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Asia Pacific REAL ESTATE INVESTMENT MARKET BULLETIN 2010 SECOND HALF 2010

Accelerating success.


table of contents asia pacific real estate inverstment bulletin | second half 2010

Regional Overview Greater China

3-4 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

13-16

Jakarta, Indonesia............................................................................................................................ 13 Manila, Philippines........................................................................................................................... 14. Singapore......................................................................................................................................... 15 Bangkok, Thailand............................................................................................................................ 16

India

17

India ..............................................................................................................................................17

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

Major Market News

26-32

Greater China.............................................................................................................................26-28 North Asia........................................................................................................................................29 Southeast Asia.................................................................................................................................30 India ............................................................................................................................................. 31 Australasia.......................................................................................................................................32

Contacts 34-35


regional overview The region’s real estate investment market saw an encouraging growth in terms of the total value of sales transactions during the second half of 2010 thanks primarily to the abundant liquidity and the continued inflow of capital. In anticipation of further economic growth in the region, business confidence as demonstrated by positive hiring expectations strengthened further. Real estate occupiers engaged in intra-regional trade and the buoyant financial services sector were the key end-users underpinning the leasing demand during the period. In addition, with expectation of growing inflationary pressure, more end-users took a forward-looking strategy for their real estate plans, including the consolidation and upgrading their business address. As such, real estate rentals picked up additional momentum in the second half of 2010. In particular, the centres with higher exposure to the financial industries grew at a faster-than-expected pace during the period. Underpinned by the continued catch up of rentals and the sustained low cost of capital, buying interests for quality real estate remained keen in the second half of 2010. According to our research, the total volume of real estate investment sales transactions increased more than 44% during the second half of 2010.

The Outstanding Centres Looking at the breakdown by subregion, Greater China continued to constitute the majority of the total volume, but South East Asia and Australasia were actually the two outstanding spots in terms of percentage growth. In South East Asia, office sales transactions posted a quantum leap of more than 300% due to the hectic activity in Singapore, which was highlighted by the sale of DBS Towers One and Two by Goldman Sachs to Overseas Union Enterprise, a firm controlled by Lippo Group, for a total consideration of S$870.5 million (US$676.1 million). Another market focus was the portfolio renewal and expansion by real estate investment trusts (REITs). In October 2010, K-REIT Asia acquired a one-third interest in Marina Bay Financial Centre (MBFC) for $1,426.8 million (US$1,108.2 million). One month later, Suntec REIT also took a one-third interest in MBFC for S$1,496.8 million (US$1,161.8 million).

Office Sector-specific Funds Elsewhere in Australasia, office sector-specific real estate funds were the key contributors to the overall growth. For example, a total of four office buildings in the Melbourne CBD was sold to Commonwealth Property Office Fund (CPA) by the Grocon Pty Ltd for an aggregated total of A$575.8 million (US$585.1 million). In Brisbane, Charter Hall Group’s Core Plus Office Fund (CPOF) purchased a 50% interest in Brisbane Square in a 50/50 joint venture with Telstra Super for A$300 million (US$304.9 million) in October 2010.

Colliers International |

p. 3


INVESTMENT market overview | SECOND HALF 2010

r eg i onal ov e rv i e w Yields Compression

         

On the pricing front, the whole region witnessed a general decline of investment yields in the order of 15 basis points during the second half of 2010. Due to the accumulated wealth and the sustained economic growth, residential developments in Greater China and India were the most sought after, with an average fall of investment yields by 24 and 38 basis points respectively. In relative terms, retail yields in India experienced the sharpest drop during the period since the government made its FDI policy regime more attractive to investors.

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Source: Real Capital Analytics, January 2011 Note: Sales transactions closed in the past 12 months valued at US$10 million or greater

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Market Outlook Going forward, the real estate market in the region continues to look positive in 2011. Notwithstanding the recent interest rate hikes in a number of centres, the overall real estate investment demand is anticipated to remain keen amid expectation on growing inflationary pressure across the region. Real estate buyers, comprising private investors, owner-occupiers and REITs, will remain particularly active in acquiring quality developments during 2011.



Property Investment Yields 4Q 2010 (% per annum)

   

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Source: Real Capital Analytics, January 2011 Note: Sales transactions closed in the past 12 months valued at US$10 million or greater

City Greater China Beijing Chengdu Guangzhou Shanghai Hong Kong Taipei

Office

Residential

Retail

Industrial

6.9% 8.9% 6.3% 6.3% 3.3% 3.0%

2.8% 3.5% 3.1% 2.4% 2.4%

6.3% 5.1% 6.4% 3.2% 4.0%

6.9% 8.5% 4.4% 3.6%

5.3% 4.7%

5.9%

4.7% -

6.2%

Southeast Asia Jakarta Manila Singapore Bangkok

8.6% 10.8% 4.0% 7.4%

10.8% 6.4% 2.0% 4.7%

8.5% 5.5% 8.2%

8.2% 6.0% 10.8%

India Bengaluru Chennai Mumbai New Dehli

10.8% 10.8% 9.3% 9.5%

4.0% 4.0% 3.0% 3.0%

11.5% 11.8% 10.5% 10.0%

# 9.0%

Australasia Adelaide Brisbane Canberra Melbourne Perth Sydney Auckland Wellington

8.0% 7.8% 7.5% 7.1% 7.5% 7.3% 8.7% 8.2%

-

8.3% 7.0% 6.9%

8.3% 8.3% 8.5% 8.3% 8.3% 8.2% 8.0%

North Asia Seoul Tokyo

# Industrial space within the city

p. 4

| Colliers International

Source: Colliers


INVESTMENT market overview | SECOND HALF 2010

C H I N A - b e ij i ng Aiming at further stabilizing the housing market and easing the growing inflation pressure, the central and Beijing local governments enacted stricter macro policies in 2H2010, including the imposition of home buying restrictions on overseas purchasers, the increase of down payment requirements, the release of tightened regulations on commodity housing pre-sales, and the consecutive increase of the banks’ reserve ratios and RMB lending interest rates. Though the en bloc residential sales market was quiet during the period, the strata-title sales market recovered strongly in the latter half of 4Q2010. Buying interests came back as a result of growing inflationary expectations.

     



    



































Source: The People’s Bank of China

    

In the office sector, investment activity showed signs of acceleration, as evidenced by the major en bloc sales transactions during 2H2010. Domestic players, including private equities, insurance companies and listed conglomerates, continued to dominate the investment sales market during the period. Headline transactions included the acquisition of C1 block of Jinmao Centre (GFA: 23,000 sq m) by China Power Investment Corporation, for a total consideration of about RMB850 million. Meanwhile, People's Insurance Company of China (PICC) purchased Capital Times Square, comprising a total GFA of 120,000 sq m, for a total consideration of RMB3.74 billion.



 

In the retail sector, investment stock for sales was limited in the core catchment of Beijing. Investors turned to individual quality retail schemes in the emerging retail notes. The latest done deal was highlighted by the sale of Novo Mall in the Wangjing District to Mingsheng Financial Leasing Co. Ltd for about RMB580 million during 2H2010.

   

                           





   

 

Source: Colliers

Major Investment Transaction Development

Floor Area

Lump Sum Price

Seller

Buyer

(sq m)

(RMB million)

(US$ million)

Capital Times Square

120,000

3,744.00

565.33

Huarong Infrastructure Investment Co. Ltd

People's Insurance Company of China

Jinmao Centre C1 Block

23,000

850.00

128.35

Beijing Hanjian Construction Group

China Power Investment Corpration

Metropolis

21,000

720.00

108.72

ECM Real Estate Co., Ltd.

Kailong Rei

30,748

580.00

87.58

NOVO Group/Toppy

Minsheng Financial Leasing Co.,Ltd

Office

Retail NOVO Mall Note: US$1 = RMB 6.6227

Colliers International |

p. 5


INVESTMENT market overview | SECOND HALF 2010

C H I N A - c hengd u During the second half of 2010, there were six major investment transactions in the urban core of Chengdu. The total value of transactions was RMB1.89 billion, representing an increase of 98% compared with the first half of the year. One of the main reasons for the significant surge of activity was that enterprises went through the required process before going for IPOs. In November alone, two transactions were concluded by the Bank of Chengdu. Among the six major deals, one half of the buyers were from other provinces outside Chengdu.

     



    



































Source: The People’s Bank of China

      

For example, Ping’an Insurance purchased a downtown office building during the period. It was the first deal after the release of the “Interim Measures for Insurance Capital Invested in Real Estate�. It is anticipated that the Ping’an’s deal just spearheaded the start of more than RMB450 billion worth of insurance capital to be invested in the real estate market in the future. In September 2010, Ping’an Insurance purchased Central Point II for RMB0.72 billion from Shui On at an estimated yield of around 8.5%. With a total floor area of 39,500 sq m, the office deal translated into an average unit price of RMB18,200 per sq m. The office development located along Metro Line 1 will be available by the end of 2011.



    

                           



In general, office and retail sectors performed well during the second half of 2010. The average office and retail yield running at about 9% and 6%, respectively, were relatively attractive to investors compared with the level in the first-tier cities. In anticipation of the continued improvement of the economic environment, the prospective expansion of multinational corporations and growing consumption are going to boost investment demand for both office and retail real estate in Chengdu.



Source: Colliers

Major Investment Transaction Development

Floor Area

Lump Sum Price

Seller

Buyer

(sq m)

(RMB million)

(US$ million)

165,845

100.00

15.10

Shenzhen Noah Holding Co'. Ltd and Sichuan Huli Investment Group

Fantasia Holding Group

Friendship Plaza Tower B

30,782

165.00

24.91

Bank of Chengdu

Buyer No. 18

Gangpeng International Plaza

75,688

383.00

57.83

China Real Estate Development Group

Yunnan Dingyun Investment Group

Central Point II

39,500

718.00

108.41

Shuion Group

Ping'an Insurance

Office / residential Noah Project

office / retail

Retail Xinjian Plaza

4,045

121.00

18.27

Bank of Chengdu

Buyer No. 78

Chengdu Hotel

30,900

403.00

60.85

Chengdu Industrial Investment Group

Sichuan Yangyang Department Store

Note: US$1 = RMB 6.6227

p. 6

| Colliers International


INVESTMENT market overview | SECOND HALF 2010

C H I N A - g uang z ho u Together with other major cities such as Shanghai, Shenzhen and Guangzhou started to implement the “Home Buying Restrictions� to curb speculation activity in the residential property market during the second half of 2010. As a result, the overall volume of residential sales transactions fell in 3Q2010. There was a rebound in volume in 4Q2010 due to the strong underlying demand. Market prices remained resilient and stayed at high levels during the period.

     



    



































Source: The People’s Bank of China

    16%

Benefiting from positive sentiment from the Guangzhou 2010 Asian Games, investment demand for office and retail properties in the city core of Guangzhou was strong during the second half of 2010. In the Grade A office sector, more developers strategically shifted from cashing out on their developments to long-term holds, due to the expectations of growing inflation and the prevailing policies on macro adjustments. The number of stock for sales fell, since more prime office projects were available for lease only. In the second half of 2010, major transactions in Guangzhou office market included the acquisition of the whole 92,783-sq m Kaisa Plaza by Evergrande, and the purchase of 40,000 sq m of Poly V Place by Bank of Communications.

14%

Meanwhile, the land sales market remained stable during the second half of 2010 in terms of price and turnover, although the market volume was once depressed by a series of macro-control measures. Towards the end of 2010, market sentiment was boosted when the site at Baiyun New City was sold for a new record price, at an average land price of RMB 20,605 per sq m.



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 1Q 2010 2Q 2010 3Q 2010 4Q 2010

0%

Office

Residential

Retail

Industrial

Source: Colliers

Major Investment Transaction Development

Floor Area

Lump Sum Price

Seller

Buyer

(sq m)

(RMB million)

(US$ million)

Kaisa Plaza

92,783

1,400.00

211.39

Kaisa Group

Evergrande Real Estate Group

Poly-V

39,362

971.80

146.74

Poly Guangzhou

Bank of Communications

Office

Note: US$1 = RMB 6.6227

Colliers International |

p. 7


INVESTMENT market overview | SECOND HALF 2010

C H I N A - s hangha i Despite the various monetary and macro policies introduced to cool the economy during the second half of 2010, the real estate sector in Shanghai in terms of both rental and capital values showed no distinct signs of decline.

     





In the residential sector, asset values increased further by 3.4% in 4Q2010. Residential sales prices are expected to dip slightly in 2011, since the government is determined to introduce a new property tax and additional new measures to control speculation in the residential sector.

   



































Source: The People’s Bank of China

     16%

The office sector was marked by a recovery in rental rates during 4Q2010 due to the strong positive absorption during the period. In 2011 more than 1,000,000 sq m of new supply will enter the Shanghai market. However, as more than 30% of this space will be used by the building developers themselves, take-up is anticipated to increase further and rental rates are forecast to consolidate mildly during 2011. Meanwhile, office capital values rose 0.7% QoQ in 4Q2010. Overall, office investment yields fell 70 basis points during 2010.

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 1Q 2010 2Q 2010 3Q 2010 4Q 2010

0%

Office

Residential

Retail

Industrial

In the retail sector, retail sales registered exceptional double-digit growth during the second half of 2010, driving retail rentals upward, with an average growth of 11% on an annualized basis during the period. The largest retail acquisition during the period occurred when UK investor Grosvenor Fund Management, together with Vega Wharlock Properties, purchased the Shanghai Changfeng International Entertainment Centre (The North) in the Changfeng area of Putuo District for RMB1.45 billion. The average unit price on the transaction was RMB16,132 per sq m. The development will provide a total retail floor area of 89,589 sq m upon completion in mid-2011.

Source: Colliers

Major Investment Transaction Development

Floor Area

Lump Sum Price

Seller

Buyer

(sq m)

(RMB million)

(US$ million)

Cross Tower

50,200

1,310

197.80

SEB Immo Invest JV Pacific Star Capital

Ascendas Group

Center

89,500

4,296.00

648.68

DEShaw/APL

CPIC

126,000

1,643.10

248.10

Beijing Tianhong Group

Grosvenor Group Holdings Limited JV Grosvenor Vega China Retail Fund

51,000

900.00

135.90

Hotel Property Limited

Shui On Construction and Materials Limited

Office

retail The North

hotel 21 Century Tower Note: US$1 = RMB 6.6227

p. 8

| Colliers International


INVESTMENT market overview | SECOND HALF 2010

hong kong The overall real estate sales market posted a consolidation in the latter half of 4Q2010 after the announcement of unexpected cooling measures on the local property market by the Government in mid-November 2010. The suggested new measures included the introduction of a Special Stamp Duty (SSD) on residential mortgages on top of the current property transaction stamp duty, the stoppage of deferred payment of stamp duty and the issue of new guidelines to local banks on further lowering of the loan-to-value ratio (LTV) for mortgages.

   



    



































Source: The Hong Kong Monetary Authority

   14% 12%

In response to the measures, the level of speculation activity in the residential market substantially subsided. While there was a mild price fall, particularly in the mass housing sector, the total volume of sales transactions staged a consolidation in the second half of November 2010. Prices in the luxury end of the market, however, remained relatively firm. The key reason was the sustained low borrowing rates in the order of HIBOR plus 70-80 bps (i.e. about 1%), most vendors preferring to hold on to their developments for a prolonged period. However, the key challenge to both real estate investors and end-users has been the availability of debt financing after the lowering of LTVs suggested by the Hong Kong Monetary Authority in November 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 1Q 2010 2Q 2010 3Q 2010 4Q 2010

0%

Office

Residential

Retail

Industrial

Source: Rating and Valuation Department, HKSAR Government

By the type of asset class in the investment market, the office sector obviously stole the limelight during 4Q 2010. Local investors and institutional buyers were seen to offer more aggressive bids, since most of them were encouraged by the continued catch-up of office rentals. Strata-titled office units in Central and Admiralty were particularly sought after due to exceptional rental growth performance. In general, prime office yields were virtually flat during the second half of 2010 but second-tier office buildings in traditional business locations saw a compression of about 20 basis points (bps) during the period. Prime retail units remained the favourite targets for local players, although investment yield fell further by 30 bps during the second half of 2010. Across the various property sectors, industrial yields were compressed the most, by 50 bps, during the second half of 2010, developers and long-term investors taking advantage of the government’s initiative on revitalizing industrial premises by snapping up whole-block industrial premises for conversion into other uses such as retail and office.

Major Investment Transaction Development

Floor Area

Lump Sum Price

Seller

Buyer

(sq ft)

(HK$ million)

(US$ million)

79/F, The Center

13,213

338.00

43.33

Korean fund

Excel Fine Holdings Ltd

8/F and 9/F, Lippo Centre Tower 1

28,958

416.80

53.44

CITIC Bank International

Sheung On Services Ltd

20 Peak Road

*25,764

750.00

96.15

Undisclosed

Local investor

3-10 Warren Street

*6,700

713.00

91.41

Undisclosed

Wing Tai Properties

9,400

1,100.00

141.03

Taiwanese investor

Emperor International

Nan Fung Industrial Building

160,000

375.00

48.08

A consortium including New Century Group

Billion Development

Wilson Logistics Centre

281,614

310.00

39.74

Goodman

AEON Stores

Office

residential

Retail 22-24 Russell Street industrial

Note: US$1 = HK$ 7.8 * Land area

Colliers International |

p. 9


INVESTMENT market overview | SECOND HALF 2010

ta i wan - TA I PE I Riding on the gradual economic recovery and the additional push by the implementation of Economic Co-operation Framework Agreement (ECFA), investment capital started returning to the commercial real estate sector during the second half of 2010. Real estate prices and investment sales volume made a return. The most favoured locations were no longer restricted to Taipei City or New Taipei City but other non-traditional areas, comprising Taichung, Kaohsiung and cities in the middle and south of Taiwan.

TAIPEI INTERBANK CALL LOAN MARKET WEIGHTED AVERAGES OF OVERNIGHT INTEREST RATES  

% per annum

    



































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



Real estate buyers were generally from the finance and insurance sector, foreign institutions and technology corporations. In addition, individual investors with Chinese backgrounds, such as Hengdeli, were getting active in the commercial investment market of Taipei.

16% 14% 12% 

The total volume investment sales reached NT$55.1 billion during the second half of the year. The total aggregate volume increased 13%, to NT$109.5 billion in 2010. The main transaction deals included those from offices, street shops, industrial offices and retail property in Taipei, to offices and hotels in Taichung. One of the most notable transactions was the acquisition of Beacon Hotel in Taichung by Optimum Care International Tech. Inc. for NT$0.88 billion in 3Q2010. The development was subsequently resold to a local firm for NT$1.04 billion in 4Q2010.

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 1Q 2010 2Q 2010 3Q 2010 4Q 2010

0%

Office

Residential

Retail

Real estate land prices are predicted to edge up in the near to medium term due to the prospective economic growth and the supportive measures by the Government. More newcomers, including a number of non-traditional real estate investors, are expected to enter the real estate market in 2011.

Industrial

Source: Colliers

Major Investment Transaction Development

Floor Area

Lump Sum Price

(ping)

(NT$ million)

(US$ million)

2,417

2,560.00

84.30

Seller

Buyer

Chin Fon Bank

Taiwan Life Insurance Company

Office Chin Fon Bank Headquarters Building Taipei Financial Centre

1,905

1,820.00

59.93

Chin Fon Bank

Lung Yen Life Service Co. Ltd

Asia Trust Building

6,242

5,057.00

166.52

Taiwan Life Insurance Company

Continental Development Corporation

Fong Yi Construction City Centre Plaza

6,389

2,173.00

71.56

Fong Yi Construction

Fubon Life Insurance Company

Universal Retail Building

4,430

3,050.00

100.43

Continental Holdings Corporation

Asia Pacific Land

Lake Square

*1,252

6,000.00

197.58

Yuanta Development Co., Ltd. & Hong Lin Development Co., Ltd.

Highwealth Construction

Shou De Building

1,180

1,822.00

60.00

Asia Pacific Land

Pan Overseas Corporation

Street shop on Sec. 2, Roosevelt Rd.

1,179

1,150.00

37.87

Ju Lian Construction

Hwa Hsia Leasing & Financial Corp

Pu Construction Building

1,900

1,000.00

32.93

Undisclosed

BMW

Industrial Office on Sec. 2, Tiding Blvd.

3,639

1,489.00

49.03

Natural person

Altek Corporation

retail

industrial / office

Note: US$1 = HK$ 7.8 * Land area

p. 10

| Colliers International


INVESTMENT market overview | SECOND HALF 2010

japan - TO K YO JAPAN 10-YEAR GOVERNMENT BOND YIELDS 

% per annum









                        



Source: Bank of Japan



7%

The Class A office market was in a moderate recovery phase. The rate of rental fall tapered off. The average vacancy rate showed signs of peaking at 8.4%. Tenants were looking for large-scale relocations and/or second rent reductions on their existing leases. The number of transactions in 2010 increased compared to the previous year. However, there were a few players looking for residential properties up to JPY3 billion. With the government support programs implemented in the second half of 2009, the number of mergers among JREITs accelerated, with a total of three in the second half of 2010. At the end of 2010, the number of listed JREITs decreased from 41 in 2008 to 35. However, the total market value in the JREIT sector expanded about 50% from the trough seen in 2008. Investment yields saw a compression in the range of 7-8% in 2008 to about 4.9-5.3% as of the end of 2010.

6% 5% 

The decline in land prices for all sectors across the country has been decelerating during the second half of 2010. As of July 1st 2010, land prices in most survey sites showed a smaller decline than a year ago. Nationwide commercial and residential were -4.6% YoY (2009: -5.9% YoY) and -3.4% YoY (2009: -4.0% YoY), respectively, In Tokyo metropolitan areas, the percentage changes being -4.1% YoY (2009: -8.9% YoY) and -3.0% YoY (2009: -6.5% YoY), respectively, during 2010.

4% 3% 2% 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 1Q 2010 2Q 2010 3Q 2010 4Q 2010

0%

Office

Residential

Industrial

Source: Colliers

Major Investment Transaction Development

Floor Area (sq m)

Lump Sum Price (Yen billion)

Seller

Buyer

(US$ million)

Office Akihabara UDX

155,629

14.30

175.44

Kajima Co.

Premier Investment Co.

Toranomon 35 Mori Building

10,300

12.68

155.56

Mori Hills REIT

Mori Building

Shinjuku Subaru Building

20,385

34.00

417.13

Fuji Heavy Industries

Odakyu Electric Railway

Royal Parks Toyosu

22,132

7.36

90.30

Royal Parks Toyosu

BLife Investment Co.

Motoazabu Hills (Bulk Condo)

8,257

9.11

111.77

Mori Hills REIT

Mori Building

Ralph Lauren Bldg

6,563

31.00

380.32

NSM Omotesando GK

Secured Capital Japan, Orix Real Estate Capital,Trinity Investments

Shinsaibashi SI Bldg

4,631

19.50

239.23

SPC of AIG Global Real Estate

RREEF

125,400

123.00

1,509.02

Subsidiary of Seven and I Holdings

Seven and I Holdings

2,307

21.82

267.70

Mori Building

Mori Hills REIT

7,684

17.40

213.47

SPC of ProLogis

Japan Logistics Fund Inc

residential

retail

Seibu Ikebukuro Laforet Harajuku (Land Only) industrial Ichikawa Logistics Center II Note: US$1 = Yen 81.51

Colliers International |

p. 11


INVESTMENT market overview | SECOND HALF 2010

s o u t h ko r ea - S EO U L The sales market recovered gradually in the second half of 2010 thanks to activity attributed to foreign investors. Since most investors preferred to wait and see, the volume of market turnover in terms of floor area contracted 31% during the second half of 2010, compared with the level in the first half of 2010. However, the average unit price edged up by 5.3% in the second half of 2010.

KOREA BASE RATE (7-DAY REPURCHASE RATE)  

% per annum

   

                       



Source: Bank of Korea

In 3Q2010, foreign investment capital continued to show interest in quality office assets. For example, RREEF acquired Prime Tower and Alpha Tower in the CBD. Traditional players such as Morgan Stanley and MIRAE Asset were generally passive during the period. In 4Q2010, investment sales transactions focused on small- to mid-size developments in the GBD. Meanwhile, Hana Daetoo Investment Building, the Grade A office building in the YBD, was sold during the period. Investors with a long-term perspective have been active in pursuing Grade A office properties in central locations. In addition, developments currently under construction were their targets in anticipation of an improvement of occupancy demand within a two-year time frame.

    





Overall, prime office buildings are expected to remain attractive due to the prevailing low vacancy rates and stable investment yields in the marketplace. Targets for investment will include headquarters office buildings listed for sale, followed by the completion of individual corporate restructure.

    

                           





 

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

Major Investment Transaction Development

Floor Area

Lump Sum Price

Seller

Buyer

252.91

Hana Daetoo Securities Co Ltd

Hana Daol Trust

135.93

GIC Real Estate (Govt of Singapore)

RREEF

139.70

123.11

MAPS Investment Management

Dongbu Insurance

119.95

105.70

Morgan Stanley

AIG International Real Estate (AIRE GmbH)

8,109

119.50

105.30

Hyundai Development Company

Han Moo shopping Co

32,942

95.00

83.72

Grand Department store, Inc

Kookmin Bank AKA Eland

8,682

28.00

24.67

Multi-Q Logistics Co Ltd

Mapletree Logistics Trust

(Pyung)

(KRW billion)

(US$ million)

20,896

287.00

9,971

154.25

Gateway Tower

12,259

Samsung Bundang Plaza (Office)

11,533

Hyundai Dept Store Trade Center Grand Dept. Store Dev. - Gangseo

Office Hana Daetoo Securities Buidling Prime Towers

retail

industrial Multi-Q Logistics Yongin Center Note: 1 Pyung = 3.306 sq m US$1 = KRW 1,134.8

p. 12

| Colliers International


INVESTMENT market overview | SECOND HALF 2010

i ndones i a - JA K A RTA The investment climate in Indonesia was improving thanks to the ongoing development infrastructure projects and the government’s policies to maintain a balanced growth of the economy. The overall GDP is expected to post further growth from 5.6% in 2010 to 5.9% in 2011.

    



     















































In the real estate investment sector, the real estate investment sector showed an obvious upturn during the second half of 2010. Foreign investors were generally interested in the local office and industrial sector. The latest sales transactions included the acquisition of a serviced apartment tower by Frasers Hospitality of Singapore. Meanwhile, the Ascott group sold Country Woods to a local developer.

Source: Bank of Indonesia

Given the positive projection for the local economy, real estate investment activity is anticipated to be sustained in 2011. More overseas players are predicted to eye Indonesia as their real estate investment target. For example, two Korean companies have been planning to strengthen their presence. Other overseas developers such as developers from Dubai and fund management companies from Malaysia are understood to be looking for investment opportunities in the Indonesian property market.

 

18% 16% 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 1Q 2010 2Q 2010 3Q 2010 4Q 2010

0%

Office

Residential

Retail

Industrial

Source: Colliers

Major Investment Transaction Development

Floor Area

Lump Sum Price

(sq m)

(Rp billion)

(US$ million)

13,440.00

Undisclosed

Undisclosed

220,000.00

217.58

24.20

Seller

Buyer

residential The Peak Serviced Apartment Country Wood

Agung Podomoro Group

Frasers Hospitality

Ascott

Group of local developers

Note: US$1 = Rupiah 8,991

Colliers International |

p. 13


INVESTMENT market overview | SECOND HALF 2010

ph i l i pp i nes - m an i la In the second half of 2010, the local property market performed better than in the same period in 2009. In the office sector, vacancy rates were coming down on the back of strong demand from the Business Process Outsourcing (BPO) companies. As such, rental rates went up and shorter rent-free periods were offered by landlords during the period.

        



     













































 

Source: Central Bank of Philippines

  

 

In the residential market, new property launches were well absorbed in the marketplace. The average absorption rate in the pre-sales of residential projects increased 18% in the second half of 2010 as compared with that in the first half. More developers turned aggressive in acquiring properties in Metro Manila and in other provinces that are considered to be the next growth areas. As for the secondary market, vacancy rates of completed residential condominiums were at 8% during the second half of the year. However, this is expected to go up as a number of projects will be completed in 2011. The continuing increase of supply targeting young professionals and start-up families in Metro Manila put pressure on the level of rental rates, as unit owners need to consider competitive pricing for their units to be rented out.

 



On the investment front, office capital values are expected to edge up over the next 12 months. Initial office yields are expected to be in the range of 9%-11%, while residential yields will be stable at 6%-7%.

                                





   

Source: Colliers

Major Investment Transaction Development

Floor Area

Lump Sum Price

(sq m)

(Peso million)

(US$ million)

65,000.00

2,300.00

52.41

Seller

Buyer

Philippine Tuberculosis Society Inc.

Ayala Land Inc. (JDA)

office / retail / residential Quezon Institute Property Note: US$1 = Peso 43.885

p. 14

| Colliers International


INVESTMENT market overview | SECOND HALF 2010

s i ngapo r e Supported by a strengthening local real estate market, increased liquidity and availability of financing, the Singapore real estate investment sales market rebounded in the second half of 2010. A total of S$21.77 billion worth of sales transactions were concluded during the period, up 65.7% from S$12.97 billion in the first half of 2010. Developers picked up some S$7.74 billion worth of development sites in the second half of 2010, representing 35.5% of the total investment sales value during the period.

       

    

Real estate investment trusts (REITs) also made a comeback in acquisitions during the period, with most having addressed major financing requirements. They amassed a total of S$4.22 billion worth of properties in the second half of 2010, accounting for 19.4% of total investment sales value. The acquisitions were led by Suntec REIT’s acquisition of a one-third stake in phase one of Marina Bay Financial Centre (MBFC) from Cheung Kong (Holdings) Limited and Hutchinson Whampoa Limited for S$1.50 billion, translating into an average price of S$2,568 per sq ft on net lettable area (NLA) basis including rental support. Meanwhile, K-REIT Asia (K-REIT) snapped up a one-third stake in phase one of MBFC from Keppel Land for S$1.43 billion or S$2,450 per sq ft on NLA including rental support. The remaining acquisitions by REITs in the second half of 2010 were mainly made by industrial REITs.





                      



Source: Monetary Authority of Singapore

    18% 16% 14% 

12% 10% 8% 6%

Looking ahead, the prevailing economic environment will continue to favour real estate investments in 2011. The local investment market will benefit from foreign buying interests redirected to the Republic arising from the stringent curbs in property markets in the region and the prospect of a large capital inflow following the US Federal Reserve’s quantitative easing measures in November 2010. REITs are expected to capitalise on the current property cycle to expand further their portfolios. Meanwhile, acquisitions by potential new REITs will also boost investment sales volume in 2011.

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 1Q 2010 2Q 2010 3Q 2010 4Q 2010

0%

Office

Residential

Retail

Industrial

Source: Colliers

Major Investment Transaction Development

Floor Area

Lump Sum Price

Seller

Buyer

(sq m)

(S$ million)

(US$ million)

*897,423

870.50

676.12

Goldman Sachs

Overseas Union Enterprise

Development site

**893,393

363.00

281.94

State

Sim Lian Land Pte Ltd & Sim Lian Development Pte Ltd

Meng Garden

**99,789

137.00

106.41

Collective Owners

TG Development Pte Ltd

*178,187

250.00

194.17

City Developments Limited

Perennial Chinatown Point LLP (Includes SEB)

C & P Logistics Hub 2

**975,823

161.00

125.05

C&P Holdings Pte Ltd

AIMS AMP Capital Industrial REIT

New Tech Park

**810,710

305.90

237.59

City Developments Limited

Sabana Shari'ah Compliant REIT

The Adelphi (86 office units & 77 retail units)

*178,067

218.13

169.42

CapitaLand Limited

Guthrie GTS and Sun Venture Property

Chevron House

*262,650

547.00

424.85

Goldman Sachs

Deka Immobilien

1,426.80

1,108.19

Keppel Land Limited

K-REIT Asia

1,495.80

1,161.79

Cheung Kong and Hutchinson Whampoa

Suntec Reit

1,326.66

State

Perfect EaglePte. Ltd., Guston Pte Ltd. & Belmeth Pte Ltd.

Office DBS Towers 1 & 2 residential

retail Chinatown Point Retail Podium industrial

office / retail

Office / residential / retail Marina Bay Financial Centre# Phase 1

*1,747,132

##

Marina Bay Financial Centre# Phase 1

*1,747,132

##

Office / Residential / Retail / Hotel Peck Seah Street / Choon Guan Street Note: US$1 = S$ 1.2875

* Net floor area

**1,697,941

** Gross floor area

1,708.08

# 1/3 stake in Phase One

## Including rental support

Colliers International |

p. 15


INVESTMENT market overview | SECOND HALF 2010

t ha i land - B A N G KO K The investment market sentiment in Thailand in the second half of 2010 was boosted by the much anticipated sale of Carrefour retail stores to Big C, a French retail operator. However, the overall market situation remained down in terms of foreign participation due to simmering political unrest and legal impediments for foreign investment in real estate that continued to hinder demand for real estate.

 

   

                              



Source: Bank of Thailand

    18%

High demolition costs continued to hinder interest in many half-completed high-rise structures dating from the 1997 crash. Meanwhile, the need to acquire land has been a major impetus, especially for residential development and land banking around future mass transit stations. The development of new lines over the next ten years will have a significant impact on the real estate market in Bangkok. The resolution of the Map Ta Phut impasse has reignited interest in industrial investment. With its central location, Thailand provides good potential for future growth especially along the Eastern Seaboard. The situation with Map Ta Phut and the political problems had little effect on medium-scale investment, especially in the automotive and electronic sectors.

16% 14% 12% 

Thailand’s benchmark interest rate rose from 1.25% to 2% over the course of 2H2010 on the back of inflationary concerns and further rate hikes are expected which could start to impact real estate investment as an alternative to cash and fixed income.

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 1Q 2010 2Q 2010 3Q 2010 4Q 2010

0%

Office

Residential

Retail

Industrial

Source: Colliers

Three property funds listed on the stock exchange in the second half of 2010 raised a total of US$134.46 million. In January 2011, the Dusit Thani Freehold and Leasehold Property Fund will list on the stock exchange with a total value of US$134.19 million. Such funds could be a thing of the past, as Thailand is in the process of adopting REITs as an alternative and more flexible method, which could generate much greater institutional foreign involvement in the real estate market in the county.

Major Investment Transaction Development

Floor Area

Lump Sum Price

(sq m)

(Baht million)

(US$ million)

18,000

540.00

17.91

Seller

Buyer

Kasikornthai Bank

Sansiri Plc.

Office Siripinyo Building residential Pacific Place I and II

Undisclosed

727.00

24.11

Lehman Brothers

Thai Property Plc.

Millenium Residence

302 Units

5,000.00

165.84

City Development Co.,Ltd.

Lee Don Asset Co.,Ltd.

Land on Rama 3 Road

22,968

779.01

25.84

Private Sellers

LPN Development Plc.

Land in Sukhumvit soi 24

5,690

387.33

12.85

Private Sellers

LPN Development Plc.

Land on Sukhumvit Road

7,328

512.96

17.01

Metrostar Property Plc.

Rojna Property Co.,Ltd.

Undisclosed

35,500.00

1,177.45

Carrefour

Big C (Casino affiliate)

retail Carrefour stores Note: US$1 = THB 30.15

p. 16

| Colliers International


INVESTMENT market overview | SECOND HALF 2010

i nd i a Thanks to the sustained growth of the manufacturing, trade, hotel, transport and communication sectors, the ongoing pace of GDP growth in the country continued to favour the real estate investment market in the country during the second half of 2010. The inflation reflected by the Wholesale Price Index (WPI) declined to 7.4% against 8.62% in the last quarter. This change was primarily attributed to the further hike in Repo Rate & the Reverse Repo Rate by 25 basis points each.

  



    

 

 

  

  

 



 







 







 











Source: Reserve Bank of India

 

 

In the second half of 2010, the local real estate investment market saw the conclusion of 15 sales transactions, totalling US$350 million. During the same period in 2009, there were only 10 deals, with a total value of US$275 million. The highlight transaction should be the sale of “The Qube� – the commercial development in Mumbai by Kotak Realty Fund to Tata Realty for US$125 million during the period.

  

                          

   



Meanwhile, the government made the FDI policy regime more attractive and investorfriendly by removing the minimum capital and area requirement and three year lock-in period for investment in hotels. It is considering raising the ceiling on FDI in the sensitive multi-brand retail and defence sectors. Total FDI inflow for April-October 2010 stood at INR crore 56,755, of which the share for FDI in housing and real estate was 6%. Maharashtra and the National Capital Region accounted for over 50% of foreign direct investment inflows into the country during the first half of 2010-11.

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

Among the various property sectors, residential continued to be the focus for all private equities players and developers, although the average lump sum per investment deal became smaller. Given the sustained leasing demand in the SEZ, investment demand for leased and partially leased plots remained keen in the SEZ. In addition, there were few private equity funds looking to exit during the period.

Colliers International |

p. 17


INVESTMENT market overview | SECOND HALF 2010

aust r al i a - A D E L A I D E In the office sector, vacancy increased but absorption showed improvement with a positive take up. On the back of about 14,400 sq m of new supply being added to the market, demand remained strong with vacancy expected to fall below 7.0% by mid2011. Office yields generally stabilised, although there were individual cases showing a decrease of 25-50 basis points.

 

























































In the industrial sector, investor sentiment remained positive during the second half 2010, but the number of major investment transactions was yet to pick up. This was due to the shortage of prime grade quality investment opportunities (i.e. spaces greater than 5,000 sq m).

Source: Reserve Bank of Australia

Looking forward, investment sales activity occurring in the sub A$3 million range will continue to be active over the near term. However, the upper end of the market (i.e. lump sum greater than A$3 million) is expected to come back in a later stage in the second quarter of 2011.

  

16% 14%



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

Office

3Q 2010

1Q 2010

3Q 2009

1Q 2009

3Q 2008

1Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

1Q 2004

3Q 2004

0%

Industrial

Source: Colliers

Major Investment Transaction Development

Floor Area (sq m)

Lump Sum Price (AUD million)

Seller

Buyer

(US$ million)

Office Worldpark:01

11,835

46.50

47.26

Axiom Properties Pty Ltd

Growthpoint Properties

City Central Tower 2

12,337

75.00

76.22

SachsenFonds

Motor Accident Commission

11,670

5.45

5.54

Nylex Properties Pty Ltd

Private

Northgate Shopping Centre

5,021

18.63

18.93

Northgate Village Shopping Centre

Whatevertoo Holdings Pty Ltd

Avenue Shopping Centre

4,858

23.01

23.38

Undisclosed

Undisclosed

Supre, 120-122 Rundle Mall

597

10.00

10.16

Ash Investments Pty Ltd

Mt Pearl Investments Pty Ltd

Westside Shopping Centre

5,868

13.24

13.45

Private Investor

Private Investor

industrial 15 Alfred Avenue, Beverley retail

Note: US$1 = AUD0.9840

p. 18

| Colliers International


INVESTMENT market overview | SECOND HALF 2010

aust r al i a - BRISB A N E  

























































Source: Reserve Bank of Australia

   

In the retail sector, private investors were active with stock valued at A$100 million or below, while listed trust and offshore buyers were generally at potential asset at all price brackets. However, there was no shopping centre transacted during the second half of 2010. Retail yields for prime assets remained firm during the second half of 2010. In the industrial sector, developments with strong upfront cash flows continued to receive the bulk of interest during the second half of 2010. Investors showed a preference for properties with blue-chip tenants. The largest sales transaction was the purchase of 62 Stradbroke Street & 82 Noosa Street Larapinta by GIC for A$79.1 million. Prime industrial yields were steady but there was mild tightening for individual assets. Looking ahead, REITs with recapitalised balance sheets are expected to support the market.

16% 14% 12% 

Investment sales volumes continued to be underpinned by solid demand from institutional investors and REITs for high quality stock during the second half of 2010. This can be demonstrated by an increase of sales transactions involving large lots (greater than A$50 million) in both the Brisbane CBD and fringe areas. In 2010, there was a total value of A$852 million in office sales transactions, but more than 75% of the deals in dollar value were concluded in the second half of the year. The largest transaction was the sale of Brisbane Square, 266 George Street to Charter Hall and Telstra Super for A$300 million in 4Q 2010. Generally, prime office yields were stable at 7.5% during the period.

10% 8% 6% 4% 2%

Office

Retail

3Q 2010

1Q 2010

3Q 2009

1Q 2009

3Q 2008

1Q 2008

1Q 2007

3Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

1Q 2004

3Q 2004

0%

Industrial

Source: Colliers

Major Investment Transaction Development

Floor Area (sq m)

Lump Sum Price (AUD million)

Seller

Buyer

(US$ million)

Office Santos Place

35,395

287.00

291.67

Northbridge MJN Pty Ltd

Permodalan Nasional Berhad

Brisbane Square

57,300

300.00

304.88

Westscheme

Charter Hall & Telstra Super

4,741

25.10

25.51

KS3 Pty Ltd

Canberra Raiders Leagues Club

104,500 (Site area)

79.05

80.34

Salta Properties Pty Ltd

GIC

51 Axis Place, Larapinta

15,720

33.38

33.92

Toll IPEC

Private Investor

514 Boundary Road, Richlands

14,585

26.88

27.31

Russo Investments (Qld) Pty Ltd

Lend Lease

10 Felix Street industrial 62 Stradbroke Street & 82 Noosa Street Larapinta

Note: US$1 = AUD0.9840

Colliers International |

p. 19


INVESTMENT market overview | SECOND HALF 2010

aust r al i a - C A N B E RR A Canberra’s office market had become two tiered with prime assets showing stability and steady demand, while secondary assets showed greater volatility and relatively weak demand. Secondary assets with short lease expiry and poor environmental ratings continued to struggle with less investment demand and more stringent financing requirements. The gap widened between the prime and secondary office markets in terms of yields, rents and market sentiment.

 

























































Source: Reserve Bank of Australia

Several secondary commercial office buildings had been actively marketed for sale. Potential buyers required softer yields, with many offers being around 10.0%. Banks imposed tight financing parameters, thus restricting the volume. Secondary assets were affected by the introduction of mandatory disclosure of energy efficiency ratings from 1 November 2010 onwards, for all buildings being sold and leased that were in excess of 2,000 sq m.

     

There was little activity for commercial office buildings during 2010. Sales transactions were highlighted by 6 National Circuit Barton. Prime assets with long government leases, high environmental ratings and state of art contemporary accommodation continued to be in favour by international and national institutional investors.

    































Prime assets rents stabilised as new supply without lease pre-commitment was delivered to the market and tenants exercised greater bargaining power. We expect greater rental growth from 2012 onwards as the dynamic of demand and supply moves toward equilibrium. A longer period of over supply is expected for the secondary markets, however, and good rental growth is not expected in the next few years.



Source: Colliers

Many secondary assets will not sustain existing passing rents that have been inflated by fixed increases over recent years. Rents in secondary buildings will be corrected as new lease deals and market rent reviews become due. Changes to the net income outlook are now the most significant driver of capital values for secondary assets.

Major Investment Transaction Development

Floor Area

Lump Sum Price

(sq m)

(AUD million)

(US$ million)

6,145

19.20

19.51

Seller

Buyer

Masonic Club

Doma Group

Office 6 National Circuit Note: US$1 = AUD0.9840

p. 20

| Colliers International


INVESTMENT market overview | SECOND HALF 2010

aust r al i a - M E L B O UR N E In the Melbourne CBD office market, a total of 12 investment sales transactions over A$5 million each were recorded in the second half of 2010, amounting to a total of A$1.26 billion. This included four Grocon properties sold to CPA for A$575 million. The highlight of 2010 was Babcock & Brown’s property at 717 Bourke Street, being sold to REST for A$242 million, at a rate of A$5,525 per sq m.

 

























































Source: Reserve Bank of Australia

  

Take-up for industrial space remained relatively flat and rental growth was limited during the second half 2010. Continuing problems in the US and Europe made tenants more conscious in their decision-making. There were a few cases of relocation to lower-priced industrial areas. Kmart consolidated two locations into one 75,000 sq m distribution centre in Melbourne’s West. A few smaller moves from the Inner East to the East and South East were observed.

16% 14% 12% 

Melbourne CBD experienced strong leasing activity during the second half of 2010, with a number of significant leasing pre-commitments taking place. Approximately 330,000 sq m of office space with deals over 500 sq m was leased / pre-committed. Notable deals included NAB’s pre-commitment to 61,000 sq m, Marsh Mercer’s 25,000 sq m, Origin Energy 24,000 sq m and BHP Billiton’s 11,841 sq m.

10% 8% 6% 4% 2%

Office

3Q 2010

1Q 2010

3Q 2009

1Q 2009

3Q 2008

1Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

1Q 2004

3Q 2004

0%

Industrial

Source: Colliers

In the residential market, the market saw the highest number of scheduled auctions during 4Q 2010, despite lower clearance rates. The latest RP Data�Rismark Hedonic Home Value Index figures indicated that the overall value for residential properties in Melbourne increased marginally by 0.5%.

Major Investment Transaction Development

Floor Area

Lump Sum Price

(sq m)

(AUD million) (US$ million)

Seller

Buyer

Office 45 William Street

9,002

27.25

27.69

Becton

Henkell Brothers

Katherine Square

7,605

16.35

16.62

The Smorgon Family

Brendan Sullivan (Private Investor)

Media House

16,963

91.60

93.09

Grocon

CPA

AXA Centre

40,741

220.00

223.58

Grocon

CPA

QV 1

40,243

188.70

191.77

Grocon

CPA

QV 2

18,428

75.48

76.71

Seven 17 Bourke

43,801

242.00

245.93

570 Bourke Street

17,546

76.50

77.74

Perron

Charter Hall

422 Little Collins Street

9,431

16.25

16.51

Becton

Private Investor

485 La Trobe Street

33,461

140.10

142.38

Investa Commercial Property Fund

CLSA Capital Partners

7,981

54.22

55.10

Trafalgar Corporate Group

Undisclosed

635 Waverley Rd

15,021

9.00

9.15

Jemasky Pty Ltd

Australian Eastern Properties Pty Ltd

501 Williamstown Rd

13,846

24.00

24.39

Australia Post

Bunnings Warehouse Property Trust

13-20 Horsburgh Dr

6,318

23.20

23.58

CIP

Charter Hall Direct Industrial Fund

21-27 Brunswick Rd

8,000

15.00

15.24

Eg Funds Management

Caydon Property

101 Canning St

6,870

13.00

13.21

John, Stephen And Vincent Chiodo

Woolworths

Channel 7

Grocon

CPA

Babcock & Brown

REST

industrial

Note: US$1 = AUD0.9840

Colliers International |

p. 21


INVESTMENT market overview | SECOND HALF 2010

aust r al i a - PE RT H Investment sale transactions remained subdued for both industrial and commercial office markets, with two Perth CBD sales over A$20 million occurring in the second half of 2010. Two vacant sites were sold, a 1.8 ha site transacted at A$49.5 million plus GST (A$2,750 per sq m) and a 3,400 sq m site sold for A$23 million plus GST (A$6,764 per sq m).

 

























































Source: Reserve Bank of Australia

Demand for good quality larger industrial properties up to A$10 million also remained strong. Strong demand for large space was driven by the oil and gas sector, with demand for workshops with overhead gantry cranes and yard space strong with rents surpassing A$135 per sq m. High-net-worth investors and syndicators actively continued to seek quality investment grade stock. Yields for industrial property ranged between 8% and 9% for prime properties. Investment yields for smaller properties were stable at 7.0% to 7.5%.



16% 14% 12% 

Rising interest rates, tight credit conditions and a shortage of reasonably priced high performance investments were factors affecting the lack of transactional activity. Demand appeared to be increasing with investors actively seeking reasonably priced investments due to Western Australia’s strong economic fundamentals. Yields for Perth CBD commercial office properties remained stable at 7.5% to 9.0% in 4Q 2010.

10% 8% 6% 4% 2%

Office

3Q 2010

1Q 2010

3Q 2009

1Q 2009

1Q 2008

3Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

1Q 2004

3Q 2004

0%

Industrial

In our view, Western Australia will continue to be Australia’s economic powerhouse on the back of A$190 billion worth of capital investment projects that are either under construction, committed or planned.

Source: Colliers

Major Investment Transaction Development

Floor Area

Lump Sum Price

(sq m)

(AUD million)

(US$ million)

26,644

39.00

39.63

Seller

Buyer

Mirjam Norvilas

Private Investor

Office Kings Corner Complex industrial 35 Baile Road 31 Miles Rd

13,385

22.65

23.02

Salta Properties West Pty

Ausco Logistics Pty Ltd

Undisclosed

16.00

16.26

Bowman Investment Holding

Perron Investment Pty Ltd

18,004 (Site Area)

49.50

50.30

Turnstone Nominees Pty Ltd

AAIG Pty Ltd

3,400

23.00

23.37

Private Investor

Brookfield Multiplex Group

commercial site 98 Mount Bay Road 123 St Georges Terrace Note: US$1 = AUD0.9840

p. 22

| Colliers International


INVESTMENT market overview | SECOND HALF 2010

aust r al i a - SY D N E Y The continuing decline in the New South Wales unemployment rate has led to an increase in confidence that the recovery of the state’s economy is well advanced. This has translated into the stabilisation of the real estate market across Sydney during the second half of 2010. The real estate investment market saw a total of 10 major sales transactions with a total consideration of about A$795.5 million.

 

























































Buyers comprised a mix of foreign investors, institutional funds and private investors. Investment yields fell by about 25 basis points during the second half of 2010. The largest transaction was the sale of 320 Pitt Street to MacarthurCook Industrial Property Fund for A$192,000,000 in late December 2010, reflecting a yield of circa 7.5%.

Source: Reserve Bank of Australia

After experiencing double-digit capital growth during the first half of 2010, Sydney’s residential property sector began to slow during the second half of the year, as the effects of higher interest rates began to take hold. Despite the slowdown in sales, residential rents continued to increase with the median weekly rent for a three bedroom house in Sydney increasing by 2.6% during 3Q 2010.

   16% 14%



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

Office

3Q 2010

1Q 2010

3Q 2009

1Q 2009

3Q 2008

1Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

1Q 2004

3Q 2004

0%

Industrial

Source: Colliers

In the industrial sector, a lack of prime industrial stock emerged over the course of 2010, as institutional owners took higher quality stock off the market and placed secondary properties on the market in order to raise capital and divest from non-core operations. The lack of stock combined with an increase in demand for high quality development led to a tightening of prime yields by as much as 50 basis points during the second half of 2010. The market witnessed an increase in demand for smaller industrial land lots within Sydney, as owner-occupiers returned to the market. This increase in sales led to a stabilisation of industrial land values across Sydney, with the highest demand and less risky preference for buyers being fully serviced industrial lots.

Major Investment Transaction Development

Floor Area

Lump Sum Price

Seller

Buyer

195.12

Investa Property Group

MacarthurCook Industrial Property Fund

79.27

Abacus Property Group

City of Sydney Council

102.50

104.17

Orchard Funds Management

GDI Property Group

99.25

100.86

Orchard Funds Management

AMP Capital Investors (Sunsuper)

14,930

95.00

96.54

GPT Group

LaSalle Investment Management

13,238

116.00

117.89

Kingvest

K-REIT (Australia)

11,609.72

70.00

71.14

DEXUS Property Group

Charter Hall

31,820

174.00

176.83

Jen Real Estate

Abacus Property Group & Kirsh Group

(sq m)

(AUD million)

(US$ million)

320 Pitt Street, Sydney

29,159

192.00

343 George Street, Sydney

10,584

78.00

233 Castlereagh Street, Sydney

19,892

35 Clarence Street, Sydney

15,335

179 Elizabeth Street, Sydney 77 King Street, Sydney

Office

retail Gordon Centre Birkenhead Point Shopping Centre industrial Lot 7 Wonderland Drive, Eastern Creek

17,400

22.53

22.90

Australand

Private

2A Victoria Avenue, Castle Hill

13,778

24.50

24.90

Valad Property Group

Private

Bankstown M5 Business Park

16,067

22.56

22.92

GEO Property Trust

Private

Note: US$1 = AUD0.9840

Colliers International |

p. 23


INVESTMENT market overview | SECOND HALF 2010

ne w z ealand - AUCK L A N D Auckland CBD office vacancy saw a decline down from 10.6% in June 2010 to 9.6% in December 2010. Prime grade vacancy showed a slight increase from 9.4% in June 2010 to 9.8% in December 2010. Office sales volume over A$2 million experienced an increase. However, overall prime capital values in CBD continued their downward trend and fell by 5.5% in 2010. Office demand looks positive in 2011 since many businesses are confident enough to make an investment in their business.

    

      













































Source: The Reserve Bank of New Zealand

     18%

In the industrial sector, the Property Council / IPD Investment Index reported that Auckland industrial investment property recorded a total return of 8.4% for the year to September 2010, up from 7.1% in the June 2010 quarter. Industrial vacancy rate declined from 6.7% in March 2010 to 6.2% August 2010. For the first nine months of 2010, total settled industrial investment sales transactions (i.e. over A$2 million) in Auckland was about A$446 million, representing a fall of over 30% from the peak in the year to September 2010. Private investor demand remained robust and individual funds started showing interest again. However, the lack of available quality stock for sale remains the most challenging aspect of the investment market.

16% 14% 

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

Office

Retail

3Q 2010

1Q 2010

3Q 2009

1Q 2009

1Q 2008

3Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

3Q 2004

1Q 2004

0%

In the retail sector, the total return for New Zealand retail and New Zealand shopping centres increased to 7.1% and 7.4% respectively in the 12 months to September 2010, according to the PCNZ / IPD Investment Performance Index. Prime retail rentals stabilised in 4Q 2010 and units in prime locations such as Lower Queen Street continued to be favoured by retailers. Capital values in Lower Queen Street saw an increase in 2010, resulting in a tightening of yields during the period.

Industrial

Source: Colliers

Major Investment Transaction Development

Floor Area

Lump Sum Price

Seller

Buyer

4.62

Private Owner

Undisclosed

11.56

St Johns Manukau Limited

Lambie Drive Nominees Limited

Rodney District Council

TFML Holdings Ltd

AMP Capital

Kiwi Income Property Trust

(sq m)

(AUD million)

(US$ million)

2,582

6.00

13,613

15.00

Office 76 Symonds Street retail Bunnings 3 Moana Ave LynnMall

4,923

5.88

4.53

Undisclosed

174.00

134.08

Undisclosed

10.50

8.09

Private Owner

Undisclosed

5,576

7.10

5.47

DNZ Property Fund

Undisclosed

42,500

5.46

4.21

Private Owner

Undisclosed

industrial Storage King Building Note: US$1 = NZD1.2977 231 Bush Road 45 Stancombe Road Note: US$1 = NZD1.2977

p. 24

| Colliers International


INVESTMENT market overview | SECOND HALF 2010

ne w z ealand - W E LL I N GTO N     

      













































Wellington CBD office investment returned around 3.7% to the 12 months to September 2010 compared with 3.0% to the June quarter and -1.6% a year ago. Leasing activity in Wellington CBD was strong, with over 23,000 sq m of office space being committed. The overall vacancy rate at June 2010 was 7.2%, or about 89,150 sq m of vacant space, up from 6.0% recorded in June 2009. Prime grade vacancy increased marginally to 1.7%. Wellington CBD prime office rentals dropped 5.7% in the year to December 2010. In addition, we are predicting prime rents to continue to edge down by 2% over the next 12 months. Prime Wellington CBD yields increased by 25 to 50 basis points, with prime CBD capital values falling by 7.1% over the last 12 months, confirming that pressures on values were still evident at the end of 2010.

Source: The Reserve Bank of New Zealand

In the industrial sector, the main industrial areas, such as Seaview, Ngauranga, Petone, Porirua and Upper Hutt, have experienced continuous rental decline since 2008. With a total of 11,000 sq m of vacant industrial stock added to the Seaview precinct in August 2010, the average vacancy increased to 9.3% from 6.9% a year ago. Petone, on the other hand, saw vacancy edging down by 1% over the same period to 3.3%. Investment activity remained subdued in the second half of 2010. Yields were holding across the board in most of the precincts except Petone, where yields had tightened by 25 to 50 basis points in the second half of 2010. Looking forward, capital values are expected to fall slightly in Wellington, while yields will hold their ground.

    

16% 14%



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

Office

Retail

3Q 2010

1Q 2010

3Q 2009

1Q 2009

3Q 2008

1Q 2008

3Q 2007

1Q 2007

3Q 2006

1Q 2006

3Q 2005

1Q 2005

1Q 2004

3Q 2004

0%

Industrial

Source: Colliers

In the retail sector, our vacancy survey showed that the overall CBD retail vacancy in Wellington fell from 4.0% in December 2009 to 3.1% in June 2010. According to the PCNZ / IPD Investment Performance Index, the total return for Wellington retail increased to 4.0% in the 12 months to September 2010, compared with 3.1% in June 2010. In general, prime Wellington CBD retail rents remained relatively stable in the 12 months to December 2010, and the market expects rents to remain stable over the next 12 months. Investment yields stabilised in both prime and secondary markets in the December 2010 quarter at an average of 6.9% and 7.4% respectively.

Major Investment Transaction Development

Floor Area

Lump Sum Price

Seller

Buyer

4.82

Equitable Finance as Mortgagee for Petherick Properties (in liquidation)

Cheops Holdings Limited

10.40

8.01

Wake Holdings Ltd

H L Burns

13.60

10.48

DNZ Property Fund

Undisclosed

(sq m)

(AUD million)

(US$ million)

Ranstad House

6,566

6.25

Gillies Group House

3,524 10,040

Office

industrial 33-43 Jackson Street Note: US$1 = NZD1.2977

Colliers International |

p. 25


INVESTMENT market overview | SECOND HALF 2010

Greater China Major Market News

Beijing The Beijing Municipal Commission of Housing and Urban-Rural Development, the Operation Offices of the People’s Bank of China, Beijing Branch of the China Banking Regulatory Commission and the Beijing Bureau of Finance on 15 July 2010 jointly announced a notice on the confirmation of second home definitions for the home loan application process, regulating that second homes should be strictly standardized in both the actual number of home loans and the houses owned by a household. According to the latest act, home loan banks were asked to confirm the households’ credit records of home loan borrowers and confirm the number of houses they owned at the same time, with access rights to log in house ownership information database of the Beijing Municipal Commission of Housing and Urban-Rural Development. The China Insurance Regulatory Commission recently issued new regulations for insurance capital management, widening insurers' investment scope to real estate. However, insurance companies are not allowed to tap directly into real estate development and construction. According to the rules, insurance companies can put as much as 10% of assets in real estate and no more than 3% in financial products relative to the real estate sector. The ceiling on the total of these two kinds of investments is 10% of overall assets. On 19 October 2010, the People’s Bank of China (PBOC) announced raising RMB lending and deposit interest rates by 25 basis points, effective 20 October 2010. The one-year term deposits rate will be increased from the previous 2.25% to 2.50%, while the benchmark lending rates of loans with a maturity of one year will be increased from 5.31% to 5.56%; interest rates with other maturities will be adjusted accordingly. It is China’s first interest rate increase in nearly three years.

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| Colliers International

On 10 November 2010, the People’s Bank of China (PBOC) announced raising the reserve ratio for commercial banks by 50 basis points, effective 16 November 2010. The act, which uplifts the reserve ratio from 17.5% to 18%, is the fourth time this year to raise the reserve ratio and may freeze the loan fund of approximately RMB300 billion. It is reported that commercial banks in Beijing have received a verbal notice from the Beijing Banking Regulatory Bureau to tighten mortgage loan conditions from 1 November 2010. Detailed rules include: the minimum down payment for the first house should be 30% and the discount of interest rate should be no more than 15%; the minimum down payment for the second house should be 50% and the interest rate 1.1 times the benchmark interest rate; mortgage loans for the third and subsequent houses are forbidden. On 8 November 2010, the Beijing Municipal Commission of Housing and Urban-Rural Development announced a new regulation on the pre-sales practice of commodity housing, effective 1 December 2010. According to the regulation, developers must submit detailed pre-sales plan of their projects, including basic information of projects, construction schedule, form of pre-sale, incentives, etc., when applying for pre-sales licences. The plan should be published in sales rooms after the pre-sales licences are granted. Without pre-sales licences, developers are not allowed to collect deposits and down payments in any form.

On 15 November 2010, the Ministry of Housing and Urban-Rural Development (MOHURD) and the State Administration of Foreign Exchange jointly released a notice regarding administration of property purchase by overseas individuals and institutions, intensifying restriction on overseas property buyers. Under the new rule, overseas individuals are capped to purchase only one residential property in China, with a statement to prove they have no other residential assets in the country and at least one year’s employment prior to the purchase being required. Moreover, foreign companies or organizations with branches in China are only permitted to purchase non-residential properties in the registered cities to be used as offices. The new rule is perceived as an act to curb overseas speculative money that may flow into property market. On 19 November 2010, the People’s Bank of China (PBOC) announced raising the required reserve ratio (RRR) of deposit-taking financial institutes by 50 basis points, effective from 29 November 2010. This is the fifth time this year the central bank has raised the ratio, nine days after the last increase, taking the required reserve ratio for large-scale banks to an historical high of 18%. According to PBOC, the act aims to strengthen liquidity management and to appropriately control the growth of credit and loans. On 29 November, the Beijing Municipal Housing Fund Management Centre (BHFMC) released new rules to further tighten housing fund loans for second housing purchases. According to the new loan criteria, families with a per capita current living space of over 28.81 sq m will be ineligible to enjoy housing fund loans, while the minimum down payment ratio for second houses is raised to 50%, from 40% previously. In addition, loans for second houses are limited to ordinary owner-occupied housing, and is forbidden for apartments, villas and high-end residential.


INVESTMENT market overview | SECOND HALF 2010

Greater China Major Market News

On 1 December, the Beijing Housing and Rural Construction Committee, Beijing Tax Bureau and Beijing Finance Bureau jointly released a notice to adjust the practices regarding land value-added tax. Under the new rule, valueadded tax is exempted on sales revenues of affordable housing and price-limited housing; The pre-paid land value-added tax is 3% of the sales revenues of commodity housing projects with a plot ratio of less than 1.0, while that of other residential projects rises to 2%, from 1% previously. The People’s Bank of China (PBOC) on 10 December announced the raising of the reserve requirement ratio for commercial banks by 50 basis points, effective 20 December 2010. The act, which uplifts the reserve requirement ratio from 18% to 18.5%, is the sixth time this year and the third within one month that the reserve ratio has been raised, bringing it to its highest since 1984, and may freeze the loan fund of approximately RMB300 billion. On 25 December 2010, the People’s Bank of China (PBOC) announced the raising of the RMB lending and deposit interest rate by 25 basis points, effective 26 December 2010. The one-year term deposits rate will increase from 2.50% previously to 2.75%, while the benchmark lending rates of loans with a maturity of one year will increase from 5.56% to 5.81%, and interest rates with other maturities will be adjusted accordingly. It is China’s second act of increasing interest rates in just over two months. At the same time, PBOC raised the rediscount and refinancing rates to increase commercial banks’ cost of borrowing money from the central bank. These acts, combined with the previous consecutive increases of reserve requirement ratio, demonstrated the government’s intention to tighten monetary conditions.

2010 announced the raising of the housing fund lending and deposit interest rates, effective 26 December 2010. The lending interest rate is raised by 25 basis points for housing fund with all maturities; that is, the lending rate for housing fund with maturity of not more than five years is raised from 3.50% previously to 3.75%, while that with maturity of more than five years is raised from 4.05% to 4.30%. Fengtai’s Advanced Business Park (ABP), the fast developing business park in the south-west of Beijing, plans to expand to the east for 1.75 sq km to attract headquarters of high-tech service companies. Occupying a total land area of 400 hectares, the ABP in Fengtai District will be invested with RMB80 billion; after expansion it will have properties with a total GFA of approximately eight million sq m.

Chengdu Following the Ministry of Housing and UrbanRural Development and the State Administration of Foreign Exchange jointly issuing the "Management Ordinance of Foreign Institutions and Individuals Purchasing Housing in China", the Chengdu Government has enforced the policy from 18 November 2010, requiring overseas buyers to submit a written commitment about housing in China.  

Shanghai On 19 July, 2010, the Shanghai Planning and Land Resources Bureau implemented a regulation on land transactions, in which the contract must be signed on the day of a land transaction; that is, developers must pay off 20% of the land transfer fee in 10 days and the remainder in 30 days. In addition, Shanghai government held a meeting on improving financial services and boosting the structural adjustment of the economy. Insurance funds and annuity funds are expected to invest in public rental housing in Shanghai. On 8 October, 2010, new measures to further regulate the property market were introduced. A family (a Shanghai family and non-local residents) is entitled to buy only one more home (including second-hand property) in the city for a certain period of time. In order to levy a land value-added tax on real estate developers in a stricter manner, with different tax rates for different residential projects, authorities needs extra time to make better preparation for property tax pilot work.

In line with the raising of the benchmark interest rate, Beijing Municipal Housing Fund Management Centre (BHFMC) on 26 December

Colliers International |

p. 27


INVESTMENT market overview | SECOND HALF 2010

Greater China Major Market News

Hong Kong

In mid-November 2010, the government implemented a Special Stamp Duty (SSD) on residential units and a prohibition against deferred payment of the SSD. Residential properties purchased from 20th November 2010 onwards and resold within six months will incur a 15% SSD. This is in addition to the current stamp duty, capped at 4.25%of the transacted price. The percentage of the SSD comes to 10% for residential units that are resold with 6-12 months and to 5% for units resold between 12-24 months.

In mid-August 2010, the Government announced new measures to cool the residential market, including the ban on “confirmor” deals on uncompleted flats. Buyers will have to forfeit 10% of the price if they pull out of sales. In October 2010, Chief Executive Donald Tsang Yam Kuen announced a package of measures covering the local property market in his 201011 Policy Address. He emphasized an annual target of 20,000 new private flats over the next 10 years to meet demand. Given an average consumption rate of about 18,500 first-hand units per annum over the past decade, such supply target is a soft one that can be finetuned by market forces in due course. The government, in collaboration with the Hong Kong Housing society (HKHS), introduced a new subsidized housing scheme known as the “My Home Purchase Plan”. Under this plan, the HKHS will develop small and mediumsized flats for lease to eligible applicants at prevailing market prices. They will receive a subsidy equivalent to half of the net rental they have paid during the tenancy period. A target of about 5,000 flats will be built, with the first project to provide 1,000 flats, and expected to be completed by 2014. On the demand side, wealthy mainlanders who have snapped up some of the most expensive apartments are blamed for driving up residential prices. The temporary suspension of real estate from the investment asset classes under the Capital Investment Entrant Scheme (CIES) is aimed at controlling the current investment flows into the local housing sector. Figures show real estate accounted for 42% of total investments made under the program in the

p. 28

| Colliers International

first nine months of 2010. But immigrationlinked purchases represented only 1% of total property market turnover during the period. In view of this insignificant volume, it is doubted that the temporary removal of real estate from the investment asset class can effectively slow the prevailing upward price spiral, as this is not only being driven by people from the mainland under CIES but also from massive capital inflows from around the globe. In addition, the 2010-11 Policy Address included the tightening of concessionary policy of including green and amenity features in private buildings in an attempt to control inflated flats. Major changes include doing away with concessions for certain features, lowering the level of concessions for car parks, balconies, utility platforms and clubhouse facilities, and imposing an overall cap of 10% for a number of features that still qualify for concession.


INVESTMENT market overview | SECOND HALF 2010

North Asia Major Market News

Tokyo

However, although there have been the opinion to raise the benchmark rate against the pressure from a sharp increase in prices and a bubble in asset prices, the bank of Korea still remained the benchmark rate at the level of 2%. In fact, the CPI recorded 3.6% in 4Q 2010, increased from 2.40% in 4Q 2009. . This result showed the inflation rate in Korea exceeded 1.7% of the average inflation rate in other advanced countries in the OECD and 2.4% of its average for Asian emerging countries including Hong Kong, Singapore and Taiwan. Moreover, the CPI for fresh food, which directly affects daily life, increased to 27.2% in Oct 2010 and 33.8% in Dec 2010.

The Japanese economy is still in moderate recovery. For 4Q 2010, real GDP showed negative growth at -0.3% QoQ (-1.1% annualized) for the first time in five quarters. However, some positive factors were seen such as the continuous growth of corporate profit resulted in rising business fixed investments. Meanwhile, private consumption remained weak, unemployment rate stood high at 5.1% and exports slightly declines. In 2009, to stimulate real estate investment environment, the government created a public/ private fund to support re-financing existing loans of JREITs and their mergers. In addition to this, on 5 October 2010, the Bank of Japan announced its decision of the asset purchase program up to JPY30 trillion, of which up to JPY50 billion is for JREITs purchase, and made first purchase with the amount of JPY2.2 billions in December 2010.

Korea During the year of 2010, Korea economy recorded remarkable growth rate. While the economic growth in 1H2010 was mainly led by rapid recovery of large export volume, its growth during 2H 2010 was driven by favourable factors in domestic demand, employment, company investments and a stock market. General economic indicators in Korea, therefore, showed outstanding results during 2H 2010. Although the GDP growth rate in 4Q 2010 was slowdown to 4.91% from 7.08% in 2Q 2010, the annual GDP growth in 2010 recorded 6.11% which is higher than the market expectation in the year beginning. In terms of trade balance, export volume has exceeded import volume since 1Q 2009, so that the overall trade balance in 2010 was over USD 41.2 billion.

In terms of Facilities investment, as the domestic companies have enough energy for investment in facilities and new employment in 2010, investment volume in facilities increased 30.40% y-o-y in 2Q 2010 and 24.12% y-o-y in 3Q 2010. In construction sector, the total completed volume in civil engineering has showed strong growth since 3Q 2010, mainly thanks to the “Four Main Rivers’ Rehabilitation Project”, one of the presidential election pledges by President Lee. In contrast, its volume in building sector recorded negative growth in 3Q 2010 due to the depressed domestic real estate market especially on the residential sector since the global financial crisis.

Colliers International |

p. 29


INVESTMENT market overview | SECOND HALF 2010

Southeast Asia Major Market News

philippines

Thailand

The Monetary Board decided to maintain the BSP’s key policy interest rates at 4% for the overnight borrowing or reverse repurchase (RRP) facility and 6% for the overnight lending or repurchase (RP) facility. The interest rates on term RRPs, RPs, and special deposit accounts (SDAs) were also left unchanged. The BSP’s policy rates have been kept steady since July 2009. The Monetary Board’s decision was based on its assessment that the inflation outlook remains favorable, indicating that current policy settings continue to be appropriate. Latest baseline forecasts show inflation settling within the target range of 4.5 ± 1% for 2010 and 4 ± 1 % for 2011 and 2012. The forecasts are also supported by well-contained inflation expectations which continue to be within target over the policy horizon. The Board noted that the growth in credit and liquidity are broadly at pace with economic activity. Moreover, the current movements of asset prices, particularly in the equities and property markets, do not appear to pose any short-term challenge to the economy. At the same time, the Board noted that possible inflation pressures could come from generally higher global food and oil prices as well as the approved increase in tollway fees. In addition, while the rebound in investment is likely to add to productive capacity, leading to higher potential output over the medium term, a stronger momentum in demand growth may add to inflationary pressures in the short term. Looking ahead, the BSP will remain vigilant against any emerging risks to the inflation outlook and will adjust policy settings if and when needed to ensure that future inflation remains consistent with the medium-term target while being supportive of sustainable economic growth.

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| Colliers International

Singapore The Government revised the Development Charge (DC) rates for the period from 1 September 2010 to 28 February 2011. The review is carried out on a half-yearly basis, in consultation with the Chief Valuer. Prompted by the broad-based market recovery and exuberance in the first eight months of 2010 that resulted in rapidly rising land prices, the DC rates for Commercial land use have been increased by an average of 1%; those for Residential use on average have been increased by 13%; for Industrial Use, there is an increase of 10% in DC rates on average.

The booming property market had prompted the Ministry of National Development (MND) to announce on 25 November 2010 new land supply for a record-breaking number of new private homes under its 1H 2011 Government Land Sales (GLS) programme, in an attempt to contain the exuberance and robust demand from developers and homeowners in the housing market. The 1H 2011 GLS Programme would comprise a total of 55 sites, 23 of which are sites on the Confirmed List and 32 are Reserve List sites. These could potentially yield a high of 14,300 private residential units, some 3.42 million sq ft gross floor area of commercial space, 1.70 million sq ft of gross industrial space and 3,700 hotel rooms.

Thailand’s economy grew by 6.7% for 3Q 2010 with projections for 2010 just shy of 8% from various bodies. This comes on the back of the 2.3% contraction in 2009 in the wake of the global economic downturn. Exports rebounded strongly in 2010 especially to its ASEAN partners as well as China and Japan. For the year excluding December 2010 exports rose by 16.7% from 2009. The other prime mover for growth was in the form of domestic investment and consumption which are expected to grow by around 14% and 5% respectively in 2010. Investment came in the form of the private sector due to increasing levels of capital utilization. However disbursement of the government stimulus programme continued to play a role. After the strong rebound in 2010 the economy is expected to grow at a less frenetic pace in 2011 with projections for GDP growth ranging from 3.5-4.5% with much depending on the precarious global economic situation as well as Thailand’s own domestic concerns for 2011. Headline inflation was at 3% in December 2010 mainly a result of an increase in fresh food prices and oil. The Bank of Thailand has remained vigilant towards further rises by gradually increasing its benchmark one day repurchase rate to 2% by the end of 2010. Expectations that rising commodity prices, an increase in the minimum wage and retail pricing pressures will stoke further inflation and it is expected that the Bank of Thailand will maintain its anti-inflationary stance with further rate rises anticipated.


INVESTMENT market overview | SECOND HALF 2010

India

Major Market News

India Buoyed by healthy growth in the manufacturing, trade, hotel, transport and communication sectors, the economy grew by 8.8% in 2Q 2010, as against 6% in 2Q 2009. The Central Statistical Organization (CSO) reported this healthy growth despite a partial withdrawal of economic stimulus packages. The government had rolled back excise duty to 10% from 8% in February 2010. CSO data reflected that the growth was fastest since the 1Q 2007 when the economy expanded by around 9.5%. The government expects GDP to grow by 8.5% in the financial year of 2010-11. During 2H 2010, the Reserve Bank of India increased its rates, with repo and reverse repo rates increased by 25 and 50 basis points, respectively, in order to soften persistent inflationary pressures in the economy. Meanwhile, the cash reserve ratio was left unchanged at 6%. With the Reserve Bank of India (RBI) raising policy rates, commercial banks also announced increase in interest rates. In general, bank raises its home loan rate by 0.5 percentage points, from 9.0% to 9.5%,

The government’s attempt to ease FDI in the hotel and tourism sector bodes well for the real estate industry during 2H 2010. The government removed the minimum capital and area requirement for hotels as well as excluding them from the purview of the three-year lock-in clause that governs real estate activities. This was due to a huge demand-supply mismatch in the availability of rooms in India. It is expected to give a fillip to the plans to increase the number of hotel rooms in the country manifold, besides enabling domestic realty majors to induct foreign partners in their projects. According to the industry ministry, Maharashtra and the National Capital Region accounted for over 50% of foreign direct investment inflows into India during the first half of 2010-11. Delhi's National Capital Region (NCR), including parts of Uttar Pradesh and Haryana, received US$1.96 billion (Rs8,961 crore) of FDI during the period. NCR accounted for 20% of the total FDI in the country. During the period, India attracted US$11 billion of FDI. Maharashtra attracted the maximum foreign direct investment (FDI) of about US$2.67 billion (Rs12,275 crore) during April-September, 2010, accounting for 34% of the total FDI in the country during the period. Analysts commented that good infrastructure of states like Maharashtra and Delhi made them more attractive FDI destinations than states with poor roads and power facilities. In addition, Karnataka was the third most preferred FDI destination in the country, attracting $1.04 billion during the period, followed by Andhra Pradesh ($491 million), Madhya Pradesh ($398 million) and Tamil Nadu ($331 million).

Non-banking financial companies (NBFCs) having previously restricted their operations to broking, are now expanding their focus to the retail housing finance business. During 2H 2010, three NBFCs: Edelweiss Capital Ltd, Muthoot Fincorp Ltd and Dewan Housing Finance Ltd (DHFL), had set up subsidiaries or acquired business from banks to tap India’s fast growing mortgage market. India’s home loan market is estimated to be around Rs5 trillion, 60% of which is controlled by banks and the rest by housing finance companies. In December 2010, the Reserve Bank of India announced that banks could give up to 90% of the value of the property in case of small value home loans up to Rs20 lakh. In case of loans above Rs20 lakh, the loan-to-value ratio (LTV) should not exceed 80%. The RBI issued the circular, putting a regulatory ceiling on the LTV ratio in respect of banks' housing loan exposures, in order to prevent excessive leveraging by banks. With regards to ‘teaser loans' (comparatively lower rates of interest in the first few years and rates are reset higher thereafter), the Reserve Bank of India increased the standard asset provisioning on outstanding amounts from 0.40% to 2% in view of the higher risk associated with such loans. The provisioning on these assets would revert to 0.40% after one year from the date on which the rates would reset at higher rates if accounts remain “standard”.

Colliers International |

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INVESTMENT market overview | SECOND HALF 2010

Australasia Major Market News

Australia

New Zealand

The official cash rate held steady for six months, until the Reserve Bank of Australia (RBA) decided to increase the rate by 25 basis points, bringing it to 4.75% in November 2010. The stronger Australian dollar encouraged consumers to shop overseas. Although household expenditure was reduced, confidence was still reported at an above-average level.

Economic activity as measured by gross domestic product (GDP) decreased 0.2% in the September 2010 quarter, following a 0.2% increase in the June 2010 quarter. The decline in economic activity this quarter follows five consecutive quarters of growth. On an annual basis, economic activity increased 1.4% in the year ended September 2010 compared with the year ended September 2009. Many Economists are widely predicting that New Zealand will avoid a double-dip recession with rising confidence and construction adding to signs the economy expanded in the final three months of the year. The Consumer Price Index (CPI) recorded an increase of 1.1% in the September 2010 quarter, following an increase of 0.2% and of 0.4% in the June 2010 and March 2010 quarters, respectively. As a consequence of the Canterbury earthquake and continued aftershocks, many homes and businesses have been damaged, as have significant parts of Canterbury’s public infrastructure. Eventual reconstruction and repairs will require considerable resources over the next few years, particularly in the construction sector. The Reserve Bank of New Zealand has said: “If, in the aftermath of the earthquake, the prices of some goods and services increase temporarily, monetary policy would remain focused on the medium-term trend in inflation.” The Policy Targets Agreement explicitly instructs the Bank to examine temporary price increases generated by a natural disaster.

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INVESTMENT market overview | SECOND HALF 2010

Colliers International |

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INVESTMENT market overview | SECOND HALF 2010

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 Unit 1504 Yanlord Landmark 1 Renmin South Road Section 2 Chengdu 610016 Jacky Tsai General Manager Tel : 86 28 8658 6288 Email : jacky.tsai@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 Senior Director Investment Services East & Southwest China Tel : 86 21 6141 3529 Email : betty.wong@colliers.com

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NORTH ASIA

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

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

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

Buddy Ferrie General Manager, Investment Services Tel : 81 3 5563 2164 Email : buddy.ferrie@colliers.co.jp

Taipei, Taiwan 49/F TAIPEI 101 TOWER No 7 Xin Yi Road Sec 5 Taipei 110

Osaka, Japan Sumitomo Seimei Kawaramachi #2 Bldg. 4-8-4 Kawaramachi Chuo-ku, Osaka 541-0048 Japan

Charles Huang Director, Investment Sales Tel : 886 2 8101 1150 Email : charles.huang@colliers.com

Brett Jensen Account Manager Tel : 81 6 6232 0790 Email : brett.jensen@colliers.co.jp

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 | SECOND HALF 2010

SOUTH ASIA SOUTHEAST 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

Sydney, Australia Sydney CBD Level 12, Grosvenor Place 225 George Street Sydney, NSW 2000

Ieyo de Guzman Director, Investment Sales Tel : 632 888 9988 Email : ieyo.deguzman@colliers.com

John Kenny Chief Executive Tel : 61 2 9257 0222 Email : john.kenny@colliers.com

Singapore 1 Raffles Place #45-00 One Raffles Place Singapore 048616 Tang Wei Leng Executive Director, Investment Sales Tel : 65 6531 8568 Email : wei-leng.tang@colliers.com

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

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 Associate Director, 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

This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and/or its licensor(s). Š2011. All rights reserved. Colliers International is the third largest global real estate services company.

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Asia Pacific Real Estate Investment Market