Savills World Research Asia Pacifi c Asia Pacifi c Investment Quarterly Q4 2016 Australia China (Northern) - Beijing/Tianjin China (Western) - Chengdu China (Southern) - Guangzhou/Shenzhen China (Eastern) - Shanghai Hong Kong | Japan | Macau Malaysia | New Zealand | Philippines Singapore | South Korea Taiwan | Viet Nam Major Transactions Image: Beijing HIGHLIGHTS In Japan, tight cap rates controls on money leaving transactions concluded. In and favourable refi nancing China are likely to result Viet Nam, continued strong conditions continue to put in more onshore activity growth in the broader downward pressure on for the foreseeable future. economy is translating into transaction volumes. The In Australia, investors' an impressive performance US election generated focus has shifted from across all property sectors. another tailwind for short-term gain to long- In Singapore, the fl ood of Abenomics, leading to a term value as rapidly money chasing a limited softer yen and stronger growing cities supported pool of investible assets stock performance. This by government spending has relegated yields to a may be a boon for the are expected to provide secondary priority. In Korea, property sector. China’s plenty of opportunities. In 2016 investment volumes investment market has had Hong Kong, the investment reached a record high due a record year as the fi nal market was surprisingly to active inbound investment quarter recorded a fl urry of buoyant in the last quarter from global investors. big ticket deals, particularly of 2016 with a number of in Shanghai. Stricter capital signifi cant locally-driven Simon Smith, Savills Research savills.com.hk/research 01 Asia Pacifi c | Investment Quarterly An introduction to Savills Source: Savills Research & Consultancy Savills is a leading global real Viet Nam, with associate offi ces gives clients access to real estate estate service provider listed on in Cambodia and the Philippines. expertise of the highest calibre. the London Stock Exchange. The Savills provides a comprehensive We are regarded as an innovative- company, established in 1855, has a range of advisory and professional thinking organisation supported by rich heritage with unrivalled growth. property services to developers, excellent negotiating skills. Savills The company now has over 700 owners, tenants and investors. chooses to focus on a defi ned set of offi ces and associates throughout These include consultancy services, clients, offering a premium service the Americas, Europe, Asia Pacifi c, facilities management, space to organisations and individuals Africa and the Middle East. planning, corporate real estate with whom we share a common services, property management, goal. Savills is synonymous with a In Asia Pacifi c, Savills has 66 leasing, valuation and sales in all key high-quality service offering and a regional offi ces comprising over segments of commercial, residential, premium brand, taking a long-term 25,000 staff. Asia Pacifi c markets industrial, retail, investment and hotel view of real estate and investing in include Australia, China, Hong Kong, property. strategic relationships. India, Indonesia, Japan, Korea, Macau, Malaysia, New Zealand, A unique combination of sector Taiwan, Thailand, Singapore and knowledge and entrepreneurial fl air 02 Q4 2016 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 Philippines 16 Singapore 17 South Korea 18 Taiwan 19 Viet Nam 20 Major transactions Q4 2016 21 savills.com.hk/research 03 Asia Pacifi c | Investment Quarterly Australia Paul Craig Tony Crabb CEO National Head +61 2 8215 8888 Research [email protected] +61 3 8686 8012 [email protected] Australian cities are set to transform fi ve CBDs – Sydney CBD, Parramatta, Coast. On top of all this there is likely themselves over coming decades as Penrith, Wollongong and Newcastle. to be over 5 million people living on the population grows from a current Melbourne too will likely be a city of the east coast of Australia outside the 24 million people to over 35 million. 10 million people with CBDs including locations mentioned above, either on a Australia is already an urbanized nation the existing one and also CBDs in full or part time basis. with over 80% of the population living places like Camberwell, Box Hill, in urban communities. As the cities in Ringwood, Dandenong, and Footscray Now, more than ever, the property Australia grow, property opportunities and satellite cities in Geelong, Bendigo industry needs to come together are expected to be abundant. The and Ballarat. Brisbane, at 5 or 6 million to provide the people with challenges of growth are constant and people, will likely integrate more closely viable solutions to their property to be expected. Australia has three with the Gold Coast and the Sunshine requirements. Opportunity abounds. tiers of government which presents great challenges to the property industry. As well as some property GRAPH 1 taxation the Federal government Government spending in Australia by sector, 2015 control immigration which is one of the major sources of demand for property use. The Federal government Commonwealth States also have control over a great deal of Public services, funding including infrastructure, tertiary 5% education and health. The State Defence, 6% governments also have a substantial Public Housing, Remaining, order & infl uence as they have greater control 12% Remaining, 5% 16% safety, of planning, education, and health, 10% roads, and rail and property taxation. Education, 8% The third tier of government – local Transport – has control over planning and the Other purposes, & comms, provision of community services 10% inc. GST, 19% Education, including parks, gardens, retail Health, 16% Social 24% amenity, garbage collection and security & the collection of local rates charged welfare, against property. 8% The private sector works within the Social security & Health, confi nes set by these three tiers of welfare, 33% 26% government and is often frustrated when the three tiers do not work with Source: Australian Bureau of Statistics each other. This is most keenly seen in areas of taxation, infrastructure TABLE 1 spending and planning. Major investment transactions, Oct–Dec 2016 A further challenge exists in Property Location Price Buyer Usage the changing nature of work as Melbourne, GPT Wholesale Offi ce technology continues its relentless 100 Queen Street Victoria AU$275.0 mil/US$206.25 mil Fund Offi ce path of disruption, advancement and St Collins Lane Melbourne, AU$247.0 mil/US$185.25 mil JP Morgan Asset Retail adaptation. Property of all types will Victoria Management most likely need to be more adaptable Abacus Property Group 324 Queen Street Brisbane, AU$132.0 mil/US$99.0 mil (50%) & Investec Australia Offi ce and resilient and private and public Queensland Property Fund (50%) property interests will need to work 307 Queen Street Brisbane, AU$153.0 mil/US$114.75 mil LaSalle Investment Offi ce more closely together to achieve Queensland Management better outcomes for the people they Brisbane, GPT Wholesale Offi ce 111 Eagle Street (33%) Queensland AU$284.2 mil/US$213.15 mil Fund Offi ce represent. Carillon City Shopping Perth, Centre West Australia AU$140.0 mil/US$105.0 mil DEXUS Property Group Retail/offi ce Sydney will likely be a city of 10 million 39 Martin Place Sydney, New AU$332.0 mil/US$249.0 mil Transport for NSW Offi ce people but is unlikely to look like it South Wales does today. Our thesis is there will be Source: Savills Research & Consultancy 04 Q4 2016 China (Northern) - Beijing Eason Yan Jack Xiong Director Head of PDC, Director Investment, Savills Northern China Research +8610 5925 2099 +86 10 5925 2042 [email protected] [email protected] Institutional investors remained active hand land resources via auctions. Shanghai Exchange-listed in purchasing offi ce developments. As a result, the market has recently Citychamp Dartong (冠城大通) Limited supply in the fi rst-hand seen more investors look to acquire acquired a 20% and 40% equity share land market increased demand for land assets on the second-hand in two project companies for a total of secondary land resources. market through a variety of fi nancing RMB1.3 billion. The project companies structures and M&A agreements. both own a share in a residential The en-bloc investment market Deals of interest included: development in the Haidian district remained robust during Q4/2016, which has an unsold area of 258,000 with eight deals transacted for an Minmetals International Trust (五 sq m. aggregate consideration of RMB10.8 矿国际信托) invested RMB813 million billion. The total consideration for for a 49.9% equity share of a project Lu Cheng Yang Guang (绿城阳 the investment market reached company co-founded by COFCO 光) purchased a 94% equity share RMB36.4 billion in 2016, marking Land and Tianheng Real Estate. The of China Investment Development the third consecutive year of strong project company will work to jointly Company for a total consideration performance. develop a residential and commercial of RMB2.7 billion. The deal sees the plot owned by Tianheng RE in the purchaser acquire the majority share Institutional investors from the Fangshan district. The project offers of the investment fi rm’s seven projects insurance sector maintained a strong a developable fl oor area over 160,000 in Northern China, four of which are appetite for assets, in particular sq m. located in Beijing. for offi ce developments due to their relatively higher gross yield GRAPH 2 expectations. Notable transactions En-bloc investment volumes by property type, 2007–Q4/2016 during the period included: Office Retail Apartment Service apartment Hotel Complex Huaxia Insurance purchased 50 the World Commerce Center, an offi ce building in Tongzhou, for a 45 total consideration of approximately RMB1.5 billion and an average 40 transaction price of RMB44,000 per 35 sq m.