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GLOBAL MARKET PERSPECTIVE Global Foresight Series 2013

COPYRIGHT © JONES LANG LASALLE IP, INC. 2013. All Rights Reserved

Global Market Perspective First Quarter 2013

COPYRIGHT © JONES LANG LASALLE IP, INC. 2013. All Rights Reserved 2

Global Market Perspective, First Quarter 2013

Global Market Perspective First Quarter 2013

Optimism returns to the global real estate market The global real estate market steps into 2013 with a more confident stride. An exceptional rally in the final quarter of 2012 has served to demonstrate the strength of investors’ appetite for commercial property. The search for yield in a low interest rate environment, combined with a perceived reduction in macro-economic risks and a selective improvement in debt markets, is supporting increasing investor activity. In this context, we expect investment volumes to grow in 2013 by a further 10-15% on 2012 levels, with upside potential in the best secondary markets, which are now beginning to attract investor interest with their more attractive yields.

The leasing markets have been less resilient however, as corporates focus on productivity gains and cost savings, rather than on expansion. But even here, we detect an improvement in optimism, which should translate into renewed growth in leasing activity during 2013, with momentum gathering pace during the second half of the year. Prime rents are projected to increase modestly, by an average of 2-3% in 2013, but given shortages of high-quality space and low levels of new construction pipeline, even a modest uptick in absorption above our baseline projections could trigger rental spikes in some markets.

The key highlights from the First Quarter 2013 Global Market Perspective are:

• Economy: The global economy begins to stir; major macro-economic risks appear to be receding.

• Investment Volumes: An exceptional Q4 pushes 2012 volumes to US$443 billion, exceeding 2011 levels.

• Capital Markets Outlook: Global volumes set to approach US$500 billion in 2013. Strongest upside in the Americas (+15-20%) and Asia Pacific (+15%). Volumes in Europe likely to be similar to 2012.

• CMBS: U.S. CMBS market registers solid growth.

• Corporate: Leasing markets still subdued. Office volumes down circa 20% year-on-year in 2012.

• Leasing Market Outlook: Office leasing volumes projected to show modest <5% growth in 2013 with momentum building during the second half of the year as confidence improves.

• Vacancy: Global office vacancy stable at 13.2%. Rate expected to edge below 13% by year-end.

• Construction: New office construction well below long-term trend despite 28% projected increase in 2013.

• Rents: Office rental growth slows to 1.5% in 2012 (across 90 markets). Circa 2-3% growth projected for 2013.

• Yields: Strong investor interest in core product in top-tier markets maintains prime yields.

• Retail: International retailers target emerging markets and key gateway cities. Istanbul, Moscow and Beijing record strong prime rental growth.

• Industrial: U.S. market strengthens and construction returns. Demand in Europe underpinned by supply-chain realignment. Retail sales growth boosts Asian markets; export-related sector show initial signs of recovery.

• Hotels: Global hotel investment volumes exceed expectations at US$32 billion in 2012; similar levels projected for 2013. The U.S. experiences strongest quarterly hotel transaction volumes since 2007.

• Residential: U.S. multi-family rental market remains resilient. Tightening measures slow sales and price growth in several major Asian cities. International investors target major global hubs such as London.



Global Market Perspective

Contents

Global Economy ................................................................................................................................................................ 4 Global Property ................................................................................................................................................................. 6 Capital Markets Outlook ...................................................................................................................................................... 7 Leasing Markets Outlook .................................................................................................................................................... 8 Global Real Estate Health Monitor ................................................................................................................................. 10 Real Estate Capital .......................................................................................................................................................... 11 Corporate Occupiers ...................................................................................................................................................... 16 Office Markets ................................................................................................................................................................. 18 Office Demand Dynamics ................................................................................................................................................. 18 Office Supply Trends ......................................................................................................................................................... 20 Office Rental Trends ......................................................................................................................................................... 22 Office Capital Values and Yield Trends............................................................................................................................. 24 Retail Markets .................................................................................................................................................................. 25 Industrial Warehousing Markets .................................................................................................................................... 27 Hotel Markets ................................................................................................................................................................... 28 Residential Markets ........................................................................................................................................................ 31 Recent Key Transactions ............................................................................................................................................... 32



Global Economy

Global economy stirs again

The economic gloom of the last 12 months or more appears to be lifting. The most obvious sign of revival has been the rally in equity markets, with some bourses touching their highest levels since 2008. A last-minute New Year tax agreement in the U.S. has helped spur the rise - although it gives only temporary respite on the ‘fiscal cliff’ - and this has been reinforced by more encouraging economic news. In China, evidence is growing that the recent slowdown was a temporary pause and that the economy is gaining momentum again.

Even the Eurozone, which has presented the gravest threat to the global outlook over the last two years, looks to be ‘on the mend’. Economic data continue to be downbeat, but the evidence from bond spreads is that the threat of a currency break-up is steadily receding. The Eurozone is certainly not ‘out of the woods’ and many debtor nations face another challenging year. But, while caution is still in order and any improvement will be slow, the major event risks seem to be reducing and conditions are falling into place for recovery.

Any tentative revival will be slow to feed into the hard data, but the latest IHS Global Insight forecasts are slightly more upbeat than three months ago. Expectations for this year have since been upgraded across Asia and Europe. The main cloud on the horizon is the sharp downward revision to the outlook for Japan since October 2012, as its economy struggles to sustain momentum in consumer and export growth.

GDP Projections 2013 in Major Economies – Recent Movements

Australia China France Germany India Japan UK USA

October 2012 2.1 7.6 -0.2 0.6 5.7 1.1 0.9 1.8

January 2013 (Latest) 2.4 8.0 -0.1 0.9 6.6 0.0 0.9 1.7

Change (bps) +30 +40 +10 +30 +90 -110 0 -10 Source: IHS Global Insight, January 2013

Pace of recovery likely to be slow over the next 12 months

Many developed economies ended 2012 close to or in recession and a rapid turnaround is not expected in early 2013. Even if the positive trends are upheld, rates of growth in 2013 as a whole will remain well below historic norms. The lingering concern for governments in the developed world will be how to foster a self-sustaining revival. In 2009-2010 these economies appeared to be emerging from their deep trough and hopes were high of a return to more normal expansion. However, demand evaporated in 2011 as the crisis in the Eurozone and tighter policy conditions halted the recovery in its tracks.

Why should the upturn be different this time? In 2011, central banks were poised to raise interest rates in many markets, as inflation was high and rising. This time, any monetary response is likely to be far more cautious, with some looking to follow the Fed’s line and commit to holding rates low for several years. There is also a view that fiscal policy was tightened far too aggressively in 2010-2011, especially in Europe, and that such austerity was counter-productive. There is now even less scope for stimulus with public debt levels still spiralling, but, as with the U.S. ‘fiscal cliff’, it is hoped that governments will tread carefully and delay tough adjustments until the upturn is well established.

Even if these policy mistakes are avoided and recovery is secured, polarisation will remain a key feature of the outlook, as the legacy of the Global Financial Crisis (GFC) weighs more heavily in some regions. In particular, a lasting consequence of the Eurozone crisis will be slower growth over the longer term. This is, in part, the cost of avoiding a break-up, as the core economies will demand further austerity from those that are ‘fringe’ which, in turn, will limit growth across the whole single currency area.



Emerging markets continue to provide dynamism

As noted, the legacy of the GFC will continue to weigh on activity in the developed world, with the growth gap with the emerging economies set to remain marked. Overall, global GDP is expected to increase by around 2.5% in 2013 but with developed economies projected to contribute just 1.0% - a slight reduction on 2012. Prospects for emerging markets are forecast to improve moderately, edging up to 5.1% in 2013, which is still below par for these economies. The growth gap closes slowly thereafter, a result of better performance in the developed world.

After a dip in mid-2012, activity indicators for the United States have picked up marginally. Forecasts for 2013 have remained broadly steady at just under 2%, which implies yet another year of below-trend GDP growth. But further monetary operations by the Fed appear to be aiding the recovery, while the uncertainty over fiscal policy has been reduced by the recent tax deal. Provided there is a further compromise on government spending, there may be upside potential later in 2013. Elsewhere in the Americas, GDP growth rates have been stronger in general, but dipped last year as world trade slowed. Rates are expected to rise again as commodity exports recover in 2013.

The financial strains within the Eurozone’s sovereign debt crisis appear to be easing. The economic outlook is also somewhat better than three months ago, albeit that output is still set to contract this year, with a wide divergence between the austerity-hit ‘South’ (still in recession) and the ‘Core’ (with slow but positive growth). Elsewhere in the region, prospects are slightly healthier on average. The UK is forecast to see GDP growth improve to 0.9% in 2013, as the headwinds of fiscal austerity and weak consumer incomes begin to calm. The Nordic economies were more resilient than most last year, but will remain impacted by Eurozone sluggishness and show growth of 1.0-1.5% in 2013.

In Eastern Europe, the picture is more positive than in the west. Even so, being most exposed to Eurozone trade, the growth prospects in the CEE economies are mixed. Poland’s continued slowdown is expected to take its expansion to a two-decade low in 2013, though overall there are better signs with the Czech Republic, Romania and even Hungary improving on 2012. However, the oil-rich CIS states remain more robust, driven by further vigorous growth in Russia. By contrast, in the Middle East and North Africa the outlook is expected to be more subdued than in 2012, with political uncertainties clouding prospects, although Dubai continues to benefit as a ‘safe-haven’.

Reinvigorated Asia Pacific markets will lead global growth trends again this year. In China, last year’s worrying deceleration is being reversed. Although the consumer-led pick-up in 2013 remains unspectacular by historic standards, it provides an important fillip for the global economy by ending speculation about a ‘hard landing’. India’s prospects have also brightened. Growth slowed to its lowest rate since the global slump of 2008 last year, but domestic reform and stronger consumer and export demand are set to lead a turnaround in the next 12 months. Japan’s fortunes are less good with growth projected to be flat as the economy continues to struggle to sustain a recovery after the disruptions of the 2011 tsunami.

Inflation concerns ease

Headline inflation rates eased across the globe last year, allowing policy-makers to reduce interest rates. The downward trend was most marked in the emerging world. For the developed economies, stubborn energy price pressures slowed progress, in spite of weak demand and subdued costs. Brent crude oil prices have kept below their US$125pb peak of early 2012 but, after a summer dip, have moved back above the US$110pb level. Political tensions and emerging market demand explain the continued buoyancy.

This year, annual consumer price inflation is forecast to fall below 1.5% in the developed world. This is the most subdued rate seen since 2009 and would be consistent with most central bank policy aims. In emerging markets, domestic demand pressures remain more significant and a slight upturn is in prospect, though not enough to reverse the downward trend in interest rates seen over recent months. Overall, global inflation rates have slipped to 3% year-on-year, a significant improvement from the highs of 2011.



Global Property Confidence builds

The global real estate market continues to move forward, and better-than-expected results in the final quarter of 2012 demonstrate renewed impetus in the investment market. At between US$450-500 billion in 2013, we anticipate that investment volumes will be at their highest level since 2007. While leasing markets are less resilient, improving business confidence could translate into higher volumes in the second half of the year. Supply is largely under control and, with shortages of high-quality space, rental spikes could appear in some markets later in the year and into 2014. Greatest upside potential is offered by U.S. markets, while austerity measures will constrain recovery across parts of Europe.

Prime Offices - Capital Value Clock, Q4 2011 v Q4 2012

Prime Offices - Rental Clock, Q4 2011 v Q4 2012

Based on notional capital values and rents for Grade A space in CBD or equivalent. US positions relate to the overall market. Source: Jones Lang LaSalle, January 2013

Capital value growth slowing

Capital value growth

accelerating

Capital values bottoming out

Capital values falling

Tokyo, Brussels

Mumbai

Beijing, Stockholm,Boston

Shanghai, Washington DC, London

Singapore, Amsterdam

Hong Kong

Madrid, Seoul

Los Angeles, Houston, Frankfurt

Berlin, Moscow

ParisMilan, New York

Sydney

Dallas

Toronto

Mexico City

Chicago, San Francisco, Sao Paulo,

Capital value growth slowing

Capital value growth

accelerating

Capital values bottoming out

Capital values falling

Sao Paulo

Dallas

Mexico City, Sydney

Washington DCToronto

HoustonSan Francisco

Hong Kong, Singapore, Paris

Mumbai

TokyoSeoul, Brussels

Milan

Madrid

Frankfurt

Moscow

BerlinStockholm

New York, Boston, Chicago Los Angeles, Shanghai, Beijing Amsterdam

London

Americas EMEA Asia Pacific

Q4 2011 Q4 2012

Rental value growth slowing

Rental value growth

accelerating

Rental values bottoming out

Rental values falling

Dubai

San FranciscoBerlin

Dallas, New York, Boston

Washington DC Johannesburg, Frankfurt, Istanbul

Tokyo Chicago

Los AngelesAmsterdam, Madrid

Shanghai

SingaporeHong Kong

Seoul Mexico City

Brussels

Stockholm, Sao Paulo

Moscow

London, Paris

Sydney

Milan

Beijing, Toronto

Mumbai

Houston

Rental value growth slowing

Rental value growth

accelerating

Rental values bottoming out

Rental values fallingToronto

New YorkMumbai

JohannesburgIstanbul

Dallas, London

Chicago, BrusselsDubai, Frankfurt

Washington DC

Los Angeles,TokyoMexico City

Sao Paulo Stockholm

Sydney,Moscow

Houston

Boston

Hong Kong Singapore

Madrid

Shanghai, Beijing Amsterdam, Paris

MilanBerlin

San Francisco

Seoul

Q4 2011 Q4 2012




Capital Markets Outlook Volumes in 2013 set to approach US$500 billion after momentum-building end to 2012

Despite investment volumes in 2012 only slightly exceeding those of 2011 (by 2%), we are confident that the year-on-year growth recorded since the end of 2009 can be maintained into 2013. In fact we think that the structural shift evident in many of the deals in 2012 will be sustained and built on during 2013 and beyond. Pension, sovereign wealth, high-net-worth individuals and private equity are all devoting extra resources and allocating more capital to real estate1. Many of the largest deals of last year involved these funds either acting alone or in partnership to secure major assets globally.

On the cyclical side, while we have seen a large amount of capital devoted to fixed income over the last three years, the prospect of rising rates may start to encourage investors to shift allocations into real estate from other asset classes. As such we believe we will witness between a 10-15% upside in 2013 with global volumes at US$450-500 billion.

Greatest upside potential in the Americas

The Americas offers strongest upside potential, with the U.S. commercial real estate sector appearing increasingly well positioned over the 2013-2014 period to attract increasing investment. As a baseline projection for 2013, overall Americas regional transaction volumes are expected to increase by 15-20%. In Europe, we anticipate that this year will see a similar level of investor activity to last year but with upside potential, particularly from the secondary markets, which are starting to see greater investor interest given their more attractive yields. Investment volumes in Asia Pacific are forecast to increase by around 15%, with Asian sovereign wealth funds and pension funds deploying more capital in their home region.

Direct Commercial Real Estate Investment, 2006-2013

Source: Jones Lang LaSalle, January 2013

1 The Advancement of Real Estate as a Global Asset Class, Jones Lang LaSalle 2013

0

100

200

300

400

500

600

700

800

Americas EMEA Asia Pacific Global

US$

billio

ns

2006 2007 2008 2009 2010 2011 2012 2013 (F)

+15-20%-5%

+15%

+10-15%



Leasing Markets Outlook Leasing activity subdued, but optimism increases

Office leasing activity has remained muted as companies focus on workspace productivity and upgrading rather than expansion. Nonetheless, there are signs that business optimism is returning, and this is likely to feed through to an increase in leasing volumes later in the year, following a probable slow start to 2013.

2013 global leasing volumes are expected to rise modestly (<5%) on 2012 levels, with the second half of the year projected to be stronger than the first half. Volumes in the U.S. are forecast to grow marginally - from 0-5% - with recovery likely to be more diversified (by geography and grade) than in 2012. In Europe, leasing activity is predicted to be flat in 2013, while Asia Pacific is expected to register a 5-10% fall in volumes. Grade A buildings will continue to be the overwhelming focus of demand.

Corporate ‘rightsizing’

One challenge that many mature office markets will still face in 2013 is contraction among some of the largest, most traditional office-using sectors. In the mature markets, the footprints of many banks, law, accounting and consulting firms are shrinking as an emphasis on efficiency and productivity has gained further traction. This ‘rightsizing’ trend is likely to remain in place over the medium term. Another impediment to a more vigorous expansion in the office sector is that record corporate profits and ‘cash in hand’ are still not being reinvested with a longer-term, growth-oriented view. Corporate innovation is currently focused on much shorter-horizon efficiency and cost-saving measures that reduce the need for additional office space.

Global vacancy trending downwards

The global office vacancy rate, which now stands at 13.2%, is expected to edge down further in 2013 to 12.9% by the end of the year, with the largest falls likely in the U.S. The decline in vacancy will be supported by continued low levels of new supply; while global office completions are forecast to rise by nearly a third in 2013 (on 2012 levels), they will remain well below the long-term trend during 2013 and 2014.

Grade A space will see tighter conditions in 2013 in many markets. Shortages of large-block and high-quality space will become more intense, and tenants in this part of the market will find it increasingly difficult to gain leverage in 2013 and 2014.

Prime rents growing by 2-3%

Prime rental growth in 2013 is forecast to match 2012 rates at around 2-3% (across 24 cities), with the majority of major markets projected to register single-digit rental growth over the next year. San Francisco is expected to show the strongest rental performance in 2013 at over 10%. Hong Kong, Tokyo and London are also forecast to register rental growth above the global average (5-10%). Of the major markets, Madrid is likely to see the largest rental decline in 2013, while the two main LATAM markets – Sao Paulo and Mexico City – are also predicted to be in negative territory, albeit marginally (by up to -5%). With signs of increasing activity in the Dubai leasing market, prime rental growth is anticipated to return for the first time in five years in 2013.



Prime Offices – Projected Value Changes in 2013

* New York – Midtown, London – West End, Paris - CBD. Nominal rates in local currency. Source: Jones Lang LaSalle, January 2013

Global Office Construction Trends, 2000-2014

24 markets in Europe; 25 markets in Asia Pacific; 44 markets in the US. Asia relates to Grade A space only. Source: Jones Lang LaSalle, January 2013

+ 10-20%

+ 5-10%

+ 0-5%

- 0-5%

- 5-10%

Hong Kong, Tokyo, London*

Beijing, Shanghai, Singapore, Sydney, MumbaiBoston, Chicago, Los Angeles, New York* Toronto, Washington DC, Paris*Frankfurt, Stockholm, Brussels, Moscow, Dubai

Hong Kong, Tokyo, Sydney Moscow, London*

Beijing, Shanghai, Singapore, MumbaiBoston, Chicago, Los Angeles, New York*Toronto, Washington DCFrankfurt, Brussels, Dubai

Madrid

Paris*, StockholmSao Paulo, Mexico City

Madrid

San Francisco

Sao Paulo, Mexico City

San Francisco

Capital ValuesRental Values

0

5

10

15

20

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013 (F)

2014 (F)

US Europe Asia Pacific

millio

ns sq

m

Average



Global Real Estate Health Monitor

Economy Real Estate Investment Markets Real Estate Occupier Markets

National GDP

OECD Leading

Indicator

National Investment

Volumes

Capital Value

Change Prime Yield Yield Gap

Rental Change

Net Absorption

Vacancy Rate

Supply Pipeline

Dubai 2.2% na 302% 0.0% 8.3% na 0.0% 4.9% 31.0% 20.3%

Frankfurt 0.9% 0.07 -1% 0.0% 4.8% 350 0.0% 2.1% 11.9% 3.6%

Hong Kong 3.7% na 2% 2.0% 3.0% 232 -11.1% 1.9% 3.8% 2.8%

London 0.9% 0.20 -1% 0.0% 4.0% 219 0.0% 0.5% 6.1% 7.2%

Moscow 3.4% -0.23 -7% -4.2% 9.0% 215 -4.2% 5.7% 13.5% 15.7%

Mumbai 6.6% 0.13 70% 2.7% 10.1% 205 1.9% 9.9% 24.1% 17.7%

New York 1.7% 0.11 11% -6.0% 4.7% 295 2.8% -0.8% 11.2% 1.8%

Paris -0.1% 0.02 -8% -2.1% 4.5% 251 -7.2% 1.1% 6.8% 3.7%

Sao Paulo 3.0% 0.01 -36% 26.4% 9.5% na 20.1% 8.6% 15.0% 31.9%

Shanghai 8.0% 0.21 -26% 0.4% 6.0% 238 2.2% 13.9% 13.9% 38.1%

Singapore 2.7% na -8% 0.8% 3.4% 214 -9.8% 8.3% 8.4% 7.0%

Sydney 2.4% -0.06 6% 2.5% 6.9% 359 -1.8% 0.7% 8.9% 1.6%

Tokyo 0.0% 0.00 6% 2.8% 3.6% 281 2.8% 6.9% 4.1% 15.5% Real estate data as at end Q4 2012

Definitions and Sources

National GDP: Change in Real GDP. National Projection, 2013. Source: IHS Global Insight

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

National Investment Volumes: Direct Commercial Real Estate Volumes. National Data. Rolling Annual Change. Source: Jones Lang LaSalle

Capital Value Change: Notional Prime Office Capital Values. Year-on-Year Change. Latest Quarter. Source: Jones Lang LaSalle

Prime Yield: Indicative Yield on Prime/Grade A Offices. Latest Quarter. Source: Jones Lang LaSalle

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

Rental Change: Prime Office Rents. Year-on-Year Change. Latest Quarter. Source: Jones Lang LaSalle

Net Absorption: Annual Net Absorption as % of Occupied Office Stock. Rolling Annual. Source: Jones Lang LaSalle

Vacancy Rate: Metro Area Office Vacancy Rate. Latest Quarter. Source: Jones Lang LaSalle

Supply Pipeline: Metro Area Office Completions (2013-2014) as % of Existing Stock. Source: Jones Lang LaSalle



Real Estate Capital

Exceptional end to 2012 pushes volumes higher than 2011

Throughout 2012 we had been forecasting full-year volumes to be around the US$400 billion mark, about 10% less than 2011, and for three-quarters of the year we were on track, with volumes averaging US$100 billion per quarter. However, we underestimated the strength of pent-up demand in Europe and the Americas, and the implications of the ‘fiscal cliff’ debate on transactional activity in the U.S. Consequently, Q4 2012 volumes came in at US$147 billion, a 47% increase on Q3 and 24% higher than the same period last year. This resulted in full-year volumes of US$443 billion, fractionally ahead of the US$435 billion achieved in 2011 but 38% higher than the US$321 billion recorded in 2010.

Direct Commercial Real Estate Investment - Quarterly Trends, 2007-2012


U.S. capital markets shift up a gear

The Americas sales transaction volumes finished 2012 on a strong note, with Q4 volumes reaching US$64 billion, up 40% year-on-year. This pushed full-year volumes to US$190 billion, an 11% increase on 2011. Key to the region’s strong performance in 2012 was the continued liquidity improvements in U.S. lending markets. Q4 volumes in the U.S. reached US$56 billion, the first time they have crossed the US$50 billion mark since Q3 2007. Volumes were higher than would have otherwise been expected due to sellers being motivated to close transactions prior to increases in capital gains tax.

Expanding CMBS market

Capital providers such as life insurance companies and U.S. banks currently remain active in primary markets and CMBS is helping to fill the funding gap, particularly in secondary and tertiary markets. Balance sheet lenders are expected to increase allocations to the sector by a moderate amount in 2013. Meanwhile, the CMBS market in particular had a better-than-expected showing in 2012. New bond issuance for the year totalled US$48 billion, an increase of 45% over 2011 levels. The market is widely anticipated to continue to expand in 2013, and the year is beginning on a solid

0

30

60

90

120

150

180

210

240

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Americas EMEA Asia Pacific Rolling Four-Quarters Average

US$ b

illion

s

205

107109100

113

7369666666

100

118120

159

204190

119

88107 100

147

40 4335



footing with first quarter pipeline estimates of approximately US$20 billion as of mid-January. While many regional and local banks are still, in large part, absent from secondary and tertiary market commercial property lending (due to lingering portfolio issues from the recession), private financial firms are eyeing this opportunity in the banks’ absence.

Americas – expect 15-20% uplift in 2013

For 2013, total transaction volume growth in the Americas is likely to accelerate further from the annual growth rate seen in 2012, with much of the institutional-quality asset class in the U.S. beginning to enter a ‘sweet spot’ for investors with a longer-term investment horizon:

• long-term interest rates remain exceptionally low;

• initial yield spreads over longer-maturity risk-free rates are attractive from an historical perspective;

• economic growth is poised to increase meaningfully by 2014;

• the U.S. has solid appeal on a global stage in the context of other large, mature commercial property markets; and

• a desire by institutional investors for an alternative to stocks and bonds, in particular ‘real’ assets such as commercial property, along with infrastructure, commodities and maritime shipping.

As a baseline projection for 2013, overall Americas regional transaction volume is expected to increase by up to 20%. Risks to the outlook include the potential for political brinkmanship from February through April over additional fiscal consolidation measures that could spark volatility in global financial markets. Should policymakers make a major misstep, commercial property would be negatively impacted, and transaction volumes could fall markedly in the first half of 2013. However, the more likely scenario is that dire outcomes are avoided, and that in turn a strong second half of 2013 materialises and introduces some greater upside potential to the full-year outlook.

Mexico is the growth story

Elsewhere in the Americas, Mexico and Canada both had stronger years. Mexico was the growth story of 2013 for investment activity, albeit coming off the low base of 2010-2011. Investment volumes more than tripled in 2012 to US$4.4 billion, as investors took note of the solid Mexican economy and sought higher yielding alternative investment destinations where risks were assessed to be lower. Positive trends in Mexico’s capital markets include a narrowing of the gap in buyer and seller expectations, increased financing availability at attractive rates and competitive terms, and stronger demand from domestic institutional capital as the country’s pension funds enter the market. Canada experienced a 28% uplift in transaction volumes during 2012 to reach US$15.2 billion, with public REITs dominating investment activity. In Brazil, 2012 was a year of capital markets’ adjustment as investors digested the enormous inflows and rising prices of 2010-2011. Nevertheless, the year ended with a surge in activity as deals totalled US$3.6 billion in Q4 2012, although a large industrial portfolio transaction did fuel these statistics. For the full-year, total transaction volumes reached US$6.5 billion, a decline of 36% from the record year of 2011.

Direct Commercial Real Estate Investment - Regional Volumes, 2011-2012


US$ Billions Q3 12 Q4 12% change

Q3 12-Q4 12 Q4 11% change

Q4 11-Q4 12 2011 2012% change 2011-2012

Americas 44 64 43% 45 40% 171 190 11%EMEA 33 60 81% 47 29% 166 159 -4%Asia Pacific 22 23 4% 27 -13% 98 95 -3%TOTAL 100 147 47% 119 24% 435 443 2%



European investment activity surprised on the upside in Q4

While we had been expecting a good end to the year in Europe, the desire to close deals was stronger than we anticipated and, as a result, volumes were 81% higher than Q3 at US$60 billion and up 29% on Q4 2011. On an annual basis, volumes are almost flat in euro terms (€123 billion) which is a better outcome than we forecast but 4% down in US$ terms (US$159 billion).

Despite the increased volumes in Q4 2012, the challenging debt market conditions continue to constrain the market. Little change is anticipated for 2013 but the postponement of Basel III could have a positive effect, allowing the banks greater flexibility. Limited finance has meant that the market has remained dominated by investors seeking core, low risk assets and consequently the three major markets (UK, Germany and France) were the most active in Q4 2012, accounting for more than 60% of total volumes.

The UK was once again the most liquid market in Q4 2012, primarily driven by activity in London, but Germany was a close second. More than US$13 billion (€10 billion) transacted in Germany in the final quarter, which is an increase of 66% in US$ terms in comparison with the equivalent period last year and mainly the result of the completion of several large deals.

Elsewhere, the Nordics, Poland and Russia also witnessed strong ends to the year. However, the market continued to be challenging in Southern Europe, where activity in 2012 fell by 46% year-on-year, reflecting the limited appetite from risk-averse cross-border investors and a lack of available debt.

The relatively robust end to the year demonstrates that real estate markets are well through the recovery phase of the cycle and we anticipate that 2013 will record a similar performance. Furthermore, we see some upside potential, particularly from the secondary markets, which have remained subdued since the GFC but are starting to witness greater investor interest given their more attractive yields.

Direct Commercial Real Estate Investment – Top Cities in 2012


0 5 10 15 20 25 30 35

TaipeiStockholm

HoustonTorontoBoston

ShanghaiSydney

MoscowSan Francisco

ChicagoSingapore

SeattleWashington DC

SeoulHong Kong

Los AngelesTokyoParis

New YorkLondon

AmericasEMEA

Asia Pacific

billion US$



Direct Commercial Real Estate Investment - Largest Markets, 2011-2012


A solid end to the year in Asia Pacific

Steady ‘deal flow’ saw Asia Pacific’s transactional activity increase by 4% in Q4 2012 (quarter-on-quarter) to US$23.2 billion and, for the full-year, volumes totalled US$95 billion, 3% down on 2011. Domestic investors continued to dominate activity accounting for 77% of total transactions during the quarter. Office assets were the most heavily traded, making up 56% of volumes. Major markets delivered mixed results in 2012, with falls in China (-26%) and Singapore (-8%), steady performances in Australia (+6%), Hong Kong (+2%) and Japan (+6%), and a solid improvement in South Korea (+14%).

Cross-border purchases totalled nearly US$20 billion in 2012, equivalent to 21% of all acquisitions. Australia, Japan, China and Hong Kong accounted for 80% of the region’s cross-border acquisitions, while Singapore was the source of one-third of all cross-border capital in the region.

Opportunities continue to exist for private debt funds to fill the void left from the exodus of European lenders in Asia Pacific, and senior lenders remain very competitive, with lending margins tightening over the past year. Meanwhile, banks are still cautious around the impact that Basel III regulatory changes may have on their commercial real estate portfolios.

Mixed performance by Asia Pacific’s major markets

As noted, Australia and Japan saw 6% rises in transactional activity year-on-year, with significant interest from overseas buyers. Elsewhere, South Korea’s importance within the region continues to grow with volumes in 2012 surpassing US$11 billion for the first time. Activity in South Korea was boosted by several large sale-and-leaseback transactions as corporates looked to redeploy capital to operating activities or to pay down debt. Also on the positive side, Hong Kong’s volumes were up 2%, where government ‘cooling’ measures aimed at the residential sector are driving capital into the commercial sectors, particularly into strata-retail and strata-office units. However, on the down side, Singapore recorded volumes 8% lower in 2012 as investors sought clarity on the market outlook.

$US Billions Q3 12 Q4 12% change

Q3 12 - Q4 12 Q4 11% change

Q4 11 - Q4 12 2011 2012% change 2011-2012

USA 37.3 56.0 50% 42.1 33% 147.1 163.7 11%UK 13.5 14.8 10% 12.6 17% 51.4 50.8 -1%Germany 6.2 13.5 119% 8.1 66% 31.6 31.2 -1%France 4.3 8.5 99% 9.6 -12% 22.7 20.8 -8%Sweden 1.7 6.2 259% 3.4 82% 11.5 12.4 8%South Korea 3.3 4.8 43% 3.2 50% 9.9 11.3 14%Australia 4.2 3.9 -6% 5.5 -28% 15.5 16.5 6%Japan 3.5 3.9 9% 4.0 -3% 20.1 21.3 6%Brazil 0.8 3.6 367% 0.7 399% 10.1 6.5 -36%Canada 3.8 3.3 -14% 1.8 80% 11.9 15.2 28%Hong Kong 3.1 3.2 1% 1.7 82% 11.0 11.3 2%Russia 1.4 3.1 124% 2.3 34% 7.8 7.3 -7%Singapore 2.0 2.6 29% 1.6 59% 9.2 8.4 -8%Norway 0.4 2.5 578% 1.7 48% 5.4 6.3 16%China 2.6 2.2 -15% 7.4 -70% 19.9 14.7 -26%Poland 0.2 2.1 1142% 0.7 211% 3.4 3.4 2%Switzerland 0.9 2.0 121% 0.6 253% 2.8 3.7 29%Taiwan 2.4 1.3 -45% 1.4 -5% 5.4 5.2 -4%Belgium 0.8 1.2 47% 0.8 63% 2.6 3.0 17%



The main reason for the modest overall year-on-year decline in volumes in the region was the 26% fall in volumes in China. H2 2012 volumes totalled US$4.9 billion, only half the US$9.8 billion registered in H1. Slowing investment activity was due to government ‘cooling’ measures and restrictions on financing in the second half of the year. Nonetheless, there has been an increase in interest from foreign buyers in China and, following a smooth leadership transition in late 2012, investment volumes are expected to improve in 2013.

Regulations and target allocations to real estate investment by pension funds and sovereign wealth funds from Asia continue to evolve, with many of their initial investments being outside the region. However, there is potential for these groups to deploy new capital within their domestic and regional markets in 2013. This is likely to include acquisitions by Chinese insurance firms across the region which are expected to progress following recent changes to regulations governing offshore investments that now allow insurance firms to invest in 45 countries outside of China.

Australia, in particular, is expected to see ongoing interest from offshore investors. There are also early signs of value-add and opportunistic groups seeking assets further up the risk curve in markets such as Indonesia, Vietnam and India. Notably, Japanese investors are looking increasingly at opportunities across Asia Pacific, and global funds are also returning to the region.

The policy overhang in some residential markets is pushing a number of retail investors into commercial real estate in markets like Singapore and Hong Kong – particularly strata-office and strata-retail – as well as towards residential markets outside the region (such as London). This trend is likely to continue into 2013 with no immediate signs of the policies easing.



Corporate Occupiers

Corporates are still cautious

Traditionally, corporate occupier activity rallies in the fourth quarter of the year. However, in 2012 the rally was muted and inconsistent across markets, and it is clear that annual volumes were reflective of corporate caution. For example, 2012 European office gross leasing volumes were down 9% on the previous year, while in the U.S. they were 20% lower. The bulk of occupier activity was driven by lease breaks and expiries. Furthermore, there was little evidence of transformative or expansionary demand in the markets given broad economic uncertainty and a general unwillingness from corporates to release capital expenditure. In Asia there was also a clear distinction between the local corporations who have remained active, and the Western MNCs who have been far less aggressive.

The key to increased market behaviour in 2013 will be an improvement in underlying corporate confidence. In Asia Pacific, while traditional MNCs are showing greater optimism but remain inherently cautious, the domestic Asian corporates continue to grow. In Europe confidence levels remain below long-term averages and will take a further six months to rebuild. Geographically, the world’s emerging markets are expected to see increased activity during 2013. China and India are likely to see some growth, given that both are at the bottom of their cycles and showing signs of recovering from the travails of 2012. This will serve as a catalyst for growth elsewhere in the region. In the Americas, Latin America will again prove to be ‘in focus’ for corporate seeking to grow, with Mexico poised to outperform and Brazil attempting to reverse its recent struggles.

In terms of industrial sectors, the technology sector looks as though it will continue to be a key story in 2013 as exemplified by Google ‘rubber stamping’ its 1 million square foot deal in London’s King’s Cross and Amazon posting a requirement of circa 600,000 square foot also in the London market. The technology sector is also playing an active role in the Dublin market, where LinkedIn, Dropbox and LogMeIn all made investments during 2012. Sweden is also emerging as a clear ‘hot spot’ for the sector.

Prospects for the financial services sector appear less rosy, with expectations of further headcount reductions as occupiers in the sector readjust to new realities. South East Asia is seeing activity levels increase, driven by both domestic corporations and a dynamic insurance sector. We also anticipate that the professional services sector will show more positive attributes during 2013.

The market dynamics in the developed world are dominated by the polarised supply-side situation, with a clear paucity of high-quality space and little sense of the pipeline offering any sort of respite over the medium term. As occupiers seek to build or renew platforms and drive increased portfolio productivity, even a slight upturn in activity levels will quickly thin market supply. This will create two pressures for all bar the ‘first movers’. First, it will drive stronger levels of rental growth and hence operational expenditure. Secondly, it will force those that have failed to develop, or are unable to implement real estate plans, into compromises that will either impact on operational efficiency or lead to a longer-term exposure to operational costs – something which does not chime strongly with a focus on cost avoidance rather than direct cost savings.

Five issues to watch

There are five key issues to watch out for in the occupational markets over the next 12 months:

1 Improvements in sentiment, which translate into increased levels of corporate occupier activity, particularly from H2 2013 onwards with more transformative real estate requirements coming to the fore.

2 The rise of strategic M&A activity, as corporates start to utilise their strong cash positions to build strength in core businesses and markets. This will lead to portfolio duplication that will require careful management by occupiers.

3 Selective platform building. This will have two essential characteristics. First, a further focus on emerging markets such as Africa given the growth opportunities that they present. Second, there will be growing impetus around the offshoring or near-shoring of activity. In the Americas this will lead to accelerated growth in Mexico. In EMEA this will lead to stronger interest in the second and third tier cities of Central and Eastern Europe. In Asia the focus is on China, India and the Philippines.



4 Further evolution of the CRE team mandate leading to a more empowered position, where those teams that can demonstrate their value act less as ‘order takers’ and more as ‘order makers.’

5 An intensification of the focus on workplace strategy but, in difference to 2012, this will be coupled with an ability and willingness to make the investment required to drive both transformation and increased productivity.

Global Office Market Conditions Matrix, 2013-2015

* Relates to conditions in the overall office market of a city. Conditions for prime CBD space may differ from the above. Source: Jones Lang LaSalle, January 2013

Market MARKET

Chicago Brussels Beijing

Los Angeles Frankfurt Hong Kong

New York London West End Mumbai

San Francisco Madrid Shanghai

Toronto Moscow Singapore

Washington DC Paris Sydney

Mexico City Stockholm

Sao Paulo Dubai

2013 2014 2015

Neutral MarketLandlord Favourable

Market 2013 2014 2015 Market 2013 2014 2015

Tenant Favourable

Tokyo



Office Markets

Office Demand Dynamics Leasing volumes subdued

Office leasing activity remained subdued in Q4 2012. Full-year 2012 gross leasing volumes were down by around 20% on 2011 levels, with the sharpest falls in net absorption recorded in Asia Pacific (but from record 2011 levels). As business confidence improves, volumes are expected to rise modestly (<5%) in 2013, with momentum building during the second half of the year and into 2014.

Asia Pacific – limited corporate expansion

Across Asia Pacific, expansion demand continues to be weak, with gross leasing volumes and net absorption falling by about one-third during 2012. Expansion by MNCs is still restrained in China, with slow take-up for new CBD buildings but more healthy demand for decentralised offices. In India, expansion by MNCs has been slow, however some occupiers have been keen to take advantage of affordable rents to consolidate or expand. In general, steady take-up was recorded in emerging SEA, with strong expansion demand in Jakarta. Australia is currently characterised by weak absorption.

Although corporates are generally feeling more optimistic in 2013 than in 2012, we forecast a slow start to the year. Companies are focusing on workspace productivity and upgrading rather than expansion. Regional net absorption is expected be largely similar to 2012, while gross leasing volumes may be down 5-10%. An anticipated revival in corporate demand in China and India could provide a boost for the whole region.

U.S. registers 11th consecutive quarter of occupancy gains

In the U.S., gross leasing volumes and net absorption in 2012 were down by 20% and 27% respectively. Nonetheless, the U.S. has seen 11 consecutive quarters of positive net absorption, indicating that the office market recovery remains very much intact. Most occupancy gains have been in the energy-rich and technology-heavy markets of Texas and California (60%). Recent evidence suggests that the U.S. recovery will broaden in 2013 to include more cities with higher exposure to housing-related industries and healthcare. Meanwhile, trophy and Grade A buildings will continue to be the overwhelming focus of demand.

Canada saw some slight weakening in its national office market during Q4 2012 as a slowing housing market and regulatory measures on lending reverberated through the economy and impacted the office leasing markets. Although net absorption was negative in the final quarter of the year, total net absorption for 2012 did register 330,000 square metres.

Uncertainty and austerity constrain European office market recovery

As in previous years, Q4 was the strongest quarter of the year in Europe, with gross leasing volumes reaching 2.9 million square metres, a 13% increase over Q3. However, ongoing uncertainty over the euro as well as strict austerity measures (particularly in Southern Europe) continue to constrain the speed of the recovery. As expected – and despite the solid Q4 results – gross leasing volumes for the full-year 2012 reached only 10.3 million square metres, a decrease of 9% on 2011 levels.

Leasing activity will continue to be affected by strict austerity measures and their resulting impact on labour markets. Lease events and renegotiations are predicted to dominate trading going forward as occupiers across the whole region keep focused on cost savings and efficiency gains or seizing opportunities to upgrade. Options are being more carefully examined and transactions are taking longer to complete. Leasing volumes for the year ahead are therefore anticipated to remain at current levels (c. 10.5 million square metres in 2013) before the projected economic and job market recovery translates into more expansionary demand in 2014.



Offices – Net Absorption, 2012

Source: Jones Lang LaSalle, January 2013. Covers all office submarkets in each city. Tokyo CBD - 3 kus

Offices – Global Net Absorption Trends, 2004-2013

24 markets in Europe; 25 markets in Asia Pacific; 44 markets in the US. Asia related to Grade A space only. Source: Jones Lang LaSalle, January 2013Office Supply Trends

-5 0 5 10 15

Washington DCNew York

ChicagoMadrid

TorontoLondonSydneyBoston

ParisLos Angeles

BrusselsStockholmHong Kong

FrankfurtSan Francisco

BeijingDubai

MoscowMexico CityTokyo CBDSingaporeSao Paulo

MumbaiShanghai

% of occupied stock

AmericasEMEA

Asia Pacific

-5

0

5

10

15

20

25

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

millio

ns sq

m

Proje

ction



Office Supply Trends Vacancies on a downward trend

The global office vacancy rate (across 98 markets) remained unchanged in Q4 2012 at 13.2%. Falls in vacancy in North America and Europe were counterbalanced by increases in Asia Pacific and Latin America. 2013 is expected to see the global rate edge down below 13%, largely due to further falls in the U.S. where there is a low development pipeline. Global office completions are projected to total 12.5 million square metres in 2013, representing a 28% increase on 2012 levels, but still well below the long-term trend (at c. 14 million square metres per year since 2000).

Falling fastest in the United States

The vacancy rate is falling fastest in the U.S., down to 17.0% in Q4 2012, from 17.6% a year ago. Tenants are being confronted by a dwindling amount of large-block high-quality space, as the development pipeline remains thin and largely consists of ‘build-to-suit’. Only 913,000 square metres of offices were delivered in 2012, while 1.6 million square metres is projected for 2013 and a further 2.3 million square metres for 2014. This compares with an average delivery of nearly 5 million square metres per year since 2000.

The vacancy rate in Canada edged up by 10 bps over the course of the fourth quarter to finish the year at 7.3%. The construction pipeline across the country is increasing, with a particular emphasis on Calgary, Vancouver and Toronto. Nationally, nearly 1.8 million square metres of office space was under construction as 2012 drew to a close, though relatively little of this space will be delivered in 2013.

Low levels of new supply in Europe

In Europe the vacancy rate declined marginally to 9.6% in Q4 2012. Demand for modern office space in prime locations is being quickly absorbed; however, vacancy levels are being impacted by the release of second-hand space. The decline in vacancy rates is supported by low levels of new completions as debt for speculative development remains tight. New office completions are increasing but, given the subdued economic outlook for 2013, there are likely to be cancellations or postponements. Nevertheless, new supply in 2013 is expected to increase by 27% on 2012 volumes, driven by construction activity in Moscow, London and Paris. Much of this is already pre-let, but with few occupiers expanding their space needs, vacancy levels are forecast to increase slightly in 2013.

Asia Pacific – steady supply additions

The Asia Pacific vacancy rate rose to 11% in Q4 2012 (from 10.6% in Q3), the second successive quarterly increase. New supply additions in 2013 are expected to exceed 2012 levels by about 1 million square metres (+20%) on the back of more supply in China, India and emerging South East Asian markets. As a consequence, further increases in the regional vacancy rate are anticipated in 2013, potentially rising to over 12% by year-end.

Latin America – demand keeps pace with rising supply

The Sao Paulo and Mexico City office markets both witnessed historically high levels of new office deliveries in 2012. Even so, net absorption remains robust in both markets and, so far, it has kept pace with supply, although Sao Paulo is facing the greater challenge as its pace of demand growth slows. Elsewhere in Latin America, the Buenos Aires market has maintained relative stability, despite economic volatility, and Santiago continues to be one of the world’s tightest markets with a vacancy rate of only 2.0%.

High vacancies in Dubai

Vacancies in Dubai’s prime CBD remain high at around 31%. Non-CBD locations have even higher vacancy levels, as much as 80% in some sub-markets. While the overall office market continues to be tenant-favourable, demand is still concentrated on just a few buildings/locations, and the range of prime buildings in single-ownership is more restricted than the overall vacancy figures would suggest.



Office Vacancy Rates - Major Markets, Q4 2012

Regional vacancy rates based on 46 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 only. Source: Jones Lang LaSalle, January 2013

Office Supply Pipeline - Major Markets, 2013-2014

Covers all office submarkets in each city. Tokyo CBD - 3 kus. Source: Jones Lang LaSalle, January 2013

0

5

10

15

20

25

Toro

nto

Mexic

o City

New

York

San F

ranc

isco

Bosto

n

Sao P

aulo

Was

hingto

n DC

Los A

ngele

s

Chica

go

Lond

on

Paris

Stoc

kholm

Brus

sels

Fran

kfurt

Madr

id

Mosc

ow

Hong

Kon

g

Toky

o CBD

Beijin

g

Sing

apor

e

Sydn

ey

Shan

ghai

Mumb

ai

Europe 9.6% Asia Pacific 11.0%Americas 16.0%%

Quarterly movementIncreasedDecreased

Stable

0 5 10 15 20 25 30 35 40

ChicagoLos Angeles

MadridSydneyToronto

New YorkSan Francisco

BostonWashington DC

StockholmBrussels

Hong KongFrankfurt

ParisSingapore

LondonBeijing

Tokyo CBDMoscowMumbai

Mexico CityDubai

Sao PauloShanghai

Completions as % of existing stock

2013

2014



Office Rental Trends Prime rents flat

Prime rental growth decelerated further in Q4, rising by 1.5% year-on-year (according the Jones Lang LaSalle’s Global Office Index which tracks 90 markets). This compares to 5.7% in 2011 and represents the lowest annual growth since Q3 2010. Among the major office markets:

• Beijing (+20.2%), Sao Paulo (+17.9%), Mexico City (+17.9%) and San Francisco (+16.3%) recorded the strongest rental growth in 2012.

• Prime rents fell furthest in Hong Kong (-11.1%) and Singapore (-9.8%), and the European cities of Paris (-7.2%), Madrid (-5.8%) and Brussels (-5%).

Growth in 2013 is expected to match 2012 rates at around 2-3% (across 24 cities), with the majority of major markets predicted to register single-digit prime rental growth over the next year. San Francisco is projected to show the strongest performance of 2013, exceeding 10% growth. Hong Kong, Tokyo and London are also forecast to register rental growth above the global average (at 5-10%). In contrast, Madrid should see the largest rental decline in 2013, while the two main LATAM markets – Sao Paulo and Mexico City – are also likely to be in negative territory, albeit marginally (by up to -5%). With signs of increasing activity in the Dubai leasing market, prime rental growth is anticipated to return for the first time in five years in 2013.

Asia Pacific rents grow more slowly

Net effective rents grew more slowly in most Asia Pacific markets during the last quarter with landlords generally taking a cautious stance on asking rents. Jakarta continued to see the largest rental increase (7.9% quarter-on-quarter and 36.5% year-on-year) due to a lack of high-quality space. However, rents in Beijing edged lower (-0.1% quarter-on-quarter) for the first time since Q4 2009, as the landlords of some premium CBD buildings lowered rents in order to attract higher-quality tenants. In Singapore, CBD rents fell further (-2.5% quarter-on-quarter and -14.3% since the last peak) as landlords of existing buildings competed with new projects offering greater rental discounts. Similarly, rents in Hong Kong Central have declined for six consecutive quarters (-1.8% quarter-on-quarter and -15.9% cumulative) as landlords at the top end of the market remain under pressure. Rents in Tokyo, after rising for two straight quarters, held flat due to tenant resistance to higher rents. Rents in India and Australia were likewise mostly flat, while small increases in rents were witnessed in a few emerging SEA markets (e.g., Manila and Bangkok).

Over the short term, rental growth is likely to be limited in most markets. Single-digit rental growth is generally expected for the year, with rents in Hong Kong and Singapore starting to recover in H2 2013. The strongest growth will most probably be seen in Jakarta.

European rents fall for fourth consecutive quarter

Prime office rents in Europe continued, on aggregate, to soften and have now fallen for four consecutive quarters. The European Office Index decreased over the quarter by -0.6% (-1.5% year-on-year). Prime office rents increased in Lyon (+5.6%), Düsseldorf (+4.0%) and Munich (+1.6%), but rental decreases in Moscow (-4.2%), Milan (-3.8%) and Paris (-3.1%) pushed the Index down. For 2013, prime rents, on aggregate, are forecast to show little growth, if any. Existing growth in relatively healthy economies, such as Germany or the Nordics, is expected to lose momentum. Markets at the centre of the Eurozone debt crisis, such as Madrid, are projected to see further rental declines. On a more positive note, latest forecasts suggest that there is potential for renewed rental growth in London.

Second year of positive rental growth in the U.S.

The U.S. market continues its recovery. Nationally, rents grew for the second year, up 3.1% in 2012, while rent concessions and tenant improvement allowances declined. San Francisco has been the star performer in North America. In Latin America, Sao Paulo tied for the strongest growth, although this is largely a reflection of ‘brand new’, top-of-the-market space becoming available.



Prime Offices - Rental Change, 2012

Based on rents for Grade A space in CBD or equivalent. In local currency. Source: Jones Lang LaSalle, January 2013.

Prime Offices – Capital Value Change, 2012

Notional capital values based on rents and yields for Grade A space in CBD or equivalent. In local currency. Source: Jones Lang LaSalle, January 2013.

-15 -5 5 15 25

Hong KongSingapore

ParisMadrid

BrusselsMoscowSydney

Washington DCFrankfurt

DubaiLondon

Los AngelesMumbaiChicago

ShanghaiBoston

New YorkTokyo

TorontoStockholm

San FranciscoSao Paulo

Mexico CityBeijing

% change

AmericasEMEA

Asia Pacific

-20 -10 0 10 20 30

Washington DCMadrid

New YorkChicagoBrusselsMoscow

ParisBoston

Los AngelesFrankfurt

DubaiLondon

ShanghaiSingapore

Hong KongSydneyMumbai

TokyoToronto

StockholmSan Francisco

BeijingSao Paulo

Mexico City

% change

AmericasEMEA

Asia Pacific



Office Capital Values and Yield Trends Capital appreciation slows

Capital values on prime assets across 24 major office markets registered 3.0% growth in 2012, an abrupt slowdown from 12.9% in 2011 and 23.5% in 2010. Fastest growth was recorded in Mexico City (+33.7%) where increasing demand from domestic institutions has sharply compressed yields. At the other end of the spectrum, values fell in Washington DC (-13.1%) and Madrid (-13.1%). Expectations for 2013 are for capital value growth to average about 2-3% (across 24 cities), largely echoing rental growth, with the majority of major markets projected to register increases in the range of 0-5%.

North v South Europe yield divergence

In Europe, prime office yields remained largely unchanged. Investor appetite is still robust for core product in the high-order cities of Northern Europe (i.e. London, Paris, Stockholm and the main German cities) and this is supporting prime yields in the 4.0-5.0% range; Munich and Berlin both saw yield compression during Q4. By contrast, Southern European cities continue to see yields drift out. Madrid, Barcelona and Lisbon each saw a 25 bps yield increase in Q4.

Yields compress in Asia’s top office markets

Prime yields in Singapore and Hong Kong tightened marginally (by around 10 bps) as capital values edged up modestly, despite ongoing rental corrections; yields in both cities are notably lower than a year ago (by about 40 bps). Across the Asia Pacific region, yields are forecast to remain largely stable.

U.S. yield spreads remain favourable

In the U.S., yield spreads continue to be favourable, even for the highest-quality product. This, in large, is being driven by the continued near-record low U.S. Treasury yields and by prime-quality office yields in primary markets largely remaining in the high 4%-low 5% range. We expect spreads to stay wide until Treasury yields mount a substantial, sustained increase, which may not occur until 2014 at earliest.

Prime Offices – Yield Shift, 2012

Source: Jones Lang LaSalle, January 2013.

-150 -100 -50 0 50 100

TokyoSydney

SingaporeShanghai

MumbaiHong Kong

Beijing

Mexico CitySao Paulo

Washington DCToronto

San FranciscoNew York

Los AngelesChicagoBoston

StockholmParis

MoscowMadrid

LondonFrankfurtBrussels

Q3 2012 - Q4 2012Q4 2011 - Q3 2012

Basis point change

Amer

icas

Euro

peAs

ia Pa

cific



Retail Markets Asia Pacific retailer demand remains healthy despite more subdued retail sales

Retailer demand remains healthy in most major Asia Pacific markets, despite weaker retail sales. Demand is robust in Greater China, although retailers have become more selective about locations and, in Hong Kong, are more cautious over lease negotiations. In general, vacancy rates are stable as most new retail space has achieved good occupancy rates. Rental growth is maintaining a moderate pace across the region (by up to 4.0% quarter-on-quarter) with the exceptions of India, Singapore and Australia, where rents are flat. Uplifts in rents are strongest in Greater China, with those in Beijing rising 3.8% quarter-on-quarter (8.7% year-on-year), although growth in prime malls in Hong Kong has eased to 2.1% quarter-on-quarter (12.5% year-on-year). Rents continue to increase moderately in emerging SEA markets. For 2013, retailer demand for space is likely to remain relatively robust in most Asian locations, leading to a further but modest upswing in rents.

United States – the slow ‘slog’ continues

Retail net absorption totalled 5.5 million square metres in 2012, more than compensating for the 4.2 million square metres of deliveries, helping the U.S. retail vacancy rate to gradually edge down to 6.8% by the end of the year. Rents continue to decline, down marginally 0.3% quarter-on-quarter and 0.8% year-on-year.

Among U.S. shopping centre types, malls are still experiencing the tightest overall market conditions with total vacancy of 5.8%. Several standout markets, such as Miami, New York City, Houston and San Francisco, are beginning to turn the corner from a falling to a rising market as rents improve and vacancy continues to head downwards.

Positive outlook for Russia and Turkey

Consumer confidence across the European Union (EU) remains at a low point, and well below the long-term average in most markets. With mounting unemployment and severe austerity measures, retail sales across the region fell by 0.4% in 2012. For 2013, retail sales are forecast to see near zero growth in the EU. The outlook for most West European countries is subdued; however continued positive growth is projected for Russia and Turkey in particular, as well as most CEE economies.

International and strong domestic retailers are still looking for expansion opportunities, but finding it difficult to secure the right units, as the supply of prime retail space remains scarce. This has helped sustain prime ‘high street’ rents in most key European markets. Significant uplifts have been recorded in Istanbul (+14.3%) and Moscow (+10.0%). Driven by robust retailer demand, strong rental growth for prime units is predicted for 2013 in Moscow, London and the major German cities.

‘Prime retail’ was the only sector in Europe to record positive capital value growth in Q4 2012. A combination of rental growth and yield compression resulted in values increasing 2.6%, and over the past year they have risen by 7.0%.

Development of new shopping centre space in Europe continues to be focused on Russia and Turkey and, together with Germany, they are expected to see healthy increases in prime rents in 2013. Supply of new shopping centre space will remain constrained in the majority of European countries, with redevelopment becoming increasingly prevalent.

Demand for Europe’s secondary retail space remains weak. The challenging trading climate is forcing retailers to optimise store portfolios by disposing of underperforming stores and renegotiating rents. Rental levels for secondary space will continue to see downward pressure.

Dubai’s top malls outperform

The Dubai retail market is witnessing a widening gap between a limited number of high-performing centres (such as ‘The Dubai Mall’ and ‘Mall of the Emirates’) and other centres where rents are, at best, stable. The success of the former has led to a number of new retail projects being announced, including a major extension to ‘The Dubai Mall’ and the development of the ‘Mall of the World’, which could potentially become the world’s largest mall.



Prime Retail – Rental Clock, Q4 2012

Prime Industrial – Rental Clock, Q4 2012

Relates to prime space. US positions relate to the overall market Source: Jones Lang LaSalle, January 2013

Rental Valuegrowth slowing

Rental Valuesfalling

Rental Value growth

accelerating

Rental Values bottoming out

AmericasEMEA

Asia Pacific

Boston, Sydney

Washington DC

Chicago

Houston, Singapore

DelhiMumbai

Shanghai

Beijing

Madrid

Dubai

Paris

Berlin

Moscow, Hong Kong

London

Milan, New York CitySan Francisco, Tokyo

AmericasEMEA

Asia Pacific

Rental Valuegrowth slowing

Rental Valuesfalling

Rental Value growth

accelerating

Rental Values bottoming out

Paris, Madrid, Los Angeles Northern New Jersey/New York

Atlanta

Boston, Dallas Houston, Tokyo

Inland Empire, Chicago

Philadelphia

Frankfurt

Amsterdam

London, Warsaw

Hong Kong

Beijing

Shanghai

Singapore

Sydney



Industrial Warehousing Markets United States market gains strength

Latest U.S. industrial statistics paint a picture of a real estate market gaining some strength. Absorption gains and vacancy declines have remained on trend with robust results in all the major logistics markets. Particularly notable is the strong performance of a trio of southern markets: Memphis, Atlanta and Dallas. In New Jersey, even ‘Superstorm Sandy’ did not prevent the completion of several large deals that had been signed earlier in 2012.

The ‘game changer’ for 2013 will be the return of supply growth to the U.S. industrial market. Construction remains overwhelmingly tilted towards ‘big-box’ product. During 2012 a large portion of the deliveries were in the Los Angeles and Inland Empire markets; however, in 2013 additional markets will join the fold. Particularly noteworthy is Dallas, which is poised for a handful of ‘ground breakings’ as developers have become comfortable with the level of vacancy. National deliveries in 2013 will significantly outpace 2012 but, compared to pre-recession levels, they will still be at about ‘half-speed’.

Investors and space-users will remain cautious as Washington’s dysfunction continues and the payroll tax increase affects consumer spending. Consumer-oriented firms, who have added significant space over the last year, may find they have excess capacity. Even so, with the housing market finally contributing to economic growth, the upside potential and downside risks are coming closer to balance and there is cause for optimism about 2013.

In Canada, the industrial market is still recovering, albeit gradually. Toronto is experiencing very healthy demand for Class A space, particularly among its multinational tenant base. Expectations across the Canada industrial market, as a whole, point to a moderate acceleration in rental growth towards the latter half of 2013.

The export-related segment slightly more buoyant in Asia Pacific

Retail sales continue to drive leasing demand in Asia Pacific, although the export-related market is now slightly more buoyant with recent PMI reports indicating that the manufacturing sector is starting to stabilise. E-commerce and logistics companies continue to be at the forefront of leasing demand in China, while a number of expanding 3PL operators are driving demand in Hong Kong. Across the region, rental growth has eased slightly with the largest quarterly growth seen in Hong Kong (+2.7%), a result of its tight supply situation. Rents in Beijing and rents (for non-bonded space) in Shanghai edged up slightly, also amid tight supply conditions. Moderate rental growth is forecast for most Asia Pacific warehousing markets this year.

Demand is holding up in Europe

In Europe, take-up of modern logistics units in 2012 remained above the 10-year average despite the ongoing economic challenges; although it was below the record 15 million square metres of 2011. However, corporate occupier caution will continue to act as a drag on take-up. Nonetheless, the shift to multi-channel distribution and rapid growth in online sales will further drive supply-chain realignment, thus maintaining healthy demand for modern distribution units which, at the same time, is being boosted by some improvement in export-related markets. As a result, take-up in 2013 is projected to match last year’s level.

Robust demand and limited supply have led to rental increases during the last quarter in Hamburg, Munich and Kiev. However, this growth could not prevent the European Rental Index from recording its softest performance of the year in Q4, down -0.7% quarter-on-quarter and -1.8% year-on-year. This was driven by rental falls over the quarter in Milan (-9.1%), Budapest (-6.3%) and Amsterdam (-2.9%).



Hotel Markets The year-end rush

At the start of 2012 we anticipated that hotel investment volumes would reach US$31 billion for the full-year; amid a slow ‘deal pace’ in Q3 we then lowered our forecast to US$28 million. However, with a particularly robust fourth quarter, full-year volumes in fact exceeded our expectations, hitting US$31.8 billion and representing a modest 7% decline on 2011 levels. Moreover, activity is set to remain healthy in Q1 2013 as several high-profile deals that had already exchanged last year are scheduled to close.

Hotel Investment Volumes, 2011-2012


2013 outlook and beyond

For 2013 we expect global deal volumes of US$33 billion to be in line with the last three-year average. Deal activity, though, is expected to remain hampered by economic pressures in several of the world’s mature economies and constrained by the availability of financing and long-term ownership structures in emerging markets, notably in Asia.

Even so, the key drivers are positive and increased competition among alternative lenders, who are willing to provide senior and mezzanine debt following cutbacks by the large banks, is anticipated to improve the overall lending landscape.

Beyond 2013, global economic growth rates for 2014-2015 are projected to be well above current levels. This should further underpin hotel trading performance as well as capital values. Over the medium term, global hotel transaction volumes could grow further to range from US$50 to US$70 billion, as recorded before the 2007 peak.

U.S. experiences strongest quarterly transactions volume since 2007

The Americas experienced a particularly strong Q4 2012 with volumes totalling US$6.4 billion (up 54% on Q4 2011 and up 62% on Q3 2012). Nearly US$1 billion was traded in New York alone, including The Manhattan at Times Square. In addition, several large portfolios changed hands including Accor’s Motel 6 sale to Blackstone for US$1.9 billion.

Transaction volumes in the U.S. and Canada for full-year 2012 were in line with 2011. Debt returned to the market in a meaningful way and drove activity, though it still remains far from previous peak levels. On top of the sale of hotel assets, performing and non-performing hotel debt also traded at a substantial level which, if fully quantifiable, would show even greater total lodging transaction volumes for 2012.

In Latin America, volumes rose 60% in 2012 compared to 2011, largely on the back of Accor’s US$275 million acquisition of Grupo Posadas. Mexico’s hotel transactions market, which has been defined by illiquidity as of late, saw deal flow double to US$400 million in 2012. Evidence points to an increase in transactional activity in Mexico, with 2013 set to bring several more sales of prime assets, as well as forced sales.

US$ billionsFY 2012

FY 2011 - FY 2012 % change

US$ billionsQ4 2012

Q4 11 - Q4 12 % change

Americas 17.5 1% 6.4 54%

EMEA 11.0 -10% 4.0 15%

Asia 1.9 -44% 0.5 -33%

Australasia 1.4 8% 0.1 -76%

Total 31.8 -7% 11.1 25%



The Caribbean Islands also experienced increased activity, driven largely by improving fundamentals attracting investor interest, but also by forced sales. Hotel owner/operators emerged as the most eager buyers in the sub-region. This trend is expected to continue in 2013, particularly in the upscale and luxury segments.

Regional Hotel Investment Volumes, 2011-2013


European portfolio sales fuel Q4 volumes

In EMEA, volumes ended 10% lower in 2012 compared to 2011 as activity was adversely impacted by a combination of ongoing uncertainty surrounding the sovereign debt crisis, limited availability of debt and subsequent high financing costs. Moreover, the buyer pool for hotel real estate in EMEA has contracted compared to a few years ago as fewer parties feel they can be competitive (in terms of cost of capital) in the market today; they are also being discouraged by notable yield contraction in key gateway cities. Nonetheless, deals are happening and EMEA experienced an impressive ‘rush to the finish line’ in 2012 with Q4 volumes up 130% on Q3 2012. This uptick in activity is anticipated to trail into Q1 2013, with several high-profile (portfolio) deals scheduled to close.

Uptick in activity in Switzerland, Ireland and the Netherlands

Even though the UK continues to be the most liquid market in Europe, transaction volumes showed a 21% decrease on 2011, totalling US$2.9 billion. Meanwhile, investment volumes in France totalled US$1.8 billion, in line with 2011 volumes, whereas Germany posted a 32% increase, totalling US$1.5 billion. The vast majority of deals in Germany took place in key markets, with Berlin (nine deals), Frankfurt (seven deals) and Hamburg (seven deals) accounting for 85% of volumes.

Significant growth in hotel investment volumes in 2012 also occurred in Switzerland, Ireland and the Netherlands:

• Investment activity in Switzerland was primarily driven by low yield prospects in other asset classes, making real estate an increasingly attractive option. Activity is expected to continue as solid benchmarks are being set in the market, even though buyers remain primarily domestic as the current exchange rate of the Swiss Franc forms an evident barrier.

$17.3 $17.5 $18.5

$12.3 $11.0 $11.0

$4.7$3.3 $3.5

0

5

10

15

20

25

30

35

40

2011 2012 2013F

US$ b

illion

s




• In Ireland (notably Dublin), volumes were propelled by healthy market fundamentals, limited supply and an economic turnaround, and ended the year totalling US$240 million compared to only US$14 million in 2011.

• Amsterdam is enticing substantial investor interest due to its healthy and diversified market fundamentals and, as such, investment volumes were up from US$36.8 million in 2011 to a little over US$400 million in 2012. The most active buyers are institutional investors, particularly in the case of leased properties where yields range from 6.2% for Amsterdam to 8.2% for provincial locations. Activity is anticipated to continue at this level into 2013.

Volumes fall short in Asia Pacific

Hotel trading activity slowed in Asia Pacific 2012, reducing by 30% to US$3.3 billion as bank inaction in Japan along with a notable absence of sales in Asia’s key gateways (against a backdrop of investor conservatism) led to lower-than- anticipated volumes.

The gap between buyer and seller expectations, which emerged in 2012 after the strong appreciation of assets over the past four years, has impeded sales activity in markets such as Hong Kong and Singapore, and this trend is expected to continue in 2013. While the long-term fundamentals remain strong, the recent softening in trading has tempered investor enthusiasm.

Australia dominated ‘deal flow’ in 2012, boosted by a number of record sales including the largest ever single asset (Shangri-La Sydney) and portfolio sale (Marriott portfolio). Capital was primarily sourced offshore, accounting for nearly 80% of the overall dollars invested. 2012 will provide a good barometer for the Australian hotel investment landscape in 2013.

Investment benchmarks are being established in India

Investment activity is gaining momentum in India with a number of deals completing in 2012, and with the expectation of more to come in 2013 as investment benchmarks are being established. A total of five deals were recorded in 2012 totalling just over US$100 million, up from two deals in 2011.

New Thai REIT law to improve liquidity

Thailand is increasingly emerging as one of the region’s hotel investment ‘hot spots’. Investment volumes totalled just over US$250 million in 2012 and are forecast to remain robust in 2013 with more deals expected in Bangkok and Phuket. The imminent signing of a new REIT law is also likely to increase liquidity in the hotel and property investment market. It is anticipated that property transactions will increase materially once the law takes effect, although it may take a few years for the market to become established.



Residential Markets U.S. apartment market – ‘easy living’

The long-awaited new supply wave is finally about to begin reaching the U.S. multifamily rental market, although it is likely to be mid-year before a ‘solid read’ on the resilience of the sector’s demand for units can be digested. In the meantime, investor demand for the product-type proved voracious in 2012; it was the first year in at least 10 that multifamily sales volumes outpaced that of office buildings. Total sales volumes surged 47% past 2011 levels, ending the year at nearly US$78 billion.

While the apartment sector’s strong fundamental performance was a primary driver behind investor demand, the availability of attractive debt relative to other property sectors was a differentiator in 2012. This fact is largely supported and fuelled by the GSEs (Government Sponsored Enterprises) that were estimated to have accounted for approximately 65% of all 2012 originations. The outlook for the multifamily sector, both leasing fundamentals and investment, appears to be on very sturdy ground once again in 2013, although the pace of growth will likely decelerate meaningfully.

Slower residential sales in some Asian markets

In mainland China, high-end residential sales are stable, and sales this year are expected to remain at similar levels to last year. In Hong Kong, however, new residential launches and secondary transactions have both fallen significantly after new tightening measures were imposed in October, and sales activity in 2013 is likely to be more muted. Singapore is also experiencing slightly fewer sales and launches; higher stamp duties on home buyers, which started in January, are likely to result in more subdued investor demand and sales activity this year. Nonetheless, ongoing low interest rates should help to limit any downside in prices in these major markets. Activity and capital value growth in Jakarta and Manila is being supported by strong local investor demand and low interest rates.

Higher sales activity in Dubai

The Dubai market continues to experience higher levels of residential sales and the prime market is now well into an upturn. The recovery in prices is most pronounced in the villa sector (where prices increased 24% in 2012, compared to 12% in the apartment sector). Rents have also started to recover (7% for villas and 6% for apartments in 2012). However, the improvement in prices is largely confined to prime established locations, with less established locations seeing little or no growth in values.

In a clear indication that the government considers that the Dubai residential market is beginning to overheat again, the Central Bank of the UAE has announced new caps on the LTV ratio for all new mortgages (50% for expatriates and 70% for UAE Nationals). The new limits will reduce residential demand and take the pressure off price growth in 2013.

Saudi Arabia sees major growth in housing finance

While the Kingdom’s new mortgage law has yet to be officially signed by the King, many of the banks have extended their lending and this resulted in a major increase in housing finance over the second half of 2012. This has supported increased transaction levels and further price growth in the residential sector in Riyadh and Jeddah.

More encouraging signs from UK residential

House prices in the UK increased by a modest 1% in 2012. Mortgage lending and transaction levels have been improving marginally but both are still very low by historic comparisons. House-building volumes in the UK also remain very low and are significantly below those required to keep pace with population growth. The London market is stronger and more resilient than elsewhere. Annual price growth in London is positive at circa 5%.

Price falls typical in most European housing markets

Residential prices are still falling in most European countries, typically by 0-5% per year. The declines have deepened somewhat in Spain and the Netherlands, where prices are falling in the order of 11-12% per year. Prices are stable in Germany and increasing by around 4% per year in Switzerland.



Recent Key Transactions

Europe

Country City Property Sectors Sales Price

US$ Mill Comments

France Lyon Rue de la République Office 406

French real estate company ANF Immobilier has sold its majority stake in its buildings on Rue de la République. The 65,000 sq m portfolio has been acquired by a joint venture between Grosvenor and ADIA.

France Multiple B&B Hotels Portfolio Hotel 605

ANF Immobilier has sold the 158-hotel portfolio consisting of approx. 120,000 rooms. The buyers are a consortium involving Foncière des Murs (50.2%), Crédit Agricole Assurances (40%) and a subsidiary of Banque Fédérative du Crédit Mutuel (9.8%).

Germany Berlin Maritim Berlin Hotel Confidential The 4-star 505-room hotel has been sold by SEB Asset Management to the hospitality arm of Middle Eastern Al Faisal Holding. Jones Lang LaSalle acted as the exclusive adviser to the purchaser.

Germany Berlin / Frankfurt RBS Portfolio Office 1,017

A joint venture between Norges Bank Investment Management (NBIM) and AXA Real Estate Investment Managers has acquired two buildings in Berlin and Frankfurt from RBS. The transaction gives each partner a 50% stake in the portfolio. Both assets are primarily offices; the first is on Kurfürstendamm Boulevard in Berlin and totals 72,400 sq m of office and retail space. The second is in Frankfurt's CBD and consists of 81,600 sq m of predominately office space. Jones Lang LaSalle advised.

Germany Munich Palais an der Oper, Residenzstrasse 2

Mixed 389 Russian investor Lenhart Global has acquired the scheme, which is currently under construction, from LBBW Immobilien Management and Accumulata Immobilien Development. The asset, when complete, will comprise 32,000 sq m of retail, restaurants, offices and medical practices.

Germany Portfolio TLG Portfolio Mixed 1,427 US private equity group Lone Star has acquired the commercial real estate portfolio of TLG Immobilien from the German government. The portfolio consists of 780 commercial assets including offices, retail, hotel and senior care homes.

Germany Portfolio Karstadt Portfolio Retail 1,427

A consortium led by Whitehall, the Goldman Sachs fund, has disposed of a portfolio of 17 Kardstadt stores in Germany. The purchaser was Austrian investor Signa. The portfolio includes the KaDeWe building, Kardstadt's flagship department store in Berlin.

Ireland Dublin The Burlington Hotel Hotel 87

The 4-star 500-bedroom hotel, the largest in Dublin, has been sold to Blackstone for €67 million. Receiver Grant Thornton put the property on the market with a guide price of €65 to €75m. Blackstone plans to spend US$20 million on refurbishment and will rebrand it under the ‘DoubleTree by Hilton’ flag.

Multiple Multiple Whitehall Fund Marriott Portfolio Hotel 573

Goldman Sachs’ Whitehall Fund has sold a portfolio of hotels totalling 1,733 rooms to a joint venture between GIC Real Estate (48%), ABP Investments (20%) and Host Hotels & Resorts (32%). The portfolio includes four hotels in Paris and one in Amsterdam, all of which are affiliated with the Marriott brand.

Poland Lodz Manufaktura Shopping Centre Retail 506

Union Investment Real Estate has purchased the shopping centre for its open-ended real estate fund UniImmo:Deutschland; it is the fund’s first investment in Poland. The asset is fully let and comprises 112,500 sq m, of which Union has acquired 91,240 sq m; the remainder (a DIY store and a cinema) are owned by the occupiers. The vendor is a property company owned by French companies Foncière Euris and Rallye and project developer Apsys. Jones Lang LaSalle advised.

Spain Barcelona Portfolio CaixaBank Retail 555

Spanish CaixaBank has completed a sale-and-leaseback transaction disposing of a 439-property portfolio. The purchaser is Inmobiliaria Carso, a property company owned by Mexican tycoon Carlos Slim. As part of the agreement, CaixaBank has the option to buy back the assets at a later date.

Sweden Stockholm Kista Galleria Retail 692

DNB Liv has sold the shopping centre to a joint venture between Citycon Oyj and Canada Pension Plan Investment Board (CPPIB), who will each hold a 50% stake. The deal represents CPPIB's first direct property investment in the Nordic region. Kista Galleria comprises 185 stores with a leasable area of around 90,000 sq m. It underwent a complete renovation in 2002 and was further expanded in 2009. Jones Lang LaSalle advised.

Switzerland Zurich Uetlihof, Uetlibergstrasse 213/233

Office 1,074

The Norwegian Government Pension Fund (managed by NBIM) has acquired the Credit Suisse headquarters as part of a sale-and-leaseback transaction. The bank has signed a 25-year lease for the 137,810 sq m complex, with the option to extend for a further 15 years. The deal represents the largest ever real estate deal relating to a single property in Switzerland. Jones Lang LaSalle advised.




US$ Mill Comments

UK London City Woolgate Exchange Office 426

TPG and Ivanhoé Cambridge have acquired Woolgate Exchange from the receivers acting for special servicers to IBRC and bondholders of the Cornerstone CMBS. The property extends to 32,633 sq m and occupies one of the largest freeholds in the core London City market. The building is let to Portigon Financial Services (West LB) until 2020. Jones Lang LaSalle advised.

UK London City Winchester House, Old Broad Street

Office 402

Invesco has purchased the property on behalf of China Investment Corporation. The building is the London headquarters of Deutsche Bank and comprises almost 30,000 sq m. The deal underlines the level of continued demand from Asia Pacific investors. The vendor was German fund manager KanAm, who has announced plans to dispose of its Central London portfolio of four assets - Winchester House is the third to be sold.

UK London West End

Adelphi, John Adam Street Office 426

Private equity firm Blackstone has acquired the Adelphi Building from Dubai investment fund Istithmar. The property has a strong asset management angle because the largest tenant, the Department for Work & Pensions, which occupies 15,325 sq m, is due to move out in 2013 and will leave more than half the building vacant.

UK London West End

78 St James’s Street Office 285

RREEF has sold the property to the State Oil Fund of the Republic of Azerbaijan (SOFAZ). The building is let in its entirety to HSBC Bank plc and is occupied by HSBC Private Bank. This transaction illustrates the wide range of investor sources of capital that are targeting London and marks SOFAZ's entrance into the London market. Jones Lang LaSalle advised.

UK Portfolio Star Portfolio Retail 409

A consortium of investors, including Capital & Regional and Aviva Investors, has sold the Junction Unit Trust portfolio to UK REIT Hammerson. The price paid reflects a 5% discount on the fund valuation in September 2012. The portfolio comprises four retail parks and two development sites; the parks are let to a diverse mix of high-quality tenants with an average lease length of 11 years. Hammerson has acquired the portfolio as part of its strategy to become an exclusively retail-focused REIT.

UK Sheffield Meadowhall Shopping Centre Retail 1,224

The Norwegian Government Pension Fund (managed by NBIM) has purchased a 50% stake in the shopping centre from London & Stamford. The shopping centre consists of 141,000 sq m of retail space over two levels. As part of the transaction, NBIM has entered into a joint venture with British Land, which owns the remaining 50% share. British Land will manage the shopping centre on behalf of the partnership.

UK London The Cavendish Hotel Hotel 257

Jones Lang LaSalle Hotels & Hospitality Group has advised Ellerman Investments on the sale of the 230-room hotel. The 4-star property was acquired by Singaporean hotel operator The Ascott Limited.

Asia Pacific


US$ Mill Comments

Australia Melbourne, Sydney

Industrial Portfolio Industrial 187

Dexus has established a capital partnership with National Pension Service (NPS) of South Korea. NPS will invest into 50% of Dexus’s A$360 million industrial portfolio which includes estates in Victoria and New South Wales. NPS has also agreed an exclusive option to enter into a 50% share of future developments at the Quarry and Laverton sites within the portfolio.

Australia Sydney Partial interests in three office towers

Office 523

Dexus has secured a partial interest in three office buildings including a joint acquisition with the Dexus Wholesale Property Fund (DWPF). The assets include a 25% interest in Grosvenor Place, a 50% interest in 2 & 4 Dawn Fraser Avenue in Homebush, and the joint 50/50 purchase of the Prudential Building at 37-51 Martin Place. The portfolio was acquired from the Direct Property Investment Fund (DPIF), a Colonial First State closed-end fund.

Australia Sydney Top Ryde City Retail 354 On behalf of receivers McGrathNicol, Jones Lang LaSalle has sold the shopping centre for A$341 million to Blackstone on a yield of 7.3%. Reflecting the tightly held nature of this investment class, Top Ryde City is the first 100% interest in a regional shopping centre to transact in Sydney in nearly 10 years.

China Shanghai Plaza 353 Retail 380 Hong Kong’s Gaw Capital has sold its full interest in the 40,000 sq m eight-storey retail mall. The centre was purchased by a joint venture between ADIA and Macquarie.




US$ Mill Comments

Hong Kong Hong Kong Stanhope House Office 309 Hong Kong-based American International Assurance (AIA) has acquired the full interest in the 19-storey building for HK$2.4 billion from Hang Lung Properties. The insurance company will use the premises for its own occupation as well as for investment purposes.

Japan Tokyo Former Shinsei Bank HQ Office 628

A Morgan Stanley Real Estate Fund (MSREF VI) has turned the former Shinsei Bank headquarters over to lenders. The asset has been acquired by a joint venture including the Development Bank of Japan, a SPC of Kenedix and Tokyu Land. The purchasers have taken vacant possession of the asset and plan to redevelop the site.

Singapore Singapore Marina Bay Financial Centre (30%)

Office 847

DBS Group Holdings Ltd has acquired a 30% share in the MBFC Tower 3. The tower is the largest corporate office in Singapore (125,000 sq m) and is the global headquarters of DBS. The group has also agreed to an option to purchase a further 3.33% in the tower from Choicewide Group Limited for S$115 million (US$94 million).

Singapore Singapore NOL Building Office 311 Jones Lang LaSalle has sold 456 Alexandra Road (NOL Building) on behalf of Neptune Orient Lines (NOL) to local developer Fragrance Regal Pte Ltd for S$380 million, which represents $1,831 per sq ft (existing net lettable area) and a net yield of 3.9%. NOL will take a short-term leaseback of the building until June 2014.

Singapore Singapore Hotel Grand Pacific Hotel 172

The 16-storey 4-star hotel has been bought by a consortium of Asian investors. The seller of the freehold property is Sun Asia Pacific Corporation which is controlled by HNWI Paul Sun. As part of the agreement, the hotel will still be managed independently under its present trading name.

South Korea Seoul KAIT-Tower (Tomato Building)

Office 199 The Korean Asset Investment Trust (KAIT) has led a consortium in acquiring the 20-storey building from the Tomato Savings Bank. KAIT expects to occupy most of the building.

South Korea Seoul Platinum Tower Office 189 Mirae Asset has acquired the office tower from a joint venture comprising Singapore-based Alpha Investment Partners and Sungdam.

South Korea Seoul Irae Building Office 185 KB Asset Management, on behalf of the Korea Teachers Credit Union and the National Credit Union Federation of Korea, has purchased the Irae building from RREEF. It plans to refurbish the property.

South Korea Seoul HPK Building Office 180 Jones Lang LaSalle has advised HP Korea on the sale-and-leaseback of its building to CBRE Global Investors Korea.

South Korea Seoul Ace Tower (Samdo) Office 179 MAPS Asset Management has sold the office tower to Samsung Life.

Americas


US$ Mill Comments

Bermuda Hamilton The Fairmont Hamilton Princess

Hotel 130 Global Hospitality Investments (GHI) has sold the hotel to the Green Family which plans to invest over US$50 million to enhance the property, continuing the development plans started by GHI.

Brazil Multiple Portfolio of 35 warehouse and logistics properties

Industrial 1,500 Private equity firm Hemisfério Sul Investimentos has sold the portfolio located throughout 10 Brazilian states to Global Logistic Properties.

Brazil Sao Paulo Shopping Penha Retail 64 CSHG Brasil Shopping FII has purchased from Sonae Sierra Brasil a 51% interest in the c. 30,000 sq m shopping centre.

Canada Fredericton Regent Mall Retail 165 Cadillac Fairview has sold the nearly 46,000 sq m mall in New Brunswick’s capital to Primaris Retail REIT.

Canada Toronto LuCliff Place Office 71 KingSett Capital has bought the c.17,200 sq m office asset located in the CBD.

Canada Vancouver 16133 Blundell Road Industrial 103 PIRET has purchased the approx. 86,000 sq m warehouse at an initial yield of

about 6.2% from KingSett Capital.

Mexico Mexico City Torre Mayor Office 204 Fibra Uno has acquired a 50% interest in the 75,000 sq m office tower from Reichmann.




US$ Mill Comments

Mexico Monterrey Plaza Santa Catarina Retail 33 Credit Suisse has sold the c. 35,000 sq m retail centre located on Industriales del

Poniente.

Multiple Multiple Grupo Posadas Hotel Portfolio Hotel 275

Accor has purchased 15 hotels in Brazil (Sao Paulo, Rio de Janeiro), Argentina (Buenos Aires) and Chile (Santiago) from Mexican hotel operator Grupo Posadas. The transaction includes four owned hotels, four variable leased hotels and seven hotels under management contract.

United States Multiple Motel 6 Blackstone Portfolio

Hotel 1,900 Accor has sold its Motel 6 assets in North America, consisting of 604 owned hotels and 480 franchises, to Blackstone. The total room count is estimated to be approx. 107,000 rooms. With the sale, Accor has reduced its net debt by about €330 million.

United States New York The Manhattan at Times Square Hotel 275

Starwood Hotels & Resorts Worldwide has sold the 665-room hotel to affiliates of Rockpoint Group, Goldman Sachs’ Real Estate Principal Investment Area and Highgate Holdings. The property, located on Seventh Avenue between 51st and 52nd Streets, will be managed by Highgate Holdings as an independent hotel unaffiliated with Starwood Hotels & Resorts.

United States New York 75% stake in The Plaza Hotel Hotel 250

A joint venture between Elad Properties and Kingdom Holdings has sold a 75% stake in the hotel to the Sahara Group. The 4-star hotel has 282 rooms and is operated by Fairmont Hotels & Resorts.

United States Portland Hilton Portland & Executive Tower Hotel 102

Walton Street Capital and Lodging Capital Partners have purchased the hotel, and the new owners are planning approx. US$10 million in renovations. Jones Lang LaSalle was retained by the vendor, Cornerstone Real Estate Advisers.

United States Various Homestead Portfolio Multiple Hotel 132

Jones Lang LaSalle represented Square Mile Capital and Garrison Investment Group on the sale of the portfolio consisting of 2,272 guestrooms located in the metro areas of Washington DC, Miami, Tampa, Atlanta and Raleigh. It has been sold to a group of buyers made up of Centerbridge Partners, Blackstone and Paulson.

United States Boston Northborough Crossing Retail 128 Equity One has purchased the 60,000 sq m + suburban shopping centre from New

England Development.

United States Denver FlatIron Crossing Retail 291 Macerich has acquired 75% of the c.158,000 sq m shopping centre from its

ownership partner, GI Partners. The centre is located in the suburb of Broomfield.

United States Los Angeles 6733 Canoga Ave Industrial 200 In Canoga Park, Pratt & Whitney has sold the 148,000 sq m warehouse facility to

United Technologies.

United States Seattle Amazon Headquarters Office 1,158 Amazon has purchased its 167,000 sq m + Terry Avenue headquarters from a

partnership of Vulcan Inc. and Schnitzer Investment Corp.

United States Washington DC Constitution Center Office 734

A joint venture of MetLife and Clarion Partners has acquired the approx. 130,000 sq m office development from David Nassif Associates at a reported 5.7% initial yield.

COPYRIGHT © JONES LANG LASALLE IP, INC. 2013. 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

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