Savills World Research Asia Pacifi c

Asia Pacifi c Investment Quarterly Q3 2018

Australia China (Northern) - Beijing/Tianjin China (Western) - Chengdu China (Southern) - Guangzhou/Shenzhen China (Eastern) - Shanghai Hong Kong | Indonesia | Japan Malaysia | New Zealand | Singapore South Korea | Taiwan Thailand | Vietnam Major Transactions

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HIGHLIGHTS

Japan remains attractive international institutions see stamp duty changes in July for investment, as Abe’s a window of opportunity if knocked the wind out of continued leadership reduces the right assets emerge at the residential sector and the likelihood of unexpected more realistic valuations. In introduced a note of caution changes in policy and the Korea, transactions volumes into commercial investment BOJ has confi rmed monetary are close to last year’s markets. In Hong Kong rising policy will remain somewhat record highs and abundant interest rates, US/China trade stimulative. Japan’s GDP liquidity has meant that friction and record low cap rebounded strongly in asset values have set new rates undermined sentiment Q2/2018, refl ecting healthy records. Demand in Australia and many sectors recorded a economic momentum. In for non-residential property tepid third quarter as a result. China, fi nancial deleveraging, remains near record highs, the trade war and a as a normalisation across Simon Smith, Savills Research stock market rout have sectors and states drives conspired to subdue market investor sentiment to post- activity levels while some GFC highs.In Singapore,

savills.com.hk/research 01 Asia Pacifi c |Investment Quarterly

An introduction to Savills

Savills Asia Pacific Network Asia Australia Hong Kong Taiwan Adelaide Central (2) Taichung Brisbane Taikoo Shing (2) Taipei (2) Canberra Tsim Sha Tsui 2 Thailand Gold Coast 5 Gordon India Bangkok Lindfield Bangalore Mumbai 47 Melbourne Vietnam Offices Notting Hill Gurgaon Da nang Parramatta Hanoi 2 Perth Indonesia Ho Chi Minh City Roseville Jakarta St Ives Sunshine Coast Japan Sydney Tokyo Turramurra Macau 3 Cambodia Macau Phnom Penh * Malaysia Johor Bahru China Kuala Lumpur Beijing Penang Chengdu & New Chongqing Z New Zealand lia e Dalian Auckland a a Guangzhou r Christchurch t la s Hangzhou n u Nanjing Philippines d Shanghai A

Makati City * Shenyang Bonifacio Global City * Shenzhen 18 Tianjin Singapore Offices Wuhan Singapore (3) Xiamen Xi’an South Korea 6 Zhuhai Seoul

*Associate Office

Source: Savills Research & Consultancy

Savills is a leading global real and Viet Nam. Savills provides a We are regarded as an innovative- estate service provider listed on comprehensive range of advisory thinking organisation supported by the London Stock Exchange. The and professional property services excellent negotiating skills. Savills company, established in 1855, has a to developers, owners, tenants and chooses to focus on a defi ned set of rich heritage with unrivalled growth. investors. These include consultancy clients, offering a premium service The company now has over 600 services, facilities management, to organisations and individuals offi ces and associates throughout space planning, corporate real estate with whom we share a common the Americas, Europe, Asia Pacifi c, services, property management, goal. Savills is synonymous with a Africa and the Middle East. leasing, valuation and sales in all key high-quality service offering and a segments of commercial, residential, premium brand, taking a long-term In Asia Pacifi c, Savills has 65 industrial, retail, investment and hotel view of real estate and investing in regional offi ces comprising over property. strategic relationships. 25,000 staff. Asia Pacifi c markets include Australia, China, Hong Kong, A unique combination of sector India, Indonesia, Japan, Macau, knowledge and entrepreneurial fl air Malaysia, New Zealand, Singapore, gives clients access to real estate South Korea, Taiwan, Thailand expertise of the highest calibre.

02 Q3 2018

Contents

Australia 04 China (Northern) - Beijing 05 China (Northern) - Tianjin 06 China (Western) - Chengdu 07 China (Southern) - Guangzhou 08 China (Southern) - Shenzhen 09 China (Eastern) - Shanghai 10 Hong Kong 11 Indonesia 12 Japan 13 Malaysia 14 New Zealand 15 Singapore 16 South Korea 17 Taiwan 18 Thailand 19 Viet Nam 20 Major transactions Q3 2018 21

savills.com.hk/research 03 Asia Pacifi c |Investment Quarterly

Australia Paul Craig Shrabastee Mallik CEO Associate Director, Capital Strategy +61 2 8215 8888 Research & Consultancy [email protected] +61 2 8215 8880 [email protected]

Australia’s appeal as a prime direction of foreign capital, with a shift hand, property industry sentiment investment destination, particularly for away from Sydney toward Melbourne (across both residential housing and direct property, remains strong, with and Brisbane in search of yield and commercial property), whilst still its stable and mature fi nancial markets more affordable investment options. positive, has been steadily falling and strong real estate fundamentals We expect a continuation of this since the start of 2018. However, keeping it a standout among global trend, with a resurgence in economic economic fundamentals remain strong peers. Australian direct property fundamentals in WA likely to drive for Australia, with forward looking returned 11.7% over the year to June capital to Perth. indicators supporting ongoing growth. 2018, according to latest available The past year has also seen the rise of data, aided by notable outperformance The next 12-18 months will be alternate property classes (e.g. child across East Coast offi ce markets. monitored closely by investors as care and medical centres) as investors Total returns for the offi ce sector were opposing forces in the Australian look to diversify. Whether this goes on reported at 14.7% over the year to economic landscape may lead to to temper demand for more traditional June 2018 nationally, (the highest very different outcomes. On the one property assets remains to be seen. recorded fi gure since March 2008), driven by outperformance of Sydney’s GRAPH 1 offi ce markets. The Sydney CBD Australia property sales, Sep 2003 – Sep 2018 returned 17.6% on the back of near record high capital returns (12.1%), as recent growth was accounted for Office sales Industrial sales Retail sales in valuations. It was clear that the 35 ongoing yield compression cycle in the CBD spurred investor activity 30 in Sydney’s fringe offi ce markets, with total returns in these markets 25 exceeding those in other national CBDs. 20 On the other hand, the Hayne

Banking Royal Commission and AUD billion 15 growing macro-prudential policies from regulatory authorities and 10 tightening fi nancial conditions has had a dampening effect on Australia’s 5 residential property prices, with these effects more pronounced in 0 Sydney and Melbourne. According to latest available data from the ABS, median house prices fell 12.1% and 1.7% across Sydney and Melbourne Source: Savills Research & Consultancy respectively over the 12 months to June 2018, following record growth in TABLE 1 recent years. Major investment transactions, Q3/2018

Sales activity across Australia’s offi ce, Property Location Price Buyer Usage industrial and retail sectors remained Eastgardens, strong, with over $30 billion of Westfi eld Eastgardens NSW AU$720.0 mil/US$511.2 mil Scentre Group Retail transactions recorded in the 12 months 80 Ann Street Brisbane, AU$418.0 mil/US$296.8 mil M&G Real Estate Offi ce to September, the second highest QLD fi gure on record. Overall sales activity 60 Station Street Parramatta, (Eclipse Tower) NSW AU$277.6 mil/US$197.1 mil GPT Offi ce was buoyed by record high sales Hong Kong Monetary Authority, volumes in the retail sector, with close 1 Sussex Street Sydney, (Daramu House) NSW AU$250.0 mil/US$177.5 mil Lendlease's Australian Prime Offi ce to $10 billion of retail assets being Property Fund transacted over the period. Sydney, 275 George Street NSW AU$240.0 mil/US$170.4 mil Daibiru Corporation Offi ce Homemaker The Fortitude Whilst foreign investor demand for Valley Valley, QLD AUS170.0 mil/US$120.7 mil Arkadia Capital Retail Australian real estate assets remained strong, there was a notable shift in the Source: Savills Research & Consultancy

04 Q3 2018

China (Northern) - Beijing Spring Cao Jack Xiong Senior Director Head of PDC, Director Investment, Savills Northern China Research +8610 5925 2048 +86 10 5925 2042 [email protected] [email protected]

The en-bloc investment market end of Q3/2018. Total consideration expected to be the main drivers witnessed the closing of four deals recorded was RMB3.61 billion, down of transactions, while there will in Q3/2018, registering a total 4.1% QoQ although slightly up 0.7% continue to be a shift away from consideration of RMB3.57 billion. YoY. The average transaction price speculative activity. Traditional asset classes proved registered RMB34,284 per sq m, up popular during the quarter with deals 19.5% QoQ and 26.8% YoY. Meanwhile, the recent policy concluded in both the offi ce and adjustment will likely halt the further retail markets. Major transactions With no loosening of the regulatory supply of new commercial land in included: framework foreseeable in the the main urban areas of Beijing. The near future, it is expected that move is expected to push up capital ZLink in Zhongguancun transaction volumes of strata-title values and rental expectations Software Park, located in Haidian commercial projects will remain low of current stock in the market, district, was acquired by Allianz for and will focus on existing stock in particularly in mature business a total consideration of RMB1.34 the market. Companies with actual districts. billion. investment needs for assets are

Fangheng Fashion Centre, also located in Haidian district, GRAPH 2 was acquired by Toutiao for a consideration of RMB2.2 billion. En-bloc investment volumes, 2007 – Q3/2018

China Life Investment Holding Company purchased a 100% Q1 Q2 Q3 Q4 60 equity share in both the podium at Tongtai Plaza and the podium at No.25 Longze West Mansion for an 50 undisclosed consideration.

A tightened regulatory environment 40 saw the fi rst-hand strata-title offi ce and retail markets continue to post 30 poor performances in Q3/2018. RMB billion The fi rst-hand strata-title offi ce 20 market saw 382,500 sq m of new supply come online in Q3/2018, up 10 45.3% quarter-on-quarter (QoQ) and 65.7% year-on-year (YoY). Total transaction area was down 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 8.0% QoQ to 160,400 sq m during Q3/2018, although up 85.1% YoY. Source: Savills Research & Consultancy Meanwhile, total consideration was up by 17.3% QoQ and 61.2% YoY to TABLE 2 RMB4.17 billion. Average transaction Major investment transactions, Q3/2018 prices were down 3.7% QoQ and 12.9% YoY to RMB26,013 per sq m. Property Location Price Buyer Usage China Life Investment Tongtai Plaza Podium Xicheng Undisclosed Holding Company Ltd Retail New supply in the fi rst-hand strata- No.25 Longze West China Life Investment title retail market reached 76,000 Mansion Podium Changping Undisclosed Holding Company Ltd Retail sq m in Q3/2018, up 103% QoQ Fangheng Fashion Center Haidian RMB2.23 bil/US$322 mil Toutiao Offi ce and 4.4% YoY. Total transaction area decreased by 19.8% QoQ and ZLink Haidian RMB1.34 bil/US$194 mil Allianz Offi ce

1.6% YoY to 105,000 sq m by the Source: Savills Research & Consultancy

savills.com.hk/research 05 Asia Pacifi c |Investment Quarterly

China (Northern) - Tianjin Andy Chee Jack Xiong Senior Director Head of PDC, Director Savills Tianjin Research +86 22 5830 8886 +86 10 5925 2042 [email protected] [email protected]

The residential land market Both land plots come with titles for The local government recently experienced a downward trend in mixed-use development, including released a new regulation on both supply and transaction volume residential and commercial, and developer-owned residential units for in Q3/2018 after the traditional peak were acquired at opening prices. PK rent. The new regulation is intended season in Q2/2018. Properties purchased the 71,942 sq to improve the situation in the housing m land plot for a total consideration system both in terms of sales and Land supply declined by 44% of RMB1 billion, with accommodation rentals. Additionally, developers quarter-on-quarter (QoQ) to 2.90 value at RMB9,929 per sq m. Agile continued to show a decreased desire million sq m, but up 55% year- acquired the 45,709 sq m land plot for purchasing land due to capital on-year (YoY) in Q3/2018. Total for a total consideration of RMB780 constraints. Activity in the residential transaction volume decreased by million, with accommodation value at land market is expected to remain 33% QoQ to 2.28 million sq m, up RMB10,038 per sq m. slow in the foreseeable future. 30% YoY. The city centre offered no new land supply, while the fringe areas contributed the highest volume GRAPH 3 (61.9%) of land supply. The suburban Land supply and transaction volumes by area, Q1/2011 – Q3/2018 areas and Binhai New Area supplied 14% and 24.1% of land plots, City core supply Suburb supply Fringe supply respectively. Despite accounting for Binhai supply City core transactions Suburb transactions around a quarter of new land supply, Fringe transactions Binhai transactions Binhai New Area accounted for 10 43% of total land transactions. The 9 suburban and fringe areas closed 28% and 29% of total transactions, 8 respectively. 7 6 Due to the scarcity of land resources in the city centre, the suburban areas 5 are increasingly becoming the focus 4 for investors. The land market in m million sq 3 Beichen district has been showing strong performances since early 2 2018. Many developers, including 1 Sunac, Greenland and Tianfang 0 Group (a local developer), entered Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3 the Beichen residential market in 2011 2012 2013 2014 2015 2016 2017 2018 1H/2018. One land plot in Beichen district was acquired in August 2018 Source: Savills Research & Consultancy by Beijing Radiance Group for a total TABLE 3 consideration of RMB640 million, with accommodation value at RMB Major investment transactions, Q3/2018 12,681 per sq m. The 25,235 sq m Property Location Price Buyer Usage land plot is zoned for residential Mixed-use and commercial development. A Plot 2018-158 (JBH) Beichen RMB640 mil/US$93 mil Beijing Radiance Group development site few residential projects with high Mixed-use accommodation values, including Plot 2018-161 (JBH) Jinnan RMB1.0 bil/US$145 mil PK Properties development those developed by Vanke and site Sino-Ocean, are located close to this Residential Plot 2018-162 (JBH) Jinnan RMB780 mil/US$113 mil Agile development land plot. Thus it is expected that site this project will experience a pricing Mixed-use Plot 2016-063 (JW) Wuqing RMB1.59 bil/US$230 mil A local developer development advantage in the future. site Mixed-use Two land plots located in Haihe Plot 2018-08 (JXQ) Xiqing RMB1.0 mil/US$145 mil Vanke development site Education Park were purchased by PK Properties and Agile, respectively. Source: Savills Research & Consultancy

06 Q3 2018

China (Western) - Chengdu Suzie Qing Dahuang Chen Director Associate Director Savills Western China Research +86 28 8658 7418 +86 23 6370 3388 [email protected] [email protected]

The old city1 has long been Chengdu’s has surpassed traditional commercial penetration level of major brands— traditional retail centre. In recent districts like Chunxi Road-Yanshikou especially luxury brands and years, however, the southern high- and Jianshe Road to become the premium brands—the southern high- tech area, stretching southward largest retail submarket, with total tech area is fast becoming the fi rst from the South Railway Station, has property stock of 1.6 million sq m. choice for brand expansion. been regarded as the new engine Furthermore, the area is increasingly of Chengdu’s economy and has challenging the old city in terms of As the southern high-tech area risen to be another core area for the project quality and diversity. develops, its location advantage will retail market. Since IKEA opened its become more and more signifi cant. fi rst store in southwestern China in In terms of demand, the southern With new supply and the ever- 2006 near the South Railway Station high-tech area’s falling vacancy improving consumption power of (quickly followed by Suning and rate—lower than the city-wide its residents, the retail market in the CapitaLand), this area has developed average—indicates strong leasing southern high-tech area is sure to into a mature retail submarket called demand. Although there is a expand and develop and as one of Xinnan Tiandi. Owing to the overall considerable gap in terms of the the new retail centres for Chengdu. southward industrial agglomeration and population growth, Xinnan Tiandi has gradually expanded and spread GRAPH 4 further south. Retail property stock comparison, 2012 – 2021 In 2012, the total retail property stock in the southern high-tech area was Old City (LHS) Southern high-tech area (LHS) barely 25% of that in the old city; by Old City stock percentage Southern high-tech area stock percentage 1H/2018, the ratio had increased to 40 80% almost 75%. The stock percentage gap has narrowed from 60 35 70% percentage points (ppts) to 11 ppts. 30 60% The increasing migration of industry and population towards the south 25 50% 39.8% has prompted the rapid development of the retail market in the southern 20 40% high-tech area. 15 30% 28.7% Opened in 2017, Intime In99 is the 10 20% fi rst high-end shopping mall in the Hundred thousand sq m 5 10% southern high-tech area and houses several luxury brands as well as 0 0% the fi rst NIO store in Chengdu. The development has greatly enhanced the quality of retail projects in the southern high-tech area. When U Source: Savills Research Fun, a shopping mall located in the Financial City, opened in 2018 TABLE 4 it introduced 20 new brands to Major investment transactions, Q3/2018 Chengdu along with the fi rst stores for over 40 brands in the southern Property Location Price Buyer Usage Group No. 4, 5, 6, Quanzi Sichuan Province region of the city. Combined with Jinjiang district RMB779 mil/US$112.9 mil Commercial Residential Nine Square, New Century Global Village, Chenglong Road Construction Co. Ltd Centre and other popular shopping Group No. 7, 8, Haibinwan Community, Chenghua RMB328 mil/US$47.5 mil Shenye Aoran Ltd Residential malls, the southern high-tech area Qinglong Road district Group No. 7, 9, 12, Chenghua Chengdu Aoshan 1 Old city: The area along and within the 2nd Congshu Community, district RMB708 mil/US$102.7 mil Property Ltd Residential Ring Road, which includes the whole Chunxi Road- Longtan Road Yanshikou submarket, and parts of Jianshe Road, City East, City South and City North submarkets. Source: Savills Research

savills.com.hk/research 07 Asia Pacifi c |Investment Quarterly

China (Southern) - Guangzhou Alvin Lau Carlby Xie Managing Director, Guangzhou Head of Research, Deputy Managing Director, Southern China Southern China +86 20 3665 4874 +86 20 3665 4888 [email protected] [email protected]

The Guangzhou Housing and Urban- with strong fi nancial backgrounds growing infl ation is another realistic Rural Committee took action in July who are preferring independent approach among many landlords. to regulate the residential property accommodations, instead of living These all combined together brought sales registration and purchasers’ with their families. In addition, the about a yield softening effect for the funding procedures. In conjunction continued growth in the capital serviced apartment property market with the stringent home purchase value of residential properties has in Guangzhou during Q3. restrictions that have been in place prevented some potential buyers since 2017, the new measures have from purchasing properties, With Jumeirah and Rosewood dampened many buyers’ purchasing resulting in additional demand for entering the market in 2019, the sentiment, resulting in a sluggish the leasing market. citywide total stock of serviced market. Against this backdrop, the apartment will increase by 15% to residential property market has Rents for the serviced apartment approximately 4,000 units. Although witnessed a growing number of property market in Guangzhou both properties are located in potential property purchasers turn increased by approximately 5% QoQ Tianhe, the impact of which on rental to the residential leasing market for to RMB203.1 per sqm per month growth and vacancy rate is expected either investment or occupancy— during Q3/2018 as a result of robust to be limited due to the strong underpinning a strong asset demand and decreasing vacancy leasing demand for Guangzhou performance, increasing investment rates. Raising rents to counter the serviced apartments. return and outperformance for the serviced apartment market in Guangzhou. GRAPH 5 Serviced apartment rental index, 2011 – Q3/2018 The positive performance of the serviced apartment property market was reinforced by a vacuum of new Occupancy rate (LHS) Rental index (RHS) supply during Q3/2018. Some of the 120% 115 new projects still under construction postponed their completion dates 100% to the end of this 2018 or early 2019 110 (as was the case with Jumeirah and Rosewood). As a consequence, the 80% Q1/2011 = 100 total stock remained at 3409 units 105 by the end of Q3/2018. 60% 100 Following on from Q2/2018, the 40% serviced apartment market, (and to a greater extent, the residential 95 property market), has entered a high 20% season. The average vacancy rate of the serviced apartment market 0% 90 decreased by 0.1 percentage points Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 (ppts) quarter-on-quarter (QoQ), to 2011 2012 2013 2014 2015 2016 2017 2018 0.7% by the end of Q3/2018 due Source: Savills Research to the lack of new completions and strong leasing demand. The TABLE 5 decrease in vacancy was primarily attributed to the stable demand from Major investment transactions, Q3/2018 expatriates and senior executives of Property Location Price Buyer Usage MNCs and some leading domestic Zengcheng Plots 110 and Zengcheng RMB2.1 bil/US$299.8 mil Capitaland China Mixed-use companies from the manufacturing 111 development Dongshan Plaza and IT industries. The new demand (166 offi ce units) Yuexiu RMB665.0 mil/US$97.3 mil Shenzhen Hou Feng Offi ce is being generated by these business elites and younger tenants Source: Savills Research

08 Q3 2018

China (Southern) - Shenzhen Ray Wu Carlby Xie Deputy Managing Director Head of Research Savills Shenzhen Southern China +86 755 8828 5693 +86 20 3892 7037 [email protected] [email protected]

With its strategic location and times, from 145,000 sq m in 2009 governments’ initiatives for developing proximity to Hong Kong, Shenzhen to 5,554,750,000 sq m in 1H/2018. and promoting in developing the has become one of the country's core By the end of 1H/2018, the vacancy Greater Bay Area economics. From cities, playing an important role in rate for Shenzhen Grade A offi ce 2009 to 2013, the profi le of offi ce the development of the Guangdong- property had decreased to 9.7%. property buyers was rather simple, Hong Kong-Macau Greater Bay Rents for Shenzhen Grade A offi ce with many being state-owned Area. According to the Shenzhen property have grown consistently in enterprises (SOEs). From 2015 to Statistics Bureau, Shenzhen’s GDP the past decades. The average rent the present, the offi ce property grew by 8.8% year-on-year (YoY) to of citywide Grade A offi ce property investor profi le became has more approximately RMB2,243.8 billion, rose from RMB114.2 per sq m in diversifi ed, with domestic private making it the third largest economy 2002 to RMB230.7 in 1H/2018, with enterprises and some government- by city in China. Meanwhile, a CAGR of 4.49%. related business entities gradually Shenzhen’s industrial development becoming the main demand source structure continued to optimise, The Shenzhen offi ce property in the Shenzhen Grade A offi ce with tertiarisation leading the trend. investment market has attracted a property investment market. By the end of 2017, tertiary industry wider spectrum of investors in recent output accounted for 58.7% of years. As this investor interest shows In the short term, fi nance, high-tech the city’s GDP, up 9.7 percentage is a strong sign of the collective industry, IT, professional services, points (ppts) from 49% in 2003. The impact of the city’s economic and TMT will continue to be the main strong economic fundamentals have growths, the continued investment drivers of the Grade A offi ce leasing underpinned a healthy development in infrastructure developments, and demand. of the city’s Grade A offi ce property most recently, the central and local market. GRAPH 6 Shenzhen’s offi ce property market has developed in three major stages. City-wide Grade A offi ce rental index, 2001 – Q3/2018 From 1984 to 2002, the market was in an infant stage, with Renmin South, Caiwuwei and Huaqiang North All Futian Luohu Nanshan Bao'an being the main business districts. 300 Subsequently, the market entered a high-speed development cycle from 250 2002 to 2015, with the Futian CBD emerging as a star location. Starting from 2015, with city master planning 200 underway, the Shenzhen offi ce market shifted into a multiple-centre 150 development stage, with business districts decentralising and moving east and west from the city centre. 100 Q1/2001 = 100 = Q1/2001 The campaign encouraged the rise of new business areas such as Nanshan and Bao’an districts. In a few short 50 years, some of these emerging business districts have matured, 0 making the city a multiple-centre Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 market landscape. 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 18 Source: Shenzhen Land & Real Estate Exchange Centre Supply in the Shenzhen Grade A offi ce property market grew rapidly TABLE 6 from 500,000 sq m during 2002 to 7.32 million sq m by the end of Major investment transactions, Q3/2018 1H/2018, an increase of 14.6 times Property Location Price Buyer Usage during the period. In the years 1999- Sungang, 2008, compared with the fi rst half The Central Times Luohu district RMB1.0 bil/US$145.0 mil Local investment company Offi ce of 2009-2018, the average annual Sungang, net absorption of Shenzhen Grade The Central Times Luohu district RMB1.1 bil/US$165.9 mil Local investment company Residential

A offi ce property increased 3.8 Source: Savills Research

savills.com.hk/research 09 Asia Pacifi c |Investment Quarterly

China (Eastern) - Shanghai Steve Chen James Macdonald Head of Investment, China Head of Research Deputy Managing Director, China Shanghai (Investment) +86 21 6391 6688 +86 21 6391 6688 [email protected] [email protected]

China and the US have been if they do not have income from the economy including clamping engaged in a tit-for-tat trade war overseas operations. Meanwhile, for down on the shadow-banking sector since early July this year. The latest international investors, the softening and raising the bar for onshore bond salvo in the ongoing dispute was of the currency could hurt the value issuance. However, as the trade war the US’s announcement of a further of their investments over the holding intensifi es, signs point towards Beijing tariff on US$200 billion of Chinese period and when they exit, requiring softening its tone on deleveraging. In goods effective September 2018. international investors to hedge the a Q2 briefi ng issued by the Monetary Protectionist measures neglect RMB to mitigate the risks. Though Policy Committee (MPC), a couple of the risk of a domino effect that capital controls are still in place, the changes in wording were observed could increase the international weakness of the RMB is expected to including the removal of “effectively fragmentation of production in global create a potential outfl ow of Chinese rein in macro leverage” from a stated value chains. In addition, the trade currency. objective. The change indicates that war has already started to impact Beijing is being cautious with its global products, but if it accelerates, the Since the end of 2016, the Chinese economic outlook, and might change effects could extend to the service government has introduced a series its tone to adapt to “reasonably industry as well. of measurements to reduce risk in adequate” liquidity.

The trade war could directly hurt Chinese companies as well as China- based US businesses operating in GRAPH 7 sectors subject to tariffs. Multinational RMB to USD month end exchange rate, 2005 – 2018 corporations are likely to review their China strategies and delay occupancy decisions until the impact of the trade 8.9 war is clear, while manufacturers 8.6 might consider relocating factories 8.3 to countries like Vietnam. As a result, 8.0 China’s offi ce and industrial sectors 7.7 are expected to suffer from weaker 7.4 leasing demand. However, companies 7.1 in sectors subject to tariffs account for only a very small part of Grade 6.8 A offi ce space occupiers in China. 6.5 In the long run, China’s vast and 6.2 strong domestic demand base and 5.9 comparatively high growth prospects 5.6 will continue to attract foreign 5.3 companies. 5.0 Interest rates in the US were raised several times in Q3 and created volatility in the foreign exchange market. The renminbi (RMB) has Source: The People's Bank of China been weakening since mid-June, and TABLE 7 in October it dropped to its lowest level versus the dollar since the Major investment transactions, Q3/2018 end of 2016. In this context, Chinese Property Location Price Buyer Usage developers who issued offshore Crystal Plaza one Pudong RMB1.5 bil/US$218 mil Comac Offi ce bonds denominated in US dollars building are now facing the rising costs of Greenland Jinchuang Building Changning RMB908 mil/US$132 mil Unidentifi ed buyer Offi ce overseas debt caused by a weaker yuan. It is expected that the value of Poly Greenland Plaza Yangpu RMB850 mil/US$123.6 mil Unidentifi ed buyer Offi ce the yuan will continue to drop in the Bay Valley C6 Yangpu RMB554 mil/US$80.6 mil Alpha and Allianz Business Park coming months. Developers will need to reconsider issuing offshore bonds Source: Savills Research

10 Q3 2018

Hong Kong Peter Yuen Simon Smith Managing Director Senior Director Head of Sales Head of Research +852 2842 4436 +852 2842 4573 [email protected] [email protected]

The third quarter was a period of global markets with the IMF citing outfl ows are always a risk. Any growing uncertainty in the Hong ‘dangerous undercurrents’ in its slowdown in China’s economy as Kong property markets as the city October Financial Stability Report a result of trade friction with the faced a number of negative cross- and warning of complacency. Asia US in a region which has become currents. Because of the territory’s Pacifi c’s emerging, export-reliant increasingly trade dependent on this peg to the US Dollar any Federal markets, although better defended regional economic power will also Reserve tightening puts pressure than they were before the Asian have negative consequences for on local interest rates and this has Financial Crisis could still feel the emerging markets generally and for been the case recently as most headwinds of rising rates and a real estate values in particular. major banks started to increase stronger US Dollar while capital mortgage rates from late September. It is highly likely that more rate hikes lie ahead with implications for borrowing costs and the city’s GRAPH 8 property markets where values sit at Savills property price indices by sector, Q1/2003 – Q3/2018 record highs across most sectors. Our latest third quarter indices have already picked up a sharp Luxury residential price Mass residential price Grade 'A' office price moderation in prices and rents, Prime street shop price Industrial price although not yet a dive into negative 1,000 territory. 900 800 If rising rates were not enough, the widely reported US/China trade war 700 piled on further negative pressure 600 and GDP fi gures have already 500 begun to fall short of analyst’s expectations. Just as the retail 400 Q1/2003=100 sector began to look like it was 300 pulling out of a two-year slump, visitor spending is showing signs of 200 weakening again and recovery has 100 almost certainly been delayed. While 0 mainland visitor numbers are up, per Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3 capita spending is weakening and 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 new transport infrastructure such Source: Savills Research & Consultancy as the recently opened Express Rail Link to Shenzhen and Guangzhou TABLE 8 has not been enough to offset the effects. Price cycles in both the Major investment transactions, Q3/2018 offi ce and retail markets meanwhile Property Location Price Buyer Usage look long in the tooth although the The Center Central HK$762 mil/US$97.7 mil TBC Offi ce industrial sector continues to benefi t from government’s revitalization Kwong Loong Tai Building Cheung Sha Wan HK$680 mil/US$87.2 mil First Group Holdings Offi ce measures as well as demand for Mee Wah Factory Building San Po Kong HK$1.25 bil/US$160.3 mil TBC Industrial logistics services. How much longer 13-15 Mercury Street Tin Hau HK$570 mil/US$73.1 mil TBC Hotel this can last in the context a trade Commercial podium, war will depend a lot on its depth Nob Hill Square Lai Chi Kok HK$888 mil/US$113.8 mil TBC Retail and duration. 8 Observatory Road Tsim Sha Tsui HK$4.0 bil/US$512.8 mil TBC Offi ce 37 Barker Road The Peak HK$3.0 bil/US$384.6 mil Mainland developer Residential Looking ahead, 2019 is already shaping up to be a turbulent year in Source: EPRC, Savills Research & Consultancy

savills.com.hk/research 11 Asia Pacifi c |Investment Quarterly

Indonesia Jeffrey Hong Anton Sitorus President Director Director Savills Indonesia Research & Consultancy +62 21 293 293 80 +62 21 293 293 80 [email protected] [email protected]

Concerns for Indonesia’s economy Group from Singapore announced As regulations on asset transactions loomed as the country’s rupiah its acquisition of 180 apartments at and ownership remain complicated, continued to weaken against a Thamrin Nine’s Tower 2 in Jakarta, partnerships in the form of joint venture stronger dollar and rising US interest purchased for US$56.2 million from agreements might be the best option rates. By the end of September, the Putragaya Wahana. These apartments for foreign companies looking to enter rupiah had edged close to IDR14,929 were intended to be developed into a the Indonesian market. per USD, very near to a 20-year low. 180-key Parkroyal Serviced Suites. This prompted the Bank of Indonesia This year, a notable number of to take aggressive, coordinated action, Just recently, the market also partnerships formed between local and and it has raised the benchmark witnessed the investment by Ascott, foreign companies. The most recent interest rate a total of fi ve times Singaporean CapitaLand’s wholly- partnerships include a joint operation since mid-May 2018 in order to owned, serviced-residence business agreement between Crown Group ensure suffi cient foreign exchange unit, of a 70% stake in Green Oak (from Australia) and PT Pembangunan reserves were available to cushion any Hotel Management, the holding Jaya Ancol to develop a mixed-used unforeseen external shocks. company for Indonesian-based project in Ancol, Jakarta as well as TAUZIA Hotel Management. Through a joint venture (JV) deal between Despite growing external tensions, this investment, Ascott will gain an Perennial Real Estate Holdings (from the internal economy remains additional 12,000 hotel units across Singapore) and PT Cipta Harmoni fundamentally sound, with infl ation key Indonesian cities such as Jakarta, Lestari for the development of a fi gures kept under control for the Bali and Bandung. residential township in Bogor. moment and wages actually rising. In fact, Fitch Ratings has affi rmed the GRAPH 8 country’s credit rating at BBB with a Strata offi ce supply growth - Jakarta, 2012 – 2021F stable outlook, as the market continues to display resilience. Existing Future Nonetheless, while the economy has 450,000 continued on its upward trajectory, the market has remained unable 400,000 to stimulate a signifi cant volume of 350,000 domestic demand. The strata offi ce sector, for example, performed 300,000 relatively similar to the sluggish leasing market, where investors were 250,000 more inclined to take a wait-and- Sq m see approach ahead of the national 200,000 election in 2019. 150,000 Although the asking price for strata offi ces remained largely stable, a slow 100,000 demand market has led to vendor 50,000 discounting across the board, with achieved prices slightly lower than the 0 preceding half year. As per the end 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F of the fi rst half of this year, the CBD market recorded an average price of Source: Savills Research & Consultancy IDR45,580,000, about 2% lower than TABLE 9 the price recorded at the end of last year. Major investment transactions, Q3/2018

Property Location Price Buyer Usage While this currently slow market may PT Waskita Karya be seen as a hindrance, some notable Logios Apartment Margonda, Depok IDR880 bil/US$63.1 bil Realty Residential investors, particularly from overseas Thamrin Nine Tower 2 Thamrin, Jakarta IDR811 bil/US$56.3 bilI UOL Group Ltd Serviced and especially from Singapore, have (180 apartments) apartment viewed this period as an opportunity to Development Land site at Jakarta CBD Sudirman, Jakarta IDR1.63 til/US$112.36 bil OUE Pte. Ltd land enter the market early and settle before any possible recovery. In July, UOL Source: Savills Research & Consultancy

12 Q3 2018

Japan Christian Mancini Tetsuya Kaneko CEO, Asia Pacifi c (Ex Greater China) Director Savills Japan Research & Consultancy +81 3 6777 5150 +81 3 6777 5192 [email protected] [email protected]

Japan’s real GDP grew an annualised while the TSE J-REIT index stood at fundamentals are strong and the 3.0% QoQ in Q2/2018, revised 1,777.18 at the end of September, up outlook is relatively stable. up from an initial reading of 1.9%, just 0.7% QoQ. In the wake of recent marking the strongest quarter in two multiple public offerings, logistics Average Grade A offi ce rents grew years. In August, the unemployment REITs have underperformed. to JPY34,106 per tsubo in the central rate ticked down a further 10 basis fi ve wards (C5W) of Tokyo, up 1.3% points (bps) to 2.4%. Core infl ation Investment volumes were thin in QoQ and 4.6% YoY. Shibuya Grade recovered somewhat in August, Q3/2018, according to preliminary A offi ce rents posted impressive registering at 0.9%. Looking further data, following in the footsteps gains of 2.8% QoQ and 7.3% YoY. ahead, the planned October 2019 of the previous quarter. Sellers Vacancy rates in the C5W tightened consumption tax hike slowly draws remain bullish and infl exible on by 10bps QoQ and 1.1ppts YoY to nearer. pricing, while low cap rates and end the quarter at 0.6%. Demand for concerns over global rises in interest offi ce space is strong and extremely Shinzo Abe was re-elected as leader rates may be leading buyers, low vacancy continues to drive of the governing LDP party, securing who are still interested, to be less exceptional pre-leasing volumes, a third term until September 2021, aggressive in negotiations. Despite somewhat quelling concerns over which is likely to make him Japan’s headwinds, Japan’s macroeconomic robust supply volumes. longest-serving prime minister. Abe’s cabinet achieved a 55% approval GRAPH 9 rating in a September poll by the Nikkei. His continued service should Property transactions by sector, 2007 – Q3/2018 limit surprises in political and fi scal policy. Office Residential Retail Hospitality Logistics Other 8

At the end of July, the Bank of 7 Japan (BOJ) confi rmed it would allow yields for the 10-year JGB to 6 fl uctuate around 0% within a range of 20bps, giving itself more fl exibility 5 and sustainability. The 10-year yield has risen slightly, averaging 0.13% in 4 September. Throughout Q3/2018 the

Trillion yenTrillion 3 BOJ purchased just 7.2 billion yen’s worth of J-REIT units, bringing the 2 YTD total up to JPY44.4 billion, far below the annual JPY90 billion target, 1 perhaps signalling a possible change in execution. 0

The Tankan survey registered at +19 as of September 2018, suggesting business conditions for large Source: RCA, Savills Research & Consultancy manufacturing fi rms have declined for three consecutive quarters. TABLE 9 The reading for Real Estate and Major investment transactions, Q3/2018 Construction enterprises remains strong, however. JPY weakened in Property Location Price Buyer Usage Q3/2018, rising from 110.5 per USD GLP Osaka Suminoe, Osaka JPY36.0 bil/US$321 mil GLP J-REIT Logistics at June end to 113.6 at the end of Matsushita IMP September, a depreciation of 2.7%. Building Chuo, Osaka JPY27.0 bil/US$241 mil Undisclosed Offi ce Large manufacturers have not Toranomon Hills Mori Minato, Tokyo JPY26.1 bil/US$233 mil Mori Hills J-REIT Offi ce adjusted their forecasts, expecting Tower (partial) an average of 107.4 for 2018, so the Yokohama i-Land Tower Naka, Yokohama JPY22.1 bil/US$197 mil MCUBS MidCity J-REIT Offi ce current environment should help companies beat forecasts. The TOPIX GLP Shinsuna Koto, Tokyo JPY18.3 bil/US$163 mil GLP J-REIT Logistics index was up 5.0% over the quarter, Source: Nikkei Real Estate, RCA, Savills Research & Consultancy

savills.com.hk/research 13 Asia Pacifi c |Investment Quarterly

Malaysia Christopher Boyd Nabeel Hussain Executive Chairman Senior Director Savills Malaysia Savills Malaysia +603 2092 5955 ext 149 +603 2092 5955 ext 126 [email protected] [email protected]

The total transaction value of real from Paragon Globe Bhd for RM41 in Q4/2018 along with the 2019 estate investment in Q3/2018 million. Malaysia Budget. Looking ahead, we dropped 23% from Q3/2017 to are encouraged by the government’s RM2.46 billion. The reduction is due Moving forward, apart from a reform agenda, and note a slow-but- to market inactivity as the newly- proposed waiver on sales tax steady improvement in both market appointed administration set about related to sales of residential sentiment and investor enquiries, their reform agenda, with major properties, the new government as we head into what is shaping reviews of various government units has promised a revamped Housing up to be a very critical 2019 for the being undertaken. It wasn’t all bad Policy focusing on affordable Malaysian economy and property news, however; total investment housing and a supportive home sector. value during the quarter exceeded loan approval environment. The new that of Q2/2018 fi gures by 54%, as policy is expected to be unveiled investors took advantage of a short- lived tax holiday which ended on 31 August. GRAPH 11 While land-banking activities Malaysia's GDP growth, 2008 – Q2/2018 appeared to bear the brunt of this reduction, elsewhere investors 8% were still trading. Thailand’s SH 7.4% REIT acquired Hilton Garden Inn 7% 6.0% 5.9% KL from Royal Group for RM240 6% 5.6% 5.8% million (RM571,000 per key). The 5% 4.8% 5.1% REIT is bullish on continued tourism 5.2% growth in KL, with the previous 4.7% 4.5% 4% 4.2% decade showing a 4.8% growth in international tourist arrivals and 3% 12.3% in local tourist arrivals. % change 2%

PNB Development has acquired not 1% only Media Prima’s fl agship 3.5-acre 0% offi ce complex in Bangsar, through -1% a sale and leaseback agreement for -1.5% RM119 million with a lease term of -2% at least six years, but also Media Prima’s 20-acre freehold industrial land in Bukit Jelutong Industrial Source: Bank Negara Park for RM161 million through a similar type of arrangement. It is reported that the two transactions TABLE 11 offer an approximate yield of 6.2% Major investment transactions, Q3/2018 per annum. During the same period, PNB Development divested itself Property Location Price Buyer Usage of a 213-acre industrial site located Jalan Tunku Abdul Hilton Garden Inn, Rahman, RM240.0 mil/US$57.43 mil SHREIT Hotel in Banting, Selangor in a sale to Kuala Lumpur Kuala Lumpur AREA Management Sdn Bhd for 213-acre industrial AREA Management Banting, Selangor RM320.0 mil/US$76.57 mil Industrial RM320 million. AREA Management land Sdn Bhd has plans to develop an RM4 billion Shah Alam, PNB Development Sdn 20-acre industrial land Selangor RM161.0 mil/US$38.52 mil Bhd Industrial GDV automated integrated industrial Two blocks of 6-storey Bangsar, PNB Development Sdn logistics hub on this site. offi ce complexes Kuala Lumpur RM119.0 mil/US$28.47 mil Bhd Offi ce

2.6-acre development Mont Kiara, RM41.0 mil/US$9.8 mil JKG Land Bhd Development Also in Greater KL, JKG Land Bhd land Kuala Lumpur land acquired a 2.6-acre site in Mont Kiara Source: Company announcements, Savills Research & Consultancy

14 Q3 2018

New Zealand Jonathan Lyttle Jenny Pham Managing Director Head of Research Savills Christchurch Research & Consultancy +64 (0) 3 974 1188 +64 (0) 9 951 5914 [email protected] [email protected]

New Zealand’s economy expanded regions outside of Auckland with the Over the next 12 months we believe by 1% in the second quarter of 2018, HPI for New Zealand outside Auckland industrial investment will remain recording the highest quarterly growth increasing 7.4% year-on-year (YoY) relatively strong as investors seek out since September 2016. This robust while Auckland’s HPI showed growth investment opportunities in this sector. result came from strong performances of 1%. across 15 of the 16 industrial sectors, The offi ce transaction market in with the largest increase recorded This quarter witnessed the Auckland was also active during the in agriculture (up 4%) via increased acquisition of the Foodstuffs quarter. Deals included prime offi ce milk production and a rebound in the Distribution Centre in Auckland by transactions in the city centre, such as forestry sector after a poor fi rst quarter. Goodman Property Trust for NZ$93 at ANZ Centre (50% share purchased) A 1% increase in all service industries, million, refl ecting a passing yield and 22 Fanshawe Street as well as such as wholesale trade, retail trade, of 5%. This price set a new record suburban offi ce transactions like 20-22 telecommunications and transportation, for a single asset transaction in the Pollen Street, Public Trust Building. was the largest contributor to GDP Auckland industrial market. We also Most of the property was sold to growth. Overall the strong second found evidence of prime industrial foreign purchasers who are on the quarter has helped to offset a weak properties refl ecting sub-5% cap lookout for investments in Auckland’s fi rst quarter, with annual GDP growth rates in Auckland during this quarter. commercial property sector. showing a steady 2.7% rise.

Annual infl ation rate rose from 1.1% GRAPH 12 in Q1/2018 to 1.5% in Q2/2018, in Auckland industrial yield spread to bond rate, Sep 2014 – Sep 2018 part due to increasing petrol prices. However, infl ation was projected to stay close to the 2% target for the year 10-yr bond rate Avg prime yield Avg secondary yield with lower interest rates continuing to 10% support growth.

A strong migration-led population rise is continuing to be a major driver of 8% aggregate economic growth. Annual net migration this year to August has fallen by 12% from its peak of one 6% year ago, however, levels remain some of the highest ever recorded with net migration fi gures in excess of 4% 60,000 for New Zealand as a whole and 30,000 for Auckland specifi cally. Net migration will likely continue on a slight downward trend over the next 2% two years.

The outlook for the national economy 0% is broadly positive, especially for the 2014 2015 2016 2017 2018 Auckland region. Auckland’s economy Source: RBA, Savills Research & Consultancy is forecast to continue to grow at above national levels, supported by TABLE 12 infrastructure development, ongoing Major investment transactions, Q3/2018 construction activities and a thriving tourism market. However, with global Property Location Price Buyer Usage growth easing and ongoing trade tensions overseas there is potential for ANZ Centre (50% interest) Auckland CBD NZD181 mil/US$118 mill Invesco Group Offi ce a negative impact on the New Zealand economy. Conrad Properties 22 Fanshawe Street Auckland CBD NZD50 mil/US$33 mil Group Offi ce Greater Goodman Property The housing market remained Foodstuffs Distribution Centre Auckland NZD93 mil/US$60 mil Trust Industrial strong, as indicated by the REINZ Greater House Price Index (HPI) of September 20-22 Pollen Street Auckland NZD37.9 mil/US$25 mil VennCap Real Estate Offi ce 2018 which rose 4% from September Public Trust Building Greater NZD17.5 mil/US$11.4 mil - Offi ce 2017. The increase was mainly driven Auckland by the higher rate of growth from Source: Savills Research & Consultancy

savills.com.hk/research 15 Asia Pacifi c |Investment Quarterly

Singapore Christopher J Marriott Alan Cheong Chief Executive Offi cer Senior Director Southeast Asia Research +65 6415 3888 +65 6415 3641 [email protected] [email protected]

For the fi rst half of 2018, the collective mainly from Real Estate Investment investible assets, in the near term, sales market for private residential Trusts’ (REITs) acquisitions. These investment attention will turn towards developments was in play, accounting included the S$908.0 million paid the commercial and industrial for 47.0% of the total volume of by OUE C-REIT for the offi ce sectors, where regulations on the investment sales, which came in at component in OUE Downtown at purchase and sale of properties are S$20.7 billion. However, the revised Shenton Way; the S$789.6 million not as onerous as those applied to Additional Buyer’s Stamp Duty (ABSD) outlay made by CapitaLand Mall the residential sector. that came into force on 6 July 2018 Trust for a 70% stake in Westgate has put the brakes on the number Mall at Jurong East; and the S$730.0 Overall, Singapore’s real estate of collective sales transactions. As million paid by Mapletree Logistics investment sales in Q3 reversed the developers now face a heftier 25% Trust for fi ve logistics properties. strong momentum that started in ABSD (compared to the previous 20% Given the high level of funds being Q2/2017 and ended the quarter at rate) and an additional, non-remittable raised globally that are in search of S$7.10 billion, down 33.4% QoQ. 5% ABSD for purchasing residential properties for housing development, their appetite for collective sales GRAPH 13 has waned. Only two en-bloc deals worth approximately S$353 million Investment sales transaction volumes by property type, Q3/2018 were concluded in the third quarter: Casa Meyfort at Meyer Road and Phoenix Heights in Bukit Panjang. The former escaped the new ABSD rates as the deal was inked before Industrial 6 July. Meanwhile, most developers S$ 1.09 bil, 16% have adopted a prudent and cautious Commercial stance for Government Land Sales S$ 2.22 bil, 31% (GLS) tenders. For example, private residential sites at Dairy Farm Road Mixed and Jalan Jurong Kechil received S$ 0.78 bil, 11% just fi ve and three bids respectively, while the offering prices were less Hospitality S$ 0.08 bil, 1% bullish compared to those achieved in the market before the cooling Others measures. On the front of a high-end, S$ 0.09 bil, 1% private non-landed unit worth at least S$10 million, transaction volume Residential also dropped sharply to six units in S$ 2.83 bil, 40% Q3/2018, down 68.4% from the 19 recorded a quarter ago. The tighter fi nancing rules and increased ABSD Source: Savills Research & Consultancy of up to 20% for foreign buyers have also sent foreigners scurrying from TABLE 13 the market. Consequently, investment Major investment transactions, Q3/2018 sales generated in the residential segment plummeted by 59.2% Property Location Price Buyer Usage quarter-on-quarter (QoQ) to S$2.83 OUE Downtown OUE Commercial Real Estate (offi ce component) Shenton Way S$908.0 mil/US$658.1 mil Investment Trust (OUE C-REIT) Commercial billion in Q3. Westgate (70% stake) Gateway Drive S$789.6 mil/US$572.3 mil CapitaLand Mall Trust (CMT) Commercial On the other hand, investment sales of Siena Residential Development Sengkang Pte Ltd and Siena Trustee Pte Commercial commercial and industrial properties Government land Central S$777.8 mil/US$563.7 mil Ltd (as Trustee-Manager of Siena & residential showed strong growth in Q3. On a Commercial Trust) quarterly basis, commercial property Government land Hillview Rise S$460.0 mil/US$333.4 mil Intrepid Investments Pte Ltd and Residential transactions rose 43.0% to S$2.22 Garden Estates (Pte) Limited Dairy Farm billion, while the sales volume for Government land Road S$368.8 mil/US$267.3 mil UED Residential Pte Ltd Residential industrial properties surged 63.8% to S$1.09 billion. Notable deals came Source: URA, Savills Research & Consultancy

16 Q3 2018

South Korea Crystal Lee JoAnn Hong CEO Director Savills Korea Research & Consultancy +82 2 2124 4163 +82 2 2124 4182 [email protected] [email protected]

The offi ce investment market in Seoul September 2018. Blue Bottle Coffee using face rent and 90% occupancy. continued its strong momentum in plans to open its fi rst Korean store in However, considering certain leasing Q3/2018. Total offi ce transaction the building’s fi rst fl oor. concessions (such as rent-free volumes from Q1/2018-Q3/2018 periods and tenant improvement were 8.6 trillion won, reaching a level A consortium of KB Securities, Hana incentives) and actual occupancy of 97% of last year’s transaction Financial Investment and Yuanta rates, the effective cap rate is in the volume, which was already a record. Securities acquired Gangnam P low to mid 4% range. At the end Transactions in the GBD increased Tower, located in Yangjae-dong for of September, the 5-YR treasury and included the Samsung C&T KRW318.0 billion through Hangang yield increased to 2.18%, meaning megadeal, Gangnam N Tower, Asset Management. Hangang Asset a prime offi ce cap rate spread of Gangnam P Tower and Platinum Management acquired the entire approximately 250 bps. Typical LTV Tower. stock of the KOCREF Yangjae REIT. rates in Korea remain at approximately 55%. With abundant liquidity, overall asset In Q3/2018, the average prime offi ce prices rose, while the unit price also cap rate stood at 4.7%; calculated set a new record. With domestic securities fi rms actively underwriting deals, the portion of overseas investors through Q3 was 13%, a GRAPH 14 lower percentage than last year. After Office transaction volumes, 2010 – Q3/2018 the close of the Centropolis deal in October, worth an estimated KRW1.1 Q1 Q2 Q3 Q4 trillion, the percentage of overseas 10 investors is expected to be similar to last year. 9

8 A KORAMCO–NH Investment Securities consortium acquired the 7 Samsung C&T Seocho building located in Samsung Town (Samsung 6 Town consists of three buildings 5 near Gangnam Station: Samsung Life Insurance, Samsung C&T, and 4 KRW trillion Samsung Seocho Building) for KRW748.4 billion. With Samsung Fire 3 & Marine Insurance as the master 2 tenant until 2021, the building traded at KRW30.5 million per pyeong. 1 NHUF(National Housing and Urban 0 Fund), NH Investment & Securities 2010 2011 2012 2013 2014 2015 2016 2017 Q3/2018 and NACF(National Agricultural Cooperative Federation) participated Source: Savills Korea in the investment. TABLE 14 Gangnam N Tower, developed by Major investment transactions, Q3/2018 Yeoksam PFV, was acquired by KB Real Estate Trust for KRW452.5 Property Location Price Buyer Usage billion. The seller, Yeoksam PFV, Mirae Asset Global will guarantee rental revenue of Platinum Tower KRW214 bil/USD190.8 mil Investments (Orion Partners) KRW24 billion for one year at most. Gangnam N TowerGBD KRW452.5 bil/USD403.4 mil KB Real Estate Trust Yeoksam PFV will also provide tenant Offi ce incentives worth KRW2 billion as well Samsung CNT Seocho Building KRW748.4 bil/USD667.3 mil Koramco REITs and Trust as marketing expenses. The offi ce leasing contract ratio at the time of Gangnam P Tower Yangjae KRW318 bil/USD283.5 mil Hangang Asset completion was 12%, but the rate increased to 40% as of the end of Source: Savills Research & Consultancy

savills.com.hk/research 17 Asia Pacifi c |Investment Quarterly

Taiwan Ricky Huang Erin Ting General Manager Associate Director Savills Taiwan Research +886 2 8789 5828 +886 2 8789 5828 [email protected] [email protected]

Owing to limited supply for tradable and Shin Kong Life both successfully development project is positioned commercial properties in Taipei’s bid on superfi cies land for investment to become Yuanta’s headquarters. CBD areas and many large investors purposes in Kaohsiung (NT$7.8 billion) According to the loyalty price, future shifting their focus to development and Taipei City (NT$1.77 billion), offi ce rents in this development projects, transaction volumes respectively. project are estimated to reach dropped by 67% year-on-year (YoY) NT$3,500 to NT$4,000 per ping to NT$9.06 billion in the third quarter This September, a 1,140-ping plot of per month, which is almost the rent of 2018. Purchasers of two notable superfi cies land in Taipei City’s CBD level for premium offi ce buildings deals that concluded this quarter attracted fi ve bidders, including Nan in the Xinyi district and double the are focused on redevelopment Shan Life, Shin Kong Life, Fubon rent of Grade B offi ces nearby. The potential. One deal was for an en- Life and Transglobe Life. Eventually, recent positive response from large bloc offi ce building in Dunhua North Yuanta Bank won the tender for investors hints at their confi dence offi ce district, purchased by a local NT$8.7 billion in royalty price, in the future of the offi ce leasing developer for NT$2.25 billion. The recording a 123% premium. This market. location is suitable for residential and offi ce use. The other involved a 691- ping strata-title offi ce space, which GRAPH 15 was purchased by Nan Shan Life Signifi cant transactions in the land market, 2011 – Q1-Q3/2018 Insurance for NT$1.1 million per ping. Nan Shan have been aggressive in consolidating ownership of this offi ce Land Superficies land right 160 building.

140 Taiwan’s land market remained active with total transaction volumes in Q3/2018 reaching NT$26.6 billion. 120 Ever since the residential market’s 2017 recovery, which spurred demand 100 for two- to three-bedroom units, developers have become hungry for 80 development land. Land deals totaling NTD billion NT$82.9 billion were completed by 60 developers in the fi rst three quarters of 2018, an amount 30% higher 40 than the NT$62.3 billion transacted throughout the whole of 2017. Several 20 public tenders for land held by the government received good responses 0 2012 2013 2014 2015 2016 2017 Q1-Q3/2018 from the market, especially in Kaohsiung, Taichung and New Taipei Source: Savills Research & Consultancy City. TABLE 15 In addition to residential land, Major investment transactions, Q3/2018 superfi cies land saw renewed interest from large investors, such as Property Location Price Buyer Usage insurance companies and banks, after United Oriental Glass Full Wang International Taoyuan City NT$922 mil/US$29.7 mil Factory the government reviewed and then Taoyuan Factory Development lowered the reserve price and rents for superfi cies land. The diffi culty in Farglory Dunhua N. Building Taipei City NT$2.25 bil/US$72.5 mil Local developer Offi ce acquiring large development sites and large-sized commercial properties Factory in Taichung Industry Taipei City NT$800 mil/US$25.8 mil LARGAN Precision Factory is another reason for the shift. In Park the fi rst three quarters, transaction Nan Shan Life volumes in superfi cies land reached 5/F, Wanguo Building Taipei City NT$760 bil/US$24.5 mil Insurance Offi ce NT$20.4 billion, up an impressive 611% YoY. Early this year, Fubon Life Source: Savills Research & Consultancy

18 Q3 2018

Thailand Robert Collins Chris Hobden CEO Associate Director Savills Thailand Research & Consultancy +66 2636 0300 +66 2636 0300 [email protected] [email protected]

The third quarter witnessed signifi cant according to the REIC. The notable sighting anticipated demand driven domestic investment activity, increase was largely driven by sales by an aging, and increasingly affl uent, with developers undertaking a within the Bangkok Metropolitan domestic population. There is also number of large-scale acquisitions Region (BMR) and centrally located rising interest in exploring the viability predominantly focused on Bangkok- provinces. of resort-based senior living schemes based land and income producing aimed at expatriate retirees. properties. While we expect demand for prime Bangkok land sites to remain strong Kasikorn Research Centre, the Central Pattana PLC (CPN) short-term, rising land prices, a research arm of one of Thailand’s announced the acquisition of Grand slowdown in off-plan condominium leading domestic banks, estimates Canal Land PLC (GLAND), via its sales and a considerable offi ce supply that investment in large retirement wholly-owned subsidiary Central pipeline, may lead to a decline in community projects between 2018 Pattaya Co., Ltd, in a deal valued at acquisitions over 2019. and 2020 will reach approximately THB20.14 billion (US$617.10 million). THB6 billion (US$183.84 million), The purchase comprised Grade Foreign investors are demonstrating leading to accumulated investment A offi ce building G Land Tower, a a growing interest in alternative of around THB27 billion (US$612.79 portfolio of three ‘Shoppes’ branded sectors, most notably senior housing, million) by 2020. retail centres, a development site on Phaholyothin Road in addition to the under construction Super Tower GRAPH 16 project. The latter broke ground last Thailand land sales value by region and land price index % year and, if completed as planned, change, Q1/2017 – Q2/2018 would become Thailand’s largest tower, standing at 615m tall. Greater Bangkok North East Central Siamese Asset Co., Ltd acquired a West South 41-unit apartment building, Above National land price index (RHS) 160,000 35% Sukhumvit 39, for THB787.76 million (US$24.1 million) and Raimon Land 140,000 30% PLC announced the purchase of high-end planned condominium 120,000 25%

developments S19 and S28 from KPN YoY Change Land. The latter are reportedly worth 100,000 20% a combined THB7.7 billion (US$236.1 80,000 million) and scheduled for completion

THB mil 15% in 2023. Raimon Land PLC further 60,000 acquired the remaining inventories of 10% Diplomat 39 and Diplomat Sathorn 40,000 condominium projects. 20,000 5% Bangkok land acquisitions remained 0 0% active over Q3, with SET-listed Q1/2017 Q2/2017 Q3/2017 Q4/2017 Q1/2018 Q2/2018 developer LPN purchasing an Source: Land Department, REIC, Savills Research & Consultancy approximately 5,500 sq m site on Ratchada-Narathiwas Road, TABLE 16 announcing plans to develop around 400 condominium units. Karmarts Major investment transactions, Q3/2018 PLC purchased around 8,250 sq Property Location Price Buyer Usage m of land in Banglumpoo-Lang, reportedly with a view to undertaking c.5,500 sq m land plot, Bangkok THB808.64 mil/US$24.74 mil LPN Development Development a commercial development. Ratchada-Narathiwas Road land 41-unit apartment building, The overall value of land sales Above Sukhumvit 39 Bangkok THB787.76 mil/US$24.10 mil Siamese Asset Co., Ltd Residential nationally increased by 25.1% c.8,250 sq m land plot, Development year-on-year and 16.3% quarter-on- Banglumpoo-Lang Bangkok THB741.84 mil/US$22.69 mil Karmarts PLC land quarter, as of Q2, reaching around THB135 billion (US$4.15 billion) Source: Company announcements, Savills Research & Consultancy

savills.com.hk/research 19 Asia Pacifi c |Investment Quarterly

Vietnam Neil MacGregor Troy Griffi ths Managing Director National Director Savills Vietnam Research & Valuation +84 8 3823 4754 +84 8 3823 9205 [email protected] tgriffi [email protected]

Vietnam’s GDP grew 6.88% YOY Seeing the increasing demand for Corporation in this quarter is with in the third quarter, keeping the urban developments in emerging Fast Retailing, to launch and develop economy on track to remain among Asia, Mitsubishi Corporation and Uniqlo’s retail business in Vietnam, the world’s best performers. Singapore-based Surbana Jurong following Thailand, Indonesia, and Within the service sector, tourism joined hands to establish a 50:50 Russia. With the cooling of China’s continued to be one of the key pillars joint venture to build transportation economy, players are now looking of growth, up 5.89% YOY in Q3, infrastructure and develop urban to change focus to smaller Asian and as a result driving hospitality real estate solutions for some target markets, most notably Vietnam, developments. Early in the quarter, markets, including Vietnam. This which since joining the World Trade the local developer Novaland US$500m JV is expected to resolve Organisation (WTO) in 2007 has opened their fi rst resort - Arezai Can the shortages in private investment been gradually liberalising its retail Tho, an “affordable luxury” resort in for infrastructure and be a boost for sector, leading to a new wave of the Mekong Delta, marking their fi rst the region's urban projects. Another foreign investment. move outside the residential sector. announcement by Mitsubishi Meanwhile, ICC-Kajima secured a prime site situated on Tran Hung Dao Street along Han River, Danang to develop a Wink Hotel, a GRAPH 17 “luxury and value-for-money” hotel Retail sales in Vietnam, 2007 – Q3/2018 concept tailored towards young and aspirational travelers. This was the third site to be developed for the 180 international-standard hotel chain in Vietnam, following their fi rst two sites located at 75 Nguyen Binh 150 Khiem, Ho Chi Minh City and 178 Tran Phu, Danang City. 120

On the residential side, the eastern areas of Ho Chi Minh City remain 90

one of the most exciting districts to USD billion investors, given strong infrastructure 60 development. In August, CapitaLand set their 13th residential development in Vietnam with the 30 acquisition of a prime site in District 2 for approximately US$60 million. 0 Measuring over 60,000 square 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1-Q3 metres in land area, the project /2018 is planned to yield more than 100 Source: Savills Research & Consultancy landed residential units, targeted for completion by 2021. Earlier in TABLE 17 July, Frasers Property announced their acquisition of 75% interest in a Major investment transactions, Q3/2018 residential-cum-commercial project in Linh Trung Ward, Thu Duc District Property Location Price Buyer Usage 6 ha development site District 2, Residential for over US$34 million. In the same (100% interest) Ho Chi Minh City VND1,380 bil/US$60 mil CapitaLand development month, local developer Khang Dien Development site (75% Thu Duc District, VND799 bil/US$34 mil Frasers Property Mixed-use transferred Phase 1 of a 90-ha interest) Ho Chi Minh City development residential development project in Phase 1 of 90 ha development site District 9, VND284 bil/US$12.4 mil Cuu Long Real Residential District 9 to another Vietnamese (100% interest) Ho Chi Minh City Estate development investor for a total consideration of approximately US$12.4 million. Source: Savills Research & Consultancy

20 Q3 2018

AAustraliaustralia

◄ 1 Sussex Street Westfield Eastgardens ▼ Sydney, NSW Eastgardens, NSW AU$250M/US$177.5M AU$720M/US$511.2M in Q3 in Q3

80 Ann Street ► 60 Station Street ▲ Brisbane, QLD Parramatta, NSW AU$418M/US$296.8M AU$277.6M/US$197.1M in Q3 in Q3

BBeijing/Shanghai/Shenzheneijing/Shanghai/Shenzhen

Retail podium of Longzeyuan Western District ► Changping district, Beijing in Q3

Fire Temple Mall ▲ Podium of Tongtai Daxing district, Beijing Mansion ▲ RMB2.0B/US$290M Xicheng district, Beijing in Q3 in Q3

Fangheng Fashion Center ▲ ◄ Hainan Airlines Mansion Chaoyang distrct, Beijing

Chaoyang district, Beijing 8 RMB2.229B/US$322M

RMB1.3B/US$188.5M 1 in Q3 in Q3 0

◄ Silicon Vally Bright City T4 2 Haidian district, Beijing

RMB422M/US$61M 3 in Q3 Q

Poly Greenland Plaza

▼ s Yangpu, Shanghai n RMB850M/US$123.3M Crystal Plaza ▲ o

in August Pudong, Shanghai i RMB1.517B/US$220.0M t in August Central Times c a ▲ Bay Valley C6 Apartment ▲ Yangpu, Shanghai Luohu district, Shenzhen s RMB554M/US$80.3M RMB1.144B/US$165.9M n in July in Q3 a r t

r o j a Major transactions Q3 2018 Q3 transactions M Major

savills.com.hk/research 21 Asia Pacifi c |Investment Quarterly

HHongong KongKong

◄ Kwong Loong Tai Building Cheung Sha Wan HK$680M/US$87.2M in September

19/F The Center ► Central HK$762M/US$97.7M in August Mee Wah Factory Building ▲ San Po Kong ◄ 13-15 Mercury Street HK$1.25B/US$160.3M TIn Hau in August HK$570M/US$73.1M in July

JJapanapan

◄ Toranomon Hills Mori Tower (partial) Minato, Tokyo JPY26.1B/US$233M in July

MMalaysiaalaysia

◄ Hilton Garden Inn Kuala Lumpur RM240M/US$57.4M in July

22 Q3 2018

SSingaporeingapore

▼ Westgate (70% stake) Gateway Drive S$789.6M/US$572.3M in August

OUE Downtown (offi ce component) ▲ Shenton Way S$908.0M/US$658.1M in September

SSouthouth KoreaKorea

▼ Platinum Tower Gangnam Finance Plaza ► ◄ Gangnam N Tower GBD GBD GBD KRW214B/US$190.8M KRW183B/US$163.2M KRW452.5B/US$403.4M in July in August in August

◄ Samsung C&T Seocho Gangnam P Tower ► GBD Yangjae KRW748.4B/US$667.3M KRW318B/US$283.5M in September in August 8 1 0 2 TTaiwanaiwan 3 Q

◄ United Oriental Glass ◄ Wanguo Building s Taoyuan Factory Taipei City Taoyuan City NT$760M/US$24.5M n

NT$922M/US$29.7M o in September i

in July t c a

Factory in Taichung s

Farglory Dunhua N. Building ► Industrial Park ► n Taichung City Taipei City a

NT$2.25B/US$72.5M NT$800M/US$25.8M r t

in August in August r o j a Major transactions Q3 2018 Q3 transactions M Major

savills.com.hk/research 23 Savills Regional Investment Advisory, Asia Pacific

Regional Investment Advisory Regional Research and Consultancy Frank Marriott Simon Smith Email: [email protected] Email: [email protected] Tel: +852 2842 4475 Tel: +852 2842 4573 23/F, Two Exchange Square, Central, Hong Kong 23/F, Two Exchange Square, Central, Hong Kong

ASIA Korea AUSTRALASIA Crystal Lee China Email: [email protected] Australia Raymond Lee Tel: +822 2124 4114 Paul Craig Email: [email protected] 13/F, Seoul Finance Center, 84 Taepyungro-1- Email: [email protected] Tel: +852 2842 4518 Tel: +61 2 8215 8888 ga, Chung-gu, Seoul 100-768, Korea Level 25, 1 Farrer Place, Sydney, Australia Wing Chu Malaysia Email: [email protected] Christopher Boyd Offices throughout Sydney, Parramatta, Tel: +8621 6391 6689 Email: [email protected] Canberra, Melbourne, Notting Hill, Adelaide, Unit 2501-13, Two ICC, Tel: +60 3 2092 5955 Perth, Brisbane, Gold Coast and Sunshine No. 288 South Shanxi Road, Level 9, Menara Milenium, Jalan Damanlela, Bukit Coast Shanghai 200031, PRC Damansara, 50490 Kuala Lumpur, Malaysia New Zealand Steve Chen With 2 branches throughout Malaysia Tel: +64 9 951 5940 Email: [email protected] Phillipines Level 6, 41 Shortland Street, Auckland, Tel: +8621 6391 6688 KMC MAG Group Unit 2501-13, Two ICC, NZ 1010, New Zealand No. 288 South Shanxi Road, Michael McCullough Email: [email protected] Shanghai 200031, PRC NORTH AMERICA Tel: +632 403 5519 Savills Studley With offices in Chengdu, Chongqing, Dalian, 8/F Sun Life Centre, 5th Ave, Woody Heller Guangzhou, Hangzhou, Nanjing, Shenyang, Bonifacio Global City 1634, Philippines Shenzhen, Tianjin, Wuhan, Xiamen, Xi'an and Zhuhai Email: [email protected] Singapore Tel: +1 212 326 1000 Hong Kong SAR Christopher Marriott 399 Park Avenue, 11th Floor, New York, Raymond Lee Email: [email protected] NY 10022 Email: [email protected] Tel: +65 6415 7582 Tel: +852 2842 4518 30 Cecil Street, #20-03 Prudential Tower, 23/F, Two Exchange Square, Central, Hong Kong Singapore 049712 LATIN AMERICA Borja Sierra Taiwan With offices in Tsim Sha Tsui Email: [email protected] Ricky Huang Tel: +44 20 7409 9937 Email: [email protected] Macau SAR Finsbury Circus House, 15 Finsbury Circus, Franco Liu Tel: +886 2 8789 5828 London EC2M 7EB, United Kingdom Email: [email protected] 21F, Cathay Landmark, Tel: +853 2878 0623 No. 68, Sec. 5, Zhongxiao E. Road, Suite 1309-10, 13/F Macau Landmark, Xinyi District, Taipei City 110, Taiwan UNITED KINGDOM & EUROPE 555 Avenida da Amizade, Macau With an office in Taichung Phillip Garmon-Jones Email: [email protected] Indonesia Thailand Tel: +852 2842 4252 PT Savills Consultants Indonesia Robert Collins 23/F Two Exchange Square, Central, Hong Kong Jeffrey Hong Email: [email protected] Email: [email protected] Tel: +66 2 636 0300 Offices throughout the United Kingdom, Tel: +62 21 293 293 80 26/F, Abdulrahim Place, 990 Rama IV Road, Belgium, France, Germany, Hungary, Italy, Panin Tower - Senayan City, 16th floor, Unit C, Jl. Bangkok 10500, Thailand Netherlands, Poland, Spain and Sweden Asia Afrika Lot. 19, Jakarta 10270, Indonesia Viet Nam Associate offices in Austria, Greece, Norway, Portugal, Russia, Turkey and South Africa Japan Neil MacGregor Email: [email protected] Christian Mancini Email: [email protected] Tel: +84 8 3823 9205 Tel: +81 3 6777 5150 18/F, Ruby Tower, 81-85 Ham Nghi Street, 15/F Yurakucho ITOCiA, 2-7-1 Yurakucho, District 1, Ho Chi Minh City, Viet Nam Chiyoda-ku, Tokyo 100-0006, Japan With an office in Ha Noi

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