JAPAN REAL ESTATE Fourth Quarter 2019

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October 2019 / Research Report JAPAN REAL ESTATE Fourth Quarter 2019

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Japan Real Estate Fourth Quarter 2019

Table of Contents

1 / Executive Summary …………………………………………………… 3

2 / Macro Economy ……………………………………………………….. 4

3 / Capital and Investment Market …………………………………….... 6

3.1 Lending ……………………………………………………………………………. 6

3.2 Pricing ……………………………………………………………………………… 7

3.3 Transactions ………………………………………………………………………. 8

3.4 Performance ………………………………………………………………………. 10

3.5 J-REITs …………………………………………………………………………..... 10

4 / Market Fundamentals ………………………………………………… 13

4.1 Office ………………………………………………………………………………. 13

4.2 Retail ………………………………………………………………………………. 16

4.3 Residential ………………………………………………………………………... 17

4.4 Industrial ………………………………………………………………………….. 18

4.5 Hotel ………………………………………………………………………………. 19

5 / Past Topics of This Report ………………………………………….. 20

Important Information ……………………………………………………. 21

Research & Strategy—Alternatives …………………………………… 25

The opinions and forecasts expressed are those of Japan Real Estate Research Report and not necessarily those of DWS. All opinions and claims are based upon data at the time of publication of this article (October 2019) and may not come to pass. This information is subject to change at any time, based upon economic, market and other conditions and should not be construed as a recommendation.

Japan Real Estate Fourth Quarter 2019

1 / Executive Summary

— Macro Economy: Japan’s real GDP experienced moderate growth in the second quarter of 2019 owing to a resilient service sector, while concerns mounted rapidly as the dispute intensified between Japan and South Korea on top of ongoing global trade conflicts. Following the VAT hike in October 2019, private consumption is expected to experience a short term slump in the final quarter of 2019. Whilst the Cabinet Office downgraded the monthly assessment of the country’s economy to ‘worsening’ also in October 2019.

— Capital and Investment Market: The volume of commercial real estate transactions in Japan in the rolling 12 months to September 2019 was JPY 3.3 trillion (preliminary), a 34% drop from the previous year. Only a couple of large sized transactions were recorded in the period while activities by cross border investors were not strong. On the other hand, as concerns over interest rate hikes faded away across the world the J-REIT index strengthened in the first nine months of 2019, recording a 22.7% increase in the period1.

— Real Estate Market Fundamentals: Leasing markets and real estate fundamentals remained very healthy across most sectors. Office vacancy rates tightened close to historical records in all major markets including Tokyo, Osaka, Nagoya and Fukuoka, which contributed to push average rents up further2. Thanks to a continued growth in tourist arrivals, rents continued to post growth in major high street precincts in Tokyo, although we expect a short term private consumption slump in the fourth quarter of 2019 following the VAT hike. Rents made positive growths both in the residential sector in Tokyo and in the logistics sector in Greater Tokyo, Greater Osaka and Greater Nagoya, respectively, confirming the continued healthy fundamentals in those sectors.3

1 Sources: Bloomberg, DWS. As of Oct. 2019. 2 Sources: Mori Building, Miki Shoji, Sanco Estate, Company, DWS. As of Oct. 2019. 3 Sources: CBRE, Ichigo Real Estate Service, DWS. As of Oct. 2019. The information herein reflects our current views only, are subject to change, and are not intended to be promissory or relied upon by the reader. There can be no certainty that events will turn out as we have opined herein. Past performance is not indicative of future returns" where qualitative performance information is given. 3

Japan Real Estate Fourth Quarter 2019

2 / Macro Economy

Japan’s real GDP growth recorded a moderate level of 0.8% in the second quarter of 2019 according to Japan’s Cabinet Office. The moderate growth was achieved owing to a resilient service sector and retail consumption while a slowdown in exports was a drag. The country’s unemployment rate remained extremely tight at 2.2% in August 2019. Concerns mounted rapidly however as the dispute intensified between Japan and South Korea, while at the same time the trade conflicts between the United States and China remain ongoing. Private consumption is also expected to experience a short term slump after the VAT hike from 8% to 10% in October 2019. The Cabinet Office downgraded the short term assessment of the country’s economy to ‘worsening’ in October 2019. EXHIBIT 1: JAPAN'S GDP GROWTH OUTLOOK AND NIKKEI

6% Forecast 60%

4% 40%

2% 20%

0% 0%

-2% 2019.10 -20% 2014.04 VAT Hike 10% -4% -40% 2000-2001 VAT Hike 8% -6% dot-com bubble -60% 2008.09 -8% 1997.04 VAT Hike 5% Global Financial Crisis -80% 1997.07 Asian Financial Crisis -10% -100% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F Q1 Q2 Q3 Q4 Nikkei 225 YoY (RHS) Sources: Bloomberg, Bank of Japan, DWS. As of Oct. 2019 F = forecast, there is no guarantee forecast growth will materialise. Please refer to Important Notes (see end of report). Past growth is not a reliable indicator of future growth. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect. There is no guarantee the estimates shown will materialize.

The manufacturing sector of corporate Japan shows a clear slowdown. The Diffusion Index (DI) of the Tankan Survey conducted by the Bank of Japan (BoJ) declined from a reading of 19 points in September 2018 to 5 points in September 2019 for the manufacturing sector, while the results at the non-manufacturing sector hovered almost flat in the same period above 20. The outlook indicates further moderation in both sectors, revealing a cautious outlook for consumption after the VAT hike. EXHIBIT 2: DIFFUSION INDEX OF BUSINESS CONDITION

50 Outlook Diffusion Index of Business Conditions: ('favourable' minus 'unfavourable,' % points) 25

-25 Dot.com Consumption Global Financial Bubble burst Tax Hike '97 Crisis -50 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

All Industries Manufacturing Non-Manufacturing Sources: Bank of Japan, Japan’s Cabinet Office, DWS. As of Oct. 2019. Past performance is not a reliable indicator of future performance. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect. There is no guarantee the estimates shown will materialize.

Japan Real Estate Fourth Quarter 2019

As concerns increased over global trade, major central banks turned their needles to dovish policies again, including the European Central Bank and the U.S. Federal Reserve. A decline of interest rates in major economies stimulated capital flow to the stock markets. The Nikkei 225 index rose by 9.5% in the first nine months in 2019, while the currency exchange rate (JPY/USD) strengthened from 110.3 yen to 108.3 yen in the same period. EXHIBIT 3: STOCK (NIKKEI) AND FOREX

¥25,000 ¥140

¥20,000 ¥120

¥15,000 ¥100

¥10,000 ¥80 2008.09 "Abenomics" Global Financial 2011.10 Crisis JPY peaked at 75 ¥5,000 ¥60 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Nikkei 225 (LHS) USD/JPY (RHS) Sources: The Bank of Japan, Japan’s Cabinet Office, DWS. As of Oct. 2019. Past performance is not a reliable indicator of future performance.

In line with prevailing dovish policies on the global market including rate cuts by the European Central Bank and US Federal Reserve, ten-year Japanese government bonds declined to -0.3% at the end of August 2019, and have been trading at around -0.2% since. Core CPI was 0.5% in August 2019. EXHIBIT 4: FORECAST OF INTEREST RATE AND CPI

3 (%) Forecast 2

-1

-2

-3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F 2023F Overnight Call Rate 10Y JGB CPI CPI (VAT effect)

Sources: The Bank of Japan, Japan’s Cabinet. DWS. As of Oct. 2019. Notes: F = forecast, there is no guarantee rates forecasted will materialise. JGB = Japanese Government Bond. CPI = Consumer Price Index. Please refer to Important Notes (see end of report). Past performance is not a reliable indicator of future performance. Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.

Japan Real Estate Fourth Quarter 2019

3 / Capital and Investment Market 3.1 Lending

The BoJ’s Diffusion Index for lending attitudes of banks to the real estate industry (green line in Exhibit 5) made successive moderations, from an index value of 23 in March 2019 to 14 in September 2019. Credit conditions still remain accommodative for income producing assets, while lenders have become cautious for non-institutional grade smaller assets invested by indi- vidual investors. Lending volumes for new projects dropped by 8.6% in the year ended June 2019, exhibiting nine consecutive quarterly declines. EXHIBIT 5: REAL ESTATE LENDING BY JAPANESE BANKS

40% 40

20% 20 Diffusion Index Diffusion

0% 0

-20% -20

-40% -40 2008.06 2008.09 2008.12 2009.03 2009.06 2009.09 2009.12 2010.03 2010.06 2010.09 2010.12 2011.03 2011.06 2011.09 2011.12 2012.03 2012.06 2012.09 2012.12 2013.03 2013.06 2013.09 2013.12 2014.03 2014.06 2014.09 2014.12 2015.03 2015.06 2015.09 2015.12 2016.03 2016.06 2016.09 2016.12 2017.03 2017.06 2017.09 2017.12 2018.03 2018.06 2018.09 2018.12 2019.03 2019.06 2019.09 growth of lending to new projects (yoy, LHS) lending attitude DI to all industries (RHS) lending attitude DI to real estate industries (RHS) Sources: The Bank of Japan, Japan’s Cabinet Office, DWS. As of Oct. 2019. Past performance is not a reliable indicator of future performance.

The volume of commercial real estate transactions in Japan in the rolling 12 months to September 2019 was JPY 3.3 trillion (preliminary), a 34% drop from the previous year. With only a couple of large sized transactions over JPY 50 billion observed in the period by domestic companies, activities by cross border investors were also not so strong, reflecting tough competition with J-REITs in the market. On the other hand, the transaction volume increased in Tokyo during the period. EXHIBIT 6: REAL ESTATE TRANSACTION VOLUME AND LENDING ATTITUDE DI

6 36

5 24 Diffusion Index (DI) Index Diffusion

4 12

3 0

2 -12 JPY JPY trillion in 1 -24

0 -36 2000.09 2001.03 2001.09 2002.03 2002.09 2003.03 2003.09 2004.03 2004.09 2005.03 2005.09 2006.03 2006.09 2007.03 2007.09 2008.03 2008.09 2009.03 2009.09 2010.03 2010.09 2011.03 2011.09 2012.03 2012.09 2013.03 2013.09 2014.03 2014.09 2015.03 2015.09 2016.03 2016.09 2017.03 2017.09 2018.03 2018.09 2019.03 2019.12F 2019.09E Transaction volume (12 months, LHS) Lending attitude DI (6 months prior, RHS)

Sources: Urban Research Institute, Bank of Japan, Real Capital Analytics, DWS. As of Oct. 2019. Notes: E = preliminary estimate, F=forecast. Please refer to Important Notes (see end of report). Past performance is not a reliable indicator of future performance. Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect. There is no guarantee the estimates shown will materialize.

Japan Real Estate Fourth Quarter 2019

3.2 Pricing Office appraisal cap rates in Tokyo were a preliminary 3.8% in the second quarter of 2019, almost flat over the last five quarters. The office yield spread in Tokyo — the difference between the cap rates and ten year bond yields — has remained flat at 2.8% over the last four quarters. The spreads jumped up significantly in the other cities including Sydney (by 180 basis points), Hong Kong (by 180 basis points), New York (by 140 basis points) and London (by 130 basis points) respectively, caused by the recent bond yield declines.

EXHIBIT 7: CAP RATE AND YIELD SPREAD

APPRAISAL PRIME CAP RATE OFFICE YIELD SPREAD (AVERAGE TRANSACTED) 5% 6.5% 6.0% 4%

5.5% 3% 5.0% 2% 4.5% 4.0% 1% 3.5% 0% 3.0% -1% Q1 2007 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016 Q32016 Q12017 Q32017 Q12018 Q32018 Q12019 Q32019 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016 Q32016 Q12017 Q32017 Q12018 Q32018 Q12019 Q3 2019 Tokyo Office Osaka Office Tokyo Residential Osaka Residential Tokyo New York London TMAX Economic Hong Kong Singapore Sydney

Sources: Association for Real Estate Securitization, TMAX, Real Capital Analytics, Bloomberg, DWS. As of Oct. 2019. Past performance is not a reliable indicator of future performance.

The capital value for grade-A office in Central Tokyo stood at JPY 10.1 million per tsubo4 in June 2019, a 13.0% increase from the previous year, but still 12.4% below the previous peak recorded back in 2008 before the Global Financial Crisis. The listed J-REIT index — the leading indicator of office capital values in Tokyo over 12 months — traded firm at around 2,200 in early October 2019, or 24% above the beginning of the year, indicating a further price appreciation ahead in the real asset space. EXHIBIT 8: REAL ESTATE CAPITAL VALUE IN JAPAN (JPY m/tsubo) 2,400 12 Sep 08 Global Financial Crisis 2,000 10

1,600 8

1,200 6

800 4 Q1 2002 Q3 2002 Q1 2003 Q3 2003 Q1 2004 Q3 2004 Q12005 Q32005 Q12006 Q32006 Q12007 Q32007 Q12008 Q32008 Q12009 Q32009 Q12010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016 Q3 2016 Q1 2017 Q3 2017 Q1 2018 Q3 2018 Q1 2019 Q3 2019 J-REIT Index (LHS) Office unit price (Grade-A, RHS)

Sources: Daiwa Real Estate Appraisal, Bloomberg, DWS. As of Oct. 2019. Past performance is not a reliable indicator of future returns.

4 Tsubo is a Japanese unit of area. It is equivalent to 3.3 square meters (35.6 square feet). 7

Japan Real Estate Fourth Quarter 2019

3.3 Transactions The largest deal reported since April 2019 was the acquisition of a portfolio comprising six logistics assets by the ESR Japan Core Fund for its initial investment at approximately JPY 110 billion. This was followed by a three-property portfolio including Aoyama Building by a consortium of Gaw Capital and Korea investors at JPY 84 billion, and an 18-property hotel portfolio by Invincible REIT at JPY 83 billion. The highest disclosed unit price was the acquisition of CROESUS Shinsaibashi, a high- street asset in Osaka, by Sumitomo Corp. at JPY 8.3 million per tsubo. While listed J-REITs dominated major transactions in each sector with the exception of office where cross border investors, especially Korean investors, were active at least until July 2019. Japan saw foreign capital attempt to tap into its rental residential sector, the only Asia Pacific country with an established and well-institutionalized presence in this space. It’s alleged that international capital seeking stable, less cyclical investments, targeted two large mass-residential portfolios, including a multi-billion dollar one, currently for sale. EXHIBIT 9: REAL ESTATE CAPITAL VALUE IN JAPAN SINCE APRIL 2019 Price Unit price Investor Type Asset (JPY (JPYm Cap rate Location Month Acquired by Origin bn) /GFA sqm) Gaw Capital / HK / 95% of Aoyama Bldg. etc 84 2.02 - Minato Apr-19 Samsung Securities / South (3 props) Mirrae Asset Daewoo Korea

Midosuji Grand Tower est. 20 0.70 - Osaka Jun-19 Phoenix Group Japan

Office South Canal Side Bldg. est. 20 0.47 - Shinagawa May-19 Daishin Securities Korea

48% of Tennnozu Yusen Bldg. est. 16 0.59 - Shinagawa Jun-19 Kenedix Private REIT Japan

South Hanzomon PREX North est. 14 2.96 - Chiyoda Jul-19 Korea Investment Mgnt. Korea

CROESUS Shinsaibashi 21 8.32 - Osaka Jun-19 Sumitomo Corp. Japan

Aeon Mall Fukutsu 18 0.18 5.7% Fukuoka Aug-19 Aeon REIT J-REIT

Mitsubishi Corporation Ito Yokado Nishikocho 15 0.20 5.3% Saitama May-19 Japan Retail Urban Development

50% of Ikebukuro Globe 11 3.43 3.9% Toshima Aug-19 Frontier REIT J-REIT

New Japan Namba Bldg. est. 10 - - Osaka May-19 Legal Corporation Japan (for redevelopment) Redwood Fujiidera DC etc. app. Yokohama Hong app 0.25 - Jun-19 ESR Japan Core Fund (6 props) 110 etc. Kong Prologis Park Kyotanabe etc. 63 0.24 4.5% Kyoto etc. Jun-19 Nippon Prologis REIT J-REIT 4 props) 51% of Logiport Amagasaki etc. 35 0.19 4.6-5.3% Hyogo etc. Sep-19 Lasalle Logiport REIT J-REIT (2 props) Logiport Kashiwa Shonan etc. Industrial 28 - 4.6-5.1% Chiba etc. May-19 Lasalle Logiport REIT J-REIT (5 props) MJ Logistics Park Kasugai 1 etc. Mitusbishi Estate Logistics 27 - 3.8-5.7% Aichi etc. Sep-19 J-REIT (4 props) REIT IIF Akishima Logistics Center etc. West To- 25 - 4.3-7.4% May-19 IIF REIT J-REIT (5 props) kyo etc. D-Project Shin-Misato etc. Saitama 12 0.24 4.9-6.2% Aug-19 Daiwa House Industry Japan (6 props) etc.

Royal Park Tower Minamisenjyu 28 50/unit 4.3% Arakawa May-19 Unknown N/A

Harajuku Verdent Heights 24 - - Shibuya Jun-19 Nomura Real Estate Japan (for redevelopment) Residential Grey Spot Namba etc. (18 props) est.20 19/unit - Osaka Aug-19 CBRE GI US

Yokohama S-Fort Aobadai etc. (22 props) 19 16/unit 3.9-6.0% Aug-19 Samty Residential REIT J-REIT etc. Hotel Hotel Mystays Sapporo Aspen etc Hokkaido 83 28/room 4.5-6.9% Jul-19 Invincible REIT J-REIT (18 props) etc.

8 Japan Real Estate Fourth Quarter 2019

Ibis Styles Osaka Namba 15 81/room - Osaka Jun-19 Wealth Management Inc. Japan Hotel Hotel Hewitt Koshien 14 33/room 5.0% Hyogo Jun-19 United Urban REIT J-REIT

Mori Trust/ Japan/ Hilton Odawara Resort & Spa 13 80/room 6.2% Kanagawa Aug-19 Mori Trust Hotel REIT J-REIT 65% of Akasaka Garden City etc. 70 - 3.6-5.0% Minato etc. May-19 Sekisui House REIT J-REIT (7 props) Shinagawa Seaside TS Tower etc. Shinagawa 24 - 4.0-4.9% Aug-19 Sankei Real Estate REIT J-REIT Cross- (4 props) etc. Sector Portfolio Almost Blue etc. (6 props) 23 - 3.5-7.4% Minato etc. Aug-19 Takara Leben REIT J-REIT

20% of Hulic Ginza 7-chome Bldg. 11 - 3.6-4.6% Chuo etc. Sep-19 Hulic REIT J-REIT etc. (3 props) Source: Real Capital Analytics, Nikkei Real Estate Market, DWS. As of Oct. 2019. Notes: Acquisitions by foreign managers are highlighted in grey and by J-REITs in green. This table is prepared solely for information purposes and not intended to recommend or endorse any specific company's shares or other products. Although information in this document has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness, and it should not be relied upon as such.

Despite the moderation of transaction activities across Japan, Tokyo’s volume of commercial real estate transactions for the rolling 12-month period ended September 2019 (preliminary) was US $23.3 billion, a 35% increase from the previous period ended in March 2019. It ranked top in the Asia Pacific region for the aggregate amount, and also top spot for the office, residential, industrial and hotel sectors respectively. According to our own estimates about a half of transactions in Tokyo were purchased by listed J-REITs while 17% were acquired by foreign capital in the period. Osaka ranked tenth in transaction volume in the region in the same period. EXHIBIT 10: TRANSACTION VOLUME BY CITY (12 MONTHS ROLLING ENDED SEPTEBMER 2019)

Office Retail Apartment Industrial Hotel

17% Tokyo J-REIT Domestic Overseas

Hong Kong 30%

Seoul 22% (of which cross border %) Sydney 53%

Shanghai 11%

Singapore 56%

Beijing 29%

Melbourne 17%

Brisbane 40%

OsakaOsaka 38%

Mumbai 93%

Shenzhen 0% ($ bn) 0 6 12 18 24

Sources: Real Capital Analytics, DWS. As of Oct. 2019. Notes: Commercial real estate transactions exclude non-income producing assets, such as development site transactions. Tokyo transaction volume is the sum-up of transaction volumes in Tokyo metro, Saitama, Chiba, Kawasaki and Yokohama. Past performance is not indicative of future results.

9 Japan Real Estate Fourth Quarter 2019

3.4 Performance The average annual total return for unlevered direct real estate investment in Japan showed stable performances. It was 6.9% in May 2019 on a preliminary basis (the latest period available), a marginal increase from 6.5% reported in the second quarter of 2018. The difference in performances among the five property sectors is still marginal, while returns look to be gradually moderating only in the retail sector towards 5%.

EXHIBIT 11: REAL ESTATE TOTAL RETURNS IN JAPAN (UNLEVERED)

TOTAL RETURN BY COMPONENT TOTAL RETURN BY SECTOR

Preliminary 15% Preliminary 20% 10% 15% 5% 10% 0% 5%

-5% 0% -5% -10% -10% -15% 2003 2005 2007 2019.5 2008.06 2008.12 2009.06 2009.12 2010.06 2010.12 2011.06 2011.12 2012.06 2012.12 2013.06 2013.12 2014.06 2014.12 2015.06 2015.12 2016.06 2016.12 2017.06 2017.12 2018.06 2018.12 2003 2005 2007 2019.5

2008.06 2008.12 2009.06 2009.12 2010.06 2010.12 2011.06 2011.12 2012.06 2012.12 2013.06 2013.12 2014.06 2014.12 2015.06 2015.12 2016.06 2016.12 2017.06 2017.12 2018.06 2018.12 Office Retail Residential Industrial Hotel Total Return Income Return Capital Growth

Sources: MSCI Real Estate - IPD, DWS. As of Oct. 2019. Notes: There is a time lag because of raw data being collected through semi-annual reports. Past performance is not indicative of future results.

3.5 J-REITs

The J-REIT index strengthened in the first nine months of 2019, from 1774 at the end of December 2018 to 2177 at the end of September 2019, recording a 22.7% increase in the period. As interest rates decline across the world, REIT stock prices in major global markets made strong recoveries, including the U.S. (up by 25.0%), Australia (up by 17.6%) and Singapore (up by 18.8%) in the same period respectively.

EXHIBIT 12: J-REIT INDEX AND LONG-TERM GLOBAL COMPARISON

J-REIT Index and Nikkei 225 (5-year) Global REIT Comparison (10-year)

450 2,400 24,000 400 350 2,000 20,000 300 250 1,600 16,000 200 150 1,200 12,000 100 50 (Mar-09 = 100) 800 8,000 2008.04 2008.10 2009.04 2009.10 2010.04 2010.10 2011.04 2011.10 2012.04 2012.10 2013.04 2013.10 2014.04 2014.10 2015.04 2015.10 2016.04 2016.10 2017.04 2017.10 2018.04 2018.10 2019.04 2019.10 2009.04 2009.10 2010.04 2010.10 2011.04 2011.10 2012.04 2012.10 2013.04 2013.10 2014.04 2014.10 2015.04 2015.10 2016.04 2016.10 2017.04 2017.10 2018.04 2018.10 2019.04 2019.10 J-REIT US-REIT J-REIT Index (LHS) Nikkei 225 Index (RHS) A-REIT (Australia) S-REIT (Singapore)

Sources: Bloomberg, DWS. As of Oct. 2019. Notes: Past performance is not indicative of future results. Tokyo Stock Exchange REIT Index (J-REIT), FTSE NAREIT All Equity REITS Index (US-REIT), S&P/ASX 200 A-REIT Index (A-REIT), FTSE ST REIT Index (S-REIT).

Japan Real Estate Fourth Quarter 2019

On average, the J-REIT dividend yield was 3.6% overall in August 2019, compressing around 50 basis points since the end of 2018, and was 3.1% for office REITs in the same period, tightening 30 basis points in the same period. The spread over ten-year government bond yields remained at an attractive level of 387 basis points in Japan in August 2019, compared to 200 basis points spread for US REITs5. EXHIBIT 13: J-REIT EXPECTED DIVIDEND YIELD

2% Spread 0%

-2% Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Feb-19 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19

J-REIT Office REIT 10Y JGB Sources: Bloomberg, DWS. As of Oct. 2019. Notes: Past performance is no guarantee of future results. JGB = Japanese Government Bond.

The amount of capital raised by J-REITs was JPY 226 billion in the trailing six months ended September 2019 (preliminary), a 23% decrease from the previous six months. After the initial public offering (IPO) of Sankei Real Estate in March 2019, there were no REIT IPOs in the six months to September 2019, while there were multiple public offerings at existing listed REITs such as Sekisui House REIT, Lasalle Logiport, Nippon Prologis REIT and Invincible REIT6. The net acquisition volume by J- REITs was JPY 500 billion, a 22% decline from the six month period ended March 2019.

EXHIBIT 14: CAPITAL RAISING AND TRANSACTIONS BY REITS IN JAPAN (6 MONTHS ROLLING)

JPY tn IPO Public Offerings Month JPY bn Public Offering 3rd Party Allotment Sekisui House REIT May-19 41 Bond Net acquisition Lasalle Logiport May/Sep -19 32 1.0 by J-REITs Nippon Prologis REIT Jun-19 37 Invincible REIT Jul-19 24 MEL REIT Sep-19 18 Sanke REIT Aug-19 13 0.5 AEON REIT Aug-19 13 Takara Leben REIT Aug-19 12 Other POs Apr-Oct 27 Total 216

Initial Public Offerings Month JPY bn 0.0 N/A - -

2002.03 2002.09 2003.03 2003.09 2004.03 2004.09 2005.03 2005.09 2006.03 2006.09 2007.03 2007.09 2008.03 2008.09 2009.03 2009.09 2010.03 2010.09 2011.03 2011.09 2012.03 2012.09 2013.03 2013.09 2014.03 2014.09 2015.03 2015.09 2016.03 2016.09 2017.03 2017.09 2018.03 2018.09 2019.03 Total - 2019.09E Planned : N/A

Sources: ARES, Nikkei, DWS. As of Oct. 2019. Notes: E = Preliminary estimate. Commercial real estate transactions exclude non-income producing assets, such as development site transactions. This table is prepared solely for information purposes and not intended to recommend or endorse any specific company's shares or other products. Although information in this document has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness, and it should not be relied upon as such. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.

5 There is also an argument that the wider spread could be a reflection of lower growth potential and or weaker governance at J-REITs. 6 This information is intended for informational purposes only and does not constitute investment advice, a recommendation, an offer or solicitation. Past performance is not a reliable indicator of future returns. 11

Japan Real Estate Fourth Quarter 2019

The volume of commercial real estate transactions in Japan in the rolling six months to September 2019 was around JPY 1.5 trillion, posting a 13% decline from the same period last year. J-REITs’ gross investment activity was at JPY 0.7 trillion in the period, also a 26% drop in the same period. EXHIBIT 15: REAL ESTATE TRANSACTIONS IN JAPAN AND J-REIT SHARE (6 MONTHS ROLLING)

4 80%

3 60%

2 40%

1 20% JPY JPY trillion in

0 0%

-1 -20% 2001.09 2002.03 2002.09 2003.03 2003.09 2004.03 2004.09 2005.03 2005.09 2006.03 2006.09 2007.03 2007.09 2008.03 2008.09 2009.03 2009.09 2010.03 2010.09 2011.03 2011.09 2012.03 2012.09 2013.03 2013.09 2014.03 2014.09 2015.03 2015.09 2016.03 2016.09 2017.03 2017.09 2018.03 2018.09 2019.03 2019.09p

Disposition by J-REITs Acquisition by J-REITs Acquisition by others J-REIT share (%) of all transactions (RHS)…

Sources: ARES, Urban Research Institute, Real Capital Analytics, DWS. As of Oct. 2019. Notes: E = preliminary estimate. Commercial real estate transactions exclude non-income producing assets, such as development site transactions. Past performance is not a reliable indicator of future returns. Forecasts are not a reliable indicator of future performance. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.

Japan Real Estate Fourth Quarter 2019

4 / Market Fundamentals 4.1 Office

The average office vacancy rates in Tokyo’s central five wards tightened to 1.7% in August 2019, around the lowest level since 1992. The vacancy rate at newly-developed buildings (average of new completed buildings in the last 12 months) increased from 3.2% in February 2019 to 7.6% in August 2019. Major manufacturers could become cautious to increase their workforces on the backdrop of the uncertainties in the economy and the recent global trade slump, but at the same time having quality office space remains a key to hiring and maintaining good staff for companies under this extremely low unemployment rate environment. The average vacancy rate in Tokyo is expected to increase only moderately in the next twelve months with a number of large-sized office supply planned in the period.

EXHIBIT 16: OFFICE VACANCY RATE AND SUPPLY IN CENTRAL TOKYO (5 WARDS*)

Major Planned Supply in Tokyo

Vacancy for new buildings (log sclae) Building Date Floors GFA (sqm) 11 % 32 % Sumitomo Shinjuku Central Park Bldg. Aug-19 34 61,212 Link Square Shinjuku Sep-19 16 43,760 9 % 16 % Shibuya Fukurasu Oct-19 18 58,900 Shibuya Scramble Square East Nov-19 47 73,000 Toranomon Business Tower Dec-19 36 94,000 7 % 8 % Comore Yotsuya Jan-20 30 58,900 Kanda Nishikimachi 2 chome Feb-20 21 85,352 5 % 4 % OH-1 A&B Feb-20 31 357,700 Bunkyo Garden Gate Tower Mar-20 23 94,562 3 % 2 % Kamiyacho Trust Tower Mar-20 38 107,613

Vacancy Vacancy for rate all buildings Toyosu Bayside Cross Tower A Apr-20 36 105,600 Waters Takeshiba Apr-20 26 62,300 1 % 1 % Takeshiba Redev. Office A May-20 39 180,000 Hareza Tower May-20 33 68,478 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 msb Tamachi N Jul-20 36 118,400 2019.08 Sumitomo Kojinmachi Garden Tower Aug-20 22 47,916

All Buildings (LHS) New Buildings (log scale, RHS) Sources: Mori Building, Miki Shoji, Sanco Estate, Company, DWS. As of Oct. 2019. Notes: GFA = gross floor area. sqm = square meters. *5 Wards includes Chiyoda, Chuo, Minato, Shibuya and Shinjuku. There is no guarantee the supply pipeline will materialize. Past performance is not a reliable indicator of future growth. This information is intended for informational purposes only and does not constitute investment advice, a recommendation, an offer or solicitation.

The average rent free period offered to tenants was 1.7 months in June 2019 in Tokyo, a marginal increase form March 2019 but still at the lower end of the last ten-year horizon. Despite the supply increase in 2020, the healthy rent free level is expected to persist on the back of the current extremely low vacancy and healthy space demand. EXHIBIT 17: OFFICE VACANCY RATE AND RENT FREE PERIOD IN TOKYO

15% (month) 8

10% 6

5% 4

0% 2

-5% 0 1996.03 1996.09 1997.03 1997.09 1998.03 1998.09 1999.03 1999.09 2000.03 2000.09 2001.03 2001.09 2002.03 2002.09 2003.03 2003.09 2004.03 2004.09 2005.03 2005.09 2006.03 2006.09 2007.03 2007.09 2008.03 2008.09 2009.03 2009.09 2010.03 2010.09 2011.03 2011.09 2012.03 2012.09 2013.03 2013.09 2014.03 2014.09 2015.03 2015.09 2016.03 2016.09 2017.03 2017.09 2018.03 2018.09 2019.03 2019.09

free rent period (RHS) Floor Plate : 165 sqm - 330sqm Floor Plate : 330 sqm - 660 sqm Floor Plate > 660 sqm Tokyo CBD Average Sources: Sanko Estate, Xymax Real Estate Institute, DWS. As of Oct. 2019. Notes: sqm = square meters. Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect. Past performance is not a reliable indicator of future growth.

Japan Real Estate Fourth Quarter 2019

On the back of tight vacancy rates, the average asking office rent (all classes) grew strongly by 6.6% in August 2019 (year- on-year) in Central Tokyo, recording continuous growth for more than five years since 2014. The average rents at grade A office buildings posted stronger growth of 12.0% in June 2019, recording double digit growth for the past four consecutive quarters, exceeding JPY 40,000 mark per tsubo*, for the first time since the Global Financial Crisis in 2008. EXHIBIT 18: OFFICE ASKING RENTS IN CENTRAL TOKYO BY BUILDING FLOOR PLATE (USD/sqf/year) Forecast 50,000 182

40,000 145

30,000 109 (JPY/tsubo*/mon) 20,000 73

10,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008.03 2008.06 2008.09 2008.12 2009.03 2009.06 2009.09 2009.12 2010.03 2010.06 2010.09 2010.12 2011.03 2011.06 2011.09 2011.12 2012.03 2012.06 2012.09 2012.12 2013.03 2013.06 2013.09 2013.12 2014.03 2014.06 2014.09 2014.12 2015.03 2015.06 2015.09 2015.12 2016.03 2016.06 2016.09 2016.12 2017.03 2017.06 2017.09 2017.12 2018.03 2018.06 2018.09 2018.12 2019.03 2019.06 2019.08 2019.12F 2020.03F

All classes Newly built (all classes) Grade A Prime Buildings in CBD floor plate > 660 sqm

Sources: Miki Shoji, Sanko Estate, DWS. As of Oct. 2019. Notes: F = forecast, there is no guarantee forecast rents will materialise. Please refer to Important Notes (see end of report). *Tsubo is a Japanese unit of area. It is equivalent to 3.3 square meters (35.6 square feet). Past performance is not a reliable indicator of future growth.

The average office vacancy rates in Osaka further tightened to 2.1% in August 2019, the lowest level in 26 years. The Umeda area, Osaka’s central business district (CBD), was extremely tight with vacancy rates standing at 1.5% in the same period. EXHIBIT 19: OFFICE VACANCY RATES IN OSAKA 14%

12%

10%

Osaka CBD Umeda Yodoyabashi & Honmachi

Sources: Miki Shoji, DWS. As of Oct. 2019. Past performance is not a reliable indicator of future growth.

Japan Real Estate Fourth Quarter 2019

The average asking office rent (all classes) made gradual but stable growth of 2.3% in August 2019 (year-on-year) in Central Osaka, recording continuous growth for more than four years since the second quarter of 2015. Asking rents at prime buildings posted the fastest growth at 9.3% in the year to June 2019, while the average rents at quality space in the Umeda area also recorded a growth of 7.0% in the year to August 2019. EXHIBIT 20: OFFICE ASKING RENTS IN OSAKA (JPY/tsubo*/month)

28,000

25,000

22,000

19,000

16,000

13,000

10,000 2008.3 2008.6 2008.9 2009.3 2009.6 2009.9 2010.3 2010.6 2010.9 2011.3 2011.6 2011.9 2012.3 2012.6 2012.9 2013.3 2013.6 2013.9 2014.3 2014.6 2014.9 2015.3 2015.6 2015.9 2016.3 2016.6 2016.9 2017.3 2017.6 2017.9 2018.3 2018.6 2018.9 2019.3 2019.6 2019.8 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12 2014.12 2015.12 2016.12 2017.12 2018.12

Osaka Prime Buildings with floor plate > 1,000sqm Osaka Class A Buildings with floor plate > 600 sqm Umeda All Grades Osaka All Grades

Sources: Miki Shoji, Sanko Estate, DWS. As of Oct. 2019. *Tsubo is a Japanese unit of area. It is equivalent to 3.3 square meters (35.6 square feet). Past performance is not a reliable indicator of future growth.

Due to a rapid expansion of hotel supply in all major regional cities in Japan over the past two years, office supply in turn has been extremely tight to date. Office vacancy rates remained below 2.5% across all these markets as of August 2019 for the first time in history. It stood at 1.9% in Fukuoka, 2.1% in Osaka, 2.2% in Yokohama, and 2.3% in Nagoya and Sapporo, at or close to all time lows in each market. The number of large supply is expected to be one or two buildings each year in 2020 and 2021 in these markets respectively, so the extreme scarcity of office space is not expected to be resolved at least until 2021. EXHIBIT 21: OFFICE VACANCY RATES IN MAJOR CITIES IN JAPAN (ALL GRADES)

(%) Large-sized Supply Pipeline in Regional Cities # of GFA 16 Building Date floors (sqm) Sapporo Sosei Square (Sapporo) 2018/10 28 35,112 Namba Sky-o (Osaka) 2018/10 29 35,818 12 Nagoya Fushimi K Suqare (Nagoya) 2019/9 13 16,891 Shin-Oroshi Center Bldg (Sapporo) 2019/12 13 20,767 OBIC Midosuji Bldg (Osaka) 2020/1 25 40,000 8 Daido Life Insurance (Sapporo) 2020/3 14 23,958 Yokohama Gran Gate (Yokohama) 2020/3 18 101,056

4 JR Yokohama Tower (Yokohama) 2020/3 26 97,601 Kyukan Shotenji Bldg. (Fukuoka) 2020/4 12 20,513 Mei-eki 1 chome PJ (Nagoya) 2020/6 14 19,000 0 Yokohama Gate Tower (Yokohama) 2021/9 21 85,800 Nagoya Mitsui Bldg N (Nagoya) 2021/1 20 29,451

1997 1998 Sapporo1999 2000 2001 2002 2003 2004 2005 2006 Fukuoka2007 2008 2009 2010 2011 2012 2013 2014 Nagoya2015 2016 2017 2018 Tenjin Business Center (Fukuoka) 2021/9 16 60,250 Osaka Tokyo Yokohama 2019.08 Honmachi Sankei Bldg. (Osaka) 2021/9 10 30,189

Sources: Miki Shoji, Sanko, DWS. As of Oct. 2019. Sources: Miki Shoji, Sanko Estate, DWS. As of Oct. 2019. Past performance is not a reliable indicator of future growth. Notes: GFA = gross floor area. sqm = square meters. There is no guarantee the supply pipeline will materialize.

Forecasts are not a reliable indicator of future performance. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect. 15

Japan Real Estate Fourth Quarter 2019

4.2 Retail

Tourist consumption in Japan posted growth of 14.1% in the second quarter of 2019 on a year-on-year basis, due to a healthy increase in inbound tourists. The average high street rents grew in most of the major submarkets in the year to June 2019, including Shibuya (14.1%), Shinjuku (10.6%) and Ginza (5.6%) while they posted a 3.1% decline in Omotesando in the same period. Looking ahead, tourist consumption is expected to slow down significantly in the latter half of 2019 due to the imple- mentation of tariff hikes in China on goods purchased overseas, the recent elevated conflicts between Japan and South Korea, as well as the strengthening value of the Japanese yen. EXHIBIT 22: HIGH STREET AVERAGE RENTS IN TOKYO AND OSAKA

48,000 (JPY/tb/m) (JPY tn) 2.0

36,000 1.5

24,000 1.0

12,000 0.5

0 0.0 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Tourist spending (RHS) Ginza Omotesando Shinjuku Shibuya Ikebukuro Shinsaibashi

Sources: Style Act, Miki Shoji, DWS. As of Oct. 2019. Note: Past growth is not a reliable indicator of future growth.

Larger retail formats and national chains provide a mixed picture. Sales at department stores and shopping centers recovered by 1.5% and 0.5% respectively for existing stores in the July and August period of 2019, while sales at chain stores and convenience stores declined by 3.7% and 0.9% in the same period. A short term consumption decline is expected in the fourth quarter of 2019 due to the VAT hike implemented in October 2019. EXHIBIT 23: RETAIL SALES GROWTH BY STORE CATEGORY (YEAR ON YEAR)

15% (for existing stores for all categories)

10%

-5% VAT hike '14 -10%

-15% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013.03 2013.06 2013.09 2013.12 2014.03 2014.06 2014.09 2014.12 2015.03 2015.06 2015.09 2015.12 2016.03 2016.06 2016.09 2016.12 2017.03 2017.06 2017.09 2017.12 2018.03 2018.06 2018.09 2018.12 2019.03 2019.06 2019.08

Shopping Center (13 cities) Dept Store (Tokyo/Osaka) Chain Store (nationwide) Convenience Store Source: Japan Council of Shopping Center, Japan Franchise Association, Japan Chain Store Association, Japan Department Store Association, DWS. As of Oct. 2019. Note: Past growth is not a reliable indicator of future growth. 16

Japan Real Estate Fourth Quarter 2019

4.3 Residential

The average sale price of newly-built condominiums sold in Greater Tokyo was JPY 60.3 million (per unit) in the July and August period of 2019, 20.6% higher than the ten year average of JPY 50 million, or an 8.1% higher than the third quarter of 2018. This reflects an increased share of high-end high rises in central Tokyo and Tokyo Bay areas and also a lack of supply of affordable units in the suburbs in Tokyo and in the surrounding prefectures. The number of units sold in Greater Tokyo, therefore, declined by 16.4% in the same period. EXHIBIT 24: AVERAGE NEW CONDO PRICE AND THE CONTRACT RATE IN GREATER TOKYO

65 75%

60 50%

55 25%

50 0%

(JPY mn/unit) (JPY 45 -25%

40 -50%

35 -75% 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 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 J/A 02 04 06 08 09 10 11 12 13 14 15 16 17 18 19

Avg. unit price (LHS) Units Sold YoY (RHS)

Sources: Real Estate Economic Institute, DWS. As of Oct. 2019. Notes: J/F =January & February. Past performance is not a reliable indicator of future growth.

Due to the recent price escalation in for-sale condominiums in Tokyo, an increasing number of households, especially the younger generations who would be the potential first time buyers, continue to stick to rental apartments as opposed to buying. Rental demand in Tokyo therefore remains strong especially among singles and double-income households. Rents increased strongly by 3.9% for apartments in the Central 5 wards in Tokyo in the year to September 2019, and more moderately by 1.5% for the broader 9 wards in the period, marking thirteen consecutive quarters of growth. EXHIBIT 25: RESIDENTIAL RENT IN TOKYO (YEAR-ON-YEAR)

12%

-4%

-8% 2011.03 2011.06 2011.09 2011.12 2012.03 2012.06 2012.09 2012.12 2013.03 2013.06 2013.09 2013.12 2014.03 2014.06 2014.09 2014.12 2015.03 2015.06 2015.09 2015.12 2016.03 2016.06 2016.09 2016.12 2017.03 2017.06 2017.09 2017.12 2018.03 2018.06 2018.09 2018.12 2019.03 2019.06 2019.09 Office - 5 ward Residential - 9 wards Residential - 5 wards Residential - 3 ward (prime)

Sources: REINS (9-ward rent), Leasing Management Consulting (5-ward asking rent), Ken Corporation (3-ward rent), Miki Shoji, DWS. As of Oct. 2019. Past performance is not a reliable indicator of future growth.

Japan Real Estate Fourth Quarter 2019

4.4 Industrial

Vacancy rates at multi-tenant logistics assets remained at tight levels of 2.7% in June 2019 in Greater Tokyo, and 7.1% in Greater Osaka. They stood at an elevated level of 17.3% in Greater Nagoya in the same period due to a recent wave of supply. Rents strengthened across all three markets, by 1.9% in Greater Tokyo from a year earlier, by 5.2% in Greater Osaka and then marginally by 0.3% in Greater Nagoya respectively. EXHIBIT 26: LOGISTICS LEASING IN JAPAN BY METRO

VACANCY RATE OF MULTI-TENANT LOGISTICS LOGISTICS RENT (JPY/tsubo/month) 30% 4,800 25% 4,200 20%

15% 3,600

10% 3,000 5%

0% 2,400 2008.06 2008.12 2009.06 2009.12 2010.06 2010.12 2011.06 2011.12 2012.06 2012.12 2013.06 2013.12 2014.06 2014.12 2015.06 2015.12 2016.06 2016.12 2017.06 2017.12 2018.06 2018.12 2019.06 2008.06 2008.12 2009.06 2009.12 2010.06 2010.12 2011.06 2011.12 2012.06 2012.12 2013.06 2013.12 2014.06 2014.12 2015.06 2015.12 2016.06 2016.12 2017.06 2017.12 2018.06 2018.12 2019.06

Greater Tokyo Greater Osaka Greater Nagoya Greater Tokyo Greater Osaka Greater Nagoya

Sources: CBRE, DWS. As of Oct. 2019. Notes: Past performance is not indicative of future results.

Vacancy rates in all the established logistics precincts in Greater Tokyo, i.e. Tokyo Bay, Gaikando and Route 16, remained very tight at between 0% to 2.2% as of June 2019, while the vacancy rate in Ken-o-do, the outer ring road in Greater Tokyo also recovered strongly from an elevated level of 21.2% in September 2018 to 7.2% in June 2019. Rents strengthened in all these precincts in Greater Tokyo in the year to June 2019, most strongly (6.2%) in Tokyo Bay area, the most expensive area and more modestly (1.5%) in Ken-o-Do area, the most affordable area, respectively. EXHIBIT 27: LOGISTICS LEASING BY SUB-MARKET IN GREATER TOKYO

VACANCY RATE OF MULTI-TENANT LOGISTICS LOGISTICS RENT Greater Tokyo 25% (JPY/tsubo/month) Greater Tokyo Tokyo Bay Tokyo Bay Gaikando Route 16 Gaikando 7,000 20% Route 16 Ken-o-do 15% 6,000

10% 5,000

5% 4,000

0% 3,000 2014.06 2014.09 2014.12 2015.03 2015.06 2015.09 2015.12 2016.03 2016.06 2016.09 2016.12 2017.03 2017.06 2017.09 2017.12 2018.03 2018.06 2018.09 2018.12 2019.03 2019.06 2014.06 2014.09 2014.12 2015.03 2015.06 2015.09 2015.12 2016.03 2016.06 2016.09 2016.12 2017.03 2017.06 2017.09 2017.12 2018.03 2018.06 2018.09 2018.12 2019.03 2019.06

Sources: CBRE, DWS. As of Oct. 2019. Notes: Past performance is not indicative of future results.

Japan Real Estate Fourth Quarter 2019

The annual supply of logistics assets is expected to be 2.3 million square meters in 2019 in Greater Tokyo following 1.6 million square meters in 2018, setting historical records of supply in two consecutive years. Greater Osaka saw a moderation of supply this year, 0.4 million square meters as compared to the peak of 0.9 million square meters in 2017, and vacancy rates recovered accordingly. Vacancy rates are forecast to remain resilient in greater Tokyo even with this record supply this year, while they are expected to be around the high single digit percent in Greater Osaka in 2019. EXHIBIT 28: LOGISTICS SUPPLY IN GREATER TOKYO AND GREATER OSAKA

GREATER TOKYO GREATER OSAKA

(mm sqm) New Supply (LHS) Vacancy Rate (RHS) (mm sqm) New Supply (LHS) Vacancy Rate (RHS) 2.4 20% Forecast 1.2 Forecast20%

1.8 15% 0.9 15%

1.2 10% 0.6 10%

0.6 5% 0.3 5%

0.0 0% 0.0 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2020F

Sources: Ichigo Real Estate Service, DWS. As of Oct. 2019. Notes: F = forecast, there is no guarantee forecast returns will materialise. Past performance is not indicative of future results. Forecasts are not a reliable indicator of future returns. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.

4.5 Hotel The number of foreign tourist arrivals to Japan recorded healthy growth of 4.7% in the first two quarters of 2019 from the same period a year earlier, while hotel sector performance continued to show marginal moderation in Osaka due to a recent expansion of new supply. Occupancy rates for budget hotels in Osaka moderated to 83.1% in the second quarter of 2019 from 84.5% a year earlier, and similarly occupancy for upscale hotels in Osaka moderated to 86.2% in the same period from 90.0% a year earlier. They remained flat at a healthy level of around 85% on average at both categories in Tokyo. Due to the recent decline of tourists from South Korea, the occupancy rate could further moderate in Osaka and the western part of Japan for the latter half of the year. EXHIBIT 29: HOTEL OCCUPANCY RATES IN TOKYO AND OSAKA (12 MONTHS TRAILING)

10 (mil/quarter) 100%

8 90%

6 80%

4 70%

2 60%

0 50% 2003Q2 2003Q4 2004Q2 2004Q4 2005Q2 2005Q4 2006Q2 2006Q4 2007Q2 2007Q4 2008Q2 2008Q4 2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 2011Q4 2012Q2 2012Q4 2013Q2 2013Q4 2014Q2 2014Q4 2015Q2 2015Q4 2016Q2 2016Q4 2017Q2 2017Q4 2018Q2 2018Q4 2019Q2

Foreign Visitors to Japan (LHS) Tokyo Upscale Hotel (RHS) Osaka Upscale Hotel (RHS) Series6 Tokyo Budget Hotel (RHS) Osaka Budget Hotel (RHS) Sources: JTA, DWS. As of Oct. 2019. Past growth is not a reliable indicator of future growth.

Japan Real Estate Fourth Quarter 2019

5 / Past Topics of This Report

Vol Year Publication Research Topic 1 Q2 Jun-08 Making sense of the rental market in Japan 2 2008 Q3 Sep-08 Impact of the credit crunch 3 Q4 Dec-08 Revitalisation of ailing J-REITs 4 Q1 Mar-09 Tokyo office market in its global context 5 Q2 Jul-09 Japan residential market 2009 6 Q3 Oct-09 History repeats itself? A comparison of the ‘Year 2003 Problem’ with 2009 7 Q4 Jan-10 Introducing unit pricing analysis in Japan 8 Q1 Apr-10 Portfolio optimisation analysis in Japan 9 Q2 Jul-10 Japan’s capital market in a global context 2010 10 Q3 Oct-10 Quarterly Report 11 Q4 Jan-11 Cross-border investment into and out of Japan 12 Q1 Apr-11 The Great Tohoku Earthquake and its impact on the Japanese real estate market 13 2011 Q2 Jul-11 Adapting Japan’s land price index for real estate analysis 14 Q3 Oct-11 Quarterly Report 15 Q1 Jan-12 The J-REITs next 10 years 16 Q2 Apr-12 Quarterly Report 2012 17 Q3 Jul-12 Quarterly Report 18 Q4 Oct-12 The inward-looking focus of the real estate investors in Japan 19 Q1 Jan-13 Can the housing tax credit boost demand? 20 Q2 Apr-13 Quarterly Report 2013 21 Q3 Jul-13 Logistics : Rapid Modernisation Underway in the Asia Pacific Region 22 Q4 Oct-13 Quarterly Report 23 Q1 Jan-14 Japan, Asia and Global Investing 24 Q2 Apr-14 Quarterly Report 2014 25 Q3 Jul-14 Quarterly Report 26 Q4 Oct-14 Quarterly Report 27 Q1 Jan-15 Quarterly Report 28 Q2 Apr-15 Emergence of Private REITs in Japan and Implications to the market 2015 29 Q3 Jul-15 Quarterly Report 30 Q4 Oct-15 Quarterly Report 31 Q1 Jan-16 Will the Third Arrow of Abenomics Fly? 32 Q2 Apr-16 Quarterly Report 2016 33 Q3 Jul-16 Impact of Negative Interest Rate 34 Q4 Oct-16 Quarterly Report 35 Q1 Jan-17 Quarterly Report 36 Q2 Apr-17 Quarterly Report 2017 37 Q3 Jul-17 Quarterly Report 38 Q4 Oct-17 Quarterly Report 39 Q1 Jan-18 Quarterly Report 40 Q2 Apr-18 Quarterly Report 2018 41 Q3 Jul-18 Quarterly Report 42 Q4 Oct-18 Quarterly Report 43 Q1 Jan-19 Quarterly Report 44 2019 Q2 Apr-19 Quarterly Report 45 Q4 Oct-19 Semi-Annual Report

Japan Real Estate Fourth Quarter 2019

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Japan Real Estate Fourth Quarter 2019

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For Investors in Switzerland: This material is intended for information purposes only and does not constitute investment advice or a personal recommendation. This document should not be construed as an offer to sell any investment or service. Further- more, this document does not constitute the solicitation of an offer to purchase or subscribe for any investment or service in any jurisdiction where, or from any person in respect of whom, such a solicitation of an offer is unlawful. Neither DWS CH AG nor any of its affiliates, gives any warranty as to the accuracy, reliability or completeness of information which is contained in this document. Past performance or any prediction or forecast is not indicative of future results.

The views expressed in this document constitute DWS Group's judgment at the time of issue and are subject to change. DWS Group has no obligation to update, modify or amend this letter or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn. Prices and availability of financial instruments also are subject to change without notice.

The information provided in this document is addressed solely to Qualified Investors pursuant to Article 10 paragraph 3 of the Swiss Federal Act on Collective Investment Schemes (CISA) and Article 6 of the Ordinance on Collective Investment Schemes. This document is not a prospectus within the meaning of Articles 1156 and 652a of the Swiss Code of Obligations and may not comply with the information standards required thereunder. This document may not be copied, reproduced, distributed or passed on to others without the prior written consent of DWS CH AG or its affiliates.

For investors in the United Kingdom: FOR PROFESSIONAL CLIENTS ONLY

Issued and approved by DWS Investments UK Limited of Winchester House, 1 Great Winchester Street, London EC2N 2DB, authorised and regulated by the Financial Conduct Authority (“FCA”).

Japan Real Estate Fourth Quarter 2019

This document is a “non-retail communication” within the meaning of the FCA's Rules and is directed only at persons satisfying the FCA’s client categorisation criteria for an eligible counterparty or a professional client. This document is not intended for and should not be relied upon by a retail client. This document may not be reproduced or circulated without written consent of the issuer.

This document is intended for discussion purposes only and does not create any legally binding obligations on the part of DWS Group GmbH & Co. KGaA and/or its affiliates (“DWS”). Without limitation, this document does not constitute investment advice or a recommendation or an offer or solicitation and is not the basis for any contract to purchase or sell any security or other instrument, or for DWS to enter into or arrange any type of transaction as a consequence of any information contained herein. The information contained in this document is based on material we believe to be reliable; however, we do not repre- sent that it is accurate, current, complete, or error free. Assumptions, estimates and opinions contained in this document constitute our judgment as of the date of the document and are subject to change without notice. Past performance is not a guarantee of future results. Any forecasts provided herein are based upon our opinion of the market as at this date and are subject to change, dependent on future changes in the market. Any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets is not necessarily indicative of the future or likely performance. Investments are subject to risks, including possible loss of principal amount invested.

When making an investment decision, potential investors should rely solely on the final documentation relating to the investment or service and not the information contained herein. The investments or services mentioned herein may not be appropriate for all investors and before entering into any transaction you should take steps to ensure that you fully understand the transaction and have made an independent assessment of the appropriateness of the transaction in the light of your own objectives and circumstances, including the possible risks and benefits of entering into such transaction. For general information regarding the nature and risks of the proposed transaction and types of financial instruments please go to https://www.db.com/company/en/risk-disclosures.htm. You should also consider seeking advice from your own advisers in making this assessment. If you decide to enter into a transaction with us you do so in reliance on your own judgment.

Any opinions expressed herein may differ from the opinions expressed by Deutsche Bank AG and/or any other of its affiliates (“DB”). DB may engage in transactions in a manner inconsistent with the views discussed herein. DB trades or may trade as principal in the instruments (or related derivatives), and may have proprietary positions in the instruments (or related derivatives) discussed herein. DB may make a market in the instruments (or related derivatives) discussed herein. You may not distribute this document, in whole or in part, without our express written permission.

DWS SPECIFICALLY DISCLAIMS ALL LIABILITY FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL OR OTHER LOSSES OR DAMAGES INCLUDING LOSS OF PROFITS INCURRED BY YOU OR ANY THIRD PARTY THAT MAY ARISE FROM ANY RELIANCE ON THIS DOCUMENT OR FOR THE RELIABILITY, ACCURACY, COMPLETENESS OR TIMELINESS THEREOF.

Any reference to “DWS”, “Deutsche Asset Management” or “Deutsche AM” shall, unless otherwise required by the context, be understood as a reference to asset management activities conducted by DWS Group GmbH & Co. KGaA and/or any of its affiliates. Clients will be provided DWS products or services by one or more legal entities that will be identified to clients pursuant to the contracts, agreements, offering materials or other documentation relevant to such products or services. DWS’s infrastructure investment business is part of the Alternatives platform. In the U.S., DWS relates to the asset management activities of RREEF America L.L.C.; in Germany: DWS Grundbesitz GmbH, DWS Real Estate GmbH, and DWS Alternatives GmbH; in Japan: DWS Investments Japan Limited; in Hong Kong: Deutsche Bank Aktiengesellschaft, Hong Kong Branch (for direct real estate business), and DWS investments Hong Kong Limited (for real estate securities business); in Singapore: DWS Investments Singapore Limited (Company Reg. No. 198701485N); in the United Kingdom: Deutsche Alternative Asset Management (UK) Limited, DWS Alternatives Global Limited and DWS Investments UK Limited; and in Denmark, Finland, Norway and Sweden: Deutsche Bank AG; in Australia: DWS Investments Australia Limited (ABN 52 074 599 401) an Aus- tralian financial services license holder.

For investors in Nordics: Deutsche Bank AG is authorised under German Banking Law (competent authority: European Central Bank and the BaFin, Germany’s Federal Financial Supervisory Authority). Deutsche Bank AG Stockholm branch ("DBS", Bolagsverket nr. 516401-9985) is authorised by BaFin and regulated by Finansinspektionen for the conduct of licensed activities in Sweden, Denmark, Norway and Finland. Deutsche Bank branches operate within the EEA on the back of the legal entity (Deutsche Bank AG) EU Passports within the European Economic Area (“EEA”). Reference is made to European Union Regulatory Background and Corporate and Regulatory Disclosures at https://www.db.com/en/con- tent/eu_disclosures_uk.htm. Details about the extent of our authorisation and regulation by BaFin and respective Nordic Region Financial Supervisory Authority are available from us on request.

Japan Real Estate Fourth Quarter 2019

Without limitation, this document and any attachment does not constitute an offer or a recommendation to enter into any transaction with DBS. This material and attachments is for information purposes only and is not intended to be an offer or an advice or recommendation or solicitation, or the basis for any contract to purchase or sell any security, or other instrument, or for DBS to enter into or arrange any type of transaction as a consequence of any information contained herein. The im- plicit or explicit views and recommendations expressed in marketing or other financial presentation material as well as any financial proposals are solely those of the issuer of such material, and forwarded to you on behalf of the contracting party.

The views set out in this presentation are those of the author and may not necessarily the views of any other division within Deutsche Bank, including the Sales and Trading functions of the Corporate and Investment Bank or the Global Client Group of Deutsche Asset Management and Private Wealth Management: all services provided by these the Sales and Trading functions of the Corporate and Investment Bank are purely on a non-advised, execution-only basis. DB may engage in transactions in a manner inconsistent with the views discussed herein. DB trades or may trade as principal in the instruments (or related derivatives), and may have proprietary positions in the instruments (or related derivatives) discussed herein. DB may make a market in the instruments (or related derivatives) discussed herein. Sales and Trading personnel are compensated in part based on the volume of transactions effected by them. You may not distribute this document, in whole or in part, without our express written permission.

DBS is solely acting for and on behalf of Deutsche Bank AG and/or any of its affiliates. Potential investors should be aware that if they decide to enter into a transaction with Deutsche Bank AG or any of its affiliates acting in their capacity as principal to the transaction (“contracting party”), any and all agreements will be entered into with that contracting party (unless re- negotiated) and pursuant to the financial laws and regulations of the country where the contracting party is licensed.

Unless DBS is entering into a separate and explicit contractual relationship with you for the provision of investment services, it is neither obliged to categorise you in accordance with MiFID nor perform MiFID suitability and/or appropriateness assessment (as enacted into Swedish laws and regulations). The investments or services mentioned in this material or an attachment thereto may not be appropriate for all investors and before entering into a transaction you should take steps to ensure that you fully understand the transaction and have made an independent assessment of the appropriateness of the transaction in the light of your own objectives and circumstances, including the possible risks and benefits of entering into such transaction. You should also consider seeking advice from your own advisers in making this assessment. If you decide to enter into a transaction with a contracting party you do so in reliance on your own judgment. For general information regarding the nature and risks and types of financial instruments please go to www.globalmarkets.db.com/riskdisclosures.

DB SPECIFICALLY DISCLAIMS ALL LIABILITY FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL OR OTHER LOSSES OR DAMAGES INCLUDING LOSS OF PROFITS INCURRED BY YOU OR ANY THIRD PARTY THAT MAY ARISE FROM ANY RELIANCE ON THIS DOCUMENT OR FOR THE RELIABILITY, ACCURACY, COMPLETENESS OR TIMELINESS THEREOF.

For Investors in Belgium: The information contained herein is only intended for and must only be distributed to institutional and/or professional investors (as defined in the Royal Decree dated 19 December 2017 implementing MiFID directive). In reviewing this presentation you confirm that you are such an institutional or professional investor. When making an investment decision, potential investors should rely solely on the final documentation (including the prospectus) relating to the investment or service and not the information contained herein. The investments or services mentioned herein may not be adequate or appropriate for all investors and before entering into any transaction you should take steps to ensure that you fully understand the transaction and have made an independent assessment of the suitability or appropriateness of the transaction in the light of your own objectives and circumstances, including the possible risks and benefits of entering into such transaction. You should also consider seeking advice from your own advisers in making this assessment. If you decide to enter into a transaction with us you do so in reliance on your own judgment.

For investors in Bermuda: This is not an offering of securities or interests in any product. Such securities may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act of 2003 of Bermuda which regulates the sale of securities in Bermuda. Additionally, non-Bermudian persons (including companies) may not carry on or engage in any trade or business in Bermuda unless such persons are permitted to do so under applicable Bermuda legislation.

Japan Real Estate Fourth Quarter 2019

Research & Strategy—Alternatives

OFFICE LOCATIONS: TEAM:

Chicago Global 222 South Riverside Plaza th 34 Floor Mark Roberts, CFA Jessica Elengical Chicago Head of Research & Strategy Head of ESG Strategy IL 60606-1901 [email protected] [email protected] United States Tel: +1 312 537 7000 Gianluca Minella Yasmine Kamaruddin

Infrastructure Research Global Strategy Frankfurt [email protected] [email protected] Taunusanlage 12 60325 Frankfurt am Main Germany Americas Tel: +49 69 71909 0 Kevin White, CFA Brooks Wells London Head of Strategy, Americas Head of Research, Americas Winchester House [email protected] [email protected] 1 Great Winchester Street London EC2N 2DB Ross Adams Liliana Diaconu, CFA United Kingdom Industrial Research Office Research Tel: +44 20 754 58000 [email protected] [email protected]

New York Ana Leon Ryan DeFeo 345 Park Avenue Retail Research Property Market Research 26th Floor [email protected] [email protected] New York NY 10154-0102 Joseph Pecora, CFA United States Apartment Research Tel: +1 212 454 6260 [email protected]

San Francisco Europe 101 California Street 24th Floor San Francisco Matthias Naumann Simon Wallace CA 94111 CIO & Head of Strategy, Europe Head of Research, Europe United States [email protected] [email protected] Tel: +1 415 781 3300 Tom Francis Martin Lippmann Singapore Property Market Research Property Market Research One Raffles Quay [email protected] [email protected] South Tower 20th Floor Farhaz Miah Aizhan Meldebek Singapore 048583 Property Market Research Infrastructure Research Tel: +65 6538 7011 [email protected] [email protected]

Tokyo Siena Golan Sanno Park Tower Property Market Research 2-11-1 Nagata-cho [email protected] Chiyoda-Ku 18th Floor Asia Pacific Tokyo Japan Koichiro Obu Natasha Lee Tel: +81 3 5156 6000 Head of Research & Strategy, Asia Pacific Property Market Research [email protected] [email protected]

Seng-Hong Teng Hyunwoo Kim Property Market Research Property Market Research [email protected] [email protected]