asia pacific capital markets in focus - jll 2q16-final.… · asia pacific capital markets in focus...

1

Asia Pacific Capital Markets in Focus

Stable investment market in H1. More deals in the pipeline for H2July 2016

Highlights/

Outlook

Market

Conditions

Market

Fundamentals

Macro

Environment

Fast Facts-4%

Asia Pacific Commercial Real Estate Investment Volumes

H1 2016

Total Transactions (US$ bn)

Office | Rising rents in Australia and Hong Kong. Falls in Singapore but stable rents elsewhere.

Retail | Retailers are cautious towards expansion across most of Asia, but expanding in Australia.

Industrial | Demand is supported by 3PLs & e-commerce in Asia, and retailers in Australia.

Residential | Stronger sales in HK and Singapore driven by the incentives / discounts. Slower price

and sales growth in Australia and Tokyo. Policy tightening led to sales slump in Shanghai.

Hotel | Diverse trading performance. Still strongest showing in Tokyo and Australia.

• Muted impact of “Brexit” on the Asia Pacific region due to limited trade exposure.

• The IMF in the World Economic Outlook cut its forecast global growth for 2016 cut by 0.1

percentage points. China’s near-term outlook has improved but a stronger Yen has weakened

Japan’s outlook.

• Investor demand for safe-haven and the prospect of most central banks keeping interest rates

lower for an extended period have driven government bond yields to fresh lows globally.

Key Contacts

Asia Pacific | Stuart Crow | +65 6494 3888

AP Research | Megan Walters | +65 6494 3649

Tokyo | Akihiko Mizuno | +81 3 5501 9947

Sydney | Simon Storry | +61 2 9220 8439

Melbourne | Robert Anderson | +61 3 9672 6588

Beijing | Kevin Qin | +86 10 5922 1191

Shanghai | Johnny Shao | +86 21 6133 5807

Hong Kong | Joseph Tsang | +852 2846 5231

Singapore | Greg Hyland | +65 6494 3876

Seoul | Steven Craig | +822 3704 8806

Delhi & Mumbai | Shobhit Agarwal | +91 22 2482 8488

Asia Pacific Capital Markets in Focus | Q2 2016Report prepared by Dr Megan Walters and Myles Huang

Stuart Crow

53.6H1 2016 vs. H1 2015

Change

• It is probably too early to see direct impact from the Brexit vote on AP real estate investment.

• Financial market volatility will likely enhance the attractiveness of some regional markets (e.g.

Australia) as a preferred destination for global capital.

• Pressure on 2007/ 2008 vintage PERE funds close to the end of fund life to sell remaining assets.

• Falling global bond yields are pushing A grade yield spreads in some markets towards record

highs – despite low cap rates.

• H1 AP investment volumes were stable y-o-y at USD 54bn. Singapore led Q2 results on a mega-

deal. Stable in Australia and Japan but lighter deal flows in Greater China due to a lack of stock.

• Cross-border investors remain active on both sides of the ledger, accounting for 36% of Q2 total.

• Capital flow by inter-regional purchasers regionally have fallen y-o-y in H1, in light of economic

uncertainty. Intra-regional purchaser capital flow within the region continued to trend higher.

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2

Asia Pacific | Investment Deal Highlights

Asia Square Tower One

Shinagawa Seaside East

Tower (Office & Hotel)

No. 25 Man Fuk Road

Nara Building

SYDNEY

MELBOURNE

SINGAPORE

MUMBAI

SEOUL

HONG KONG

BEIJING

SHANGHAI

TOKYO

Evergo Tower

420 George Street

(75% interest)

Asia Pacific Capital Markets in Focus | Q2 2016

Seller Blackrock

Buyer Qatar Investment

Authority

SGD 3.4bn (USD 2.5bn)

Seller M&G Real Estate

Buyer Koramco

KRW 208bn (USD 179m)

Seller Chinese Estate

Holdings

Buyer Local SOE

RMB 1.15bn (USD 176m)

Seller HK Private

Buyer UK based

international school

HKD 673m (USD 86m)

Seller Fortius

Buyer Investa Commercial

Property Fund

AUD 443m (USD 330m)

Seller GIC

Buyer Invesco

JPY 25bn (USD 232m)

BRISBANE

Shimao Gongsan

Plaza

Seller Shimao Gongsan

Buyer Letv

RMB 2.9bn (USD 447m)

Satellite Corporate

Centre

Seller Frasers Property Group

Buyer Stockland

AUD 88m (USD 65m)

DELHI

Vicinity Centres

Portfolio Sale

Seller Vicinity Centres

Buyer Blackstone

AUD 840m (USD 627m)

Tokyo

Akihiko Mizuno

Outlook

Market

Conditions

Market

Fundamentals

Macro

Environment

• 2016 transaction volumes (in Yen terms)

will likely fall short of last year’s level, due to

a shortage of large deals.

• Strong appetite from international investors

will continue as Japan is seen as a safe

haven amidst global uncertainty.

• We are starting to see more Japanese

investors chasing yield and diversification in

offshore markets.

• Some investors are targeting the hotel

sector in order to capture a share of the

booming tourist industry.

• Stable cap rates in core asset classes.

Scope for some compression in niche areas.

• Investment volumes were up 16% y-o-y (+4%

in Yen terms) in Q2 2016. Fewer large deals

have made their way into the market. Landlords

are unmotivated to sell and some have

refinanced assets as an alternative to selling.

• Prime office and retail assets are keenly priced

and difficult to find.

• Some J-REITs were outbid as price/yields in

recent deals have exceeded their affordability.

• Mid-sized developers that plan to redevelop/

refurbish older buildings are the main buyers.

• Plenty of debt is available as banks are keen to

lend. New PE funds are raising capital.

Office | Rent growth was slower-than-expected and

concentrated in prime buildings.

Retail | International retailers are more cautious

towards expansion as luxury goods sales slows.

Industrial | 3PLs (including retailers and

manufacturers) and e-commerce firms.

Residential | Falling interest rates buoyed upswing

in condominium prices, but sales have slowed.

Hotel | Although the number of foreign visitors has

topped 10 million in H1, the stronger yen may

dampen Revenue per Available Room (RevPAR).

• Capital Economics now forecasts 2016 GDP

to remain flat (0.5% in 2015) as a result of

weak consumer demand.

• Prime Minister Abe announced the delay of

the consumption tax hike to October 2019.

• The Abe administration and coalition parties

have gained a two-thirds majority of Japan's

upper house election in July, which should

help the ruling party press forward with their

economic reforms and stimulus package

• The Yen has been strengthening off the back

of safe haven buying. Should this trend

continue, the BoJ could take steps to alleviate

further appreciation.

Notable

Transactions

• Some investors are moving to regional cities to find deals

and yield

• Some investors have broadened their mandates to look at

niche markets - self-storage, student housing, aged care

• Multifamily offers good yields and stable income

3

Fast Facts

2.6-3.0 2.6-3.5 4.2-5.5

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

Grade A Office Retail Industrial Q2 2016 Total Transactions

(US$ bn)

Japan Market Statistics 6-12 Month Outlook

-0.25 10-yr JGB bond yield (% p.a.),

2Q16

Deal availability No. of foreign buyers Cap rate trend

Tokyo Office (CBD)

Source: JLL (REIS)

7.4

Hotel Grand Pacific Le Daiba | Hotel | USD 610m

Seller Keikyu Corporation | Buyer Hulic Co. Ltd.

Shinagawa Seaside East Tower | Office & Hotel

USD 232m | Net Yield 3.9% | Seller GIC

Buyer Invesco

Ueno East Tower | Office & Hotel | USD 200m

Net Yield 4.2% | Seller Mitsui Fudosan Co., Ltd.

Buyer Nippon Building Fund

Asia Pacific Capital Markets in Focus | Q2 2016Sources: JLL, Japan Government

Asia 3rd

+16%Q2 2016 vs. Q2 2015

Change

Japan’s ranking

JLL Real Estate Transparency 2016

Office rent and capital value

(y-o-y growth)

Up / down / side

arrows show

expectation of

market conditions.

0

5

10

15

20

25

4Q12 4Q13 4Q14 4Q15 2Q16%

Net Eff Rent Growth (y-o-y)

Capital Value Growth (y-o-y)

Sydney

Simon Storry

• Strong demand for office assets reflects investor

confidence in the leasing market

• Long leased commercial and industrial assets are highly

sought after

• Investors chasing yield look into secondary markets

5.0-6.0 4.75-7.25 6.0-7.25

Australia Commercial Real Estate Investment Volumes

Office Retail

Australia Market Statistics 6-12 Month Outlook

Deal availability No. of foreign buyers

4

• Investment activity in Australia was up 32% q-

o-q for Q2. Cross-border transaction volumes

totalled US$ 2.7bn in the quarter.

• Domestic investors have recently acquired

several large real estate assets and portfolios.

• Foreign investors actively seek exposure to

sub-regional shopping centres and all grades

of industrial assets.

• Financial market volatility has driven

superfunds and insurance groups to target

securely leased investments.

• Capital raising by private equity and domestic

syndicates has been successful. Banks are

tightening lending criteria.

Office | Cyclical upswing driven by centralisation

and expansionary activity from the finance and

professional services sectors.

Retail | International retailers continued to expand.

Low vacancy rates across all retail sub-sectors.

Industrial | Strong demand for prime grade space.

Wider divergence between the prime and

secondary markets.

Residential | Supply of apartments is set to peak

over 2017-18.

Hotel | Stable occupancy levels and rising room

rates will further push RevPAR upwards.

• Consensus Economics forecasts GDP

growth of 2.9% this year and 2.8% in 2017.

Stronger business confidence pointed to a

further improvement in the non-mining

economy in Q2.

• The Reserve Bank cut policy interest rate to

a record low of 1.75% in May. Another rate

cut in August is likely.

• Slower house price growth and sales.

• Lower domestic interest rates should help

the A$ to depreciate to around 0.72 to US$

by the end of the year.

Industrial

One Shelley | Office | USD 391m

Seller Brookfield Office Properties | Buyer Charter Hall

/ Morgan Stanley

420 George Street | Office | USD 330m (75% interest)

Yield 4.9% | Seller Fortius Funds Management

Buyer Investa Commercial Property Fund

JP Morgan Industrial Portfolio | Industrial

USD 186m | Yield 6.5% | Seller JP Morgan

Buyer AMP

Sydney Office (CBD)

Source: JLL (REIS)

Outlook

Market

Conditions

Market

Fundamentals

Macro

Environment

Notable

Transactions

Fast Facts

-75

Sources: JLL, Reserve Bank of Australia

Transactional Yield Ranges (%)

1.75Cash rate (% p.a.), 2Q16 Cap rate trend

Q2 2016 Total Transactions

(US$ bn)

+32%Q2 2016 vs. Q1 2016

Change

Monetary easing

since 4Q14 (bps)Asia Pacific Capital Markets in Focus | Q2 2016

World 2nd

Australia’s ranking


• Financial market volatility will likely

enhance the attractiveness of Australia as

a preferred destination for global capital

given its secure governance and

transparent market structure.

• Investors chasing yield will have to look

outside prime and into secondary markets.

• With spreads still high and the prospect of

above-trend rental growth, we expect

further yield compression (under 5% for

prime offices) before the end of the year.

4.4


(y-o-y growth)

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4Q12 4Q13 4Q14 4Q15 2Q16%



Melbourne

Robert Anderson

• Right time to divest prime Grade A office as pricings have

become very tight

• Look at city fringe offices and Grade B CBD offices

• Secondary industrial as well as metropolitan shopping

centres in strong population growth catchment areas

5.25-6.75 4.75-7.5

Australia Commercial Real Estate Investment Volumes

Office Retail

Australia Market Statistics 6-12 Month Outlook


5

• Robust outlook for transactions over the

next 6-12 months, supported by the depth

of capital looking for investment across all

asset categories.

• With very tight pricings in prime Grade A

offices, investors will look to city fringe

offices (lower vacancy risks and good

tenants) and Grade B CBD offices to

benefit from future rent growth.

• With spreads still high and rental growth,

we expect further yield compression before

the end of the year.

• Domestic investors active in the market

include private investors and syndications.

International investors are actively buying.

• There is depth of capital from core and

core plus funds.

• Vendors have the potential to capitalise on

strong pricings, but find limited

reinvestment opportunities available.

• Very few assets are available in the CBD.

More industrial portfolio offerings.

• Residential sites are available but banks

are unwilling to fund residential projects –

pockets of distress likely.

Office | Expansion by professional services,

education and the public sector.

Retail | International retailers have been attracted

to redevelopment projects.

Industrial | International retailers’ expansion

boosted demand for third party logistics services.

Major supermarket retailers continued investing into

new warehouses.

Residential | Median home price fell by 1.0% in

1Q16, the largest quarterly fall since June 2013.

Hotel | RevPAR growth should continue in the next

few years but the supply pipeline is growing.

• The Victorian economy is gaining ground

with strong housing finance and population

growth.

• Victoria together with New South Wales

recorded the fastest retail turnover growth

nationally at 5.1% y-o-y in April.

• Apartment supply in Melbourne is set to

peak in 2017-18. However, the

geographical focus of developers is

shifting away from the CBD and inner city

locations where the supply pipeline is

strongest.

Industrial

Como Centre | Mixed-use | USD 125m

Seller Mirvac | Buyer Newmark Capital

Satellite Corporate Centre | Office | USD 65m

Yield 7.0% | Seller Frasers Property Group

Buyer Stockland

Melbourne Office (CBD)

Source: JLL (REIS)

Outlook

Market

Conditions

Market

Fundamentals

Macro

Environment

Notable

Transactions

Fast Facts

Sources: JLL, Australia Government


6.25-7.5


Australia’s ranking


1.9510-yr AGS bond yield (% p.a.),

2Q16

World 2nd


(US$ bn)

+32%4.4Q2 2016 vs. Q1 2016

Change


(y-o-y growth)

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arrows show

expectation of

market conditions.

-15

-5

5

15

25

4Q12 4Q13 4Q14 4Q15 2Q16%



Hong Kong

Joseph Tsang

• Mainland Chinese investors focus on core Central offices.

• End-users see opportunities to consolidate to

decentralisaed areas due to a supply flux

• Soft retail (less PRC visitors) and industrial (expiry of

government revitalisation policy) markets

2.5-3.0 2.8-3.2 3.5-3.8

Hong Kong Commercial Real Estate Investment Volumes

Office Retail

Hong Kong Market Statistics 6-12 Month Outlook


6

• We expect a similar style of en-bloc deals

to continue in the next 12 months – long

term HK owner sells and Chinese entity or

end-user buys.

• Investors and end-users will continue to

favour office properties for long-term

investments, as Chinese demand supports

rents.

• More assets will come to market. Some

developers may sell assets (include enbloc

offices) to capitalise on high pricing levels.

• Yields will likely remain too low to attract

core capital, unless prices start to come

down in some sectors.

• Investment activity in Hong Kong fell by 59% y-

o-y in Q2. This came off the back of two strong

quarters that saw a few high profile trades.

• Investment activity in the industrial and retail

sectors picked up in Q2. The Link REIT

disposed seven retail assets for about US$

253m, as part of its capital recycling strategy.

• Investors were outbid by end-users and

developers in recent purchases in all sectors.

• China outbound capital remained active in the

office and luxury residential segments.

• Stable yields in Q2 (except for small

compression for industrial).

Office | Leasing demand in Central was driven by

expansion requirements from the banking and

finance sector.

Retail | Landlords of high street shops continued to

cut rents to lease space.

Industrial | Existing tenants became more

conservative during lease renewals.

Residential | More home buyers returned to the

market looking for bargains. Developers slashed

prices and offered attractive financing incentives.

Hotel | Occupancy rates and room rates both

trended lower in Q2, less in the luxury segment.

• The government is forecasting real GDP

growth of 1-2% this year, because of

moderation in inbound tourism and

financial market volatility.

• Retail sales fell 10.8% y-o-y in the first

five months of 2016. The number of

Mainland Chinese visitors (accounting for

75% of total visitors) fell 11.8% y-o-y in

the same period.

• Mass residential prices continued to

correct, with varied opinion of bottom,

some estimates – [25%]. Luxury prices

will remain buoyant.

Industrial

Hong Kong Office (Central)

Source: JLL (REIS)

NWS Kwai Chung Logistics Centre | IndustrialUSD 484m | Seller New World DevelopmentBuyer China Resources Enterprise

No. 25 Man Fuk Road | Others | USD 86mSeller HK Private | Buyer UK based international school operator

Link REIT 7 malls portfolio | Retail | USD 253mAverage Yield 3.7% | Seller Link REIT | Buyer Local investors


Outlook

Market

Conditions

Market

Fundamentals

Macro

Environment

Notable

Transactions

Fast Facts

Sources: JLL, Monetary Authority of Hong Kong


0.55HIBOR rate, 3-month

(% p.a.), 2Q16


(US$ bn)

-59%1.6Q2 2016 vs. Q2 2015

Change

Asia 2nd

Hong Kong’s global ranking



(y-o-y growth)

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expectation of

market conditions.

-15

-10

-5

0

5

10

15

4Q12 4Q13 4Q14 4Q15 2Q16%



Shanghai & Beijing

Johnny Shao

3.6.-5.0 3.9-5.0 5.5-6.5

China Commercial Real Estate Investment Volumes

Office Retail

China Market Statistics 6-12 Month Outlook

4.35Lending rate: 1-year

(% p.a.), 2Q16


7

• Transaction volumes in China doubled from

the levels in Q1. Asset availability was

relatively low after a record year of investment

in 2015 and due to few willing sellers.

• Institutional investors will continue to seek core

stabilised assets in major cities, which are

scarce to come by given strong rental growth.

• Domestic capital (trusts, funds) is active.

Sufficient onshore liquidity (domestic insurers

and SOEs) due to tighter control on capital

outflows.

• Core stabilised assets are trading within a tight

yield level.

Office | Domestic financial institutions dominated

the leasing markets in Shanghai and Beijing

markets.

Retail | F&B remained a core demand driver. Kids’

brands were active in suburban community malls.

Industrial | Strong demand from e-commerce

companies but performance of 3PLs varied.

Residential | Sales plunged after the Shanghai

government rolled out new restrictions in late March.

Hotels | Strong demand from the corporate sector.

The opening of the Shanghai Disney Resort

generates short-term demand.

• China real estate markets are based on

domestic occupiers and relatively well

insulated from global turmoil.

• A cyclical recovery over H2 2016 is likely,

party driven by credit growth. 2016 GDP

growth is projected at 6.5%.

• Policy makers have room for manoeuvre

but need to push forward with structural

reforms in order to sustain growth.

• No interest rate cuts but lower bank

reserve requirements are expected in H2.

• The RMB will likely weaken slightly against

the USD by end-2016.

Industrial

Shanghai Office (CBD)

Source: JLL (REIS)

ShanghaiYongfen International Plaza | Office | USD 194m Seller Shanghai Guang Wan Real Estate Co.Buyer East Money Information Corporation

Evergo Tower | Office | USD 176mSeller Chinese Estate Holdings | Buyer Local SOE

BeijingShimao Gongsan Plaza | Office | USD 447m Seller Shimao Gongsan | Buyer Letv


Outlook

Market

Conditions

Market

Fundamentals

Macro

Environment

Notable

Transactions

Fast Facts

-125

• A strong deal pipeline is expected for H2.

The investment market may be quieter in

2017 because core money that has been

buying will likely hold for longer period.

• More retail and logistic products – both

stabilised assets and value-added

opportunities – are coming to market.

• The trend of Chinese capital going global

will continue. A fall in the Pound may

provide an entry point into the UK for

Chinese investors.

• Yields for core assets should be close to

bottom, given current onshore interest

rates and costs of currency hedges.

Sources: JLL, PBOC



(US$ bn)

+96%6.0Q2 2016 vs. Q1 2016

Change

Monetary easing

since 4Q14 (bps)

Asia 6th

China’s alpha cities ranking


• Core offices will provide good income growth

• Value-added opportunities in business park and

logistics

• Opportunistic investors look to platform deal to get

logistics/retail portfolio


(y-o-y growth)

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expectation of

market conditions.

-4

1

6

11

16

4Q12 4Q13 4Q14 4Q15 2Q16%



8

Singapore• “Correction in Singapore pricing has resulted in value

emerging, particularly in office and residential markets.

We are forecasting pricing to rebound from 2018”

• More office stock (CBD en-bloc offices and

some strata-title prime offices) are on the

market as occupancy and rents fall.

• Retail assets with opportunity for value-add

could be sold.

• Pocket of distress may emerge in the

residential market due to the ongoing

market correction.

• Government policies are subduing

industrial / logistics investor demand.

• There is scope for yield compression in the

next 12 months on low vacancy levels and

the prospect of rent recovery.

• Singapore’s investment volumes more than

doubled y-o-y in Q2 on the sale of Asia

Square.

• Other notable deals include CapitaGreen

and The Straits Trading Building (freehold).

The latter set a new record per sq ft price

(S$3,520) for the Singapore prime office

market.

• Abundant equity funding. Office yields

remained stable after the recent benchmark

transactions.

Office | Rents declined 3.3% q-o-q in Q2 and have

corrected by 25–30% from peak levels.

Retail | New entrants were mostly in low-to-mid tier,

and some preferred to set up small pop-up stores.

Industrial | The logistic sector buoyed leasing

demand but other sectors remained weak.

Residential | Sales improved in the core central

region as developers lowered pricing and offered

more incentives (deferred payments, cash back etc).

Hotel | Improving visitor arrivals boosted hotel

performance but supply pressures remained.

• The government expects GDP to grow 1-3%

this year and inflation of -1% to 0%.

• Benign outlook on domestic interest rates on

expectation that the US will raise rates more

gradually than anticipated.

• The Monetary Authority of Singapore moved

to a zero SGD appreciation stance vs. the

trade-weight basket of currencies in April,

the first time since Oct 2008

• Caps on car loan tenures and LTV ratios

were relaxed in May to boost consumption.

• Increase in immigration may signal further

policy adjustment.

2.5-4.0 4.0-5.0 6.0-7.0

Singapore Commercial Real Estate Investment Volumes

Office Retail

Asia Square Tower One | Office | USD 2.5bn

Yield 3.2% | Seller Blackrock | Buyer Qatar

Investment Authority

Straits Trading Building | Office (freehold)

USD 412m | Yield 2.3% | Seller Sun Venture

Buyer Mayapada Group

Capitagreen | Office | USD 707m (60% interest)

Yield 3.9% | Seller CapitaLand / Mitsubishi

Buyer CapitaLand Commercial Trust

Singapore Market Statistics 6-12 Month Outlook


Greg Hyland

Industrial

Singapore Office (CBD)

Source: JLL (REIS)


All-in bank lending rate (%

p.a.), 2Q16

Outlook

Market

ConditionsMacro

Environment

Market

Fundamentals

Notable

Transactions

Fast Facts

Sources: JLL, Singapore Government


2.6-3.2


(US$ bn)

+144%4.4Q2 2016 vs. Q2 2015

Change

Asia 1st

Singapore’s ranking



(y-o-y growth)

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market conditions.

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Seoul

Steven Craig

• Competition for core assets has softened in the past year,

especially for larger deals

• High availability of Seoul Grade B office assets but they

come with vacancy risk

4.0-4.7 4.0-5.0 6.5-7.5

South Korea Commercial Real Estate Investment Volumes

Office Retail

Korea Market Statistics 6-12 Month Outlook

1.25BOK base rate (% p.a.),

2Q16


9

• Several large assets on market will lead

transaction activity in H2 2016.

• There is less completion on large core

deals than a year ago (still competition

for mid-sized deals), as big Korean LPs

have stepped away from the market.

• Corporate restructuring is resulting in

more sales of non-core building by

conglomerates.

• Yields may compress further before the

end of 2016, aided by the recent interest

rate cut.

• South Korea investment volumes were

slightly higher than Q1 at USD 3.1bn.

• Domestic investors (i.e. pension funds)

were active purchasers in Q2. Foreign

investors are monitoring any

opportunities but in a cautious manner.

• More local landlords are willing to sell

given a weak office leasing market.

• Ample bank financing but equity

financing is more difficult. Korean LPs

were absent for all but the most core

offerings

Office | Weakness in the economy continues to

undermine leasing activity in Seoul.

Retail | Rising high street rents due to expansion of

conglomerate-owned stores.

Industrial | Weak exports / imports performance

but any impact from Brexit is likely to be limited.

Residential | Rising rents and home prices. Lower

rental affordability in Seoul is stimulating tenant

relocations to satellite cities.

Hotel | Supply of new stock continues with opening

of Ibis Ambassador, Tmark and Sheraton hotels.

• The Bank of Korea (BOK) has lowered

real GDP growth estimate for 2016 to

2.8% from 3%, citing weak exports and

high levels of household debt.

• BOK cut policy rate to a new record low

of 1.25% in June. One more rate cut in

H2 is possible as inflation stays below

the 2% target for now.

• The Korean won should remain stable in

H2, after sliding to 1,200 won against the

USD in March (its lowest level against

the US$ since 2010).

Industrial

Seoul Office (CBD)

Source: JLL (REIS)

Migeun Dong Lim Kwang Buildings | Office

USD 271m | Yield 4.7% | Seller IGIS Asset

Management | Buyer NH Life Insurance

Nara Building | Office | USD 179m | Yield 4.3%

Seller M&G Real Estate | Buyer Koramco

Gukje Building | Office | USD 71m | Yield 4.2%

Seller Namil-belt | Buyer KT AMC


Outlook

Market

ConditionsMacro

Environment

Market

Fundamentals

Notable

Transactions

Fast Facts

-75Monetary easing

since 4Q14 (bps)

Sources: JLL, Bank of Korea



(US$ bn)

+16%3.1Q2 2016 vs. Q1 2016

Change

South Korea ranking


Asia 10th


(y-o-y growth)

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expectation of

market conditions.

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0

3

6

9

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Mumbai & Delhi

Shobhit Agarwal

• Investors focus on stabilized portfolios (office and retail)

and alternative sectors

• Consolidated large scale warehouses with modern

facilities are in demand, in anticipation of the GST bill

8.5-10.5 9-11 10-11

India Commercial Real Estate Investment Volumes

Office Retail

India Market Statistics 6-12 Month Outlook


10

• H2 2016 will see stronger transaction

volumes, judging from the current deal

pipeline.

• Global investors are looking to buy good

mall properties to build core asset

portfolio in the country.

• With REITs, a host of domestic

developers will likely look at divesting

strategic stakes in their leased portfolios.

• There is a likelihood of further yield

compression in the next 12 months,

given the level of investor interest.

• Investors look towards development and debt

products to gain or increase exposure to the

real estate sector.

• Several large financing deals are in progress

for new launches or under construction

projects by developers with good track record.

• Private equity and sovereign wealth funds

have strong interest to acquire stabilized

assets, largely with an objective of REIT

listing.

• H1 witnessed considerable growth in PE

activities compared to same period last year.

Office | Strong IT demand in Bengaluru and Mumbai.

Stable e-commerce demand as operators have met

their space requirements for the near term.

Retail | Relaxation of the sourcing rules for foreign

retailers may lead to stronger leasing demand.

Industrial | GST, E-Commerce and cold storage

drive increase in grade A warehousing space.

Residential | Real Estate Act came into force from

May. Higher transparency of the sector will help

attract investor interest

Hotel | The corporate segment is driving demand

but leisure tourism is also growing. Future supply is

likely to be absorbed over the medium to long term.

• Consensus Economics forecasts GDP

growth in the 7-8% range in Fiscal Year

2016-17.

• The Reserve bank of India (RBI) cut the

repo rate by 25 bps in April, but no

further rate cuts are expected this year

• CPI inflation is currently near the top of

the RBI’s target band of 2-6%.

• In June, India allowed a REIT to invest

up to 20% in under-construction projects.

This followed the exemption of Dividend

Distribution Tax announced in March.

Industrial

Mumbai Office (SBD BKC)

Source: JLL (REIS)


Outlook

Market

ConditionsMacro

Environment

Market

Fundamentals

Notable

Transactions

Fast Facts

-150

(No notable deals in Q2)


6.5Repo rate (% p.a.),

2Q16

Sources: JLL, Reserve bank of India

H1 2016 Total Transactions

(US$ bn)H1 2016 vs. H1 2015

Change

Monetary easing

since 4Q14 (bps)

Asia 7th

India’s alpha cities ranking


0.7 -50%


(y-o-y growth)

Up / down / side

arrows show

expectation of

market conditions.

-2

-1

0

1

2

3

4

4Q12 4Q13 4Q14 4Q15 2Q16%



11

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