Asia Pacific Regional Office Market Report Q1 2010

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Review of the Asia Pacific office market. Including rentals, occupancy, transactions.

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<p>Asia Pacific Office Market OverviewREGIONAL RESEARCHQ U A RT E R LY U P DAT E | A P R I L | 2 0 1 0</p> <p>ASIA PACIFIC OFFICE MARKET OVERVIEW | APRIL | 2010</p> <p>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</p> <p>North Asia ...................................................................................7Seoul, South Korea............................................................................................ 7 Tokyo, Japan ........................................................................................................ 7</p> <p>Southeast Asia ...................................................................... 8-10Jakarta, Indonesia ............................................................................................... 8 Kuala Lumpur, Malaysia ..................................................................................... 8 Manila, Philippines.............................................................................................. 9 Singapore ............................................................................................................ 9 Bangkok, Thailand ............................................................................................ 10 Ho Chi Minh City, Vietnam ............................................................................ 10</p> <p>India ..................................................................................... 11-12Bangalore .......................................................................................................... 11 Chennai ............................................................................................................. 11 Mumbai .............................................................................................................. 12 New Delhi ........................................................................................................ 12</p> <p>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</p> <p>Prime Office Rentals ................................................................17 Trends &amp; Forecasts ............................................................. 18-19 Definitions &amp; Terminology ................................................. 20-21 Contacts .............................................................................. 22-23</p> <p>2</p> <p>COLLIERS INTERNATIONAL | REGIONAL RESEARCH</p> <p>ASIA PACIFIC OFFICE MARKET OVERVIEW | APRIL | 2010EXECUTIVE SUMMARY</p> <p>REGIONAL OVERVIEWMarket RevivalAttributed largely to the relaxed monetary measures adopted by various central governments, the ease of credit and the sustained low interest rates, the regions economy continued to move ahead with its recovery in 1Q2010. With a stronger-than-expected pace of recovery registered in a number of centres in 1Q2010, the regions economy has been returning gradually to its pre-crisis levels. Against this favourable economic backdrop and the sustained positive market sentiment boosted by the performance of a number of asset and equity markets, the office real estate market in the region displayed corresponding positive signs, with a measurable revival in demand during the period.</p> <p>Leasing Trends</p> <p>A number of multinational corporations have been encouraged by the stronger-thananticipated economic conditions to re-activate their real estate plans, which had been largely put on hold immediately after the crisis hit. In Hong Kong, companies engaged in the financial sector were bold in committing to new space in 1Q2010 thanks in part to the return of hedge funds and private equities. In Beijing, domestic corporations engaged in the finance, technology and services sectors were particularly active in securing their office addresses. Elsewhere, in India, occupational demand improved across both IT and non-IT sectors as occupiers moved pre-emptively to secure new leases before rentals increase again from their cyclical lows in 1Q2010. The trend towards a flight to quality remained popular in many cities, with plenty of brand new space coming up for lease especially in decentralised locations. Overall, the leasing market in the region revived, with rentals edging up by 0.9% quarter-on-quarter in 1Q2010 the first positive quarterly growth registered in the past one and a half years.</p> <p>Sales Market</p> <p>On the sales front, the investment demand for office real estate remained strong notwithstanding the continued compression of investment yields in 1Q2010. Local private investors continued to be one of the key groups of players. In addition, there were initial signs of a return of real estate funds into the market. In China, the highlight was the sale of Gateway Plaza, a prime office building comprising 131,575 sq m in the Lufthansa precinct, to the Mapletree India China Fund for a total consideration of US$425 million (RMB2.9 billion). Elsewhere in Australasia, Aviva Investors acquired 80 Clarence Street in Sydney for US$27.86 million (AU$29.95 million).</p> <p>Market Outlook</p> <p>Looking ahead, the demand for office real estate in the region continues to gather strength on the back of further economic growth expected over the next couple of years. Despite the projection that interest rates might edge up again, possibly in the latter part of 2010, the prospective rate hike by virtue of market consensus will be mild. In addition, with expectations of a further catch-up of rentals, the current price level across various key centres continues to represent an attractive entry point in the present real estate cycle, despite the challenge of compressed investment yields.</p> <p>COLLIERS INTERNATIONAL | REGIONAL RESEARCH</p> <p>3</p> <p>ASIA PACIFIC OFFICE MARKET OVERVIEW | APRIL | 2010</p> <p>CHINABeijing Phoenix Place I in Lufthansa was completed in 1Q2010, adding 32,000 sq m of new office space to the stock. Despite the new release, the overall vacancy rate dropped by 0.88 percentage points to 16.27% as at the end of 1Q2010 on the back of an active leasing market. With growing leasing demand from multinational corporations, the market saw an increase in transactions in 1Q2010. For example, Halliburton and Sumitomo Pharmaceuticals took up 3,800 sq m and 2,300 sq m, respectively, in the World Financial Centre and Raffles City. Meanwhile, domestic corporations engaged in the finance, technology and services sectors also contributed to the revival of demand in 1Q2010. Prime office rent edged up 1.06% quarter-on-quarter (QoQ) to RMB166.49 per sq m per month in 1Q2010 on an effective basis as a result of improving market sentiment and a general reduction in the rent-free period by most landlords. On the investment front, the key highlight in 1Q2010 was the transaction of The Gateway Plaza. The development, comprising a total gross floor area of 131,575 sq m in the Lufthansa precinct, was sold by RREEF China Commercial Trust to the Mapletree India China Fund for a total consideration of RMB2.9 billion.Capital Values</p> <p>BEIJING OFFICE SUPPLY, TAKE-UP &amp; VACANCY RATE3.00 2.50 2.00 Million sq m 1.50 1.00 0.50 0.00 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Vacancy Rate</p> <p>2007</p> <p>2008Supply</p> <p>2009Take up</p> <p>2010 F</p> <p>2011 FVacancy Rate</p> <p>BEIJING OFFICE CAPITAL AND RENTAL VALUES400.00 350.00 300.00 250.00 Rentals 200.00 150.00 100.00 50.00 0.00 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 F 3Q 2010 F 4Q 2010 F 1Q 2011 F 2Q 2011 F 3Q 2011 F 4Q 2011 F 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0</p> <p>Building Gateway Plaza World Financial Centre Tengda Building Raffles City Raffles City China Overseas Plaza China Central Place Yintai Centre China Central Place China Central Place</p> <p>Rentals (RMB / sq m / Month)</p> <p>Capital Values (RMB / sq m)</p> <p>MAJOR TRANSACTIONS Lease (L) / Tenant / Sale (S) Purchaser S Mapletree India China Fund Ltd. L Halliburton L A subsidiary of BiAuto L Sumitomo Pharm L CITIC Investment L Trimble L Zhong De Securities L He Yu Real Estate L Hanas Natural Gas L Sequoia Capital</p> <p>Area (sq ft) 1,416,300 40,900 37,700 24,800 24,600 19,400 16,100 16,100 12,900 10,800</p> <p>CHENGDU OFFICE SUPPLY, TAKE-UP &amp; VACANCY RATE0.60 0.50 0.40 Million sq m 0.30 0.20 0.10 0.00 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Vacancy Rate</p> <p>Chengdu The overall leasing market picked up additional momentum on the back of improving economic conditions during 1Q2010. Major deals included the lease of 450 sq m at Centre Plaza by CENOSLS PTE CTD. Meanwhile, Lenovo took 3,000 sq m at Lippo Tower and rented 2,000 sq m at Air China Century Centre. No new development was completed in 1Q2010 and the average vacancy rate remained at 16%. Average office rentals edged up to RMB108 per sq m per month as at the end of 1Q2010.</p> <p>2007</p> <p>2008Supply</p> <p>2009Take up</p> <p>2010 F</p> <p>2011 FVacancy Rate</p> <p>CHENGDU OFFICE CAPITAL AND RENTAL VALUES180.00 160.00 140.00 120.00 Rentals 100.00 80.00 60.00 40.00 20.00 0.00 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 F 3Q 2010 F 4Q 2010 F 1Q 2011 F 2Q 2011 F 3Q 2011 F 4Q 2011 F 18,000 16,000 14,000 Capital Values 12,000 10,000 8,000 6,000 4,000 2,000 0</p> <p> In anticipation of new supply coming through in 2011 and 2012, the average vacancy rate is predicted to edge up to over 30%. However, vendors might prefer to keep rentals high at the expense of low occupancy.MAJOR TRANSACTIONS Lease (L) / Sale (S) L L</p> <p>Building Central Plaza Lippo Tower</p> <p>Tenant / Purchaser Cenosls PTE CTD Lenovo</p> <p>Area (sq ft) 4,500 30,000</p> <p>Rentals (RMB / sq m / Month)</p> <p>Capital Values (RMB / sq m)</p> <p>4</p> <p>COLLIERS INTERNATIONAL | REGIONAL RESEARCH</p> <p>ASIA PACIFIC OFFICE MARKET OVERVIEW | APRIL | 2010EXECUTIVE SUMMARY</p> <p>CHINAGuangzhou In tandem with the pace of overall economic recovery, the demand for prime office space continued on its upward trend in 1Q2010. Prime office rentals achieved a notable rise of 7% QoQ to RMB133.7 per sq m per month as at the end of 1Q2010.Vacancy Rate</p> <p>GUANGZHOU OFFICE SUPPLY, TAKE-UP &amp; VACANCY RATE2.50 50.0%</p> <p>2.00</p> <p>40.0%</p> <p>Million sq m</p> <p>1.50</p> <p>30.0%</p> <p>1.00</p> <p>20.0%</p> <p> No new supply entered the market in 1Q2010. The average vacancy rate fell to 16.3% by the end of 1Q2010 thanks to the improvement in take-up rates. As a number of new developments are expected to be launched in 2Q2010, vacancy rates will edge up in the second half of 2010. However, office rentals may hold firm, given the quality premium for most new projects coming on line. On the investment front, office sales prices are expected to increase due to limited supply of stock for sale during 2010.MAJOR TRANSACTIONS Lease (L) / Tenant / Sale (S) Purchaser L Security firm L Domestic bank L Investment company L Real estate company L Accounting firm L Media company</p> <p>0.50</p> <p>10.0%</p> <p>0.00</p> <p>2007</p> <p>2008Supply</p> <p>2009Take up</p> <p>2010 F</p> <p>2011 FVacancy Rate</p> <p>0.0%</p> <p>GUANGZHOU OFFICE CAPITAL AND RENTAL VALUES160.00 140.00 120.00 100.00 Rentals 80.00 60.00 40.00 20.00 0.00 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 F 3Q 2010 F 4Q 2010 F 1Q 2011 F 2Q 2011 F 3Q 2011 F 4Q 2011 F 32,000 28,000 24,000 Capital Values 20,000 16,000 12,000 8,000 4,000 0</p> <p>Building Poly Centre Poly Centre Poly Centre Poly Centre GT Land Plaza Poly Centre</p> <p>Area (sq ft) 9,100 37,700 20,400 19,700 95,300 4,800</p> <p>Rentals (RMB / sq m / Month)</p> <p>Capital Values (RMB / sq m)</p> <p>SHANGHAI OFFICE SUPPLY, TAKE-UP &amp; VACANCY RATE1.50 25.0%</p> <p>Shanghai Notwithstanding the seasonal slow period, particularly during the period of Chinese New Year, prime office space in Shanghai exhibited growth in 1Q2010. Individual buildings in Pudong, which previously suffered from high vacancy rates, saw an encouraging increase in absorption during the period. Although there was only one small development (i.e. about 5,000 sq m floor area) completed in Lujiazui, the vacancy rate in the area edged down in 1Q2010. Effective office rent edged up slightly by 1.7% QoQ to RMB6.9 per sq m per day as at the end of 1Q2010, representing the first positive growth over the past 18 months. The office investment market remained active in 1Q2010. A number of investment transactions were closed, including the sale of seven floors in 21st Century Tower to Ningbo Bank at an average price of RMB37,500 per sq m. Going forward, office leasing demand is predicted to stage further growth in 2010 against the backdrop of the sustained recovery of global and domestic economies. However, plentiful supply in the marketplace will constrain any sharp surge in rentals from now through 2012.MAJOR TRANSACTIONS Lease (L) / Sale (S) L L L L L S</p> <p>1.20</p> <p>20.0%</p> <p>0.60</p> <p>10.0%</p> <p>0.30</p> <p>5.0%</p> <p>0.00</p> <p>2007</p> <p>2008Supply</p> <p>2009Take up</p> <p>2010 F</p> <p>2011 FVacancy Rate</p> <p>0.0%</p> <p>SHANGHAI OFFICE CAPITAL AND RENTAL VALUES15.00 60,000</p> <p>12.00</p> <p>48,000</p> <p>Vacancy Rate</p> <p>Million sq m</p> <p>0.90</p> <p>15.0%</p> <p>Rentals</p> <p>9.00</p> <p>6.00</p> <p>24,000</p> <p>Capital Values</p> <p>36,000</p> <p>Building Corporate Avenue SWFC Intercontinental Centre Chong Hing Finance Plaza 66 Tower II 21st Century Tower</p> <p>3.00</p> <p>12,000</p> <p>0.00 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 F 3Q 2010 F 4Q 2010 F 1Q 2011 F 2Q 2011 F 3Q 2011 F 4Q 2011 F</p> <p>0</p> <p>Rentals (RMB / sq m /...</p>