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Asia Pacific Real Estate Investment Market Bulletin 2009 FOURTH FOUR FO URTH UR TH HQ QUARTER UART UA RT ER RTER RT


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

CONTENTS Regional Overview .................................................................................. 3-4 Greater China ........................................................................................ 5-10 Beijing, China ....................................................................................................5 Chengdu, China ...............................................................................................6 Guangzhou, China ...........................................................................................7 Shanghai, China ................................................................................................8 Hong Kong SAR, China ..................................................................................9 Taipei, Taiwan ................................................................................................. 10

North Asia ............................................................................................11-12 Tokyo, Japan ................................................................................................... 11 Seoul, South Korea....................................................................................... 12

Southeast Asia ......................................................................................13-17 Jakarta, Indonesia .......................................................................................... 13 Manila, Philippines......................................................................................... 14 Singapore ....................................................................................................... 15 Bangkok, Thailand ......................................................................................... 16 Ho Chi Minh City, Vietnam ......................................................................... 17

India ..............................................................................................................18 Australasia ............................................................................................. 19-26 Adelaide, Australia ........................................................................................ 19 Canberra, Australia ...................................................................................... 20 Melbourne, Australia .................................................................................... 21 Perth, Australia .............................................................................................. 22 Sydney, Australia ........................................................................................... 23 Auckland, New Zealand .............................................................................. 24 Wellington, New Zealand ........................................................................... 25

APPENDIX Major Market News ............................................................................ 28-35 Greater China ......................................................................................... 28-30 North Asia ..................................................................................................... 31 South Asia ................................................................................................ 32-33 India................................................................................................................. 34 Australasia ..................................................................................................... 35

Contacts ................................................................................................ 36-37

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COLLIERS INTERNATIONAL | REGIONAL RESEARCH


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

REGIONAL OVERVIEW The real estate investment market in the region continued to benefit from the improving sentiment and the gradual economic recovery seen in the second half of 2009. The massive flow of liquidity and the ease of credit initiated by a series of fiscal and monetary stimulus measures not only kept borrowing rates at low levels, but also underpinned investment demand for various asset classes, including real estate.

Greater China Region Stolen the Limelight

In terms of overall activity, the region experienced a significant surge in sales transaction volumes during the second half of 2009. Rebounding from the trough seen in 1Q2009, the aggregate value of investment sales transactions increased nearly four fold to reach the levels seen over the same period before the onset of the financial crisis. The key cities in China, particularly Beijing and Shanghai, remained the key contributors to the upsurge in market volume during the second half of 2009, despite the fact that a number of measures have been implemented by the Central Government to curb speculative purchases. As usual, Hong Kong continued to benefit from the growing appetite attributed to a massive group of buyers in the mainland. Elsewhere in the region, the pace of recovery in terms of volume was generally slower than expected. In the case of Australasia, the overall volume in the second half of 2009 remained 50% below the levels seen before the financial crisis due to rate hikes and sales withdrawals by individual vendors.

Investment Yields

Although there was a rebound in both capital values and transactional volume during the second half of 2009, the leasing market is yet to catch up with the sales market in general. Rentals continued to trend downwards as occupational demand remained fragile. Rentals in individual centres continued to face the challenge of higher-than-average vacancy rates in the secondary market and plentiful new supply coming on line. As such, average investment yields in the region were compressed further by about 50 basis points (bps) during the second half of 2009, although Australasia saw a mild expansion of about 3 bps.

Office Developments Gained Market Favour

By asset type and location, office developments in the Greater China region have been favoured by the market amid expectations of a prospective rental catch-up and long-term economic growth in the region. A similar trend was seen in the statistics compiled by Real Capital Analytics. Looking at the office sector, as of January 2010, Shanghai, Beijing and Hong Kong were among the top five cities with the highest volume of sales transactions valued at US$10 million or above over the past 12 months. Tokyo and Seoul continued to stay on top of the list with aggregate volumes of US$11.1 billion and US$4.2 billion, respectively, over the same period.

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

3


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

REGIONAL OVERVIEW Market Outlook

Looking forward, the prevailing positive market sentiment is expected to continue in 2010 and the various governments in the region are anticipated to keep market liquidity at high levels over the near to medium term. As such, a dramatic expansion of investment yields is unlikely, particularly when rentals are yet to catch up in most of the centres. However, with the gradual economic recovery, together with the real growth in real estate demand as a result of job growth and business expansion, the leasing market might hit bottom in the second half of 2010. As such, investment grade office assets will continue to be sought after by investors over the next 6-12 months.

OFFICE INVESTMENT SALES TRANSACTIONS

PROPERTY INVESTMENT YIELDS 4Q 2009 (% per annum)

(Asia Pacific Region in the past 12 months)

12,000

City Greater China Beijing Chengdu Guangzhou Shanghai Hong Kong Taipei

11,167

Total Value (US$ million)

10,000

8,000

6,000 4,232

4,000

1,183 1,101 832

676 660 596 553 441

410 354 311 287

152 128 119 95 69 42 35 30 22

Tokyo Seoul Shanghai Hong Kong Beijing Sydney Taipei Singapore Melbourne Osaka Brisbane Kuala Lumpur Canberra Perth Guangzhou Nanjing Nagoya Shenzhen Adelaide Fukuoka New Delhi Mumbai Auckland Wellington Chennai Gold Coast

0

Residential

Retail

Industrial

7.2% 8.0% 5.9% 6.8% 3.5% 3.5%

3.0% 3.5% 3.4% 2.4% 3.1%

6.5% 5.3% 6.5% 3.8% 4.1%

7.0% 8.6% 5.2% 4.3%

4.6% 4.8%

6.5%

3.6% -

6.5%

8.0%

3,543 2,647 2,428

2,000

Office

Source: Real Capital Analytics, January 2010 Note: Sales transactions closed in the past 12 months valued at US$10 million or greater

North Asia Seoul Tokyo Southeast Asia Jakarta Manila Singapore Bangkok Ho Chi Minh City India Bangalore Chennai Mumbai New Dehli Australasia Adelaide Canberra Melbourne Perth Sydney Auckland Wellington

#

8.2%

10.0%

4.4%

10.6%

6.5%

-

-

*3.9%

*1.9%

*7.1%

**6.0%

7.5% -

4.9% -

8.2% -

10.9% -

11.3% 11.3% 10.3% 9.8%

5.3% 5.3% 3.3% 3.8%

14.0% 14.0% 11.0% 11.0%

-

8.0% 7.8% 7.9% 8.0% 7.7% 8.4% 8.1%

-

7.0% -

8.4% 8.8% 9.0% 8.5% 8.1% -

* Strata net yield ** Strata net yield for 60-year leasehold multi-user upper floor space # 3Q 2009

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COLLIERS INTERNATIONAL | REGIONAL RESEARCH

#

Source: Colliers


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

CHINA - BEIJING

O

1-YEAR LENDING RATE 28% 24% 20% % per annum

16% 12% 8% 4%

1Q 2009

3Q 2007

1Q 2006

3Q 2004

1Q 2003

3Q 2001

1Q 2000

3Q 1998

1Q 1997

3Q 1995

1Q 1994

3Q 1992

1Q 1991

3Q 1989

0% 1Q 1988

n the back of the consistent and stable macro-economic policies, Beijing’s real estate market continued to witness an increasing level of investment activities, with 11 en bloc or significant sales transactions recorded in the office sector during the second half of 2009. In addition to the growing investment transaction volume, the profile of investors became more diversified, with two of the largest of the transactions by value revealing a turnaround in the domination among buyers of State-Owned Enterprises (SOEs) in the first three quarters of 2009 to domestic listed developers and investors. Wharf sold its 87.5% stake in Beijing Capital Times Square to Beijing Huarong Infrastructure Investment Co. for a total consideration of RMB2.708 billion and Bluewater sold Nexus Centre, with a total GFA of 103,340 sq m, to SOHO China for RMB2.34 billion.

Source: The People’s Bank of China

BEIJING PROPERTY YIELDS 16% 14% 12% % per annum

In the second half of 2009, three major en bloc sales transactions of luxury residential properties were concluded, suggesting that many investors continued to be interested in Beijing’s residential investment market. International developers and funds became very active, as evidenced by the acquisitions of projects under development by Shui On Construction and Materials Limited (SOCAM) and Gaw Capital. Meanwhile, the retail property investment market continued to be dominated by domestic enterprises, especially those with an SOE background, and financial institutions.

10% 8% 6% 4% 2% 0% 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

In the second half of 2009, the Central Government circulated two notices to further tighten management of land supply in a bid to curb speculative purchases in the land investment market. This should further consolidate Beijing’s real estate market, especially the residential sector, and the market should be more divergent, and dominated by developers with healthier and stronger financial conditions. In addition, the establishment of a consortium by several developer companies in order to get a lot in the local market, especially within city centres, should become a trend given continued growing land sales prices.

Office

Residential

Retail

Source: Colliers

MAJOR INVESTMENT TRANSACTIONS Development

Floor Area (sq m)

Lump Sum Price (RMB million) (US$ million)

Seller

Buyer

CITIC Securities Bank Of China Beijing Branch Beijing Huarong Infrastructure Investment Co. SOHO China Sohu Guangyao Dongfang Group

Office Sunny Region One Square Beijing Capital Times Square

53,176 60,000 120,000

1,400.00 1,740.00 2,708.00

205.03 254.83 396.59

Chang Qing Co.,Ltd. Nan Fung Group Wharf

Nexus Center Raycom Infotech Park Tower D Haitian Square

103,340 41,000 200,000

2,340.00 750.00 2,000.00

342.70 109.84 292.90

Bluewater Raycom Beijing Haitian Square Real Estate Development Company

57,700

800.00

117.16

42,000

750.00

109.84

Pacific Century Premium Developments Limited Golife Concepts Holdings

48,248

1,000.00

146.45

Hines

Residential Pacific Century Place Phase 2 / No. 4 Gongti Beilu Regal Garden / No. 9 Gongyuan Xijie Company Limited Embassy House / Dongzhimenwai Xiaojie No. 18

Shui On Construction and Materials Limited Beijing Yinzuo Xingye Agency Real Estate Gateway Captial

Note: US$1 = RMB 6.8282

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

5


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

CHINA - CHENGDU

A

In the retail sector, the highlight of the market was the launch of Silver Stone for sale in December 2009. The project is one of the city’s most famous mixed commercial developments, comprising an office block, a five-star hotel and an upper-end shopping mall

28% 24% 20% 16% 12% 8% 4%

1Q 2009

3Q 2007

1Q 2006

3Q 2004

1Q 2003

3Q 2001

1Q 2000

3Q 1998

1Q 1997

3Q 1995

1Q 1994

3Q 1992

1Q 1991

3Q 1989

0% 1Q 1988

According to our research, this take-up of office space will increase by about 20% per annum over the coming years, translating into demand for 607,200 sq m of office space. However, with supply in the market in the order of 2.32 million sq m, average vacancy rates will be over 73%, creating serious oversupply, causing both office rentals and capital values to suffer from substantial downward pressure over the next three years. However, given the long-term growth potential in Chengdu, the office market continues to present opportunities to a number of long-term investors as the existing supply is expected to be absorbed gradually over time.

1-YEAR LENDING RATE

% per annum

s one of the most popular cities in southwestern China, Chengdu has been favoured by a number of real estate investors, with many multinational corporations, local and overseas tycoons, and private investors setting up business in the city, providing strong support to the local office market. It is understood that the take-up of prime office space in Chengdu has been at 60,000-139,000 sq m per annum.

Source: The People’s Bank of China

CHENGDU PROPERTY YIELDS 14% 12% 10% 8% 6% 4% 2%

1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

0%

Office

Source: Colliers

MAJOR INVESTMENT TRANSACTIONS Development

Floor Area (sq m)

Lump Sum Price (RMB million) (US$ million)

Seller

Buyer

Zhong Xin Mei Di Real Estate Development Co,.Ltd Hua Yang Nian Real Estate Co.,Ltd Xin Xi Wang Real Estate Development Co,.Ltd

Local company

Office Tian Fu Avenue

3,000

23.40

3.43

Dong Avenue

20,000

1,500.00

219.68

Ren Min South Road

60,000

4,200.00

615.10

Note: US$1 = RMB 6.8282

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COLLIERS INTERNATIONAL | REGIONAL RESEARCH

Local investors Local investors


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

CHINA - GUANGZHOU

T

he stimulus measures gradually took effect in the second half of 2009. Since the minimum downpayment was lowered to 20%, more prospective purchasers have been prompted to enter the market, thus leading to an increase in activity in the sales market during the period.

1-YEAR LENDING RATE 28% 24% 20% % per annum

Despite the substantial accumulated price growth, property prices continued to remain on an upward trend due to the sustained buying interest among both foreign and domestic investors. Some of the latest sales transactions included the en bloc transaction of Kaisa Plaza and the acquisition of five floors in Nanya Zhong He Plaza by the Guangdong Development Bank.

16% 12% 8% 4%

1Q 2009

3Q 2007

1Q 2006

3Q 2004

1Q 2003

3Q 2001

1Q 2000

3Q 1998

1Q 1997

3Q 1995

1Q 1994

3Q 1992

1Q 1991

Although tightening measures were implemented by the Government, property developers determined that they would go ahead with their investment plans by building up their land banks for development. One of the most notable sales transactions was the successful acquisition by a consortium comprising R&F Properties, Agile Property and Country Garden of a plot of land in Asian Games City. With a total site area of 2.64 million sq ft, the site was sold for RMB25.5 billion, a record high land price in China.

3Q 1989

1Q 1988

0%

Source: The People’s Bank of China

GUANGZHOU PROPERTY YIELDS 16% 14%

% per annum

12%

Looking ahead, the total volume of sales transactions in the local real estate market is expected to slow over the coming few months due to the cooling, antispeculation measures implemented recently by the Government. Meanwhile, with expectations of a higher interest rate cycle, the real estate market as a whole will see additional downward pressure over the near term.

10% 8% 6% 4% 2%

1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

0%

Office

Residential

Retail

Industrial

Source: Colliers

MAJOR INVESTMENT TRANSACTIONS Development Office R&F Yingyue International Nanya Zhong He Plaza International Creative Valley International Creative Valley Kaisa Plaza Office & Retail R&F Yingyue International Residential Gold Arch Residence

Floor Area (sq m)

Lump Sum Price (RMB million) (US$ million)

Seller

Buyer

Infinitus (China) Co Ltd Guangdong Development Bank IT Company Individual Foreign Insurance Company

12,000 11,941

300.00 346.29

43.94 50.71

R&F Group Nanya Group

4,561 1,000 117,575

47.00 14.50 2,817.50

6.88 2.12 412.63

KWG Property KWG Property Kaisa Group

16,000

420.00

61.51

R&F Group

Shanghai Pudong Development Bank

186

6.39

0.94

Individual

Individual

Note: US$1 = RMB 6.8282

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

7


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

CHINA - SHANGHAI

D

ue to abundant liquidity as a result of the Central Government’s economic stimulus policies, Shanghai’s investment sales market became much more active during the second half of 2009. Most buyers were domestic investors or endusers with strong balance sheets. Commercial properties were more popular than residential in terms of the number of sales transactions during the period.

24%

% per annum

20% 16% 12% 8% 4%

1Q 2009

3Q 2007

1Q 2006

3Q 2004

1Q 2003

3Q 2001

1Q 2000

3Q 1998

1Q 1997

3Q 1995

1Q 1994

3Q 1992

1Q 1991

3Q 1989

1Q 1988

0%

Source: The People’s Bank of China

SHANGHAI PROPERTY YIELDS 16% 14% 12% 10% 8% 6% 4% 2% 0% 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

There were also a couple of notable retail transactions during 2H2009, including the sale of InPoint, an 11,000 sq m retail property near Nanjing West Road, for an average price of RMB45,000 per sq m in October 2009, as well as the sale of the 3,000 sq m retail facility of Jinlin Tiandi in November 2009 at a total price of RMB400 million. In the residential sector, the 27-storey serviced apartment block comprising 103 units at Shama Luxe in Xintiandi was sold for RMB928 million in December 2009.

28%

% per annum

Recent office transactions included the sale of the 18th floor of Shui-On Plaza at a price of RMB52,000 per sq m in late December and the acquisition of a 30% stake at K. Wah Centre by K. Wah at an average price of around RMB36,000 per sq m. Meanwhile, in Pudong Lujiazui, the Agriculture Bank of China purchased one tower of Pujiang Shuanghui Towers for RMB4.83 billion in September 2009. The floors from the 1/F to the 41/F in the other tower had been acquired previously at a price of RMB3.77 billion. In addition, a major portion of Pufa Tower was sold to the Hainan Air Group in October 2009 for RMB1.5 billion. In August 2009, SOHO made its first investment deal in Shanghai by acquiring The Exchange on Nanjing West Road for RMB2.45 billion. The building has an above ground GFA of 71,671 sq m.

1-YEAR LENDING RATE

Office

Residential

Looking ahead, it is likely that the volume of market activity will remain buoyant throughout 2010. Office investment yields, currently fetching around 7.0%, are predicted to edge down further due to the sustained buying interest in the marketplace.

Retail

Industrial

Source: Colliers

MAJOR INVESTMENT TRANSACTIONS Development Office Pujiang Shuanghui Towers Pufa Tower The Exchange Residential Shama Luxe at Xintiandi Retail Jinlin Tiandi

Floor Area (sq m)

Lump Sum Price (RMB million) (US$ million)

Buyer

CITIC Pacific /CSSC Shanghai Guosheng Morgan Stanley

Agriculture Bank of China Hainan Air Group SOHO China

189,445 41,773 71,671

8,476.00 1,475.00 2,450.00

1,241.32 216.02 358.81

15,472

928.00

135.91

Mirae Asset Maps Investment

SOCAM

3,167

400.00

58.58

Undisclosed

A Singapore Fund

Note: US$1 = RMB 6.8282

8

Seller

COLLIERS INTERNATIONAL | REGIONAL RESEARCH


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

HONG KONG

D

espite the pre-emptive measures implemented by the HKMA, the real estate investment market showed no signs of significant consolidation in terms of the number of sales transactions across the various property sectors. First, thanks to the continued inflow of capital, the average cost of capital came down further during 2H2009. For example, the three-month Hong Kong interbank offered rates (3M-HIBOR) fell 22 basis points to 0.14% as at the end of December 2009. As such, positive carry emerged in the prime office market as mortgage rates for commercial developments, based on a premium of 150 to 200 basis points above 3M-HIBOR, remained below prevailing office rental yields during the period.

HONG KONG 3-MONTH HIBOR 28% 24%

% per annum

20% 16% 12% 8% 4%

Second, a group of cash-rich private investors continued to dominate the bulk of activity in the investment market. Fundamentally, the real estate investment market in the second half of 2009 was equity- rather than debt-driven, as it was before the financial crisis hit in 3Q2008. Prime office units in traditional business districts and G/F shops remained the most popular targets for most investors. In the office sector, a batch of strata-title office units at Grand Millennium Plaza in Sheung Wan was acquired by investors from mainland China and Taiwan, as well as Hong Kong. In 4Q2009, a Taiwanese company bought two strata-title floors in the low block of Grand Millennium Plaza for HK$332 million, representing an average unit price of HK$11,388 per sq ft. In the retail sector, the key sales transaction was the acquisition of The Pemberton, a vertical retail block in Central with a total floor area of 70,000 sq ft, by a real estate fund for a lump sum of HK$344 million in December 2009.

1Q 2009

3Q 2007

1Q 2006

3Q 2004

1Q 2003

3Q 2001

1Q 2000

3Q 1998

1Q 1997

3Q 1995

1Q 1994

3Q 1992

1Q 1991

3Q 1989

1Q 1988

0%

Source: The Hong Kong Monetary Authority

HONG KONG PROPERTY YIELDS 14% 12%

% per annum

10% 8% 6% 4%

Looking ahead, the local real estate investment market is predicted to perform better in 2010 than in 2009, although there are a number of uncertainties that might affect the pace of recovery going forward. Obviously, the key risk factor for local property prices is the reversal of capital flow. Assuming that the volume of liquidity will remain in the system over the medium term, say 6-12 months, and the average cost of capital continues to stay low, further capital growth in the real estate sector is expected to be maintained over the next 12 months. Property investment yields will remain compressed unless there is a sharp rental catch up in the leasing market during the same period. Office investment yields for quality buildings in prime locations will stay below the market average of 3.5%.

2%

1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

0%

Office

Residential

Retail

Industrial

Source: Rating and Valuation Department, HKSAR Government

MAJOR INVESTMENT TRANSACTIONS Development Office 27-28/F, Low Block, Grand Millennium Plaza 33/F, Cosco Tower Retail G/F, 6-8 Canton Road The Pemberton Industrial Universal Industrial Building Sunhing Chekiang Godown

Floor Area (sq ft)

Lump Sum Price (HK$ million) (US$million)

Seller

Buyer

29,160 20,506

332.10 253.50

42.58 32.50

MGPA GIC

Guotai Junan Local investment company

1,520

843.00

108.08

Local investor

70,000

344.38

44.15

Local investor

Emperor International Holdings Ltd AEW

Undisclosed 252,756

468.00 390.00

60.00 50.00

Excel Vast (Hong Kong) Ltd Sunhing Group

Trinity Elite International Ltd Olympic Creation Ltd

Note: US$1 = HK$7.8

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

9


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

TAIWAN - TAIPEI

T

TAIPEI INTERBANK CALL LOAN MARKET WEIGHTED AVERAGES OF OVERNIGHT INTEREST RATES 28% 24% 20% % per annum

16% 12% 8% 4%

1Q 2009

3Q 2007

1Q 2006

3Q 2004

1Q 2003

3Q 2001

1Q 2000

3Q 1998

1Q 1997

3Q 1995

1Q 1994

3Q 1992

1Q 1988

1Q 1991

0%

The notable deals were the acquisition of Asia Plaza by Shin Kong Life for NT$11.5 billion and the sale of Cashboxparty KTV retail building to Cathay Life for NT$3 billion. Meanwhile, Nanshan Life acquired Rich 19 office in Taichung for NT$2.7 billion and Highwealth Construction purchased the Yi Jin Office building in Taipei and the Asia Rich Tower in Taichung for a total consideration of NT$3.1billion.

3Q 1989

hanks to the relaxed monetary policies implemented by the Government and the gradual recovery of the external economic environment, the local real estate investment market benefitted from an increase in the total volume of sales transactions. According to our research, the real estate investment market saw total turnover reach NT$61.4 billion in the second half of 2009. Insurance companies continued to be the key players as they have a vast amount of spare cash to invest. Compared to other financial investment vehicles, commercial real estate continued to be favoured by a number of insurance companies looking for a stable rental income stream over time.

Source: Central Bank of the Republic of China (Taiwan)

TAIPEI PROPERTY YIELDS 16% 14% 12% % per annum

Institutional investors continued to stay on the sidelines during 2H2009. However, due to the sustained low interest rate environment, flexible loan-tovalue ratios at 70%-80%, the closer collaboration between Taiwan and mainland China, and the fact that current commercial real estate prices are relatively lower than in other countries in the region, overseas institutional investors have started planning a comeback.

10% 8% 6% 4% 2%

1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

0%

Given the ongoing recovery of the global economy and the positive impact attributed to the signing of the Economic Co-operation Framework Agreement (ECFA) with mainland China, the local investment market is expected to grow in 2010. Real estate prices are predicted to rise thanks to keen buying interest among prospective investors going forward.

Office

Residential

Retail

Industrial

Source: Colliers

MAJOR INVESTMENT TRANSACTIONS Development Office San Gong International Building Yi Jin Office building Rich 19 office Asia Rich Tower Residential Starry9 Retail Cashboxparty KTV retail building Industrial Office E-park Industrial Office Building Asia Plaza No. 550 Ruiguang Road industrial office

Floor Area Lump Sum Price (ping) (NT$ million) (US$ million)

Buyer

33.41 Hua Nan Bank 58.35 Jye Tai Precision Industrial Co., Ltd 82.80 Highwealth Construction 36.53 Hong Yu Construction

MassMutual Mercuries Life Highwealth Construction

2,033 Undisclosed

1,070.00 1,869.00

Undisclosed Undisclosed

2,652.00 1,170.00

1,035

550.00

17.17

Taiwan Life Insurance

GIANT CIRCLE LIMITED

2,295

3,000.00

93.66

Yuan Yi Co., Ltd

CathayLife Insurance

8,048 34,787

2,816.00 11,503.00

Cathay Life Insurance Shin Kong Life Insurance

8,411

3,000.00

87.92 Chailease Finance Co., Ltd. 359.13 CPI ASIA MIRROR A LIMITED 93.66 Taiwan Life Insurance

Note : 1 ping = 3. 3 sq m : US$1 = NT$ 32.03

10

Seller

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

Nan Shan Life Insurance Highwealth Construction

Shin Kong Life Insurance


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

JAPAN - TOKYO

L

and values in Tokyo continued to fall across the board, although the pace of decline narrowed. The overall demand for office space remained weak and most companies continued to go for cost-saving options, including downsizing and negotiating a better rental rate for their existing premises, rather than relocating. As a result, the average vacancy rate for Grade A office space had edged up to a high of over 7% by the end of 2009.

JAPAN 10-YEAR GOVERNMENT BOND YIELDS 5%

4%

% per annum

3%

The JREIT market remained difficult and office capital values continued to fall. However, the local Government remained supportive of JREITs with such measures as clarification of the tax rules for mergers, tightened standards for listings and the creation of a public/private fund to support lending. Given this continued support, a number of mergers are expected to take place in the first half of 2010.

2%

1%

2Q 2009 4Q 2009

4Q 2008

4Q 2007 2Q 2008

4Q 2006 2Q 2007

2Q 2006

2Q 2005 4Q 2005

2Q 2004 4Q 2004

4Q 2003

4Q 2002 2Q 2003

4Q 2001 2Q 2002

2Q 2001

2Q 2000 4Q 2000

2Q 1999 4Q 1999

4Q 1998

0%

Source: Bank of Japan

In the sales market, overall activity was slow, particularly in 3Q2009. No property was acquired by JREITs in 3Q2009 for the first time since the JREIT was introduced in September 2001. In 4Q2009, a few properties were traded between JREITs and institutional investors, but most developments were transacted between JREITs and their related companies. Secured Capital Japan acquired Pacific Century Place Marunouchi, which was defaulted by the DaVinci fund, for a lump sum of about JPY140 billion. This was the largest transaction in 2009, even larger than the sale in May 2009 of AIG’s headquarters in Japan for JPY115.5 billion.

TOKYO PROPERTY YIELDS 7% 6%

% per annum

5% 4% 3% 2%

Looking ahead, the majority of investors will continue to wait on the sidelines for clear indications of a recovery in both the economy and the real estate market. As such, the current bid-ask spread, in particular for quality assets, will remain wide at least over the near term.

1%

1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

0%

Office

Residential

Industrial

Source: Colliers

MAJOR INVESTMENT TRANSACTIONS Development Office Nihon Jisho Daiichi Building

Floor Area (sq m)

Lump Sum Price (Yen billion) (US$million)

Seller

Buyer

SPC of Simplex Investment Advisor SPC of Davinci Advisor Kansai Urban Banking Hankyu REIT, Inc.

Hulic

25,561

13.50

146.53

Pacific Century Place Marunouchi Shinsaibashi Urban Building Hankyu Residential Park Axis Tatsumi Stage Park Axis Toyosu Proud Flat Kamata II

81,752 25,839 27,369

140.00 24.40 10.20

1,519.59 264.84 110.71

22,480 34,806 5,316

7.46 14.30 2.98

Urban Stage Nihonbashi Yokoyamacho Fraser Place Howff Shinjuku West Tower Retail Cinema and Sports building and mall building of Aeon Maall Chiba New Town Tsutaya Fukuoka Tenjin

6,898 17,929

3.53 6.50

81.02 Mitsui Fudosan Co. Ltd. 155.22 Mitsui Fudosan Residential Co. Ltd. 32.35 Nomura Real Estate Development Co. Ltd. 38.32 Tosei Co. 70.55 SPC of Re-plus

107,413

12.00

130.25

A domestic institution investor

SEB Asset Management

4,532

3.70

40.16

Undisclosed

Frontier Real Estate Investment Co.

Secured Capital Japan Keihanshin Real Estate GK Kairos Funding Nippon Accomodation Fund Nippon Accomodation Fund Nomura Residential Fund Nomura Residential Fund Orix Real Estate

Note: US$1 = Yen 92.13

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

11


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

SOUTH KOREA - SEOUL

T

he real estate investment market was active in the second half of 2009, with the market seeing a record high lump sum price of KRW1,843 billion during 3Q2009. In terms of unit price, the deal translated into an average of KRW5.43 million per sq m, surpassing the previous high seen in mid-2008.

KOREA BASE RATE (7-DAY REPURCHASE RATE) 6% 5%

% per annum

4%

By district, the GBD recorded the highest levels in terms of the size of total floor area and the lump sum price. Meanwhile, there was only one case in the YBD. In 4Q2009, overall activity slowed, with only four deals completed during the period.

3% 2% 1%

4Q 2009

2Q 2009

4Q 2008

2Q 2008

4Q 2007

2Q 2007

4Q 2006

2Q 2006

4Q 2005

2Q 2005

4Q 2004

2Q 2004

4Q 2003

2Q 2003

4Q 2002

2Q 2002

4Q 2001

2Q 2001

4Q 2000

2Q 2000

Domestic buyers remained the key group of players in the marketplace during the second half of 2009, while only four cases including one purchase via a domestic REIT were sold to foreign investors. In addition, real estate funds accounted for the largest slice of the pie during 2H2009. It was noted that competition was getting stronger and the focus continued to be placed on prime buildings by both institutions and funds. Meanwhile, a number of occupiers have been looking to acquire mid-sized premises.

4Q 1999

2Q 1999

0%

Source: Bank of Korea

SEOUL PROPERTY YIELDS 16% 14%

% per annum

12% 10% 8% 6% 4% 2%

Office

3Q 2009

2Q 2009

1Q 2009

4Q 2008

3Q 2008

2Q 2008

1Q 2008

4Q 2007

3Q 2007

2Q 2007

1Q 2007

4Q 2006

3Q 2006

2Q 2006

1Q 2006

4Q 2005

3Q 2005

2Q 2005

1Q 2005

4Q 2004

3Q 2004

2Q 2004

1Q 2004

0%

Retail

Source: Ministry of Land, Transport and Maritime Affairs, Republic of Korea

MAJOR INVESTMENT TRANSACTIONS Development

Floor Area (Pyung)

Lump Sum Price (KRW billion) (US$ million)

Seller

Buyer

London Capital Advisores (LCA) RREEF Spezial Invest GmbH Samsung Investment Fund KOKREF 15 CR-REITs Dohwa Consulting Engineers Individual Hansol Texile Samsung Investment Fund Jamsil Project Finance Group Samsung Investment Fund KR-3 CR-REITs KTB Asset Management Standard Chartered Korea First Bank Neowiz

Office Cheongjin 8-block(development site)

15,646

390.00

334.91

G-well E&C

SK Soonwha Bldg Samsung Life Insurance Bldg.-Naeja Insong Building Pacific Tower M Tower Maps Songpa Tower Samsung Life Insurance Bldg.-Nonhyun Woori Bank Jamsil Center Dongyang Securities Bldg E-Land Gasan Building MBC Business Cneter Seohyun Building

6,586 13,008 8,562 8,786 23,289 7,045 21,773 21,309 42,346 11,979 6,881 4,994

92.20 52.01 121.90 152.00 47.67 67.31 73.89 210.00 169.71 49.00 92.00 44.68

79.18 44.66 104.68 130.53 40.94 57.80 63.45 180.33 145.74 42.08 79.00 38.37

Samsung Life Insurance Samsung Life Insurance DNDS Mirae Asset Maps AM Mirae Asset Maps AM Mirae Asset Maps AM Samsung Life Insurance Woori Bank RREEF Investment E-Land Foundation for Broadcast Culture HSB Property 1 ABS

Neowiz Building Retail Newcore Gangnam Shopping mall

4,822

65.00

55.82

Kookmin Bank

14,542

220.00

188.92

E-Land Group Newcore Gangnam CR-REITs

Note : 1 Pyung = 3.306 sq m : US$1 = KRW 1,164.5

12

COLLIERS INTERNATIONAL | REGIONAL RESEARCH


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

INDONESIA - JAKARTA

T

he overall property market in Jakarta was slow in 2009, notwithstanding the signs of recovery in the last quarter of 2009. Due to the smooth presidential election and the gradual improvement of the regional economy, property rentals largely held firm, although individual landlords remained flexible on lease negotiations.

16% 14% 12% % per annum

Benefitting from the continued improvement of the external environment, the local office market witnessed an increasing number of lease enquiries in the private sector. However, the bulk of the occupiers acted cautiously, waiting for more positive signs to emerge from both the local political and economic fronts.

BANK INDONESIA RATE

10% 8% 6% 4% 2%

Given a positive projection for GDP growth over 2010 and a much better outlook in 2011, we believe that the property market will show positive growth in 2010. Some positive economic indicators seen early in the year include the strengthening Rupiah against the US Dollar, relatively steady occupancy rates, low interest rates and, more importantly, signs that foreign investors are starting to eye and invest in Indonesia.

4Q 2009

3Q 2009

2Q 2009

1Q 2009

4Q 2008

3Q 2008

2Q 2008

1Q 2008

4Q 2007

3Q 2007

2Q 2007

1Q 2007

4Q 2006

3Q 2006

2Q 2006

Source: Bank of Indonesia

JAKARTA PROPERTY YIELDS 18% 16% 14% % per annum

12% 10% 8% 6% 4% 2% 0% 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

The retail sector will have to put a lot more effort into this year in order to perform better, particularly because of the large amount of vacant space and continued supply projection in the future, and the relatively slow activity among retailers taking space. The big hope is for the apartment sector. It has been indicated that the government will revise the regulation that limits foreign ownership, giving foreigners property ownership for up to 75 years upfront instead of the current 25 years (subject to extension). Currently, with numerous vacant units available in the market, the apartment market is very much relying on this regulation because local buyers are now becoming limited. In short, we believe that 2010 will offer much hope for the property industry to perform better than in 2009.

1Q 2006

Of the various property sectors, in terms of both rentals and occupancy, the local office market experienced immediate growth over the second half of 2009 due to a revival of lease enquiries and the relatively small new supply coming on line in 2010.

4Q 2005

3Q 2005

0%

Office

Residential

Retail

Industrial

Source: Colliers

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

13


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

PHILIPPINES - MANILA

T

he second half of 2009 was a lot better than the first. On the commercial front, demand shows signs of an imminent recovery over the next six months. However, despite minimal activity in the construction of office space in Makati CBD, there remains a glut of office space in the market. Vacancy rates are still on the rise as more space becomes available in many parts of Metro Manila. Rents for office spaces went down by a total of 20%-25% over the past 18 months, but expectations point to stable rents in 2010.

PHILIPPINES REVERSE REPURCHASE RATE (OVERNIGHT) 18% 16% 14% 12% 10% 8% 6% 4%

In the residential segment, sales take-up of ongoing residential projects in Metro Manila outperformed expectations. As a result, developers boosted their developments in the pipeline by launching new residential projects for both the luxury and the middle income markets. The bullish sentiment of developers moving forward is highlighted by strategic land acquisitions in various locations in Metro Manila and the provinces. Some developers are also being aggressive in expanding their business by entering other segments of the market. For example, Ayala Land formed a new group, Amaia, that will offer affordable housing projects and Robinsons Land signalled its entry into the luxury residential segment by launching a Makati CBD project called Signa Designer Residences.

3Q 2009

1Q 2009

3Q 2008

1Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

3Q 2004

1Q 2004

3Q 2003

1Q 2003

3Q 2002

1Q 2002

3Q 2001

1Q 2001

3Q 2000

1Q 2000

0%

Source: Central Bank of Philippines

MANILA PROPERTY YIELDS 18% 16% 14% % per annum

Average rents for luxury condominiums in Makati CBD continue to correct slightly as the result of a slight glut in supply. Demand for overall supply in the secondary rental market remains soft in non-CBD locations.

2%

12% 10% 8% 6% 4% 2% 0% 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

What will be interesting to see moving forward is the implementation of the highly anticipated local Real Estate Investment Trust (REIT) law, which was passed in December 2009. With the implementing rules and regulations likely to be released in 1Q2010, REITs will open up opportunities for the industry to finance more projects in the commercial, retail, hospitality, residential and leisure segments of the market.

Office

Residentail

Source: Colliers

MAJOR INVESTMENT TRANSACTIONS Development

Floor Area (Hectares)

Lump Sum Price (Peso billion) (US$ million)

Office / Residential Bonifacio North

8.38

3.15

67.97

Quezon City

29.00

6.00

129.43

Note : US$1 = Peso 46.356

14

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

Seller

Buyer

Bases Conversion and Development Authority National Housing Authority (Joint-venture agreement)

Megaworld Corporation Ayala Land, Inc.


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

SINGAPORE

O

n the back of the recent nascent economic recovery seen in Singapore, the loosening of credit and improved market sentiment, the property investment sales market garnered a total investment in sale transactions of S$8.92 billion in the second half of 2009, representing nearly three times the level tallied in the second half of 2008, in the aftermath of the global financial crisis.

SINGAPORE 3M-INTERBANK 10% 9% 8%

% per annum

7%

There was a noticeable increase in the number of deals at and above the S$100 million band in 2H2009, with a total of 15 such transactions registered during the period. One of the largest deals was the S$541.9-million acquisition of the 99year leasehold Clementi Mall from the Government by a joint venture involving Singapore Press Holdings, NTUC FairPrice Co-Op and NTUC Income Insurance Co-Op. Another was Frasers Centrepoint Limited’s injection of the S$342.5million Alexandra Technopark, a high-specifications industrial development into Frasers Commercial Trust.

6% 5% 4% 3% 2% 1% 1Q 1988 4Q 1988 3Q 1989 2Q 1990 1Q 1991 4Q 1991 3Q 1992 2Q 1993 1Q 1994 4Q 1994 3Q 1995 2Q 1996 1Q 1997 4Q 1997 3Q 1998 2Q 1999 1Q 2000 4Q 2000 3Q 2001 2Q 2002 1Q 2003 4Q 2003 3Q 2004 2Q 2005 1Q 2006 4Q 2006 3Q 2007 2Q 2008 1Q 2009 4Q 2009

0%

Source: Monetary Authority of Singapore

SINGAPORE PROPERTY YIELDS

In the second half of 2009, the Government announced that it will reinstate the Confirmed List1 for residential and industrial property development under its Government Land Sales (GLS) programme for the first half of 2010. However, it will not introduce any commercial, hotel or white sites to the List over this period, preferring to maintain hotel, commercial, residential, commercial/residential and white sites on the Reserve List2for 1H2010.

18% 16% 14% % per annum

12% 10% 8% 6% 4% 2%

Going forward, in line with the modest economic recovery foreseen for the key global economies, the pick-up in investors’ sentiment and confidence, which began in the second half of 2009, is likely to continue into 2010. Coupled with the unfreezing of the global credit market, the presence of cash-rich investors who are likely to raise exposure of their portfolios to property investment, as well as the availability of property investment options at corrected price levels, the investment sales market in 2010 is expected to outperform that in 2009.

1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

0%

Office

Residential

Retail

Industrial

Source: Colliers 1. Sites on the Confirmed List are released for tender at a pre-determined date without the need for the sale to be triggered by an application. The number of sites on the Confirmed List in each GLS programme will depend on market conditions, the strategic need for certain sites to be developed and other factors. 2. On the Reserve List, the Government will release a site for sale only if an interested party submits an application for the site to be put up for tender with an offer of a minimum purchase price that is acceptable to the Government. The successful applicant must undertake to submit a bid for the site in the ensuing tender at or above the minimum price offered in the application.

MAJOR INVESTMENT TRANSACTIONS Development Commercial - Office Prudential Tower - 6 floors / Cecil Street Aviva Building / Cecil Street Residential Development Site / Dakota Crescent Development Site at Former The Parisian / Angullia Park Development Site / Jalan Senang/Lengkong Tujoh Commercial - Retail Clementi Mall / Commonwealth Avenue West / Clementi Avenue 3 Katong Mall / East Coast Road Industrial Alexandra Technopark / Alexandra Road Soon Hock Holding Logistics Building / Penjuru Close

Floor Area (sq ft)

Lump Sum Price (S$ million) (US$ million)

Seller

Buyer

APF Property Investments (S) Pte Ltd Aviva

K-REIT Asia Sommerville Development

67,300

106.29

75.74

67,708

65.00

46.32

647,599* 137,519*

329.00 283.00

234.43 Urban Redevelopment Authority 201.65 Overseas Union Enterprise

UOL Group China Sonangol Land Pte Ltd

434,700*

158.00

112.58

Hoi Hup and Sunway Group

193,750

541.90

386.13

172,170

247.55

176.39

1,048,607 444,043

342.50 43.00

244.05 30.64

Lee Tat Developmemt

Housing Development Board Singapore Press Holdings and NTUC FairPrice Co-Op and NTUC Income Insurance Co-Op Tuan Sing Holdings Perennial Katong Retail Trust Orrick Investments Pte Limited SH Cogent Logistics

Frasers Commercial Trust Mapletree Logistics Trust

Note: US$1 = S$ 1.4034 * Potential gross floor area

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

15


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

THAILAND - BANGKOK

T

he overall investment market remained weak during the second half of 2009 due to the prevailing uncertainty about the political environment in Thailand. The current uncertainty on the approval of various environmental regulations for the Map Ta Phut Industrial Estate has cast a shadow over industrial investment in Thailand.

10%

8%

6%

% per annum

4%

2%

4Q 2009

3Q 2009

2Q 2009

1Q 2009

4Q 2008

3Q 2008

2Q 2008

1Q 2008

4Q 2007

3Q 2007

2Q 2007

1Q 2007

4Q 2006

3Q 2006

2Q 2006

1Q 2006

4Q 2005

3Q 2005

2Q 2005

0% 1Q 2005

Overall, the registered capital of applications submitted for investment approval fell nearly 6% year-on-year (YoY) from THB418 billion to THB393.2 billion during the period between January and November 2009 and there was a reduction in investment flow from foreign investors. For example, investment from Japan declined 44% YoY to THB54.6 billion, although demand attributed to local investors was relatively strong.

THAILAND 3M-BIBOR

Source: Bank of Thailand

Foreign Direct Investment (FDI) in real estate stood at THB6.89 billion in 3Q2009, representing a fall of 36% YoY. Going forward, the prospective role of FDI in the local real estate market will remain largely uncertain.

BANGKOK PROPERTY YIELDS 18% 16% 14% 12% % per annum

No new property stocks were listed on the Stock Exchange of Thailand (SET) during the second half of 2009. However, the Thanasiri Group became the first property developer to list on SET’s Market for Alternative Investment. The company specialises in landed housing projects in Nonthaburi and Phuket, and has a registered capital of THB255 million.

10% 8% 6% 4% 2% 0% 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

Four new property funds were listed on the SET during the second half of 2009. TPARK Logistics Property Fund (TLOGIS) is worth THB1.533 billion and will invest in land, warehouses and cold storage facilities at Ticon Logistics Park. Sala@sathorn Property Fund has invested in the Sala@sathorn office building and is worth THB1.67 billion. The MFC Strategic Storage Fund was set up with a capitalisation of THB608 million and invests in cold storage facilities. The 101 Montri Property Storage Fund, worth THB603 million, invests in warehouse facilities.

Office

Residential

Retail

Industrial

Source: Colliers

MAJOR INVESTMENT TRANSACTIONS Development Office Sathorn Road Surawong Road Sala @ Sathorn, Sathorn Road Retail Central Plaza Pinklao, Boromarajajinani Road Industrial TICON Logistics Park - Wangnoi and Park - Bangna PCL Rama 2 Road, Muang

Floor Area (sq m)

Lump Sum Price (Baht million) (US$ million)

Buyer

2,706 3,976 2,924

1,000.00 500.00 1,649.40

29.98 14.99 49.44

CIMB Thai Bank Leenuttapong Family St. Louise Holding Co.,Ltd.

Undisclosed TCC Group Sala @ Sathorn Property Fund

185,671

5,680.00

170.27

Central Pattana PCL

CPN Retail Growth Property Fund

144,448

1,530.00

45.86

11,132

142.50

4.27

Note: US$1 = THB33.359

16

Seller

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

TICON Industrial TICON TPARK Logistics Logistics Connection Property Fund North Agricultural Co.,Ltd. MFC - Strategic Storage Fund


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

VIETNAM - HO CHI MINH CITY

C

VIETNAM REAL GDP GROWTH 9% 8% Cumulative Year-on-Year Change

7% 6% 5% 4% 3% 2% 1% 4Q 2009

3Q 2009

2Q 2009

1Q 2009

4Q 2008

3Q 2008

2Q 2008

1Q 2008

4Q 2007

3Q 2007

2Q 2007

1Q 2007

4Q 2006

3Q 2006

2Q 2006

1Q 2006

4Q 2005

3Q 2005

2Q 2005

0% 1Q 2005

ompared with other major cities in the region, the real estate investment market in Ho Chi Minh City (HCMC) is currently in the early stages of development. Regarding market size, the number of investment-grade assets available for sale to both local and overseas investors has been very limited. For example, the total size of the Grade A office market in HCMC is 105,000 sq m of floor area in six buildings. A similar situation is seen in the local serviced apartment and retail markets. Meanwhile, in the industrial sector, speculative projects being built for lease are virtually non-existent. Industrial manufactures usually lease land by paying a capital sum in advance and then build their own facilities to suit their needs. In addition, market transparency remains an issue as investment yields are not publicly available and nearly every sales transaction is regarded as a special purchase.

Source: The State Bank of Vietnam

During the good years before the financial crisis, a number of international real estate investment trust (REIT) players visited Vietnam and prepared to acquire local real estate at 7.5%. This reflected a country risk of about 2.5 percentage points higher than the typical 5% benchmark yields in other cities in the region. However, yield expectations changed at the beginning of 2008 when inflation in Vietnam rose as high as 25% per annum. Prospective investors changed their strategies to acquire distressed assets at yields of no less than 20% per annum. With market volatility and a lack of real estate assets available for sale, the market has seen a thin volume of sales transaction over the past four years.

16% 14% 12% % Per annum

10% 8% 6% 4% 2% 0% 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

Over the medium term, the local real estate investment market will see yields falling to between 12% and 15% per annum for prime assets with quality management. Special purchasers, such as REITS, are willing to accept very low yields, although distressed asset buyers will anticipate high yields. Prime office properties available for lease to most international tenants will be on the lower end of the yield range (i.e. 12%), while industrial properties will show yields of around 15%. It should be noted that the above range is assumed on the basis of an international purchaser. Local real estate buyers usually adopt a different attitude to risk as Vietnamese citizens are permitted to acquire freehold properties. Foreign investors are allowed to purchase leasehold interests but there remains uncertainty concerning the security of tenures. From a legal perspective, it is still unclear whether or not leaseholders have the right to renew after the lease expires.

VIETNAM PRIME INTEREST RATE

Source: Colliers

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

17


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

INDIA

I

INDIA REPO RATE 10% 9% 8% 7% Per annum

ndia’s overall economy showed signs of recovery during the second half of 2009, with various factors suggesting that the country’s economy has bounced back and the Finance Ministry projecting a growth in GDP of 7.75% for 2009-10. Indian industry continued to show robust recovery, with a growth rate touching a 25-month high of 11.7% in November 2009. The latest foreign direct investment (FDI) numbers have also shown renewed growth, an indicator of long-term expectations for the economy. However, a large portion of FDI is tending to go into sectors where the average capital requirement is also high, such as the core sectors of real estate and power.

6% 5% 4% 3% 2% 1%

Institutional investors have been actively looking for investment opportunities, with the residential sector being the most sought after due to encouraging signs of economic recovery, cheaper entry price levels, lower borrowing costs and the inherent demand for housing.

1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

0%

Source: Reserve Bank of India

The office market also showed signs of recovery, with a revival of leasing activity during the second half of 2009. India-focused funds, as compared to global funds, have been more active as many global funds continued to adopt a wait-and-see strategy. A number of other funds, including Red Fort Capital, Edelweiss, ASK Investments and ICICI Ventures, have been actively raising funds for local investment opportunities.

INDIA REAL GDP GROWTH 12%

On the policy front, the Reserve Bank of India’s monetary policy gave the directive to banks to increase standard provisioning norms on loans for commercial real estate from 0.4% to 1.0%. This represented an increase in interest costs, which the market perceived as a reduction of funding that will be available to developers in the future. However, it was regarded as the right pre-emptive move to prevent the formation of a local real estate market asset bubble.

18

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

8% 6% 4% 2% 0% 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009

Prompted by the positive signs of economic recovery, a number of realty companies, including Lodha Sahara Prime City, Emaar MGF and BPTP, filed draft red herring prospectuses (DRHPs) with the Securities Exchange Board of India for IPO listing in 1Q2010. Several listed companies, such as DLF, Unitech, Indiabulls Real Estate, Sobha Developers and HDIL, went in for successful qualified institutional placements or promoter stake sales and raised over US$2 billion. The ability of listed realty players to raise funds gave privately held firms the confidence to look into the primary market.

Year-on-Year Change

10%

Source: Central Statistical Organisation, Ministry of Statistics and Programme Implementation, Government of India


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

AUSTRALIA - ADELAIDE

AUSTRALIA OCR

F

10%

ollowing an increase in vacancy levels in July 2009 to 4.8%, demand levels have now begun to stabilise with an improvement anticipated in 2010. In the early part of 2010, overall vacancy rates will be impacted only by the additional stock completed in 2009. Currently, an estimated 22,000 sq m remains seeking pre-commitment in these developments. A modest outlook suggests that there will be some vacant stock in 1Q2010, resulting in a further increase in overall vacancy rates to 6.0%-6.5%. By mid-2010, vacancy rates will start to tighten and are expected to fall back to below 6%.

% per annum

8%

6%

4%

Development activity will be limited until at least 2011 as the ability to secure funding for many projects has been difficult. Given this, no new development projects were announced in 4Q2009. Currently, any future new project will coincide with tenant pre-commitment, thus helping to keep vacancy rates low going forward.

3Q 2009

1Q 2009

3Q 2008

1Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

3Q 2004

1Q 2004

3Q 2003

1Q 2003

3Q 2002

1Q 2002

3Q 2001

1Q 2001

3Q 2000

0%

1Q 2000

2%

Source: Reserve Bank of Australia

ADELAIDE PROPERTY YIELDS 16%

On the sales front, institutions continued to unload their portfolios in an attempt to reduce their overall debt levels, causing a two-fold increase in the number of sales transactions in 2009. Although only two major investment transactions were completed in 3Q2009, overall activity is expected to increase in 2010.

14%

% per annum

12% 10% 8% 6% 4%

In the industrial sector, the overall volume of sales transactions fell in the second half of 2009 due to the withdrawal of institutions from the buying arena, notwithstanding the sustained buying interests from a number of private investors. Given that the same conditions are expected to prevail over the short term, investment yields for premises located in less-established areas may increase. Overall, demand for units priced at AU$3 million or below is expected to remain strong.

2%

1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

0%

Office

Industrial

Source: Colliers

Leasing demand remained stable for the traditional inner industrial precincts, fuelling further rental growth during the second half of 2009. Looking forward, the market will see an increase in activity in the first half of 2010 if more stock is released onto the market. MAJOR INVESTMENT TRANSACTIONS Development Office 199 Grenfell Street 115 Grenfell Street 80 King William Street Retail Firle Plaza, 171 Glynburn Road Industrial Allotment 101 Cavan Road & 8-10 Waldaree Street

Floor Area (sq m)

Lump Sum Price (AUD million) (US$ million)

Seller

Buyer

5,061 13,903 8,474

13.75 41.00 21.75

12.33 36.77 19.51

Becton Investment Management Investa Funds Management Trinity Limited

Private Investor Local Private Investor Local Private Investor

12,143

37.75

33.86

ISPT

Firle Property Management Pty Ltd

20,466

15.00

13.45

Celdann Pty Ltd

Cavan Property Unit Trust

Note: US$1 = AUD1.1150

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

19


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

AUSTRALIA - CANBERRA

I

AUSTRALIA OCR 10%

8%

6%

% per annum

4%

3Q 2009

1Q 2009

3Q 2008

1Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

3Q 2004

1Q 2004

3Q 2003

1Q 2003

3Q 2002

1Q 2002

3Q 2001

1Q 2001

0%

3Q 2000

2%

The outlook for non-contemporary accommodation will be less optimistic and capital values are expected to fall further, albeit at a slower rate. The market dynamics have changed, with a widening gap between old and new building stock in terms of rental values, yields and capital value rates. Tenants in older accommodation now have greater bargaining power, which will reduce rental growth and increase incentive levels. Non-market review mechanisms in existing leases have created a situation where many secondary buildings have passing income in excess of market levels. This will change as market reviews, renewals and new lettings take effect, and reduce net income and capital values.

1Q 2000

nvestor confidence in the Canberra commercial property market improved in 2009. The completed sales of Industry House, 64 Allara Street and 10 Rudd Street, impending sale of the ATO Building and 82 Northbourne Avenue, and improved sentiment from both international and national institutions have helped narrow the gap between the expectations of vendors and buyers. Prime office buildings have been particularly sought after due to the security of longterm government leases and attractive yields.

Source: Reserve Bank of Australia

CANBERRA PROPERTY YIELDS 16% 14% 12% 10% 8% 6% 4% 2% 0%

The quality of Canberra stock will continue as new developments are completed over the next few years, in addition to the significant amount that has been delivered over the past three years. We expect yields to be relatively stable over the short to medium term and incremental capital growth to be achieved for prime assets that meet contemporary standards. Secondary assets with inflated passing rents are likely to experience further capital depreciation over the short term and might be considered for major refurbishment and/or redevelopment.

1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

% per annum

The migration of tenants from old to new stock has caused a sharp increase in sub-leasing vacancy levels, which have doubled from 1.3% to 2.6% in the Canberra region. The delivery of new stock without pre-commitments over the past 12 months has caused vacancy levels to increase for Grade A premises, a trend that will continue in 2010. However, it will be corrected over the next few years as new stock absorbs demand from second-tier developments.

Office

Source: Colliers

MAJOR INVESTMENT TRANSACTIONS Development Office 10 Rudd Street 4 Marcus Clarke 19-25 Moore Street 7-11 Barry Drive 82 Northbourne

Floor Area (sq m)

Lump Sum Price (AUD million) (US$ million)

4,736 2,354 3,559 2,375 7,000

Note: US$1 = AUD1.1150

20

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

18.70 9.70 12.40 8.59 44.00

16.77 8.70 11.12 7.70 39.46

Seller

Buyer

Mirvac Cromwell Becton Private Private

Private Private Private Private Private


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

AUSTRALIA - MELBOURNE

D

ue to positive economic results, including positive GDP growth and strong job growth figures, the Reserve Bank of Australia (RBA) started to increase interest rates from the lows in October 2009 with three consecutive increases of 25 basis points in October, November and December 2009 to the current level of 3.75%. The national unemployment rate reached a high of 5.9% in 2009 but declined to 5.5% in December 2009, with many economic commentators believing that the unemployment rate has now peaked. Strong employment growth and a substantial growth in house prices put additional pressure on the RBA to lift rates.

AUSTRALIA OCR 10%

% per annum

8%

6%

4%

3Q 2009

1Q 2009

3Q 2008

1Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

3Q 2004

1Q 2004

3Q 2003

1Q 2003

3Q 2002

1Q 2002

3Q 2001

1Q 2001

Private and offshore investors dominated the bulk of sales activity in 2009. Investment sales transactions (on sales in excess of AU$10 million) in Melbourne’s CBD totalled AU$600 million in 2009. The major highlight in 2009 was the sale of 15 William Street in June 2009 to Deka Immobilien Investment. The shortand long-term appeal of the Melbourne CBD office market has been enhanced, bringing forward demand from active European and Asian groups. The results of the latest Colliers International Investor Sentiment Survey 3Q2009 also indicate that investors believe that the market has seen its bottom and is poised for an upswing as early as mid-2010. In the survey, the Melbourne CBD office market was identified as one of the top two locations offering the best investment value over the next 12 months.

3Q 2000

0%

1Q 2000

2%

Source: Reserve Bank of Australia

MELBOURNE PROPERTY YIELDS 16% 14%

% per annum

12% 10% 8% 6% 4%

Leasing activity levels remained steady during the second half of 2009, with a number of significant leasing transactions taking place in quality office buildings as landlords continued to offer attractive incentives. Net office rentals for prime grade stock remain stable.

2%

1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

0%

Office

Industrial

Source: Colliers

In the industrial sector, there was an improvement in both sales and leasing activity in the second half of 2009. Investment yields for prime assets remained stable and were at 8.50% as of 4Q2009, while second-tier industrial developments were between 10% and 11%.

MAJOR INVESTMENT TRANSACTIONS Development Office 128 Exhibition Street 410 Elizabeth Street 350 Collins Street 456 Lonsdale Street Industrial 324 Frankston Dandenong Road 1-23 Wirraway Drive Lot 5, Horsburgh Drive

Floor Area (sq m)

Lump Sum Price (AUD million) (US$ million)

Seller

Buyer

4,737 6,091 17,798 8,427

18.00 15.00 51.05 27.00

16.14 13.45 45.78 24.22

Undisclosed Private Orchard Funds Management Macquarie Direct

Salvest Capital Undisclosed Prime Value Private Investor

29,042 7,915 18,020

20.20 18.90 22.00

18.12 16.95 19.73

AMP Capital Salta Properties Undisclosed

Prime West Private Investor Private Investor

Note: US$1 = AUD1.1150

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

21


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

AUSTRALIA - PERTH

I

10%

8%

6%

4%

3Q 2009

1Q 2009

3Q 2008

1Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

3Q 2004

1Q 2004

3Q 2003

1Q 2003

3Q 2002

1Q 2002

3Q 2001

1Q 2001

0%

3Q 2000

2%

1Q 2000

Yields for the Perth CBD have stabilised to an average of circa 7.5% after softening in the first half of 2009. With the rising level of optimism over the past six months, investment yields may begin to tighten in 2010. Foreign investors continue to favour Perth as a favourable investment location in Western Australia for supplying minerals and natural gas to the world.

AUSTRALIA OCR

% per annum

nvestment sales transactions remained subdued in the second half of 2009, with four major transactions occurring in the CBD. The largest one was the sale to an institutional investor of a 50% stake in a fully pre-committed office development. Uncertainty in the future course of the office market in combination with tight credit conditions remain the major challenges facing transaction volumes.

Source: Reserve Bank of Australia

On the industrial front, the number of investment transactions fell significantly in 2009. Demand for sizeable developments is apparent in the marketplace, however limited stock is available for sale. Many investors are looking for bargains but there are very few distressed assets available over the short term. Yields will range between 8.0% and 9.5% in 2010 as investors remain largely cautious.

PERTH PROPERTY YIELDS 16% 14% 12% % per annum

Interest rates in Australia have risen in 2009 and are likely to rise further in 2010 as the Reserve Bank of Australia will act pre-emptively in order to dampen any uncontrollable inflation. If there is no corresponding growth on the economic front, the prospective increase in interest rates will result in low investment activity in 2010.

10% 8% 6% 4% 2%

1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

0%

Office

Industrial

Source: Colliers

MAJOR INVESTMENT TRANSACTIONS Development

Floor Area (sq m)

Lump Sum Price (AUD million) (US$ million)

Seller

Buyer

Office 58 Mounts Bay Road

22,294

95.00*

85.20

Charter Hall

6 King Park Road 23 Barrack Street

1,553 960

10.30 7.50

9.24 6.73

Finander Pty Ltd MPH Resources Pty Ltd

53-55 Ord Street Retail 622- 646 Hay Street Industrial 52-64 Sheffield Rd

6,864

41.50

37.22

Cfs Managed Property Ltd

Commonwealth Property Office Fund Chyreck Nominees Pty Ltd Hire Intelligence International Ltd Perpetual Corporate Trust

24,076

114.50

102.69

CPT Manager Limited

Starhill Global REIT

3,639

9.35

8.39

Trust Co of Australia Ltd

Argosy Nominees Pty Ltd

Note: US$1 = AUD1.1150 * 50% share

22

COLLIERS INTERNATIONAL | REGIONAL RESEARCH


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

AUSTRALIA - SYDNEY

After reducing the official cash rate to a 50-year low of 3.00% in April 2009, the RBA started to move interest rates up from the lows in October 2009 with three consecutive increases of 25 basis points in October, November and December to the current 3.75%. These increases occurred due to positive economic results, including positive GDP growth and strong job growth figures. The national unemployment rate reached a high of 5.9% in 2009 but declined to 5.7% and held steady in 4Q2009. Concerns in early 2009 that the unemployment rate would escalate to between 7% and 8% have abated and the rate is now not expected to go beyond current levels. Stronger than expected retail sales in November and December 2009, as well as rising house prices, put additional pressure on the RBA to lift rates further.

AUSTRALIA OCR 10%

% per annum

8%

6%

4%

3Q 2009

1Q 2009

3Q 2008

1Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

3Q 2004

1Q 2004

3Q 2003

1Q 2003

3Q 2002

1Q 2002

3Q 2001

1Q 2001

3Q 2000

0%

1Q 2000

2%

Source: Reserve Bank of Australia

Overall, the second half of 2009 saw a strong increase in sales activity within Sydney’s CBD, with AU$105 million worth of major office sales taking place in 3Q2009 and a massive AU$808 million in 4Q2009. The major highlight of 2009 was the sale in December 2009 of Aurora Place at 88 Phillip Street to South Korean National Pension Service. The sale represented the first of a major premium-grade building in the CBD since the sale of Chifley Tower in 2005. What’s more, at a sales price of AU$685 million, it was one the largest office sale to take place in the world since the global financial crisis took hold in 2008.

SYDNEY PROPERTY YIELDS 16% 14%

% per annum

12%

In the Sydney industrial market, there was an increase in sales and leasing activity during the second half of 2009 due to an increase in imports and stock replenishment in the private sector. During 4Q2009, the market saw the first purchase of an industrial asset by a listed property trust in more than 12 months when the Dexus Property Group bought 2-4 Military Road, Matraville, for AU$46 million.

10% 8% 6% 4% 2%

1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

0%

Office

Industrial

Source: Colliers

MAJOR INVESTMENT TRANSACTIONS Development Office Aurora Place 60 Union Street, Pyrmont 20 Hunter Street, Sydney 234 Sussex Street, Sydney Industrial 2-4 Military Road, Matraville 2 Quarry Road & 33 James Erskine Drive, Erskine Park 70-82 Marple Avenue,Villawood

Floor Area (sq m)

Lump Sum Price (AUD million) (US$ million)

Seller

Buyer

South Korea National Pension Service AFIAA (Swiss Pension Fund) ACE Trust Private

48,908

685.00

614.35

19,790 9,942 11,067

137.00 77.00 46.00

122.87 69.06 41.26

Commonwealth Property Investment Trust Charter Hall Grosvenor Australia Stockland Trust Group

30,154 12,897

46.10 22.40

41.35 20.09

AMP Capital Investors ING Industrial Fund

Dexus Property Group Private Investor

16,339

15.55

13.95

ING Industrial Fund

Private Investor

Note: US$1 = AUD1.1150

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

23


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

NEW ZEALAND - AUCKLAND

I

In the retail sector, prime retail rents stabilised in 4Q2009 after a decline of around 15% since the beginning of the year. Prime locations, such as lower Queen Street, still remain retailers’ favourite spots. Due to the stabilisation of retail spending and the return of consumption confidence, retail investment sentiment rebounded to the levels seen in early 2009. Prime average retail yields tightened to around 7% in 4Q2009.

9.0% 8.0% 7.0% % per annum

6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 3Q 2009

1Q 2009

3Q 2008

1Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

3Q 2004

1Q 2004

3Q 2003

1Q 2003

3Q 2002

1Q 2002

3Q 2001

1Q 2001

3Q 2000

1Q 2000

0.0%

Source: The Reserve Bank of New Zealand

AUCKLAND PROPERTY YIELDS 16% 14% 12% 10% 8% 6% 4% 2% 0% 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

In the industrial sector, the property council/IPD investment index reported that Auckland industrial investment property returned a total of 2.4% for the year to September 2009, up from 0.6% in the March 2009 quarter. Industrial vacancy levels in the Auckland region rose to 6.4% in August 2009 from 4.8% six months previously and prime market yields stabilised at between 7.75% and 8.75%. Good-quality, well-located properties with secure medium- to long-term tenants remain in favour, and a number of private investors and high-net-worth individuals are merging to acquire larger industrial assets.

NEW ZEALAND OCR

% per annum

n the office sector, vacancy rates moved up in most CBD precincts, with the average rate registered at 11.5% in 4Q2009 compared with 8.4% in mid-2009. Prime-grade office vacancy rates also rose to 11.5% over the same period, up from 5.4% in June 2009. In 2009, typical prime office rents fell to around NZ$330 per sq m per annum, down 8% from early 2009, as tenants opt for renewals rather than take new leases. Landlords are agreeing to shorter lease terms and lease term extensions to increase tenant flexibility, in some cases offering a rent-free period as part of an incentive package. The sales transactions that have occurred in the Auckland market have shown the return to the market of private investors and property syndicates looking to take advantage of cyclical lows. Investment yields are now between 8% and 9% for typical prime-grade office space and are expected to remain stable over the next 12 months.

Office

Retail

Industrial

Source: Colliers

MAJOR INVESTMENT TRANSACTIONS Development

Floor Area (sq m)

Lump Sum Price (NZD million) (US$ million)

Office 60 Cook & 143 Nelson Streets 4,604 Aurecon House, 139 Carlton Gore Road 5,929 Retail Berkley Cinema & Retail complex, 1,739 32-34 Anzac Street Birkenhead Retail Complex, 174 Mokoia Road 1,355 Rialto Centre & Carlton DFK Tower 7,865 Buildings, 135-187 Broadway Industrial 169 Bush road 6,084 (office/warehouse) 10,000 (yard) 38A & 38B Harris Road & 73 Crooks Road 4,497 11 Dalgety Drive 14,363 130 Keers Road 6,814 (office/warehouse) 20,146 (yard) 92-98 Harris Road 7,313 Note: US$1 = NZD1.3856

24

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

Seller

Buyer

7.68 26.65

5.54 19.23

Kermadec Property Fund Goodman Property Trust

Undisclosed Overseas Investor

7.00

5.05

Kermadec Property Fund

Undisclosed

5.90 49.00

4.26 35.36

Private Owner National Property Trust

Private Investor Ladstone Developments

9.40

6.78

Siemens (NZ)

Private Investor

7.32 11.70 7.40

5.28 8.44 5.34

Private Owner Property For Industry Pangani Properties

Private Investor Corporate Investor Stuart P C

12.34

8.91

Direct Property Fund

Private Investor


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

NEW ZEALAND - WELLINGTON

T

he CBD office leasing market has experienced a series of rental reductions since mid-2008, with prime rents now sitting at around NZ$374 per sq m per annum. The overall vacancy rate increased from 6% in 2Q2009 to 6.7% in 4Q2009, while prime-grade vacancy rates remained stable at around 0.7% and secondary grade rates rose from 6.7% six months ago to 7.4% in 4Q2009.

NEW ZEALAND OCR 9.0% 8.0% 7.0% % per annum

6.0%

Investment yields in the majority of the office precincts remained static in 4Q2009. However, yields have edged up by 25 to 50 basis points in the Core precinct and investment activity remained active in the sub-NZ$3 million bracket. The prevailing trend is expected to continue over the next 12 months, with face office rents dropping by a further 2.4% to the end of 2010. Capital values are also expected to decline further over the next 12 months on the back of weakening rents.

5.0% 4.0% 3.0% 2.0% 1.0% 3Q 2009

1Q 2009

3Q 2008

1Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

3Q 2004

1Q 2004

3Q 2003

1Q 2003

3Q 2002

1Q 2002

3Q 2001

1Q 2001

3Q 2000

1Q 2000

0.0%

Source: The Reserve Bank of New Zealand

In the industrial sector, vendors have been offering a range of lease incentives, including straightforward rental reductions. These have been more prevalent in secondary or larger warehouses with floor areas of over 3,000 sq m. Industrial capital values have been dropping, although the rate of decline has narrowed. With a further downslide in rentals, industrial capital values will see a further downward adjustment over the next 12 months.

WELLINGTON PROPERTY YIELDS 16% 14%

% per annum

12%

In the retail sector, the pace of rental decline in the CBD narrowed from 5.1% in mid-2009 to 4.0% in 4Q2009. With strengthening consumption confidence and improving market sentiment, the retail market saw a return of investment demand during 4Q2009. This was particularly the case for properties in the lower price bracket. Despite the fall in rentals, investment yields were compressed further to an average of 6.9% and 7.4% in the prime and secondary markets, respectively, during 4Q2009.

10% 8% 6% 4% 2%

1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009

0%

Office

Source: Colliers

MAJOR INVESTMENT TRANSACTIONS Development Office 15-21 Abel Smith Street Old Wool House, 139-141 Featherston Street

Floor Area (sq m) 1,320 2,430

Lump Sum Price (NZD million) (US$ million) 4.30 5.10

3.10 3.68

Seller

Buyer

Liquidators of Williams & Smith Hong Polo

The Wellington Company Stressfactor Investments

Note: US$1 = NZD1.3856

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

25


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

This page is deliberately left blank.

26

COLLIERS INTERNATIONAL | REGIONAL RESEARCH


Appendix Major Market News Contacts


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

Greater China

MAJOR MARKET NEWS

Beijing The Beijing Municipal Government on 24 June 2009 issued the Implementation of Provisions to Encourage Multinational Corporations to Set up Regional Headquarters in Beijing, corresponding to the Provisions to Encourage Multinational Corporations to Set up Regional Headquarters in Beijing released on 21 May 2009.The act aims at sharpening Beijing’s edge compared to Shanghai, Hong Kong and Singapore, which are also actively creating conditions to attract MNCs’ headquarters. According to the Implementation, MNCs with Asian headquarters newly established in Beijing can benefit from government subsidiaries of as much as RMB10 million. Sources from the Beijing Commission of Development and Reform reveal that the Implementation Plan of Restructure and Revitalisation of the Electronic Information Industry in Beijing (‘the Plan’) will soon be officially released. According to the Plan, Beijing aims to develop into the information centre city of the Asia Pacific region, and a global electronic information industry base. Over the next three years, Beijing will emphasize and strengthen the development of mobile communications, digital television, software and information services, high-generation flat panel display, integrated circuits, computers, next-generation Internet applications domains, etc. As it suggests in the Plan, the added value of the electronic information industry will account for 15% of Beijing’s GDP, of which the information services and the electronic information manufacturing sectors will contribute 11% and 4%, respectively, by the end of 2011.The government’s initiative will further improve not only the healthy conditions of the local economic structure, but also the competitiveness of the city in the region. In addition, the act will probably catalyse more demand for industrial properties in the medium term (3-5 years).

28

Beijing’s Haidian District council officially released The Circular of Accelerating the Adjustment of Trades in Zhongguancun West Zone on 20 July. According to the Circular, the Haidian local government will encourage technological and creative industries, instead of traditional retail properties such as electronic stores and shopping centres, to develop in the West Zone of Zhongguancun. According to the new act, the Zhongguancun West Zone will be developed into an area consisting of six functional areas, including financial, technology service, high-tech corporate headquarters, R&D centres, creative industries, new product trading and display, and service areas. The action plan of the Circular will be introduced later by the Haidian District Government. The adjustment is expected to foster more demand for office space from high-tech and creative industries in the Zhongguancun West Zone. China’s central bank is still committed to a moderately loose monetary policy, according to Su Ning, deputy governor of the People’s Bank of China (PBOC), at a press conference in Beijing on 7 August. The promise from the government to maintain a moderately loose monetary policy will boost market sentiment, while any changes to government policies will definitely reverse the upward momentum of the economy and lead to failure at the mid-point. It should be noted that the PBOC will manipulate slower credit growth rather than a decrease in credit supply, despite the country’s banking loans having recorded nearly RMB7.4 trillion in 1Q09, far higher than the initial full-year target of RMB5 trillion.

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

On 1 September, The Ministry of Land and Resources (MLR) issued the Notice on Approval for Land Use with Strict Supervision to strengthen the supervision of land for construction and protect rural collective land areas from illegal use. According to the Notice, land areas on which construction has not started upon two years of approval being received will be resumed by the government and labelled a vacant area for further consideration, according to the relevant laws and regulations. In addition, the government will take action on those housing and golf resort projects with illegal property rights, and monitor all processes of land planning, execution, approval, supply and development. This Notice unveils the government’s intention of strengthening land management with statutory policies and preventing land resources from lying vacant and being wasted. The Ministry of Finance (MOF) will maintain its active fiscal policy during the crucial period of economic recovery, as a solid foundation has yet to be confirmed, according to finance minister Xuren Xie.The government agency will continue to enlarge investment in public expenditure, and strengthen the development and construction of key projects. In addition, the government will carry out structural tax reduction policies, including raising tax rebates and exempting tax for certain exports, in order to boost investment and consumption by reducing the tax burden on corporations and residents. On 22 September, China’s State Council issued a document with opinions to strengthen support for the development of the country’s Small- and Medium-sized Enterprises (SMEs). According to the latest policy, the Central Government will deepen reforms to the country’s monopoly industries, lower the market access threshold, and create a more open and fair competition environment for SMEs, with more favourable tax breaks, better access to markets and banking loans,


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

Greater China

MAJOR MARKET NEWS and stronger government aid for technological innovations. The action aims to drive a new source of economic growth that will sustain China’s recovery. According to the Ministry of Land Resources (MLR), the government recently approved the revised edition of the Beijing Municipal Overall Land Use Master Plan from 2006 to 2020 and stated that Beijing will strictly manage land for construction, especially in urban areas, and also maintain rural land construction areas in good order for infrastructure construction. According to the latest plan, urban and suburban land construction areas in Beijing will be capped at the upper limit of 270,000 hectares by 2020, of which urban land construction areas will be limited to 77,800 hectares. In 2009, Beijing plans to have about 4,000 hectares of new construction area and offer a total land supply of 5,700 hectares. The Beijing Municipal Government released the Action Plan of Promoting the Beijing’s Southern Areas and Accelerating Its Development on 5 November. According to the Plan, the local government will invest over RMB50 billion in infrastructure projects in Beijing’s southern areas over the next three years. This will bring a total estimated investment of RMB290 billion from both the public and private sectors. In addition, the Plan also reveals that a total of seven subway lines, covering 188 km, will be completed in the region and several motorways linking to the southwest of Beijing, including Jingshi Motorway II, will be constructed within five years, which should benefit the further promotion and development of such business parks as the Lize Financial Business District of Beijing, the Zhongguancun Fengtai Science Park and the Daxing Bio-medicine Industry Park in the precinct. The Ministry of Land and Resources (MLR) on 10 November circulated the Notice on “The Directory of Projects with Restricted Land Use (the Revised Edition of 2006)” to further tighten

the overall land supply policy. Delimiting to the segment of commodity residential housing, the land sales area of single plot must not exceed the upper limits of 7, 14 and 20 hectares in small cities (towns), medium-sized cities and large cities, respectively. Apparently, the government intends to nurture a healthier real estate market through the revised land management mechanism. The State Council on 2 November announced further streamlining of the approval process of foreign investment in the form of joint venture enterprises. According to the new policy, which will take effect on 1 March 2010, foreign-funded joint venture enterprises are eligible to set up a partnership enterprise with registration directly to the registration authority, instead of requiring prior approval from the local commission of the Ministry of Commerce (MOC). The government intends to encourage overseas investors with advanced technology and management experience to set up joint ventures, aiming at promoting the development of modern service industry and other related sectors in the country. According to the State Council Executive Meeting on 9 November, chaired by Chinese Premier Wen Jiabao, China will further strengthen the incentives on domestic consumption and continue to maintain most of the pace of current policies through next year, in order to achieve stable and rapid economic growth. As for the real estate sector, most of the favourable housing policies, such as the 20% down payment and discount mortgage rate on first home buyers, will remain the same in 2010, except that the business tax exemption for second housing will be limited to more than five years, instead of a two-year holding period.

period of the total land price shall not exceed one year in principle, and the down payment shall not be less than the 50% of the total price for the developer.The new down payment policy for land transactions, along with the 5.55% business tax on selling houses within the five-year holding period, reintroduced two weeks ago, aims mainly to curb speculation in the national real estate market. The Ministry of Finance on 22 December announced the new package on property sales tax, effective from 1 January 2010. Owners have to pay taxes levied on the sales price if a noncommon house is held for less than five years; owners only have to pay taxes levied on the profit if a non-common house is held for at least five years, or that of a common house for less than five years; and owners pay no property sales tax if a common house is held for at least five years. This clarification on the property sales tax is a response to the 5.5% tax on sales of homes by the State Council on 9 December, and is aimed at curbing speculation in the housing market.

Chengdu Effective on 1st January 2010, the down payment for land acquisition increased from 20% to 50% and the term of capital gain tax on the sale of housing properties was revised upwards from 2 years to within 5 years of purchases.

The consor tium of MOF and four other government agencies on 17 December circulated the notice on further strengthening the transfer payment management of land transactions. According to the notice, the instalment payment COLLIERS INTERNATIONAL | REGIONAL RESEARCH

29


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

Greater China

MAJOR MARKET NEWS

Guangzhou On 9th December 2009, the government introduced policies to prevent overheating in the real estate market, changing the levy exemption from two to five years with effect from 1 Jan 2010, with the aim of discouraging speculative investment. On 17th December 2009, five ministries, the Ministry of Finance, the Ministry of Land Resources, the central bank, the Ministry of Supervision and the Audit Commission jointly issued the “Circular on Tightening of Land transfer revenue and expenditure management notification”. It aims to strictly tighten deposits on land, which should not be less than 50% of the total value.

Shanghai In December 2009, State Council issued a number of policy directives to curb speculation in the residential and land markets. The required holding period of residential property by an individual to qualify for business tax concession reverts from two years back to five years. Measures will also be implemented to increase the effective supply of ordinary housing and support home purchases for self-use or upgrading. On the land sale market,

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the Ministry of Finance adopted regulations to strengthen management on settlement of land premium. The initial instalment of land premium is raised to 50% and full payment has to be settled in one year under normal circumstances. The above policy initiatives were targeted specifically at the residential and land sale markets and basically did not touch upon commercial property and service apartments. Given the abundant liquidity in the market and a sanguine market outlook, investment sales activities are expected to remain active in the foreseeable future.

(2) The application is made jointly by all owners of the buildings (3)There will be no increase in building height, bulk or gross floor area after conversion (4) The building cannot be reverted to industrial use during the waiver period (5) The full market premium is payable when the building is redeveloped in the future Except for lower ing the threshold for application under the Land (Compulsory Sale for Redevelopment) Ordinance, which will be implemented via subsidiary legislation on a permanent basis, applications for the other measures must be made within a three-year period from 1st April 2010.

Hong Kong In view of the continued structural change in demand for industrial properties, the local government has introduced various measures over the past few years to help boost the use of vacant or under-utilised industrial premises. In October 2009, the Secretary for Development elaborated on a new package of measures proposed by the government to facilitate the redevelopment and wholesale conversion of industrial buildings, which will become effective on 1st April 2010. The most notable measure for facilitating the redevelopment of industrial buildings is the lowering of the threshold for owners of industrial buildings in non-industrial zones and those aged 30 years or above from 90% to 80% to apply to the Lands Tribunal for compulsory sale for redevelopment. In addition, in order to facilitate the conversion of industrial buildings for other uses, owners can apply for a “nil waiver fee” concession if the following criteria are satisfied: (1) The industrial buildings are aged 15 years or above and located in “Industrial”,“Commercial” or “OU (Business)” zones

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Taipei The real GDP rebounded from -1.29% QoQ in 3Q 2009 to 6.89% QoQ in 4Q 2009. As the global economy saw some improvement, the trading sector, including exports and imports, gained momentum and recovered from -20.86% QoQ and -29.52% QoQ respectively in 3Q 2009 to 16.86% QoQ and 16.21% QoQ respectively in 4Q 2009. During the second half of 2009, the home mortgage loan increased from NT$4.77 million July 2009 to NT$4.88 million in November 2009, up by 2.24% during the period. Meanwhile, the construction loan Index edged up slightly by 0.73%, from NT$0.98 million in July 2009 to NT$0.99 million in November 2009.


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

North Asia

MAJOR MARKET NEWS

Seoul Korea recorded a positive economic growth after three consecutive quarters of decline, with GDP growing by 0.73% YoY in 3Q 2009 and 6.29% YoY in 4Q 2009.

Tokyo The Democratic Party of Japan won the general election on 30th August 2009 after long domination by the Liberal Democratic Party over the past 16 years.

In anticipation of a rise in the benchmark interest rate in 2010, investors will tend to seek any assets enjoying low interest rates. Moreover, the tax reduction for acquisition and registration and the heavy tax levy waiver for real estate fund and REITs will continue until 2012, which will facilitate more investment using these vehicles.

The Japanese Market saw an improved economy, with real GDP increased by 0.3% QoQ and 1.2% YoY in 3Q 2009. Meanwhile, public investment, exports and production were also on the upward trend. However, the rate of growth is expected to moderate as economic fundamentals remain weak, for example, with a high unemployment rate of over 5%.The momentum is not strong enough to underpin a full recovery. In December 2009, Bank of Japan introduced a new fund-supplying operation to encourage a further decline in long-term interest rates at 0.1% for three months, bringing the total amount of loans approximately to 짜10 trillion, in order to overcome deflation and a sustained growth in price stability.

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INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

South Asia

MAJOR MARKET NEWS •

Manila SM Development Corp. acquired three new properties in Mandaluyong, Manila, worth close to P2 billion to support the company’s aggressive expansion. The company bought a one-hectare property near Welcome Rotonda in Quezon City, where it plans to build two residential condominiums under the Sun Residences brand. Meanwhile, Jazz Residences, located on a twohectare lot along Jupiter Street in Makati City, is planning to build four residential towers on the lot. The third acquisition is located on a two-hectare property in Mandaluyong City, near the Boni Station of MRT 3, where the company plans to build Light Residences. Looking ahead, other projects scheduled for launching in 2010 are Princeton Residences in Quezon City, located beside Gilmore LRT-2 Station along Aurora Boulevard, and Wind Residences in Tagaytay City. The Real Estate Investment Trust measure is now a law (RA 9856), after President Arroyo allowed the 30-day period to lapse within which to veto the bill. To encourage investments in REITs, the REIT law provides certain tax incentives to the REIT. However, the REIT must be listed with a stock exchange and maintain its status as a listed company and annually release at least 90 percent of its distributable income to shareholders.

• •

Singapore Singapore’s GDP expanded by 3.5% YoY in 4Q 2009, bringing a full year contraction of 2.1% YoY in 2009. Looking ahead, the government now expects the economy to expand by between 3% YoY and 5% YoY in 2010.

On the 6th November 2009, the Government announced the reinstatement of the Confirmed List for 1H 2010 GLS Programme to ensure that there will be adequate land supply for housing development.

The Singapore government made moderate downward adjustments to development charge (DC) rates, effective from 1 September 2009. On average, the DC rates for commercial land use were cut by 4.0%, rates for non-landed residential use decreased by 2.0%, and those for hotel/ hospital and business zone commercial uses were trimmed by 4.0%.

Under the GLS programme, a Confirmed List comprising eight residential sites for the development of 2,925 housing units will be released. The government will also maintain a Reserve List, with a total of 16 residential sites and two mixed-use plots, which will bring a supply of 7,625 units. Both the Confirmed and Reserve Lists can potentially bring 10,550 housing units into the market. This is the highest supply in the half-yearly GLS programme since the Reserve List system began in 2H 2001.

The Government had removed the Interest Absorption Scheme (IAS) and Interest-Only Housing Loans (IOL), with effect from 14 September 2009. The Government will also not extend the following January 2009 Budget assistance measures for the property market when they expire. This includes:

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Allowing a one-year extension of project completion period for existing Government residential sale sites and private residential projects by foreign housing developers with Qualifying Certificates (QC); Allowing re-assignment of Government Land Sales (GLS) sites and private land owned by QC holders; Allowing up to two years of property tax deferral for land under development; Offering QC holders up to four years to dispose all private residential units in the development; and Allowing QC holders to rent out unsold private residential units for a maximum of four years.

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The Government will also resume the Confirmed List for industrial land sales, with two sites, which can potentially yield some 1.34 million sq ft of industrial space. Eight sites will also be maintained in the Reserve List for industrial use in the first six months of 2010.


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

South Asia

MAJOR MARKET NEWS No commercial, hotel or white sites are added to the Confirmed List for 1H 2010. However, two new hotel plots are added to the Reserve List.The Reserve List will comprise five commercial sites, two white sites, 10 hotel sites and one commercialand-residential site.These sites can potentially yield 4.50 million sq ft (gross floor area) of commercial space and 4,515 hotel rooms.

Bangkok Thailand’s economy rebounded in 3Q 2009, with the GDP rate of decline narrowing from 7.1% YoY in 1Q 2009 and 4.9% YoY in 2Q 2009 to 2.8% YoY in 3Q 2009. On a quarterly basis, an increase of 1.3% QoQ was recorded in 3Q 2009. The Bank of Thailand predicted the economy to grow in the range of 3.3%-5.3% in 2010. Meanwhile, the state planning agency NESDB forecast GDP to expand by 3-4% and Reuters expects a 3.5% growth in 2010.

Interest Absorption Scheme The IAS is a housing loan payment scheme offered by a housing developer and his partner bank(s) to buyers of uncompleted housing units. The IAS allows purchasers who, after paying the upfront downpayment, to defer making any further installment payments until the units are completed, i.e. issued a Temporary Occupation Permit (TOP). The purchaser would take up a loan with the developer’s partner bank to buy the property under the IAS. Prior to TOP, the bank will require only interest payments to be made on the loan and these payments will be paid by the developer. The borrower will start making regular installment payments on the loan only after TOP.

Core inflation remained stagnant with only a negligible 0.3% YoY rise in 2009. Meanwhile, the headline inflation (including food and energy prices) entered the negative region of 1.9% YoY in 2009. The Bank of Thailand’s Monetary Policy Committee is likely to keep its one-day repurchase rate at 1.25% in 1H 2010, in order to encourage the delicate momentum that is taking root in the economy.

Interest-Only Housing Loans The IOL is a housing loan whereby the borrower makes only interest payments on the loan for a period of time, with no repayments of the loan principal. For uncompleted properties, the interest-only period could be from the inception of the IOL to TOP of the project. (If an IOL is offered under an IAS scheme, the developer pays the interest instead of the borrower in the interest only period). Compared to payments under a standard payment scheme, installment payments under an IOL in the interest-only period are lower, but as the loan principal is not paid down during this period, subsequent installment payments may be higher when servicing of the principal resumes.

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INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

INDIA

MAJOR MARKET NEWS

Economy The Reserve Bank of India (RBI) moved to hike the statutory liquidity ratio (SLR) and increase the provisioning norms for advances to the commercial real estate sector.The provisioning requirement for loans to commercial real estate has been increased from 0.4% to 1%. Some analysts commented that interest rates are still at their lowest in recent times, and even a marginal hike due to this tightening in provisioning will not seriously affect the overall sector. Rather, it might help, as the central Bank is trying to curb the formation of an asset bubble. In other words, it is trying to control the asset prices for end users. Indeed, in some cities property prices have gone up by 5-15 percent in past 2-3 months. If well implemented, this policy will benefit property buyers in the long run.

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The Reserve Bank of India (RBI) has made it easier for banks to lend to special economic zones (SEZ). Several types of advances to projects in special economic zones have now been excluded from the definition of commercial real estate loans. In the circular issued on Wednesday, RBI has sought to define a commercial real estate loan as one where the funds are used to acquire real estate and the repayment of the loans is out of proceeds of sale or rentals from the property. Bearing these conditions in mind, RBI has sought to differentiate between loans that could be classified as CRE exposures and those that were not. Kotak Realty Fund, a real estate private equity (PE) fund from Kotak Mahindra Group, will invest Rs 270 crore to acquire stakes in a Mumbai-based realty firm and a slum rehabilitation project and a Bangalore-based developer.The fund will spend Rs 100 crore to acquire a 60% stake in Star Light Developers Pvt. Ltd and another Rs 100 crore for 50% of the slum rehabilitation project undertaken by Ackruti City Ltd near Mumbai’s international airport. It will also spend Rs 70 crore to purchase a 60% stake in Bangalore-based Lalith Gangadhar Constructions Pvt. Ltd. Canada-based NRI billionaire Bob Dhillon is all set to make a foray into India. Dhillon’s Canadian

COLLIERS INTERNATIONAL | REGIONAL RESEARCH

real estate company, Mainstreet Equity, which owns more than 6,000 rental properties across Canada, is likely to set up a billion-dollar India-specific real estate fund to mark its entry into the Indian real estate market. Between April and October 2009, the total FDI inflow stood at $17.64 billion, almost 6% lower than the corresponding period in 2008. Meanwhile, foreign investments flowing into the services sector (financial and non-financial) fell by about 7% YoY, to $3,121 million, during April- October 2009. Among other major sectors, housing and real estate development witnessed a 12.5% YoY surge in FDI inflows, to $2,056 million, during the same period. The FDI into construction totalled $1,565 million during the same period in 2009 (against $1,742 million a year ago). Aimed at promoting low-cost housing, the government has launched an interest rate subsidy scheme that could help a home loan borrower save up to Rs10,000 in EMIs, provided the cost of the house is less than Rs20 lakh. In other words, the interest subvention scheme of 1 percent will apply on all individual housing loans up to Rs10 lakh for units costing up to Rs20 lakh. The interest rate subsidy scheme will be offered at a one-year period from 1st October 2009 to 30th September 2010.


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

Australasia

MAJOR MARKET NEWS

New Zealand After five consecutive quarters of contraction in the New Zealand economy, gross domestic product (GDP) increased 0.2% in the June 2009 quarter and economic activity maintained a same pace of growth during the September quarter. For the year ended September 2009, GDP contracted 2.2% compared with the year ended September 2008.

Australia The release of positive economic indicators in 4Q 2009 revealed that the Australian economy finished the year stronger than expected, thanks to the stimulus measures put in place by the federal government and increased commodity exports, leading to recovery. During 3Q 2009, GDP expanded further by 0.5%.The most recent forecasts from Access Economics suggest that GDP growth is expected to accelerate to 2.5% in 2010 and 3.5% in 2011. The unemployment rate peaked at 5.8% in October 2009, and the latest figures showed a decline to 5.5% in December 2009.The market experienced strong job growth, with the total number in employment up by 35,200 in December 2009, of which full-time employment rose by 7,300 jobs and part-time employment grew by 27,900.

Total export volumes increased 4.7% in the June 2009 quarter, mainly driven by an increase in exports of dairy products (up 20.9%).Total import volumes were down 3.8%, with intermediate goods (down 6.1%), and capital goods (down 3.5%) making the largest contributions.

In response to recessionary pressures, the Reserve Bank of New Zealand (RBNZ) expanded liquidity facilities by progressively lowering the Official Cash Rate (OCR) by 575 basis points since mid 2008 down to 2.5%. In light the uncertainty remaining around the durability of New Zealand’s economic expansion the RBNZ is expected to leave the OCR rate unchanged for at least another six months. The labour market weakened further in the September 2009 quarter. According to Statistics New Zealand the unemployment rate rose to 7.3% in the December 2009 quarter from 6.5% in the September quarter.

The Consumer Price Index (CPI) figure recorded an increase of 1.3% in the September 2009 quarter, up from 0.6% in the June quarter. Seven out of 11 groups increased, with transport (up 3.1%), food (up 1.7%), and housing and household utilities (up 0.7%) making the most significant contributions. On an annual basis, inflation, as measured by the CPI dropped to 1.7% in the year ending September 2009 year. Annual CPI inflation is currently well within the target band of 1% and 3% and is expected to remain below 2% until early 2011 and track within the target range over the medium term.

During 4Q 2009, The Reserve Bank of Australia was the pioneer among central banks to lift its official cash rate by 25 basis points, from 3.00% in September 2009 to 3.75% in December 2009. The recent string of positive economic results, such as strong jobs growth and retail spending figures, further supports the forecast that the Reserve Bank will lift the official cash rate to 4.00% in February 2010.

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INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009

For further details, please contact: GREATER CHINA Beijing, China 502 Tower W3 Oriental Plaza No 1 East Changan Avenue Dongcheng District Beijing 100738 John Wong Director, Investment & Project Department Tel : 86 10 8518 1578 Email : john.wong@colliers.com

Chengdu, China Room L 16F City Tower 86 Section One Renmin Nan Road Chengdu 610016 Jacky Tsai General Manager Tel : 86 28 8620 2128 Email : jacky.tsai@colliers.com

Hong Kong, HKSAR Suite 5701 Central Plaza 18 Harbour Road Wanchai, Hong Kong

Tokyo, Japan Halifax Building 8F, 16-26 Roppongi 3-Chome Minato-ku, Tokyo 106-0032

Antonio Wu Regional Director / Head of HK Investment & Retail Services Tel : 852 2822 0733 Email : antonio.wu@colliers.com

Christopher Parry Senior Investment Adviser Tel : 813-5563-2180 Email : cparry@colliershalifax.com

Taipei, Taiwan 49/F TAIPEI 101 TOWER No 7 Xin Yi Road Sec 5 Taipei 110 Charles Huang Director, Investment Sales Tel : 886 2 8101 1150 Email : charles.huang@colliers.com

Guangzhou, China Room 702 Teem Tower 208 Tianhe Road Guangzhou 510620 Eric Lam General Manager Tel : 86 20 3819 3988 Email : eric.lam@colliers.com

Shanghai, China 16F Hong Kong New World Tower 300 Huaihai Zhong Road Shanghai 200021 Betty Wong Director, Investment Services & Special Projects - East China Tel : 86 21 6141 3529 Email : betty.wong@colliers.com

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NORTH ASIA

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Osaka, Japan Sumitomo Seimei Kawaramachi #2 Building 8-4, Kawaramachi 4-chome Chuo-ku Osaka, 541-0048 Brett Jensen Account Manager Tel : 81 6 6232 0790 Email : bjensen@colliershalifax.com

Seoul, South Korea 10F. Korea Tourism Organization Bldg. 10 Da-dong, Jung-gu, Seoul 100-180 Jay Yun Senior Director & General Manager Tel : 82 2 6740 2001 Email : jay.yun@colliers.com


INVESTMENT MARKET OVERVIEW | FOURTH QUARTER | 2009 EXECUTIVE SUMMARY

SOUTHEAST SOUTH ASIA ASIA

INDIA

AUSTRALASIA

Jakarta, Indonesia World Trade Centre, 10th Floor Jalan Jenderal Sudirman Kav 29-31 Jakarta 12920

Mumbai, India 31-A, 3rd Floors, Film Centre 68, Tardeo Road Mumbai 400 034

Melbourne, Australia Level 32, Optus Centre 367 Collins Street Melbourne VIC 3000

Mike Broomell Managing Director Tel : 62 21 521 1400 ext 131 Email : mike.broomell@colliers.com

Joe Verghese Managing Director Tel : 91 22 4050 4500 Email : joe.verghese@colliers.com

John Marasco Managing Director, Investment Sales Tel : 61 3 9612 8830 Email : john.marasco@colliers.com

Manila, Philippines 10/F Tower 2 RCBC Plaza 6819 Ayala Avenue cor. Sen. Gil J Puyat Avenue Makati City 1200 Ieyo de Guzman Director, Investment Sales Tel : 632 888 9988 Email : ieyo.deguzman@colliers.com

Singapore 1 Raffles Place #45-00 OUB Centre Singapore 048616 Ho Eng Joo Executive Director, Investment Sales Tel : 65 6531 8618 Email : eng-joo.ho@colliers.com

Bangkok, Thailand 17/F Ploenchit Center 2 Sukhumvit Road Klongtoey, Bangkok 10110

Sydney, Australia Sydney CBD Level 12, Grosvenor Place 225 George Street Sydney, NSW 2000 John Kenny Chief Executive Tel : 61 2 9257 0222 Email : john.kenny@colliers.com Jon Chomley National Director, Investment Sales Tel : 61 2 9257 0236 Email : jon.chomley@colliers.com

Auckland, New Zealand Level 27, 151 Queen Street PO Box 1631, Auckland 1140 John Goddard Director Tel : 64 9 356 8837 Email : john.goddard@colliers.com

Nukarn Suwatikul Senior Manager, Investment & Advisory Tel : 662 656 7000 Email : nukarn.suwatikul@colliers.com

Ho Chi Minh City,Vietnam Bitexco Building, 7th Floor 19-25 Nguyen Hue Street District 1, Ho Chi Minh City KP Singh Managing Director Tel : 84 83 827 5665 Email : kp.singh@colliers.com

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 Colliers International prior to acting in reliance upon any such information. The opinions, estimates and information given herein or otherwise in relation hereto are made by Colliers International and affiliated companies in their best judgement, in the utmost good faith and are as far as possible based on data or sources which they believe to be reliable in the contest hereto. Notwithstanding, Colliers International and affiliated companies disclaim to the extent permitted by law, any liability in respect of any claim which may arise from any errors or omissions or from providing such advice, opinions, judgement or information. Colliers Macaulay Nicolls Inc., and certain of its subsidiaries, is an independently owned and operated business and a member firm of Colliers International Property Consultants, an affiliation of independent companies with over 294 offices throughout more than 61 countries worldwide.

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Asia Pacific Real Estate Investment Q4-2009  

Looking forward, the prevailing positive market sentiment is expected to continue in 2010 and the various governments in the region are anti...

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