Asia Pacific Office Market Overview Q4 2009

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An review of the office market in the Asia Pacific region. Rentals, occupancy, major transactions.

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Asia Pacific Office Market OverviewREGIONAL RESEARCHQ U A RT E R LY U P DAT E | J A N UA RY | 2 0 1 0

ASIA PACIFIC OFFICE MARKET OVERVIEW | JANUARY | 2010

CONTENTSRegional Overview .....................................................................3 Greater China ..........................................................................4-6Beijing, China ...................................................................................................... 4 Chengdu, China ................................................................................................. 4 Guangzhou, China ............................................................................................. 5 Shanghai, China .................................................................................................. 5 Hong Kong SAR, China .................................................................................... 6 Taipei, Taiwan ...................................................................................................... 6

North Asia ...................................................................................7Seoul, South Korea............................................................................................ 7 Tokyo, Japan ........................................................................................................ 7

Southeast Asia ...................................................................... 8-10Jakarta, Indonesia ............................................................................................... 8 Kuala Lumpur, Malaysia ..................................................................................... 8 Manila, Philippines.............................................................................................. 9 Singapore ............................................................................................................ 9 Bangkok, Thailand ............................................................................................ 10 Ho Chi Minh City, Vietnam ............................................................................ 10

India ..................................................................................... 11-12Bangalore .......................................................................................................... 11 Chennai ............................................................................................................. 11 Mumbai .............................................................................................................. 12 New Delhi ........................................................................................................ 12

Australasia .......................................................................... 13-16Adelaide, Australia ........................................................................................... 13 Canberra, Australia ......................................................................................... 13 Melbourne, Australia ....................................................................................... 14 Perth, Australia ................................................................................................. 14 Sydney, Australia .............................................................................................. 15 Auckland, New Zealand ................................................................................. 16 Wellington, New Zealand .............................................................................. 16

Prime Office Rentals ................................................................17 Trends & Forecasts ............................................................. 18-19 Definitions & Terminology ................................................. 20-21 Contacts .............................................................................. 22-23

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COLLIERS INTERNATIONAL | REGIONAL RESEARCH

ASIA PACIFIC OFFICE MARKET OVERVIEW | JANUARY | 2010EXECUTIVE SUMMARY

REGIONAL OVERVIEWThanks to the sustained low-interest rate environment and a number of economic stimulus packages introduced by various governments, the region showed further signs of improvement on the economic front during 4Q2009. Hiring expectations were increasingly positive as more companies in the private sector started replenishing their workforce in anticipation of stronger economic performance in 2010. Market sentiment remained buoyant since market players, in particular vendors and investors, were encouraged by the price rise in stock markets and a number of asset classes, including office real estate. Office capital values rose in individual centres during 4Q2009 but rentals were yet to show a similar growth pattern.

Mixed Leasing Trends

Although there was an increase in the level of both enquiries and transactional volume during 4Q2009, leasing trends in the region remained mixed. Despite the prevailing positive market sentiment and the reported growth in hiring expectations in individual companies, office occupiers remained largely cautious about any significant capital expenditure. Although there was demand attributed to office consolidation and relocations, the pace of growth in expansionary floor area requirements was yet to catch up with the sales market. In addition, the supply cycle in 2010 continued to challenge the rental performance of individual centres where demand fundamentals were relatively fragile. Overall, the leasing market in the region took another step closer to its cyclical trough. Thanks to the strong rental performance in a few centres, such as Hong Kong and Chengdu, where the supply of new development remained tight, the pace of rental decline narrowed further to less than 1% quarter-on-quarter in 4Q2009.

Sales Market

Similar to the situation in 3Q2009, overall sales activity picked up additional momentum in 4Q2009, with private investors with a strong equity position continuing to be the key group of buyers in the marketplace. In Beijing, there was a change in buyers profiles from stateowned-enterprises to local listed developers and real estate investors. For example, Beijing Huarong Infrastructure Investment Co. acquired an 87.5% stake in Beijing Capital Times Square for a total consideration of RMB2,708 million (US$397 million). In Shanghai, a range of domestic investors were keen to acquire office premises for their own occupation. Elsewhere in Australasia, Sydney saw the return of core investment funds during 4Q2009, with a major sales transaction being the sale of Aurora Place to the Korean National Pension Fund for a total of AU$685 million (US$614 million).

Market Outlook

Looking ahead, the office leasing market in the region is predicted to move further along its recovery track during 2010. The prevailing supply cycle in some centres will put a damper on any material rental growth over the near term. However, in anticipation of the catch-up of occupational demand in tandem with overall economic growth, average rentals in the region should return to positive growth in the latter part of 2010. On the sales front, market activity should continue to be underpinned by growing occupational demand and, importantly, the sustained buying interest of a number of private investors. In addition, the return of long-term real estate funds to the marketplace is reckoned to be a good endorsement for the overall market in 2010.

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

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ASIA PACIFIC OFFICE MARKET OVERVIEW | JANUARY | 2010

CHINABeijing Three new projects - PICC Tower, Central Point and ECM Tower - were completed in 4Q2009, providing a total of 126,000 sq m of new office space to the market. The overall vacancy rate edged up 0.18 percentage points quarter-on-quarter (QoQ), to 17.16%, as at end 4Q2009. The leasing market continued to be driven by headcount increases and relocations among some major multinational corporations engaged in the pharmaceutical, media, energy, education and electronics sectors. For example, Novo Nordisk committed to 9,000 sq m in the World Financial Centre, while Pearson took up 4,000 sq m in China World Trade Centre III. Prime office rents fell 0.68% QoQ to RMB164.75 per sq m per month in 4Q2009. This was despite the improving economic environment, satisfactory occupancy rates achieved in individual new projects and growing expectations among landlords for an improved rental market.35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1Q 2010 F 2Q 2010 F 3Q 2010 F 4Q 2010 F 1Q 2011 F 2Q 2011 F 3Q 2011 F 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 Capital Values

BEIJING OFFICE SUPPLY, TAKE-UP & VACANCY RATE2.50 25.0%

2.00

20.0%

Million sq m

1.50

15.0%

1.00

10.0%

0.50

5.0%

0.00

2007

2008Supply

2009Take up

2010 F

2011 FVacancy Rate

0.0%

BEIJING OFFICE CAPITAL AND RENTAL VALUES350.00 300.00 250.00 Rentals 200.00 150.00 100.00 50.00 0.00

Vacancy Rate

The investment sales market revealed a significant turnaround in the profiles of buyers from State-owned Enterprises to local listed developers and investors. For example, Wharf sold its 87.5% stake in Beijing Capital Times Square to Beijing Huarong Infrastructure Investment Co. for a total consideration of RMB2.708 billion, while Bluewater sold Nexus Centre with a total GFA of 103,340 sq m to SOHO China for RMB2.34 billion.Building Beijing Capital Times Square Nexus Centre Raycom Infotech Park Tower D Power Land World Financial Centre China World Trade Centre III China Central Place China Central Place The Fifth Square The Fifth Square MAJOR