactions ........................................................................................................................... 35

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Global Market Perspective, First Quarter 2015

Global Economy

Sharp fall in oil prices brings new uncertainties to the outlook for 2015

Each January brings intense speculation about the global economic outlook. On balance, 2014 was a satisfactory year,

marred by the impact of the harsh winter and some unforeseen geopolitical developments. This year, strong messages

are emerging – not least that there seems little doubt now about the robustness of the U.S. recovery, and this will be the

driver of improved global performance in 2015. There are other potential tailwinds: the drop in oil prices brings upside to

oil importers, while the ECB’s belated conversion to quantitative easing seemed unlikely only a few weeks ago. But this

is set against uncertainty elsewhere, most notably about China’s slowdown, risks to emerging markets and deflation

concerns in the fragile Eurozone.

Of recent global developments, the sharp declines in oil prices may have most impact in 2015. For the developed world,

this is generally good news, effectively raising disposable incomes at a stroke, as well as postponing the need for higher

interest rates. By contrast, oil exporters will be adversely impacted, which is another setback for emerging market

prospects. On balance, the World Bank estimates the oil shock will bring a small net benefit to global growth, but it also

stresses that there are important uncertainties in the current climate.

Oil prices have reinforced existing concerns about global inflation, or rather deflation. Most developed economies have

experienced only steady disinflation so far, though the Eurozone saw prices drop year-on-year at end-2014 and others

are likely to follow. The danger is that the deflationary period is prolonged and that expectations become entrenched.

Eventually, sustained falls in prices could bring stagnation in demand, similar to the recent experience in Japan. The

sluggish Eurozone is most exposed to this risk, triggering further ECB activism in early 2015.

Taking these developments together, it is perhaps not a surprise that global forecasts for 2015 have been edged down

slightly since last quarter. Nonetheless, the recovery is expected to continue, though the aggregate uplift on 2014 will be

modest on current estimates, maintaining the slow-moving and uneven global upswing evident for much of the post-

crash period.

GDP Projections for 2015 in Major Economies – Recent Movements

Australia China France Germany India Japan UK U.S.

October 2.9 6.9 1.0 1.7 5.6 1.0 2.7 3.1

January (Latest) 2.7 6.8 1.2 2.0 6.1 0.9 3.0 3.3

Change (bps) -20 -10 +20 +30 +50 -10 +30 +20

Source: Oxford Economics, January 2015

Interest rate expectations tempered, but the U.S. cycle will turn in 2015

The re-emergence of deflationary concerns has brought a reassessment of global interest rate prospects. Bond rates

softened significantly in late-2014 and the plummeting oil price has reinforced the weaker outlook. As a result,

commentators now project a more cautious tightening in some economies. The UK continues to show healthy growth

and was expected to see an early tightening until recently. However, with price rises dropping to a 15-year low, most

predict that the Bank of England will hold fire until early 2016. By contrast, with the recovery firmly on track, an early

U.S. interest rate hike is still anticipated by many economists, with June 2015 seen as the potential date for a 25 bps

rise.

There is no chance of imminent interest rate rises in the Eurozone. Indeed, with inflation rates negative in December for

the first time since 2009, most expected more monetary stimulus. The ECB dithered on asset purchases for months in

the face of opposition from the some national Central Banks, but near-zero interest rates left few other options. The

implementation will be challenging given the range of economies involved in the scheme, but the pressure to act had

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Global Market Perspective, First Quarter 2015

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become implacable, so the announcement of a €1 trillion programme after January’s ECB meeting was warmly received

by markets.

U.S.-led upturn in developed economies drives global recovery

The long, slow upturn since the financial crisis continues into 2015. Last year saw the global economy expand by just

over 3%, a similar rate to the previous two years and still below historic norms. The highlight of 2014 was an

improvement in growth in the advanced economies; however, this was offset by a slowdown in emerging markets, facing

a stronger U.S. dollar and weaker commodity prices. This year, the expansion is forecast to continue at a slightly faster

rate, with the developed world accounting for much of this uplift and the rest of the world stable.

Asia Pacific remains top of the growth rankings, though this dynamism appears to be topping out at current levels.

China’s steady slowdown explains much of this stability, a necessary correction to financial overheating risks, but

weighing on regional performance. Against this, Japan is seeing a moderate acceleration as the economy emerges

from another recession and policy remains supportive. India continues to experience a steady improvement in growth

assisted by further monetary easing, although deeper structural reform will be required to push rates up further in a

sustained manner.

The U.S. economy has rebounded strongly from a weak start to last year and GDP growth this year is forecast to reach

its strongest rate since the financial crisis. A healthier housing market, continued job creation and some initial hints of

nascent wage pressures suggest a self-sustaining upturn, robust enough to weather increases in interest rates later in

the year. The U.S. economy leads a strong North American performance, reinforced by more rapid Latin American

activity this year and next.

Europe remains the laggard, though further recovery is in prospect for 2015. The Eurozone has experienced anaemic

growth, faltering against a background of emerging deflation and glacial structural reform. But a weaker euro, low

interest rates and falling oil prices should help boost demand this year. The slow upturn is expected to be led by

Germany, the strongest of the core economies, while France’s progress continues to be held up as fiscal consolidation

weighs on domestic demand. Outside of the single currency area, the UK was one of the top-performing developed

economies in 2014. Although growth rates will dip slightly as an uncertain election and then interest rate tightening

impacts, the UK is predicted to experience further above-trend expansion.

Global Outlook, GDP growth % pa

GDP growth % pa 2014 2015 2016

Global 3.2 3.4 3.8

Asia Pacific 5.2 5.4 5.2

Australia 2.8 2.7 3.0

China 7.4 6.8 6.1

India 5.2 6.1 6.2

Japan 0.1 0.9 1.8

Americas 2.0 2.7 2.9

U.S. 2.4 3.3 2.9

MENA 2.2 2.9 3.9

Europe 1.5 2.0 2.4

France 0.4 1.2 1.7

Germany 1.5 2.0 2.1

UK 2.6 3.0 2.8

Source: Oxford Economics, January 2015

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Global Market Perspective, First Quarter 2015

Real Estate Capital Markets

Investment Volumes

Record final quarter brings the market back to over US$700 billion

Global investment markets recorded a fifth consecutive year of volume growth in 2014 as real estate continues to attract

capital in an environment of low interest rates, low inflation and relatively stable macroeconomic conditions.

Transactions totalling US$230 billion in Q4 2014, the largest single quarter that JLL has registered, pushed full-year

investment volumes to US$710 billion, a 20% increase on 2013 and in line with the level of investment activity logged in

2006. However, the composition of activity is now different with relatively more equity being deployed, less dramatic

risk-taking and still greater value differentiation among assets.

Rate of growth in the United States accelerates as markets remain buoyant

Regional volumes across the Americas reached the US$94 billion mark in Q4 to exceed the previous high of US$90

billion in Q2 2007 – a level 19% higher than Q3 2014 and 7% higher than Q4 2013. Full-year totals were US$302 billion,

a 25% increase on 2013. Volumes in the United States in 2014 were 25% greater than a year earlier and have been

supported by growth in Canada, Mexico and Brazil during the year. Markets across the U.S. have seen an impressive

rate of progression over the last five years, but 2014 saw that rate accelerate above the 20% mark for the first time in

three years as resurgent economic growth supported investor sentiment.

EMEA registered 25% year-on-year increase

EMEA witnessed the largest final quarter growth globally with Q4 volumes of US$93 billion, which are 45% higher than

Q3 and 8% more than the fourth quarter of 2013. This pushed full-year 2014 volumes to US$277 billion, a 25% increase

on 2013. Activity in Europe has spread consistently across the continent as investors look to deploy an ever increasing

amount of equity. While volumes in the big three markets of the UK, France and Germany expanded 25% in 2014, the

smaller, peripheral markets of the Nordics, CEE, Southern Europe, Ireland and the Benelux all experienced transactional

volume growth in excess of the European average. The only significant fall during 2014 was in Russia, where volumes

were down over 60%.

Asia Pacific bounces back in Q4 thanks to China, Japan and South Korea

Having lagged 2013’s performance for much of the year, a record final quarter brought Asia Pacific’s performance back

in line with last year, with US$131 billion recorded for the full-year 2014. Q4 2014 investment volumes were US$43

billion, 35% higher than the third quarter and up 17% on Q4 2013. The outperformance in the final quarter was focused

on three countries in particular:

China, which finished the year 23% down on 2013, but saw Q4 volumes 74% higher than Q3 2014;

Japan, which experienced 84% growth quarter-on-quarter with volumes of almost US$15 billion, twice the level

of any other market in the region, and a record in Japanese yen terms; and

South Korea, which had a bullish final quarter - over 100% higher than the same period last year - and

registered full-year volumes that were 27% higher than 2013, at US$10.6 billion.

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Global Market Perspective, First Quarter 2015

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Direct Commercial Real Estate Investment – Regional Volumes

Source: JLL, January 2015

REGIONAL TRENDS

Abundant liquidity in the U.S. propels volumes to near-record highs

The capital markets in the Americas region finished 2014 on a high note with total sales volume of US$94 billion for the

fourth quarter bringing the full-year figure to a near-record US$302 billion, up 25% on 2013. The underlying pace of

transaction activity (excluding real estate firm merger-and-acquisition-related activity) has essentially returned back to its

peak levels in the last cycle. However, it is important to highlight that this cycle – from the perspective of the

macroeconomy, interest rates, bond market yield curves and broad risk-taking – may still be little more than at its

midpoint. The Americas regional volume growth mirrored that of its dominant market, as total office, retail, industrial and

hotel transaction volumes in the U.S. were up 6% year-on-year in Q4 to US$85 billion, and up 25% for 2014 overall to

US$269 billion. Reflecting the strong growth of the U.S. market, its cities accounted for half of the world’s Top 20

investment destinations in 2014.

Direct Commercial Real Estate Investment – Top 20 Cities, 2014

Source: JLL, January 2015

$US Billions Q3 14 Q4 14

% change

Q3 14-Q4 14 Q4 13

% change

Q4 13-Q4 14 2013 2014

% change

2013-2014

Americas 79 94 19% 88 7% 241 302 25%

EMEA 64 93 45% 86 8% 221 277 25%

Asia Pacific 32 43 35% 37 17% 127 131 3%

TOTAL 175 230 31% 211 9% 589 710 20%

0 5 10 15 20 25 30 35 40 45

Atlanta

Stockholm

San Jose

Melbourne

Hong Kong

Dallas

Toronto

Shanghai

Singapore

Seoul

Sydney

San Francisco

Washington DC

Chicago

Boston

Los Angeles

Paris

Tokyo

New York

London

Americas

EMEA

Asia Pacific

US$ billions

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Global Market Perspective, First Quarter 2015

U.S. secondary markets rise further up investors’ targets

In part due to the tremendous price run-ups in primary markets – but now also partly because of broadening and

strengthening economic drivers and property market fundamentals – there is a notable growing interest in higher-yielding

assets in a variety of secondary cities across the U.S. In 2014, secondary markets comprised 53% of transacted square

feet of office product, compared to 43% in 2013; leading this activity were Atlanta, Austin, Dallas, Denver, Oakland

and Philadelphia.

Europe’s investment activity beats expectations

In Europe there was again a big spike at year-end with final quarter volumes reaching US$92.9 billion, up 45% quarter-

on-quarter and 8% on Q4 2013. This beat expectations, making Q4 the strongest quarter on record in both euro and

U.S. dollar terms. Over the full year, investment activity reached US$277 billion, representing a 25% increase year-on-

year. This is well ahead of JLL’s forecast of a 10% increase on 2013 in euro terms to €180 billion (i.e. US$214 billion at

year-end exchange rates).

Smaller European markets outperform

Europe’s three largest markets continued to perform robustly, together growing at 24% year-on-year, just below the

European average: France grew by 35%, the UK by 22% and Germany by 21%. But it is the next tier of markets that

registered the greatest improvements – the Nordics and Benelux countries were up 31% and 70% respectively, powered

by Sweden (+58%) and the Netherlands (+88%). Elsewhere, momentum was sustained in the recovering markets of

Southern Europe and Ireland, where deal volume doubled in 2014 compared to 2013, and the CEE region saw a 50%

increase to US$10.2 billion, with the healthiest growth recorded in the Czech Republic and Romania. The notable

exception was Russia where volumes in 2014 were down 62% to US$2.7 billion.

Asia Pacific sets a new quarterly record in Q4 2014

Asia Pacific investment volumes set a new quarterly record of US$43.5 billion in Q4 2014 (+17% year-on-year), with

activity buoyed by the region’s largest markets of Australia, Japan and China (as highlighted below) as well as by

strong performances from South Korea and New Zealand. Despite Singapore and Hong Kong continuing to drag on

overall regional performance, full-year volumes also set a new record, slightly higher than the 2013 level. In particular,

cross-border investors were prominent in Q4, accounting for 37% of transaction volumes.

Investment activity in Japan finished the year vigorously, supported by a number of large deals. Full-year 2014

volumes were 4% higher than 2013 levels (but higher in local currency terms) and accounted for one-third of

total regional volumes. Investment activity should continue to build momentum into 2015, as investors are

attracted by the low cost of borrowing and the healthy yield spread. It is also likely that more assets will come

to the market, with banks looking to sell down assets (that they took control of following the financial crisis) now

that pricing has recovered, and with corporates also being active on both sides of the ledger.

Q4 volumes in China recovered strongly in Q4 2014 (+74%) but were insufficient to compensate for a

disappointing Q1-Q3, with annual deal flow in 2014 down 23% on 2013 levels. Macro concerns about

developers and residential sector weakness weighed on commercial markets. However, the relaxation of home

purchase restrictions and the recent interest rate cut could see the residential market stabilise and may support

an improvement in overall sentiment. Should the residential market stabilise over the next few months,

developers’ credit positions will improve and confidence will return to the market. Underlying demand for core

assets in Tier 1 cities remains in good shape and much of private equity funds’ capital needs to be deployed.

In Australia, given strong liquidity, full-year volumes surprised on the upside (+23% year-on-year; higher in

local currency terms). The investment market should continue to be active but volumes are likely to be slightly

down in 2015, as many of the large existing assets have traded over the past few years and the development

pipeline has thinned.

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Global Market Perspective, First Quarter 2015

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Direct Commercial Real Estate Investment – Quarterly Trends, 2007-2014

Source: JLL, January 2015

Growth in global volumes may be harder to come by in 2015

There continues to be huge demand for direct real estate across the globe. Although the U.S. has ceased its QE

programme, the Eurozone and Japan have taken up the baton of providing ample liquidity to global markets. Interest

rates in the U.S. may move higher later in 2015, which would garner the attention of real estate investors in the world’s

most liquid market. JLL estimates that the rate of growth in global investment transactions will moderate to between

5%-10% in 2015, which would result in volumes of US$740-760 billion, matching the record levels of 2007.

In the Americas, JLL expects additional sturdy growth in volumes to continue throughout 2015. As the U.S.

capital markets cycle enters a more maturing phase, total transaction volumes are projected to grow by around

15%, compared to 25% in 2014.

There is greater potential for headwinds in Europe due to the upcoming UK and Greek elections, deflation in

the Eurozone and the impact of sanctions and low oil prices on Russia. Activity in the first half of 2015 is likely

to be vigorous due to the significant weight of capital that continues to target the sector, but second-half

volumes could be impacted by the events outlined above. JLL is forecasting stable volumes in euro terms of

around €210 billion in 2015 (but which would imply a 5% fall in U.S. dollar terms, due to the depreciation of the

euro).

JLL anticipates that the investment market across Asia Pacific will improve this year with core investors

remaining active and a number of large mega-deals expected to trade through the year. However, there will

probably be some profit-taking after strong price growth last year. The active end to 2014 has carried through

into the New Year, so we are likely to see strong volumes in Q1 2015 (particularly in view of the relatively

benign Q1 2014) and also full-year transaction volumes to set a new record at around US$140 billion. Investors

are becoming more flexible in their location targets and we are witnessing signs of new players moving into

markets like South Korea, India, Thailand and some other emerging markets.

0

30

60

90

120

150

180

210

240

Q10

7

Q20

7

Q30

7

Q40

7

Q10

8

Q20

8

Q30

8

Q40

8

Q10

9

Q20

9

Q30

9

Q40

9

Q11

0

Q21

0

Q31

0

Q41

0

Q11

1

Q21

1

Q31

1

Q41

1

Q11

2

Q21

2

Q31

2

Q41

2

Q11

3

Q21

3

Q31

3

Q41

3

Q11

4

Q21

4

Q31

4

Q41

4

Americas EMEA Asia Pacific Rolling Four-Quarter Average

US

$ bi

llion

s

205

107110100

113

7369

666666

100

118120

159

204

190

119

91

110100

163

40 4335

108

124

146

211

142

162175

230

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Global Market Perspective, First Quarter 2015

Direct Commercial Real Estate Investment – Largest Markets

Source: JLL, January 2015

$US Billions Q3 14 Q4 14

% change

Q3 14-Q4 14 Q4 13

% change

Q4 13-Q4 14 2013 2014

% change

2013-2014

USA 71.1 85.4 20% 80.2 6% 214.6 269.1 25%

UK 29.4 33.8 15% 36.8 -8% 87.3 106.5 22%

Germany 10.0 16.5 65% 15.3 8% 38.5 46.3 21%

Japan 8.1 14.8 84% 12.2 21% 41.7 43.4 4%

France 4.9 11.4 134% 5.7 99% 24.6 33.1 35%

Australia 6.9 7.9 14% 6.4 24% 21.9 26.9 23%

China 4.0 7.0 74% 8.5 -17% 25.1 19.2 -23%

Canada 5.8 6.7 16% 5.7 18% 18.1 19.1 5%

Sweden 2.7 6.2 130% 3.6 72% 10.3 16.3 58%

South Korea 2.4 4.8 100% 2.3 113% 8.3 10.6 27%

Italy 1.4 3.2 129% 2.6 22% 6.0 7.0 18%

Norway 1.0 3.2 203% 2.1 52% 6.5 7.0 8%

Spain 3.0 3.1 2% 1.1 173% 3.4 9.8 189%

Netherlands 1.5 2.9 96% 1.6 84% 4.9 9.3 88%

Hong Kong 2.1 2.2 1% 1.8 24% 7.3 7.2 -1%

New Zealand 2.1 1.9 -10% 0.6 187% 1.9 4.5 141%

Ireland 1.4 1.6 13% 1.2 38% 2.5 5.4 119%

Poland 0.7 1.6 136% 1.4 10% 4.0 4.3 7%

Belgium 0.6 1.5 145% 0.6 154% 3.0 4.1 39%

India 0.2 1.2 424% 0.2 655% 1.3 2.3 74%

Thailand 1.0 1.2 19% 0.0 2553% 0.6 3.5 462%

Singapore 3.3 1.2 -64% 3.3 -63% 11.6 8.1 -30%

Czech Republic 0.6 1.2 108% 0.4 198% 1.6 2.6 63%

Switzerland 0.0 1.0 3403% 1.6 -35% 3.7 3.1 -15%

Austria 0.5 1.0 82% 1.2 -15% 2.6 3.6 36%

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Global Market Perspective, First Quarter 2015

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 13

Capital Values and Yields

Office yields compress to new lows

Yields for prime office assets in the world’s dominant markets compressed further in Q4 2014. The largest falls were

recorded in the U.S. gateway cities; Paris recorded further yield compression (-25 bps); and strong investor demand in

Tokyo, Sydney and Seoul continued to push yields down.

Annual capital value growth (for prime assets across 25 markets) has been stable at around 8%-9% for much of the past

year, and growth of circa 5% is projected for 2015. Tokyo, Madrid, London, Beijing, Sydney and the U.S. gateway

cities are expected to show the strongest capital value appreciation over the next 12 months.

U.S. prime office values rise further, yields compress

The large number of institutional, private fund and foreign investors looking to place capital in core U.S. real estate has

pushed pricing beyond previous record levels. Gateway office markets including Washington DC and Chicago have

seen new record transacted office values in 2014, and initial income yields – across all primary U.S. office markets and

some leading secondary markets – are at record-low levels. However, with risk-free rates falling even further during Q4

2014 and continuing into 2015, spreads generally remain at quite healthy levels.

The weight of demand continues to have an impact on prime pricing

In the final quarter of 2014 the weighted European prime office yield came in by 7 bps to 4.85% and now stands just 54

bps from the last ‘peak’ in Q2 2007. Several markets witnessed yield compression over the quarter, including Paris,

several German markets, Lyon, Edinburgh and Amsterdam; the exception was Moscow, where prime yields moved

out. Looking ahead, prime yields in recovering markets are likely to compress further, while in many core markets yields

are believed to have reached or almost reached the bottom.

The disconnect between rents and capital values continues

Capital values rose in most Asia Pacific markets in Q4 2014, with the largest quarterly increases evident in Seoul,

Melbourne, Bangkok, Manila and Tokyo (of 3%-5%) on sustained investor interest. Single-digit capital value growth is

generally expected in 2015 on the back of continued investor interest and moderate rental growth in most markets, while

yields are forecast to remain generally flat or to compress marginally.

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 14

Global Market Perspective, First Quarter 2015

Prime Offices – Annualised Capital Value Change, 25 Major Office Locations, 2010-2014

Unweighted average of 25 major office markets across the globe

Source: JLL, January 2015

Prime Office Yields, 2010-2014

*Across 25 major office markets.

Source: JLL, January 2015

0

5

10

15

20

25

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

% pa

22.6%

13.2%

2.8%

8.3%

6.6%

5.2

5.6

6.0

6.4

-30

-20

-10

0

10

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

‘Mean’ Prime Office Yields*6.62%

5.38%

Yield Compression (bps)

%

bps

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Global Market Perspective, First Quarter 2015

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 15

Prime Offices – Capital Value Clock, Q4 2013 v Q4 2014

Based on notional capital values for Grade-A space in CBD or equivalent. U.S. positions relate to the overall market.

Source: JLL, January 2015

Prime Offices – Capital Value Change, Q4 2013-Q4 2014

Notional capital values based on rents and yields for Grade-A space in CBD or equivalent. In local currency.

Source: JLL, January 2015

Americas EMEA Asia Pacific

Q4 2014

Capital Value

growth slowing

Capital Value

growth

accelerating

Capital Values

bottoming

out

Capital Values

falling

Q4 2013Hong Kong, Toronto

Singapore, Houston

Shanghai, Washington DC, Mexico City

London, Stockholm, Seoul

Paris

Brussels

Amsterdam

Berlin, Boston, Los Angeles

Frankfurt, Chicago

Milan

Sydney

New York, San FranciscoDallas

Sao Paulo

Moscow

Mumbai, Madrid

Capital value

growth slowing

Capital value

growth

accelerating

Capital values

bottoming out

Capital values

falling

Beijing

Hong Kong

Singapore

Chicago, Toronto

Washington DC

Mumbai

Brussels

Shanghai

Madrid

Tokyo

Seoul

Sydney, New York

Frankfurt Sao Paulo

Mexico City

Boston, Los Angeles

Berlin, Stockholm

Houston

San Francisco

MoscowDallas

Amsterdam

London

Milan

Paris

Tokyo, Beijing

-30 -25 -20 -15 -10 -5 0 5 10 15 20 25 30 35

Moscow

Sao Paulo

Brussels

Mumbai

Hong Kong

Singapore

Shanghai

Toronto

Frankfurt

Stockholm

Dubai

Beijing

Washington DC

Seoul

London

Sydney

Mexico City

Paris

Tokyo

Madrid

Los Angeles

New York

Chicago

San Francisco

Boston

% change

Americas

EMEA

Asia Pacific

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 16

Global Market Perspective, First Quarter 2015

Corporate Occupiers

Q4 activity exceeds expectations but remains unevenly distributed

Although an upturn in year-end occupier activity is commonplace, 2014 closed out with surprising strength. Confidence

levels, fuelled by an improving economic backdrop, saw occupiers return to the market after a brief pause in Q3. While

expansionary demand continues to be relatively muted, portfolio restructuring and lease-event driven activity drove

improved global take-up levels. For example, gross Q4 take-up in Asia Pacific was up 14% year-on-year, while in

Europe the year-on-year improvement was 17%, with Q4 representing the strongest quarter in the occupier markets for

seven years.

Overall activity levels do however mask an increased geographical selectivity. In Asia Pacific, improvements were

witnessed in Australia but emerging markets are proceeding with increased caution. Activity in Western Europe was up

43% quarter-on-quarter with notably strong improvement in Paris, Dublin and Amsterdam and the German markets;

Southern Europe (Madrid, Barcelona, Milan) saw opportunistic occupiers become active; but this contrasts markedly

with Central and Eastern Europe, and in particularly the slowdown in Moscow.

2015 Outlook

JLL expects the following themes and trends to surface in global occupier markets during 2015:

Uneven recovery to continue: A steady, incremental growth in occupier activity is anticipated throughout the

year but with continued unevenness. An increasing divergence between markets is also expected, as structural

event-driven demand plays and expansionary demand emerges on a highly selective basis. In markets such as

China, activity will be driven by active, domestic occupiers rather than large-scale international occupiers, who

will remain firmly in cost-saving mode.

Geopolitical risks high: An improving economic backdrop has meant that the primary risk to further volumes of

occupier activity is now geopolitical risk. Notable here is the continuing situation in Russia / Ukraine and the

rising threat levels emerging from fundamentalist groups. The uncertainty relating to national elections could

also serve to stifle activity levels temporarily across a number of markets.

Headcount growth to return within strong labour markets, placing a premium on talent: 41% of C-suite

respondents to a recent McKinsey survey expected their headcount to grow in the first half of 2015. This

against a backdrop of improving but polarised labour market conditions as talent shortages continue to emerge.

The U.S. labour market, for example, is showing the fastest pace of job creation since 1999, while the number

of people who are changing jobs is at its highest level since 2007. This will impact occupier decision-making.

Workplace design and location strategy will become central to talent retention and attraction as further

momentum builds in global labour markets.

Activity will be more balanced across industry sectors: For the past several quarters, technology and energy

firms have been the most active occupiers in global real estate markets. However, 2015 may be a year in which

activity in these sectors shows reduced cadence as oil prices plummet and as tech valuations are corrected. In

this context other industry sectors such as manufacturing, banking, consumer and healthcare will become more

active in the market. On the flip side, those markets with an historically high dependency on energy, such as

Houston, Calgary and Denver, will see particular challenges in 2015 if the oil price drop is sustained – all the

more so given the volume of new office product coming to market.

Supply constraints start to bite: In some markets, particularly within Europe, supply is becoming a more

noticeable constraint as a shortage of the high-quality modern space that occupiers are typically seeking

becomes evermore tangible. Consequently we are witnessing increased pre-leasing in new projects as

occupiers seek to combine consolidation with a ‘flight to quality’ space (e.g. Tokyo, London).

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Global Market Perspective, First Quarter 2015

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 17

Rising demand for ‘secondary’ locations and product: The consequence of both the talent challenge and select

supply shortages facing corporate occupiers, is a discernible shift in interest away from trophy properties and

an increasing demand for secondary markets that offer character over cachet. This is bringing new markets

and sub-markets into consideration, together with ‘secondary’ stock. This is most noticeable in, but not

exclusive to, the U.S. markets. In a similar vein, alternative markets that are positioned as BPO destinations,

such as Manila, will continue to witness strong and rising demand.

Global Office Market Conditions Matrix*, 2015-2017

* Relates to conditions in the overall office market of a city. Conditions for prime CBD space may differ from the above. Source: JLL, January 2015

MARKET

Brussels Beijing

Frankfurt Hong Kong

London (West End) Mumbai

Madrid Shanghai

(Pudong)

Moscow Singapore

Paris Sydney

Stockholm

Dubai

Market 2015 2016 2017 Market 2015 2016 2017

Tokyo

Neutral Market

Landlord Favourable

Tenant Favourable

Market

Chicago

Los Angeles

New York

San Francisco

Toronto

Washington DC

Mexico City

Sao Paulo

2015 2016 2017

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 18

Global Market Perspective, First Quarter 2015

Global Real Estate Health Monitor

Economy Real Estate Investment Markets Real Estate Occupier Markets

National

GDP

OECD

Leading

Indicator

City

Investment

Volumes

Capital

Value

Change

Prime

Yield Yield Gap

Rental

Change

Net

Absorption

Vacancy

Rate

Supply

Pipeline

Dubai 2.9% na -35% 3.1% 7.5% na 3.1% na 24.0% 14.5%

Frankfurt 2.0% -0.10 24% 2.2% 4.6% 406 0.0% 1.0% 10.4% 1.9%

Hong Kong 3.1% na -1% 0.3% 2.9% 101 2.7% 0.8% 4.2% 4.8%

London 3.0% -0.10 0% 9.5% 3.8% 200 9.5% 1.9% 5.0% 4.9%

Moscow -6.3% -0.40 -58% -29.8% 9.8% -434 -21.7% 5.3% 15.9% 11.6%

Mumbai 6.1% 0.20 96% -2.2% 10.1% 204 -2.8% 7.1% 20.4% 15.7%

New York 3.3% 0.00 14% 22.8% 3.5% 133 2.3% 2.1% 9.5% 0.5%

Paris 1.2% 0.10 33% 18.1% 3.8% 291 4.2% 1.6% 7.6% 4.2%

Sao Paulo 0.1% 0.00 148% -17.6% 9.5% na -7.9% 2.5% 22.8% 23.7%

Shanghai 6.8% 0.10 -23% 1.8% 6.0% 229 2.2% 10.7% 10.7% 42.5%

Singapore 3.0% na -30% 1.3% 4.1% 184 14.9% 3.4% 6.1% 12.8%

Sydney 2.7% 0.20 21% 12.3% 6.3% 344 3.1% 2.5% 9.6% 3.9%

Tokyo 0.9% 0.00 65% 19.3% 3.3% 297 6.4% 4.3% 3.0% 11.5%

Real estate data as at end Q4 2014

Definitions and Sources

National GDP: Change in Real GDP. National Projection, 2015. Source: Oxford Economics

OECD Leading Indicator: Composite Leading Indicator. Change in Index. Latest Month. Source: OECD

City Investment Volumes: Direct Commercial Real Estate Volumes. Metro Area Data. Rolling Annual Change. Source: JLL

Capital Value Change: Notional Prime Office Capital Values. Year-on-Year Change. Latest Quarter. Source: JLL

Prime Yield: Indicative Yield on Prime/Grade-A Offices. Latest Quarter. Source: JLL

Yield Gap: Basis Points that Prime Office Yields are above or below 10-year Government Bond Yields. Latest Quarter. Source: JLL, Datastream

Rental Change: Prime Office Rents. Year-on-Year Change. Latest Quarter. Source: JLL

Net Absorption: Annual Net Absorption as % of Occupied Office Stock. Rolling Annual. Source: JLL

Vacancy Rate: Metro Area Office Vacancy Rate. Latest Quarter. Source: JLL

Supply Pipeline: Metro Area Office Completions (2015-2016) as % of Existing Stock. Source: JLL

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Global Market Perspective, First Quarter 2015

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 19

Office Markets

Office Demand Dynamics

Leasing activity clearly strengthening

Corporate occupier activity has strengthened across the globe:

The U.S. saw its highest quarterly net absorption gains for more than five years in Q4 2014, underpinned by

solid GDP, consumer spending and employment growth.

Europe witnessed its best quarterly take-up volumes for seven years, fuelled by a number of large corporate

occupiers taking advantage of favourable market opportunities.

In Asia Pacific, Q4 leasing volumes were up 14% year-on-year, although improvements remain patchy.

Leasing volumes constrained in 2015 by shortages of quality space

Accelerating global economic growth, increasing expansionary demand, portfolio restructuring and a clear occupier

preference for modern, accessible space (to drive productivity and increase efficiency) are expected to boost office

leasing volumes in 2015. At around 15%, Asia Pacific is projected to show the strongest growth in gross leasing

volumes in 2015; meanwhile, the U.S. and Europe are forecast to register growth of up to 5%, with leasing activity

constrained in some markets by a scarcity of high-quality available stock. As a consequence, JLL expects to see high

levels of pre-letting in many markets.

U.S. office sector hitting its stride

As the U.S. economy moves into higher gear, so has demand for office space. Quarterly occupancy gains in Q4 were

7.2% up on Q3, and for the full-year 2014, increases were 38% greater than 2013:

Absorption gains were dominated primarily by East Coast markets during the quarter, led by New York and

Washington DC, two markets that are finally beginning to show momentum after stagnating through 2012,

2013 and the beginning of 2014.

On the West Coast, absorption increases were headed by Orange County and the tech hubs of Portland, San

Francisco and Seattle-Bellevue.

In the Central markets, Chicago and Houston contributed to the largest absorption gains. However, the

slowdown in the energy industry, as a result of the decline in oil prices in recent weeks, will yield a slower

demand environment in energy hotbeds like Houston, Denver and Fort Worth over the short to mid-term.

Likewise, absorption in high-priced tech markets, such as San Francisco and Silicon Valley, could also slow

as rental rates reach peak levels amid declining vacancy.

Increases in corporate profitability and economic growth will continue to result in headcount increases and expansionary

leasing activity across U.S. markets. As a result, net absorption is projected to increase by 25% in 2015 to reach a new

cyclical high. JLL anticipates further absorption increases in suburban and secondary markets as corporations look to

expand into more affordable locations as the economy expands.

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 20

Global Market Perspective, First Quarter 2015

Canada’s office market sees further demand spark

After a sluggish first half of the year, 2014 drew to a close on a stronger note for the office market in Canada. Demand

was particularly healthy in the Greater Toronto Area, while other markets that performed well included Calgary (despite

tumbling oil prices) and Vancouver.

Increasing choice for tenants in Brazil and Mexico

The primary commercial property markets in Brazil (Sao Paolo and Rio de Janeiro) remain advantageous to tenants as

a surge of new supply comes onto the market. Meanwhile, tenant demand in Mexico City has continued its robust trend

of the past few years, due to a combination of corporate expansions and relocations to higher-quality product as new

supply comes onto the market.

European leasing activity regains traction in Q4 with highest volumes in seven years

European office leasing volumes picked up considerably in Q4 2014, increasing by 36% over the quarter to total just

over 3.1 million square metres. Although a seasonal strengthening in activity towards the end of the year is common in

Europe, Q4 2014 was particularly lively, with levels up 17% on Q4 2013, representing the most robust quarter recorded

since Q4 2007. Drivers behind this boost are diverse and largely local in nature:

In London, Dublin and Edinburgh, pent-up demand and high pre-letting activity have continued to drive

leasing activity. London remains particularly upbeat and although Q4 volumes were down on previous levels, it

was a result of a tightening in supply rather than a decrease in demand.

In Germany, leasing volumes in the five largest markets were up by 41% in the final quarter compared to Q3

2014, with growth particularly vigorous in Munich and Berlin. Leasing activity in Germany has been enhanced

by strong employment growth, with many occupiers looking for additional space.

In Southern European markets - Spain, Portugal and Italy - a recovery is now underway as occupiers seem

more willing to make decisions and to take advantage of favourable market conditions (which are likely to

tighten in 2015).

Paris has recovered from a disappointing third quarter, with volumes up 48% in Q4. The city has seen the

completion of several new, high-quality projects enabling large occupiers to fulfil their requirements.

Corporate occupier activity in Moscow has been heavily influenced by recent macro factors and continued to

be relatively muted in Q4 on the back of an expected economic slowdown in 2015.

Q4 leasing volumes in Europe are unlikely to be repeated in Q1 2015. However, in the absence of further geopolitical or

macroeconomic shocks, demand for office space should see modest growth during 2015 (+0%-5%, compared to 2014).

Asia Pacific office leasing activity strengthens, but still patchy

Regional gross take-up in Asia Pacific was up 14% year-on-year in Q4 and by 16% on a full-year basis. Take-up

remains patchy, with the greatest improvements in India and Australia (especially from technology firms in cities such

as Bangalore and Sydney). Large corporates are still in cost-saving mode, with increasing space requirements coming

mainly from domestic occupiers and technology-related firms:

Singapore and Hong Kong have continued to see limited take-up driven by tenant relocations and small

requirements from the financial sector, business centre operators and non-traditional occupiers (e.g. medical

clinics).

Activity in China has come mainly from domestic financial firms augmented by small requirements from non-

financial MNCs (e.g. retailers, pharmaceuticals).

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Global Market Perspective, First Quarter 2015

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 21

Tokyo recorded slightly positive take-up in Q4 on the back of expansion by IT companies (e.g. app developers)

but has registered slow pre-leasing in new projects.

Manila has continued to see healthy underlying demand; however, activity has remained quiet elsewhere in

emerging SEA.

India has experienced steady take-up, mainly relating to IT and e-commerce firms (expansion) as well as

financial institutions (cost-motivated relocations).

In Australia, overall leasing activity has improved in Sydney and Melbourne (with stronger enquiry/activity

from technology firms) but is still flat (or slightly contracting) elsewhere due to limited demand growth from

traditional occupiers (such as mining and the public sector).

Global Office Demand – Net Absorption Trends, 2004-2015

24 markets in Europe; 25 markets in Asia Pacific; 44 markets in the U.S. Asia relates to Grade A only. Source: JLL, January 2015

-5

0

5

10

15

20

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

mill

ions

sq

m

Pro

ject

ion

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 22

Global Market Perspective, First Quarter 2015

Office Supply Trends

New supply still limited, but construction is rising

New office deliveries remain well below the historic average, with only 11 million square metres completed across the

globe during 2014, compared to an historic average of nearly 14 million square metres. Nonetheless, limited office

space availability has prompted a further rise in construction, with new deliveries expected to be one-third higher in 2015

at close to 15 million square metres, and to be nearly 17 million in 2016; this would represent the highest level since

2009.

Construction in U.S. continues to increase, and not just in core markets

Development activity continues to increase across the U.S. as tenant expansion and tightening fundamentals further

justify new construction. Construction activity in Q4 grew by a further 12% quarter-on-quarter, and of the 48 markets

tracked by JLL, there are now only 10 markets without activity. Additionally, a solid majority of projects now under

construction have space remaining to be leased.

Annual completions in Europe increase moderately and unevenly

Office completions in Europe in 2014 were up 18% on 2013 levels and 28% above 2012 levels. This has been heavily

influenced by strong annual growth in London (+90%) and Moscow (+49%), which together accounted for almost 40%

of Europe’s completions over the past year. Rising construction levels underline the robust demand for modern space in

most markets. Confidence among developers is likely to persist, but a significant increase in supply is not anticipated,

with annual completions remaining at around 5 million (i.e. long-term average) in both 2015 and 2016.

Lull in new completions in Asia Pacific

Completions of Grade A office space in Asia Pacific in 2014, at 3.4 million square metres, were down one-third from

2013 and represent the lowest level for nearly a decade. Most completions were in India and Greater China.

Nonetheless, a sharp increase in completions is projected for 2015.

Office Supply Pipeline - Major Markets, 2015-2016

Source: JLL, January 2015. Covers all office sub-markets in each city. Tokyo – CBD - 5 kus

0 5 10 15 20 25 30 35 40 45

New YorkLos Angeles

Washington DCChicago

MadridSeoul

StockholmFrankfurtBrusselsToronto

San FranciscoBostonSydney

ParisHong Kong

LondonBeijingTokyo

MoscowSingapore

DubaiMumbai

Sao PauloMexico City

Shanghai

Completions as % of existing stock

2015 2016

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Global Market Perspective, First Quarter 2015

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 23

Global Office Completions, 2000-2016

24 markets in Europe; 25 markets in Asia Pacific; 44 markets in the U.S. Asia relates to Grade A only.

Source: JLL, January 2015

Office Vacancy Rates in Major Markets, Q4 2014

Regional vacancy rates based on 49 markets in the Americas, 24 markets in Europe and 24 markets in Asia Pacific.

Covers all office submarkets in each city. All grades except Asia and Latin America (Grade A only). Tokyo relates to CBD – 5 kus.

Source: JLL, January 2015

0

5

10

15

20

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015(F)

2016(F)

U.S. Europe Asia Pacific

mill

ions

sq

m

Average

0

5

10

15

20

25

New

Yor

k

Tor

onto

San

Fra

ncis

co

Mex

ico

City

Bos

ton

Los

Ang

eles

Chi

cago

Was

hing

ton

DC

Sao

Pau

lo

Lond

on

Par

is

Sto

ckho

lm

Bru

ssel

s

Fra

nkfu

rt

Mad

rid

Mos

cow

Bei

jing

Tok

yo

Hon

g K

ong

Sin

gapo

re

Syd

ney

Seo

ul

Sha

ngha

i

Mum

bai

Europe 9.6% Asia Pacific 11%Americas 15%%

Quarterly movement

Increased

Decreased

Stable

Global 12.7%

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 24

Global Market Perspective, First Quarter 2015

Vacancy rates edge downwards

The global office vacancy rate (across 98 markets) has edged down to 12.7% and is projected to continue to decline

steadily to around 12.5% by the end of 2015, driven primarily by a further drop in U.S. rates.

Sharp fall in Class A vacancy in the Unites States

At 15.6%, total vacancy in the U.S. is just 180 bps from the 13.8% pre-recession low recorded in 2008, and down 290

bps since its recessionary peak in 2010. As occupier activity has expanded, vacancy rates for all classes have declined,

with Class A vacancy recording the sharpest year-on-year decline.

New supply pushes up vacancy in Canada, Brazil and Mexico

The Canadian national vacancy rate saw a slight uptick in Q4, increasing 10 bps to 9.6%, and is expected to continue on

its uphill trajectory in 2015 as 9.6 million square feet of new supply is slated for completion through the year, of which

48% is still available for lease.

The office vacancy rate increased further during the fourth quarter in the two main Brazilian markets of Sao Paulo and

Rio de Janeiro. Sao Paulo in particular faces a considerable supply-side challenge in 2015. The office vacancy rate

rose 440 bps over the course of 2014 to 22.8%, and further increases are likely in 2015 as new space under

construction is currently just 13% pre-leased.

Mexico City’s office market experienced an increase in vacancy of 100 bps during the fourth quarter to 11%. Most of

this was attributable to the beginning of a very large wave of supply being delivered to the market, which will almost

assuredly put some sustained upward pressure on the market’s vacancy rate.

Asia’s core markets register low single-digit vacancy

Many of Asia’s major office markets continue to register very low vacancy - notably Hong Kong, Tokyo, Manila and

Jakarta (all 4% or below). The exceptions include the Shanghai decentralised market and most Indian and Australian

cities, where vacancy levels generally range between 10% and 20%.

Stable European vacancy rate conceals notable changes is some markets

The European office vacancy rate fell marginally to 9.6%. Dublin recorded the largest decline (down 320 bps), whereas

vacancy rates are increasing in most major CEE markets – Moscow, Prague and Warsaw – as new supply comes on

tap. While a shortage of quality space in prime locations across Western Europe will intensify in 2015, the aggregate

vacancy rate is expected to reduce only slowly as occupiers continue to release second-hand space back onto the

market.

Vacancy falls in Dubai

Vacancy levels in Dubai have fallen in recent quarters, but at 24% remain high; however, much of the vacant space is in

secondary-quality buildings, many of which are in strata title ownership and of little interest to major corporate occupiers.

2015 is expected to see the completion of a number of new high-quality office projects which could result in significant

pre-leases for the first time in the Dubai market

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Global Market Perspective, First Quarter 2015

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 25

Office Rental Trends

4% per year rental growth projected for 2015

Rental growth continues to move at a steady pace, with the annual rate of growth on prime office assets across 25

markets standing at 3.1% in 2014, compared to 1.7% in 2013. Momentum is building with projections of a steady 4%

per annum growth rate for 2015.

Singapore is the standout market in 2014

Singapore emerged as the top-performing major market in 2014 (+14.9%), closely followed by the tech-rich markets of

San Francisco (+12.8%) and Boston (+10.2%). Mexico City (+10.7%) maintained strong rental growth despite its high

supply pipeline, while London (+9.5%) was the leading major market in Europe.

Tokyo projected to be the top performer in 2015

While Tokyo and Beijing are projected to be the top-performing rental markets in 2015, the highest ranks are expected

to be dominated by the major U.S. markets (Boston, Chicago, Los Angeles, New York and San Francisco). In

EMEA, London and Dubai are forecast to be the strongest markets. Sydney is also expected to be among the top

performers in 2015.

Prime Offices – Projected Changes in Values, 2015

*New York – Midtown, London – West End, Paris - CBD. Nominal rates in local currency.

Source: JLL, January 2015

+ 10-20%

+ 5-10%

+ 0-5%

- 0-5%

- 5-10%

Sydney, Beijing, Dubai, BostonChicago, Los Angeles, New York*San Francisco, London*

Tokyo

Capital ValuesRental Values

Hong Kong, Paris*, MadridToronto, Washington DC, Mexico CitySingapore, Stockholm, Seoul, Shanghai Frankfurt, Brussels

Mumbai, Sao Paulo

Tokyo, Madrid

Beijing, London*, Sydney Dubai, Boston, Chicago, Los Angeles New York*, San Francisco, Seoul

Toronto, Frankfurt, Washington DCMexico City, Paris*, Shanghai, BrusselsStockholm, Hong Kong, Singapore

Mumbai, Sao Paulo

Moscow Moscow

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Global Market Perspective, First Quarter 2015

Prime Offices – Rental Change, 2010-2015

Prime office rental growth: unweighted average of 25 major markets.

Source: JLL, January 2015

Prime Offices – Rental Clock, Q4 2013 v Q4 2014

Based on rents for Grade-A space in CBD or equivalent.

U.S. positions relate to the overall market

Source: JLL, January 2015

0

1

2

3

4

5

6

7

8

9

10

2010 2011 2012 2013 2014 2015

8.8%

7.3%

2.2%1.7%

Ren

tal c

hang

e (y

-o-y

%)

4%

3.1%

Americas EMEA Asia Pacific

Q4 2014

Rental Value

growth slowing

Rental Value

growth

accelerating

Rental Values

bottoming

out

Rental Values

falling

Q4 2013

Sao Paulo

Boston, Los Angeles

New York

Hong Kong

Berlin, Frankfurt

Amsterdam, Madrid, Dubai, Milan

Chicago

Moscow

Paris, Sydney

Toronto, Johannesburg

Mumbai

Mexico City, Shanghai

Singapore, Houston

San Francisco

DallasRental value

growth slowing

Rental value

growth

accelerating

Rental values

bottoming out

Rental values

falling

Seoul

Paris, Milan

Beijing

Hong Kong

Washington

DC

Shanghai

Singapore

Mumbai, Istanbul

Dubai

Tokyo

Los Angeles

New York

Toronto

Sao Paulo

Mexico City

Dallas

Houston

San Francisco

Frankfurt

Boston

Amsterdam, Johannesburg

Berlin, Moscow

Brussels, Madrid

Sydney, Chicago

Stockholm

London

Beijing

London

Stockholm, Tokyo

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Global Market Perspective, First Quarter 2015

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 27

Retail Markets

Upside potential on U.S. consumer tailwinds

With the net absorption rate more than double that of new deliveries, the U.S. retail vacancy rate fell to 6.1% in Q4.

Meanwhile, rents inched up by 0.1% during the quarter, and increased 1.5% year-on-year. Among U.S. shopping centre

types, power centres are still seeing the tightest overall market conditions, with total vacancy of 4.7%. Several standout

markets, such as Miami, Washington DC, Houston, Dallas, Fort Lauderdale and San Francisco, continue to

experience the strongest conditions typical of a rising market, as rents see assertive growth and vacancy falls. With the

dramatically lower price of oil, U.S. suburban shopping centres are likely to enjoy stronger consumer – and thus tenant –

demand growth over the short-to-medium term.

Consumer confidence remains stable. Positive European retail sales growth outlook

Consumer confidence across Europe remained stable during Q4 2014, despite increased uncertainty around deflation,

geopolitical risk and the recovery of Europe’s economy. Retail sales across Europe are forecast to grow 1.7% and 1.8%

respectively in 2015 and 2016, due to vigorous sales growth in non-Eurozone countries, including the UK and Sweden.

Strong growth is also anticipated for Turkey and most of the CEE region. At the same time, the outlook for Europe’s

recovery markets has also improved significantly, with forecasts for positive retail sales growth in the medium term.

Iberia, UK and Germany outperform

Lisbon (+15.8%), Madrid (+4.5%) and Barcelona (+4.3%) recorded healthy rises in prime high street rents during Q4

2014, highlighting increasing retailer interest in Europe’s recovery markets. Strong uplifts over the quarter were also

recorded in Hamburg (+7.8%), London (+7.4%) and Berlin (+7.1%). Rents fell significantly however in St. Petersburg

(-29%) and Moscow (-18.2%). Robust rental growth for prime unit shops in 2015 is forecast for the UK cities – London,

Leeds, Birmingham and Manchester – as well as for Munich and Dublin.

Healthy retailer demand in Asia Pacific

The Asia Pacific region witnessed generally positive retailer demand in Q4. The demand picture varied in China with

quality mature malls continuing to outperform and garner strong retailer interest and dining and entertainment services

becoming a larger demand segment for malls. Leasing demand remained healthy in Hong Kong as ‘Occupy Central’

protests mostly affected nearby prime shopping belts. Expansion of foreign fashion retailers and F&B continued to buoy

demand in SEA, but leasing activity in India has been diverted to high streets due to limited quality mall space.

Australia experienced stable leasing conditions (which was stronger in regional centres and bulky goods centres) with

international retailers continuing to enter the market.

Rents generally flat across most of Asia Pacific

Bangkok recorded the highest quarterly rental growth in the region (+2.4%) and rents edged up in China and some

emerging SEA markets. In Australia, India, Singapore and Hong Kong, average mall rents were flat. For the next 12

months, retailer demand for space is likely to remain relatively robust, but will not be sufficient enough to boost rents by

any significant margin.

Increasing new supply in the UAE

While overall retail spending in the United Arab Emirates (UAE) is forecast to increase by 5.6% in 2015, significant

levels of new retail supply are coming onto the market in both Dubai and Abu Dhabi, which is increasing the competition

for the retail dollar. Retail supply in Abu Dhabi continues to grow with the opening in Q4 2014 of the 370-store Yas Mall

(Abu Dhabi’s largest mall to date).

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Global Market Perspective, First Quarter 2015

Prime Retail – Rental Clock, Q4 2014

Prime Industrial – Rental Clock, Q4 2014

Relates to prime space. U.S. positions relate to the overall market

Source: JLL, January 2015

Rental Value

growth slowing

Rental Values

falling

Rental Value

growth

accelerating

Rental Values

bottoming

out

Americas EMEA Asia Pacific

New York, Los Angeles

Delhi

Berlin

Dubai

Mumbai, Boston, Houston

Washington DC

Chicago

Singapore, Hong Kong

Tokyo, Miami, San Francisco

Paris

Shanghai, Beijing

Madrid

Milan, Sydney

London

Moscow

Rental Value

growth slowingRental Values

falling

Rental Values

bottoming

out

Warsaw

Americas EMEA Asia Pacific

Rental Value

growth

accelerating

Amsterdam, Paris, Beijing

Boston

London, New York, Atlanta

Houston, San Francisco

Frankfurt

Philadelphia, Chicago

Los Angeles

Singapore

Dallas

Hong Kong

Shanghai

Tokyo

Madrid, Sydney

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Global Market Perspective, First Quarter 2015

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 29

Industrial Warehousing Markets

U.S. industrial surpassing the last cycle

The U.S. national vacancy rate stands at 6.9%, which is 80 bps lower than the last cycle’s low. Rents, in turn, continue

to follow suit with annual rental growth at 4.0%, while the current average asking rental rate is just 2.2% off the last

cycle’s 2007-high. Rental growth is expected to continue in 2015 based on increasing tenant demand and developers

being generally disciplined in keeping new supply in check. Even so, construction is ever-increasing - new deliveries

totalled 135 million square feet in 2014, up nearly 50% from 2013, and may reach 171 million square feet in 2015.

However, these totals are still below the last cycle’s annual average of 184 million square feet. Requirements for big box

space in excess of 500,000 square feet outpace existing and under construction supply in St. Louis, Kansas City,

Boston, Northern California, Phoenix, Atlanta, Chicago, Philadelphia / Harrisburg and New Jersey. JLL therefore

expects development activity (whether from build-to-suits or new speculative product) to increase in these markets (or to

spill over into nearby secondary markets) and for pronounced absorption gains to eventually follow as tenants take

occupancy.

European occupational demand expected to remain broadly stable

Europe’s logistics occupational market continues to benefit from significant network reconfiguration and, in particular,

retail and logistics companies are continuing to support ongoing healthy demand levels. Full-year 2014 take-up volumes

were in line with 2013, and initial expectations for 2015 are for another year of stable occupier demand despite signs of

renewed economic uncertainty.

Europe’s availability still mostly restricted to build-to-suit facilities

European industrial vacancy remains at an historic low with virtually no large buildings being immediately available on

the market. Continued strong market fundamentals in combination with low vacancy have triggered a slight uptick in

speculative development with many developers increasingly building up land banks for speculative construction in 2015.

Nevertheless, the re-emergence of economic uncertainty could delay speculative developments planned to commence

over the first half of the year. As a result, the majority of large space requirements will continue to be led by build-to-suit

solutions.

Rental growth prospects in Europe are brightening

The majority of European markets have now seen two years with virtually no rental movement. Even so, following a

moderate 0.4% rental increase in the previous quarter, the Q4 European Warehousing Index rose by another 0.5% over

the fourth quarter. This growth was headed by rising rental levels in Birmingham (+5.0%), Manchester (+4.8%),

Dublin (+4.2%), Barcelona (+4.0%) and Madrid (+2.2%). Rents have fallen for a third consecutive quarter in Moscow

(-1.5%).

Stable warehousing demand in Asia Pacific

Across the Asia Pacific region, third-party logistics companies, retailers and manufacturers continue to underpin leasing

activity. The largest quarterly rental growth (+2.8%) was seen in Hong Kong due to tight supply, followed by Greater

Tokyo (+0.9%). Rents remained mostly stable in China, Singapore and Australia.

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Global Market Perspective, First Quarter 2015

Hotel Markets

Global hotel investment reaches seven-year high

2014 was a robust year for hotel investment with transaction volumes exceeding US$58 billion, a 10% increase on 2013,

marking a seven-year high. Single-asset deals climbed to their highest annual level on record, comprising some US$40

billion or 70% of volumes. Investment funds and private equity firms were the most active buyers during the year and

the same is expected to be the case for 2015.

Hotel Investment Volumes, 2014–2015

US$ billions

2014 2015F %

change

Americas 30.0 34.5 15%

EMEA 21.5 24.7 15%

Asia Pacific

7.5 8.5 13%

TOTAL 59.0 67.7 15%

Figures include hotel property transactions of US$5 million and above and exclude note sales, land sales, foreclosures and recapitalisations.

Source: JLL, January 2015

Deal volumes could reach US$68 billion in 2015

One-third of transactions completed in 2014 were cross–border deals, and Asia, the Middle East and the U.S. will

continue to be the major exporters in 2015 with the intensity and momentum notching up. Three main trends are

expected to shape hotel investment this year:

The floodgates are opening up for Chinese outbound capital. Asian money will feature more strongly, driven by

Chinese capital which is dominating the investment market landscape, and now includes insurance companies

who have emerged as a new capital source from within the country. China’s outbound hotel capital rose by

80% in 2014 and outbound volumes look set to increase up to fivefold in 2015.

Middle Eastern outbound capital, which has been active, remains robust. However, while significant in U.S.

dollar terms, it is not expected to grow by the same pace as Asian capital.

U.S. private equity funds are cash-rich and face pressure to deploy capital in the short term, pursuing higher

yielding offshore markets such as secondary locations in Europe.

The confidence that investors and lenders have in global hotel market performance is expected to remain strong in 2015,

with the year projected to record the highest transaction volumes in eight years. JLL’s view is that the hotel investment

market will continue to gain traction during 2015, reaching a deal volume of US$68 billion – a 15% year-on-year

increase. All indications point to the current cycle continuing at peak volumes for several more years.

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Global Market Perspective, First Quarter 2015

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 31

Regional Hotel Investment Volumes, 2014-2015

Source: JLL, January 2015

Private equity dominates the market

Private equity investors continue to dominate hotel acquisitions, accounting for over 40% of investment. Hotel operators,

developers and REITs are also among the most acquisitive groups. Private equity firms are flush with capital and have a

duty to deploy capital, motivating them to push forward with deals. 2015 will therefore bring increasing pressure for

those that have disposed of their early-cycle investments and want to make acquisitions with yield potential while the

market is on its upward trajectory. They will aim to time the market right, deploy capital quickly and find meaningful yield

in their three to five-year investment window.

Global funds and private equity groups based in the U.S. and Western Europe will lead the charge here, with the U.S.,

UK and Germany the biggest destinations for private equity capital. Private equity investors will also look to higher

yielding markets such as Southern and emerging Europe, as well as resorts and secondary and tertiary locations in the

U.S. and UK throughout 2015. In Asia, private equity plays will remain limited to core markets.

The U.S. is in the driver’s seat

The Americas experienced robust growth during 2014, with investment volumes increasing to US$30 billion. As in

recent years, the region is expected to once again drive the boost in liquidity, with a projection of US$34.5 billion in

transaction volumes in 2015. In the U.S., more opportunistic investors are re-trading assets purchased on the onset of

the recovery cycle and momentum is being further fuelled by the weight of private equity pursuing portfolios.

EMEA goes from strength to strength

EMEA saw the strongest growth of all global regions in 2014, and closed the year at US$21.5 billion. Growth in the final

quarter of 2014, although up more than 20% compared to the corresponding quarter in 2013, was less robust than the

previous two quarters which both saw a number of significant portfolio deals.

The UK remained the most liquid market in EMEA, accounting for almost 40% of deals during 2014. With an improving

economic backdrop, 2014 witnessed an unprecedented appetite for UK hotel assets with limited competing

opportunities. Interest stemmed from both domestic and international investors stirred by the improved availability of

debt and financing terms, the increasing weight of private equity, and portfolio investors with existing platforms in which

30.034.5

21.5

24.7

7.5

8.5

0

10

20

30

40

50

60

70

80

2014 2015F

US

$ B

illio

n

Americas EMEA Asia Pacific

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Global Market Perspective, First Quarter 2015

single or multiple asset acquisitions could be amalgamated. While the UK Regions saw a significant uplift in liquidity,

overall transaction volumes in London fell compared to the prior year.

EMEA will continue its forward strides in 2015 with a projected US$24.7 billion in hotel transactions. The bulk of its sales

activity will be driven by large single-asset transactions, led by London and Paris, while portfolio deals are anticipated in

the UK and Germany. Outbound capital from the Middle East is anticipated to remain strong.

Spotlight on Japan in Asia Pacific

Hotel transaction volumes in Asia Pacific reported double-digit declines in 2014, falling to US$7.5 billion. The spotlight

remained firmly on Japan last year, which secured 30% of all deals in the region at US$2.1 billion. Following closely on

Japan’s heals was Australia, taking a 28% (US$2 billion) cut in deals, and China falling into third place on the leader

board with a 19% (US$1.3 billion) share.

Asia Pacific is expected to bring a steady increase of 15% more transactions in 2015, lifting deal volumes to US$8.5

billion. Japan will be the standout market in the region, led by increased debt and investor confidence in hotel

performance growth. Australia is slated to remain an active market as well; its stable government and rise in tourism

and investment interest from China is expected to make it a continued safe haven for moderate growth.

Wildcards

Several factors could influence hotel transaction volume projections for the positive or for the not-so-positive. Starting

with the glass half full, a strong return in the European Commercial Mortgage-Backed securities (CMBS) market,

although smaller than the U.S. market, would increase demand for acquisitions in EMEA and stretch equity further. More

momentum from capital exporters from China and the Middle East would put an upward pressure on deal flow as well. A

lowering of tourism taxes across a number of key travel hotspots could also spark an uptick in travel.

And on the downside – political conflict, natural disaster, a pandemic or other demand shocks have the potential to

impact travel and tourism. All eyes remain on the global economy – while the U.S. expects a robust 2015, growth in

EMEA remains more irregular and the BRIC countries face some clouds – Russia in particular. Moreover, recent global

forces, such as lower oil prices and the U.S. dollar at its highest level in over a decade, all stand to influence the

movement of goods, capital and travellers.

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Global Market Perspective, First Quarter 2015

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 33

Residential Markets

Structural demand shifts boost U.S. multifamily rental

Although the U.S. for-sale housing market fundamentals are still well below previous cycles, multifamily rental product

continues to significantly outperform property markets in general. This is supported by continually declining

homeownership rates, which at 64.4% in Q4 2014 have fallen to their lowest level since early 1995. The Millennial

segment has seen declines in virtually every quarter of the past decade, bringing current homeownership among

Millennials to 36%. Meanwhile, the 35-44 and 45-54 age cohorts have seen homeownership decline at its quickest pace

in 10 quarters at 200 and 120 bps respectively year-on-year.

Improved economic growth and evolving demographics are propelling demand across a broadening subset of rental

apartment markets across the United States. The Sunbelt markets continue to exhibit strong occupancy growth, posting

7 of the 10 highest absorption rates nationally led by Austin (3.1%), Charlotte (3.1%) and Jacksonville (2.9%). The

Pacific Northwest - notably, Portland - and Washington DC have seen a similar expansion of absorption in 2014.

Supply-side expansion softens U.S. rental growth

However, as current construction deliveries across the U.S. exceed long-run averages, three-quarters of markets are

now experiencing softened rental growth. Should the supply pipeline continue to expand at a robust rate, apartment

tenants may begin to regain some leverage from landlords by 2016-2017, particularly in markets with average to lower-

than-average supply constraints.

UK market slows. London will continue to outperform

The strong run of UK house price growth over the past two years slowed towards the end of 2014, particularly in high-

value locations in London. The pre-election rhetoric that is defining party policies has created a spectre of uncertainty

for this market. Nationally, prices finished the year up 7%, while the strong first half of the year meant that London still

ended the year with a 17% rise. Transaction levels pushed through the 10-year average of 1.2 million, although more

recently have tapered back. Expectations are for a moderation of price growth, averaging between 3% and 5% over the

next few years nationally. London will continue to outperform, despite the weakness in prime markets over the short

term.

Institutional-grade residential investment volumes have remained weak. However, despite this, the number of investors

announcing new funds to allocate to the sector continues to grow. This weight of capital (with an international bias) has

sharpened pricing for many incumbent investors that are finding the market extremely challenging for new stock. This

continues to drive forward-funding deals for development and a larger appetite for regional opportunities, as well as

alternative investment sectors.

German transaction market remains strong

Activity in Germany’s residential transaction market remained strong in 2014 with a total of 218,000 apartments sold,

which was ahead of expectations. At approximately €12.9 billion, this was the second highest transaction volume since

2007, behind the 2013 record (€15.8 billion).

While in 2013 transactions were dominated by national investors, in 2014 there was more interest shown by international

investors, who accounted for almost 25% of the volume. Most originated from neighbouring countries, but there was

also interest from Israel and the United States.

Further housing stock adjustments and mergers of housing companies are expected over the coming year as market

conditions and the investor climate are set to remain favourable. As a result, 2015 transaction volumes are likely to

reach similar heights to 2014.

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Global Market Perspective, First Quarter 2015

Sentiment in the Netherlands improves

Sentiment in the Dutch residential market has significantly improved during 2014. In recent years, investment volumes

in the residential market have fluctuated around €1 billion per year, accounting for around 20% of total real estate in the

Netherlands. In 2014, however, volumes doubled to €2 billion, mainly driven by several large portfolio deals, the largest

of which was the sale of 4,157 units by housing co-operative Vestia to Patrizia for approximately €458 million.

Stronger residential sales in select Asian markets

Buyer sentiment has improved in China on recent supportive policies by the government, with Shanghai recording its

highest quarterly sales of 2014 in Q4, a growth trend that is expected to continue into 2015. Meanwhile, end-user

demand in Hong Kong continues to buoy sales momentum in its primary market. As a result, Shanghai and Hong Kong

together with Manila recorded the strongest quarterly growth in capital values in the region during Q4. By contrast,

prices in Singapore fell further in the fourth quarter (and were down 6% for the full-year 2014) due to lower secondary

market prices and price discounts offered by developers. Nonetheless, JLL expects high-end residential sales in

Singapore to improve this year as the ongoing price correction boosts buyers’ affordability.

Residential leasing activity remains subdued in Asia

Most Asian markets witnessed subdued residential leasing activity in the final quarter as a result of slow corporate hiring

and stringent housing budgets. Rents were generally flat, except in Singapore (down 12% year-on-year partly due to

restrictions on imported labour).

Dubai residential reaches cyclical peak

Residential prices and rents in Dubai have been increasing at an unsustainable level over the past couple of years with

average prices experiencing a 56% increase over the two years to June 2014. This growth had fuelled fears of another

‘bubble’ and has reduced the competitive advantage of the city. JLL therefore finds it encouraging that both prices and

rents have stabilised over the second half of 2014. The cooling of the residential market is further confirmed by data

from the Dubai Land Department which shows that the number of transactions declined by 30% in 2014.

New regulations to affect Saudi Arabia’s residential market in 2015

A new mortgage regulation has been announced in Saudi Arabia, restricting loan-to-value ratios for mortgages to a

maximum of 70%, and this is expected to impact middle-income buyers, many of whom are unable to afford a 30% down

payment. Additionally, the Saudi government is also considering the introduction of a new tax on ‘white lands’ (i.e.

undeveloped sites) in order to control land speculation and increase the supply of housing. If implemented, this measure

could boost residential supply as investors switch their portfolios to include more income-generating residential

developments, as opposed to undeveloped sites

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Global Market Perspective, First Quarter 2015

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All Rights Reserved 35

Recent Key Investment Transactions

Europe, Middle East and Africa

Country City Property Sector

Sales price

US$m Comments

Belgium Brussels Covent Garden Office c. 310

JLL has advised Evans Randall on the sale of Covent Garden to Hannover Leasing, which is in partnership with a major Asian institutional investor, for over €250m. The 70,000 sq m office complex is let to the European Commission on a nine-year lease.

Czech Republic Various Bora Bora - VGP Portfolio

Industrial 653

Advised by JLL, Tristan Capital Partners and its joint venture partner VGP have sold the Bora Bora portfolio of Czech logistics assets for €523m, making it the largest real estate transaction in the history of the Czech market. The purchaser is P3 which was acquired by TPG and Ivanhoé Cambridge last year. The portfolio comprises 58 modern logistics buildings with a total of 627,000 sq m of lettable space as well as 34 hectares of development land, primarily around Prague.

France Paris 54-56 Rue La Boétie, 8th Arrondissement

Office 437

KanAm grundinvest Fonds has sold a portfolio of assets located in Paris, Washington DC and Montreal to IGIS Asset Management, acting on behalf of a Korean consortium led by Hanwha and Kyobo Life Insurance. The Paris asset is the Sanofi Headquarters, situated at 54-56 Rue la Boétie, which was acquired for €350m.

France Paris Paris Marriott Hotel Champs Elysées

Hotels 439

JLL has acted as advisor on the largest single-asset EMEA deal of the year: the purchase of the Paris Marriott Hotel Champs-Elysées by a Chinese investor. The 192-room property is the only hotel located on the prestigious Avenue des Champs-Elysées and the sale represents a rare opportunity in a market with high barriers to entry due to lack of supply and huge demand for trophy assets.

France Various Shopping Centre Portfolio

Retail 1,062

Unibail-Rodamco has sold six French shopping centres to Dutch-listed Wereldhave for €850m for a net initial yield of 5.5%. The deal is Wereldhave's largest ever acquisition. Located in Rouen, Bordeaux, Strasbourg, Le Havre and the Paris suburb of Argenteuil, the centres have an average size of 33,750 sq m, an average annual footfall of 7 million visitors and an occupancy rate of 91%.

Germany Frankfurt PalaisQuartier Mixed c. 1,000

JLL has advised Rabo Real Estate on the sale of the PalaisQuartier complex for circa €800m. The buyer was Deutsche AWM (90%) in a joint venture with ECE (10%). PalaisQuartier offers 115,000 sq m of space in four buildings - the 43,800 sq m MyZeil mall which ECE will manage; the 33,790 sq m Nextower office high-rise; the 218-room six-star Jumeirah Frankfurt hotel; and the reconstructed Thurn und Taxis Palais event venue. The vacant land component, known as the Rundschau site, has been sold to construction group Strabag for development.

Germany Frankfurt Silver Tower Office c. 560

IVG Institutional Funds has sold the Silver Tower to a consortium led by Korea's Samsung SRA Asset Management for circa €450m. Hines acted as investment manager for Samsung and will provide asset management for the property. The 50,000 sq m property in central Frankfurt is let to Deutsche Bahn and its in-house IT service provider DB Systel. The transaction also included the adjacent Executive Headquarters building with an area of 22,000 sq m, also fully let to Deutsche Bahn.

Italy Rome RomaEst Retail 250

GIC has acquired the remaining 50% share it did not already own in the RomaEst shopping centre from CBRE Global Investors for a price reported to be around €200m. RomaEst, located about 14 km to the east of the city centre, comprises c. 100,000 sq m of gross lettable area spread over more than 210 retail units, as well as a hypermarket and a cinema.

Netherlands Multiple Project 14 Retail 300

CBRE Global Investors has sold 14 retail assets on behalf of the CBRE Dutch Retail Funds to Blackstone Real Estate Partners Europe IV for c. €240m; the assets will be added to Blackstone’s European retail platform, Multi Corporation. The properties in the 107,500 sq m portfolio are located in city centres and residential areas across the Netherlands including Nootdorp, Utrecht and Leusden, while anchor retailers include Ahold, Blokker and H&M.

Poland Warsaw Plac Unii Office & Retail

282

Invesco Real Estate has bought the Plac Unii complex for €226m on behalf of two German pension funds. The sellers were Belgium-based Liebrecht & Wood and Polish listed BBI. Located on the fringe of Warsaw’s CBD, the 56,800 sq m scheme comprises 41,300 sq m of office space and a 15,500 sq m shopping gallery. Tenants include ING Bank and Dalkia as well as H&M, Inditex and Cubus.

Spain Zaragoza Puerto Venecia, 7 Travesía Jardines Reales

Retail 563

Intu has acquired the Puerto Venecia shopping centre and retail park for €451m. The vendor was Orion's European Real Estate Fund III. While the centre and retail park provide a trading area of 200,000 sq m, this transaction involves around 120,000 sq m, with the remaining area owner-occupied, including sites sold to Ikea, Leroy Merlin, Porcelanosa, El Corte Ingles and Hipercor.

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Country City Property Sector

Sales price

US$m Comments

UK Edinburgh Radisson Blu Hotel

Hotels 99 On behalf of Deloitte Real Estate, JLL has advised on the sale of the 238-room Radisson Blu Hotel to Deka Immobilien Investment GmbH for £63m.

UK London HSBC Tower, 8-16 Canada Square

Office 1,741

JLL has advised Korea’s National Pension Service on the sale of HSBC Tower in Canary Wharf. These are HSBC's Global Headquarters, let to the bank for another 13 years. The purchaser, Qatar Investment Authority, paid circa £1.1bn for the 1.1 million sq ft building.

UK London 30 St. Mary Axe Office 1,148

Brazilian banking billionaire Joseph Safra has bought ‘The Gherkin' office building in the City of London for circa £725m. The building was placed in receivership in April after banking covenants were breached on Swiss franc financing raised by its owners, German-owned IVG Funds and UK's Evans Randall.

UK London The Savoy Hotel - 50% stake

Hotels 352

Lloyds Banking Group has sold its 50% stake in The Savoy, a Fairmont-managed Hotel, for an estimated £220m. A joint venture led by Katara Hospitality, controlled by the Qatari government and Fairmont, has acquired the stake in the luxury 268-bed hotel on The Strand.

UK Multiple De Vere Village Portfolio

Hotels 788 US-based investor KSL Capital Partners has acquired the mid-market Village hotel chain, comprising 25 properties and three under construction, from De Vere for a reported £485m.

Asia Pacific

Country City Property Sector

Sales

price

US$m Comments

Australia Brisbane Mt Ommaney Shopping Centre

Retail 356 Mt Ommaney Shopping Centre, sold by AMP Capital, has been acquired by a joint venture between Federation Centres (25%) and US-based TIAA Henderson Real Estate (75%). The purchase marks TIAA Henderson Real Estate’s first foray into retail property in Australia.

Australia Sydney Gold Fields House Office 363 Stichting Pensioenfonds ABP and Valad Property Group have sold Gold Fields House to China's Dalian Wanda Group. The property has significant redevelopment potential and will be redeveloped into prime waterfront apartments.

Australia Sydney 175 Liverpool Street Office 333

Hong Kong-listed Shimao Property Holdings has bought this CBD office building with apartment and hotel conversion potential. It is thought that the group aims to hold the building as an investment for a decade before undertaking any redevelopment. It was sold by Singaporean investment giant GIC.

Australia Sydney Sheraton on the Park Hotels 398

One of Australia's largest trophy hotels, the five-star Sheraton on the Park, has been sold to China-based Sunshine Insurance Group Corporation. The transaction sets a new record for the largest single hotel asset sale in Australia. JLL advised the seller, Sheraton on the Park Pty Ltd.

China Beijing EC Mall Retail 390 South Korea’s National Pension Service and its private equity partner The Carlyle Group have bought the renowned shopping centre EC Mall. The pair saw off a number of competing entities for the deal, including ARA Asset Management and Macquarie.

China Beijing Sino Ocean Land Z6 Development Strata Floors

Office Confidential HSBC has acquired 25,000 sq m of office space in this iconic tower currently under construction. This forward purchase will be the new HSBC HQ in North China.

China Guangzhou Hilton Guangzhou Tianhe

Hotels 275 Talent Property Group Ltd has agreed to dispose of the Hilton Guangzhou Tianhe, a five-star luxury hotel, to Jinyingfeng Equity Investment Fund (Shenzhen) Co., Ltd.

China Multiple Suning Retail Portfolio Retail 652 Suning Commerce Group, China's biggest appliance retailer, has sold a portfolio of 11 stores to CITIC Securities' real estate investment trust.

China Shanghai Harbour Ring Plaza & Harbour Ring Huangpu Centre

Office 494 China Oceanwide, a listed real estate investment firm belonging to Chinese billionaire Lu Zhiqiang, has agreed to buy Hutchison Whampoa's 71.36 percent stake in Hutchison Harbour Ring Ltd., the owner of Harbour Ring Huangpu Centre and Harbour Ring Plaza.

Japan Tokyo Pacific Century Place Marunouchi

Office 1,479 GIC, Singapore’s sovereign wealth fund, has acquired the office component of Pacific Century Place Marunouchi from Secured Capital. This is a 32-storey mixed-use development located in Tokyo's prime business district.

Japan Tokyo Mizuho Bank HQ Building

Office 1,383

Mitsubishi Estate Co. Ltd., one of Japan's largest property developers, has agreed to sell this 41-year-old office building back to Mizuho Financial Group. Mitsubishi had bought the 15-storey property from Mizuho in 2003 for an undisclosed sum. The property will be redeveloped along with neighbouring buildings.

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Japan Tokyo Garden City Shinagawa Gotenyama

Office 345 Sekisui House REIT, Inc. has entered into a purchase and sale contract to acquire Garden City Shinagawa Gotenyama from Sekisui House Ltd.

Japan Tokyo Kioicho Building Office 298 Mori Trust Sogo REIT, Inc. has acquired a partial stake in Kioicho Building from ORIX Real Estate and Angelo, Gordon International, strengthening its investments in central Tokyo.

Japan Tokyo Best Western Shinjuku Astina Hotel

Hotels 74 The 206-room Best Western Shinjuku Astina Hotel in Tokyo has been acquired by Ascott International Management Japan Co. Ltd from Japan-based Kabushiki Kaisha Oumi.

New Zealand

Auckland Westfield Shopping Centre Porfolio

Retail 772

GIC has entered into a joint venture with Scentre Group, the largest shopping centre operator in New Zealand, to buy five shopping centres. GIC will own a 49 percent interest in Westfield Albany, Westfield Manukau, Westfield Newmarket, Westfield Riccarton and Westfield St Lukes.

South Korea

Seoul Autoway Tower Office 284 SK Networks Co. Ltd. has sold Autoway Tower to Aegis Private Real Estate Investment Trust No. 35.

South Korea

Seoul Jeong Dong Building Office 255 The Jeong Dong Building in Jung District has been sold to IGIS Asset Management. The vendor, Samsung SRA Asset Management, which bought the building in March 2010 for 178 billion won, will realise a profit of nearly 100 billion won after only five years.

South Korea

Seoul YTN Tower Office 213 Owner-occupier YTN has sold a 20-storey building near Seoul Station to a newly established REIT. The REIT has been organised by investors including MetLife and NH Nonghyup Life, as well as KB Real Estate Trust.

Thailand Krabi Outrigger Phi Phi Island Resort

Hotels 84 Property fund MFC Amazing A-la Andaman, which acquired the resort in late 2011 and rebranded it as Outrigger, has now sold it to a local Thai property company.

Americas

Country City Property Sector

Sales

price

US$ m Comments

Brazil Rio de Janeiro Rio de Janeiro Office Portfolio

Office 275

Listed property trust Patria Real Estate III - Fundo de Investimento em Participações has acquired the four-building office portfolio comprising approximately 53,000 sq m from Opportunity Fundo de Investimento Imobiliário pension fund.

Canada Montreal Bell Canada Campus

Office 303 A joint venture of South Korean-based insurance companies and an asset manager consisting of IGIS, Hanwha Life and Kyobo Life purchased the circa 84,000 sq m office asset from Germany-based KanAm Group in October.

Canada Montreal Centre Rockland Retail 239 Publicly-traded Cominar REIT acquired the more than 60,000 sq m retail property on Chemin Rockland in the Mont Royal neighbourhood in October from public pension plan fund manager Caisse de dépôt.

Canada Toronto Pickering Warehouse

Industrial 72 A joint venture of Choice Properties REIT and Loblaw Properties Ltd. acquired the nearly 86,000 sq m warehouse in Toronto's Pickering district in November at a reported 6.5% initial yield.

Mexico Mexico City Democracias116 Industrial 43 Administración Inmobiliaria HL bought the 12,000 sq m industrial asset from Olmarg, S.A. de C.V. in November.

US Fort Lauderdale The Westin Fort Lauderdale Beach Resort

Hotels 149 JLL has advised Starwood Capital Group on the sale of the Westin Beach Resort. Acquired by DiamondRock Hospitality Company, the 432-room resort will remain a Westin and be managed by HEI Hotels & Resorts.

US Honolulu Town Center of Mililani

Retail 227 Life insurance firm MetLife purchased the circa 42,000 sq m shopping centre located in central Oahu from institutional investor TIAA-CREF in December.

US Houston Lakes on Post Oak - 3000

Office 170 South Korea-based FG Asset Management has bought the approximately 41,000 sq m office property at a reported 5.5% initial yield from Five Mile Capital Partners.

US Multiple NorthStar 52-Hotel Portfolio

Hotels 1,100

NorthStar Realty Finance Corp. in a joint venture with Chatham Lodging Trust has acquired a hotel portfolio from Inland American Real Estate Trust. The portfolio includes 52 upscale extended-stay and select-service hotels comprising approximately 7,000 rooms.

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US Multiple Hyatt Upscale Select-Service Portfolio

Hotels 590

JLL has advised Hyatt Hotels Corporation on the sale of several dozen Hyatt-branded select-service assets in numerous markets across the U.S. to a company organised by Lone Star Funds. The overall portfolio also includes several assets not handled by JLL.

US New York 1470 Broadway Office 605 Private equity giant Blackstone purchased the circa 56,000 sq m office property from REIT Vornado Realty Trust in December.

US New York Residence Inn New York World Trade Center

Hotels 151

The Premier Group has acquired the Residence Inn World Trade Center from The Carlyle Group, Crown Acquisitions and Highgate Hotels. The 18-storey property was recently converted into a 228-room hotel from an office building. JLL advised The Carlyle Group on this transaction.

US Salt Lake City South Towne Center

Retail 205 Retail REIT Macerich has sold this approximately 119,000 sq m retail asset located in the Salt Lake City suburb of Sandy to Goldman Sachs.

US Silicon Valley Caribbean Corporate Center

Industrial 98 U.S. REIT Kilroy Realty Corp. has purchased this nearly 24,000 sq m flex asset in Sunnyvale from DivcoWest at a reported 6.5% initial yield.

US Washington DC PNC Place Office 392 PNC Financial Services has sold the nearly 34,000 sq m downtown office property to Norway's Norges Bank Investment Management for a historical record price per sq m for the Washington DC office market.

US West Palm Beach Downtown at the Gardens

Retail 142 REIT Excel Trust Inc. acquired the circa 33,000 sq m retail property in Palm Beach Gardens from BECO Management during October.

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015.

This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from

the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015.

This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report