Savills World Research Asia Pacifi c

Asia Pacifi c Investment Quarterly Q2 2018

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

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HIGHLIGHTS

For Japan, monetary policy money remains the dominant a result. Korea’s investment remains supportive and the force and the focus this year market was more active World Bank forecasts steady has been on the offi ce market than ever during the second growth through 2020. Real while a recovering retail quarter. Total volumes for estate fundamentals are sector is gaining appeal. In the fi rst half of this year strong, and international Singapore, the July cooling have already reached 70% investors continue to target measures had a particularly of those posted in FY2017 fi rst and second tier cities negative impact on residential when the investment market in a display of confi dence. collective sales. This will saw its most active year. In Financial restrictions remain almost surely result in a Vietnam foreign capital is tight on the property market precipitous drop in this abundant but opportunities in China, with investment segment of the investment are limited across all sectors. funds less active than owner- sales market and we have occupiers. This trend could revised our investment sales Simon Smith, Savills Research continue for the rest of the forecast down, from S$36 year. In Hong Kong mainland billion to S$25-27 billion as

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

An introduction to Savills

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

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

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Source: Savills Research & Consultancy

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

02 Q2 2018

Contents

Australia 04 China (Northern) - Beijing 05 China (Northern) - Tianjin 06 China (Western) - Chengdu 07 China (Southern) - Guangzhou 08 China (Southern) - Shenzhen 09 China (Eastern) - Shanghai 10 Hong Kong 11 Japan 12 Macau 13 Malaysia 14 New Zealand 15 Singapore 16 South Korea 17 Taiwan 18 Thailand 19 Viet Nam 20 Major transactions Q2 2018 21

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

Australia Paul Craig Chris Freeman CEO National Head +61 2 8215 8888 Capital Strategy [email protected] +61 2 8215 6093 [email protected]

Australian direct property & Major Regional centres remains focus to income growth. Over the performance extended its gains over strong, as investors are increasingly last 3 years, capital returns have the equities markets according to attracted to the high income returns accounted for the majority of total the latest MSCI data. In the past on Retail assets. Although, with the returns, with record capital value fi ve years, the average investment in launch of Amazon Prime during the appreciation, particularly in Sydney commercial property has delivered quarter in Australia, all eyes will be on and Melbourne’s offi ce markets, an average unlevered total return retail trade performance over coming driving market yields to record low of an impressive 72.4% (income months. levels. Moving forward, capitalisation and capital returns) while Australian of income growth expected in these equities has delivered 42.9% over the We are now at a point in the markets will most likely drive overall same period. This outperformance commercial property sector, returns over the short to medium was stark over the past 12 months, where we are seeing a shift in term. with yield compression in commercial property driving an average return of 11.5% over the year to March-18 GRAPH 1 (latest available) while equities posted a total return of just 1.0% Australian property vs equities, Mar 2013 – Mar 2018 over the same period as the heavy weighting to resource and fi nancial Aus property Aus equities stocks drove continued volatility. 180

While the extent to which yield 170 compression can continue to driver performance across major markets 160 is a cause of debate, Australia is now in its 26th consecutive year 150 of economic growth with the drag 140 of low employment growth now appearing to be behind us. A surge 130 in full-time employment over the last 9 months has driven employment 120 growth across all states, fuelled by record company revenue growth 110 across key industries. With this will 100 likely to translate to rising wages growth (which has been largely 90 stagnant since 2008), a turnaround Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 in the previously ailing retail sector appears plausible in late 2018. Source: Savills Research & Consultancy

TABLE 1 It was another record 12 month period for sales in the offi ce and Major investment transactions, Q2/2018 retail sectors. In FY-18, the retail Property Location Price Buyer Usage sector recorded total sales of $10.33 billion, whilst $18.00 billion of offi ce Westpac Place Sydney, NSW AU$860 mil/US$635.4 mil Mirvac Offi ce sales was only slightly below the Pacifi c Epping (50%) Epping, VIC AU$402 mil/US$301.5 mil Queensland Investment Retail $18.12 billion record set in FY-16. Corporation (QIC) Transaction volumes in the industrial Brown Plains, Grand Plaza (50%) QLD AU$215 mil/US$161.3 mil Invesco Real Estate Retail sector however are still well below Hopper Queensland Investment the record set 3 years ago as quality Pacifi c Werribbe (50%) Crossing, VIC AU$215 mil/US$161.3 mil Corporation (QIC) Retail offerings of scale remain in short 117 Clarence Street Sydney, NSW AU$153 mil/US$114.8 mil Investa Property Group Offi ce supply. Wheelers Hill, Newmark Brandon Core Brandon Park S.C. VIC AUS135 mil/US$101.3 mil Plus Fund Retail Transactional evidence from 2017 and the fi rst half of 2018 suggests Gateway Plaza S.C. Leopold, VIC AUS117 mil/US$87.75 mil Charter Hall Retail demand for Regional and Super Source: Savills Research & Consultancy

04 Q2 2018

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

Activity in the en-bloc investment QoQ to 106,487 sq m GFA. Total hotel markets will remain popular market was largely stable in Q2/2018. consideration rose by 20.5% QoQ to investment targets, a lack of tradable A total of four deals registering a RMB3.56 billion. assets will see astute investors total consideration of RMB4.9 billion expand their investment horizons. were concluded during the period. The fi rst-hand, strata-title retail The market for serviced apartments, Traditional asset classes proved market received 25,173 sq m of long-term leasing apartments popular during the quarter with the new supply in Q2/2018, up 29.0% and detached offi ce towers in offi ce, retail and hotel markets all QoQ. Total transaction area reached industrial parks will continue to gain witnessing deals. 131,206 sq m, up 183.5% QoQ. Total momentum. In addition to this, the consideration registered RMB3.76 impact from restrictive regulations Deal activity was dominated by billion, up 101.3% QoQ. and high land costs will see some domestic players during the quarter developers target mature assets, with both buyers and sellers Institutional investors are expected to which offer potential for value-add, coming from the mainland. Major continue to diversify their acquisition and greater asset appreciation and transactions during the quarter targets. While traditional asset return on investment. included: classes such as the offi ce, retail and

New Everbright Centre Tower A was acquired by Postal Savings GRAPH 2 Bank of China for an undisclosed consideration. The offi ce project En-bloc investment volumes, 2007 – Q2/2018 will be positioned for self-use and is located in Tongzhou district, the new home of the Beijing Municipal Q1 Q2 Q3 Q4 60 Government headquarters.

ICBC International Holdings 50 Limited purchased an equity interest from Beijing Capital Land in the Beijing Financial Street International 40 Hotel. The deal saw ICBC pick up a 59.5% equity share in the hotel for RMB667 million. 30 RMB billion Xinhua Cultural Centre, a retail 20 project in Dongcheng district, was acquired by Jingrui Holdings for a total consideration of RMB240 10 million.

FT. Mall in Daxing district was 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 purchased by GoHigh Capital for an undisclosed consideration. Source: Savills Research & Consultancy

The strata-title offi ce and retail TABLE 2 markets posted a slight improvement from the previous quarter in Q2/2018. Major investment transactions, Q2/2018 However, restrictive policies Property Location Price Buyer Usage continued to see performance down Beijing Financial Street ICBC International from previous years. International Hotel Xicheng RMB667 mil/US$99.55 mil Holdings Limited Hotel Xinhua Cultural Centre Dongcheng RMB240 mil/US$35.82 mil Jingrui Holdings Retail New supply in the strata-title offi ce New Everbright Centre Postal Savings Bank market reached 45,253 sq m GFA Tower A Tongzhou Undisclosed of China Offi ce during the quarter, up 56.2% quarter- FT. Mall Daxing Undisclosed GoHigh Capital Retail on-quarter (QoQ). Total transaction area also increased by 20.1% Source: Savills Research & Consultancy

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

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

The residential land market saw education facilities. The bid price improvement in the business upward trends in both supply and of this land plot was set at a ceiling environment continued to attract new transaction volumes in Q2/2018. price, hence the land auction process immigrants. Therefore, developers Land prices remained stable thanks started with bidding on the land size showed confi dence in the residential to land auction regulations. However reserved for lease-only residences. land market. As the third quarter the proportion of developer-owned Vanke won the bid by committing to is traditionally peak season, land space for rent has fallen. use 1,000 sq m of the land area for transaction volumes are expected lease-only housing. to climb higher over the next three Land supply shot up by 384% months. quarter-on-quarter (QoQ) to 5.16 The announcement of a talent million sq m, up 279% year-on-year attraction policy and the (YoY) in Q2/2018. Total transaction volumes rose by 106% QoQ to 3.39 million sq m, up 287% YoY. The city GRAPH 3 centre contributed only one new land Land supply and transaction volumes by area, Q1/2011 – Q2/2018 plot, while suburban areas supplied almost half (47.8%) of the new land City core supply Suburb supply Fringe supply plots. Fringe areas and Binhai New Binhai supply City core transactions Suburb transactions Area provided 32.6% and 18.7% of Fringe transactions Binhai transactions 10 land supply respectively. In terms of transaction volumes, suburban 9 areas continued to lead city-wide, 8 accounting for 53.7% of total 7 transactions. Fringe areas and Binhai New Area contributed 28.5% and 6 16.3% of total transactions, and the 5 city centre accounted for only 1.5% 4 of total transactions. m million sq 3 Financial Street Holdings acquired 2 its third land plot in Dongli district 1 for a total consideration of RMB677 0 million, with an accommodation value Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2 of RMB5,719 per sq m. The 147,304 2011 2012 2013 2014 2015 2016 2017 2018 sq m land plot is zoned for mixed-use development, including residential, Source: Savills Research & Consultancy commercial and education TABLE 3 components. In line with government wishes, developer will carry out Major investment transactions, Q2/2018 the planning and development of Property Location Price Buyer Usage the education facilities and deliver Mixed-use them together with residential and Plot 2017-188 (JBB) Beichen RMB2.95 bil/US$444 mil Tianfang development site commercial buildings. Afterwards, Mixed-use ownership of the education facilities Plot 2018-063 (JNB) Nankai RMB2.70 bil/US$406 mil T. B. Infrastructure development will be transferred to Education site Residential Bureau of Dongli district. Plot 2018-04 (JXQ) Xiqing RMB755 mil/US$113 mil Vanke development site Mixed-use Vanke purchased one land plot Plot 2017-040 (JW) Wuqing RMB1.39 bil/US$209 mil Jiqing Real Estate development located in Xiqing district for a total site consideration of RMB881 million, Commercial Plot 2018-1 (JBS) Binhai RMB118 mil/US$17.7 mil Jinyuan Investment development with an accommodation value of site RMB10,717 per sq m. The 49,684 sq m land plot will have residences and Source: Savills Research & Consultancy

06 Q2 2018

China (Western) - Chengdu Eric Wo Dahuang Chen Managing Director Associate Director Savills Western China Research +86 28 8658 7828 +86 23 6370 3388 [email protected] [email protected]

The hi-tech industry has fl ourished of new offi ce transactions. More than in the CBD and Dongda Street, while in Chengdu and become a new 30% of hi-tech tenants in Chengdu’s local companies are mainly in Dayuan. force supporting the absorption Grade A offi ce buildings relocates from rate of Grade A offi ce market. The non-A-grade offi ce buildings. Due to the “mass entrepreneurship proportion of hi-tech industrial and innovation” policy and building tenants in Grade A offi ce in Chengdu 78% of newly leased hi-tech tenants a western technology center, hi-tech has risen from 4% to 14% in the past are located in Financial City and companies’ demand for Grade A fi ve years, ranking in the top three Dayuan. Information technology offi ce buildings in Chengdu will sources of leasing demand. services companies are primarily in increase. As a result, they will take Dayuan, while the others are mainly up more leasing space and became By the end of 2017, local Sichuan in Financial City. More than 35% of a signifi cant source of Grade A offi ce and other domestic companies have electronic equipment and Internet tenants; it is also expected that the become the largest composition of services companies are in the CBD proportion of hi-tech companies hi-tech enterprises in Grade A offi ce and Dongda Street. Moreover, more in Chengdu’s Grade A offi ce will in Chengdu—each of them accounted than half of foreign tenants are located increase. for more than 40%. In 2017, more than half of newly leased hi-tech companies were local. However, since many local GRAPH 4 companies are still in their infancy Analysis of tenant structure of Grade A offi ces in Chengdu, and the scale of their businesses is 2013 – 2017 limited, they only take up about 25% of total leasing area, far less than the Others Retail & trade Real estate & construction proportion of domestic companies. Finance & insurance Professional services Hi-tech 100% According to the Global Industry Classifi cation Standard, the hi-tech 90% industry mainly includes Internet 80% services, software, information technology services, electronic 70% equipment, computer hardware 60% and related equipment, and 50% communications equipment. 40% With the rapid development of the hi- 30% tech industry, large offi ce space leasing demand from hi-tech companies in 20% Chengdu’s Grade A offi ce buildings 10% has become increasingly common. More specifi cally, the biggest leasing 0% demand for large offi ce space comes 2013 2014 2015 2016 2017 from computer hardware companies; Source: Savills Research electronic equipment and Internet services companies also have TABLE 4 signifi cant demand, while the software Major investment transactions, Q2/2018 and information technology services companies have relatively less demand Property Location Price Buyer Usage for large offi ce space. Banyan Tree China Hotel Portfolio 2018 Wenjiang RMB1.348 bil/US$203.3 mil China Vanke Hotel Regarding transaction type, new Laguna Chengdu Jinkong Square Tower Chengdu Hi-Tech companies entering the Chengdu A6 Area RMB520 mil/US$78.4 mil China Vanke Offi ce market are the main source of Senyu Shuangliu Shuangliu RMB2.315 bil/US$349.1 mil CLR Real Estate Development transactions, and both the number of Huayang Street land site site such companies and their absorption Wuhou New City land Development site Wuhou RMB190 mil/US$28.6 mil COFCO Property site rate contribute more than 60% in the Anbang Chengdu Chengdu Hi-Tech Development hi-tech industry. The offi ce upgrades Financial Plaza land site Area -Sino-oceansite have also become an important source Source: Savills Research

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

China (Southern) - Guangzhou Alvin Lau Carlby Xie Managing Director Director, Research Savills Guangzhou +86 20 3892 7037 +86 20 3892 8590 [email protected] [email protected]

The Guangzhou government Town, Pazhou Internet Innovation The Guangzhou government stated released the Guangzhou City Land Cluster and Baiyun New Town. that the construction land supply in Supply Plan 2018 in May. According key areas must be guaranteed; the to the plan, 114 land plots will be According to the plan, 11 new government is expected to pay more suppled in 2018, 44 of which are business plots will open in Haizhu attention to developing International for residential use, some of them district, west of Pazhou. There will Financial City, Pazhou Internet in downtown areas, and 48 plots be 16 new business plots in Tianhe Innovation Cluster, Baiyun New Town will be for business use (the other district, nine of which will be located and the Huadu commercial area. 22 plots will be used for other at International Financial Town. Therefore, the land value of plots in purposes, including public parking, Zhujiang New Town also received one these areas is expected to continue schools and parks). new plot with a fl oor area of 6580 sq appreciating and driving up capital m, located at the junction of Huangpu values. Residential land supply Avenue and Huaxia Road, near the The latest plan shows that the Poly Clover Commercial Centre and total volume of residential land the Huacheng commercial area. supply sits at 625 hectares: 477 hectares for commercial housing GRAPH 5 and 148 hectares for low-income Residential and business land plots by district, May 2018 housing and rental housing. The 44 residential plots are mainly distributed in suburban areas such Huangpu, 2 as Conghua, Huadu, Nansha and Panyu, 2 Zengcheng. However, some new supply is located in downtown Huadu, areas like Liwan (Guanggang New Haizhu, 9 11 City), Baiyun (Airport Economic Tianhe, Zone), Haizhu (Guangzhi New Zhencheng, 16 Town), and Tianhe (Huijing New 9 Town E3AT050747 plot, which is 44 residential 48 business the only residential land supply land plots land plots available in Tianhe this year). Liwan, 6 Baiyun, 10 The Guangzhou government is once Liwan, 4 Huadu, 4 again responding to the central Baiyun, government housing directive 5 Panyu, 5 of “living but not speculating”. Tianhe, 1 Guangzhou is making every Haizhu, 1 Huangpu, effort to develop a healthy and Nansha, 3 Conghua, 3 1 stable residential market through Source: Guangzhou City Land Supply Plan 2018, Savills Research increasing the volume of housing land supply and long-term leasing TABLE 5 houses. As a result, investment Major investment transactions, Q2/2018 opportunities in the residential market have narrowed. Property Location Price Buyer Usage 18 Baoying Delton Technology 18 Baoying Avenue Avenue RMB105.03 bil/US$16.23 mil Guangzhou Inc Commercial Business land supply Guangzhou Starry Currently, 48 business plots with a Project Guangzhou Ave RMB9.05 bil/US$1.40 mil Yuexiu Property Mixed-use total of 400 hectares are distributed between International Financial Source: Savills Research

08 Q2 2018

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

Shenzhen has been one of the For talent with in-demand skills Shenzhen’s new approach fastest-growing cities in the world (such as technology), or those resembles the Singapore model. since it was designated China’s fi rst engaged in business management, The city state’s public housing, Special Economic Zone in 1979. social work or government services, known as Housing and Development Shenzhen has experienced an the rental or selling price of welfare- Board (HDB) fl ats, accounts for economic miracle over the last 30 housing will be about 60% of the 80% of total supply. The majority years, but rapid economic growth cost of commodity housing in the of Singaporeans live in these HDB has also driven up Shenzhen house same areas. fl ats and are little affected by private prices. housing price moves. By 2035, Shenzhen’s housing supply Shenzhen housing prices have will reach 1.7 million units, which The government appears to be roughly quadrupled since 2000, includes no less than one million seeking approaches which could which has led to a series of units in welfare and public rental signifi cantly reshape the architecture public concerns—that homes are housing. of China’s housing market. increasingly unaffordable and that the economy is too reliant on Currently, more than 80% of homes housing prices, potentially causing a in Shenzhen are privately owned, bubble and subsequent crash. while public housing represents only 10%. Thus, Shenzhen’s move to ramp Skyrocketing home prices may up the ratio of public housing to 60% become a hurdle as the city tries represents a major policy U-turn. to lure talent to its workforce. Shenzhen has always been a city GRAPH 6 of migrants; its fast development has depended largely on the Shenzhen mass residential market transaction volumes, 2012 – infl ux of clever and ambitious Q1/2018 workers from all over the country. First-hand volume (LHS) Second-hand volume (LHS) First-hand price (RHS) However, surging property prices may discourage young talent from 5.0 60,000 settling down in Shenzhen or 4.5 54,000 prompt them to move to other cities where the cost of housing is less 4.0 48,000 RMB per per m RMB sq prohibitive. 3.5 42,000 3.0 36,000 The government has started talking about a “long-term mechanism” to 2.5 30,000

calm the housing market. Several m million sq 2.0 24,000 times during the past year China’s president, Xi Jinping, has said that 1.5 18,000 “homes are for living in, not for 1.0 12,000 speculating on.” Against such a backdrop, on 20th June 2018, the 0.5 6,000 Shenzhen Construction Bureau 0.0 0 issued a draft plan for housing Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1 market reform, aiming to build a 2012 2013 2014 2015 2016 2017 18 differentiated and fully covered housing supply system. Source: Shenzhen Land & Real Estate Exchange Centre TABLE 6 According to the plan, there will be three categories of housing— Major investment transactions, Q2/2018 commodity housing based on Property Location Price Buyer Usage market price, government welfare- Hubei Fuxing Science and housing to attract talent, and public Plot B105-92 Futian FTZ RMB984.5 mil/US$152.2 mil Technology Co., Ltd Commercial rental housing for low- and middle- income residents. Source: Real Capital Analytics

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

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

2018 saw the government’s asset-backed securities (ABS) by size to squeeze out smaller ones continued efforts at deleveraging repacking rental income or property which struggle with less-preferential the property sector, which included management fees in order to lower lending rates and other market crackdowns on M&A loans used to fi nancing costs. barriers. Moreover, alternative asset buy land, a ban on non-bank fi nancial classes such as logistics, data centre institutions from channelling funds Highly capitalised investors, such and senior housing are expected to into the property and infrastructure as insurance companies, SOEs and continue to be attractive to funds as sectors via entrusted loans and pension funds with fewer needs they will need cash fl ow and higher restrictions on real estate developers for onshore leverage are expected yields to cover debt. from using funds raised via foreign to take up more transactions in debt for real estate investments or for 2H/2018. In addition, the market is working capital. expected to see more consolidation as the bigger developers use their Unable to access previously plentiful sources of fi nancing, some highly leveraged Chinese borrowers are under a lot of stress—especially GRAPH 7 those facing large amounts of debt China shadow banking's share of GDP, 2011 – 2017 coming due. This year has seen a wave of defaults that include a RMB1.1 billion bond default by listed 100% developer Zhonghong Holdings, which purchased a 21% stake in SeaWorld Entertainment for US$449 80% million from Blackstone about a year ago. The average cash ratio of China’s listed developers dropped to 60% 95% at the end of March from 139% a year ago, according to Bloomberg, indicating an increasing liquidity risk 40% for developers.

Meanwhile, as forecasted in the end 20% of 2017, the en-bloc market has been slow in Shanghai and in China as a whole because of diffi culty in accessing capital and rising 0% fi nancing costs. In Shanghai, only 2011 2012 2013 2014 2015 2016 2017 a total RMB19.6 billion deals were Source: Moody's Investors Service concluded in 1H/2018, less than half of those in 1H/2017. Domestic TABLE 7 developers and investors who rely on Major investment transactions, Q2/2018 heavy leverage to make investments have been affected the most. Property Location Price Buyer Usage Qiantan 40-01 Land Plot Pudong RMB2.9 bil/US$438.2 mil Fusheng Group Development site To survive these tough times, 90% of Shanghai Huangpu RMB2.5 bil/US$377.8 mil JV (Sunac, Nova, Retail mainland developers are seeking Plaza Hualing, Metro) different fi nancial channels to raise Bay Valley B7 Yangpu RMB726 mil/US$109.7 mil IDG Capital Offi ce funds while facing restricted onshore Fudu Plaza Huangpu RMB700 mil/US$105.8 mil JV (Sunac, Nova, Retail liquidity, which includes raising funds Hualing, Metro) offshore and taking more expensive Hongkou Bailian Hongkou RMB465 mil/US$70.3 mil Nova & InfraRed NF Retail mezzanine loans. In addition, property fi rms are also tapping Source: Savills Research

10 Q2 2018

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

We are seeing renewed interest in The completion of both the Hung prospects and core retail rents, and prime street shops in core retail Shui Kiu New Development Area with Mainland spending continuing areas as prime street shop rents (NDA) and the Yuen Long South to support retail sales we expect fi nally rebounded in Q2/2018, NDA from 2024 onwards should a bottoming out of prime street signaling the end of the down cycle bring an additional population shop prices in the second half of which has lasted for almost four of 300,000 to stations near Tuen 2018. Suburban retail looks set to years and seen a 50% correction. Mun. All these developments continue to fl ourish, but investors While investors were in general more will inevitably enlarge the retail may be more convinced that areas optimistic about the prospects of catchment of Tuen Mun as a whole with comprehensive infrastructure prime street retail, the changing and thus prove benefi cial to retail and development programmes will spending patterns of Mainland within the area. prevail in the longer-term, and thus tourists towards more affordable areas such as Tuen Mun, Sheung luxury and necessity items meant We have seen a full-blown recovery Shui / Fanling and Tung Chung may investors are also being more in the retail sector in terms of leasing become more popular over time. realistic when assessing rental and price growth potential. GRAPH 8 The suburban retail story continued to attract interest with sustained Prime street shop price indices by district, Q1/2003–Q2/2018 local spending supporting both street shops and shopping centres, Overall Central Causeway Bay Tsimshatsui Mongkok and a number of transactions were 1,200 concluded in areas such as Tuen Mun and Sheung Shui by local investors. Besides being drawn 1,000 to the strong spending power of existing catchments, investors 800 are also looking at future value, and are favouring areas where comprehensive planning initiatives 600 have begun. 400 Q1/2003 = 100 = Q1/2003 There are a number of key infrastructure and development programmes underway in the New 200 Territories, which are concentrated in three main districts: Tuen Mun 0 / Yuen Long, Tung Chung and Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1 the Northeastern New Territories 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 (which includes Sheung Shui and Source: Savills Research & Consultancy Fanling). Among them, Tuen Mun has the highest concentration of infrastructure programmes with TABLE 8 the upcoming Tuen Mun-Chek Major investment transactions, Q2/2018 Lap Kok Link connecting the area directly with both the airport and Property Location Price Buyer Usage Cityplaza Three & Hengli Investments the soon-to-be-completed Hong Cityplaza Four Quarry Bay HK$15.0 bil/US$1.91 bil Holding Offi ce Kong-Zhuhai-Macau Bridge, which OCTA Tower Kowloon Bay HK$7.5 bil/US$955.76 mil TBC Offi ce will vastly improve the area’s connectivity with the airport and the Brilliant Cold Storage Kwai Chung HK$1.6 bil/US$203.90 mil TBC Industrial western PRD, while the Tuen Mun Butterfl y on Waterfront Hotel Sheung Wan HK$810 mil/US$103.22 mil Tai Hung Fai Hotel South Extension will improve intra- Enterprise district accessibility. Source: EPRC, Savills Research & Consultancy

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

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

Japan’s real GDP grew 1.1% YoY the end of June, up 4.5% over the Average Grade A offi ce rents grew to in Q1/2018, despite a small QoQ quarter, outperforming the TOPIX by JPY33,653 per tsubo in the central decline which broke a streak of eight 3.7% as the market favoured stable fi ve wards (C5W) of Tokyo, up 0.8% consecutive quarterly expansions. income products. QoQ and 3.9% YoY. Shinjuku Grade In June the World Bank trimmed its A offi ce rents grew the most YoY, up forecast of GDP growth for 2018 by Total investment volumes in Japan 5.0% to JPY30,591 per tsubo but the 0.3 percentage points (ppts) to 1.0%, were below market expectations in least QoQ, up just 0.3%. Vacancy but held its 2019 and 2020 forecasts Q2/2018, according to preliminary rates in the C5W tightened by a few steady at 0.8% and 0.5%, respectively, data. The property market is still basis points QoQ and 1.7 ppts YoY highlighting strong employment and strong and sellers remain bullish. to end the quarter at 0.7%. Strong an increased labour participation rate. On the other hand, buyers do not pre-leasing activity and an apparent feel comfortable paying increasingly lack of secondary vacancy appears The Prime Minister, Shinzo Abe, is still higher asking prices while the to have helped push rents upwards in hot water due to political scandal, cycle continues to extend. Global despite initial concerns over a but has seen public opinion of his uncertainties such as possible trade large volume of supply this year, cabinet improve recently, with the wars remain and may somewhat and raises confi dence in a sound Nikkei’s June public opinion survey slow down trading volumes, although 2H/2018. reporting a 52% approval rating. In the outlook is still positive. June, the government pushed back the target date for achieving a primary GRAPH 9 budget balance from 2020 to 2025, Property transactions by sector, 2007 – 1H/2018 signalling continuous fi scal stimulus. Office Residential Retail Hospitality Logistics Other Overall loose policy from the Bank of Japan (BOJ) is likely to continue, 8 though the market suspects some 7 aspects could be reviewed. Belt- tightening by other central banks 6 should make Japanese assets look relatively attractive. In Q2/2018 the 5 BOJ maintained its 2.0% infl ation target but removed the 2019 4 deadline. The 10-year JGB yield has traded in a narrow range throughout yenTrillion 3 Q2/2018, implying some market confi dence. Throughout Q2/2018 2 the BOJ purchased 14.4 billion yen’s worth of J-REIT units, behind 1 schedule on its annual JPY90 billion target, suggesting purchases are likely 0 to pick up in 2H/2018.

After reaching an 11-year high of +26 in December 2017, the headline Source: RCA, Savills Research & Consultancy index of the Tankan business TABLE 9 confi dence survey has declined for two consecutive quarters, landing Major investment transactions, Q2/2018 at +21 as of June 2018, though Property Location Price Buyer Usage confi dence is still comfortably strong. Nishi-Shinjuku Prime More positively, JPY weakened in Square Shinjuku, Tokyo JPY34.8 bil/US$320 mil Invesco Offi ce J-REIT Offi ce Q2/2018, rising from 106.2 per USD Hitachi Solutions Hanwha Investment Securities at March end to 110.5 at the end of Tower B Shinagawa, Tokyo JPY31.0 bil/US$280 mil and Hana Financial Group Offi ce June, a depreciation of 3.9%. An Himonya Shopping Meguro, Tokyo JPY27.5 bil/US$250 mil Undisclosed domestic Retail exchange rate of JPY per USD below Centre company Yokohama i-Land 105 could start to weigh on corporate Tower Naka, Yokohama JPY22.1 bil/US$201 mil IBJ Leasing Offi ce profi ts so this quarter’s weakening has Cross Place been welcomed by businesses. The Hamamatsucho Minato, Tokyo JPY20.7 bil/US$180 mil Kenedix Offi ce J-REIT Offi ce TSE J-REIT index stood at 1,764.6 at Source: Nikkei Real Estate, RCA, Savills Research & Consultancy

12 Q2 2018

Macau Franco Liu Felicia Chen Managing Director Director Savills Macau & Southwest China Project & Development Consultancy +853 2878 0623 +86 756 322 6223 fl [email protected] [email protected]

Macau’s economy is expected to surge from March to May with fi rst- Public Works and Transport Bureau grow at its fastest pace yet, with time buyers accounting for 83.12% show 10,405 residential units and real GDP of Q1/2018 increasing by of market activity, compared with 304 commercial and offi ce units were 12.9% compared to Q1/2017. This 41.76% in the same period a year under construction and inspection was helped by increases in gaming earlier. This policy has led to prices in Q1/2018. This represents a 2.0% revenue and visitor spending. Gross rising due to increased demand from QoQ decline in residential units and Gaming Revenue (GGR) for Q1/2018 a younger demographic seeking a 2.8% QoQ decline in commercial was MOP76.75 billion, which units priced below MOP8 million. and offi ce units. Concurrently, increased by 5% quarter-on-quarter Prices have risen by approximately 20,707 residential units and 1,247 (QoQ) and 20% year-on year (YoY). 8% in the past few months. The commercial and offi ce units were in a January to May 2018 spending by average price achieved was design phase in Q1/2018, up 0.87% visitors (excluding gaming) reached MOP113,356 per sq m for the fi rst QoQ for residential and up 1.34% MOP21.8 billion, up 28% YoY. fi ve months in 2018, an increase of QoQ for commercial and offi ce. 13% YoY. Prices in the Macau residential Boosted by the surging economy, market are likely to keep rising for the in April the Macau Sun Tung Fong Residential construction activity remainder of 2018. Group completed the acquisition is mixed—fi gures from the Land, of Macau Landmark Hotel with MOP4.6 billion from Macau Legend Development Ltd. The property is approximately 80,000 sq m TABLE 10 with 439 rooms, a casino and a Macau residential property transactions by buyer and average shopping mall. It is the largest hotel price, Jun 2017 – May 2018 transaction project completed by a Other buyers Local non first-time buyer local enterprise in recent years. Local first-time buyer Average price (RHS) 2,500 140,000 Demand in the primary sales market has remained strong, especially 120,000 for off-plan unit sales in Taipa, 2,000 which have been picking up since 100,000 September 2017. Over 76% of MOP sq per m 1,500 total residential transactions within 80,000 the fi rst two months of 2018 were 60,000 located on the Macau Peninsula, 1,000 including 1,338 completed 40,000 development units and 202 off-plan No. of transactions units. There were 119 off-plan unit 500 transactions in Taipa with a high 20,000 average unit price of MOP167,202 0 0 per sq m.

In light of the government’s policy, launched in February, adjusting the Source: Savills Macau proportion of mortgage loans for fi rst-time homebuyers, residential TABLE 10 transactions have grown sharply, particularly in the low- to mid-range Major investment transactions, Q2/2018 home segment. Figures from the Property Location Price Buyer Usage Financial Services Bureau revealed Macau Macau Sun Tung Hotel/ Casino/ that fi rst-time buyers accounted for Hotel Macau Peninsula MOP4.6 bil/US$569 mil Fong Group Commercial 31.72% of activity in the fi rst two months of the year followed by a Source: Savills Macau

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

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

This quarter Malaysia witnessed deal came with Asian Pac Berhad’s Looking ahead, we expect limited its fi rst transition of governmental acquisition of development land in market activity until Q4/2018, when power since independence over 60 Petaling Jaya, for RM300 million. Both the 100-day review period is over and years ago. The long-ruling Barisan sites are planned for development investors have better visibility on the Nasional coalition has been replaced into mixed commercial projects. implications of changes undertaken by Pakatan Harapan, led by returning by the new administration. Longer- Prime Minister Tun Dr Mahathir In the industrial sector, Axis REIT term, we are hopeful of increased Mohamad. He left UMNO in 2015 in a continued its acquisition activity, with foreign investment, which is one bid to unseat Dato’ Sri Najib Razak, the purchase of a 5.7-acre freehold of the stated objectives of the whose administration was beset industrial premise in i-Park Indahpura, government. In the meantime, key with allegations of corruption. The Johor for RM38 million, and a 10-acre policy changes such as the recent new administration campaigned on freehold industrial premise in Shah easing of housing loan requirements a promise of 10 key changes in the Alam, Selangor for RM87 million. by Bank Negara Malaysia should fi rst 100 days, including restructuring Both assets will be leased back to serve to improve buyer sentiment. and reviews of: government offi ces, the current tenants with an average Government-linked Companies (GLC) starting net yield of 7%. and mega infrastructure projects. GRAPH 11 Since the election, the government announced the postponement of Malaysia's approved domestic and foreign investment in the the Kuala Lumpur-Singapore (KL- manufacturing and services sector, 2007 – 2018 SG) high-speed rail project and a potential review of the East Coast Manufacturing - Domestic investments Manufacturing - Foreign investments Rail Link, which was awarded on Services - Domestic investments Services - Foreign investments generous terms to a group of Chinese Total growth (RHS) companies. Another key change is 140 60% to the unpopular GST, which will be 49.8% replaced by a Sales and Services 120 40% Tax (SST) in September 2018. The 25.8% 24.1% 24.4% 18.1% government's anti-graft drive has led 100 14.5% 20% to the investigation and arrest of some 8.1% senior executives at government 0.0% 80 0% departments and GLCs, while others -10.6% -16.0% have stepped down from their posts.

RM billion 60 -20% As a result of these changes, -36.9% 40 -40% property investment activity during -49.1% Q2/2018 was subdued and total transaction value dropped 50% 20 -60% year-on-year (YoY) to RM1.6 billion. Nevertheless, there were a few key 0 -80% transactions during the period, led by 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CIMB Group’s acquisition of Wisma Source: Malaysian Investment Development Authority (MIDA) UOA Pantai from UOA REIT. CIMB acquired the building to support TABLE 11 its restructuring exercise as it will Major investment transactions, Q2/2018 vacate most of Menara Bumiputera- Commerce in the Kuala Lumpur CBD. Property Location Price Buyer Usage The six-storey building transacted Wisma UOA Pantai for RM120 million (RM764 per sq ft), Commercial Offi ce Taman Bukit Pantai, RM120.0 mil/US$29.57 mil CIMB Group Offi ce assisted by low occupancy rates Building Kuala Lumpur of 19% and UOA REIT’s need to 73 acre leasehold Kepong, RM416.4 mil/US$102.62 mil UEM Sunrise Bhd Development maximise returns to unitholders. development land Kuala Lumpur land 74 acre leasehold Petaling Jaya, RM300.0 mil/US$73.93 mil Asian Pac Holdings Development Developer land acquisitions remained development land Selangor Bhd land healthy, especially in the Greater KL 5.7 acre freehold I-Park Indahpura, RM38.7 mil/US$9.54 mil Axis REIT Industrial area, where UEM Sunrise Berhad industrial premise Johor 10 acre freehold Shah Alam, acquired a 73-acre development plot industrial premise Selangor RM87.0 mil/US$21.45 mil Axis REIT Industrial in Kepong from DBKL for RM416 million. A similar-sized 74-acre land Source: Company announcements, Savills Research & Consultancy

14 Q2 2018

New Zealand Thomas McAlister Jonathan Lyttle Managing Director Managing Director Savills Auckland Savills Christchurch +64 (0) 9 307 4536 +64 (0) 3 974 1188 [email protected] [email protected]

The New Zealand economy particularly in Auckland, as a result of 100% occupancy rate. The industrial expanded by 0.5% in the fi rst high levels of overseas net migration. property sector remains attractive quarter of 2018 driven by growth in In addition the unemployment to both investors and occupiers at a IT-related services, manufacturing rate, according to the Reserve time when the overall vacancy rate and a recovery in the agricultural Bank, fell to 4.4% (4.9% last year) in Auckland is likely to hit its lowest sector. Annual average GDP growth and is forecast to fall further as level in two years. stood at 2.7% while GDP per capita employment is expected to grow growth fell to 0.6%, the lowest rate in ahead of the labour force. Another notable deal outside seven years. The Auckland region’s Auckland during the quarter was economy is expected to continue In May 2018, Augusta Industrial 704 Halswell Junction Road, to grow at above average rates, Fund announced the acquisition of Christchurch. The warehouse and supported by strong migration, four industrial properties, three in showroom property erected on a 2.2 ongoing construction activity, Auckland and one in Wellington, for ha site occupied by a single tenant infrastructure development and a over NZD114 million. These properties was transacted at NZD18.6 million, robust tourism sector. have a total net leasable area of refl ecting a net yield of 6.6 %. approximately 70,000 sq m with a Annual infl ation dropped to 1.1% and is likely to remain stable in the near GRAPH 12 term. The lower than average long- term interest rates are continuing to CPI and GDP growth, Mar 2014 – Mar 2018 support economic growth, though they are projected to start rising from CPI GDP growth Q3/2019. 2.5% The New Zealand housing market remained strong as indicated by the 2.0% REINZ House Price Index (HPI) of June 18, which rose approximately 4% from June 2017. Over the 1.5% same period the Auckland market stabilised as the Auckland HPI only rose 1% year-on-year (YoY). 1.0% The widespread concerns about the impact of the changes to the Overseas Investment Act have been 0.5% clarifi ed whereby foreign investors are allowed to purchase in multi- unit housing developments such as 0.0% new apartments, or to develop new homes. Additionally new government led projects are being developed across New Zealand which aim to Source: Statistics New Zealand, Savills Research provide thousands of affordable homes with a particular emphasis on TABLE 12 Auckland and surrounding suburbs Major investment transactions, Q2/2018 where demand is greatest. Property Location Price Buyer Usage While GDP growth of the fi rst quarter 862-880 Great South Road Auckland NZD19 mil/US$13.3 mill Augusta Industrial Industrial was slightly lower than forecast the Fund Ltd outlook remains broadly positive. Augusta Industrial More construction activity occurred 20 Paisley Place Auckland NZD25.34 mil/US$17.8 mil Fund Ltd Industrial in Q2 than in Q1 with the rising 704 Halswell Junction Road Christchurch NZD18.6 mil/US$13 mil - Industrial number of new residential consents showing an increased percentage 128 Broadway Auckland CBD NZD9.1 mil/US$6.4 mil - Offi ce of apartments rather than houses. Strong population growth continues, Source: Savills Research & Consultancy

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

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

In Singapore, the real estate best showing since 2018. Some In the retail sector, there were also investment market continued its benchmark prices have been two notable bloc transactions strong momentum in the second achieved in popular developments sealed in Q2; the S$248 million sale quarter of 2018 with S$10.59 with strata offi ce units. For of Sembawang Shopping Centre to billion of sales, 5.3% higher than example, the 20th fl oor at Samsung a joint venture of Lian Beng Group the S$10.06 billion recorded last Hub on Church Street was sold for and Apricot Capital and SPH Reit’s quarter. S$3,550 per sq ft in April, while an S$63.2 million acquisition of The offi ce space with 20,828-sq ft in Rail Mall at Upper Bukit Timah. Investment sales of residential Springleaf Tower on Anson Road land and homes came in at S$6.88 changed hands for S$2,602 per sq billion of volume in Q2. Although ft in June. falling by 14.5% quarter-on-quarter (QoQ), this sector continued to GRAPH 13 account for the lion’s share of the total sales value, with 65.0% in Transaction volumes of investment sales by property type, Q1/2013 the reviewed quarter. Twenty-one – Q2/2018 private residential sites were sold in Q2, 16 of which were transacted Residential Commercial Hospitality Industrial Mixed Others 16 through collective sales. Together with the 18 sites sold in Q1, 14 developers have acquired a total of 34 sites, spending S$9.84 billion 12 in the collective sales market and 10 already surpassing the S$8.24 billion spent on 29 sites in the 8 whole of 2017. Although collective sales activity remained healthy, it S$ billion 6 was noted that developers have become more selective even as the 4 number of sites launched for sale 2 have increased. Consequently, the success rate for a collective sale 0 has fallen signifi cantly compared to 2016 and 2017. Developers’ buying interests have shifted to freehold sites in the high-end and mid-tier Source: Savills Research & Consultancy markets with a quantum of less than S$500 million. TABLE 13 Major investment transactions, Q2/2018 After a quiet fi rst quarter, Property Location Price Buyer Usage investment activity of commercial Stirling Land Holdings Pte Ltd, properties picked up with the Stirling View Pte Ltd (as Trustee of Commercial sector recording a total of S$1.57 Government land Holland Road S$1,213.3 mil/US$890.1 mil Commons SR Trust) and Stirling Property Pte Ltd (as Trustee of & residential billion in transaction value in Q2, Commons Commercial Trust) 286.3% higher than Q1’s S$410.0 UOL Venture Investments Pte Ltd, Government land Silat Avenue S$1,035.3 mil/US$759.5 mil UIC Homes Pte Ltd and Kheng Residential million. Two offi ce buildings in the Leong Company (Private) Limited CBD – Twenty Anson and MYP Tulip Garden Farrer Road S$906.9 mil/US$665.7 mil MCL Land and Yanlord Land Group Residential Plaza – were sold for S$516 million and S$247 million, respectively. Twenty Anson Anson Road S$516.0 mil/US$378.8 mil AEW Capital Management Offi ce In the meantime, the buying Dunearn Gardens Dunearn Road S$468.0 mil/US$343.5 mil EL Development Residential activity of strata-titled offi ce units has improved signifi cantly in the Source: URA, Savills Research & Consultancy

16 Q2 2018

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

In Q2/2018, total offi ce investment remaining part will be used by the GIC and CPPIB acquired the Kumho volumes were recorded at KRW3.8 DGB Group as their headquarters. Asiana HQ building located in the trillion, nearly triple the ten-year In October 2016, Capstone AMC (on CBD for KRW418 billion. GIC and average for the same period. Several behalf of Orion Partners) purchased CPPIB entered into a joint-venture deals over KRW200 billion were the building from DSME for KRW170 partnership to acquire the asset, and concluded in Seoul, including KDB Life billion before reselling it. each will own a 50% stake. Kumho Tower, SK Securities, Citi Center Tower, Asiana Group, the parent of Asiana DSME headquarters, and Kumho Hanwha AMC purchased Daechi 2 Airlines, sold the building to boost Asiana Group headquarters. In Pangyo, Building located in the GBD from liquidity. The seller will lease back ownership of Alphadom 6-3 and 6-4 Samsung Life for KRW190 billion the building for one year. DWS, the were transferred, with a value of slightly with backing from a core strategy asset manager, will convert the public over KRW1 trillion for the two deals. blind-pool fund from Hanhwa Life areas, such as auditoriums, etc., into Insurance, the parent company of leasable spaces. Transactions of core stabilized assets Hanhwa AMC. The major tenant of the showing around a 90% occupancy building is Samsung Life Insurance. rate were prevalent, resulting in higher unit prices for those GRAPH 14 sales; while a number of buildings Office transaction volumes, 2010 – Q2/2018 broke pricing records within their districts. Domestic blind funds were particularly active this quarter. Q1 Q2 Q3 Q4 10

KB AMC purchased KDB Life Tower 9 located near Seoul Station (CBD) for KRW423.3 billion with backing from a 8 KB affi liate’s blind fund. The KDB Life 7 Tower was owned by Consus AMC; KDB Life was a major investor and 6 occupier of the building. KDB Life sold their call option (option exercise 5 price: KRW380 billion) and cashed 4 in a premium of more than KRW40 KRW trillion billion. KDB Life also reinvested into 3 the new fund set by KB AMC that acquired the building. 2 1 KB AMC also purchased the SK Securities building for KRW295 0 billion. SK Securities is located next 2010 2011 2012 2013 2014 2015 2016 2017 2018 to KB Financial Group’s headquarters Source: Savills Korea in Yeouido and KB Finance Town, scheduled to deliver in 2020. The unit TABLE 14 price of the SK Securities Building Major investment transactions, Q2/2018 (KRW20.6 million/pyeong) was higher than that of Citi Plaza which Property Location Price Buyer Usage was the highest price in the YBD KDB Life Tower KRW422 bil/ USD391 mil KB AMC last year. The seller, KTB AMC, had purchased the Mirae Asset Building Kumho Asiana Group HQCBD KRW418 bil/ USD387 mil DWS previously and reconstructed it as the DSME KRW205 bil/ USD190 mil DGB AMC SK Securities building, completing it in 2017. The major tenants are SK SK Securities Building YBD KRW295 bil/ USD273 mil KB AMC Offi ce Securities and HPE Korea. Daechi 2 Building GBD KRW190 bil/ USD176 mil Hanwha AMC DGB AMC purchased the DSME Shinhan REITs Alphadom 6-4 KRW541 bil/ USD501 mil Management Building in the CBD for KRW205 Pangyo billion (KRW27.3 million/pyeong). Alphadom 6-3 KRW466 bil/ USD432 mil Mirae Asset AMC DSME lease 2/3 of the space, and the Source: Savills Research & Consultancy

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

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

Commercial property market are trying to diversify their business which includes an en bloc offi ce sentiment turned positive, with with a shift in focus from residential building in and a transaction volumes totaling NT$31.7 to commercial property. Stable rental department store in Tainan City, will billion in Q2/2018, up 237% quarter- income generated from commercial provide a yield of between 2.8% and on-quarter (QoQ) and 108% year-on- properties can moderate the impact of 3%, with the REIT’s size reaching year (YoY). This is the largest volume the residential market cycle, providing NT$3 billion. The other REIT receiving increase recorded in the past eight opportunities for landlords to enjoy FSC approval will be over NT$10 billion quarters. Strong export demand and asset appreciation through the sale of in size and includes a strata-title offi ce economic recovery have continued high-quality properties to insurance in Taipei City and a shopping mall in to drive corporate expansion. Three companies or the launch of REITs. Hsinchu County. It is diffi cult for REITs large deals concluded in the Neihu to fi nd properties providing attractive Technology Park. Taiwan’s REIT market turned active yields due to the lack of available with two new REITs ready to be stock in the market. As developers With available stock extremely limited launched, after three REITs were become more involved in commercial and priced highly in central areas, liquidated during 2011-14. O-Bank property projects, the REIT market will industrial offi ces in decentralised No.1 Real Estate Investment Trust, have more room for future growth. areas, such as Neihu Technology Park and Nankang Software Park, are GRAPH 15 attracting owner-occupiers looking for Signifi cant transactions by investor type, 2011 – 1H/2018 larger offi ce space or headquarters. However, traffi c congestion in decentralised areas remains a concern Retail Factory Industrial office Office Hotel Other for both investors and tenants. 140,000

Notably Formosa Plastic Group 120,000 acquired two-and-a-half en bloc industrial offi ce buildings in Neihu Technology Park for NT$18.7 billion, 100,000 the largest deal in Taiwan in the past three years. These buildings 80,000 will be the company’s corporate headquarters, while the original 60,000 headquarters building in the Dunhua NTD million N. district undergoes redevelopment. 40,000 A further two large deals located in the same area include Transcend Information, which purchased LIH 20,000 PAO’s headquarters in Neihu for NT$2.37 billion for offi ce expansion, 0 and Farglory Life Insurance, which 2011 2012 2013 2014 2015 2016 2017 1H/2018 disposed of en bloc buildings for Source: Savills Research & Consultancy NT$2.77 billion to a local investor with an estimated yield of 3%. TABLE 15 With more landlords considering offi ce Major investment transactions, Q2/2018 redevelopment, the stock of B and C Property Location Price Buyer Usage Grade offi ce space may decline in the short term. Forced tenant relocations Transcend Information, Industrial LIH PAO Neihu Headquarters Taipei City NT$2.37 bil/US$79 mil and the growth of demand due to Inc. offi ce the economic recovery are providing Industrial London Technology Building Taipei City NT$2.77 bil/US$92 mil Local investor strong momentum in the commercial offi ce leasing market. Pre-leasing for new A1, A2, A5 buildings in Formosa Plastics Industrial Taipei City NT$18.7 bil/US$623 mil offi ce projects has been performing T.CBD Group offi ce well, so some developers including Ruentex, Highwealth Construction Source: Savills Research & Consultancy Corp and King's Town Construction

18 Q2 2018

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

Second quarter investment activity The Eastern Economic Corridor (EEC) Thai Airways International and Airbus was dominated by Thailand’s gained further traction over Q2, with Commercial Aircraft announced a joint hospitality sector, with rising tourist the long-awaited EEC Act coming venture to develop a multi-billion-baht arrivals, coupled with healthy growth into effect in May. The Act provides maintenance, repair and overhaul in average daily hotel rates, driving a number of incentives for targeted (MRO) facility for wide-bodied aircraft demand. industries to establish operations at U-Tapao international airport, within within the zone, which spans 13,285 the EEC. The expansion of capacity Tourist arrivals rose by 6.3%, to a total square kilometers across Chonburi, and facilities at U-Tapao has been of 2.8 million, over the fi rst fi ve months Rayong and Chachoengsao provinces. a long-stated ambition of the Thai of the year, with Thailand’s hotels government and is considered a key seeing an increase in average daily Alibaba announced plans to invest infrastructure milestone for the zone’s rates of 5.3% year-on-year in May. THB10 billion (US$320.2 million) into wider commercialisation. a ‘digital hub’ within the ECC, set to SET-listed Singha Estate acquired break ground within the year and with an international portfolio of six hotels operations expected to commence from Honolulu-based hotel chain and over 2019. management company, Outrigger. The portfolio included a 252-key resort GRAPH 16 in Phuket and a 52-key resort in Koh Samui, acquired in June for US$101.1 Thailand hotel average occupancy and average daily rate, million (THB3.63 billion) and US$20.9 Jan 2015 – May 2018 million (THB965 million) respectively. Occupancy rate (LHS) Average daily rate (RHS) Q2 further witnessed Grande Asset’s 90 1,900 acquisition of the 726-key Royal Orchid 80 1,800 Sheraton Hotel & Towers in Bangkok for US$115.3 million (THB3.84 billion). 70 1,700 Grande Asset acquired the hotel through the purchase of all shares 60 1,600 held within Royal Orchid Hotel 50 1,500 THB (Thailand) PLC (ROH), with prominent % previous shareholders including Thai 40 1,400 Airways International and Starwood Hotels (Thailand). 30 1,300 20 1,200 SET-listed Pace Developments (Pace) announced the sale of THB14 billion 10 1,100 (US$420.8 million) worth of assets within their MahaNakhon project to 0 1,000 duty-free operator King Power Group. The sale included the 154-key Edition Hotel, the building’s observation deck, retail cube and a land component. Source: Ministry of Tourism and Sports, Savills Research & Consultancy The 209-unit freehold condominium component, branded as Ritz Carlton TABLE 16 Residences Bangkok, was excluded Major investment transactions, Q2/2018 from the deal. Pace stated intentions to use a portion of sales proceeds Property Location Price Buyer Usage to reacquire project shares from Goldman Sachs Investment Holdings 252-key Outrigger Laguna Phuket Beach Resort Phuket THB3.37 bil/US$101.13 mil Singha Estate Hotel (Asia) and Apollo Asia Sprint, a unit of Apollo Global Management LLC. 52-key Outrigger Koh Samui Beach Resort Koh Samui THB695 mil/US$20.87 mil Singha Estate Hotel

While less active than over Q1, listed 726-key Royal Orchid developers continued to explore Sheraton Hotel & Towers Bangkok THB3.84 bil/US$115.27 mil Grande Asset Hotel central Bangkok land opportunities, c.1,980 sqm Land Plot, Development with SET-listed residential developer Sukhumvit 34 Bangkok THB355 mil/US$10.65 mil Sansiri PLC land Sansiri PLC purchasing a 1,980 sq m development site on Sukhumivit 34. Source: Company announcements, Savills Research & Consultancy

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

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

In the fi rst six months of 2018, project, and was in the process of key project, Waterpoint township in Vietnam’s GDP expanded 7.08% acquiring the remaining 0.8% stake Long An province in June. Covering year-on-year, marking the highest from Berjaya. 355 ha, Waterpoint consists of fi rst-half growth since 2011. The real townhouses, villas, high-rise estate sector continued to receive The residential sector was still the apartments, a mixed-use complex, robust interest from foreign investors focus of local players. Xuan Mai a hospital, education and sports by ranking fi rst in the contribution Corporation successfully acquired facilities. to FDI registration with US$4.971 Eco-Green Saigon, a 14-ha billion, of which the Smart city project in District 7, Ho Chi Minh The second quarter of 2018 also recorded the notable IPO of project in Hanoi accounted for the City. Nam Long Group continued their cooperation with Japanese Vinhomes JSC, the residential majority. This mega project covering investors, Hankyu Hanshin property development unit of 271.82 ha, is jointly invested by Properties Corporation and Nishi Vingroup, drawing strong interest four local investors and Japan’s Nippon Railroad to develop Akari from both domestic and foreign Sumitomo Corporation. The fi rst City, a 8.8-ha residential project investors, including GIC who phase is planned to commence in in Binh Tan District, Ho Chi Minh acquired a 5.74% stake as Vinhomes’ the third quarter of this year and City. Nam Long also kicked off their cornerstone investor. is to be developed by a Sumitomo – BRG Group joint venture. Once completed, the Smart city is GRAPH 17 expected to be one of the most Ho Chi Minh apartment market performance, 2013 – 1H/2018 advanced smart cities in Southeast Asia with a modern transport system. Sold units (LHS) Absorption rate (RHS) 50 80

The property market in Ho Chi 70 Minh City saw strong interest 40 from major players this quarter. 60 Frasers Property entered into a conditional purchase agreement 50 to acquire 75% of the issued share 30 capital of Phu An Khang Real 40 % Estate, which owns a mixed-use 20 development plot in District 2, for 30 circa US$18 million in April. In early Thousand units June, Malaysia’s Berjaya Land 20 Berhad announced their proposed 10 disposal of the Vietnam Financial 10 Center project to Vinhomes and its affi liates for approximately US$39 0 0 million, following Vinhomes’ capital 2013 2014 2015 2016 2017 1H/2018 contribution of nearly US$88 million Source: Savills Research & Consultancy to the project back in March. Upon completion of the transaction, TABLE 17 Vinhomes and its affi liate will fully own the 6.6-ha project in District Major investment transactions, Q2/2018 10 for mix-used development. In Property Location Price Buyer Usage addition, Vinhomes and its affi liates Vinhomes JSC & Vietnam Financial District 10, Approx. Mixed-use also injected approximately US$522 Centre (32.5% interest) Ho Chi Minh City Can Gio Tourist City VND904.4 bil/US$39 mil Corporation development million as capital contributions A development site District 2, Approx. Frasers Property Mixed-use and accordingly owned an 99.2% (75% interest) Ho Chi Minh City VND417.3 bil/US$18 mil development interest in the 925-ha Vietnam International University Town Source: Savills Research & Consultancy

20 Q2 2018

AAustraliaustralia

◄ Brandon Park S.C. Grand Plaza (50%) ▼ Wheelers Hill, VIC Browns Plains, QLD AU$135M/US$101.3M AU$215M/US$161.3M in April in April

◄ 117 Clarence Street Sydney, NSW AU$153M/US$114.8M Westpac Place ▲ in June Sydney, NSW AU$860M/US$635.4M in June Pacific Epping (50%) ► Epping, VIC AU$402M/US$301.5M in June

BBeijing/Shanghaieijing/Shanghai

Qibao Powerlong Building T2 ► Minhang, Shanghai RMB452M/US$68.3M in Q2

▲InterContinental Beijing Financial

Buildings 2, 3, 4, 7, 8 of 8 Street Hotel (59.5% shares)

Xinhua Culture Mansion 1 Xicheng district, Beijing ▲ Dongcheng district, Beijing RMB667M/US$99.55M 0 RMB240M/US$35.82M in Q2 2

in Q2 Shanghai Plaza (90%) ▲ 2 Huangpu, Shanghai ▼ Hongqiao World Centre

RMB2.5B/US$377.8M (4/F-10/F) Q in May Fudu Plaza ▲ Qingpu, Shanghai Huangpu, Shanghai RMB403M/US$60.9M s ◄ Bay Valley B7 RMB700M/US$105.8M in April n Yangpu, Shanghai

in June o

RMB726M/US$109.7M i in April t c

608 Xikang Road Project ► a

Jing'an, Shanghai s

RMB260M/US$39.3M n in Q2 a r t

◄ Hongkou Bailian Shopping Mall

▲ Jinkaili Square r Hongkou, Shanghai Huangpu, Shanghai RMB465M/US$70.3M o RMB430M/US$65.0M j in June in Q2 a Major transactions Q2 2018 Q2 transactions M Major

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

HHongong Kong/MacauKong/Macau

◄ Butterfl y on Waterfront Hotel Sheung Wan, Hong Kong HK$810M/US$103M in April

OCTA Tower ► Kowloon Bay, Hong Kong HK$7.5B/US$956M in May Centro Industrial De Macau ▲ Macau HK$150M/US$19M ◄ Cityplaza Three & Cityplaza Four in Q2 Quarry Bay, Hong Kong HK$15B/US$1.91B in June

JJapanapan

◄ Nishi-Shinjuku Prime Square Himonya Shopping Centre ► Shinjuku, Tokyo Meguro, Tokyo JPY34.8B/US$320M JPY27.5B/US$250M in May in May

Hitachi Solutions Tower B ► ◄ Cross Place Hamamatsucho Shinagawa, Tokyo Minato, Tokyo JPY31B/US$280M JPY20.7B/US$180M in June in May

MMalaysiaalaysia

◄ Wisma OUA Pantai Kuala Lumpur RM120M/US$30M in June

22 Q2 2018

SSingaporeingapore

Chancery Court ► ◄ Dunearn Gardens Dunearn Road Dunearn Road S$401.8M/US$294.9M S$468.0M/US$343.5M in May in April

Twenty Anson ▼ Anson Road S$516.0M/US$378.8M in June Tulip Garden ► Farrer Road S$906.9M/US$665.7M in April

SSouthouth KoreaKorea

▼ DSME KDB Life Tower ► ◄ ACE Tower CBD CBD CBD KRW205.4B/US$190.4M KRW422.3B/US$391.5M KRW199.8B/US$185.2M in April in June in May

◄ Hyundai Card Capital HQ Kumho Asiana HQ ► 8

YBD CBD 1 KRW177.5B/US$164.6M KRW418B/US$387.6M 0 in May in May 2

2 Q

TTaiwanaiwan s n o i

◄ Inventec Daxi Factory T.CBD ▼ t

Taoyuan City Taipei City c

NT$1.38B/US$46M NT$18.7B/US$623M a in June in May s n London Technology Building ► a

Taipei City r

NT$2.77B/US$92M t

in April r o j a Major transactions Q2 2018 Q2 transactions M Major

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

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

ASIA Korea AUSTRALASIA Crystal Lee China Email: [email protected] Australia Raymond Lee Tel: +822 2124 4114 Paul Craig Email: [email protected] 13/F, Seoul Finance Center, 84 Taepyungro-1- Email: [email protected] Tel: +852 2842 4518 Tel: +61 2 8215 8888 ga, Chung-gu, Seoul 100-768, Korea Level 25, 1 Farrer Place, Sydney, Australia Wing Chu Malaysia Email: [email protected] Christopher Boyd Offices throughout Sydney, Parramatta, Tel: +8621 6391 6689 Email: [email protected] Canberra, Melbourne, Notting Hill, Adelaide, Unit 2501-13, Two ICC, Tel: +60 3 2092 5955 Perth, Brisbane, Gold Coast and Sunshine No. 288 South Shanxi Road, Level 9, Menara Milenium, Jalan Damanlela, Bukit Coast Shanghai 200031, PRC Damansara, 50490 Kuala Lumpur, Malaysia New Zealand Steve Chen With 2 branches throughout Malaysia Thomas McAlister Email: [email protected] Phillipines Email: [email protected] Tel: +8621 6391 6688 KMC MAG Group Unit 2501-13, Two ICC, Tel: +64 9 951 5340 No. 288 South Shanxi Road, Michael McCullough Level 6, 41 Shortland Street, Auckland, Shanghai 200031, PRC Email: [email protected] NZ 1010, New Zealand Tel: +632 403 5519 With offices in Chengdu, Chongqing, Dalian, 8/F Sun Life Centre, 5th Ave, NORTH AMERICA Guangzhou, Hangzhou, Nanjing, Shenyang, Bonifacio Global City 1634, Philippines Shenzhen, Tianjin, Xiamen, Xi'an and Zhuhai Savills Studley Singapore Woody Heller Hong Kong SAR Christopher Marriott Email: [email protected] Raymond Lee Email: [email protected] Tel: +1 212 326 1000 Email: [email protected] Tel: +65 6415 7582 399 Park Avenue, 11th Floor, New York, Tel: +852 2842 4518 30 Cecil Street, #20-03 Prudential Tower, NY 10022 23/F, Two Exchange Square, Central, Hong Kong Singapore 049712

With offices in Tsim Sha Tsui and Kowloon Tong Taiwan LATIN AMERICA Ricky Huang Borja Sierra Email: [email protected] Macau SAR Email: [email protected] Franco Liu Tel: +886 2 8789 5828 Tel: +44 20 7409 9937 Email: [email protected] 21F, Cathay Landmark, Finsbury Circus House, 15 Finsbury Circus, Tel: +853 2878 0623 No. 68, Sec. 5, Zhongxiao E. Road, London EC2M 7EB, United Kingdom Suite 1309-10, 13/F Macau Landmark, Xinyi District, Taipei City 110, Taiwan 555 Avenida da Amizade, Macau With an office in Taichung UNITED KINGDOM & EUROPE Indonesia Thailand Phillip Garmon-Jones PT Savills Consultants Indonesia Robert Collins Email: [email protected] Jeffrey Hong Email: [email protected] Tel: +852 2842 4252 Email: [email protected] Tel: +66 2 636 0300 23/F Two Exchange Square, Central, Hong Kong Tel: +62 21 293 293 80 26/F, Abdulrahim Place, 990 Rama IV Road, Panin Tower - Senayan City, 16th floor, Unit C, Jl. Bangkok 10500, Thailand Offices throughout the United Kingdom, Asia Afrika Lot. 19, Jakarta 10270, Indonesia Viet Nam Belgium, France, Germany, Hungary, Italy, Netherlands, Poland, Spain and Sweden Japan Neil MacGregor Email: [email protected] Associate offices in Austria, Greece, Norway, Christian Mancini Portugal, Russia, Turkey and South Africa Email: [email protected] Tel: +84 8 3823 9205 Tel: +81 3 6777 5150 18/F, Ruby Tower, 81-85 Ham Nghi Street, 15/F Yurakucho ITOCiA, 2-7-1 Yurakucho, District 1, Ho Chi Minh City, Viet Nam Chiyoda-ku, Tokyo 100-0006, Japan With an office in Ha Noi

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