Savills World Research Asia Pacifi c

Asia Pacifi c Investment Quarterly Q4 2016

Australia (Northern) - Beijing/Tianjin China (Western) - Chengdu China (Southern) - / China (Eastern) - Shanghai | Japan | Malaysia | New Zealand | Philippines Singapore | South Korea | 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. 30 Dong Li Gang, an offi ce project consisting of three towers located 25 outside the East Fourth Ring Road,

RMB billion 20 was sold to a domestic investment company. The deal recorded a total 15 consideration of RMB520 million and an average transaction price of 10 RMB40,000 per sq m. 5

D&J China, a business park 0 developer backed by US private 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 equity giant Warburg Pincus, Source: Savills Research & Consultancy acquired the Ronsin Technology * Historical data in 2014-2016 has been updated. Center in Wangjing for a lump sum TABLE 2 of RMB5.1 billion. The deal sees the developer take on all equity and Major investment transactions, Oct–Dec 2016 debt responsibilities for the large- Property Location Price Buyer Usage scale project, which boasts six offi ce World Commerce Tongzhou RMB1.52 bil/US$223 mil Huaxia Insurance Offi ce buildings and two retail properties. Center (世界侨商中心 ) The average transaction price Dong Li Center Chaoyang RMB520 mil/US$75 mil A domestic investment Industrial registered at RMB43,300 per sq m. (建工动力港中心 ) company Ronsin Technology Chaoyang RMB5.10 bil/US$735 mil D&J China Industrial Center (融新科技中心 ) (Equity + debt + other fee) (Warburg Pincus) Limited land supply in 2016 has seen Riverside Palace Haidian RMB1.30 bil/US$187 mil China National Nuclear Offi ce it become increasingly diffi cult for (京投琨御府 ) Corporation investors to gain access to fi rst- 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]

New restrictions on land purchases well as public facilities. The land plot in response to expectations of good came into effect in Tianjin in Q4/2016, recorded the highest accommodation returns following the continued including the setting of a maximum value in Q4/2016, surpassing appreciation of prices and the local price for land plots with high price transactions in the central Heping government’s promise to enforce expectations before auction, to district. The Nankai district land new measures, including stricter prevent bidders from pushing market has stood out in 2016, with due diligence on capital sources of premiums to record highs. land prices rising steadily in the area land buyers and restrictions on land throughout the year. auctions, to encourage more stable The quarter saw an increase in land price growth. Developers have demonstrated a supply by 27% quarter-on-quarter growing appetite for land in Tianjin (QoQ) and 68% year-on-year (YoY) to 3.23 million sq m. However, with a “circuit breaker mechanism” now in place, certain land plots were GRAPH 3 temporarily taken off the market, Land supply and transaction volumes by area, Q1/2011–Q4/2016 leading to a decrease in total land transactions to 1.58 million sq m, City core supply Suburb supply Fringe supply down 42% QoQ and 16% YoY, Binhai supply City core transactions Suburb transactions Fringe transactions Binhai transactions respectively. 10 9 Fringe areas witnessed the greatest level of activity, with supply and 8 transaction volume accounting for 7 46.7% and 50.2% of the city-wide 6 total, respectively. The city centre remained the smallest contributor, 5 due to land scarcity, recording just 4

2.7% of total transactions. m million sq 3

Tianjin Longfor acquired one 2 residential-zoned land plot, totalling 1 932,000 sq m, located in the Jinnan 0 district, for a total consideration Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 of RMB1.56 billion and an 2011 2012 2013 2014 2015 2016 accommodation value of RMB11,100 Source: Savills Research & Consultancy per sq m. With the development of surrounding infrastructure, more TABLE 3 affordable pricing, and the launch Major investment transactions, Oct–Dec 2016 of Haihe Education Park, the Jinnan district has become an attractive Property Location Price Buyer Usage location for fi rst-time home buyers. Mixed-use Plot 2016-03 (JXQ) Xiqing RMB7.45 bil/US1.07 bil Tianjin Wanhe Real Estate development site The highly sought-after land plot Mixed-use Plot 2016-134 (JNS) Nankai RMB4.74 bil/US$681.7 mil Gemdale Group development 2016-134 (JNS) in the Nankai district site was purchased by an affi liate of Mixed-use Gemdale Group for RMB4.74 billion, Plot 2016-04 (JN) Jinnan RMB1.55 bil/US$222.9 mil Longfor development site with an accommodation value of Mixed-use approximately RMB49,000 per sq Plot 2013-120(JJ) Jinghai RMB1.24 bil/US$178.3 mil Beijing Hongkun Group development m, and a premium of 89.6%. The site Commercial 42,000-sq m land plot is zoned for Plot 2016-028 (JJ) Ji County RMB359 mil/US$51.6 mil Lianfa Group development mixed-use development, including site residential, retail and education, as Source: Savills Research & Consultancy

06 Q4 2016

China (Western) - Chengdu Eric Wo Dave Law Managing Director Director Savills Western China Project & Development Consultancy +86 28 8658 7828 +86 28 8665 7375 [email protected] [email protected]

During 2016, the residential sales to the city’s commercial real estate Currently, the city’s real estate market saw fi rst-hand average sales market. industry is going through a prices increase dramatically over transition and adjustment period. the year. This led to a strict policy It must be noted that transacted Mergers and acquisitions between implementation by the government properties are concentrated in companies are expected to become to limit second home purchases, the southern core business areas, increasingly frequent, with large which resulted in the cooling down showing that good quality properties real estate companies buying out of the market. Although under located in easily accessible areas cash-strapped small- to medium- increasing pressure, the commercial with strong amenities are still sized local developers, picking real estate market also continues to attracting the attention of investors. up development opportunities grow, with en-bloc investments and Emerging markets are also attracting and assets in the process. This transactions at a record high. demand from investors looking for developer consolidation is likely to more affordable projects offering accelerate and become a trend in As of December 2016, the city’s higher yields and strong future 2017. real estate market saw 23 business potential. or project equity transfer cases, a signifi cant increase from 2015. The majority of cases were large TABLE 4 companies from outside the Sichuan province, who are acquiring local Major en-bloc transactions, 2016 companies with weaker fi nancial capabilities but a large land reserve. Property name Location Property type Construction area Seller Buyer For example, Evergrande acquired (sq m) Rising Group's 2,400 acres of new Yintai Center Financial City Offi ce 80,000 Yintai PingAn Life land in the Xindu district, and Poly acquired Fusen’s land in western Yintai Center T2 Financial City Offi ce 80,000 Yintai Huaxia Life Chengdu. This is also refl ective of Capital Land the increasingly competitive, and Galleria South Station Area Shopping mall Offi ce: 53,619 MGPA Commercial therefore concentrated, industry, Trust with fewer opportunities for small- to TEDA Times Center Mianyang – Building 3 Financial City Offi ce 20,000 TEDA Bank medium-sized local businesses. Offi ce building Chengdu China Railway Trust Financial City and commercial ~50,000 Jia Yu TBC In 2016, commercial en-bloc Building Investment podium Co., Ltd. transactions and investments also Chengdu Shenzhen increased, with six transactions Tairan Global Times Tairan Times Wongtee Center Financial City Offi ce 52,875 Industrial Co Real Estate recorded by the end of the year. Ltd Group Although the commercial real estate market has seen a decline overall, Source: Savills Research & Consultancyy investors are still optimistic about the long-term development of the TABLE 5 city. This can be attributed to the Major investment transactions, Oct–Dec 2016 establishment of the free trade zone (FTZ), combined with the city Property Location Price Buyer Usage being a major component of the LQ11(252/211) Longquanyi district RMB690 mil/US$99.34 mil BRC Mixed-use government’s policy to develop JN09(21/252):2016- key cities in central China and 037 Jinniu district RMB293.52 mil/US$42.26 mil Poly Mixed-use the local government’s efforts to JN10(252):2016-038 Jinniu district RMB945.81 mil/US$136.17 mil Changhong Mixed-use promote asset securitisation, which Development is expected to add a new dynamic Source: Savills Research & Consultancy

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

China (Southern) - Guangzhou Woody Lam James Macdonald Managing Director Head of Research Savills Southern China China +86 20 3892 7168 +86 21 6391 6688 [email protected] [email protected]

Despite the government’s attempt to all of which achieved high premium conglomerate bought the property, cool the property market by placing rates ranging from 45% to 180%. on which it plans to construct Wanda new restrictions on house buyers, real Poly Real Estate Group conducted Resort Town, for RMB4.1 billion, or an estate companies and the land auction one of the largest transactions, with a average of RMB 4607.9 per sq m. market, the Guangzhou land market purchase of two residential plots (GFA recorded a strong performance in 218,999 sq m) and one residential & As competition in the land market the last quarter of 2016, which saw commercial plot (GFA 134,674 sq m) continues to intensify, developers are premium rates increase. in the Guanggang New Town area of adapting their strategies to lower the the for a total value of costs of expanding their stocks, such Guangzhou witnessed a huge increase RMB10.4 billion. as acquiring assets through company in land transaction volumes in Q4/2016, acquisitions. To spread their risks, with 16 more deals completed Wanda also acquired a residential and many developers are also increasingly compared with the previous quarter. commercial plot in the looking to acquire land through joint Land transaction deals of both with a land area of 504,178 sq m. The ventures. commercial and residential land types increased this quarter by eight and 12, respectively. In addition, the transaction GRAPH 4 value of the land auction market hit a Total land transaction prices and transaction volumes by land record high, with a total consideration of RMB44.4 billion, 4.35 times type, Q1/2014–Q4/2016 greater than Q3/2016. The majority Commercial (LHS) Commercial & residential (LHS) of transactions reached record-high Residential (LHS) Industry (LHS) premium rates, even in regional areas. Others (LHS) Total transaction prices (RHS) Buyers were predominantly state- 1,200 50 owned enterprises and large 45 1,000 developers. For example, Vanke won a 40 residential land plot in the Zengcheng

35 Billion RMB district with an average transaction 800 unit price of RMB12,089 per sq m 30 at a premium rate of 174%, while 600 25 MCC purchased a residential and commercial land plot in the Haizhu 20 400 district for an average transaction unit m Thousand sq 15 price of RMB42,573 per sq m (including 10 free construction of affordable housing) 200 with a premium rate of 45%. Vanke also 5 acquired six commercial land plots in 0 0

the for a total price of Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 RMB3.8 billion, the largest transaction 2014 2015 2016 of Q4/2016, with plans to develop them into the Guangzhou Southern Station Source: Savills Research transportation area. Vanke already had TABLE 6 an initial investment in the area where it plans to construct an integrated Major investment transactions, Oct–Dec 2016 community comprising shopping malls, apartments, offi ce buildings and hotels. Property Location Price Buyer Usage The World Villa Baiyun district RMB1.37 bil/US$198.4 mil Huayuan Property Residential Following the growth of the residential Poly Finance Tal To sales market, competition for Wun (West Tower) - CPIC Commercial residential land plots has become Guangzhou AF040219 Liwan district RMB2.50 bil/US$359.9 mil Poly Group Residential increasingly fi erce, especially in Residential & downtown areas, as nearly every plot Guangzhou AF040206 Liwan district RMB3.90 bil/US$561.9 mil Poly Group commercial to enter the market attracted more Guangzhou AF040224 Liwan district RMB3.99 bil/US$574.5 mil Poly Group Residential than 10 bidders. The Guangzhou land Guangzhou AH050406, Residential & auction market saw 15 residential AH050408 RMB3.06 bil/US$441.7 mil MCC commercial deals closed in Q4/2016, with a total transaction price of RMB24 billion, Source: Savills Research

08 Q4 2016

China (Southern) - Shenzhen Woody Lam James Macdonald Managing Director Head of Research Savills Southern China China +86 20 3892 7168 +86 21 6391 6688 [email protected] [email protected]

The Qianhai Shenzhen-Hong This will see Grade A offi ce stock in policies afforded to companies Kong Modern Service Industry Nanshan, the greater area Qianhai registered in the area. These policies Cooperation Zone (Qianhai), is part of, surpass popular Futian, are expected to attract numerous established on 26 August 2010, is an the current home of prime offi ce companies to register in Qianhai, emerging business centre attracting stock. The majority of Grade A which in turn will result in strong national interest. offi ce projects in Qianhai will be demand for the area’s offi ce market, headquarters of big corporations, resulting in Qianhai becoming an Qianhai is expected to become a predominantly due to the favourable important business hub in future. trendsetter in terms of innovating new systems and regulations, accumulating modern service industries and leading structural GRAPH 5 reform. To ensure the success of Qianhai, the government has Main development areas in Qianhai, offi ce supply and transacted released a series of policies in an land areas attempt to attract corporations and Qianhai office supply talent to settle in the area. Some of 2019 and the policies include tax deductions, after special privileges for talent, convenient medical and education 2018 systems, and well-appointed public Guiwan Comprehensive 2017 amenities. Business Area

Qianhai will focus on the 2016 development of the following industries: fi nance; modern logistics; 2015 headquarter economics; technology 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 & professional services; information sq m & media services; and commercial Total land areas transacted in Qianhai services. According to the master Hong Kong 2016 Modern Industrial plan of Qianhai, these key industries Area will be developed separately in dedicated areas where land supply 2015 Mawan Modern is already currently focused: the Logistics Industrial Area Guiwan Comprehensive Business 2014 Area; Hong Kong Modern Industrial Area; and the Mawan Modern 2013 Logistics Industrial Area. Qianhai Cooperation Zone 0 50,000 100,000 150,000 200,000 When land was fi rst released in sq m Qinhai in 2013, supply quickly Source: Shenzhen Land & Real Estate Exchange Centre peaked. This then dipped sharply in 2015, and has now started to show TABLE 7 signs of recovery. The fi rst offi ce supply was launched in 2015, and Major investment transactions, Oct–Dec 2016 supply levels have continued to Property Location Price Buyer Usage increase since then. According to GL Land DY04-01, the master plan, there will ultimately LW Land DY02-04, Nanshan Qianhai RMB978.0 mil/US$141.9 mil New World Dev, China Offi ce and retail be over 16 million sq m of offi ce ER Land DY04-04, Merchant Shekou SD Land DY02-02 space in Qianhai, accounting for Futian SCP Plaza & Futian & Bao`an 62% of the total GFA. Bao`an SCP Plaza district RMB3.8 bil/US$559.4 mil China Vanke Retail 2 Lan Jing Zhong Lu Pingshan district RMB658.0 mil/US$97.1 mil Pingshan City Const Inv Industrial The infl ux of offi ce supply will be launched onto the market gradually. Source: Savills Research

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

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

Investors and property owners are investors to generate large returns accommodate changes in needs. The increasingly turning to new strategies, on short-term holdings, they do bring government has shown acceptance such as project conversions or new risks. When working within a tight of this fact, allowing R&D operations repurposing underutilised space with timeframe, unexpected delays may to take place on premises previously shared offi ce concepts, to increase the lead to higher costs for investors down designated as industrial, and now value of their projects. the road. For example, recent delays with the conversion of commercial during the fi t-out of a recently opened properties to residential lease In November 2016, KaiLong co-working centre is estimated to have properties. More freedom should be announced it had sold The Konnect, cost the operator nearly RMB5 million, provided to owners to change the the former three-star Laurel Hotel, as they were forced to compensate usage of existing properties as long as for more than RMB500 million. The signed tenants after pushing their top-up charges are paid and housing Warburg Pincus-invested fund bought launch date back a week. codes adhered to. Owners will the building in March 2015 and ultimately need to assess the best and converted the 11,000 sq m, 12-storey As cities develop, the use of the highest use of an asset for the leading building into a boutique offi ce. After properties will have to evolve to market conditions. nearly a year of renovation, 10,000 sq m of the project was leased to the world’s largest co-working space GRAPH 6 operator, New York-based WeWork. Shanghai investment volumes, Q1/2011–Q4/2016 Buoyed by the recent increase in demand for co-working space, KaiLong was able to sell the property 45,000 for a marked up price of RMB50,000 per sq m to a Hong Kong-listed fund. 40,000

Hong Kong’s Pamfl eet Investment also 35,000 acquired an older hotel development in Q4/2016, when it signed a joint 30,000 venture deal with Deson Development 25,000 to convert the Shanghai Parkview South Station Hotel into a co-living 20,000 centre. The venture, of which Pamfl eet RMB million purchased a 70 percent stake for 15,000 RMB57.4 million, aims to convert the 7,318 sq m hotel into 80 co-working- 10,000 inspired units as venture capital begins 5,000 to fi nd its way into this niche market. 0 With retailers scaling back expansion Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 plans, and even closing landmark stores, some landlords are looking 11 12 13 14 15 16 to fi ll vacant space by signing on Source: Shanghai Ststistics Bureau, Savills Research co-working tenants. Supported by the recent announcement by top TABLE 8 developers such as Longfor and Major investment transactions, Oct–Dec 2016 Singapore’s CapitaLand to introduce shared offi ce spaces to their projects Property Location Price Buyer Usage in Beijing and Wuhan, Shanghai- based operators and landlords are Century Link Pudong RMB20.0 bil/US$2.9 bil ARA Offi ce/retail rushing to sign their own agreements. Star Bund T1 Hongkou RMB5.3 bil/US$764 mil State Development & Offi ce Co-working company NakedHub Investment Corporation and international shared offi ce brand Jiaxing Shengshi BFC (50% stake) Huangpu RMB5.3 bil/US$764 mil Shenzhou Offi ce/retail Regus are currently in negotiations with landlords in a race to open new Central Plaza Huangpu RMB2.4 bil/US$346 mil V Capital Offi ce/retail co-working-retail facilities in the near Parkside Plaza Putuo RMB2.2 bil/US$317 mil COFCO Retail future. Rich Gate (Retail podium) Huangpu RMB1.4 bil/US$202 mil CSI Properties Limited Retail While project conversions have proven to be a successful method for Source: Savills Research & Consultancy

10 Q4 2016

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

The investment market was assets in 2016 to ride on rising offi ce with more luxury brands retreating, surprisingly buoyant in the last rents as well as resilient local retail but this trend may be close to quarter of 2016 with a number of spending, with prime retail falling completion with rents likely to bottom signifi cant transactions concluded; out of favour due to shrinking tourist out in the second half of this year. while purchasers spending and receding rents and Veteran retail investors will soon dominated headlines in previous prices. Early signs of a slowing in be looking at the prime street shop months, it was local investors who the rate of decline in the retail sector sector for bargains and we may see prevailed in the latest spending have been noted, however, with an upturn in the fortune of the street spree for en-bloc properties: Swire’s retail sales declining at a slower shop investment market as early as Grade A offi ce under construction in pace towards the end of last year. A the second half of 2017 if a few more Bay was sold to a locally rebalancing of the trade mix on prime prominent deals can be concluded. listed company for HK$6.5 billion, streets is likely to continue in 2017 while all fi ve shopping centres tendered for sale by the Link REIT were disposed of successfully for a combined HK$3.6 billion, four of GRAPH 7 which were bought by local investors. Savills property price indices, Q1/2006–Q4/2016

Mainland purchasers and developers Grade A office Street shop have been more focused on the 1,000 land market of late, evident by the HNA Group picking up three 900 residential land plots in Kai Tak for 800 a total consideration of HK$19.8 billion, and a Goldin / Huarong 700 consortium winning the Ho Man Tin 600 Station tender for a total investment amount of HK$13 billion, after their 500 counterparts bought en-bloc offi ces 400 in Hong Kong earlier last year. While Q1/2003=100 further restrictions on capital outfl ow 300 from China may dissuade wealthy 200 individuals from investing overseas 100 this year, Mainland developers and corporate investors are expected 0

to continue to invest in the local 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 property market (both completed 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 buildings and land sites), given Source: Savills Research & Consultancy their more diversifi ed sources of fi nancing, as well as their more TABLE 9 legitimate channels of capital for such investments. We are also Major investment transactions, Oct–Dec 2016 seeing an increasing tendency for Property Location Price Buyer Usage non-banking Mainland institutions, 19 Wang Chiu Road Kowloon Bay HK$6.53 bil/US$842 mil Lucky Melody Ltd Offi ce such as insurance companies, 1 Horizon Drive & 44-50 asset management fi rms as well as Chung Hom Kok Road Stanley HK$1.80 bil/US$232 mil TBC Residential developers to make their mark on J Plus Boutique Hotel Bay HK$1.70 bil/US$219 mil TBC Hotel the local market and this looks set to 16A-16D Shouson Hill continue in 2017. Road Southside HK$1.30 bil/US$168 mil Joy More Inv Ltd Residential Cheung Hong (retail Tsing Yi HK$1.15 bil/US$148 mil TBC Retail Local investors were more focused portion + 709 carparks) on prime offi ce and suburban retail 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 growth for Q3/2016 Real estate cap rates are tight and Inbound visitors to Japan exceeded edged 0.1 percentage points (ppts) asset prices are high in Japan. 24 million people in 2016, over 20% higher to 0.3% quarter-on-quarter Low borrowing costs are still growth vs 2015. Although growth has (QoQ) for an annualised rate of 1.3%. resulting in net yields favourable decelerated from the impressive 47.1% Sound private consumption and net to most regional peers, but annual increase in 2015, Japan will exports contributed to this positive fewer transactions took place in mark its fi fth consecutive year of over growth. Core infl ation was down 4Q/2016 as buyers have grown 20% growth despite a stronger yen. 0.4% in November, despite a 0.1% more cautious and unwilling to Additionally, the Japanese parliament increase in core-core CPI (all items meet sellers’ asking prices. J-REIT passed a bill legalising casinos less food and energy). As YoY energy property acquisitions declined in December, paving the way for price drops have largely stopped by 28.5% QoQ to 213 billion yen, development of Integrated Resorts. in 2016, defl ationary pressure on with signifi cant declines seen Although it is likely that casinos Japan’s CPI should relax in 2017. In in logistics and hotel sectors. will start operating in 2022 at the its latest Economic Prospects report Additionally, attractive refi nancing is earliest, the new legislation should published this January, the World causing sellers to think twice about be a tremendous tailwind for Japan’s Bank increased its Japanese GDP unloading assets. already booming inbound tourism. growth forecasts for 2017 and 2018 from 0.5% to 0.9% and 0.7% to 0.8% respectively, citing slightly higher GRAPH 8 infl ation expectations and modest wage increases. J-REIT property acquisitions by sector, Q1/2011–Q4/2016

The surprise US election result led to Office Residential Retail Hotel Logistics Other No. of transactions (RHS) stock rallies and a strengthening of 900 140 the US$ in November as expectations 800 for large corporate tax cuts and public 120 spending increased in America. The 700 yen rapidly depreciated to weaker 100 transactions of No. than 118 JPY per US dollar, the 600 weakest the yen had been over the 500 80 prior three quarters, and a signifi cant tailwind for the Japanese economy. 400 60 JPY billion Encouraged by improved exports and 300 40 factory output, the Bank of Japan 200 (BOJ) revised its economic outlook 20 upward after its last policy meeting 100 in 2016, noting that the country's economy continued its moderate 0 0 recovery trend. However, the BOJ Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 suggested it would continue using 2011 2012 2013 2014 2015 2016 its powerful monetary policy tools to maintain the policy rate at negative Source: Japan REIT, Savills Research & Consultancy 0.1% and the ten-year Japanese government bond (JGB) yield near TABLE 10 zero. Major investment transactions, Oct–Dec 2016

The BOJ’s J-REIT purchases totalled Property Location Price Buyer Usage JPY88.7 billion in 2016, roughly Tradepia Odaiba Minato Ward, Tokyo JPY30.0 bil/US$290 mil Ichigo Group Holdings Offi ce achieving its annual goal of JPY90 billion. As of the end of December, Kawasaki Tech Center Kawasaki, Kanagawa JPY23.1 bil/US$210 mil MIRAI Corporation Offi ce 359 billion yen worth of J-REIT shares Shiodome Building Minato Ward, Tokyo JPY20.9 bil/US$194 mil Activia Properties Offi ce has been purchased by the BOJ since (additional 10%) 2010. The TSE J-REIT index rallied Hyatt Regency Osaka Osaka, Osaka JPY16.0 bil/US$150 mil Hoshino Resorts REIT Hotel after the US presidential election and ended at 1,856 in December or about Kinshicho Prime Tower Koto Ward, Tokyo JPY15.1 bil/US$130 mil Invesco Offi ce J-REIT Offi ce/retail 1.6% up from its September close of 1,826. Source: J-REIT disclosures, Real Capital Analytics, Savills Research & Consultancy

12 Q4 2016

Macau Franco Liu Ron Mak Managing Director Senior Manager Savills Macau & Southwest China Research & Consultancy +853 2878 0623 +852 2842 4287 fl [email protected] [email protected]

Macau’s mid-to high-end residential , the developer is raising asking Although the appreciation of the market has rebounded strongly since prices gradually. local currency and the slowdown the start of 2016 on the back of a of China’s economy is likely to add domestic economic recovery. Mid-to- Macau’s economy is expected to uncertainty to the gaming, retail and high end residential prices increased contract by 4.7% in 2016 then grow tourism sector, we expect residential by 26% throughout the year to a at a rate of 0.2% to 2.6% per annum prices to rise alongside a mild growth level similar to 2014 after a 23% from 2017 to 2021, according to in gaming revenue and higher sales crash in 2015. Meanwhile residential the International Monetary Fund. activity in 2017. transaction volumes in the fi rst 11 months of 2016 increased by 32.1% from 9,013 to 11,907. As foreign investors and Chinese buyers are GRAPH 9 discouraged from entering the market Mid-to-high end residential price index, Q1/2005–Q4/2016 by a 10 percent punitive tax, as well as a newly-imposed restriction on the use of UnionPay credit cards for payment, domestic demand has 700 been the major driver. According to offi cial fi gures, 97.8% of property 600 buyers originated from Macau in the fi rst 3 quarters of 2016. 500

The YoY change in monthly gross 400 gaming revenue accelerated since turning positive from August 2016 to 300

14.3% in November 2016 due partly 100 Q1/2005 = to a low base of comparison. The 200 improvement in the gaming sector drove economic growth from -7.0% 100 YoY in Q2 2016 to +4.0% in Q3/2016. Meanwhile domestic consumption 0

and unemployment have remained 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 Q3 Q4 stable. Median employment income 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 in Q3/2016 stood at a record level of MOP15,000, and the unemployment Source: DSCE, Savills Research & Consultancy rate at a low level of 1.9%. Although a TABLE 11 decline in gaming revenue and GDP in 2016 as a whole are expected, Recent mid- to high-end residential transactions over HK$20 the recent pickup in the economy million, Oct–Dec 2016 has already boosted enquiries from Property Unit Size (sq ft gross) Location Price owner-occupiers. However, there High-fl oor unit A, is still an undersupply of fl ats in the Villa de Mer Block 1 5,431 HK$57.0 mil/US$7.35 mil short term as the number of fl ats Villa de Mer High-fl oor unit B, 5,049 Macau Peninsula HK$45.0 mil/US$5.81 mil completed in the fi rst 11 months of Block 4 High-fl oor unit B, 2016 was only 792, the lowest level One Oasis Block 8 2,622 Coloane HK$25.7 mil/US$3.32 mil since 2008. Mid-fl oor unit S, One Grantai Block 5 2,996 Taipa HK$24.5 mil/US$3.16 mil High-fl oor unit A, Developers are now more One Central Residences Block 2 2,299 Macau Peninsula HK$23.0 mil/US$2.97 mil conservative on pricing with new One Central Residences Low-fl oor unit B, 2,267 Macau Peninsula HK$21.1 mil/US$2.72 mil launches now asking for prices closer Block 2 to the secondary market than in 2014. Low-fl oor unit N, Lake View Tower Block 1 2,233 Macau Peninsula HK$21.0 mil/US$2.71 mil In light of a positive market response High-fl oor unit F, to new projects such as Sky Oasis One Central Residences Block 1 1,841 Macau Peninsula HK$20.3 mil/US$2.61 mil by yoo in and Nova Grand in Source: Savills Research & Consultancy

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

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

Q4/2016 saw 14 major transactions Dredging Berhad acquiring a parcel and the acquisition of Boustead Sedili with a total investment value of of freehold residential land in Batu Estate by Johor Corporation in Kota RM2.46 billion, up 28.1% from RM1.92 Ferringhi for RM25 million. Tinggi (for RM74 million). billion in Q3/2016. The deals included three asset investments and 11 land In Johor, Sime Darby Berhad acquired This increase in transactional activity deals, suggesting that property two agricultural land parcels, known was welcome, as sentiment has been players still have an appetite for as Lian Seng Estate in Batu Pahat and otherwise poor in 2016. As we enter expanding their land bank. Talisman Estate in Kluang, from two 2017, concerns around the economy subsidiaries of I&P Group Berhad, and domestic politics have not yet Notably, Kumpulan Wang Persaraan for RM77.6 million and RM29 million abated, and it is likely that land (KWAP) acquired Menara AIA respectively. Other major transactions transactions will continue to dominate, CapSquare in Kuala Lumpur for included the acquisition of two as cash rich developers stockpile RM416 million, accounting for 17% of parcels of freehold land by Scientex landbanks as and when attractive the total investment value in Q4/2016. Berhad in Kulai (for RM123 million) deals emerge. Mass Rapid Transit Corp acquired a one-acre prime land site at Jalan Kia Peng from Malaysian Resources Corporation Berhad (MRCB) for GRAPH 10 RM180 million (RM4,132 per sq ft), Total value of property transactions per subsector in Greater for the construction of MRT Line Kuala Lumpur, 2008–Q3/2016 2. Meanwhile, Selangor Dredging Berhad disposed of 16 parcels of Development land Agricultural Industrial Commercial Residential freehold residential land in Kuala 80 Lumpur to Bukit Selesa Development Sdn Bhd for an aggregate sum of 70 RM71 million. Boustead Berhad purchased a parcel of leasehold 60 commercial land in Bukit Jalil for RM172 million (RM369 per sq ft). 50

In Selangor, MRCB, through its 40 subsidiary, acquired a 7.8-acre parcel of land with development MYR billion 30 potential in Petaling Jaya for RM24 million (RM70 per sq ft), which was 20 being occupied by the National Film Development Corporation Malaysia. 10 Petaling Garden Sdn Bhd acquired an 805-acre parcel of agricultural 0 land known as Glengowrie Estates, 2008 2009 2010 2011 2012 2013 2014 2015 Q1-Q3/ Q1-Q3/ owned by Sime Darby, in the quickly- 2015 2016 developing town of Semenyih, for a Source: NAPIC total sum of RM428.8 million (RM12 * In this chart, Greater Kuala Lumpur consists of the State of the Selangor and the Federal Territories of Kuala Lumpur and Putrajaya. per sq ft), representing 17% of the TABLE 12 total investment value in Q4/2016. Another parcel of freehold land with Major investment transactions, Oct–Dec 2016 development potential in Semenyih, totalling approximately 250 acres, was Property Location Price Buyer Usage acquired by Seacera Group Berhad 5-pieces of adjoining Seberang Perai, for RM165.1 million (RM15 per sq ft). freehold land Pulau Pinang RM620.1 mil/US$138.82 mil SP Setia berhad Industrial

2-contiguous parcels with Semenyih, RM428.8 mil/US$95.99 mil Petaling Garden Sdn Agriculture SP Setia expanded its land bank in development potential Selangor Bhd Penang by acquiring fi ve parcels of Menara AIA Cap Square Kuala Lumpur RM416.1 mil/US$93.20 mil KWAP Commercial adjoining freehold land measuring 1,675 acres in Seberang Perai for Jalan Kia Peng, 1-piece of leasehold land Kuala Lumpur RM180.0 mil/US$40.32 mil MRT Corp Commercial RM620 million, which represented Bukit Jalil, 25% of the total investment value A parcel of leasehold land Kuala Lumpur RM172.8 mil/US$38.70 mil Boustead Berhad Commercial during the review quarter. Another major transaction involved Selangor Source: Company announcements, Savills Research & Consultancy

14 Q4 2016

New Zealand Paddy Callesen Harold McCracken Managing Director Associate Director Commercial Sales Commercial Sales +64 (0) 27 271 1558 +64 (0) 27 445 1201 [email protected] [email protected]

Foreign Investment, Tourism and Tourism is one of our largest earners in the country. A combination of Immigration continue to stimulate the of overseas income; factors is driving the region’s strong New Zealand economy and property growth. Growth in both domestic sector. Population growth has placed The momentum in construction and overseas tourism is benefi ting the supply pressure on property markets activity, particularly in the Auckland retail and hospitality sectors. Strong in high growth locations within the residential market, the strengthening population growth of 2.8% per annum country with the greatest effect being of earthquake prone commercial is driving uplift in both commercial and in Auckland. buildings around the country and the residential activity which in turn also remediation of leaky buildings are supports above average retail sales Low vacancy rates, rising rentals, continuing to have a positive impact growth. In the short term, barring strong occupier demand and falling on the sector. However, the rate of external shocks [ of which there are yield are the trends characterising the growth from this sector is expected to many on the horizon], it is hard to see market leading from mid to end 2016 . slow due to capacity constraints. a change in local economic conditions which will underpin the local property Investors chasing yield is being The Auckland region continues to be markets. driven by historically low interest one of the fastest growing economies rates although the market is now of the belief that we have seen the end to this downward trend. Some GRAPH 11 uncertainty has crept into investors Net migration gain and residential house price growth, Sep 1991– thinking about accepting current low Sep 2016 yields. New Zealand - net migration Auckland - net migration Auckland - house prices (RHS) New Zealand’s economy grew faster 100,000 50% than market expectations in the Annual % change in house prices September 2016 quarter, increasing 80,000 40% by 1.1%. 60,000 30% Growth in economic activity was boosted by growth in the business 40,000 20% services, transport, manufacturing and construction sectors from rapidly 20,000 10% growing population. 0 0% Factors that are likely to support migration Annual net economic growth includes: -20,000 -10%

Infl ation is continuing to trend -40,000 -20% below market expectation but market consensus is that we are at the bottom of monetary policy settings. Source: Statistics New Zealand, Corelogic Lower than average interest rates are supporting growth in economic TABLE 13 activity; Major investment transactions, Oct–Dec 2016 Stronger population growth, particularly in Auckland as a result Property Location Price Buyer Usage Offi ce/ of increased positive overseas net 31 Highbrook Drive Auckland NZD1.82 mil/US$1.32 mill Private migration, is expected to continue to industrial support growth. 27 Customs Street Auckland NZD3.33 mil/US$2.42 mil Private Offi ce

Strong growth in the number 111 Carlton Gore Road Auckland NZD22.25 mil/US$16.17 mil Private Offi ce of overseas visitors, up 10% over 600-662 Great South Road Auckland NZD210.0 mil/US$152.67 mil Private Offi ce the last year to 3.2 million visitors is supporting growth across the country. Source: Savills Research & Consultancy

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

Philippines Michael McCullough Antton Nordberg Managing Director Head of Research KMC Savills, Inc KMC Savills, Inc +632 217 1730 +632 403 5519 [email protected] [email protected]

Uncertainty in the global and local Emerging Trends in Real Estate completions and the vacancy rate landscape together with the US report, Manila ranks third as an still moves in single digits. Fed’s rate hike triggered some investment prospect in the region. capital outfl ows from the Philippines Evidence of this has been witnessed Looking ahead, GDP expansion toward the end of 2016. This in the asset market where yields should sustain its momentum in switched the momentum in the local in established CBDs have started 2017 with a potential boost from stock exchange which recorded to compress, adding an attractive government spending. The new a decline of 15.6% from its peak capital appreciation component administration has laid out plans to in July and made Philippine peso into the total returns equation. In spend around PHP860.7 billion in depreciate by 5.3% in 2016 – making addition, despite the depreciation of infrastructure which is forecasted to it one of the worst performing the peso, offi ce take-up is expected account for 5.4% of GDP. This will currencies in Asia. to be sustained as rental and labour support the property markets and costs have become more affordable potentially open up new investment Same sentiment was also witnessed for BPOs. Currently, demand opportunities beyond the traditional in the property sector where the remains strong with a number of offi ce and residential sectors. volumes continued the year’s trend offi ce space pre-committed to their and stayed low also in Q4/2016. The only notable direct transaction in the last quarter of the year was GRAPH 12 when A. Soriano Corporation sold PSE index and foreign exchange rate, 2016 its 2,336-sq m prime lot in Cebu Business Park to Skyrise Realty and Development Corporation for PSE index FOREX US$8.0 million. 8,500 51

Another noteworthy capital market 8,000 50 arrangement was the announcement of joint venture partnership between

Century Properties and Mitsubishi 7,500 49 US$/PHP Corporation wherein a 26-hectare property in Cavite will be developed into a large-scale residential project 7,000 47 in affordable segment. The deal Index point illustrates the high prospects in this segment and how it has started to 6,500 46 attract both local and international investor interest. The large local developers have started to include 6,000 45 affordable housing into their strategy to the massive housing backlog in the country. This backlog is caused by the rising Source: PSE and BSP middle class who have benefi ted from an expanding economy TABLE 14 fuelled by overseas remittances Major investment transactions, Oct–Dec 2016 and employment in the outsourcing sector. Property Location Price Buyer Usage

Tanza Century Cavite - Mitsubishi Residential Furthermore, Manila maintained its Mitsubishi JV status as an appealing investment Skyrise lot in Cebu Skyrise Realty and Business Park Cebu PHP397.1 mil/US$8.0 mil Development Corporation Development site destination, particularly in the offi ce sector. According to the ULI Source: KMC Savills Research, Savills Research & Consultancy

16 Q4 2016

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 the last quarter of 2016, the residential, hotel and/or serviced despite the gloomy economic outlook, residential segment raked in a total of apartment, was awarded to Wealthy the investment sales market also came S$2.38 billion in investment sales, up Link Pte Ltd, a subsidiary of IOI in above expectations. The economic 7.0% quarter-on-quarter (QoQ). The Properties, for almost S$2.57 billion negativities were overlooked because growth is mainly attributable to City (S$1,689 per sq ft per plot ratio). This of scarcity of sites in a prime CBD Developments Limited’s divestment of was the highest bid achieved for a location. In addition, developers could the freehold residential project Nouvel white site in the GLS programme to also be more optimistic about the 18 to Green 18 Pte Ltd (S$965.4 date. The site comes nearly 10 years market in 2021/2022 when the project million), and the collective sales of after the last white sites in the Marina is completed. With this tender, the Raintree Gardens to a joint venture Bay area – from which Asia Square mixed property segment therefore of UOL Group and United Industrial came about – were sold in 2007. The accounted for the highest market Corporation (S$334.2 million). The bid price was above expectations and share of Q4’s total investment sales at latter is the third collective sale in this this singular deal was the reason why, 32.3%. year.

Investment sales of commercial GRAPH 13 properties totalled S$1.95 billion in Q4/2016, representing 24.5% Transaction volumes of investment sales by property type, of the total investment sales. On a Q1/2011–Q4/2016 quarterly basis, sales rose 42.3% from Q3’s S$1.37 billion. For the Residential Commercial Hospitality Industrial Mixed Others 14 quarter in review, the transactions were all from the private sector. Some notable deals included CLSA Capital 12 Partners’ acquisition of a 99-year leasehold, 35-storey offi ce building 10 at Robinson Road, Robinson 77, (S$530.8 million), the sale of a 50% 8 stake in Capital Square at Church Street to ARA Asset Management 6 (S$475.5 million) and Perennial Real S$ billion Estate Holdings and Singapore Press 4 Holdings’ purchase of a 60% stake in Chinatown Point retail mall along with 2 four strata-titled offi ce units above the mall (S$265.5 million). 0

The industrial segment closed the fi nal quarter with S$1.05 billion worth of transactions. This made up 13.1% of Source: Savills Research & Consultancy total investment sales for that quarter. When measured against the third TABLE 15 quarter’s number of S$1.24 billion, the investment sales value dropped Major investment transactions, Oct–Dec 2016 15.7% QoQ. Industrial REITs were Property Location Price Buyer Usage active in the last three months. For example, the biggest deal was done Government land Central Boulevard S$2.57 bil/US$1.82 bil Wealthy Link Pte Ltd White by Ascendas Real Estate Investment Nouvel 18 Anderson Road S$965.4 mil/US$682.63 mil Green 18 Pte Ltd Residential Trust (A-REIT), who bought DSO National Laboratories buildings Robinson 77 Robinson Road S$530.8 mil/US$375.33 mil CLSA Capital Partners Commercial and DNV GL Technology Centre at Capital Square Science Park for S$420.0 million. (50% stake) Church Street S$475.5 mil/US$336.23 mil ARA Commercial DSO National Laboratories On 11 November 2016, the Central buildings and DNV GL Science Park Drive S$420.0 mil/US$296.97 mil A-REIT Industrial Boulevard white site, with parameters Technology Centre for predominantly offi ce and complementary uses such as retail, Source: URA, Savills Research & Consultancy

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

South Korea K.D. Jeon JoAnn Hong CEO Director Savills Korea Research & Consultancy +82 2 2124 4101 +82 2 2124 4182 [email protected] [email protected]

2016 saw three records set: in of the incoming U.S. administration incentive The Q4/2016 nominal cap transaction volumes; unit sale price; and the interest rate increase by rate is estimated to be in the high- and foreign investors’ contribution. the Federal Reserve. Despite such four percent to fi ve percent range. Total investment volumes for offi ce, volatile external circumstances, However, the real cap rate with rent- retail, logistics and hotels reached investment in Korean commercial free period and TI is expected to be over KRW12 trillion in 2016, with offi ce properties continued to expand. in the low- to mid-four percent range. transaction volumes of KRW7.9 trillion As of the end of December, the yield also a new high. In the offi ce sector, The demand from international of fi ve-year government bonds rose Center Point Gwanghwamun in the investors for value-add properties beyond 1.8%, but the spread is still CBD set a new record for a sale price aimed at lowering vacancies, along above 200 basis points (bps) (220 per 3.3sqm. The proportion of foreign with the new offi ce buildings planned to 270 bps). In general, the LTV rate investment increased and accounted to be put on the market, is expected in the Korean investment market is for about half of the offi ce investment to lead to continued provision 55%. market. of rent-free periods and tenant

In Q4/2016, offi ce transaction volumes over KRW3.3 trillion included two prime offi ce buildings, IFC and Capital Tower, which represented 76% of the GRAPH 14 entire transaction amount. Office transaction volumes, 2010–2016

IFC is the fi rst real estate asset that Q1 Q2 Q3 Q4 Brookfi eld Asset Management has 9 acquired in Korea. The transaction was executed through a merger 8 between the SPCs of AIG (seller) and Brookfi eld Asset Management. 7 The total purchase amount of IFC Building I, II, III and Conrad Hotel & 6 retail mall is estimated to be KRW2.5 5 trillion. 4 Blackstone purchased the Capital KRW trillion Tower for KRW473 billion. The deal 3 was concluded in the form of a share transaction. 2

Foreign investors have been 1 continuing to acquire value-add 0 investments. Orion Partners acquired 2010 2011 2012 2013 2014 2015 2016 the offi ce building of Daewoo Shipbuilding & Marine Engineering in Source: Savills Research & Consultancy the CBD for KRW170 billion. They have a value-add strategy for the property TABLE 16 through conversion of the lower fl oors Major investment transactions, Oct–Dec 2016 (1/F to 3/F) into a retail section. Property Location Price Buyer Usage

The BOK benchmark interest rate IFC (Complex) YBD KRW2.5 tri/US$2.16 bil Brookfi eld Asset Management Complex remained at 1.25%, the lowest ever Capital Tower GBD KRW473.0 bil/US$408.6 mil Mirae Asset Global Investments Offi ce level. However, the yield of fi ve-year (Blackstone Group) government bonds and bank loan DSME CBD KRW170.0 bil/US$146.8 mil Capstone Asset Management Offi ce interest rates surged amid growing (Orion Partners) uncertainties caused by the policies Source: Savills Research & Consultancy

18 Q4 2016

Taiwan Cynthia Chu Erin Ting Managing Director Associate Director Savills Taiwan Research +886 2 8789 5828 +886 2 8789 5828 [email protected] [email protected]

The implementation of the new to NT$10.3 billion, and the price fell the correction period, they tend to capital gains tax at the beginning 8% on average. rent instead of buying premises. of 2016, coupled with the president election in January 2016 and the The shrinkage in offi ce transactions In the coming year, the bargaining exposure of liquefaction potential showed a pattern of divergence power of buyers will be reinforced maps, has made the real estate from the leasing market. According after a year of correction. We market more fragile. The total to our survey, the total take-up in have seen several deals recording amount of commercial property the Grade A offi ce market reached a lower-than-average price. In transactions over NT$300 million 20,000 ping (approximate 66,000 sq addition, the holding tax, such as in 2016 decreased by 40% year- m) in 2016, recording a 50% growth the land tax and building tax, could on-year (YoY) to NT$64.6 billion, compared with last year. The healthy possibly increase and will cause with only 46 deals recorded. leasing market implies that the a downward pressure on prices If the volume of Taiwanese demand in the offi ce market from as buyers tend to transfer that to insurance companies buying end-users is fi rm, however, during sellers. overseas properties is taken into consideration (who acquired NT$57.1 billion worth of commercial GRAPH 15 properties in UK and Europe in 2015 Signifi cant transactions, Q1/2009–Q4/2016 but stopped investing this year), the property investment momentum in Taiwan actually dropped by 61% Q4 Q3 Q2 Q1 YoY. 140,000

End-users dominated the property market, taking up 50% 120,000 of total transactions. Technology, biotechnology and logistics 100,000 industries were the major buyers, preferring factory and industrial 80,000 offi ces in the north of Taiwan. In general, technology companies NT$ million 60,000 tend to buy vacant land in order to customise their own factory; 40,000 therefore, they became the second largest buyers in the land market. As a whole, technology companies 20,000 invested in NT$35.1 billion worth of property this year, increasing 0 57% YoY compared with 2015. 2009 2010 2011 2012 2013 2014 2015 2016

Increasing demand from end-users Source: Savills Research & Consultancy caused a slow upward trend in industrial property, different from TABLE 17 the conditions in the other property sectors. Major investment transactions, Oct–Dec 2016

Property Location Price Buyer Usage Transaction activities in the offi ce and retail markets stagnated, due GlobalView Technologies Ming Fang Investment Industrial City NT$1.08 bil/US$34 mil to the high unit price, refl ecting a Headquarters Company offi ce higher risk under the correction Chunghwa Picture Tubes Taiyuan City NT$3.84 bil/US$121 mil Giantplus Technology Factory situation; investors retreated from Taiyuan Factory the property market in the face of Industrial the revised capital gains tax. In Yang Ming Neihu Building Taipei City NT$1.89 bil/US$60 mil Nan Shan Insurance offi ce 2016, transaction volumes in the offi ce sector decreased by 70% YoY Source: Savills Research & Consultancy

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

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

In the last quarter of 2016, we In 2016, Vietnam’s economy was despite the ups and downs of the witnessed a burst of activity in the a highlight in the South East Asian global economy. Top-tier real estate Vietnam real estate market, with region. Vietnam’s Gross Domestic companies, especially local players, strong interest from both foreign Product (GDP) increased by 6.21% are shifting their focus to low- to and local investors. Earlier in the year-on-year (YoY), which makes mid-end residential developments to quarter, one of the contractors for Vietnam one of the fastest growing attract more buyers, targetting the Ho Chi Minh City’s fi rst metro line, countries worldwide. In the same young workforce which accounts for Maeda, partnered with Thien Duc, year, Vietnam attracted over US$24 the majority of Vietnam’s population. a local developer, in a joint venture billion in total newly-registered and The trend is towards smaller units in to develop an approximately US$30 additional Foreign Direct Investment locations with good accessibility, a million high-end residential project, (FDI), and achieved over US$15 billion full range of amenities, competitive Waterina Suites. This is the fi rst of FDI disbursement, a record high pricing and favourable payment property investment by the Japan- 9% increase over the previous year. terms. This market movement is based company after almost two going to help the real estate sector in decades being present in Vietnam. Vietnam’s property market continues Vietnam to continue its sustainable In the hotel sector, the global private to show its resilience, with consistent growth trend moving forward. equity investment fi rm, Warburg growth across different sectors Pincus, joined hands with VinaCapital to form a US$300 million hospitality joint venture, aiming to become a GRAPH 16 major hotel platform in Vietnam and South East Asia. Shortly after its HCMC apartment transaction volumes and absorption rate, foundation, the platform acquired Q1/2011–Q4/2016 a 50% stake in the Sofi tel Legend Metropole Hanoi, a fi ve-star hotel Grade C Grade B Grade A Absorption rate (RHS) 12,000 25 in the heart of the country’s capital, from Vietnam Opportunity Fund (VOF) under VinaCapital, with a 10,000 20 total consideration of approximately US$100 million. In November, Dubai- based real estate developer Limitless, 8,000 an affi liate of the Dubai World holding 15 group, has resumed work on the

6,000 % US$550 million project Ha Long Star on Vietnam’s North Coast. The 10 No. of units project features approximately 2,000 4,000 villas, townhouses and apartments along with retail outlets, leisure 5 2,000 facilities and hotels in one of the most popular destinations on Vietnam’s hospitality map. On the coast line of 0 0 Hoi An – a renowned tourist location Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 in Central Vietnam – VinaCapital and 2011 2012 2013 2014 2015 2016 its joint venture partners, Gold Yield Enterprises and Sun City Group, have Source: Savills Research & Consultancy started construction of the US$4 billion project HOIANA, aiming to TABLE 18 have its fi rst phase completed in early Major investment transactions, Oct–Dec 2016 2019. Once completed, HOIANA will be Vietnam’s largest integrated resort, Property Location Price Buyer Usage with the fi rst phase of this project Sofi tel Legend Metropole Hanoi Hanoi VND2.26 tri/US$100 mil N/A Hotel featuring a 685-key New World Hotel, (50% interest) 100-key Rosewood Residences and Casuarina Cove HCMC VND543.90 bil/US$24.1 mil Hung Phu Residential Resort, and signature Championship Vietnam (60% interest) Golf Course designed by Robert Trent Riviera Cove (40% interest) HCMC VND327.26 bil/US$14.5 mil Keppel Land Residential Jones II, along with the largest casino in Vietnam. Source: Savills Research & Consultancy

20 Q4 2016

AAustraliaustralia

◄ 324 Queen Street Brisbane AU$132.0M/US$99.0M in November

39 Martin Place ► Sydney AU$332.0M/US$249.0M in November St Collins Lane ▲ Melbourne AU$247.0M/US$185.25M in November ◄ Carillon City Shopping Centre Perth AU$140.0M/US$105.0M ▼ 111 Eagle Street (33%) in October Brisbane AU$284.2M/US$213.15M in December

307 Queen Street ► Brisbane AU$153.0M/US$114.75M 100 Queen Street ▲ in October Melbourne AU$275.0M/US$206.25M in December

BBeijingeijing 6 1 0 2

◄ Financial Street Changan Center, Building 2

Chaoyang 4 RMB8.85B/US$1.29B

in October Q

Ronsin Technology Center ► s Chaoyang n

RMB5.1B/US$735.0M o i

in December t c

The Capital Center ▼ Fraser Residence ▲ a

Fengtai Chaoyang s RMB2.8B/US$407.5M RMB1.18B/US$172.2M n in December in December a r t ◄ Dong Li Center r ▲ Riverside Palace Chaoyang o

Haidian RMB520M/US$75M j RMB1.30B/US$187.0M

in October a in December Major transactions Q4 2016 Q4 transactions M Major

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

SShenzhenhenzhen

◄ International Tech Building Q-Plex ► Futian Nanshan RMB29.3M/US$4.27M RMB440.0M/US$64.17M in December in October

Luo Hu Commercial City ► Luohu RMB395.0M/US$57.61M in December

SShanghaihanghai

◄ Century Link ◄ Parkside Plaza Pudong Putuo RMB20.0B/US$2.9B RMB2.2B/US$317M in October in November

The Konnect ◄ Star Bund T1 ► Hongkou Huangpu RMB5.3B/US$764M RMB520MB/US$75.87M in December in November

Huiyin Mingzun ▼ Putuo ▲ Central Plaza RMB471.0M/US$68.71M Huangpu in December RMB2.4B/US$346M in October

▲ BFC (50% stake) ▼ Hongqiao R&F Center Huangpu Minghang RMB5.3B/US$764M RMB2.1B/US$306.28M JT-Plaza ▲ in December in December Yangpu RMB660M/US$96.28M in December ◄ A-REIT City Pudong RMB1.1B/US$161.99M ◄ Xuebao Mall in October Luwan RMB610M/US$89.02M in November

◄ Rich Gate (Retail podium) Luwan RMB1.4B/US$202M in November

22 Q4 2016

HHongong KongKong

◄ Cheung Hong (Retail portion ◄ 19 Wang Chiu Road and 709 car parking spaces) (NKIL6312) Tsing Yi Kowloon Bay HK$1.15B/US$148M HK$6.53B/US$842M in December in October

16A-16D Shouson Mount Nicholson Hill Road ▼ (House 1) ► Southside The Peak HK$1.3B/US$168M HK$1.08B/US$139M in October in December

▲ Pemberton Sheung Wan HK$1.0B/US$129M in December

◄ J Plus Boutique Hotel 1 Horizon Drive and Causeway Bay 44-50 Chung Hom Kok Road ▲ HK$1.7B/US$219M Stanley in December HK$1.8B/US$232M in October

JJapanapan 6 1

Shiodome Building (additional 10%) ► 0 Minato Ward, Tokyo 2

JPY20.9B/US$194M in December 4 Q

◄ Hyatt Regency Osaka

Osaka City, Osaka s JPY16.0B/US$150M n in November o i t Tradepia Odaiba ► Minato City, Tokyo c JPY30.0B/US$290M a

in October s n a r

◄ Kinshicho Prime Tower Kawasaki Tech Center ► t Koto Ward, Tokyo Kawasaki, Kanagawa r JPY15.1B/US$130M JPY23.1B/US$210M o

in December in December j a Major transactions Q4 2016 Q4 transactions M Major

savills.com.hk/research 23 Asia Pacifi c |Investment Quarterly

SSingaporeingapore

▼ Nouvel 18 (50% stake) ◄ Robinson 77 Anderson Road Robinson Road S$965.4M/US$682.63M S$530.8M/US$375.33M in October in November

Capital Square (50% stake) ► Church Street S$475.5M/US$336.23M in October

SSouthouth KKoreaorea

▼ Capital Tower DSME ► GBD CBD KRW473.0B/US$408.6M KRW170.0B/US$146.8M in Q4/2016 in Q4/2016

◄ IFC YBD KRW2.5T/US$2.16B in Q4/2016 6 1 0 2 TTaiwanaiwan 4 Q

◄ GlobalView Technologies U-TOWN ► s Headquarters Taipei City NT$703M/US$22.2M n

NT$1.08B/US$34M o in November i

in November t c a s n a

◄ Nankang r t

Software Park ◄ Yang Ming Neihu

Taipei City Building r

NT$585M/US$18.5M Taipei City o in November NT$1.89B/US$60.0M j in December a Major transactions Q4 2016 Q4 transactions M Major

24 Q4 2016

NOTES PAGE

savills.com.hk/research 25 Asia Pacifi c |Investment Quarterly

NOTES PAGE

26 Q4 2016

NOTES PAGE

savills.com.hk/research 27 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 K. D. Jeon China Email: [email protected] Australia Raymond Lee Tel: +822 2124 4101 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 7, 50 Bridge Street, Sydney, Australia Albert Lau Malaysia Email: [email protected] Christopher Boyd Offices throughout Sydney, Parramatta, Tel: +8621 6391 6696 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 Email: [email protected] Paddy Callesen Tel: +8621 6391 6688 Phillipines Email: [email protected] Unit 2501-13, Two ICC, KMC MAG Group Tel: +64 9 951 5910/+64 9 951 5911 No. 288 South Shanxi Road, Michael McCullough Level 8, 33 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, Qingdao, Bonifacio Global City 1634, Philippines Shenyang, Shenzhen, Tianjin, Xiamen, Xi'an and Savills Studley Singapore Woody Heller Christopher Marriott Email: [email protected] Hong Kong SAR Email: [email protected] Tel: +1 212 326 1000 Raymond Lee Tel: +65 6415 7582 399 Park Avenue, 11th Floor, New York, Email: [email protected] 30 Cecil Street, #20-03 Prudential Tower, NY 10022 Tel: +852 2842 4518 Singapore 049712 23/F, Two Exchange Square, Central, Hong Kong Taiwan LATIN AMERICA With offices in Tsim Sha Tsui and Kowloon Tong Cynthia Chu Borja Sierra Email: [email protected] Email: [email protected] Macau SAR Tel: +886 2 8789 5828 Franco Liu Tel: +44 20 7409 9937 21F, Cathay Landmark, Finsbury Circus House, 15 Finsbury Circus, Email: [email protected] No. 68, Sec. 5, Zhongxiao E. Road, Tel: +853 2878 0623 London EC2M 7EB, United Kingdom Xinyi District, Taipei City 110, Taiwan Suite 1309-10, 13/F Macau Landmark, 555 Avenida da Amizade, Macau With an office in UNITED KINGDOM & EUROPE Thailand Phillip Garmon-Jones Indonesia Robert Collins PT Savills Consultants Indonesia Email: [email protected] Email: [email protected] Jeffrey Hong Tel: +852 2842 4252 Tel: +66 2 636 0300 Email: [email protected] 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, Neil MacGregor Netherlands, Poland, Spain and Sweden Japan Email: [email protected] Associate offices in Austria, Greece, Norway, Christian Mancini Tel: +84 8 3823 9205 , Russia, Turkey and South Africa Email: [email protected] Tel: +81 3 6777 5150 18/F, Fideco 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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