Asia pacific-property-digest-4q-2014

2014: A New Investment Record
Asia Pacific Property Digest
Fourth Quarter 2014

Asia Pacific Property Digest • Fourth Quarter 2014 3
Feature Articles
Asia Pacific Economy and Property Market 4
Mind the (data) gap 8
Kangbashi “Ghost Town”: Not as empty as one might expect 9
The Korean logistics market 10
Indonesia logistics – a new frontier in the making 11
Office
Hong Kong 12
Beijing 15
Shanghai 16
Guangzhou 17
Taipei 18
Tokyo 19
Osaka 20
Seoul 21
Singapore 22
Bangkok 23
Kuala Lumpur 24
Jakarta 25
Manila 26
Ho Chi Minh City 27
Delhi 28
Mumbai 29
Bangalore 30
Sydney 31
Melbourne 32
Perth 33
Auckland 34
Retail
Hong Kong 35
Beijing 36
Shanghai 37
Guangzhou 38
Tokyo 39
Singapore 40
Bangkok 41
Kuala Lumpur 42
Jakarta 43
Delhi 44
Mumbai 45
Sydney 46
Melbourne 47
Residential
Hong Kong 48
Beijing 51
Shanghai 52
Singapore 53
Bangkok 54
Kuala Lumpur 55
Jakarta 56
Manila 57
Industrial
Hong Kong 58
Beijing 59
Shanghai 60
Tokyo 61
Singapore 62
Sydney 63
Melbourne 64
Hotels
Hong Kong 65
Beijing 66
Shanghai 67
Tokyo 68
Singapore 69
Bangkok 70
Kuala Lumpur 71
Jakarta 72
Sydney 73
Dear Reader,
AP commercial real estate investment volumes surged to a record high in 4Q14, bringing full year volumes to USD 131 billion,
also a record high for the region. Office leasing activity continued to gain traction in the final quarter and full year net take-up was
around 15% higher than the year before.
You can view this report on-line at www.jll.com/thehub where you will also find our other research outputs.
The AP research team hopes that you find this publication valuable.
Happy reading!
Best regards,
Dr Jane Murray
Head of Research – Asia Pacific

0Economy
4 Asia Pacific Property Digest • Fourth Quarter 2014
China slowing…but fastest in the region
In 2014, theAsia Pacific economy is estimated to have grown by just
over 5%, similar to the year before. This rate of expansion was more than
twice that of the rest of the world which grew by around 2% last year.
China’s full year growth came in at 7.4%. This was the slowest rate
since 1990, but still the fastest across Asia Pacific. After two quarters
of contraction, Japan’s economy is expected to have exited recession
in 4Q, and a decisive election victory for Prime Minister Abe in
December indicated ongoing political support for Abenomics. India’s
growth is stabilising and sentiment remains buoyant following Modi’s
election victory.
Asia Pacific Economy
Steady growth in 2014
Dr Jane Murray
Head of Research – Asia Pacific
Elsewhere, growth in Australia, Hong Kong and Singapore remains
underwhelming, while emerging Southeast Asia is mixed – strong
in the Philippines but weaker in Indonesia which recorded its worst
annual result since the Global Financial Crisis.
Mixed retail sales, exports and manufacturing
Retail sales in China have been bolstered in recent months by surging
online sales. However, sales have faltered in Hong Kong – with a 4%
y-o-y decline in December largely due to reduced spending on luxury
goods by Mainland tourists – while full year sales fell by 0.2%, the first
decline since SARS struck in 2003. The recovery in Japan’s retail sales
showed some signs of fading towards the end of 2014 despite record
Figure 1: Outlook for Major Economies
Country
Real GDP Growth (%)
2015 Outlook
2014E 2015F
China 7.4 6.8
• Further slowing in growth as the property sector continues to weigh on investment
spending. Slightly stronger exports and public infrastructure spending; consumption
growth to exceed overall GDP.
• Policymakers are committed to new growth drivers, while further monetary loosening
and targeted stimulus measures are likely to ensure employment growth.
Japan 0.1 0.9
• A mild recovery on aggressive QE, delay in the 2nd consumption tax hike to 2Q17 and
slight improvement in exports (due to a weak yen and stronger US demand).
• The central bank has sharply cut its core inflation forecast to 0.6% and admitted that it
may take longer than expected to hit the 2% annual inflation target.
India 5.3 6.3
• Growth to start recovering, with stronger exports and fixed investment. The extent of
recovery will largely depend on how much progress the new government makes on its
reform agenda.
• Recent rapid falls in inflation provide more scope to reduce interest rates – following
cut in mid-January.
Australia 2.8 2.7
• Below-trend growth due to weak consumption (soft labour market, high household
debt) and investment (end of mining boom). Slower home price growth and inflation
should allow the RBA to cut interest rates again – following cut in early-February.
• Slow export growth on soft demand from China and lower commodity prices, but the
recent weakening of the AUD should assist exporters’ competitiveness.
South Korea 3.4 3.5
• Slow export growth, with sluggish demand from China.
• Gradual improvement in consumer spending, helped by a healthy labour market, low
interest rates and higher public spending.
Indonesia 5.0 5.5
• Strong consumer and public spending, but limited scope for a recovery in exports.
• Headline inflation (more changes to administered prices likely) and interest rates to
remain elevated this year. Widodo’s reform-minded government may face strong op-
position in removing bureaucratic and regulatory bottlenecks.
Singapore 2.8 3.0
• Steady growth supported by public investment, but limited improvement in exports and
consumption (weaker inbound tourism, ongoing housing market correction).
• Interest rates to rise in line with the US but low inflation expectations – second con-
secutive month of deflation recorded in December.
Hong Kong 2.5 3.1
• More solid economic footing after the end of “Occupy Central” protests but changing
shopping patterns of Mainland tourists to impact consumption growth.
• Sales volumes in the primary residential market are likely to fall in 2H15 as local inter-
est rates rise in line with the US.
Source: Oxford Economics, February 2015

EconomyandPropertyMarket
Figure 2: Uneven Growth Across Asia Pacific
Source: Oxford Economics, February 2015
tourist arrivals. Growth remained sluggish in Singapore (excluding
cars) as well as Australia, where Christmas sales were disappointing.
Exports from Japan have been encouraging of late, growing by
12.8% y-o-y in December. China’s export performance has been
more volatile, with a strong December figure followed by a 3.3% y-o-y
decline in January. Falling commodity prices have dented exports
from Australia and Indonesia.
Manufacturing has started the year on a slightly stronger footing for
a number of countries, based on the January PMI readings. However,
the figures for China came in slightly below 50, indicating a slowdown
in the sector.
Falling inflation and loose monetary policy
Inflation is subsiding in most countries in the region, largely due to
falling commodity prices. Central banks are generally prioritising
growth through looser monetary policy. China lowered policy interest
rates by 40 bps in November for the first time since 2013, and also
cut banks’ reserve requirements in early February. India and Australia
cut rates by 25 bps in early 2015.
Despite the expected commencement of interest rate tightening in
the US later this year, reduced price pressures in Asia Pacific should
allow central banks to keep monetary policy loose, with no significant
interest rate hikes expected until 2016.
AP commercial real estate investment volumes surged to a record
high in the final quarter of 2014, bringing full year volumes to
USD 131 billion, also a record high for the region.
Office leasing activity continued to gain traction in 4Q14 and full year
net take-up was around 15% higher than the year before.
Further improvement in office leasing activity. Technology firms
most active
Across Asia Pacific, gross leasing volumes grew by 14% y-o-y in
4Q14, with India being the most active market. However, it is evident
that expansion demand in the region is still much lower than the peak
level of 2011, with leasing remaining patchy across many markets.
Domestic occupiers and technology-related firms have been at the
forefront of the demand recovery, while large corporates generally
remain in cost-saving mode.
During 4Q, Singapore and Hong Kong continued to see small
requirements from the financial sector, business centre operators and
non-traditional occupiers. Activity in China mainly came from
domestic financial firms augmented by small requirements from non-
financial MNCs. Expansion by IT firms and manufacturers supported
mild take-up in Tokyo. Manila continued to see healthy underlying
demand but activity remained quiet elsewhere in Southeast Asia.
Asia Pacific Property Market
A record year for investment in 2014
Leasing activity has gathered pace in Sydney and Melbourne, but
other Australian markets are still seeing only limited demand.
Full year Grade A supply additions in the Tier I markets were down by
one-third from the year before to 3.4 million sqm and the lowest since
2006. As a result, vacancy rates fell in three-quarters of the major
markets during 2014. The aggregate vacancy rate for the region
stood at 11.6% at the end of the year, but with a wide range across
cities – from as low as 2.5% in Beijing to a high of 29% in Hanoi.
Office rental growth moderates. Singapore and Tokyo slow
Quarterly average office rental growth slowed to 0.2% in 4Q (0.9% in
3Q). Concerns around large upcoming supply in Singapore saw q-o-q
growth slow sharply to 0.9% (3.5% in 3Q). Rental growth also slowed
in Tokyo (0.3% versus 1.9% in 3Q), and modest growth of less than
1% was recorded in Hong Kong and Shanghai due to patchy
demand/limited tenant affordability.
Rents remained largely flat in Southeast Asia and India, apart from
growth of 1.5 to 2.5% in Bangkok and Manila, and a 2.8% decline in
Mumbai due to some tenants exiting costly space. In Australia,
leasing recovery supported mild rental growth in Sydney and
Melbourne (less than 1% q-o-q) but rents continued to fall in most
other cities by 1 to 8% (the most in Perth).
Another year of growth around 5%
Stable regional economic growth of around 5% is expected this year,
with most economies likely to see a gradual improvement in growth
on accommodative monetary/fiscal policy and a slow pick-up in global
demand. Lower oil prices should also boost consumers’ purchasing
power and support growth in many AP countries.
Risks to the outlook include a re-emerging economic crisis in Europe,
geopolitical tensions, the vulnerability of some emerging market
currencies to US interest rate hikes, and a possible fallout from the
increase in global debt levels over the last few years.
2014E 2015F
y-o-y(%)
0
2
4
6
8
China
Japan
Philippines
India
Vietnam
Indonesia
Malaysia
Thailand
Taiwan
SouthKorea
HongKong
NewZealand
Singapore
Australia

PropertyMarket
Over the last 12 months, average rents have grown by around 3%.
Singapore has been the strongest performer with a 14.9% increase,
followed by Taipei, Auckland and Wellington which recorded annual
growth of 8 to 10%.
Healthy retailer demand. Bangkok records highest quarterly growth
The region saw generally healthy retailer demand in 4Q. New
international brands as well as dining and entertainment services
have become larger demand segments for malls. The picture was
varied in China during 4Q, with quality mature malls continuing to
outperform and garner strong retailer interest. Retailer caution in
Hong Kong has led to a longer decision-making process; however,
demand remained healthy for prime malls. Southeast Asia and
Australia continued to see demand for space from international
retailers, while leasing activity in India has been diverted to high
streets. Bangkok saw the strongest quarterly rental growth (2.6%) and
rents rose slightly in China (strongest in Beijing with growth of 1.4%).
Subdued residential leasing. Rents fall in Singapore
High-end residential leasing demand remains subdued in most
markets as a result of slow corporate hiring and stringent housing
budgets. Rents fell further in Singapore during 4Q (partly due to
restrictions on imported labour) but were stable or increased
marginally elsewhere. In general, we do not expect take-up or rents
to pick up significantly in the near term.
Stable warehousing demand. Hong Kong sees solid rental growth
Across the region, third-party logistics companies, retailers and
manufacturers continued to underpin industrial leasing activity.
Hong Kong recorded solid rental growth in 4Q (2.8% q-o-q) and
Greater Tokyo saw a mild uplift (0.9%), but rents remained mostly
flat in China, Singapore and Australia. Over the next year, rents are
projected to grow by 4 to 5% in Greater China and 1 to 2% elsewhere.
Strong fourth quarter sees commercial real estate investment
volumes hit a record in 2014
In 4Q14, commercial real estate investment volumes set a new
quarterly record of USD 44 billion (+18% y-o-y), with activity buoyed
by AP’s largest markets of Australia, Japan and China as well as
strong performances by Korea and New Zealand.
In 2014, Japan was the largest commercial real estate investment
market in Asia Pacific by a wide margin, and with record volumes in
yen terms. The market there has been benefiting from the massive
amounts of liquidity unleashed by Abenomics, with ultra-low borrowing
costs and attractive yield spreads. Second behind Japan was
Australia – which recorded its highest ever yearly volumes (+22%
y-o-y) – supported by strong buying activity from offshore investors.
Macro issues have dented investment in China over the last year
(–23% y-o-y) but encouragingly 4Q volumes staged a strong recovery.
Other markets remain mixed, with full year volumes up by 30% in
South Korea but down by the same percentage in Singapore, due
partly to a lack of available product. Hong Kong also saw below par
activity (down 1% for the full year).
Office rental and capital value trends have mirrored the differing
performance of the investment and leasing markets, with capital
values continuing to outpace rentals. During 2014, average prices
increased by 7%, the strongest result since 2011. Tokyo surged by
almost 20% while Taipei, Manila, Melbourne and Sydney also
registered double digit growth.
Leasing and investment to strengthen. Moderate rental and price
growth
During 2015, we are expecting a further pick up in leasing and
investment in Asia Pacific. Some volatility is likely in world markets,
especially in relation to the expected interest rate hike by the US Fed.
However if the global economy can continue to make a steady
Figure 4: Direct Commercial Real Estate Transactions
2006–2014
Figure 3: Office Rental Capital Value Changes
Yearly % Changes, 4Q14
Figures relate to the major submarket in each city
Source: JLL (Real Estate Intelligence Service), 4Q14
Figures refer to transactions over USD 5 million in office, retail, hotels and industrial
Rental Values Capital Values
y-o-y%
–5
0
20
10
15
5
Singapore
Bangkok
Tokyo
Manila
Seoul
Shanghai
HongKong
Beijing
Melbourne
Jakarta
Sydney
Mumbai
Japan AustraliaChina
Hong Kong
Singapore
South Korea Other
USDBillion
0
25
75
150
125
50
100
2006 2007 2008 2009 2010 2011 2012 20142013
2014
$130.9 bill
3% y-o-y

PropertyMarket
About the Author
Dr Jane Murray joined JLL in 1998
and in 2005 was appointed as Head
of Research – Asia Pacific. In this
role, Jane leads a team of over
100 professional researchers in the
region, which forms part of a network
of around 300 researchers in 60
countries around the globe.
The Asia Pacific Research team
produces a range of outputs to
assist the clients of the Firm with their decision making, including
comprehensive market monitoring and analysis across major
institutional-grade real estate markets in the region; forecasts of key
real estate indicators; consultancy projects; thought leading research
papers on topical issues as well as regular publications.
Figure 5: Rental Property Clocks, 4Q14
recovery, we should see a continued improvement in demand for
space. Meanwhile ample liquidity in the system will underpin another
buoyant year of investment activity.
Moderate rental and capital value growth of less than 10% is
expected across most sectors and markets over 2015. We expect the
disconnect between rental and capital value growth to continue this
year, but to narrow – average rents and prices to increase by 4% and
5% respectively. Outperformers are likely to include Tokyo, Beijing,
Sydney and Auckland in the office sector, and Beijing and Bangkok in
retail. In some residential markets such as Hong Kong and
Singapore, policy curbs are expected to remain in place for some
time which – together with likely interest rate increases – should put
downward pressure on prices.
Note: Clock positions for the office sector relate to the main submarket in each city.
Growth
Slowing
Rents
Falling
Rents
Rising
Decline
Slowing
Beijing
Hong Kong
Tokyo
Singapore (Multi User)Singapore (Logistics)
Singapore (Business Park)
Shanghai
Manila
Brisbane
Sydney, Melbourne
Wellington
Auckland
*Business Parks (Singapore) Conventional (Singapore)
Logistics Space (Hong Kong, Shanghai, Beijing, Tokyo Bay Area)
Growth
Slowing
Rents
Falling
Rents
Rising
Decline
Slowing
Beijing
Hong Kong
Hanoi
Bangkok
Taipei
Tokyo
Osaka, Sydney
Seoul, Ho Chi Minh City,
Adelaide, Canberra, Mumbai
Kuala Lumpur, Jakarta
Singapore
Shanghai
Manila
Bangalore
Delhi
Auckland, Chennai
Guangzhou
Perth
Brisbane
Melbourne
Wellington
Growth
Slowing
Rents
Falling
Rents
Rising
Decline
Slowing
*For Luxurious Residential Properties
Kuala Lumpur, Beijing, Guangzhou
Hong Kong
Bangkok
Singapore *
JakartaShanghai
Manila
Growth
Slowing
Rents
Falling
Rents
Rising
Decline
Slowing
Beijing
Bangkok
Tokyo
Kuala Lumpur, Jakarta
Shanghai
Manila
Singapore
Hong Kong
Bangalore
Delhi
Mumbai
Chennai
Guangzhou
Sydney*, Melbourne*, Brisbane*
SE Queensland* Wellington
Auckland
*Regional
Grade A Office Prime Retail
Prime Residential Industrial

AsiaPacific
Recently, I saw two headlines which summarise the dichotomous
view of data and analytics: one said ‘Saving the World? How Big
Data Is Tackling Everything From Cancer to Slavery’ but it was sitting
within a special page on the Bloomberg website entitled ‘Buried in
Big Data.’ Indeed, big data – or any data–and the analytical tools that
turn it into actionable insights provide massive opportunity, but can be
equally daunting. While some industries or functions are known for
capitalising on the power of analytics and big data (retail; banking;
risk management), others have made less progress, for reasons of
(at least perceived) lack of data, unwillingness or inability to invest in
technology tools and specialists, or remaining scepticism about its
value – no surprise given the hype-o-metre is off the chart.
JLL recently commissioned a survey from the global technology
market research firm, Forrester Consulting, to assess corporate real
estate’s current and planned data and analytics strategy, and how it
supports the broader businesses of which they are a part. The survey
reveals that the number of corporate real estate leaders who plan to
be ‘data-centric’ – using CRE data to shape all their decisions—will
double in the next three years from 28% to 56% (see figure 1). So
there is a clear appetite to use the wealth of data that exists in real
estate portfolios to drive better and faster decision-making, and to
ultimately differentiate and generate competitive advantage. This is
supported by, for many companies, a broader effort spearheaded by
the C-suite, and backed up by increasing financial resources.
However, when probed in more detail, it seems that the CRE function
is lacking some of the capabilities that are essential in achieving
‘data-centricity.’ They are focusing too much on how to get the data,
and less on the insights that it generates. While they say they are
strongest at data gathering and storage, their weakest perceived
capabilities are those which in fact add the most value – like
establishing data governance policy. It’s not entirely their fault –
organisational barriers like fragmented data initiatives, and limited
sharing of data across functions are standing in their way as well.
More disappointingly, CRE leaders are not seeing value in some of the
most powerful tools – like real time and predictive analytics. This is a
missed opportunity.
So how can they fill the gap between where they are and where they
want to be, given these challenges? Stepping up efforts to work across
departments to drive data and analytics, in acknowledgement of shared
corporate goals, pivoting towards strategic rather than tactical data and
analytics efforts, and cultivating/recruiting talent are just a start.
Read more in the paper from Forrester Consulting commissioned by
JLL: ‘Mind the Data Gap: Aspiration vs. Reality in Corporate Real
Estate.’
Susan Sutherland
Head of Corporate Research, Asia Pacific
Mind the (data) gap
About the Author
Susan Sutherland is the head of
corporate research for JLL in Asia
Pacific. She is responsible for
delivering thought leadership and
support for the Corporate Solutions
business in the region and globally.
Susan holds a Bachelor of Arts from
Wellesley College (USA) and a
Master of Science from the University
of Illinois (USA).
“How would you best characterise your firm’s use of data and
analytics three years from now?”
Source: Mind The Data Gap: Aspirations vs. Reality In Corporate Real Estate,
a commissioned study conducted by Forrester Consulting on behalf of JLL,
November 2014
Today Three years from now
Data denial
(firm has a distrust of
CRE data and
avoids using it)
1%
4%
2%
Data-indifferent
(firm does not care
about CRE data and/or
has no need for it)
67%
42%
Data-information
(firm uses CRE data
only when it supports
oponions or decisions)
28%
56%
Data-centric
(firm uses CRE data
to shape all opinions
and decisions)

China
Linda Yu
Senior Analyst, Research, Beijing
Kangbashi “Ghost Town”: Not as empty as one might expect
Still, relative to the progress of new towns across China, Kangbashi is
not extraordinary and continues to exude qualities unmistakably
associated with a city in the early stages of development: the
(perhaps unsurprisingly) misspelt Ordos Huneng Shoping Mall has
very high vacancy; and unlike the curious daytime, night-time in
Kangbashi can be rather haunting. Endless rows of visibly vacant
apartment towers are disturbingly easy to spot in the town’s would-be
flourishing residential neighbourhoods, where a limited number of
vehicles sit in unfilled car parks beside massive housing blocks
showing few lit windows after dark.
Widely criticised for the hubristic scale of its development, Kangbashi
is often mocked for its master plan which has led to the town’s
oversized roads and a ubiquity of barely occupied residential projects.
Yet at the core of this so-called ghost town, there is life – and enough
to support a viable, if weak, commercial centre. Considering it all,
even Kangbashi’s remarkably bizarre existence, it is no longer fair or
accurate to call Kangbashi a ghost town.
About the Author
Based in Beijing, Linda Yu is a senior analyst with JLL’s China
research team. Her contributions to quarterly reports and work on
special publications are intended to further client-understanding on
China’s vast commercial real estate landscape.
Known, if at all, as the most notorious of China’s modern ghost towns,
Kangbashi (formally Kangbashi New Area of Inner Mongolia’s Ordos
city) is something of a peculiar place and somewhat difficult to
describe. But that’s not to say that the young district is still deserving
of the infamous status that has stuck with it since being named and
shamed some five years ago by Aljazeera and subsequently all major
international media outlets.
Nearly 50,000 people now call Kangbashi home, according to an
official count released in 2014. Though the population comprises just
5 percent of the 1 million people Kangbashi was originally said to
be planned for, residents here contribute to a regular hub of activity
in the centre of town as they go about their daily lives, defying the
definition of a true ghost town.
Perhaps best likened to where a nondescript Chinese city meets
Ashgabat, the notably strange capital of Turkmenistan, Kangbashi
shares a few oddities with the little-known Central Asian city, including
public buildings infused with monumentalist vision and a smattering of
statues that are both kitschy and representative of local traditions.
Guarded by giant fighting horse sculptures, the Ordos government’s
new home is not far from Kangbashi’s “high street” made up of a
cluster of projects offering mass market-oriented brands. Largely
ignoring the low-end fashion on offer here, locals mostly come to eat,
not shop. Shopping is generally reserved for Ordos’ more developed
Dongsheng district some 25 kilometres away, or increasingly, like
elsewhere in China, online.
Anchored by a McDonald’s that serves as the only obvious
international chain around town, Kangbashi Food Plaza offers a
surprising amount of FB options, including Chinese fast-food chain
Dicos; it competes with the Golden Arches near the building’s main
entrance. Inside, a food court offers tasty cuisines and sugary fruit
drinks. It is calm, but happening here. Affordable meals do well to
bring modest crowds out, particularly on weekends. The nearby Jin
Chen International Shopping Center also draws customers with a
Suning store, simple electronics market, and small nail salon.

Korea
The economies and real estate markets of Korea and Japan have
many similarities so it’s not too surprising that I occasionally hear the
Korean logistics market compared to its Japanese counterpart – only
15 years ago.
Certainly, the local logistics market has a lot in common with Japan
circa 2000:
• Warehouse space is predominantly outdated and/or functionally
obsolete due to one or a combination of location, design,
specifications and building size;
• Domestic conglomerates are the dominant market players but
have typically run their own supply and distribution chains; and
• As a result of the above two factors, the quantity and quality of
leasable space is limited.
Since 2000, the Japanese logistics market has seen dramatic
structural changes especially after the arrival of notable global
logistics developers and, as a consequence, the market has evolved
into one of the most active logistics investment markets in Asia. So is
it possible that the Korean logistics market may follow a similar path
to maturity? Well, over the past couple of years some positive signs
have certainly emerged:
• The Korean national government has designated the logistics
industry as an economic growth engine with the stated aim of
increasing logistics industry revenue by nearly 50% by 2017;
• The outsourcing of logistics functions is on the rise. Government
tax incentives and global competition are encouraging domestic
conglomerates to utilise 3PL operators and to improve the
efficiency and flexibility of their distribution and supply channels;
Yongmin Lee
Head of Research, Korea
The Korean logistics market – following in the footsteps
of Japan?
About the Author
Yongmin Lee is responsible for
leading the research team at JLL
Korea. Yongmin’s primary focus is on
the analysis of the Seoul office
market to produce market-leading
research and consultancy reports. He
also actively monitors retail and
industrial markets.
• A forecast uptick in new supply is expected to significantly
improve the quality of space available. The government’s
‘Logistics Service Improvement Plan’ released in August 2014
provides for investment of around KRW 1 trillion in new logistics
facility projects. Private developers are also responding to
growing tenant and investor demand for modern, hi-tech
distribution centres in key locations; and,
• Lease covenants are improving. As more blue-chip tenants
occupy leasable space, the days of one to two year lease terms
are disappearing and terms of up to 10 years are becoming more
common, particularly for build-to-suit facilities.
While the market is still characterised by a lack of transparency and
limited transaction volumes, the signs of progress are encouraging.
How long the Korean logistics market will take to reach the level of
maturity of its Japanese equivalent is of course hard to predict, but
the improving fundamentals of the industry are likely to provide a
compelling investment story to the increasing number of institutional
buyers reviewing the sector in coming years.

Indonesia
Indonesia is the largest archipelagic country in the world and the fourth
most populous nation, with about 250 million people. The Indonesian
economy is driven by robust domestic consumption attributed to rapid
urbanisation and a growing middle class.
With a large population base, the demand for consumer products – from
basic foodstuffs and personal care to high-tech gadgets and
motorcycles – has risen. With this expanding consumer market, a
larger volume of goods is being transported throughout the archipelago.
Coupled with a greater number of new international brands with
production facilities in the Greater Jakarta area, the demand for
distribution and logistics services by local and foreign manufacturers,
including third-party logistics (3PL) companies, has expanded rapidly.
Vivin Harsanto
Head of Advisory Group, Indonesia
Indonesia logistics – a new frontier in the making
About the Author
Vivin heads JLL’s Indonesia Advisory
Group which covers Strategic
Consulting, Research and Valuation
businesses. She has been involved
in numerous projects covering all
property sectors and in most major
cities throughout Indonesia, providing
strategic advisory services to both
private and public sectors. Vivin has
a Civil Engineering background and
a Master’s in Real Estate and
Construction Management from the
University of Denver.
between demand and available supply where major occupiers have
been looking at multiple locations – will continue to drive rents up and
asset yields down for some time.
However, with a population this large and geographically dispersed, the
weak infrastructure translates into longer distribution times and higher
costs. Nonetheless, this is set to change. At the Asia Pacific Economic
Cooperation (APEC) convention, recently elected President Jokowi
invited foreign investors to support his government’s programme to
build and improve the ports and other transportation infrastructure. If
the new president is able to deliver on this, this infrastructural issue
could be minimised, if not mitigated, eventually providing significant
opportunities for logistics operators and developers.
As such, there has been considerable interest from local and foreign
investors in the logistics market. These include local and regional
private equity groups as well as pension and sovereign funds. A
number of these investors have enjoyed success, being the first
movers in other emerging cities in the Asia Pacific region.
Most investors and 3PL companies look to acquire land within
established industrial estates in the Greater Jakarta area, with a
number in Surabaya, Medan and other secondary cities. While land
prices within industrial estates have increased significantly over
the past few years, estates with good infrastructure, utilities and
professional estate management are still preferred.
Despite these exciting changes and the potential in the Indonesia
logistics market, some large international owners, operators and
developers are still hesitant in their participation, as they feel that
the Indonesian market is not mature or sophisticated enough. In my
opinion, the opportunities are bountiful. The underlying conditions – 1)
the increase in retail and e-commerce and 2) the current imbalance
Average Land Price (IDR psm) vs. Annual Take-up (Ha)
Source: JLL
Avg. Take-up Ha per Year Avg. Land Price IDR psm
900
800
700
600
500
400
300
200
100
0
2,500,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
2,000,000
1,500,000
1,000,000
500,000
0

HongKong:Office
Hong Kong: Office
• Tsimshatsui and Hong Kong East only submarkets to record positive net take-up
• Industrial refurbishment projects continue to weigh on Kowloon East rentals
• Capital values remain broadly stable on back of low holding costs
Demand
All submarkets, with the exception of Tsimshatsui and Hong Kong East, recorded
negative net take-up in 4Q14. However, stronger than expected demand in Central,
Tsimshatsui and Hong Kong East helped offset large lease expiries. As a result, the
overall occupier market contracted by only 75,200 sq ft, trimming net take-up for the
full year to 724,000 sq ft.
In Central, demand for larger office space was led by tenants outside of the banking
and finance sector. Pure Yoga, for example, leased 15,100 sq ft at Hutchison House in
Central while two floors at Citibank Plaza were leased to a medical clinic – Hong Kong
Integrated Oncology Centre. The Occupy Central protest did not have any notable
effect on the city’s office leasing market.
Supply
The completion of The Octagon in Tsuen Wan and 10 Shing Yip Street in Kwun Tong
in 4Q14 brought the total new supply for the year to 1 million sq ft, which is half of the
ten-year average annual supply.
The government released two commercial development sites for sale via public tender
during the quarter, both with tender deadlines in January 2015. Both sites are located
in decentralised areas – KCTL 495 in Kwai Chung and NKIL 6512 in Kwun Tong – and
have maximum buildable GFA of 228,000 sq ft and 883,900 sq ft, respectively. There
are no restrictions on stratification for the two sites, unlike the last two commercial sites
sold in Kowloon East – NKIL 6312 (buyer Swire Properties) and KTIL 761 (Mapletree).
Asset Performance
All office submarkets, with the exception of Hong Kong East and Kowloon East, posted
marginal rental growth in 4Q14, padded by a tight vacancy environment. Supply
competition arising from refurbished industrial projects continued to weigh on Kowloon
East rentals.
The investment market was relatively quiet ahead of the holiday season. Investment
sentiment, nonetheless, remained intact as transaction volumes continued to be
largely supported by end-user demand, especially in decentralised locations. For
example, Chinese developer Evergrande Group purchased two floors at Global Trade
Square in Wong Chuk Hang for HKD 317.7 million (HKD 18,600 per sq ft). Capital
values remained broadly stable across the submarket on the back of low holding costs.
12-Month Outlook
The overall occupier market is forecast to grow by about 2 million sq ft in 2015, its
highest level since 2011. However, about 60% of demand is expected to be from the
realisation of pre-committed space in three upcoming developments. Excluding pre-
commitments, demand for office space should be moderately higher in 2015 on the
back of stronger economic growth, which should support modest rental growth across
all submarkets with the exception of Kowloon East, where rental growth may continue
to be negatively impacted by industrial refurbishment projects.
Investors are likely to continue to be on the lookout for long-term investment
properties. For example, Chinese insurer China Life reportedly was in negotiation to
purchase Wheelock Properties’ One HarbourGate in Hunghom at end-2014. The
investment market should receive a boost with the launch of several upcoming Grade
A projects. As such, capital values are expected to hold firm over the next 12 months.
Note: Hong Kong Office refers to Hong Kong’s Overall Grade A office market.
12-Month Outlook
Rental Value Capital Value
For 2010 to 2014, take-up, completions and vacancy
rates are year-end annual. Future supply is for 2015.
Physical Indicators are for the Overall market.
Financial Indices
Arrows indicate 12-month outlook
Index base: 4Q10 = 100
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ HKD 90.4 psf pm
Stage in Cycle Rents rising
No. of Quarters Since
Last Trough
7
^ net effective, on NFA
Financial Indicators are for Central.
Index
Rental Value Index Capital Value Index
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
0
50
150
100
200
Take-Up (net) Completions
Future Supply Vacancy Rate
10 11 12 13 14
–2
2
4
6
8
Percent
–100
100
200
300
400
Thousandsqm
00
15F

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Beijing:Office
Beijing: Office
• Domestic finance and IT firms continue to drive leasing demand
• Citywide rental growth declines, while CBD rents stay flat
• Yields remain unchanged q-o-q; supply of tradable assets limited
Demand
Domestic investment and wealth management firms drove demand, with most of the
leasing activity concentrated in the CBD and Finance Street. As such, landlords
continued to exercise discretion when leasing to different types of financial companies,
showing a preference for large, stable private equity firms. Domestic IT firms were
consistently the second most active source of enquiries, but leasing activity from
smaller IT companies was often limited by budgetary constraints. Due to a scarcity of
space in Zhongguancun, domestic IT companies, and software firms in particular,
turned to Beijing’s eastern submarkets.
Supply
No new supply was completed in 4Q14, marking an entire calendar year without any
Grade A completions. Although Beijing’s office building quality has improved greatly in
recent years, new Grade A completions are categorised separately from Grade B office
and business park projects. Meanwhile, Fortune Financial Center, the most recent
completion in the Grade A market and a useful barometer for the CBD, continued to
make steady leasing progress and reached a commitment rate of 75%.
Asset Performance
The Grade A office market was largely a landlord’s market characterised by renewals,
with landlords mainly focused on striking a balance between raising rents and
managing tenant-risk profiles. The run-up in rents over the past few years has created
opportunities for landlords to substantially increase incomes through positive rental
reversion. However, CBD market rents were flat q-o-q as landlords prioritised low-risk
tenants, sacrificing higher rents in favour of more stable occupiers. Upcoming anchor
tenant expiries also weighed on key buildings. In Finance Street, strong demand from
big, domestic financial institutions with high rental affordability pushed rents up 2.1%
q-o-q as new leases were signed at current market rents.
12-Month Outlook
Overall, there was a sharp uptick in the volume of enquiries in 4Q14, and these
enquiries are expected to account for a fair amount of leasing activity over the coming
quarters. Five new Grade A projects are scheduled to complete in 2015. However, new
supply is likely to offer tenants only a short respite from the tight vacancy environment,
as roughly half of the space is for self-use. Furthermore, much of the new space will
be in outlying areas, not within central areas where demand is most concentrated.
Domestic financial institutions should continue driving demand, keeping vacancy rates
down and further bolstering landlord confidence. As such, we expect rents to resume
rising at a moderate pace in 2015.
Note: Beijing Office refers to Beijing’s overall Grade A office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ RMB 373 psm pm
Stage in Cycle Rents stable
Last Trough
4
^net effective, on GFA
Financial Indicators are for the CBD.
Thousandsqm
Percent
10 11 12 13 14 15F
0
720
1,200
0
6
12
15
3
9
480
240
960
4Q10 4Q11 4Q012 4Q13 4Q14 4Q15
60
100
200
160
180
140
80
120
Index

Shanghai:Office
Shanghai: Office
• Domestic finance companies and MNC retailers active in CBD market
• Rents in Pudong and Puxi edge up
• Decentralised office Suntown Plaza sells for RMB 3.1 billion
Demand
Domestic financial services companies remained active in the CBD leasing market in
4Q14. In Pudong, domestic and JV financial institutions were active seeking Premium
Grade A office space. For example, the New Development Bank, a multilateral
development bank operated by the BRICS states, leased around 6,000 sqm in Oriental
Financial Center to set up its office in Shanghai in the quarter. In Puxi, domestic
finance companies continued to demonstrate strong demand in the leasing market.
Many new enquiries for office space were from domestic companies in new financial
services such as internet finance. Additionally, MNC retailers were also active in
seeking opportunities for upgrading and expanding their office space. For example, VF
Corporate, an American retailer, leased 8,000 sqm in Henderson 688 in the quarter.
Supply
No new projects were completed in the CBD market in 4Q14. In the decentralised
market, three new projects with a combined office space of 238,998 sqm were
completed. One project was in Decentralised Puxi–HQ Green Valley Plaza Ph
1(89,373 sqm)–and two in Decentralised Pudong–Lujiazui Century Financial Plaza
Bloc 3 (62,125 sqm) and Chamtime Plaza (87,500 sqm).
Asset Performance
Pudong Grade A rents continued to steadily increase, up by 0.9% q-o-q to RMB 10.1
per sqm per day. Meanwhile, Grade A rents in Puxi reversed their downward trend and
edged up by 0.6% q-o-q to RMB 8.8 per sqm per day in 4Q14. To retain high quality
tenants in their buildings, the landlords of Premium Grade A buildings in both Pudong
and Puxi became more negotiable on renewal rents. As a result, Pudong Premium
Grade A rents grew by just 0.2% q-o-q to RMB 11.5 per sqm per day, while Puxi
Premium Grade A rents went up slightly by 0.1% q-o-q to RMB 10.1 per sqm per day.
Domestic RMB funds continued to show interest in en bloc investment opportunities in
the Shanghai office market. Gopher Asset Management, a domestic real estate fund,
purchased Suntown Plaza, a project under development in Huangpu District, for
RMB 3.1 billion in 4Q14.
12-Month Outlook
Looking forward to 2015, demand from domestic companies should remain the main
source of demand in the CBD leasing market. Although both Pudong and Puxi will
witness a large volume of new supply, rising demand from domestic tenants is
expected to prevent a decline in rents in both markets. We expect rents to continue to
grow in Pudong, albeit at a slower pace than 2014. In Puxi, rents are projected to
remain flat throughout 2015.
Note: Shanghai Office refers to Shanghai’s Overall Grade A office market consisting of Pudong, Puxi and the decentralised
areas.
12-Month Outlook
Physical Indicators are for the CBD.
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ RMB 9.4 psm per day
Stage in Cycle Growth slowing
Last Trough
7
^net effective, on GFA
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
60
80
120
100
160
Index
140
Thousandsqm
Percent
10 11 12 13 14
0
3
9
15
12
0
120
240
360
600
480
15F
6

Guangzhou:Office
Guangzhou: Office
• Office leasing activity slightly increases
• Declining vacancy and rising demand underpin stable rents
• Local end-users and individual investors support strata-titled demand
Demand
The leasing market witnessed a gradual pickup in transaction volumes and new
enquiries in the quarter. Signs of a stabilising Chinese economy and decreasing interest
rates have improved business sentiment, and more local companies, in particular IT,
finance and professional services firms, are using this soft rental environment to expand.
Strong pre-commitment (80%) at a new completion in the quarter helped push net
absorption higher to 93,000 sqm. As a result, the overall vacancy rate declined to 9.1%
at end-4Q14.
Supply
Agile Centre (79,196 sqm, GFA) in Zhujiang New Town (ZJNT) completed in the
quarter, increasing overall stock of Grade A office space to 3.9 million sqm (GFA). This
building was developed by Agile Property and the company will self-occupy a portion
of the building for its headquarters.
Asset Performance
With improving demand conditions, most landlords of existing buildings maintained
asking rents. However, rents in a few core buildings, such as RF Centre in ZJNT and
Taikoo Hui in Tianhe CBD, rose slightly, benefiting from more enquiries and declining
vacancy rates. Landlords of some new buildings in ZJNT softened their rental stance
to compete with upcoming supply to fill vacant space. After declining for two quarters,
overall average rents edged up 0.1% q-o-q to RMB 156.4 per sqm per month (GFA) in
4Q14.
Market sentiment in the sales market remained stable despite market liquidity
improving following the People’s Bank of China 40 bps interest rate cut in November.
Although leasing demand picked up slightly, lower sales volumes resulted in a few
vendors willing to lower asking prices. Average capital values edged down 0.6% q-o-q
to RMB 37,300 per sqm (GFA) in 4Q14.
12-Month Outlook
We hold a relatively positive view on leasing market conditions over the next 12 months,
as economic reforms encourage further development of finance and IT related
industries while improving credit market liquidity should support expansion of state
owned enterprises and private companies. Nevertheless, these positive factors should
mainly benefit local companies, while most MNCs are likely to continue to have limited
budgets for expansion.
In 2015, 474,000 sqm of new supply is expected to be completed. However, with
healthy pre-commitment levels we expect overall vacancy to stay at around 10%. On
the rental front, potential tenant outflows to newer buildings and a supply influx in
ZJNT is likely to continue to exert downward pressure on rent growth in older buildings,
thus only minimal rental growth is expected. Limited availability of investment grade
assets and stable demand from end-users and investors in the strata-titled sales
market is expected to underpin modest capital value growth.
Note: Guangzhou Office refers to Guangzhou’s Grade A office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ RMB 162.3 psm pm
Last Peak
3
^ net effective, on GFA
Financial Indicators are for Zhujiang New Town.
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
60
100
120
140
Index
80
10 11 12 13 14
0
500
300
400
200
Thousandsqm
0
9
6
12
15
Percent
15F
100 3

Taipei:Office
Taipei: Office
• Overall vacancy remains stable despite new supply
• Modest rental growth driven by higher rents at new buildings
• Investment restrictions and property tax reform impact sales volumes
Demand
In 4Q14, net take-up was recorded at 15,400 ping (50,800 sqm) and was boosted by
owner-occupancy. Corporate tenants were most active in Xinyi and Non-Core
submarkets, with notable sources of take-up including a local bank moving into its
newly completed headquarters in Xinyi and a local IT firm leasing nearly 4,000 ping of
space at a newly completed building in the Non-Core submarket. The overall vacancy
rate remained stable at 8.0%.
Annual net absorption reached 32,600 ping in 2014, the second highest amount in the
last eight years. Two notable trends observed in 2014: 1) corporate consolidation of
operations into self-owned buildings or large office units in non-core or city fringe
areas 2) rising prominence of small space occupiers in the CBD.
Supply
Two buildings, namely HuaNan Bank World Headquarters Building and Taipei New
Times Square, came on stream in the quarter with a total of 16,553 ping of space. The
majority of space at HuaNan Bank World Headquarters Building was occupied by its
owner with only 20% (or 2,500 ping) of space made available for lease, while strong
pre-commitments to Taipei New Times Square saw it open with over 88% occupancy.
Asset Performance
A low vacancy environment and higher asking rents at new buildings pushed overall
rents higher by 0.8% q-o-q (3.9% y-o-y) to NTD 2,566 per ping per month.
Total investment volumes for all property types in 4Q14 totalled NTD 19.9 billion, a
decrease of 39.6% q-o-q (–28.1% y-o-y). Full year investment volumes reached
NTD 88.2 billion, a 2.6% decrease compared to 2013 due mainly to high property
prices in the main business districts along with slower rental growth in these areas.
Investors have found it difficult to find suitable properties that provide adequate rental
yields. Government restrictions on insurers acquiring commercial real estate and
property tax reform have both made investors take a cautious view.
12-Month Outlook
Demand is likely to remain stable supported by a gradually improving economy and
tenant relocations to new buildings. Our market research indicates that over 100,000
ping of new supply will enter the Grade A office market by end-2015 of which nearly
30% is committed for owner-occupancy. Thus, the overall vacancy rate is expected to
rise. Moderate rental growth is projected for 2015, driven mainly by higher asking rents
at new completions.
Modest economic growth prospects and restrictive government investment policies are
likely to have an impact on sales volumes despite an abundance of domestic capital
available for investment in real estate. In recent quarters, investors have focused their
attention on foreign properties and public infrastructure developments.
Note: Taipei Office refers to Taipei’s Overall Grade A office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ NTD 2,566 per ping pm
Last Trough
11
^ net, on GFA
Financial Indicators are for Xinyi.
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
80
90
100
110
150
Index
140
130
120
10 11 12 13 14
Percent
0
40
80
200
Thousandsqm
0
4
12
8
20
160
120
16
15F

Tokyo:Office
Tokyo: Office
• Otemachi/Marunouchi and Akasaka/Roppongi near full occupancy
• Rental growth driven by Otemachi/Marunouchi and Shibuya
• Yields compress for fifth straight quarter and support capital value growth
Demand
The overall vacancy rate stood at 3.0% at end-4Q14, a decrease of 90 bps q-o-q and
40 bps y-o-y. For the Otemachi/Marunouchi and Akasaka/Roppongi submarkets,
vacancy reached an extremely low level of 1%, while some buildings situated in the
Nihonbashi, Shiodome and Shibuya submarkets saw an increase of vacant space.
Net absorption was registered at 64,000 sqm in 4Q14. The information and
communication, professional services and manufacturing sectors, among others, were
active in taking up space in the quarter for relocation, expansion and consolidation.
Notable activity included the consolidation of Fujitsu Marketing at Shinagawa Intercity
Tower C, the expansion of NEC Personal Computers and Renovo Group at Akihabara
UDX, and the relocation of Japan Medical RD at The Yomiuri Building. Net absorption
for the full year 2014 totalled 287,000 sqm and was at a similar level to 2013.
Notable future tenant relocations announced in 4Q14 include Metal One moving to
JP Tower in May 2015 and Tanseisha’s moving to Shinagawa Season Terrace in
September 2015.
Supply
No new supply entered the market in 4Q14. For the full year 2014, total stock
increased by 270,000 sqm (4.1% y-o-y) with the completion of six buildings.
Asset Performance
Rents averaged JPY 33,399 per tsubo per month in 4Q14, an increase of 0.4% q-o-q
and a moderate rise for the 11th consecutive quarter. Rent growth was mostly driven
by Otemachi/Marunouchi and Shibuya submarkets, while a slight decrease was
observed in some buildings located in Roppongi and Shiodome. For the full year 2014,
rent growth accelerated to 5.0% from 2.4% in 2013.
Investment yields compressed for the fifth straight quarter in 4Q14, while capital
values grew for the 11th straight quarter. Capital value growth for the full year 2014
accelerated to 19.3% compared with 6.1% in 2013, due in part to an interest rate
environment that has reached historic lows following continued monetary easing by
the Bank of Japan.
The investment market remained active in 4Q14 with numerous Grade A buildings
transacting. Activia Properties acquired a 15% stake in Shiodome Building for
JPY 30.3 billion (NOI yield 4.1%), Hulic Reit acquired a 13% stake in Ochanomizu
Sola City for JPY 22.85 billion (NOI yield 3.9%) and Mori Trust Reit acquired an
interest in Kioicho Building for JPY 34.3 billion (NOI yield 3.4%).
12-month Outlook
According to Oxford Economics, economic growth in 2015 is expected to improve
(0.9% in 2014 vs. 0.1% in 2013) supported in part by a tight labour market with an
unemployment rate expected to remain below 4.0%.
The occupier market is expected to see stable demand amid a strengthening economy
and against a supply pipeline mostly in line with the past ten-year average. As such,
vacancy is likely to remain at a low level and support the growth trend of rents.
The investment market is expected to see capital values rise, underpinned by rent
growth. However, given the rapid compression of yields witnessed over the past 12
months, further yield compression is expected to be less pronounced.
Note: Tokyo Office refers to Tokyo’s 5 Kus Grade A office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ JPY 33,399 per tsubo
pm
Last Trough
11
^ gross, on NLA
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
Index
90
100
110
120
130
Thousandsqm
Percent
0
150
300
450
600
10 11 12 13 14 15F
0
2
4
8
6

Osaka:Office
Osaka: Office
• Improving occupancy at Grand Front Osaka pushes vacancy lower
• Rents grow for second straight quarter, driven mainly by Umeda submarket
• Capital values rise and record first annual growth in seven years
Demand
The vacancy rate at end-4Q14 stood at 8.1%, a decrease of 60 bps q-o-q and 220 bps
y-o-y, and falling rapidly for the second consecutive quarter. Vacancy declined
significantly in Umeda as Grand Front Osaka’s occupancy rate reached 70%, although
vacant space increased moderately across some buildings located in submarkets
including Honmachi, Osaka Business Park and Nakanoshima.
Industry occupiers, including those from the manufacturing, professional services and
medical sectors, absorbed space for a variety of reasons, including consolidation, and
net absorption in 4Q14 was 21,000 sqm. Occupier activity in the quarter included the
consolidation of Mitsubishi Electric at Grand Front Osaka and the relocation of The
Kanden LA at Ujiden Building. Net absorption for the full year 2014 totalled 64,000
sqm, down slightly from 2013 but in line with 2012.
Supply
Supply increased 0.8% q-o-q in 4Q14 with the completion of the Ujiden Building
(13,000 sqm, NLA), which had a full commitment upon opening. This was the first new
Grade A building since Grand Front Osaka entered the market in early 2013.
Asset Performance
Rents in 4Q14 rose for the second consecutive quarter and averaged JPY 15,674 per
tsubo per month, an increase of 0.3% q-o-q. Rental growth was driven by Umeda,
where declining vacancy improved landlords confidence to raise rents. For the full year
2014, positive rent growth (0.6% y-o-y) was registered for the first time in three years.
In 4Q14, investment yields compressed for the fifth consecutive quarter and supported
the growth of capital values, which also increased for the fifth consecutive quarter.
Growth for the full year 2014 was 11.4%, the first positive growth in seven years, in
part reflecting an interest rate environment that reached historical lows.
Major investment deals in 4Q14 included Orix J-Reit’s acquisition of Dojima Plaza for
JPY 9.5 billion (NOI yield 5.1%) and Activia’s acquisition of Osaka Nakanoshima
Building (50% co-ownership) for JPY 5.85 billion (NOI yield 5.5%).
12-month Outlook
According to Oxford Economics, the economy in Osaka is expected to return to
positive growth in 2015. However, sentiment among large manufacturers as measured
by the Greater Osaka Tankan Survey in December was less optimistic about the short-
term outlook.
In the occupier market, demand is expected to strengthen relatively in line with the
economy, while new supply is expected to amount to about 80% of the past ten-year
average. As such, further downward pressure on vacancy is expected while rent
growth should accelerate.
In the investment market, a further compression of yields is likely, and this coupled
with accelerating rent growth should see capital values grow.
Note: Osaka Office refers to Osaka’s 2 Kus office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ JPY 15,674 per tsubo
pm
Last Trough
2
^ gross, on NLA
Thousandsqm
Percent
0
40
80
120
200
10 11 12 13 14 15F
0
2
6
14
10
160
4
12
8
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
Index
80
90
100
110
120

Seoul:Office
Seoul: Office
• Vacancy rises as tenants relocate due to refurbishment project
• Landlords offer attractive incentives to induce large deals
• State Tower Namsan sells for record high price
Demand
In 4Q14, net absorption was recorded at –10,800 sqm and marked the first time in two
years that it moved into negative territory. However, this figure was distorted by the
withdrawal of Hanhwa Janggyo Building for refurbishment and the resulting relocation
of several Hanwha affiliates to lower grade stock. The overall vacancy rate increased
46 bps q-o-q to 10.3%.
Yeouido was the main source of take-up in the quarter, with positive demand recorded
at the district’s landmark buildings. Two IFC welcomed several new tenants including
TUV SUD Korea (2,600 sqm) and JLL Korea (1,100 sqm), while Hanwha EC (30,700
sqm) and Toray Chemical Korea (10,000 sqm) arrived at FKI Tower. The occupancy
rate of Hanwha Life 63 Building rose to its highest level in three years due to the
arrival of KTCU (15,200 sqm), which relocated due to the redevelopment of its Yeouido
headquarters.
Other activity of note included a taskforce team dealing with the pending merger of
Hana Bank and KEB taking up 23,600 sqm at Seoul Square in the CBD, and Kyobo
Life relocating from Capital Tower in Gangnam to 6,800 sqm at nearby SI Tower.
Supply
D Tower (GFA 105,795) completed in October with the owner, Daelim, pulling a division
of their business from nearby Twin Trees to occupy 50% of the building. Negotiations
with several third-party tenants were known to be ongoing as at end-4Q14.
Asset Performance
Overall net effective rents declined 0.1% q-o-q as Two IFC and FKI Tower ramped up
incentives to conclude sizeable leasing deals.
Record quarterly investment volumes pushed the average Seoul office market yield
below 5% for the first time on record. The overall market yield declined 12 bps q-o-q to
4.9% as capital values increased (2.2% q-o-q) to KRW 6,615,723 per sqm in 4Q14.
Deal activity was led by CBRE Global Investors’ acquisition of State Tower Namsan
(GFA 66,799 sqm) in the CBD for KRW 503.1 billion. The deal was backed by ADIA
and reflected a record price of KRW 7,531,000 per sqm. IGIS Asset Management
acquired two assets during the quarter - Jeongdong Building (GFA 39,144 sqm) in the
CBD from Samsung SRA for KRW 277.5 billion and the recently completed Autoway
Tower (GFA 47,721 sqm) in Gangnam from SK Networks for KRW 309 billion. Although
predominantly vacant, Deutsche Asset Wealth Management purchased Olive Tower
(GFA 59,502 sqm) for KRW 347 billion and YTN disposed of their CBD building (GFA
42,322 sqm) via a sale-and-leaseback to KB Real Estate Trust for KRW 231 billion.
12-Month Outlook
Supply is forecast to decline further with Tower 8 (GFA 51,751 sqm) in the CBD
expected to be the only Grade A completion of 2015. Coupled with stable demand,
vacancy is therefore likely to tighten over the coming 12 months to sit around 8.0% by
end-2015 and may support modest rental growth via a softening in incentives.
The outlook for the investment market remains positive with strong liquidity and the
potential for further interest rate declines likely to underpin activity.
Note: Seoul Office refers to Seoul’s Overall Grade A office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ KRW 96,539 per
pyung pm
Last Trough
2
^ net effective, on GFA
Index
4Q10 4Q11 4Q12 4Q13 4Q154Q14
90
100
120
110
150
140
130
10 11 12 13 14
Thousandsqm
Percent
0
5
15
10
0
200
100
300
20400
15F

Singapore:Office
Singapore: Office
• Demand driven by expansion and relocation activity
• Rents rise at slower pace
• Capital values stable amid limited sales activity
Demand
Net take-up in the overall CBD remained positive at over 58,000 sqm with a flight-to-
quality among occupiers persisting. Vacancy declined in all submarkets except Shenton
Way and as a result the overall CBD vacancy rate remained relatively stable at 6.1%.
Demand was driven by a mix of expansion and relocation activity across various
occupier segments including small financial institutions. Consumer goods, IT and
social media occupiers provided some expansion activity with LinkedIn, Facebook and
Twitter moving into the CBD over the quarter. This recent occupier trend could be
attributed to the perception of Singapore as an access point to ASEAN and APAC
regions.
As a commercial gateway, office demand could rise as modern services such as IT,
business advisory including legal firms, real estate and financial are expected to grow
on the back of the formation of the ASEAN Economic Community (AEC) in 2015.
Supply
CapitaGreen (65,032 sqm) was completed in 4Q14 and is located within the Shenton
Way submarket.
Asset Performance
Average CBD rents rose at a slower pace of 0.9% q-o-q in 4Q14 as compared to
3.5% q-o-q in 3Q14. Slower growth was partly due to seasonality as the fourth quarter
normally sees a lower level of leasing activity.
On the investment front, the total value of CBD sales transactions fell by 84.5% q-o-q
to SGD 194 million as there were no major en bloc transactions in the quarter. This
could be partly attributed to a mismatch of price expectations between buyers and
sellers as yields and interest rates continued to compress.
12-Month Outlook
Rental growth is likely to slow despite the tight supply situation in 2015. This is in light
of the upcoming supply in 2016, which is expected to commence pre-leasing in 2H15.
A large amount of office space, especially from Marina One, is expected to inject at
least 1.5 million sq ft into the market. This is likely to add pressure on landlords to
lock-in existing tenants by offering attractive rental rates and/or longer lease periods.
A longer lease term for tenants may be deemed attractive as it helps to amortise their
overhead cost over a longer period.
Modest economic growth of 2.8% in 2014 and a forecast for below trend growth of
3.0% in 2015 may prompt some companies to adopt a more cautionary approach
towards expansion due to uncertainties in major economies such as China, Japan and
the European Union.
Note: Singapore Office refers to Singapore’s CBD Grade A office market in Marina Bay, Raffles Place, Shenton Way and
Marina Centre.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ SGD 10.42 psf pm
Last Trough
8
^ gross effective, on NLA
Financial Indicators are the CBD.
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
80
100
130
Index
120
110
90
0
100
250
10 11 12 13 14
0
4
8
10
2
6
12
200
50
150
300
Thousandsqm
Percent
15F

Bangkok:Office
Bangkok: Office
• Vacancy declines amid no new supply and active leasing
• Gross rents move higher as vacancy tightens
• Yields compress as capital value growth outpaces rentals
Demand
Net absorption increased to 28,900 sqm in 4Q14 as business sentiment continued to
improve due to the stable political climate.
Leasing demand remained active and consisted mostly of lease renewals in existing
prime grade office buildings. All large renewals were in Central Bangkok.
As a result of increased leasing demand and no new supply completing in the quarter,
the vacancy rate declined from 7.8% in 3Q14 to 6.1% in 4Q14. The vacancy rates in
Central Bangkok and Central East both decreased, reaching 7.4% and 2.6% respectively.
Supply
Grade A office stock remained unchanged in 4Q14 at 1,738,000 sqm, with no new
supply in the Central Bangkok and Central East submarkets.
AIA Sathorn Tower (38,500 sqm), on South Sathorn Road in Central Bangkok, and
Bhiraj Tower at EmQuartier (47,442 sqm), on Sukhumvit Road near Phrom Phong BTS
station in the Central East, are expected to complete in 1Q15.
The Metropolis Building (13,425 sqm) located on Sukhumvit Road in Central East and
the mixed-use Magnolia Ratchadamri Boulevard on Ratchadamri Road are all
scheduled to complete in 4Q15.
Asset Performance
The average gross rent increased by 2.1% q-o-q to THB 762 per sqm per month in
4Q14. Capital values increased more rapidly than average gross rents, up 3.9% q-o-q
to THB 101,878 per sqm in 4Q14, causing market yields to compress by 10 basis
points to 6.9%.
One office building sales transaction was completed in October 2014 when Teo Hong
Silom Co., Ltd. sold Bangna Towers, a non-Prime grade asset, to the Prime Office
Leasehold Property Fund for THB 2.045 billion.
12-Month Outlook
The Bank of Thailand revised its 2015 economic growth forecast down from 5.5% to
4.8% in September due to slower-than-expected budget disbursements and delays in
public spending on infrastructure development projects.
Despite a downward revision in 2015’s GDP growth forecast, positive winds are
blowing in the economy as tourism has started to recover despite Bangkok still being
under martial law. Major infrastructure projects are moving closer to kickoff and
improvements in export figures are soon expected as the baht weakens relative to the
dollar. With 105,000 sqm of new Prime Grade space expected to complete in the CBD
in 2015 and only 35,000 sqm of new completions elsewhere in the market, we expect
that demand should be strong as tenants occupy AIA Sathorn and Bhiraj Tower.
Note: Bangkok Office refers to Bangkok’s CBD Grade A office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ THB 762 psm pm
Last Trough
12
^ gross, on NLA
Index
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
80
90
100
110
120
150
140
130
0
50
200
150
Thousandsqm
0
10
5
15
20
Percent
100
10 11 12 13 14 15F

KualaLumpur:Office
• Slowing demand for prime office space
• Rents stable for most office buildings
• Limited prime office investment activity
Demand
Despite positive net absorption of 231,200 sq ft, the average vacancy rate increased to
14.4% in 4Q14 due to new supply in the Golden Triangle.
In 4Q14, relocation and expansion activities of existing local tenants continued to
support demand. Notable take-up in the City Centre included: the expansion of Carigali
Hess Operating Company Sdn Bhd at Menara Darussalam, relocation of MSIG
Malaysia to Menara Hap Seng 2 from Menara Weld, and relocation and expansion of
FELDA and its subsidiaries from Wisma Felda to Menara FELDA Platinum 3.
Supply
Total stock in the City Centre increased to 22.9 million sq ft due to the completion of
Menara Hap Seng 2, a 320,000 sq ft prime office building located on Jalan Tengah.
Two prime office buildings are expected to be completed in 2015, namely Naza Tower
and IB Tower. Naza Tower is a 50-storey office building with net lettable area (NLA) of
535,112 sq ft located within a mixed-use development known as Platinum Park which
comprises office, retail and residential components. IB Tower is a 60-storey tower
comprising serviced apartments and office space with NLA of 426,200 sq ft located on
Jalan Binjai.
Asset Performance
In general, rental rates for the majority of office buildings remained stable as
occupancy held firm. Rising operation and maintenance costs has led landlords to hold
their asking rents. However, landlords of buildings with relatively high vacancy rates
were more willing to offer incentives (i.e. rent free periods) to remain competitive. In
4Q14, the average rental rate increased marginally by 0.9% q-o-q to MYR 6.6 per sq ft
per month.
One prime office building, namely Menara ING, was transacted in 4Q14. The 20-storey
freehold office tower located on Jalan Raja Chulan was sold by Tower REIT to
Goldstone Kuala Lumpur Sdn Bhd for MYR 132 million (MYR 825 per sq ft).
12-Month Outlook
The average vacancy rate in the City Centre is expected to increase marginally in the
short to medium term due to new incoming supply and a stable level of demand.
Steady demand is still expected to prevail driven by positive growth of several local
economic sectors such as oil gas, banking/finance, insurance and services, which
are expected to achieve good, sustainable growth in the short term. However, if oil
prices remain lower it is expected that oil gas companies may adopt a cautious
approach about expanding their operations.
Despite limited rental growth prospects, capital values are expected to see marginal
growth in the short to medium term, underpinned by several factors such as higher
construction costs, better quality new buildings and escalating land costs in the more
sought after commercially established locations.
The investment market is expected to remain quiet due to the cautious approach of
some investors, limited short-term rental growth prospects, pricing mismatch between
vendors and purchasers, and limited prime grade office buildings available for sale in
the market.
Kuala Lumpur: Office
Note: Kuala Lumpur Office refers to Kuala Lumpur’s Grade A office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ MYR 6.6 psf pm
Last Trough
10
^gross, on NLA
Financial Indicators are for the City Centre.
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
Index
90
95
105
100
120
115
110
Thousandsqm
Percent
10 11 12 13 14
0
300
0
24
250 20
12
100
16200
8
150
50 4
15F

Jakarta:Office
Jakarta: Office
• Subdued demand due to limited supply and slowing economy
• Rents broadly stable amid political and economic uncertainty
• Sustained interest from foreign investors but no major investment deals
Demand
Although some small tenants leased space within the CBD, the relocation of a major
tenant, with an area of 2,000 sqm, to an owner occupied building resulted in net take-
up of –2,000 sqm in 4Q14.
Smaller firms from the mining and consulting sectors took up space in buildings in
Satrio and Sudirman as these areas continue to be perceived as prestigious locations
for corporate tenants. Firms engaged in professional services, commodities trading,
consumer goods and manufacturing for the local economy continued to be the main
drivers of demand for premium office space in Jakarta.
Supply
No new projects were completed during the final quarter of 2014 and no supply has
entered the market since 2Q13. As such, existing stock of investment grade office
space in Jakarta remained at 1.29 million sqm. However, in 2015 we expect to see
over 260,000 sqm of Grade A office space enter the market and vacancy rates are
likely to enter double digit territory for the first time since early 2011.
Asset Performance
Significant rental growth was recorded between 2011 and 2013 in Jakarta. As such,
anecdotal evidence suggests that rents are in the upper range of affordability for some
tenants, particularly given the weakening of the Rupiah against the USD. Many leases
in Jakarta are denominated in USD. Landlords responded accordingly in 4Q14 and
rents moved lower (–0.7% q-o-q). However, whole-year growth remained in positive
low single digit territory.
Foreign investors, including private equity, sovereign wealth funds and developers
remained active in 4Q14 and continued to show interest in Jakarta. However, no major
Grade A office sales transactions were closed and with no evidence to suggest
otherwise, capital values remained unchanged at USD 4,335 per sqm.
12-Month Outlook
The bulk of the new supply in 2015 (260,000 sqm) is likely to be completed towards
the back-end of the year meaning that the majority of net absorption in these buildings
is not expected to be recorded until 2016, and thus vacancy rates are expected to rise.
Affordability is already an issue for some tenants, and as such rental growth is
expected to remain relatively weak; especially given the increased competition from
upcoming projects.
From an investment perspective, the macroeconomic and general business outlook for
Jakarta give grounds for cautious optimism and we expect to see continued interest
from international institutional investors in the coming year.
Note: Jakarta Office refers to Jakarta’s CBD Grade A office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ USD 334 psm pa
Last Trough
17
^ net effective, on NLA
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
Index
80
120
160
320
280
240
200
10 11 12 13 14
0
50
100
150
200
300
250
Thousandsqm
0
3
6
9
15
18
Percent
15F
12

Manila:Office
Manila: Office
• Net absorption increases in line with new office completions
• Rental growth remains steady due to healthy leasing demand
• Capital values post strong growth, while investment yields slightly compress
Demand
Healthy office demand continued to support strong take-up of office space within
Makati CBD and Bonifacio Global City (BGC). This was evidenced by an increase in
net absorption, which was recorded at 32,500 sqm in 4Q14.
The average vacancy rate registered a slight increase from 3.9% in 3Q14 to 4.1% in
4Q14, but remained healthy on the back of robust leasing demand from various
sectors. Notably, Grade A office developments located in Makati CBD and BGC
maintained healthy occupancy levels, as most office developments remained fully
occupied while other developments posted relatively low vacancy rates.
Offshoring outsourcing (OO), IT and software firms continued to buoy demand for
office space in the local property market in Metro Manila. Other notable sources of
demand during the quarter included firms from the manufacturing, logistics,
pharmaceutical, marketing and services sectors.
Key lease transactions during 4Q14 included an OO firm occupying 3,570 sqm in Net
Square and a marketing firm occupying 1,410 sqm of office space in Frabelle Business
Center.
Supply
Three office developments were completed in 4Q14, adding a consolidated total office
supply of 37,800 sqm. However, five office developments initially expected to become
operational within the quarter were not completed likely due to construction delays.
Upcoming office developments scheduled to complete in 1Q15 include MDI Corporate
Center, Orion, Techzone, Uptown Bonifacio Tower 1, One World Place and Wilcon IT
Hub. The six buildings are expected to add a consolidated 148,000 sqm of office space.
Asset Performance
Sustained office demand from both multinational and local firms of different sectors
supported the continued growth of office rents and capital values. Average rents
posted growth of 1.6% q-o-q in 4Q14, reaching PHP 10,538 per sqm per annum.
Meanwhile, average capital values were recorded at PHP 111,885 per sqm, posting a
slightly faster growth of 3.6% q-o-q given strong investor interest buoyed by the
continued positive performance of the local property market supported by recent credit
rating upgrades.
Investment yields posted a slight decrease of 20 bps q-o-q to 9.4% in 4Q14.
12-Month Outlook
Fifteen office developments are scheduled to complete in 2015, adding a consolidated
total floor area of around 435,500 sqm. The significant volume of upcoming office
space in the next several quarters may create upward pressure on vacancy rates
during 2015.
Demand from various segments of the OO sector, such as business processing
outsourcing and knowledge processing outsourcing, are likely to remain among the
major sources of demand during 2015. Other sectors, such as financial services, IT
and software, among others, may likewise buoy demand for office space. Both
average rents and capital values are likely to sustain an upward trend, in line with
sustained office demand.
Note: Manila Office refers to the Makati CBD and BGC Grade A office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ PHP 10,538 psm pa
Last Trough
20
Index
80
90
100
110
160
150
140
130
120
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
10 11 12 13 14 15F
0
160
320
400
Thousandsqm
0
2
10
Percent
6
8
4
240
80

HoChiMinhCity:Office
Ho Chi Minh City: Office
• New leasing activity helps push vacancy down
• Stable rents as landlords focus on maintaining occupancy
• Quiet investment market with no sales transactions
Demand
Moderate leasing activity was witnessed in 4Q14. Net absorption totalled 1,200 sqm,
driven by new leases in Bitexco Financial Tower. As a result, the overall vacancy rate
declined to 8.2%.
While some major office buildings saw tenants vacate space in the quarter, most
buildings in the CBD either maintained occupancy rates or welcomed new tenants.
The Grade A office market has recently moved away from a tenants’ favoured market,
as vacancy has continued to trend lower and leave only limited options of large spaces
for lease. As at end-4Q14, there was only around 12,500 sqm of space available for
lease, mainly available in Bitexco Financial Tower and Times Square. However, with
ample new supply expected in 2015, this trend could be short lived.
Supply
There were no new supply completions in the quarter and as a result, office stock
remained at 155,000 sqm.
Buildings expected to be launched in 2015 continued to make good construction
progress in 4Q14, with Vietcombank Tower’s windows and glazing done, Le Meridien’s
interiors installed and The Waterfront Saigon topped out. On the other hand, The One
Ho Chi Minh City, scheduled for completion in 2016, saw construction halted.
The proposed projects likely to be launched in 2017 should add 100,000 sqm to stock.
Asset Performance
The average net effective rent held steady at USD 39.1 per sqm per month in 4Q14,
as most landlords maintained asking rents in a bid to preserve occupancy rates.
However, landlords of properties with higher vacancy rates offered incentives to fill up
available space.
There were no major investment deals reported in the Grade A office sector in the
quarter, however, the residential investment market remained active. The office
investment market has been quiet since the acquisition of Saigon Tower by Daibiru
Corporation in 2012.
Valuation-based yields for Grade A office space remained in the range of 8–9%.
12-Month Outlook
Office stock is expected to increase significantly in 2015, with more than 70,000 sqm of
new supply anticipated to come online. This will mark the end of more than two years of
no new Grade A office completions.
Tenant expansions and new setups are likely to be the major occupier trends witnessed
in 2015, in line with prospects of a better macroeconomic environment. Net absorption
might rise, thanks mostly to pre-commitments in the new supply.
Rents are expected to increase slightly as new properties enter the market with higher
asking rents. Landlords of existing properties are likely to wait and gauge market
sentiment after the launch of these new properties before deciding on their rental
strategies.
Note: Ho Chi Minh City Office refers to Ho Chi Minh City’s CBD Grade A office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ USD 39.1 psm pm
Last Peak
25
NA
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
Index
Rental Value Index
0
40
60
80
100
120
20
10 11 12 1413
0
20
40
60
120
100Thousandsqm
0
20
10
30
40
60
50
Percent
80
15F

Delhi:Office
Delhi: Office
• Leasing activity driven by relocations and consolidations
• Gurgaon rents increase, unchanged elsewhere
• Capital values rise in CBD, SBD and Gurgaon
Demand
Leasing activity continued to be strong in 4Q14, but occupier exits as part of relocation
and consolidation activity caused net absorption volumes to decline 61.5% q-o-q to
940,000 sq ft. Occupier movement continued to be driven by the need for portfolio
optimisation through relocation and consolidation to reduce occupancy costs. This was
also accompanied by fresh expansion-driven demand and kept leasing volumes
healthy. This demand was led by IT/ITeS occupiers, and among others, by telecom,
e-commerce, consulting and financial service firms. The CBD continued to see healthy
leasing volumes, although net absorption was lower compared to the previous quarter.
With stable rents a major attraction for occupiers, net absorption in the SBD remained
robust. While leasing activity retained its momentum, exits by occupiers from older
space resulted in net absorption declining by 61.9% q-o-q in Gurgaon, while in Noida it
declined by 65.2%.
Major leases in the CBD were SBI taking up 45,000 sq ft in Redfort Parsvnath Towers
and Metal One Corp and BNP Realtors leasing 15,000 sq ft each in Birla Towers.
Mankind Pharmaceuticals leased 54,000 sq ft and Indian Energy Exchange leased
22,000 sq ft in TDI Center. Notable lettings in Gurgaon included British Telecom
leasing 500,000 sq ft across DLF Buildings 14C and D, and Boston Scientific leasing
80,000 sq ft in Parkview Business Park. In Noida, Exponential (Tribal Fusion) leased
30,000 sq ft in Advant Navis IT Park Tower 2 and Naukri.com took up 25,000 sq ft in
Express Trade Tower 2.
Supply
Additional supply of 1.13 million sq ft became operational in 4Q14 across four projects –
two in the SBD and one each in Gurgaon and Noida.
Asset Performance
With occupiers still focusing on reducing costs, landlords remained flexible on rents in
all submarkets. Overall rent growth was slightly faster than in the previous quarter at
1.1% q-o-q, primarily on the back of rising rents in Gurgaon. Capital values edged up
in the CBD and SBD while rising at a slightly higher rate in select office corridors in
Gurgaon. Yields declined by 10 bps q-o-q in the SBD and the overall market.
12-Month Outlook
Occupier sentiment is expected to remain positive on the back of some supporting
global economic cues and a better investment climate in India, and these factors are
expected to keep leasing volumes and net absorption healthy. Future demand for
office space is likely to be driven by the relocation/consolidation strategies of
occupiers, with fresh expansion also a driving factor. Going forward, occupier interest
may shift towards quality supply in the growth corridors, as the established office
corridors may see lower vacancy rates and limited new supply. Rent growth in the
established office corridors should be slightly higher and capital values may rise with
improving investor sentiment.
Note: Delhi Office refers to the Overall NCR Grade A office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ INR 145 psf pm
Last Trough
18
^ gross, on GFA
Financial Indicators are for the SBD.
Index
40
100
140
80
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
120
60
10 11 12 13 14
Thousandsqm
Percent
0
280
420
700
0
8
16
40
32
24
140
560
15F

Mumbai:Office
Mumbai: Office
• Improved business sentiment underlies stronger net absorption
• SBD BKC landlords soften rental stance to minimise tenant exits
• Yields compress in CBD, Thane and Navi Mumbai
Demand
During 4Q14, net absorption stood at 1.72 million sq ft, a notable improvement of
23.9% q-o-q. This was the highest level of take-up in the past six quarters and likely
highlights a lag between improved business sentiments following the elections being
converted into visible business expansion.
The quarter was characterised by the sale of large office spaces in buildings that are
under-construction. There was about 600,000 sq ft of office space sold in 4Q14. The
key contributors to absorption were IT/ITeS and pharmaceutical sectors. Select
occupiers from media, banking, financial services and insurance industries were
observed consolidating and entering into rental re-negotiations. About 600,000 sq ft of
leasehold space was renewed during the quarter.
Supply
In 4Q14, seven projects were expected to become operational but only three managed
to obtain the occupancy certificate needed to commence operations. These three
completions added about 550,000 sq ft of office space to market stock and became
operational with a moderate level of occupancy. The overall vacancy rate declined by
140 bps q-o-q and stood at 20.4%. However, the decrease in vacancy is likely to be
short lived as upcoming supply may witness weak pre-commitments.
Asset Performance
During 4Q14, CBD and SBD BKC rents dipped marginally. The trend of CBD tenants
relocating to SBDs and Suburban submarkets to obtain modern amenities and wide
floor plates continued. The SBD BKC commercial precinct which has large office
buildings in advanced stages of construction provided occupiers with more leasing
options to pre-commit to space. Landlords were also flexible in rental negotiations in a
bid to minimise occupier exits. Both of these factors contributed to SBD BKC rentals
slightly declining.
12-Month Outlook
Robust leasing activity is expected in 1H15, in line with improving economic sentiment.
This anticipated growth will likely lead to established businesses expanding and new
foreign players entering the market. Request For Proposals (RFP) for more than 1 million
sq ft of office space are being shopped around the market for implementation in a
phased manner. It is likely that institutional investors will become confident in purchasing
strategically located income generating office assets as they know that quality space
should attract a good number of MNCs and Indian corporations willing to pay a
premium. Rents and capital values are expected to grow steadily after 1Q15, likely
holding yields relatively firm.
Note: Mumbai Office refers to Mumbai’s Overall office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ INR 225 psf pm
Last Peak
1
^ gross, on GFA
Financial Indicators are for the SBD BKC.
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
Index
90
100
110
120
130
10 11 12 13 14
Thousandsqm
Percent
0
400
200
600
0
5
10
15
1,200
1,000
800
30
25
20
15F

Bangalore:Office
Bangalore: Office
• Vacancy edges down as corporate expansion underpins demand
• Limited availability of leasable space puts upward pressure on rents
• Capital values increase marginally across all submarkets
Demand
Leasing activity in the Bangalore office market dropped in 4Q14 with about 2.3 million
sq ft of office space leased compared with a total transacted area of 3.6 million sq ft in
the previous quarter. However, net absorption recorded a smaller decline (–9% q-o-q)
and was recorded at 2.7 million sq ft.
The overall vacancy rate edged down by to 8.2% in 4Q14. Corporate expansion
continued to be strong and supported demand. Major companies such as Akami
Technologies, Unisys, Snapdeal, Flipkart, Wipro, FlowServe, Airwatch, Amazon,
Accenture, Brocade, Boehringer Ingelheim, Success Factors, Moveinsync and Royal
Chemistry leased space in the quarter.
Supply
Eight projects totalling 3.3 million sq ft commenced operations in 4Q14 in Bangalore.
New completions include BCIT Block 1 Wing A, BCIT Block 1 Wing B, Karle Town
Centre Hub 1, Embassy Manyata Tech Park L3, Prestige Valdel Valance, Pardhanani
Wilshire, NCC Windsor and Prestige Star. As a result, total stock of Grade A office
space in Bangalore increased to 85.7 million sq ft.
Asset Performance
In 4Q14, average rents for office space increased across all submarkets of the city. In
the CBD, the average rent increased by 1.2% q-o-q to INR 86 per sq ft per month in
4Q14. Meanwhile, in the SBD, the average rent rose by 1.0% q-o-q to INR 52 per sq ft
per month. Rents in the Whitefield and Electronic City submarkets grew in the range of
1–2% q-o-q and were INR 34 and INR 27 per sq ft per month, respectively.
Capital values increased marginally across all submarkets due to stronger demand. In
the CBD, capital values rose 1.5% q-o-q to INR 10,100 per sq ft during 4Q14, while in
the SBD q-o-q growth was recorded at 0.9%. Capital values in the Whitefield and
Electronic City submarkets also slightly increased.
12-Month Outlook
Demand for office space is expected to increase across all of the submarkets of the
city during 2015, supported by expansion of major sectors such as manufacturing, IT,
banking, financial services and insurance.
Investor sentiment and activity in the Bangalore office market has improved, as
evidenced by a rise in the number of enquiries for the purchase of office space. As a
result, we expect more sales transactions in the market and capital values are likely to
increase across all submarkets.
Note: Bangalore Office refers to Bangalore’s Overall Grade A office market.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ INR 51.5 psf pm
Last Trough
18
^ gross, on GFA
Financial Indicators are for the SBD.
Index
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
80
100
150
90
120
140
130
110
10 11 12 13 14
0
200
800
Thousandsqm
0
16
Percent
12
4
8400
15F
600

Sydney:Office
Note: Sydney CBD Office refers to Sydney’s CBD office market (all grades).
Sydney: Office
• Improving tenant demand with fourth straight quarter of positive take-up
• Rents edge up as vacancy drops below 10%
• Strong investment activity persists
Demand
Tenant demand improved further with Sydney CBD recording its fourth successive quarter
of positive net absorption (27,700 sqm) in 4Q14. The positive net absorption recorded in the
quarter was generally driven by tenants in theA-grade market which recorded positive net
take-up of 25,700 sqm. Overall the market remains buoyant with a general increase in
activity and enquiry.
Increased activity across the market saw overall vacancy tighten by 0.6 percentage points
to 9.5% in 4Q14. Prime grade vacancy decreased by 1.0 percentage point to 11.0%, with
A-grade vacancy declining 1.3 percentage points to 10.3%. Secondary grade vacancy
recorded a marginal decline to 7.7%, largely driven by activity in the C grade market.
Improvement across the leasing market is partly the result of tenants making real estate
decisions to support their future business strategies. In 4Q14, Challenger pre-committed to
9,127 sqm at 108–120 Pitt Street. Overall there are pre-commitments for 67% of the
construction projects that are expected to be delivered by end-2016.
Supply
There were no new supply additions to Sydney CBD in the quarter, leaving supply
additions in the Sydney CBD at 41,100 sqm for the year. However, taking into account
stock withdrawals, the net supply was 24,000 sqm, below the ten-year average of
45,500 sqm.
Asset Performance
Prime gross effective rents increased by 0.7% over the quarter and have increased
2.8% over the year to finish at AUD 620 per sqm per annum. Average prime net face
rents and outgoings increased 1.2% and 0.4% q-o-q respectively in 4Q14, but the
impact was partially offset by a small increase in incentives.
The strong investor appetite for Sydney CBD core product has pushed prices higher
and resulted in yield compression during 2014. In 4Q14, Sydney CBD prime yields
compressed 25 basis points at the lower end to now range from 5.75% to 6.75%.
Strong investment activity continued into 4Q14, with seven transactions totalling
AUD 1 billion recorded in the Sydney CBD. The robust activity in 4Q pushed 2014
investment volumes to the highest level on record at AUD 5 billion.
12-Month Outlook
Demand conditions are expected to improve further over 2015 with the availability of
space stimulating activity across the market, particularly from the professional services
and technology sectors.
Rents are forecast to increase modestly over 2015, with prime gross effective rents
forecast to record growth. Strong investment demand is expected to continue in 2015.
The competition for prime assets and the scarcity of product is expected to push yields
lower.
12-Month Outlook
Financial Indices
Source: JLL
Physical Indicators
Source: JLL
Rental Information
Rental Value^ AUD 616 psm pa
Last Peak
11
^ gross effective, on NLA
4Q10 4Q11 4Q12 4Q13 4Q14 4Q15
Index
80
90
100
120
110
130
140
Take-Up (gross) Completions
10 11 12 13 14 15F
Thousandsqm
Percent
–100
0
100
150
–6
–50 –3
0
6
50 3
9
200 12

Asia pacific-property-digest-4q-2014

Asia pacific-property-digest-4q-2014

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