asia pacific mid year 2016 office overview and outlook

Asia PacificH1 2016 Office Overview and Forecasts

19th July 2016

H1 2016 Office Overview and Forecasts | Cushman & Wakefield

AGENDAH1 2016 Recap

Economic Outlook

Office Forecasts 2016-17

Occupier Conditions

Investment Outlook

Q&A

4


CHINAGradual Transition

HONG KONGRental Growth in Greater Central

SEOULLackluster Demand

TOKYOGoing Strong

JAKARTADomestic Reforms; Infrastructure Push

SINGAPOREPrime Supply Changing Market Dynamics

MANILABPO Sector Drives Momentum

HCM CityHeating Up

INDIAOn the Upswing

SYDNEYBack on Solid Ground

MELBOURNEHealthy Occupier Demand

Asia Pacific – Resilience in Tough TimesH1 2016 Recap

Annual rental growth of

in Tokyo5.7 % highest

vacancy rate in Kolkata

42.3 % of new office space in Shanghai

5.0 million sf.

lowestvacancy rate in Manila

1.6 % Rental drop in Singapore since H1 2015

10.4 % Incentivesreduced to

in Sydney20-25 %

net absorption inBengaluru

4.4 million sf.

Source: Cushman & Wakefield Research

5


Asia Pacific Economy2016 Real GDP Growth

Growth in Asia is Highest GloballyAmericas

2.1%Europe

1.6%APAC

5.2%

Thailand / New Zealand / S. Korea

3

Malaysia4

Indonesia5

Philippines / Vietnam / China6

India7

Japan / Hong Kong1

Singapore / Australia / Taiwan2

Leadership Changes

Source: Oxford Economics, IMF, Cushman & Wakefield Research

?6


Critical IssuesAsia Pacific Economy

Extraordinarily

Expansionary Policies

Walking the Reform Talk

Lower Global Growth

Emerging ASEAN Markets

Poised for Take Off

No BREXIT Hangover

7


Forecast Assumptions

ABOUT THE DATA

Data include Grade A properties in 30 major cities in Asia Pacific, tracked via C&W’s Site Solutions®

Australia : Adelaide, Brisbane, Melbourne, Perth and Sydney , China : Beijing, Chengdu, Guangzhou, Shanghai and Shenzhen , India : Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi and Pune , Indonesia : Jakarta , Japan : Tokyo , Malaysia : Kuala Lumpur , New Zealand : Auckland , Philippines : Manila , South Korea : Seoul , Taiwan : Taipei , Thailand : Bangkok , Vietnam : Hanoi and Ho Chi Minh City

Grade A properties are defined as prime office buildings with higher design standards and provide superior building services, and are well-leased to high-quality tenants and suitable for institutional-grade portfolios

8


Adelaide Ahmedabad

Bangkok

Beijing

Bengaluru

Brisbane

ChengduChennai

New Delhi

Guangzhou

HanoiHo Chi Minh City

Hong Kong

Hyderabad

Jakarta

KolkataKuala Lumpur

Manila

Melbourne

Mumbai

Perth

Pune

Seoul

Shanghai

Shenzhen

Singapore

Sydney

Taipei

Tokyo

-3,000

0

3,000

6,000

9,000

12,000

15,000

18,000

21,000

24,000

27,000

30,000

0 20 40 60 80 100 120 140 160 180

Absorption2016-17

Core markets & Southeast Asia

Emerging markets - China and India

Office-Using Employment Growth (‘000s)

Abs

orpt

ion

(‘000

Sf.)

24

61

78

54 55 58

80

90 93

0

10

20

30

40

50

60

70

80

90

100

2009 2010 2011 2012 2013 2014 2015 2016 2017

sf (m

illion

s)

Absorption 2009-17

Absorption to Reach 8-year High in 2016

Continued Demand from Tech / Outsourcing

Absorption Vs Office-Using Employment Growth

Source: Cushman & Wakefield Research New Delhi refers to Delhi, Gurgaon and Noida markets *Projections for Australia includes all grades

9


Highest New Supply 2016-17

Supply as a Share of Inventory

South Asia31%

Greater China48%

North Asia5%

Southeast Asia14%

Australia2%

Over 250 msf Under Construction

Inventory in China to Rise by 45% in 2 years

Above-Average Supply in

China, India and Parts of SE

Asia

2016-17 Supply

Source: Cushman & Wakefield Research New Delhi refers to Delhi, Gurgaon and Noida markets *Projections for Australia includes all grades

0%0%2%2%2%

6%8%8%8%9%

11%12%

14%15%15%

18%22%24%

28%28%

32%32%33%

35%36%

38%44%

55%67%

101%

0 0.2 0.4 0.6 0.8 1 1.2

AdelaidePerth

MelbourneBangkok

SeoulSydney

TaipeiHong Kong

TokyoBrisbane

Kuala LumpurHanoi

ChennaiNew Delhi

PuneSingaporeBengaluru

Mumbai (overall)Ho Chi Minh

JakartaGuangzhou

BeijingHyderabad

ManilaMumbai Core

AhmedabadShanghaiChengdu

KolkataShenzhen

10


49.3%43.0%43.0%

27.9%26.8%26.7%

23.0%21.4%

14.9%14.4%14.2%

10.4%9.6%

8.5%7.9%

4.1%3.9%

2.3%

20.8%18.0%

15.2%13.0%

12.5%12.0%

8.8%8.6%

7.6%7.0%

5.3%4.5%

0% 10% 20% 30% 40% 50%

AhmedabadKolkata

ChengduJakarta

New DelhiMumbai Core

HanoiMumbai (overall)

ShenzhenKuala Lumpur

GuangzhouPune

BengaluruChennai

HyderabadBangkok

ManilaHo Chi Minh

PerthBrisbaneShanghai

SeoulAdelaide

TaipeiBeijing

SingaporeMelbourneHong Kong

SydneyTokyo

13.2%

11.2%12.2%

11.5% 11.4% 11.2%

13.8%14.6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2010 2011 2012 2013 2014 2015 2016 2017

Vacancy Rate

2016 Vacancy Rate Vacancy RateAsia Pacific

Supply Outpacing Demand in 2016 – 17

17-18%

CORE MARKETS

EMERGING MARKETS

10-11%

New Delhi refers to Delhi, Gurgaon and Noida markets *Projections for Australia includes all grades

11


Rental Growth2016-17

Rent Growth 2015-17 Rent Reversions

Rental growth slowing

Occupancy Cost Escalations Easing Gradually

13-1

5%

8-10

%

6-8%

3-5%

2010-13 2011-14 2012-15 2013-16

3-5%

2014-17


Cor

eE

mer

ging

New Delhi refers to Delhi, Gurgaon and Noida markets

-19%-8%

-6%-5%

-4%-3%

-2%-2%

2%4%4%5%5%

7%15%

20%21%

24%

-10%-3%

-1%0%

1%1%1%

3%6%

7%11%11%

-0.25 -0.2 -0.15 -0.1 -0.05 0 0.05 0.1 0.15 0.2 0.25 0.3

JakartaChengdu

Kuala LumpurKolkata

Mumbai (overall)Hanoi

New DelhiShenzhen

Ho Chi MinhMumbai Core

GuangzhouBangkok

AhmedabadManila

HyderabadPune

ChennaiBengaluru

SingaporeBeijing

PerthBrisbane

SeoulShanghaiAdelaide

TaipeiMelbourne

SydneyHong Kong

Tokyo

12


Most Expensive Markets

Rank Country City Location Occupancy Cost (US$/sf/year)

1 UK London West End $186.10

2 Hong Kong Hong Kong Central $178.92

3 Hong Kong Hong Kong Wan Chai / Causeway Bay $111.60

4 USA Silicon Valley Palo Alto $110.40

5 Japan Tokyo CBD 5 Wards $105.12

6 USA New York Park Avenue $104.80

7 UK London London(City) $104.20

8 USA New York Midtown (Madison/5th Ave.) $103.67

9 Singapore Singapore Marina Bay $85.68

10 France Paris CBD $79.70

11 India New Delhi Connaught Place $77.43

12 USA San Francisco East SOMA $74.38

13 Russia Moscow CBD $69.70

14 Australia Sydney CBD $67.09

15 China Beijing CBD $65.16

* Includes service charges, data as of Q1 2016

* Asia Pacific markets are highlighted in red

13


Rent Reversion2013-16 and 2014-17

EMER

GIN

GC

OR

E

2013-16 2014-17

*5-year rent rollovers in Australia

-20% -10% 0% 10% 20% 30% 40%

ChengduKuala LumpurMumbai Core

KolkataHanoi

JakartaHo Chi Minh

HyderabadGuangzhou

PuneMumbai (overall)

New DelhiChennaiBangkok

AhmedabadManila

BengaluruShenzhen

SingaporePerth

BeijingSeoul

BrisbaneAdelaide

TaipeiShanghai

MelbourneSydney

TokyoHong Kong

-30% -20% -10% 0% 10% 20% 30% 40%

JakartaChengdu

Kuala LumpurMumbai Core

KolkataHanoi

Ho Chi MinhNew Delhi

GuangzhouShenzhen

BangkokManila

HyderabadAhmedabad

PuneChennai

Mumbai (overall)Bengaluru

SingaporePerthSeoul

BrisbaneBeijingTaipei

ShanghaiAdelaide

MelbourneSydney

TokyoHong Kong

3-4%

4-5%

3-4%

6-7%

New Delhi refers to Delhi, Gurgaon and Noida markets

14


Key Themes

Japan

Stable and Consistent South Korea

Muddling Through

China

Still Room to Grow Hong Kong

Bracing for Slower Growth

Singapore

Looking Beyond the Subdued Market

Indonesia

Gradual Liftoff India

The Cycle Turns Up

Philippines

Continuing to Shine

Vietnam

Ready for Take-off

Australia

The Only Way is Up

15


Occupier Conditions2016-17


Tenant Favorable

Neutral

Landlord Favorable

Neutral to Landlord

Source: Cushman & Wakefield Research New Delhi refers to Delhi, Gurgaon and Noida markets

GREATER CHINASOUTH ASIA

SOUTHEAST ASIA

Seoul Tokyo

AUSTRALIA &NEW ZEALAND

NORTH ASIABeijing

Chengdu

GuangzhouShanghai

Shenzhen

Hong Kong

Taipei

Bangkok

Hanoi

Ho Chi Minh City

Manila

Kuala Lumpur

Jakarta

Singapore

Ahmedabad

Bengaluru Chennai

Hyderabad

Kolkata

Mumbai

New Delhi

Pune

AdelaideBrisbane

Perth Sydney

Melbourne

Auckland

*Hong Kong Greater Central is landlord favorable 16


Co-working Spaces Continue to Gain Traction

32,300 sf in Shenzhen

93,700 sf in Hong Kong, 28,000 sf in

Shanghai and more in Sydney

22,000 sf in Singapore

15,600 sf in Ho Chi Minh City



About 11,000 sf in

Singapore

• Flexibility

• Community

• Networking Opportunities

• Plenty of Room to Grow

• Co-working as a Hedge

• Driving Innovation

Selling Points

17


Key Takeaways2016-17

ECONOMY DEMAND SUPPLY RENTS

GDP GROWTH

HIGHEST GLOBALLY

5.1-5.3%IMPACT OF

BREXITWILL BE

CONTAINED

TECH / OUTSOURCING

SECTORWILL CONTINUE TO BE

THE GROWTH LEADER

ABSORPTION GAINS TO REACH

8-YEAR HIGH

HIGHER THAN AVERAGE SUPPLY IN

CHINA, INDIA & JAKARTA,

SINGAPORE

OVER

250MILLION SF

IN 2016-17

VACANCY TO EDGE UPCORE: 10 - 11%

EMERGING: 17 - 18%

OCCUPANCY COSTS

RISINGIN 50% OF THE

MARKETSin 2017

HIGHER SUPPLY LEADS TO

WEAKENING RENTS IN

JAKARTASINGAPORE

CO-WORKINGGAINS MOMENTUM

18


Critical IssuesAPAC Investments

Outbound Investments Easing Restrictions

Brexit

Yield Compression

Rise of Middle East Capital

19


OutlookAsia Pacific Commercial Real Estate

0

26

52

78

104

130

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016P

US

$ bi

llion

H1 H2

Upside drivers in investment volumes• Diversification• Demand for safe haven assets• Search for yield• Sustained allocations• Reforms/Loosening measures

Opportunities in Hong Kong, South Korea and China areemerging as corporates and developers are selling their assetsto pare down debt and recycle capital. Chinese companies arealso keen to increase their presence in Hong Kong. Similarly,Singapore could see fresh inflows of capital, especially as itsoffice market negotiates the current rental down cycle.

Core markets Regional markets in Japan Rebounding land sales in China Emerging markets: India

Flat to -5.0%

Projected volumes

“

”

Limited assets for sale

Source: Real Capital Analytics, Cushman & Wakefield Research

20


Landmark TransactionsAsia Pacific Office Sales

Location SINGAPORE SINGAPORE MUMBAI MELBOURNE HONG KONG

Property Asia Square Tower I Straits Trading Building Equinox Business Park Southern Cross Tower Dah Sing Financial Centre

Buyer Qatar Investment Authority Tahir RMZ Corp Blackstone China Everbright

Price US$2.5 billion US$411.8 million US$354.8 US$490.2 US$1.3 billion

Price/sf US$1,928 US$2,588 US$285 US$1,120 US$3,225

Yield 3.2% ∼2.2% 9-10% < 5.0% 2.4%

Source: Real Capital Analytics, Cushman & Wakefield Research

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Asia PacificH1 2016 Office Overview and Forecasts