Cushman & Wakefield Research

MARKETBEAT
OFFICE SNAPSHOT
A Cushman & Wakefield Research Publication

KUALA LUMPUR, MALAYSIA

Q2 2012

ECONOMY
The Malaysian economy grew moderately to register a 4.7% growth rate in the first quarter of 2012 as compared to 5.2% in the fourth quarter of 2011 as the country's external sector started to feel the pinch from the prolonged economic crisis in the euro zone economy. Domestic demand, however, continued to play its pivot role in sustaining the country's economy activities with a growth rate of 9.6% during the first quarter of the year, albeit lower than the 10.4% growth rate recorded in the previous quarter. On the supply side, all economic sectors reported lower growth rates compared to the preceding quarter. The services sector recorded a growth rate of 5% during the first quarter of the year (fourth quarter of 2011: 6.6%) supported by the domestic-demand driven by subsectors namely wholesale and retail trade, real estate and business activities and communications. Meanwhile, inflation rate was also lowered to 2.3% in the first quarter of 2012 from the 3.2% inflation rate recorded in the fourth quarter of 2011. Unemployment rate remained unchanged at 3% in the first quarter of 2012 (fourth quarter of 2011: 3%).

With the large supply expected to come on-stream over the next six to nine months, landlords of the new buildings may start to offer more favorable leasing terms to entice potential tenants. The office market, therefore, is expected to be steering towards the tenant's market in the second half of 2012 and early-2013.

STATS ON THE GO
1Q12 Vacancy Grade A Overall Rents 15.4% RM7.48 Q-O-Q CHANGE -3.3% 0.3% Y-O-Y CHANGE 1.4% 20.9% 12 MONTH OUTLOOK

Note: For Kuala Lumpur CBD Office Market only Source: YYPS Research

ECONOMIC INDICATORS
MALAYSIA *GDP Growth **CPI Growth **Unemployment
Source: *Bank Negara Malaysia, IMF **Bank Negara Malaysia

2010 7.2% 1.7% 3.3%

2011 5.1% 3.2% 3.1%

2012F 4.0% - 5.0% 2.5% - 3.0% 3.2%

RENT AND VACANCY RATE
In this review quarter, no new buildings were completed. Thus, the overall rental rate of the monitored sample of basket Grade A office buildings have remained stable. In this quarter, average net effective gross rent in the KL CBD edged up marginally to RM7.48 per square feet (/sf), as opposed to RM7.46/sf recorded in the previous quarter. Average vacancy rate also improved slightly to 15.4% in the second quarter of 2012 from 18.7% in the first quarter of 2012. Within Klang Valley, average net effective gross rate for selected Grade A buildings increased marginally to RM6.11/sf (first quarter of 2012: RM6.09/sf), whilst average vacancy rate declined by 2.3% to register at 11.8% during the review period (first quarter of 2012: 14.1%).

GRADE A OVERALL RENTAL VS. VACANCY RATES
8.00 RM/sf/month 6.00 4.00 10% 2.00 0.00 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Vacancy 5% 0% 25% 20% 15%

OUTLOOK
The overall improvement of vacancy rates of the existing prime Grade A office buildings monitored during the second quarter indicates the resilient demand for good quality and well-managed existing office buildings in the Klang Valley office market. Nonetheless, landlords of existing office buildings are in general adopting a cautious strategy in adjusting the rental rates in order to retain their existing tenants. The office market is expected to face intense competition as the KL CBD area is anticipating a large supply, approximately 1.96 million sf. The KL Fringe area also expects to see 1.90 million sf entering the market by end-2012 or early-2013.

Grade A Net Effective Rent (RMpsf)

KUALA LUMPUR MARKET STATISTICS
SUBMARKET INVENTORY OVERALL VACANCY RATE UNDER CONSTRUCTION YTD CONSTRUCTION COMPLETIONS 0 0 0 0 0 0 OVERALL DIRECT NET ABSORPTION 133,817 -33,734 100,083 192,265 -112,012 180,336 GRADE A AVERAGE NET (RM/SQFT/MTH) 1Q12 7.46 5.79 6.66 4.31 4.10 RM6.09 2Q12 7.48 5.84 6.69 4.31 4.10 RM6.11 US$ SF/YR 2Q12* $28.13 $21.96 $25.15 $16.22 $15.41 $22.98 EURO SF/YR 2Q12* 22.37 17.46 20.00 12.90 12.25 18.27

KL CBD KL FRINGE SUBTOTAL - KL **SELANGOR CYBERJAYA & PUTRAJAYA TOTAL

35,344,019 34,565,951 69,909,970 23,212,663 3,155,061 **96,277,693

16.0% 25.1% 20.5% 22.3% 40.7% 21.7%

4,507,232 7,541,349 12,048,581 4,894,431 1,496,935 18,439,947

*RENTAL RATES REFLECT NET EFFECTIVE RATE MYR PSF/YEAR **INVENTORY OF SELANGOR EXCLUDES CYBERJAYA Source: yyps research, napic report

MARKET HIGHLIGHTS
SIGNIFICANT 2Q12 LEASE TRANSACTIONS BUILDING Menara Maxis KL Sentral Park Quill 7 The Gardens South Tower Puchong Financial Corporate Centre Puchong Financial Corporate Centre MARKET KL CBD KL Fringe KL Fringe KL Fringe Decentralized Area Decentralized Area TENANT CEO Suite Serviced Office SBM Malaysia Axiata Alcatel OCBC Bank Bank of China BUILDING CLASS A A A A A A SQUARE FEET 13,000 17,000 13,000 16,000 10,000 5,000

SIGNIFICANT 2Q12 SALE TRANSACTIONS BUILDING Menara Tun Razak 2 MARKET KL CBD BUYER Tradewinds Corporation PURCHASE PRICE (RM) 510,000,000 SQUARE FEET 439,800

SIGNIFICANT 2Q12 CONSTRUCTION COMPLETIONS BUILDING MARKET MAJOR TENANTS SQUARE FEET COMPLETION DATE -

SIGNIFICANT 2Q12 PROJECTS UNDER CONSTRUCTION BUILDING Integra Tower @ The Intermark Menara Darussalam Menara Binjai Menara Felda KL Sentral ­ Lot A Point 92 Damansara Perdana 348 Sentral KL Sentral ­ Lot G Office Tower 1 KL Sentral ­ Lot G Office Tower 2 Jaya 33 Cybercentre ­ Tower 4 Jaya 33 Cybercentre ­ Tower 5 MARKET KL CBD KL CBD KL CBD KL CBD KL FRINGE DECENTRALIZED AREA KL FRINGE KL FRINCE KL FRINCE DECENTRALIZED AREA DECENTRALIZED AREA MAJOR TENANTS Felda CIMB Investment Bank Shell Malaysia SQUARE FEET 777,000 164,000 330,000 689,000 600,000 158,000 500,000 320,000 480,000 265,000 265,000 COMPLETION DATE 3Q2012 3Q2012 3Q2012 3Q2012 3Q2012 3Q2012 4Q2012 4Q2012 4Q2012 4Q2012 4Q2012

* RENEWAL - NOT INCLUDED IN LEASING ACTIVITY STATISTICS

YY Property Solutions Sdn Bhd Lot 3A-I, Level 4, Wisma WIM 7 Jalan Abang Haji Openg Taman Tun Dr Ismail 60000 Kuala Lumpur, Malaysia Tel: +603 7728 8116 (Agency & Corporate Real Estate) Tel: +603 7728 4117 (Valuation & Consultancy) www.yypropertysolutions.com

This report contains information available to the public and has been relied upon by Cushman & Wakefield on the basis that it is accurate and complete. Cushman & Wakefield accepts no responsibility if this should prove not to be the case. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. ©2012 Cushman & Wakefield, Inc. All rights reserved.