ASIA MARKET SNAPSHOT

CAPITAL MARKETS & INVESTMENT SERVICES 19 As the unease wrought by the REGIONAL TRENDS US-China trade war recedes into the background, real SHANGHAI TO BENEFIT FROM INFRASTRUCTURE PUSH estate markets across Asia rung in the new year on a Q1 2019 recorded total transaction volumes worth USD9.6 billion, an 8% increase over Q4 2018, with a positive note, with friendly USD20 billion plan to develop urban infrastructure among the factors boosting investor confidence in the city’s real estate market government policies, tax reforms and infrastructure spending propping up demand. IPO GLORY FOR INDIAN REIT With sentiment improving, The successful launch of a 47.5 billion rupee (USD687 million) IPO[1] by the Blackstone-backed Embassy investors are seen diversifying Office Parks Real Estate Investment Trust (REIT) – India’s first - is seen marking the debut of the away from more traditional country’s real estate sector on the global stage sectors such as office space and housing into areas such as FDI FLOCKS TO VIETNAM REAL ESTATE data centres and warehousing, while new developments are Vietnam saw foreign direct investment (FDI) of USD2.58 billion in the first two months of 2019, a y-o-y cropping up farther away from increase of nearly 10%, with real estate the second-most invested sector in terms of total FDI contributions long-established and rapidly saturating real estate hubs. HEAVY COMPETITION SHIFTS FOCUS IN KOREA TO NON-CORE ASSETS

Coming off a stellar 2018 with record transaction volumes, competition in Korea for core assets remains strong, with a lack of stable office investment opportunities fueling interest in retail and industrial properties

INDONESIA HOLDS ITS BREATH

Investment activity in Indonesia has paused and is only expected to pick up in the second half of 2019 as TERENCE TANG the upcoming presidential election followed by two major religious holidays take precedence Managing Director Capital Markets & Investment Services I Asia Industrial sector in the spotlight Hong Kong bounces back in slow motion A combination of emerging infrastructure, investment trends and government Hong Kong’s property market took a hit from the economic uncertainties and weak stock incentives has put the industrial sector firmly on the radar of investors and developers markets triggered by the US-China trade war, keeping aggregate investment activity low. across the region. In Hong Kong, the relaunch of a massively popular scheme that However, things are already beginning to look up with demand reviving and the reduces the costs and complexity of repurposing industrial buildings is expected to announcement of a highly awaited industrial revitalisation scheme. Improving liquidity make the sector the standout performer of 2019. Meanwhile in India greater clarity on and sentiment is starting to drive up transaction volumes in the residential sector, tax structures and the introduction of ‘single window’ approvals have stoked interest in indirectly benefiting commercial sector, including retail, office and industrial properties. the development of international-class industrial townships. The sector is expected to benefit from improved connectivity along Thailand’s Eastern Economic Corridor (EEC), Singapore commercial assets shine a manufacturing zone on the eastern seaboard, while in Vietnam surging interest on Commercial property in Singapore is expected to remain highly attractive to investors the back of US-China trade tensions is powering the growth of factory and logistics and developers, with office rental growth continuing. Rising visitor numbers combined facilities in the country’s west. with tight supply is also raising revenue forecasts in the hotel sector. Activity in the residential space is expected to be relatively subdued in the second quarter as Government policies propel demand in China developers focus on new property launches, with the exception of the country’s largest The real estate market in the Pearl River Delta continues to see rising transaction HUDC estate up for collective sale. volumes – up 32% over Q1 2018 to USD1.58 billion – thanks to development-friendly government policies that are attracting new businesses and high-end talent. In Beijing, Tight supply in a boon for outlying districts decentralisation remains a key theme as planners seek to promote development in the In Taiwan, improving market sentiment has ensured demand for office assets remains outlying districts of the nation’s capital. Investors continue to look to the office sector strong. With supply tight in the CBD, developers are pursuing sites suitable for for stable incomes and rental upside while growing consumption levels ensure interest office use while investors and end-users are considering outlying districts such as in the retail sector is retained. In Chengdu, government initiatives such as the Key Dazhi, Neihu, Nangang, and . Growing investor confidence is also Projects Plan 2019, which aims to plough investments worth over RMB3.4 trillion expected to help boost markets such as and . (USD506.4 billion) primarily into basic infrastructure, are contributing to a positive outlook for the city’s residential, office and retail markets. Growth continues apace in the Philippines Japan’s regional markets beckon amid tight conditions With the Philippines economy expanding at a steady clip, business sentiment remains positive, casting a halo effect on the real estate sector. Offshore gaming and outsourcing Cautious optimism marks the mood in Japan’s real estate market despite a looming will sustain demand for office space with a strong pre-leasing trend expected to support consumption tax hike in October, supported by tight conditions and strong balance fresh inventory due to come online this year. Meanwhile growing consumption levels and sheets. Foreign and domestic investors are likely to find value in provincial markets like foreign arrivals should keep the retail and hospitality sectors vibrant. The residential Osaka that, while less economically robust than Tokyo, offer underutilised assets. The sector however is contending with higher prices, a lack of land supply and slower logistics sector is also expected to continue to produce strong returns in Q2 2019. launches of more affordable units.

Please feel free to contact our relevant investment market experts for further insights and in-depth discussions on key trends and opportunities across this fast-changing region. BEIJING

Decentralisation is the main focus of development in Beijing in 2019 with the government’s announcement of “Beijing’s 2019 Plan of major projects” in Q1, where 82% of the projects are located in decentralised areas. In addition, the State Council approved the "Detailed Planning and Regulations 6 for Beijing City Sub-center (2016-2035)” at the beginning of 2019, and the planning of Fengtai District EN-BLOC TRANSACTIONS was also finalised in Q1. Investors are optimistic about their prospects in Beijing and are actively searching for suitable investment opportunities. The investment market remained active in the quarter with a total transaction volume of USD5.1 billion. USD5.1 B COMBINED VALUE The Beijing market continued to grow in Q1 2019 with 6 completed transactions, totalling approximately USD5.1 billion, a 50% increase compared to Q4 2018. The largest deal in Q1 came from the development project sector, where Sunac acquired the Oceanwide’s portfolio in Q1, with the value of the Beijing component, Land No.1 of Beijing in BIGGEST DEAL Haidian District, estimated at around USD3 billion. Offices or projects with potential to be converted to office space »»Oceanwide Portfolio are still the most desired asset classes for investors, as seen by 4 projects transacted in Q1 for USD2.1 billion. In addition, end-users also have been active in this quarter, closing 3 out of 6 deals, totalling USD2 billion. Beijing Component USD3B | Development Project HIGHLIGHTED DEALS »» Oceanwide Portfolio was acquired by Sunac in Q1 for USD1.9 billion and related debts of USD5.3 billion. The Beijing component of this portfolio has a total buildable GFA of 668,500 sq m with an estimated value MAJOR MOVER Q1 2019 of about USD3 billion. »»Development Project »» JD acquired a hotel located in Haidian District from Beijing Capital Group for USD399.6 million. The project has a total GFA of 68,629.04 sq m. SECTORS TO WATCH Q2 2019 The investment market in Beijing continues to be opportunity-driven in 2019 due to the limited supply. Along with the city’s development trend, we expect more opportunities in emerging areas, especially Fengtai and Tongzhou. The »»Office office market will continue to be the most active sector in Beijing, where investors will look for office assets with »»Retail stable income, the most upside potential for rentals, and an opportunity to reposition buildings. End-users will look for traditional office space or opportunities to convert space into office use. Furthermore, due to the fast-growing consumption per capita in Beijing, investors are positive in their outlook for Beijing’s retail market and actively looking for investment opportunities in the retail sector.

CHARLES YAN Managing Director | North China +86 10 8518 1593 [email protected]

4 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 CHENGDU

In Q1 2019, Chengdu continued its push towards becoming the economic centre and international transportation hub for Western China. In Q1, the Chengdu government announced MAJOR MOVER Q1 2019 the “Key Projects Plan 2019” involving 1,090 projects with a total investment of more than RMB3.4 trillion (USD506.4 billion) and a focus on the basic infrastructure sector. This was preceded »»Development Site by the State Council including Chengdu in its “One City, One Policy” at the end of 2018, a designation that helped slightly relax restrictions on the real estate market in Q1. These positive steps have SECTORS TO WATCH Q2 2019 boosted investor confidence in the Chengdu market, which has seen an increase in activity in Q1 »»Development Site compared to the previous quarter. »»Office In Q1, the Chengdu government slightly loosened its control of the real estate market, especially in residential housing. As a result, the land market became more active in Q1 with the highest land price in the past year reaching »»Retail RMB17,200 per sqm. Development projects remain the most popular sector in Chengdu. As the city’s economy, basic infrastructure, service industry and consumption per capita continue to grow, investors are showing more interest in the market by actively searching for high-quality office and retail projects. With the continuous implementation of “One City, One Policy" by the Chengdu government, the residential market remains active. Development projects, especially those with a residential component, will continue to be the most popular investment targets in Chengdu. With office rental rates expected to rise in 2019, investors are looking for office projects in prime locations. In addition, the positive outlook for Chengdu’s retail market will also attract investors.

SEAN SUN Deputy Managing Director | West China +86 28 8658 6288 [email protected]

5 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 HONG KONG

The slowdown in Hong Kong's property market carried over into the new year as dampened sentiments permeated across all sectors. Rising economic uncertainty, fuelled by the US-China trade war and a weak stock market, kept aggregate investment activity low. Total office transaction value dropped a 6 further 27% between Q3 and Q4 2018. The residential market has been particularly affected in the EN-BLOC TRANSACTIONS process as developers felt the squeeze on liquidity and began offering units at discounts in the range of 10% to 20% to attract buyers. Institutional investors have turned to commercial sectors, where capital values have been less impacted by the slowdown, especially focusing on offerings in core USD1.382B districts for added stability. COMBINED VALUE

Nonetheless, activities later in the quarter have proven that demand persists across the city. Investors have regained confidence and responded positively to reduced prices, as evidenced by transactions in the core CBD such as BIGGEST DEAL office building trading at a rate of 20% below records achieved in 2018, or sell-out performances on »»New Kowloon Inland, residential projects such as Sino’s Grand Central. We have also begun to see developers cutting 5% to 10% off the initial discounts offered on new rounds of first-hand unit sales. Lot No. 6551, Meanwhile, Hong Kong welcomed the much-anticipated Revitalisation Scheme 2.0, the latest version of a hugely Kai Tak Area 4C Site 3 popular arrangement that ended two years ago and encouraged repositioning of dated industrial buildings without USD1.435B | Residential Site subjecting them to a huge premium for change of usage. The announcement made by the city’s Chief Executive Carrie (Government Land Sale) Lam Cheng Yuet-ngor in her policy address has helped shift focus to the sector, which will likely be the standout performer in 2019. MAJOR MOVER Q1 2019 HIGHLIGHTED DEALS »»Industrial »» Government Land Sale NKIL 6551 awarded to Sun Hung Kai Properties for USD1.435 billion or USD2,213 per sq ft on land value. SECTORS TO WATCH Q2 2019 »» Mapletree sold their brand new office building in East Kowloon, Mapletree Bay Point, to private equity firm PAG for USD1.147 billion or USD1,518 per sq ft. »»Industrial Revitalisation »» Government Land Sale TPTL 244 awarded to Sun Hung Kai Properties for USD804.13 million or USD847 per »»Redevelopment Sites sq ft on land value. We expect to see increasing transaction volumes in the industrial sector as more options become available on the ANTONIO WU market, attracting private and institutional investors alike looking to capture potential. Commercial assets such as Deputy Managing Director | Asia retail and offices should witness continued interest from qualified buyers due to Hong Kong’s high market liquidity. +852 9195 5983 [email protected]

6 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 INDIA

The Indian real estate market witnessed a rather slow start to Q1 2019 with the announcement of general elections, although the union budget provided some relaxation on taxable income and BIGGEST DEAL income from capital gains, to entice housing demand from end users. Alternate asset classes such as Co-living, Student Housing and Co-working segments witnessed growing interest from global »»CDPQ Invests in NBFC institutional investors and domestic players. The launch of India’s first REIT – an initial public offering arm of Edelweiss (IPO) from Embassy–Blackstone, widely considered as marking the announcement of India’s real USD250M | Funding estate sector on the global platform – was also witnessed in Q1.

The slowdown in NBFC funding for developers continued in Q1, resulting in a liquidity crunch and limiting the MAJOR MOVER Q1 2019 completion of existing projects and new launches. »»Co-Living The warehousing sector continued to witness growth with increasing interest from institutional players, thanks to greater clarity on GST from the central and state governments. Grade A developers continued to develop »»Co-Working international-standard industrial townships, including logistics and warehousing facilities, following a single-window clearance approval from the central government. SECTORS TO WATCH Q2 2019 With the launch of India’s first REIT in Q1, global and domestic investors continue to show an interest in income- generating assets, including retail malls and warehousing/logistics parks, as well as conventional Grade A »»Co-Living/ commercial office stock. Student Housing HIGHLIGHTED DEALS »»Warehousing »» Caisse de dépôt et placement du Québec (CDPQ) has invested about Rs1,800 crore (USD250 million) in the non- banking financial arm of Edelweiss Group, as the Canadian pension fund continues to bet big on Indian companies. »»Commercial »» HDFC Capital Advisors and Tribeca have set up a USD72.45 million platform to develop mid-income housing projects. »» Global realty investment, development and management firm Hines is paying USD130 million to DLF for a 49% stake in a proposed commercial project in Gurgaon. Alternate asset classes such as Co-living and Student Housing are expected to continue to gain traction from SURESH CASTELLINO Executive National Director investors and users going forward, along with other income-generating asset classes, such as retail malls and +91 997 009 6633 warehousing/logistics parks. With the announcement of general elections, we expect major players, including global [email protected] investors, to adopt a “wait-and-see” approach. And, depending upon the success of the Embassy-Blackstone REIT, GAGAN RANDEV many more REIT players could hit the Indian markets. National Director +91 990 127 7222 [email protected]

7 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 INDONESIA

The big news in Indonesia at the moment is the upcoming presidential election in mid-April. All in all, it has been a peaceful process in one of the world’s largest young democracies. However, until the MAJOR MOVER Q1 2019 election is final, speculative property investment remains on hold. And, following the election, we have the Muslim fasting month beginning early May with the Lebaran holiday to follow in June. So, the best »»Office scenario is that investment sentiment and activity will start to turn around in Q3 or Q4 2019. »»Low Middle Cost Fundamentals currently point to an overbuilt office market with new supply outweighing annual demand by Residential Housing a 3-to-2 margin in 2018 and 5-to-2 margin in 2017. The impact will be continued lower effective rental rates and good deals for relocating tenants. The technology and co-working sectors have seen greater absorption, SECTORS TO WATCH Q2 2019 however co-working operators are currently slowing down. But, despite the slowdown, we expect the co-working space to continue to shape the future of the office market with not only end-users but also more and more with »»Residential traditional corporate occupiers. »»Co-working Spaces In addition to the pleasant work environment of a co-working space, and advantages such as better amenities, shorter lease terms and the flexibility to increase or decrease the size of space compared to a traditional office space, many »»Logistics firms are now choosing co-working spaces as a way to eliminate the high tenant fit-out cost of doing business. This burden is transferred to the co-working operators who charge higher rates and provide more services. Some of the traditional serviced-office players are beginning to build co-working space businesses and so too are some landlords. It is an evolving industry and we believe it’s a trend that is here to stay. As fund managers across Asia shift their investment focus up the risk curve from core and core-plus to opportunistic or alternative asset classes due to lower office yields in most of the key gateway cities, local investors in Indonesia are either seeking distressed opportunities or sitting on the sidelines. Foreign developers continue to seek a piece of the Indonesia pie, but are largely moving into perceived safer segments of the market, such as development of low- cost housing and low-middle cost apartments. Historically, the most popular sector for foreign JV developers to enter the Indonesia market, especially the Greater Jakarta market (Jabodetabek), has been stand-alone residential apartment projects, covering middle, middle-up, upper-end and luxury segments. When the government adjusts the tax regimen in the near future, including a possible reduction or elimination of the super luxury and luxury taxes, we expect the investment market and demand for middle, upper-middle, high-end and luxury apartments will turn around. Like other governments in the Asia Pacific region, Indonesia’s will likely become increasingly active in implementing policies that will stimulate the local real STEVE ATHERTON estate market. However, this will need to be done in a way that keeps the most affordable segment attainable for Director +62 21 3043 6820 entry-level buyers. [email protected]

8 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 JAPAN

Optimism continues across Japan’s commercial real estate market despite the continued threat of a consumption tax increase in October. With strong corporate balance sheets providing the flexibility to invest, Japan’s property market remains strong, suggesting more upside in asset prices. We expect 13 historically tight market conditions to continue for occupiers, developers and investors despite some EN-BLOC TRANSACTIONS uptick in Tokyo’s net supply towards 2020. Although economic prospects for all regional cities, including Osaka and Nagoya, are not as robust as those in Tokyo, investors seeking steady income- producing assets ought to find more attractive opportunities in local cities where more underutilised USD500M assets exist, notably Osaka. COMBINED VALUE

Market sentiment remains cautiously optimistic as Japan continues to attract investors with more infrastructure development ahead of the 2020 Tokyo Olympics. Transactional volumes remain down for Q1 2019 as stock remains BIGGEST DEAL limited. The investment market in Japan is still favorable to overseas and domestic buyers alike. The logistics market »»Hilton Tokyo Odaiba remains an interesting sector as yields continue to track towards 4% and prime rents within Tokyo’s 23 CBDs push to USD569.6M | Hotel JPY8,000 per tsubo per month, a cyclical high for stock of this nature. HIGHLIGHTED DEALS MAJOR MOVER Q1 2019 »» Osaka Shinsaibashi Building, Osaka, transacted in February 2019 for JPY14.9 billion (USD136.9 million) at a capitalisation rate of 3.5%, sold by Japan Retail Fund (JRF) to a domestic SPC. »»Logistics »» G-BASE Tamachi, Tokyo, transacted in February 2019 for JPY28.9 billion (USD259.1 million) at a capitalization rate of 3.4%, sold by Nippon Building Fund to Shimizu. SECTORS TO WATCH Q2 2019 »» Glass City Harumi, Tokyo, transacted in February 2019 for JPY11.2 billion (USD98 million) at a capitalization rate »»Nagoya Offices of 4.1%, sold by Glass City Private Limited (SPC of Union Investment) to Daiwa Office Investment Corporation (JREIT). »»Osaka Offices Our top investment pick is office space in Osaka, although Tokyo has better fundamentals to support rental growth »»Logistics beyond the cyclical horizon. A lower-than-expected vacancy rate in markets should keep net investment yields above an attractive 3.5% even with more money chasing steady yields in real estate. Regionally, rents continue a modest upward trajectory as limited supply is met with strong demand for good quality stock. The logistics market continues to show strong investment returns and sets a positive tone for Q2 2019. HIDEKI OTA Executive Director +81 3 4572 1005 [email protected]

9 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 KOREA

The office investment market retained its strong momentum in the first quarter of 2019. A total of 8 office transactions with a combined value estimated at KRW 2.3 trillion (USD2.1 billion) were recorded. Competition is strong among home and overseas investors due to high demand for core 8 assets. However, there remains a lack of core buildings that can guarantee secure tenancy by EN-BLOC TRANSACTIONS preleasing or master leasing. A lack of available stable office investment opportunities has led investment companies to keep an eye on non-office USD B commercial buildings such as retail and industrial properties. In addition, a number of domestic institutional investors 2.1 COMBINED VALUE are seeking to invest in overseas properties as they pursue higher returns.

HIGHLIGHTED DEALS BIGGEST DEAL »» NH Investment and Securities and ARA Asset Management consortium acquired the Seoul Square building for approximately KRW970 billion (USD858 million) from KR1 CR REIT, a locally listed trust whose largest shareholder »»Seoul Square Building is a division of Singapore’s Keppel Capital. USD858M | Hotel »» NH Investment and Securities and Ryukyung PSG Management consortium acquired the Samsung SDS Tower West campus, currently being leased by Samsung SDS, for approximately KRW628 billion (USD555 million). MAJOR MOVER Q1 2019 »» Mastern Asset Management sold We Work Tower (PCA life Tower) to JS Asset Management for approximately »»Office KRW150 billion (USD132 million). Some prime buildings, including Jongro Tower and Namsan State Tower, are currently being put on the market. SECTORS TO WATCH Q2 2019 However, transaction volumes will probably drop in 2019 compared to 2018, which saw the highest transaction volume in Korea’s capital market history. And while reduced supply has pushed down the volume of investment »»Office compared to 2018, the transaction market in 2019 is expected to show a positive trend. »»Industrial

KICHOON JUNG Managing Director +82 2 6325 1900 [email protected] JOON LEE Seinor Director +82 2 6325 1900 [email protected]

10 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 MYANMAR

Investments in real estate are likely to surge in coming years as investors take advantage of opportunities that will arise from further enforcement of friendlier government policies. The flow of MAJOR MOVER Q1 2019 hotel investments into the country continues to rise. Likewise, liberalisation of sectors such as banking & insurance and wholesale & retail activities are expected to further facilitate growth in the office »»Retail and retail sector. Meanwhile, condominium sales are likely to improve as developers start to introduce competitively-priced projects in the market. SECTORS TO WATCH Q2 2019 Better quality spaces are becoming more prevalent as both office and retail rents stabilise at reasonable levels. »»Office Likewise, the entry of new serviced apartments offering competitive rates has exerted downward rental pressure on existing developments. Demand remains geared towards studio to two-bedroom unit types. Meanwhile, despite the »»Retail current low occupancy rates, hotel investments in the country continue to rise in anticipation of future growth. Given that projects and investments are still mostly concentrated in the upper-scale segment, developers and operators should venture into the untapped mid-scale category instead. Office space requirements are set to increase from 2019 onwards especially now that the insurance sector is liberalised. Given the strong development pipeline for 2019, along with the shift in consumer preferences towards modern retail developments, prospects for large-scale shopping malls and lifestyle-oriented centres will remain strong. Meanwhile, more developers are likely to start expanding their mass market as they plan to introduce more low-cost residences. Sales of lower-tier albeit modern apartments and condominiums are likely to do better.

KARLO POBRE Managing Director +95 931 336 099 [email protected]

11 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 PEARL RIVER DELTA

The development plan for the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) released in February has made this region a central focus in Q1 2019. The Guangdong government has also been preparing detailed development plans for the Pearl River Delta (PRD) region, including a three-year 5 action plan (2018-2020) and implementation guidebook. Infrastructure, urban renewal and talent EN-BLOC TRANSACTIONS attraction have remained the main driving forces of the region’s development. Investors are paying more attention to the PRD regional market and we have witnessed a total transaction volume of USD1.58 billion in Q1, a 32% increase compared to Q1 2018. USD1.4B COMBINED VALUE A total of 9 projects were transacted in Shenzhen and Guangzhou in Q1 2019 totalling USD1.58 billion. Shenzhen and Guangzhou completed three deals with a transaction amount of RMB1.17 billion and RMB417 million respectively, accounting for 74% and 26% of the total transaction volume for each city. The retail sector was the major focus of BIGGEST DEAL the PRD investment market in Q1 2019, totalling USD1.22 billion and accounting for 77% of the total volume. On the »»Shenzhen’s Central other hand, although four office projects were closed in Q1 2019 for a total of USD166 million only, we continue to see investors actively searching for high-quality office projects. Walk Mall USD985M | Retail HIGHLIGHTED DEALS »» Hong Kong’s Link REIT purchased the Central Walk mall for USD985 million. The more than 120,000 sq m retail project is located between the Shenzhen Convention and Exhibition Centre and the city’s seat of government in MAJOR MOVER Q1 2019 the Civic Centre. »»Retail »» Approximately 22,000 sq m of Greenland Centre’s retail component in Tianhe District of Guangzhou was sold at an estimated amount of USD236 million. SECTORS TO WATCH Q2 2019 With the further integration of the GBA and close collaboration between the PRD, Hong Kong and Macau, more enterprises and high-quality talent will be attracted to the region, giving the PRD a promising future. With continuous »»Office population inflow and steadily rising consumption per capita in the PRD region, the outlook for the retail market »»Retail is positive and will continue to attract retail investors. Furthermore, with the improvement of basic infrastructure, especially transportation and amenities in emerging areas, investors will also look for opportunities outside traditional CBD areas.

ALAN FUNG Managing Director | South China +86 20 3819 3998 [email protected]

12 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 PHILIPPINES

The Philippine economy clocked a full-year growth rate of 6.2% in 2018, and multilateral banks and credit rating firms forecast GDP to grow between 6% and 6.5% in 2019. Property market sentiment BIGGEST DEAL remains positive and the sustained economic growth should spill over to the real estate segment in 2019. Offshore gaming and outsourcing operations are likely to sustain office space absorption while »»Alphaland Southgate a mix of foreign and domestic demand will drive condominium take-up. Retail is likely to benefit Tower from the influx of food and beverage (F&B) brands while hotel occupancy should be sustained by USD95M | Office higher foreign arrivals.

An estimated 220,000 sq m of office space was taken up in Q1 2019. Offshore gaming firms covered about a third MAJOR MOVER Q1 2019 of total transactions during the period followed by non-outsourcing tenants such as traditional firms, government »» agencies and flexible space operators. Strong pre-leasing will sustain the office sector with about 30% of space due Office for completion in 2019, about 30% of which is already pre-committed. SECTORS TO WATCH Q2 2019 Sales in the pre-selling market are projected to have reached between 10,000 to 13,000 units. About 54,000 residential condominium units were sold in the Metro Manila pre-selling market in 2018, outpacing the 53,000 sold in »»Office 2017. A major challenge for developers is to beat 2018 residential sales despite higher prices, lack of developable land and slower launches of more affordable units. »»Residential HIGHLIGHTED DEALS »»Retail »» Alphaland Corp. sold Alphaland Southgate Tower to League One Inc. for USD94 million at an undisclosed cap rate. Alphaland Southgate Tower sits on an aggregate land area of 100,466 sq ft and total GFA of 816,715 sq ft. OFFICE Over the past three years, the Metro Manila office market has witnessed a diversification of its tenant base and it will be interesting to see if this will spill over into the next 12 months. While offshore gaming operations from China are re-emerging and occupying new office space, the outsourcing sector remains strong and is likely to contribute between 20% to 30% to total office space take-up in 2019. Colliers’ supply of new projects reached 1.1 million sq m (11.8 million sq ft) over the next 12 months, with a net take-up of around 1 million sq m (10.8 million sq ft). RETAIL Retail vacancy rates across Metro Manila are expected to remain below 10% and the F&B sector will continue to drive IEYO DEGUZMAN retail spending in Metro Manila. The sector covers 30% to 50% of leasable space in shopping centres across the Deputy Managing Director +63 2 858 9040 metro area, one of the highest levels in the Asia Pacific region. However, lease rate growth is projected to remain flat. [email protected]

13 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 SHANGHAI

The Shanghai government announced the city’s development statistics for last year in Q1. The city’s GDP ranked no. 1 in China yet again, reaching USD493 billion in 2018. The government also released its major project investment plan in 2019 involving 138 projects, of which more than 45% are related 14 to urban infrastructure, the highest in three years and expected to reach USD20 billion. These positive EN-BLOC TRANSACTIONS developments have boosted investor confidence in Shanghai’s market and continue to make the city the most attractive investment destination in China. The total transaction volume reached USD9.6 billion, an 8% increase compared to Q4 2018. USD9.6 B COMBINED VALUE A total of 14 transactions were recorded in Q1 2019 totalling USD9.6 billion. The biggest transaction in Shanghai was Sunac's acquisition of the Oceanwide Portfolio (Shanghai component), estimated at about USD4.2 billion, accounting for 44% of total transaction volume in Q1. Of the remaining 13 transactions, the office sector, including business parks, BIGGEST DEAL remained the top choice for investors as 10 of the 13 deals were office projects or mixed-use projects with large »»Oceanwide Portfolio office components. The transaction volume totalled USD3.2 billion in Q1. Shanghai Component HIGHLIGHTED DEALS USD4.2B | Development Project »» Oceanwide Portfolio was acquired by Sunac in Q1 for USD1.9 billion and related debts of USD5.3 billion. The Shanghai component of this portfolio has a total buildable GFA of 628,000 sq m with an estimated value of about USD4.2 billion. MAJOR MOVER Q1 2019 »» Yi Fang Tower, a recently completed prime Grade A office and retail mixed-use development located in North »»Development Project Bund, was sold for USD686 million. It has a total GFA of 69,491 sq m. »» Silver Square, a business park project in Zhangjiang Hi-Tech Park with a total GFA of 51,479 sq m, was acquired by SECTORS TO WATCH Q2 2019 GLP for USD157 million. »»Office Although the real estate sector may continue to face financing difficulties in 2019, government control will not be as tight as last year. In addition, according to a central government press release, tax reduction will be a major goal for »»Business Park 2019, including in the real estate sector. We expect the investment market in Shanghai to be more active in 2019 as »»Retail some large deals are under negotiation and estimated to close this year. The office market will remain the most active sector in Shanghai, while retail and long-term rental apartments will also grab the attention of investors.

BETTY WONG National Head and Executive Director | China +86 21 6141 3529 [email protected]

14 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 SINGAPORE

Singapore’s hospitality sector continued to grow in Q1 2019 driven by keen interest from investors and developers who shifted focus to non-residential sectors. The commercial sector also enjoyed some BIGGEST DEAL deals after months of negotiations and due diligence thanks to a recovery in the office rental market and firming up of retail market fundamentals. Meanwhile, the residential sector saw a slight pick-up »»Development Site at in transaction value as a number of residential sites offered under the Government Land Sale (GLS) Pasir Ris Central Programme were awarded successfully in Q1. USD519m | Commercial & Residential

HIGHLIGHTED DEALS MAJOR MOVERS Q1 2019 »» A white site at Pasir Ris Central was awarded at about SGD700 million (USD519 million), or SGD684 psf ppr to a tie-up between Allgreen Properties and Kerry Properties through a Concept and Price Tender. There are plans to »»Residential develop about 480 residential units atop a 3-storey retail podium. »»Hospitality »» Midtown Development Pte Ltd (part of Worldwide Hotels Group that includes Hotel 81) tendered successfully for a premium hotel site at Club Street, within the Central Business District for SGD562.2 million (USD415.3 million) or SGD2,148 per sq ft per plot ratio (psf ppr). This is the first hotel site made available through the Confirmed List of SECTORS TO WATCH Q2 2019 the Government Land Sales Programme since 2008. »»Office »» A joint venture between ARA Asset Management and Chelsfield acquired Manulife Centre, an office building »» located in Bras Basah Road for SGD555.5 million or SGD2,305 per sq ft based on net lettable area. Hotel »» An executive condominium (EC) development site at Tampines Avenue 10, offered through the GLS tender, was awarded to the top bidder - Hoi Hup and Sunway Development at a price of SGD434.45 million (USD320.9 million), or SGD578 psf ppr. The achieved land price is the second highest on record for EC land since Sumang Walk’s SGD583 psf ppr in March 2018. The keen interest in commercial assets is expected to continue among investors and developers in Q2, driven by steady office rental growth and Singapore’s status as a global business hub. We also expect the hotel sector to be attractive to investors and developers, with Singapore hotels’ RevPAR expected to grow at about 3.5% y-o-y in 2019 as tourism arrivals reach record highs amid tightening hotel supply. The residential market could remain relatively subdued in Q2 2019 as developers focus on new property launches and take-ups. TANG WEI LENG Managing Director +65 6531 8688 [email protected]

15 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 TAIWAN

Improving market sentiment led to a slight increase in total commercial property transaction volumes to TWD 21.4 billion (USD 713 million) in Q1. Total land transaction volumes reached TWD61.4 billion (USD2.04 billion) in Q1 on the back of several large-scale land transactions through public tender, 2 reflecting a 40% increase over Q4 2018 to record the second highest transaction volume in a quarter EN-BLOC TRANSACTION since Q4 2013. Self-use buyers remain active in the office and industrial sectors, and demand for office assets remains strong. USD M However, there was only 1 en-bloc office transaction in Q1 due to limited availability of existing office properties. 93 COMBINED VALUE Encouraged by tight office supply and successful en-bloc forward sale deals with end-users in 2018, developers are pursuing development sites suitable for office use. BIGGEST DEAL The combined value of industrial property transactions was TWD12.1 billion (USD403 million), which contributed 45% of total transaction volumes in Q1. Major buyers were from the photoelectric, optical and DRAM industries. For »»Commercial Plot instance, Largan Precision Co.,Ltd, one of the world’s leading designers and manufacturers of plastic aspherical lens, purchased two industrial sites in Taichung Industrial Park in Q1. in Taichung USD221M | Development Site HIGHLIGHTED DEALS »» Fong Yi Group purchased a commercial plot in the CBD of Taichung for TWD6.65billion (USD221 million). MAJOR MOVER Q1 2019 »» Kai De Tang Corp., a subsidiary of Hai Pa Wang Group, purchased 51 floors of 85 Sky Tower in Kaohsiung for TWD5.44 billion (USD181 million) through auction. »»Industrial »» Highwealth Construction purchased a commercial plot in Taipei’s Zhongshan District for TWD5.11 billion (USD170 million), with plans to develop an office tower for sale. SECTORS TO WATCH Q2 2019 Office and industrial sectors will remain the focus for investors in Q2. There’s no new office supply in Taipei CBD »»Office in 2019, and most existing office properties are tightly held. Investors and end-users could also have on their radar »» decentralised business districts such as Dazhi, Neihu, Nangang and New Taipei City. Industrial The outcome of the mayoral election in November 2018 showed that people are positive about the government’s focus »»Development Site on the economy, which has helped boost investors' confidence, particularly in Taichung and Kaohsiung.

DEREK HUANG Executive Director +886 8722 8650 [email protected]

16 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 THAILAND

The general election took place in Thailand on 24 March 2019 with several parties hoping to form a new government. The final result is not known as of this writing, but the top priority for real estate investors is the stability of the new government and its ability to sustain growth in the country. With 5 the elections in mind, investors shifted their focus from signing new capital commitments to existing EN-BLOC TRANSACTIONS ones in Q1, given the large number of commercial construction projects currently underway in Bangkok and elsewhere in Thailand. USD110M Whatever the election’s outcome, there are many infrastructure projects that have progressed under the existing COMBINED VALUE government and those should continue under the new government. For example, the extension to Bangkok’s mass transit system is well underway with its completion expected in various stages over the coming years. The project is generally perceived as extremely positive for the capital city and its real estate. The same should apply to other BIGGEST DEAL transport projects, such as the Suvarnabhumi airport extension, new motorways and various EEC Thailand IV initiatives, all of which are generally beneficial to Thai real estate. »»Sale of Sathorn Office Such projects should further benefit the Bangkok office sector, which continued its upward trajectory in Q1. The EEC Building in the CBD infrastructure projects should benefit the industrial sector, creating better linkages throughout the region, particularly (comprising of 38,000 sq ft GFA) helping logistics providers. Perhaps only the residential sector is showing signs of saturation, with sentiment turning a The building is to undergo renovation and repositioning for leasing. little in 2019. HIGHLIGHTED DEALS MAJOR MOVER Q1 2019 Q1 was relatively quiet as many investors were in a wait-and-see mode with elections just around the corner. But that has not stopped the ongoing construction of multiple projects across the Central Business District (CBD), the most »»Office Grade A & B notable of which are: »» One Bangkok, a mixed-use office, hotel, retail, leisure and residential project, with staged openings from 2022 SECTOR TO WATCH Q2 2019 »» EmSphere, Sukhumvit 24, a leisure and entertainment-led development linking to EmQuartier, scheduled for 2021 »»Residential »» Multiple office projects including The PARQ, Samyan Mitrtown, Once City Centre and Vanissa Tower, all opening Development within the next 3 years. The residential sector is attracting the greatest interest at present. Demand for condominiums has been very robust over recent years, leading to an increase in the number of projects. 2019 is expected to see record rates of supply BARNY SWAINSON amid concerns of demand. This could put some projects under strain and residential developers are likely to be more Senior Director cautious when buying new sites. +66 2 656 7000 [email protected]

17 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 VIETNAM

Vietnam’s economy continues to grow rapidly with GDP expanding 7.08% in 2018. The industrial and construction sectors witnessed a particularly impressive growth rate of 8.8% during the same time. GDP growth is forecast to reach 6.6% to 6.8% in 2019 while foreign direct investment (FDI) 3 is expected to hit new highs, having attracted USD2.58 billion in the first two months of 2019, an EN-BLOC TRANSACTIONS increase of 9.8% compared to the same period last year. Real estate remains the second most invested sector in terms of total FDI contributions. USD197M The industrial and office sectors continue to be top-of-mind for investors. Continued interest from Chinese industrial COMBINED VALUE investors on the back of the US-China trade war is boosting demand whilst supply stays relatively stagnant, driving land prices upward. In a market where the majority of stock are old and of low quality, foreign investors and operators are demanding higher quality and more sophisticated industrial facilities. We are expecting new office BIGGEST DEAL supply to finally reach the market over the next two years to relieve some of the pressure on demand in Ho Chi Minh City (HCMC). Rental rates are expected to continue to rise as demand outpaces supply. With the current restriction on »»Waterfront City new high-rise residential developments in HCMC, sale prices have increased 16% compared to last year, especially in Dong Nai centrally located luxury-segment properties. USD142M | Mixed-use Residential Township HIGHLIGHTED DEALS »» Mapletree Logistics Trust announced the acquisition of Unilever factory in VSIP 1 Industrial Park on a sale and leaseback transaction with an expected value of USD31.5 million at a capitalisation rate of approximately 8%. MAJOR MOVER Q1 2019 »» Nam Long acquired 70% of Waterpoint City in Dong Nai for USD142 million, while Keppel Land continues to hold »»Industrial 30% of the project.

»» A commercial land transaction took place in Lien Chieu District of Da Nang for USD24 million. SECTOR TO WATCH Q2 2019 There will be continuous growth for the industrial (factory and logistics) market in the West, North-West and South- »»Industrial West of Vietnam. However, there are a few new sectors to look out for in 2019: The mid-end to affordable apartments sector continues to show strong demand and we expect to see new supply coming up in the neighbouring cities »»Office around HCMC and Hanoi. The flexible work space and Grade B office sectors will also see strong performance in 2019. With the rise of e-commerce in Vietnam, we are expecting a number of new businesses to enter the market and the expansion of current key market performers in 2019. JONATHON CLARKE Director +84 938 150 019 [email protected]

18 | CAPITAL MARKETS & INVESTMENT SERVICES | ASIA MARKET SNAPSHOT Q1 2019 ABOUT COLLIERS INTERNATIONAL

Colliers International (NASDAQ, TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning more than 40% of our equity, have delivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including affiliates), with more than $26 billion of assets under management.

For the latest news from Colliers, visit our website or follow us at Capital Markets & Investment Services (CMIS) We have Asia covered. BETTY WONG China CHARLES YAN [email protected] North China SEAN SUN [email protected] West China [email protected] JIMMY GU East China BAYAN KUATOVA [email protected] Kazakhstan [email protected] HUGH MENCK East China IMRAN MOHIUDDIN [email protected] Pakistan [email protected] KICHOON JUNG Korea KARLO POBRE [email protected] Myanmar TERENCE TANG [email protected] Asia [email protected] HIDEKI OTA SURESH CASTELLINO Japan India [email protected] [email protected] DEREK HUANG GAGAN RANDEV Taiwan India [email protected] [email protected]

BARNY SWAINSON ANTONIO WU Hong Kong Thailand [email protected] [email protected]

DAVID JACKSON IEYO DE GUZMAN Vietnam Philippines [email protected] [email protected] colliers.com/acmis

This document has been prepared by Colliers International for advertising TANG WEI LENG ALAN FUNG and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding Singapore South China the information including, but not limited to, warranties of content, accuracy [email protected] [email protected] and reliability. Any interested party should undertake their own inquiries STEVE ATHERTON as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties Indonesia arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers [email protected] International and/or its licensor(s). ©2019. All rights reserved.