Cushman & Wakefield Research

ASIA PACIFIC MARKETBRIEFS
AN OVERVIEW OF THE ASIA PACIFIC OFFICE MARKET
A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION

SEPTEMBER 2011

ASIA PACIFIC MARKETBRIEFS
REGIONAL APAC With uncertainties still impacting the global economy, the growth Vacancy momentum in the Asia Pacific - 1.4% region is slowing down. In a series Rent of manufacturing surveys, signs of + 3.0% slowdown emerged including in China where manufacturing activity contracted for the first time in July. Nonetheless, strong leasing activity has lowered the regional office vacancy rates for the sixth consecutive quarter to 10.6%. Rents remained on an uptrend for most markets with exceptions in Seoul, Tokyo and several cities in Vietnam and India, where new developments are likely to exceed absorption. On investment activity, against solid property fundamentals and increasing rental values, investors are still expected to remain optimistic but more cautious in their acquisitions.
Y-o-Y change 12-mth outlook

CHENGDU
Y-o-Y change

Absorption for high quality space has been strong and this has contributed Vacancy to a slight rise in rents. Consequently, - 3.3% vacancy rate has also been reduced from Rent 29.4% to 26.1% this quarter. Many + 2.2% high quality buildings (i.e. two Grade A buildings by end 2011 and three in 2012) will come on-stream. Tenants will benefit from more choices in future. Overall, the market is expected to remain stable.
12-mth outlook

GUANGZHOU
Y-o-Y change

SELECT COUNTRIES AUSTRALIA ADELAIDE
Y-o-Y change

A boom in natural resources has created a demand for office space after a few years of weak absorption. Currently, premium space is unavailable. In Rent addition, incoming supply in the next + 2.6% two years will amount to less than 430,000 square feet (sf ) and most of that is already pre-leased. Rents are expected to be on the rise over the near term.
12-mth outlook

Vacancy 0.0%

The leasing market in Guangzhou has been vibrant with both foreign and domestic corporations entering the market. Coupled with abundant new Rent supply, rental rates for Grade A space + 4.1% have increased on a slower momentum at 4% quarter-on-quarter (q-o-q). With more than 20 million sf of Grade A space in the pipeline, vacancy rates are expected to remain high. On the investment front, it was announced in June that the ratio of supply for commercial and residential will be adjusted from 1:3 to 2:3; a move by the Government to encourage developers to enter the commercial real estate.
12-mth outlook

Vacancy - 1.2%

SHANGHAI
Y-o-Y change

MELBOURNE
Y-o-Y change

The occupier market in Melbourne has been active with rents on the uptrend. Vacancy The banking sector has been one of 0.0% the main drivers this quarter with the Rent Commonwealth Bank of Australia + 6.6% taking up 91,000 sf. Though about 1 million sf of space will be entering the market in 2012, 70% have already been pre-committed.
12-mth outlook

Following strong expansionary demand by both foreign and domestic companies, Vacancy rentals surged reaching RMB391 per + 1.9% square meters per month (sq.m/mth), Rent increasing 7.7% q-o-q. Most high quality + 7.7% buildings are fully occupied. With about 70% of the 10.8 million sf completed in the first half of 2011, it is estimated that the it is estimated that the remaining 30%, which translates to 3.2 million sf will enter the market by the end of the year. Consequently, rentals are expected to increase by 8% to 10% in the next few quarters.
12-mth outlook

SHENZHEN
Y-o-Y change

SYDNEY
Y-o-Y change

Sydney's office market has been stable with a moderate tightening of vacancies in prime grades. There is a noticeable increase in demand for Grade A and A+ Rent space from occupiers who prefer longer + 3.1% leases and are perceived to make safer choices. There are few completions in the next 18 months and if absorption remains high, vacancy rates are likely to fall.
12-mth outlook

Vacancy 0.0%

The Shenzhen market continued to post rental growth, increasing 7.6% q-o-q. For many corporations, the CBD area is their first choice. For example, Rent Kerry Plaza I is almost fully occupied + 6.3% posting new records in terms of local rentals this quarter. Due to rising costs, some sectors such as IT and electronics have chosen to relocate to alternative locations such as Luohu and Chegongmiao. With the backdrop of a steady economy, demand for leasing is expected to continue and rentals are expected to be on the uptrend in the next two quarters.
12-mth outlook

Vacancy - 2.4%

CHINA BEIJING
Y-o-Y change

HONG KONG
Y-o-Y change 12-mth outlook

Office rental continued to surge, posting a new high for the third consecutive quarter Vacancy due to strong leasing demand and limited - 1.8% supply. Grade A vacancy rate has fallen to Rent 4.5% and given the dearth in new supply + 11.9% until 2013, rents will continue on an uptrend and thus maintain Beijing's position as a landlord's market. To combat increasing costs, tenants are considering options in adjacent suburban locations or even decentralising their functions in various buildings.
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The overall availability of space has been reduced to 4.6% in the second quarter, sustained by a positive leasing momentum with many buildings fully Rent leased or almost occupied. Office rentals + 14.5% are still on the rise but certain districts like Wan Chai and Causeway Bay are gaining popularity as their rentals are lower when compared with Greater Central. In this tight market, rentals are expected to continue growing and new records might be set in the next two quarters. The market is waiting in anticipation to see if the Government's measures such as
12-mth outlook

Vacancy - 1.1%

ASIA PACIFIC MARKETBRIEFS
including more sites for application and the revitalisation of industrial buildings to incorporate office use will relieve the crunch in office space. INDONESIA JAKARTA
Y-o-Y change

for almost 25% of total absorption. This is also reflected in the multiple smaller developments sprouting up in both the CBD and Off CBD locations. The trend of increasing absorption is likely to continue but there will be an increased supply in the coming quarters. Rents should remain relatively stable. KOLKATA
Y-o-Y change

Leasing enquiries and activities continued at high levels in the second quarter Vacancy with coal mining and its related services - 3.4% being the largest demand generators Rent in the CBD area. This trend can also + 1.2% be seen on the investment front. The mining sector, in particular coal mining, was the largest demand source for strata-office space and the average sales price per sq.m. has risen by 7% q-o-q. Leasing and sales activities are predicted to remain strong. With some 2.1 million sf estimated to be completed in the second half of this year, rentals and vacancy are likely to remain stable.
12-mth outlook

Leasing activity was subdued this quarter and absorption was primarily from the Vacancy engineering and telecom sectors. A ro+ 3.9% bust construction pipeline and increased Rent vacancy rates kept rents in the periph+ 12.0% eral locations under pressure. However, rental values across all micro markets are expected to be stable for the remainder.
12-mth outlook

MUMBAI
Y-o-Y change

INDIA AHMEDABAD
Y-o-Y change

Ahmedabad continued to see buoyant demand for office space. Besides the banking sector, which is the primary demand driver for office space, there Rent was also an increased demand from the + 3.0% IT and manufacturing sectors. Stable demand, coupled with no new supply resulted in a slight drop in vacancy this quarter. As the economy continues to do well stimulating corporate expansion plans, there will be slight appreciation in rental values.
12-mth outlook

Vacancy - 1.0%

Several companies have scaled up their operations resulting in increased leasing transactions this quarter. Rental values however, have remained stable due Rent to high vacancies across most micro 0.0% markets. With the withdrawal of benefits under the Software Technology Park and little availability of SEZ space in the city, the IT/ITes sectors are in the process of considering their options for the future.
12-mth outlook

Vacancy + 2.0%

NCR

BANGALORE
Y-o-Y change

Buoyant demand coupled with conservative supply caused rental appreciation across all micromarkets for Bangalore. Overall vacancy rates were reduced to Rent 13.3%. Absorption was dominated + 4.0% by IT/ITes sector this quarter with a few transactions over 100,000 sf, eg HCL. The lack of supply in Grade A space has also led to an increase in demand for Grade B stock; which accounted for almost 40% of total absorption this quarter.
12-mth outlook

Vacancy - 2.5%

New supply with a steady increase in absorption kept vacancies and rentals Vacancy stable in most submarkets. This quarter + 2.8% saw new completions of 1.7 million sf in Rent Gurgaon and Noida catering to the IT 0.0% sector. These locations are the preferred destinations as reflected by the high absorption share of 56%. On the outlook, rental values will continue to be stable across most submarkets in view of the steady supply coming on-stream.
Y-o-Y change 12-mth outlook

PUNE

CHENNAI
Y-o-Y change

The Chennai market witnessed significant pre-commitments in commercial office space this quarter, especially in the suburban districts. A majority demanded Rent for Special Economic Zone (SEZ) space. + 8.0% As such, the overall vacancy dipped to 17.9% from 19.3% last quarter. Moderate rental appreciation of about 4% to 10% was seen across all micromarkets. Approximately 3.1 million sf will be completed in the third quarter and rental values should remain stable.
12-mth outlook

Vacancy - 1.4%

The large supply (about 3.0 million sf ) this quarter has caused a sharp increase Vacancy in Pune's vacancy rate from 25% to + 3.7% 29%. The influx of supply however, is Rent in the suburban areas. Hence, the rental + 3.0% values in the CBD and Off CBD have remained stable. The city will continue to witness an additional supply of about 2.6 million sf over the next six to nine months and rentals are expected to be under pressure.
Y-o-Y change 12-mth outlook

SOUTH KOREA SEOUL
Y-o-Y change

HYDERABAD
Y-o-Y change 12-mth outlook

Vacancy - 2.0% Rent 0.0%

Traditionally, the key demand driver for Hyderabad is the IT/ITes sector. This quarter, interest was also seen from the banking and financial services, consulting and engineering which accounted

Seoul's market can be characterised as a tenant's market. Most buildings provide Vacancy rent-free periods and effective rents are + 1.1% slightly down by 10% to 20%. SignifiRent cant construction is underway and when + 5.0% completed would likely result in an oversupply if absorption remains at existing levels. For occupiers, such availability provides wider options in their renewal and expansion in the CBD area in particular.
12-mth outlook

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ASIA PACIFIC MARKETBRIEFS
MALAYSIA KUALA LUMPUR
Y-o-Y change

The oversupply situation within Klang Valley has been evident, creating a Vacancy downward pressure on rentals. Land+ 0.3% lords of older buildings are also considRent ering refurbishing and alteration works - 1.0% in the meantime, in a bid to remain competitive. Despite rentals on the downside, capital values have remained stable as a majority of owners and sellers have not been willing to lower their price expectations.
12-mth outlook

THAILAND BANGKOK
Y-o-Y change

The overall office market in Bangkok remained stable. A total of 111,500 Vacancy sq.m. will enter the market in the third - 0.7% quarter this year. If the same absorption Rent continues for the next two quarters, rents 0.0% are expected to be slightly higher. A new Government has been formed following the General Elections. It is still too early to evaluate if the new Government can bring more stability into the political environment of Thailand.
12-mth outlook

PHILIPPINES MANILA
Y-o-Y change

Leasing activity in Manila remained positive, mainly driven by the business Vacancy process outsourcing (BPO)/call center - 2.6% industry. Despite bullish construction Rent in the pipeline, completions are at a + 5.7% slow pace. Current conditions should support rentals rising at a gradual pace as demand from BPO continues to grow with supply being limited.
12-mth outlook

VIETNAM HANOI
Y-o-Y change

There will be an additional 1.0 million sq.m. of office space completed over the Vacancy next three years and this is a significant + 1.5% amount as it is twice the current supply. Rent Pressure is expected on rentals and occu+ 0.3% pancy rates. Overall, it will be a tenant's market and occupiers are likely to take this opportunity to renew their leases at more favorable terms in current market conditions.
12-mth outlook

SINGAPORE
Y-o-Y change

The Grade A office market remained active, backed by increased interest for Vacancy newly completed top-tier space in the + 0.3% CBD. Selected take-ups in brand new Rent office facilities reached as high as S$15 + 8.9% per sf and this continues to widen the differential between brand new buildings and existing Grade A stock. New office construction and completions will peak this year at 2.79 million sf but more than 70% have been pre-leased. Completions in 2012 and 2013 on the other hand, will ease significantly to 1.7 million sf and 2 million sf respectively.
12-mth outlook

HO CHI MINH CITY
Y-o-Y change 12-mth outlook

The overall average Grade A and Grade B rents have been on the decline. With Vacancy several projects (totaling about 2 million - 1.0% sf ) due for completion in 2012/13, rentRent als are expected to continue to soften in - 14.0% the next few quarters. Due to economic uncertainty, these projects in the pipeline might also be delayed.

TAIWAN TAIPEI
Y-o-Y change

Leasing activity remained active primarily due to the expansion of MNCs and new offices set up by Chinese companies. There was no new supply since the Rent fourth quarter last year and the average + 0.8% rental is on the uptrend. On investment activity, major real estate transactions totalled about US$1.4 billion, 80% of which was secured in 2010. Retail properties have been popular this quarter, boosted by both domestic demand and the Chinese market. In the second half of this year, Taipei will see the completion of two Grade A office buildings which will help to ease the demand.
12-mth outlook

Vacancy - 0.5%

JAPAN TOKYO

Tokyo's office market is currently stable. Absorption remained positive this quarVacancy ter with a slight decrease in vacancy to - 0.2% 7.9%. Rents in the CBD have also been Rent lower at JPY12,989/tsubo/month com- 1.6% pared to JPY13,152. Tokyo currently faces the challenge of having a surplus supply in the short term as demand is reduced due to the changing demographics of the city with post-war baby-boomers expected to retire in 2012.
Y-o-Y change 12-mth outlook

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ASIA PACIFIC MARKETBRIEFS
2Q 2011 SIGNIFICANT NEW LEASE TRANSACTIONS Country/City China, Beijing India, Mumbai India, Pune India, Mumbai China, Shenzhen Building Jiaming Center Jalan Mills Embassy Tech Zone L & T ­ Tower 1 Netac Building CBD Lower Parel Hinjewadi Andheri High-tech Park Submarket Bayer Star TV Atos Origin J P Morgan Chase Tencent Tenant Square Feet 317,535 300,000 300,000 270,000 236,806
Table: 1

Source: Cushman & Wakefield Research

2Q 2011 SIGNIFICANT NEW SALE TRANSACTIONS Country/City Japan, Tokyo South Korea, Seoul South Korea, Seoul South Korea, Seoul China, Beijing Building Shinjuku Subaru Building Hana Daetoo IB Buidling M plaza Gangbyeon Techno Mart Beijing International Electrical Headquarter Block 1B Submarket Shinjuku CBD CBD Others Jiuxianqiao Buyer Odakyu Electric Railway/Fuji Heavy Industries Mirae Asset MAPS Global Investments Co Ltd/Hanshin Mutual Savings Bank Invesco/Lehman Brothers' fund JR AMC Co Ltd/Prime Group Media Tek (Beijing) Inc/Beijing Electronic Zone Investment and Development Co Square Feet 219,424 530,650 295,157 699,654 236,806 Purchase Price (US$ million) 406 223 158 149 63
Table: 2

Source: Cushman & Wakefield Research

2Q 2011 SIGNIFICANT CONSTRUCTION COMPLETIONS Country/City India, NCR Singapore India, Kolkata India, Pune Singapore Building Spaze I-Tech Park Asia Square Tower 1 Godrej Waterside EON Free Zone Cluster B Ocean Financial Centre Submarket Gurgaon Marina Bay Rajarhat Kharadi Raffles Place NA Citi Group (250,000 sf) ANZ Bank (200,000 sf) Major Tenant Square Feet 1,400,000 1,300,000 1,200,000 1,000,000 850,000 Completion Date 2Q11 2Q11 2Q11 2Q11 2Q11
Table: 3

Source: Cushman & Wakefield Research

2Q 2011 SIGNIFICANT PROJECTS UNDER CONSTRUCTION Country/City Singapore India, Mumbai India, Ahmedabad Japan, Tokyo Malaysia, Kuala Lumpur Building Marina Bay Financial Centre Tower 3 Peninsula Business Park Iscon Elegance Nishi Shinjuku 8-chome Project KLCC Tower 3 Submarket Raffles Place Lower Parel S.G. Highway Shinjuku KL City Major Tenant DBS (70,000 sf) NA NA Septeni Holdings NA Square Feet 1,258,500 1,200,000 1,000,000 931,698 840,000 Completion Date 2Q12 4Q11 3Q11 3Q11 4Q11
Table: 4

Source: Cushman & Wakefield Research Source: Cushman & Wakefield Research

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ASIA PACIFIC MARKETBRIEFS
2Q 2011 RENTAL RATES

LOCAL CURRENCY* GRADE A GROSS RENTAL RATE

USD* GRADE A GROSS RENTAL RATE

EURO* GRADE A GROSS RENTAL RATE

MARKET/ SUBMARKET

CITY

MEASUREMENT

QOQ CHANGE IN RENTS

YOY CHANGE IN RENTS

Australia Australia Australia Australia Australia China China China China China China India India India India India India India India Indonesia Japan Korea Malaysia Philippines Singapore Taiwan Thailand Vietnam Vietnam

Sydney Melbourne Brisbane Perth Adelaide Beijing Shanghai Chengdu Guangzhou Shenzhen Hong Kong Bangalore Chennai Hyderabad Kolkata Mumbai NCR Pune Ahmedabad Jakarta Tokyo Seoul Kuala Lumpur Manila Singapore Taipei Bangkok Ho Chi Minh City Hanoi

AUD/sqm/mth AUD/sqm/mth AUD/sqm/mth AUD/sqm/mth AUD/sqm/mth RMB/sqm/mth RMB/sqm/mth RMB/sqm/mth RMB/sqm/mth RMB/sqm/mth HKD/sf/mth INR/sf/mth INR/sf/mth INR/sf/mth INR/sf/mth INR/sf/mth INR/sf/mth INR/sf/mth INR/sf/mth IDR/sqm/mth JPY/tsubo/mth KRW/sqm/mth RM/sf/mth PHP/sqm/mth SGD/sf/mth TWD/ping/mth THB/sqm/mth VND/sqm/mth VND/sqm/mth

68.75 54.17 50.83 52.50 33.33 287.70 302.00 114.53 140.70 188.30 76.09 85.00 65.00 47.00 115.00 300.00 257.00 60.00 36.00 190,021.00 27,023.00 29,540.00 6.19 555.00 9.15 2,516.00 712.00 739,770.00 777,350.00

3.1% 6.6% 0.0% 0.0% 2.6% 11.9% 7.7% 2.2% 4.1% 6.3% 14.5% 4.0% 8.0% 0.0% 12.0% 0.0% 0.0% 3.0% 3.0% 1.2% -1.6% 5.0% -1.0% 5.7% 8.9% 0.8% 0.0% -14.0% 0.3%

-1.2% 18.2% 0.0% 5.0% 5.3% 38.9% 32.5% 17.6% 5.0% 29.3% 34.8% 13.0% 18.0% 0.0% 17.0% 0.0% 4.0% 7.0% 9.0% 4.3% -7.2% 3.0% 2.8% 5.7% 14.5% 0.6% -1.0% -25.0% -0.7%

6.71 5.28 4.96 5.12 3.25 4.13 4.33 1.64 2.01 2.70 9.77 1.83 1.42 1.00 2.50 7.08 5.67 1.33 0.79 2.05 9.45 2.56 2.03 1.19 8.40 2.46 2.15 3.33 3.50

50.81 40.03 37.57 38.80 24.63 31.22 32.77 12.43 15.27 20.43 74.14 14.13 10.80 7.81 19.11 49.86 42.72 9.97 5.98 15.52 71.55 19.08 15.47 9.05 55.93 17.94 16.03 24.69 25.95

* In psf per month * In psm per month Source: Cushman & Wakefield Research

Table: 5

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ASIA PACIFIC MARKETBRIEFS
2Q 2011 OVERALL VACANCY RATES

Singapore Beijing Hong Kong Melbourne Tokyo Manila Ahmedabad Sydney Adelaide Seoul Shanghai Brisbane Perth Shenzhen Jakarta Bangkok Taipei Hyderabad Bangalore Hanoi NCR Kuala Lumpur Chennai Ho Chi Minh City Guangzhou Mumbai Chengdu Kolkata Pune

3.8% 4.5% 4.6%

6.2% 6.7% 6.7% 8.0% 8.1% 8.3% 8.8% 8.8% 9.3% 9.4% 9.7% 10.6% 11.3% 12.7% 13.0% 13.3% 13.5% 15.2% 16.8% 17.9%

20.0% 21.8% 22.0%

26.1% 27.6% 29.0%

Source: Cushman & Wakefield Research

Figure: 1

PROJECTS UNDER CONSTRUCTION IN ASIA PACIFIC

Australia 2.1% Malaysia 4.1% Korea 7.3%

Philippines Taiwan Hong Kong Singapore 1.1% 1.7% 1.5% Indonesia 1.6% 1.7% Japan 4.0%

Thailand 0.4%

China 33.0% 33.0%

China

India India 32.3% Vietnam 9.0%

32.3%

Total construction = 273.8 million sf
Source: Cushman & Wakefield Research Figure: 2

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ASIA PACIFIC MARKETBRIEFS
Cushman & Wakefield's Asia Pacific Research Group utilizes research data material, statistics and sources to create leading micro and macro economic market reports and publications about the Asia Pacific region. Through the delivery of timely, accurate, high-quality research reports on the leading trends, markets around the world and business issues of the day, we aim to assist our clients in making property decisions that meet their objectives and enhance their competitive position. For all research related queries, please contact Sigrid Zialcita Managing Director, Research, Asia Pacific Email: sigrid.zialcita@ap.cushwake.com Address: 3 Church Street #09-03 Samsung Hub Singapore 049483 65 6535 3232 Joanne Lee Manager, Research, Asia Pacific Email: joanne.lee@ap.cushwake.com Address: 3 Church Street #09-03 Samsung Hub Singapore 049483 65 6535 3232

AUSTRALIA David Woolford Managing Director Email: David.Woolford@ap.cushwake.com Address: Level 1, 60 Castlereagh Street Sydney, Australia NSW 2000 612 9223 4888 CHINA Andy Zhang Managing Director Email: Andy.Zhang@ap.cushwake.com Address: 6F, Tower 1, China Central Place No. 81 Jianguolu, Chaoyang District Beijing, China 100025 86 10 5921 0808 HONG KONG John Siu Executive Director Email: John.Siu@ap.cushwake.com Address: 6th Floor, Henley Building 5 Queen's Road Central Hong Kong, China 852 2956 3888 INDIA Anurag Mathur Managing Director Email: Anurag.Mathur@ap.cushwake.com Address: 14th Floor, Tower C, Building 8 DLF Cyber City Gurgaon, India Haryana-122002 91 124 4695555 INDONESIA David Cheadle Managing Director Email: David.Cheadle@ap.cushwake.com Address: Jakarta Stock Exchange Building Tower 2, 15th Floor Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190 62 21 2550 9500

JAPAN Todd Olson Executive Managing Director Email: todd.olson@ap.cushwake.com Address: Sanno Park Tower 13F 2-11-1 Nagatacho Chiyoda-ku, Tokyo, Japan 100-6113 813 3596-7070 MALAYSIA YY Lau CEO Email: yylau@yypropertysolutions.com Address: Lot 3A-1, Level 4, Wisma W1M 7 Jalan Abang Haji Openg Taman Tun Dr Ismail Kuala Lumpur, Malaysia 60000 603 7728 8116 PHILIPPINES Jose Marie Cuervo CEO Email: josemari_cuervo@cuervo.com.ph Address: 5th F S&L Building 101 Esteban St. cor. Dela Rosa St. Legaspi Village, Makati City 1229, Philippines 632 750 6610 SINGAPORE Toby Dodd Executive Director Email: Toby.Dodd@ap.cushwake.com Address: 3 Church Street #09-03 Samsung Hub, Singapore 049483 65 6535 3232 SOUTH KOREA Richard Hwang Managing Director Email: Richard.Hwang@ap.cushwake.com Address: 5/F Korea computer building 21 Sogong-dong, Jung-gu Seoul, South Korea 100-070 822 3188 322

TAIWAN Michael Tseng President Email: mktseng@repro.com.tw Address: REPro International Inc. 13F-2, No. 89, SongRen Road Exchange Square One Taipei, Taiwan 886 2 2758 6000 THAILAND Teerawit Limthongsakul Director Email: teerawit@nexus.co.th Address: 31st FI., Bangkok Insurance Building / Y.W.C.A. 25 South Sathorn Road, Thungmahamek, Sathorn Bangkok 10120, Thailand 02 286 8899 VIETNAM Leon Cheneval Executive Director Email: Leon.Cheneval@ap.cushwake.com Address: Room 602, Asia Tower, 6 Nha Tho street, Hoan Kiem district, Hanoi 84 4 3938 1786

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