Singapore Office and Retail Market Overview By CBRE Pte. Ltd. 8 June 2013

1 The Economy 2 The Office Market Singapore’s economy avoided recession in 2012 with a 2.1 Supply GDP growth of 1.3% y-o-y. The main strain came from the As at Q1 2013, the total office stock in Singapore was relatively weak manufacturing sector, which is reliant on 52.49 million sf. Singapore’s pre-eminent destination for exports and susceptible to adverse global developments. office occupiers is the Core Central Business District (“Core In addition, headline inflation caused some concern in CBD”), which consists of Raffles Place, Shenton Way the first half of 2012, though inflationary pressure eased Corridor, Marina Centre and Marina Bay. The 26.67 million significantly in the second half of the year, with 2012’s sf of office space in the Core CBD represents some 50% of inflation ending at 4.6%. overall office stock, and is the location of choice for high- end financial services functions and other business services Going forward, the economy will be supported by reasonable companies. The immediate environs of the Core CBD are the growth of the construction and services segments. micro-markets of Tanjong Pagar, Beach Road/City Hall and The expected recovery in the manufacturing sector across , which represent a further 30% of existing Asia will support a growth in regional trade which would stock (collectively the Fringe CBD). With 80% of total benefit Singapore. The Ministry of Trade and Industry office stock found in the Core and Fringe CBD, the leasing (“MTI”) has forecast GDP growth to be between 1.0 to and investment sales market is highly focused on these 3.0% in 2013 and the outlook for inflation is projected to two locations. The remaining office stock can be found in be between 3.5% and 4.5% in 2013. According to Oxford decentralized locations such as Alexandra/HarbourFront, Economics, Singapore’s GDP is forecast to grow by 2.5% Thomson/Novena, Tampines and River Valley. and 4.9% in 2013 and 2014 respectively. The Tanjong Pagar micro-market1 contributes 4.69 million In the long-term, however the economy faces some sf and 9% of the total market while the Alexandra/ challenges as it adjusts to lower population growth and HarbourFront2 micro-market contributes 3.55 million sf and easing of the current immigration policy in coming years. 7%. Both micro-markets are characterized by a wide range Labour is expected to become more costly and therefore of assets, which vary greatly in age and quality. impact future economic growth. Consequently, GDP growth forecasts for 2015-20 have been lowered to an average of Singapore’s office market expanded at an exponential 3.6% pa. pace between 2009 and 2011 when 7.43 million sf of new office space was delivered to the market. This was a substantial 16.0% market growth over a three-year period. Office development activity, however, has slowed since.

GDP Growth and Inflation (%, Y-o-y change)

16 7

14 6 12 5 10 4 8 3 6 2 4 2 1 0 0 -2 -1 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

GDP (LHA) Consumer price index (RHA) Source: Oxford Economics

38 Mapletree Commercial Trust Annual Report 2012/13 The market grew by 2.5% in just over a year (Q1 2012 to Q1 Potential Supply 2013 inclusive) with a total of 1.34 million sf of new office Over the next four years (Q2 2013 – Q4 2016 inclusive), space completed mainly in two office projects - Marina an approximate 8.96 million sf of office space is expected Bay Financial Centre Tower 3 (totalling 1,300,000 sf) and to be delivered island-wide. The potential office supply is One Upper Pickering (office component of ParkRoyal on evenly distributed over time and geography. 37.5% of future Pickering, totalling 70,000 sf), completed in Q1 2012 and supply is expected to be Grade A (located in CBD) while Q3 2012 respectively. 34.9% and 27.6% will be from the CBD (non-Grade A) and Rest of the Island markets respectively. In terms of net new office supply3, the 10-year average was 1.10 million sf while the 5-year average was 1.67 Throughout 2013, 2.84 million sf of new space will be million sf. In comparison, 2012’s net supply of 923,200 sf is completed comprising of Asia Square Tower 2 (782,300 sf) below these long term averages, which has provided some and The Metropolis (1,180,000 sf). Supply in 2014 includes support to the office leasing market despite the weak global CapitaGreen (720,000 sf), while supply in 2015 will come economy. Q1 2013 net supply was a negative 274,800 sf, mainly from the South Beach development (527,450 sf). due to a number of projects being demolished or vacated for In 2016, there will be a wave of new office completions conversion; namely 138 Robinson Rd (totalling 121,674 sf) totalling 4.27 million sf. The major projects are Marina One and Marina Bayfront (totalling 153,172 sf). and Duo (1,880,000 sf and 570,000 sf respectively) by M+S, in addition to the Tanjong Pagar Centre (850,000sf) Both Tanjong Pagar and Alexandra/HarbourFront micro- by GuocoLand. The latter is a mixed-development in markets remain tight on new supply with no recent Tanjong Pagar, which will potentially enhance the overall completions. In Tanjong Pagar the last developments were attractiveness and rejuvenate this micro-market with new Twenty Anson (completed in Q4 2009) and Mapletree amenities such as quality retail, high-end hotel and new Anson (completed in Q3 2009). The last completion in modern office supply. the Alexandra/HarbourFront micro-market was the office component of Mapletree Business City (completed in Q2 2010).

Potential Office Supply

NLA (mil sf) 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2013 2014 2015 2016

Core CBD Fringe CBD Decentralised Source: CBRE Research

For the confidentiality reasons CBRE cannot provide the full list of buildings in the particular baskets but to name a few key projects. 1 The Tanjong Pagar basket of properties consists of 23 buildings that total 4.7 million sf, none of which is classified as Grade A. The key projects are 79 Anson Road, Keppel Towers, Axa Tower, Mapletree Anson and Twenty Anson among others. 2 The Alexandra/HarbourFront basket of properties consists of 12 buildings that total 3.5 million sf, none of which is classified as Grade A. The key projects are HarbourFront Tower 1 and 2, Keppel Bay Tower, HarbourFront Centre and PSA Building among others. 3 Net new supply is calculated as a sum of new completions, demolitions and conversions.

39 Annual Report 2012/13 Mapletree Commercial Trust Singapore Office and Retail Market Overview By CBRE Pte. Ltd. 8 June 2013

There are no office developments scheduled in the Conversely, demand from banks and other financial Alexandra/HarbourFront micro-market in the next five years. institutions have stayed subdued along with anchor tenant However, approximately 1.0 million sf of business park space deals seeking large floor-plate requirements. However, the will be delivered in Mapletree Business City Phase II in 2016. Singapore office market has retained its cost competitive edge over other regional cities and some corporates took As at Q1 2013, the estimated secondary space is calculated advantage of lower occupancy costs to either consolidate or to be approximately 282,000 sf. This is a vast improvement incrementally expand their operations. This has dramatically from the estimated 840,000 sf of secondary space projected helped to stimulate leasing activity. Furthermore, flight to for 2013 in Q4 2012. It has been observed that some older quality has been a pronounced feature of tenant movement buildings and portfolios have enjoyed considerable success in core locations but a strong appetite to move out of CBD in back-filling such space. In addition, some landlords have to quality decentralised space has also been observed. also taken the opportunity to undertake asset enhancement works when their anchor / larger tenants relocate. This may Leasing sentiment was boosted by relatively high cause a delay in the availability of some of the secondary pre-commitment levels in the upcoming The Metropolis space; for instance, 6 Shenton Way (formerly DBS Building). (65% pre-let as of Q1 2013 to a diverse mix of occupiers The positive net absorption of the secondary space is likely such as Proctor & Gamble, Shell International B.V., Neptune to ease some of the downward rental pressures on the Orient Lines and the Singapore Exchange), JEM (100% Grade B market segment. pre-let to MND), Westgate Tower (50% pre-let to CapitaLand) as well as Asia Square Tower 2 (20% pre-let to 2.2 Demand tenants such as Allianz, National Australia Bank, JustOffice In 2012 and early 2013, office demand was diverse with and Swiss RE). occupiers from a wide variety of industries relocating or expanding. Office space has been mostly taken up by Following the healthy 1.33 million sf net absorption recorded commodity and energy companies, maritime, insurance, for the full year of 2012 (average 332,000 sf per quarter), legal and professional services companies. Diversification the net absorption for Q1 2013 stayed in positive territory at has also taken place in terms of nationalities. It was reported 126,000 sf. Modest positive occupier demand is expected to that there have been more Japanese services firms setting maintain through the rest of 2013. up in Singapore. According to the Singapore Economic Development Board, there were 29 new Japanese companies’ registrations in 2012 as compared to only six in 2008.

Island-wide Office: Net Supply, Net Absorption & Vacancy Rate

NLA (‘000 sf) 2,000 12% 10% 1,500 8% 1,000 6% 4% 500 2% 0 0% -2% -500 -4% -1,000 -6% -1,500 -8% Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013

Net New Supply New Absorption Vacancy Rate (Islandwide) Source: CBRE Research

40 Mapletree Commercial Trust Annual Report 2012/13 Office demand in Tanjong Pagar has benefited from its supported by an economic recovery and subsequently by proximity to the Core CBD, the planned urban regeneration improved office demand, vacancy rate is forecast to hover of the area and the expected relocation of existing occupiers in the region of 6.0% - 8.0%. of the nearby GE and Keppel Towers (totalling 430,122 sf). The two developments are due to be demolished and In the Tanjong Pagar micro-market, the vacancy rate stood converted for residential use although no time horizon at 4.0% in Q1 2013. Given the limited supply in recent has been announced. On average, the 10-year annual net years, the vacancy rate has been declining over the long absorption in this micro-market is 118,300 sf while in Q1 term and is currently relatively low compared to its long 2013 it was a positive 14,800 sf. term averages. The 10-year average vacancy is calculated to be 11.2% while the 5-year average vacancy was Alexandra/HarbourFront is a well located micro-market 8.1%. Going forward, vacancy rate in the micro-market that has outperformed other micro-markets during periods is expected to remain low given that no significant new of downturn when occupiers opted for more affordable supply is due till 2016. That said, some upward pressure quality office space that was close to the CBD as part of will be inevitable in the short term given that both new and their cost rationalization. It remains an attractive solution to secondary supply are due to be delivered in the adjacent occupier who prefer fringe locations with good amenities. core CBD. On average, the 10-year annual net absorption in this micro-market is 165,900 sf, while Q1 2013 was a negative The Alexandra/HarbourFront micro-market has historically 17,100 sf. Net absorption in this micro-market is projected recorded a very low vacancy rate as the attractiveness of the to stay close to zero in 2013 and 2014. location improved over time with completion of new MRT line and increasing residential catchment in the area. Over 2.3 Vacancy Rates the last five years, the micro-market vacancy rate rose above Positive net absorption in 2012 and Q1 2013 served to 5.0% only in 2009. In Q1 2013, Alexandra/HarbourFront lower the overall island-wide office vacancy rate by 70 vacancy stood at 2.15%, 48 basis points below Q1 2012. basis points q-o-q from 5.8% to 5.1% and by 220 basis The micro-market has no future office supply for the next points from 7.3% 15 months ago. This is the lowest level five years, which should provide existing developments a recorded since Q3 2008 at 4.5%. competitive advantage and limit the increase in vacancies. That said the location has well established business park Global economic conditions, while showing gradual properties and confirmed future pipeline that could compete improvements, will continue to weigh on office leasing with the adjacent office properties. In addition, the opening demand. Vacancy rates across all grades and micro-markets of new decentralised office locations such as Jurong and are expected to increase and peak in 2013. In 2014, Buona Vista may add further competition.

Office Vacancy Rates

20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013

Islandwide Alexandra/Harbourfront Tanjong Pagar Source: CBRE Research

41 Annual Report 2012/13 Mapletree Commercial Trust Singapore Office and Retail Market Overview By CBRE Pte. Ltd. 8 June 2013

2.4 Rents find their support levels to reach the trough by the second Whilst occupier demand has surprised the market on the half of 2013. Flight to quality has been a visible trend in upside, it was not sufficient to avert rental corrections. this segment, which will support the activity in the Grade Office rents have been declining for six consecutive quarters; A office market and provide resilience to its rents. The first however, the pace decelerated over the last few quarters. signs of upward rental movements are expected in 2014 All in all, average Grade A rent has corrected by 13.7% since although at modest levels compared to the past. the peak in Q3 2011 while the Grade B office rental correction was much less pronounced with average rent declining Conversely, the Grade B market is likely to experience more by 3.7%. pressure in 2013 due to the injection of office space coming from new decentralised locations, strata-titled offices as well In Q1 2013, average Grade A rent saw a minor decrease as secondary space. Grade B rents are projected to decline of 0.3% q-o-q to register at $9.55 psf/month. Similarly, by up to 10% in 2013 although the downturn should be the Grade B market saw a slight correction of 0.1% q-o-q short lived and recovery could happen as early as in 2014. to $7.10 psf/month. Looking ahead, Grade A rents could

Singapore Office Rents

Q1 2013 ’11 Peak (psf/mth) to Now Y-o-Y Q-o-Q Grade A S$9.55 -13.7% -9.9% -0.3% Grade B Island-wide S$7.10 -3.7% 2.1% -0.1% Tanjong Pagar S$6.92 2.5% -1.4% -0.6% Alexandra/HarbourFront S$6.94 -0.8% -0.4% -0.2%

Source: CBRE Research

Office Rents (in S$ psf/month)

20 250 18 16 200 14 12 150 10 8 100 6

4 50 2

0 0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013

Grade A Alexandra/Harbourfront Grade B Island-wide Source: CBRE Research, Tanjong Pagar URA Rental Index Urban Redevelopment Authority (URA)

42 Mapletree Commercial Trust Annual Report 2012/13 Despite moving in tandem with the island-wide office rental Grade A rents are forecast to remain stable in the next six to cycle, Tanjong Pagar rents have displayed less volatility over eight months and recover thereafter. While overall demand the past five years. This is primarily due to the tenant mix is expected to remain positive, Grade B office space of lower in the Tanjong Pagar micro-market, which has a higher technical quality and in less prime locations is likely to see percentage of non-banking and financial services office rents declining further mostly due to the weight of supply tenants compared to Core CBD. Average office rents had available. grown by 48.3 % since the bottom in 2009 and peaked at S$7.10 psf/month in Q3 2011. They have since declined Any hint of a global economic recovery will translate to a by a limited 2.5% to $6.92 psf/month in Q1 2013. stronger recovery in the office market. That said the strength New developments (built since 2008) in the Tanjong Pagar of upside remains highly dependent on the health of the area, however, have commanded rents of $8.00 psf/mth in financial industry, which has driven leasing demand in the Q1 2013. This is a substantially higher rental level compared past. In order to outperform other global business cities to the full Tanjong Pagar micro-market rent, indicating a in such market conditions, Singapore will have to use the substantial difference between the new and old stock in the advantage of being an attractive location and a lower cost area. Looking ahead, a combination of fairly valued office base destination to attract new occupiers in the future. rents in Tanjong Pagar and less new supply alternatives appearing in the immediate neighbourhood will support 3 The Retail Market stable rental performance in the next six to twelve months. 3.1 Supply As at Q1 2013, the total island-wide retail stock stood at Average office rents in Alexandra/HarbourFront peaked at 36.86 million sf. By market size comparison, the Fringe Area S$7.00 psf/month in Q3 2011 and it has since declined still accounts for the largest share at 27.6%, followed by by a limited 0.8% to $6.94 psf/month in Q1 2013. Outside Central Region (22.4%), Orchard Road (20.3%), Going forward, the Alexandra/HarbourFront rents are Rest of Central Area (18.2%) and the Downtown Core expected to remain stable throughout 2013 and 2014 Region (11.6%). considering the low vacancy in the micro-market. Driven by strong demand and appetite for new retail space, 2.5 Office Outlook the market expanded exponentially in recent years. In the The risk of a severe global recession has moderated with period from 2009 to 2012, approximately 2.21 million sf well-aimed policy initiatives of the major central banks of new retail space was added to total private retail supply. globally; however, the recovery is likely to be gradual and 2009 witnessed the largest addition of approximately 1.37 long drawn. million sf retail space, mostly in the Orchard submarket. Major malls completed along Orchard Road since 2009 Regardless, Singapore’s office demand in 2012 has surprised include Ion Orchard (660,000 sf), Orchard Central (250,000 on the upside and it is expected to remain in positive territory sf), 313 Somerset (294,000 sf), Mandarin Gallery (130,000 throughout 2013 as the city has retained its attractiveness sf) and TripleOne Somerset (294,000 sf). to occupiers as a base for their regional operations. “Flight to quality” will remain the key trend in the next six to After 2009, the bulk of the retail supply has come from twelve months where occupiers will take the opportunity to outside the prime area of Orchard. This includes Marina consolidate or expand their operations due to the relatively Bay Shoppes (800,000 sf) and Resorts World Sentosa lower occupancy costs. (330,000 sf) as well as nex (600,000 sf). Other notable malls completed outside Orchard include Rochester Mall (95,300 sf), (207,400 sf) and the convenience centre Alexandra Retail Centre (89,600 sf). Most recently, several landlords have embarked on asset enhancement initiatives (AEI) on their assets in order to keep up with new trends.

43 Annual Report 2012/13 Mapletree Commercial Trust Singapore Office and Retail Market Overview By CBRE Pte. Ltd. 8 June 2013

The inclusion of Resorts World Sentosa and Alexandra Retail In 2014, retail supply will be more geographically diverse Centre was the only retail supply in the HarbourFront/ Telok across all four sub-markets. The completion of the Blangah area since VivoCity in 2006. It should be noted refurbished Shaw Centre (400,000 sf) and 268 Orchard that the retail space in Resorts World Sentosa has been (147,500 sf) will add to the Orchard Road sub-market stock. predominantly taken up by food & beverage outlets as well From the Downtown Core sub-market, retail space expected as a master tenant. As such, VivoCity still remains the only include the completion of the AEI of (125,000 full-fledged serving the area. sf), the AEI of (14,000 sf), Capitol Piazza (156,100 sf) as well as the extension wing of The only new retail developments in Tanjong Pagar in recent (200,000 sf). The key retail development arising from the years were a retail podium of ICON (totalling 30,000 sf) Fringe Area sub-market will be the Sports Hub (441,500 sf) completed in 2007, followed by recent asset enhancement while One KM (110,700 sf) and (188,000 sf) will of 100AM (totalling 110,000 sf) completed in 2012. Retail in add to the suburban stock in 2014. the Tanjong Pagar area predominantly caters to the working population in the area, but also serves the increasing resident Come 2015, projects with retail space sold on a strata- population. titled basis will dominate the supply. These projects include Altez (18,600 sf), Eon Shenton (5,200 sf), Park Hotel Potential Supply Alexandra (46,450 sf), Centropod @ Changi (18,300 sf), Based on data tracked by CBRE, the projected island-wide The Promenade @ Pelikat (83,400 sf) & The Commerz @ retail supply (Q2 2013 to Q4 2017 inclusive) is approximately Irving (36,000 sf). Two major suburban retail projects include 5.65 million sf. The significant majority of potential supply is (370,000 sf) and Big Box (329,000 sf); while expected in 2013 and 2014; while geographically much of South Beach (85,500 sf) will add to the Downtown Core the new space is located in suburban locations. sub-market supply.

In 2013, Jem (818,000 sf) and Westgate (420,000 sf) are Finally in 2016, a significant supply of retail space will arise expected to open in the Jurong Lake District. Other upcoming from the Downtown Core sub-market with the completion suburban retail spaces include East Village Hotel (43,700 sf), of Marina One (140,000 sf), Tanjong Pagar Centre (100,000 HillV2 (55,000 sf), Paya Lebar Square (88,200 sf) and Bedok sf) and a yet named commercial development at Robinson Mall (220,000 sf). Lastly, there is an upcoming retail project Road (10,600 sf). Other notable potential projects in this Orchardgateway (172,000 sf) along Orchard Road. year include Duo Galleria (54,000 sf) and (114,450 sf) from the Rest of Central and Outside Central Area sub-markets.

Potential Retail Supply: 2013 - 2016

NLA (mil sf) 2.5

2.0

1.5

1.0

0.5

0.0 2013 2014 2015 2016

Orchard Road Downtown Core Rest of Central Fringe Area Suburban Source: URA / CBRE Research

44 Mapletree Commercial Trust Annual Report 2012/13 3.2 Demand Following the positive 53,800 sf net absorption recorded Supported by positive indicators of consumer spending for the full year of 2012, net absorption for Q1 2013 for and healthy visitor arrivals in 2012, retail occupier demand the private retail market as tracked by URA was recorded continued to grow especially from the fast fashion and food at -215,000 sf. This negative net absorption caused a & beverage (F&B) industries. European retailers continued compression in the island-wide private retail occupancy rate to be a major player in the Orchard Road retail scene, with q-o-q by 0 basis points percentage points to 93.1%. Korean and Japanese brands following suit. While such potential tenants continued to seek large and flexible retail Retail leasing demand should remain relatively steady in floor plates, majority of the new F&B outlets are located in 2013, particularly from international fast fashion retailers non-shopping mall lifestyle destinations as well as in niche and F&B start-ups. Retailers will continue to focus on growth shop-house locations. opportunities but at a more moderate pace and on a more strategic basis than in previous quarters. The Singapore Tourist Board reported a 9.1% y-o-y growth with visitor arrivals for 2012 hitting 14.37 million. Tourism Consolidation of operations has also been observed to be receipts reached $23.0 billion in 2012, a growth of 3.0% on the business decisions of some retailers who have been y-o-y. This is expected to moderate to between 3.0% to on the expansion mode for the previous years. Consumer 4.0% annually over the next decade while tourism receipts confidence, however, should remain positive due to the are expected to grow between 4.0% to 6.0% annually healthy domestic economy and rising household incomes over the same period. Excluding the sales of motor vehicles, and spending power. Nominal retail sales are expected to nominal retail sales for March 2013 displayed a decline of remain in a positive growth territory but at a lower rate 0.5% m-o-m and a growth of 1.2% y-o-y. This is mainly going forward. attributed to the higher sales during the Chinese New Year holiday which was in February 2013.

Visitor Arrivals & Retail Sales Index (Excluding Motor Vehicles)

16,000,000 160

14,000,000 140

12,000,000 120

10,000,000 100

8,000,000 80

6,000,000 60

4,000,000 40

2,000,000 20

0 0 2005 2006 2007 2008 2009 2010 2011 2012

Tourist arrival Retail sales Index (excluding motor vehicles) Source: Singapore Tourist Board / Department of Statistics

45 Annual Report 2012/13 Mapletree Commercial Trust Singapore Office and Retail Market Overview By CBRE Pte. Ltd. 8 June 2013

Island-wide Office: Net Supply, Net Absorption & Vacancy Rate

NLA (‘000 sf) 800 8%

600 6%

400 4%

200 2%

0 0%

-200 -2%

-400 -4% Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013

Net New Supply New Absorption Vacancy Rate (Islandwide) Source: URA / CRE Research

3.3 Rents Relatively subdued nominal retail sales have weighed down 3.4 Retail Outlook the rental market. To boost activity, there has been a series While Singapore continues to enjoy tourism growth, of asset enhancement initiatives undertaken by several it is expected to remain in the spotlight for international of the large Orchard Road malls in the last two years. brands seeking exposure to consumers in the region. In addition, ION Orchard, Orchard Central and 313 Orchard Retail occupancy costs in Singapore are still lower as have taken advantage of their lease renewal period since compared to other Asian cities like Hong Kong, Shanghai, their commencement to reposition themselves in the market. Beijing and Tokyo, which provide confidence for the retailers As a result of renewals, the average rents for prime Orchard to establish in the market. Leading indicators have shown Road has risen by 1.9% q-o-q to reach $32.20 psf/month that retail sales and business sentiments continued to be in Q1 2013. This is after nine months of static rents in this positive. That said the retail market might be affected by market. For the past 12 months, average prime Suburban the strength of the Singapore dollar and further exacerbated rents stayed at $29.75 psf/month. by the current labour crunch faced by the service industry.

From the chart on page 47, it is clearly illustrated that In the tourist-dependent prime Orchard Road market, the rent premium of Orchard Road sub-market over the average rents are expected to hover at the same levels Suburban sub-market has compressed significantly over the in 2012. Orchard Road will always remain the prime past three years. Orchard Road rents have been correcting shopping belt, with a critical mass of shopping centres since Q3 2008 following the Sub-prime crisis and onslaught located in the heart of the city and well served by hotels. of retail supply. On the other hand, the Suburban sub-market As a result, major international and luxury brands still prefer has shown its resilience over the past years with minimal to be located along this shopping belt. fluctuations as they are not highly dependent on the tourism market and are well supported by their respective residential Although driven by different spending habits the suburban catchment areas. retail market remains active. The upcoming suburban malls are typically located within residential catchments and near to major transport infrastructure, allowing them to draw on regular customers who frequent the malls for their daily necessities and services. Supported by relative strong interest from retailers, suburban average rents are expected to remain stable.

46 Mapletree Commercial Trust Annual Report 2012/13 Prime Retail Rents

50 140 45 120 40 35 100 30 80 25 20 60

15 40 10 20 5

0 0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013

Orchard Road Suburban URA Rental Index Source: URA / CBRE Research

Qualifying Clause This Report is subject to the following limiting conditions:

The content of this report is for information only and should not be relied upon as a substitute for professional advice, which should be sought from CBRE prior to acting in reliance upon any such information.

The opinions, estimates and information given herein or otherwise in relation hereto are made by CBRE and affiliated companies in their best judgment, in the utmost good faith and are as far as possible based on data or sources which they believe to be reliable in the context hereto.

Where it is stated in the Report that information has been supplied to CBRE’s by another party, this information is believed to be reliable by CBRE. Other information is derived from sources which we believe to be reliable to the best of our ability. We can accept no responsibility if this should prove not to be so.

Notwithstanding this, CBRE disclaims any liability in respect of any claim that may arise from any errors or omissions, or from providing such advice, opinion, judgment or information.

All rights are reserved. No part of this report may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of CBRE.

47 Annual Report 2012/13 Mapletree Commercial Trust