ASIA PACIFIC

OFFICE FORECAST
2015-16
A Cushman & Wakefield Research Publication
DECEMBER 2014
MONTH 2012

ASIA PACIFIC SOUTHEAST ASIA NORTH ASIA GREATER CHINA SOUTH ASIA AUSTRALASIA

CONTENTS
A Cushman & Wakefield Business Briefing
SOUTHEAST ASIA
Bangkok 4
Vietnam 6
Jakarta 8
Kuala Lumpur 10
Manila 12
Singapore 14

NORTH ASIA
Seoul 16
Tokyo 18

GREATER CHINA
China 20
Hong Kong 24
Taipei 26

SOUTH ASIA
India 28

AUSTRALASIA
Australia 32
Auckland 34

i PLEASE CLICK WITHIN THE

CONTENTS OR RIBBON AT THE
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Market indicators in this report refer to Prime/Grade A offices in CBD/CBD equivalent

localities in 30 markets that we track across Asia Pacific. Prime/Grade A properties are
defined as prime office buildings that offer higher design standards, superior building
services and are well-leased to a high-quality tenant base, well suited to institutional-
2grade portfolios.
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EXECUTIVE
SUMMARY

Overall,
Looking back over the past 12 months since we released our report,“14 Trends for
2014,” our central theme of “moderate growth” held true to a large extent. Economic
growth continued to decelerate across the region. As a result, leasing activity came off

as we
the boil in the region’s large markets but showed some resurgence as political stability
and some policy changes helped to stimulate regional economies in the second half.
Japan’s contraction following the consumption tax hike in April took us by surprise, as it

move
did most observers; but we remain confident in Japan’s unswerving commitment to
growth. Just as we had anticipated, property fundamentals in Tokyo turned around this
year, with rents and prices finally showing some gains. From an investment perspective,

into 2015
we thought the office sales volume in the region would surpass the record level in 2013;
at the same time, we forecasted that Asian investors would be a key player in the global
arena. And we were right; as of October 31, the annualized office sales volume set a new
high in 2014, and the surge in Asian international investments turned out to be even
better than expected.
we continue to see a healthy
leasing market and active
Looking forward, this slower macro environment is likely to persist but remain generally
transactions market fueling
supportive of property fundamentals. Regional economic performance, aided by resilient
domestic demand, strong policy support, and an improving export sector, will continue growth of the office sector in
to support sentiment and thus, underpin the strengthening recovery in leasing activity the region.
across all 30 cities that we track in Asia Pacific. Additionally, speculative construction will
remain on an uptrend especially in fast-rising markets across the region, and bring about
the emergence of new competitive urban centers. With occupancy costs still on a
modest uptrend in most markets in the region, though they are already among the
highest globally, further adoption of workplace strategies will become a business
imperative. Companies will be well-placed to explore various strategies that would allow
them to manage their costs alongside their efficiency and productivity in the workplace.
While returns are expected to continue their descent against this slower macro
backdrop, lower returns is a new reality that is evolving across the global marketplace.
Nevertheless, there are compelling reasons for continued interest in the region as an
investment destination. A number of Asia Pacific markets will still have ample room for
significant improvement in fundamentals over the long term, especially in light of new
regulations and better governance that are poised to foster the continued development
of the real estate sector. Furthermore, the extensive availability of financing through
domestic and international channels will likely sustain the high volume of transaction
activity and pricing in the region. Overall, as we move into 2015, we continue to see a
healthy leasing market and active transactions market fueling growth of the office sector
in the region.

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BANGKOK
MARKET REMAINS STRONG

ECONOMY
After struggling with slow economic growth, Thailand’s GDP is picking up slightly as the
TOP TRENDS
political situation unfolds. Export and investment figures have rebounded from the effects 1
of a political crisis in the first half of 2014. Moreover, domestic demand and consumer Demand and rent remain
spending is improving albeit marginally. Thailand’s economy is expected to rebound strong.
between 2015 and 2016 from a consumption and investment-led expansion.
2
Conditions to favour
IMPLICATIONS FOR OCCUPIERS/INVESTORS
landlords as supply remains
Demand in Grade A office remains strong. The overall CBD rentals are likely to go up at limited
3.0–5.0% annually in 2015 and 2016. With continuous high demand, landlords are asking
for higher rents; however, tenants also have the option of picking Grade A non-CBD as a 3
substitute. In the next two years, Bangkok’s office market will see the delivery of new New supply with high quality
office buildings just before the Asean Economic Community (AEC) comes into effect in will be completed in non-core
2015, which is expected to boost demand in Bangkok’s office market. locations, namely the Asoke &
Ratchada and Sukhumvit area

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“Tenants are more likely to

renew their lease due to the
limited availability of office
space in prime locations.
For expansion or relocation
options, tenants should be
making sharp and quick
decisions, planning at least
six to 12 months in advance.
Absoprtion and pre-lease
commitments is expected to
be strong, especially in non-
CBD areas.”
“Prime office yields remain
stable at 7.0–7.5%. Market
sentiment is optimistic
between 2015 and 2016
given a continued rise in
occupancy rate in the prime
office market and subsequent
rental growth. Going forward,
we expect the dearth of sales
options will continue in core
locations and investors will
increasingly focus on non-
CBD locations such as Asoke
& Ratchada, Sukhumvit and
BANGKOK
new Petchburi, which are set
1000 25% to see sizeable new supply in
900 the next 12–18 months.”
800 20%
Rent (THB/sq.m./month)

700 TEERAWIT
LIMTHONGSAKUL
Vacancy Rate

600 15%
500 Executive Director
400 10% Advisory Services
300
Nexus Property Consultants Co., Ltd
200 5%
100
0 0%
2010 2011 2012 2013 2014F 2015F 2016F

Rent Vacancy

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VIETNAM
HIGHER INCENTIVES TO BENEFIT OCCUPIERS

ECONOMY
The government remains committed to opening up the economy and straightening out
TOP TRENDS
the banking system. However, the pace of change has been infuriatingly slow. The 1
economy in general is expected to continue to perform solidly rather than spectacularly, Incentives will remain high
with inflation expected to remain at historically low levels. Exports, especially electronics, as supply build-up pushes up
clothing and footwear, are driving the economy and this is expected to continue going vacancy, especially in the Grade
forward, especially as Vietnam remains committed to signing Free Trade Agreements B and C sectors.
(FTA) with a number of countries including Europe, ASEAN and North America. 2
Tenants will look to consolidate
IMPLICATIONS FOR OCCUPIERS/INVESTORS space requirements into more
Ho Chi Minh City has suffered from a lack of large floor plates and suitable space in the efficient workspaces to save
Grade A office segment, but this is expected to change in 2015 and 2016 as some new costs.
and large spaces come online. It remains to be seen what derived demand there will be
from the burgeoning manufacturing sector, but we expect a fairly high degree of
conservatism across the Grade A market in terms of absorption and with the new space
coming online, possible pressures on headline rents. Office availability will increase in the
short term as new space enters this small market. In Hanoi, supply is mostly limited to
non-core areas. Competition among landlords is likely to intensify in Tu Liem and Cau
Giay districts and tenants would gain with higher incentives on the offer.

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“We will see rents continue to fall due to supply-side pressure.

Mature buildings in the CBD that have historically maintained “The Grade A office
high headline rent and occupancy will have to significantly realign market is a small one
rentals to remain competitive with the newer projects. Buildings and new entrants to the
with large, efficient floor plates will continue to be a first tier market impact headline
consideration for occupiers and there is a big focus on workplaces figures quite considerably.
which will grow moving forward. Talent is at a premium in a Having said that,Vietnam
number of sectors and companies are acutely aware of the is achieving good progress
importance of a good working environment in attracting and in attracting foreign direct
retaining the best staff.” investment and effectively
moving up the value chain
ALEX CRANE in terms of manufacturing.
National Head, Tenant Advisory Group
This will definitely benefit
the economy in general
HANOI as well as the real estate
market.”
40 35%

35 30% JONATHAN TIZZARD

National Head,Valuations &
Rent (US$/sq.m./month)

30
25% Advisory
25
Vacancy Rate

20%
20
15%
15
10%
10

5 5%

0 0%
2010 2011 2012 2013 2014F 2015F 2016F

Rent Vacancy

HO CHI MINH CITY

60 35%

50 30%
Rent (US$/sq.m./month)

25%
40
Vacancy Rate

20%
30
15%
20
10%

10 5%

0 0%
2010 2011 2012 2013 2014F 2015F 2016F

Rent Vacancy

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JAKARTA
HIGHER SUPPLY TO IMPACT RENTAL GROWTH

ECONOMIC OVERVIEW
Indonesia’s economy has been growing at its slowest pace in five years, and is expected
TOP TRENDS
to slow further going into 2015, due to falling commodity prices and decreasing 1
domestic production. This will continue to pose a challenge for the newly elected Large volume of new supply to
president, who has advocated an increase in the price of subsidized fuel in order to free enter the market in both 2015 &
funds for much needed infrastructure and development programs, the benefits of which 2016.
are not anticipated to kick-in for some time. The expected impact of a fuel price hike
renders prospects of a economic turnaround in 2015 or early 2016 somewhat slim. In
2
addition, we will need to wait and see the new government policy in respect of the 2015 Overall occupancy to decrease to
Asean Economic Community (AEC), which will be unveiled in the coming months. around 85%.

3
MUCH SLOWER RENTAL GROWTH DUE TO SIGNIFICANT RISE IN Much slower rental growth and
SUPPLY some competitive relocation
Jakarta’s CBD Grade-A office market is expected to see a return to greater transaction opportunities for ‘anchor’
volume and be more tenant-favorable in 2015-2016, as a significant amount of new occupiers.
supply will enter the market over the next 2 years, following record low new building
completions in 2014. In the face of this increasing competition, landlords will likely be
more cautious in raising their base rentals; corporate occupiers will enjoy greater
opportunities to satisfy needs to expand or relocate. Occupancy is projected to fall to
around 85% in 2015-2016, and average rentals are only expected to see growth of about
5% per annum in the next 2 years.

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“The 2015/2016 new

office supply pipeline will
finally bring some relief
to corporate occupiers,
as well as provide more
expansion and relocation
alternatives to meet
market demand, which has
remained tight.”
DAVID CHEADLE
Managing Director, Indonesia

”The market will see

occupancy levels drop
by up to 10% in the
coming year, which will
likely compel landlords
to be more competitive
in retaining existing
tenants and in offering
packages to attract larger
‘anchor’ occupiers to new
buildings.”
NONNY SUBENO
Director Office Leasing, Indonesia

JAKARTA

500,000 25%
450,000
400,000 20%
Rent (Rp/sq.m./month)

350,000
Vacancy Rate

300,000 15%
250,000
200,000 10%
150,000
100,000 5%
50,000
0 0%
2010 2011 2012 2013 2014F 2015F 2016F

Rent Vacancy

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KUALA LUMPUR
STABLE RENTALS AND OCCUPANCY RATES

ECONOMIC OVERVIEW
The Malaysian economy, which posted robust growth in the first half of the year, is likely
TOP TRENDS
to expand at a slower pace in the second half with the economy growing at its slowest 1
pace in the 3rd quarter of 2014, as annual growth slipped to 5.6% from a revised Incentives will remain high
estimate of 6.5% growth in the previous quarter, as exports struggled against a fragile as supply pressure in the city
global economy. Nevertheless, the Malaysia’s economy is expected to remain steady. center drives vacancy up.
While private consumption may moderate, investment activity will be supported by the
2
continued flow of ongoing and new projects by the private and public sectors. Inflation is
expected to hover around 4% to 5% following the implementation of the Goods and Tenants continue to explore
Services Tax (GST) and the subsidy rationalization measures in 2015. consolidation of space with
more efficient workspaces.

IMPLICATIONS FOR OCCUPIERS / INVESTORS 3

Despite the limited growth from new tenants especially from foreign corporations, Rentals in Greater KL are
steady demand is still expected to prevail due to positive growth of several economic expected to remain stable with
sectors such as the oil and gas, banking/ financial institution, insurance and services. marginal growth prospects.
Demand will continue to be driven by tenants’ relocation to and expansions in newer
offices with good quality specifications, green building certification and MSC cyber
center status. The future development pipeline is expected to remain manageable in 2015
/2016; many landlords are expected to maintain their rental expectations whilst landlords
of newer buildings and those with relatively low occupancy rates will be pressured but
are unlikely to significantly reduce their rental rates. Landlords will however, be likely to
be more willing to offer incentives, i.e. rent free periods to remain competitive in the
leasing market. As more office buildings are expected to be completed in the next 24
months, tenants will continue to be in a better position to negotiate tenancy terms.

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The investment market is

expected to remain stable in
the short term as investors
remain cautious on rental
growth prospects, limited
building available for sale and
mismatched expectations
between sellers and buyers.
WONG WAI KUN
Executive Director,Valuation & Advisory,
Malaysia

In general, landlords are

expected to maintain
their rental expectations
and are not expected
to significantly reduce
quoted rentals due to
rising land costs and
increasing operational and
maintenance cost of office
buildings. Nevertheless,
the availability of newer
offices with better
specifications are likely
to put pressure on the
landlords to closely
monitor the current
KUALA LUMPUR
market and review rental
8.50 30% expectations in order to
remain competitive.
8.40 25%

TIFFANY GOH
Rent (MYR/sf/month)

8.30 20%
Managing Director, Malaysia
Vacancy Rate

8.20 15%

8.10 10%

8.00 5%

7.90 0%
2010 2011 2012 2013 2014F 2015F 2016F

Rent Vacancy

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MANILA
OUTSOURCING & OFFSHORING TO SUSTAIN OFFICE DEMAND

ECONOMY
The Philippine economy slowed in the first half of 2014, largely due to the impact of
TOP TRENDS
super typhoon Haiyan that hit the country in late 2013. In addition, recent port and road 1
congestion, monetary policy tightening, and threats of a possible power crisis in the Redevelopment and expansion
summer of 2015 have kept growth outlook subdued. Nonetheless, the country is of existing districts.
expected to continue on its growth track and remain as a bright spot in the ASEAN
region in the short to medium term. This positive outlook is supported by the
2
resurgence of the manufacturing sector, anticipated accelerated government spending Incoming supply to push
under the Public Private Partnership program, and projected sustained growth of the vacancy upwards and temper
Outsourcing & Offshoring (O&O) industry and foreign remittances. rental growth.

3
IMPLICATIONS FOR OCCUPIERS/INVESTORS Landlords and tenants may be
Prime and Grade A office leasing demand continued to be positive in 2014 as new and keen to lock in deals prior to
existing O&O firms continue to enter and expand their footprint across various offices the 2016 national elections.
within Metro Manila. This trend is expected to continue as the O&O industry is forecast
to remain as the primary growth driver of the office market. Nonetheless, we still see
growing office demand from traditional corporate occupiers seeking to either relocate
or consolidate office space in select key districts. This projected sustained office demand
should be able to offset supply pressure from the large volume of future stock in the
next two years, keeping vacancy levels relatively low and driving moderate rental growth.

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“The strength of the

O&O industry makes
the office market an
attractive investment
choice for both local and
foreign investors. Capital
values have posted steady
growth in Manila’s core
business districts, vacancy
rates remain low and the
continued expansion of
reputable multinational
companies make the
office sector an attractive
option.“
JOE CURRAN
General Manager

“Now is the best time for tenants considering expansion or

consolidation of their office as developers/landlords are keen to
pre-lease large chunks of their office space in upcoming projects
by providing flexible and preferential terms to prospective
tenants.”
TETET CASTRO
Director, Tenant Advisory Group

MANILA

1,200 8%

7%
1,000
Rent (PHP/sq.m./month)

6%
800
5%
Vacancy Rate

600 4%

3%
400
2%
200
1%

0 0%
2010 2011 2012 2013 2014F 2015F 2016F

Rent Vacancy

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SINGAPORE
RENTAL REVERSION TO CONTINUE

ECONOMY
TOP TRENDS
After achieving 4.8% in the first quarter, growth in the economy has not been able to
exceed 2% to 3% for the past two quarters. While the government’s restructuring policy 1
is seen to be leading the shift towards service-based and manufacturing-related services Net demand is forecast to
sectors, the tightening labor policy has continued to impact new business growth of fall to 0.8 msf next year due
these sectors as they are known to rely heavily on labor. Nevertheless, the restructuring to limited new supply before
policy to increase productivity is for the long term and this should help to sustain rising to 1.7 msf in 2016.
economic growth in Singapore. Hence, amid an interest rate hike and other economic 2
challenges in the region, the near to medium-term growth outlook may remain tepid.
Further rental increases are
expected for premium offices
IMPLICATIONS FOR OCCUPIERS/INVESTORS in 2015 especially in Marina
We expect positive office demand sentiment in 2014 to continue into 2015 as we Bay and Raffles Place.
anticipate the growth in employment of the office-occupying sectors to translate into 3
new demand for space. Amid the tightening prime office supply situation, landlords of
Tenants may be drawn
premium buildings are likely to be in a better negotiating position with potential tenants.
towards decentralized
However, landlords of older premises in the CBD may be inclined to extend incentives offices to reduce costs; the
so as to retain existing tenants or attract new occupiers amid the competitive market. momentum is expected to
With the overall prime Grade A rent rising by 10.3% this year, we are targeting another increase with commercial hub
6-7% increase in 2015 and 2-3% in 2016. The marginal rental increase in 2016 is in suburbs providing new good
attributed to the expected delivery of more than 4.00 msf of new office supply in that quality space.
year compared to only about 0.18 msf in 2015, which are mainly strata office
developments and known largely to be for sale.

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“Major office occupiers

have fast-changing
needs when it comes
to their talent and cost
requirements. They need
flexibility to adjust their
space needs without
significant difficulty or
costs. The quality and
location of office space
is becoming a critical
factor, particularly in a
rental market upswing.
Prime rents in Singapore
are forecast to increase
in 2015 although at a
slower pace than in 2014
as market anticipates a
strong supply in 2016.
“Landlords of premium CBD buildings are likely to steadily With new supply located
increase their rents in 2015, especially when their buildings have a in distinctly different
low vacancy. During this period of transition when prime rents are micro-markets, this will
increasing and tenants are not prepared to increase their rental reduce any dramatic
budget, we may see more lease renewals taking place which usually rental fluctuations.”
incur a lower cost than relocations.”
TOBY DODD
JUNE CHUA Managing Director, Singapore
Executive Director, Commercial Leasing

SINGAPORE

12.00 14%

10.00 12%

10%
Rent (S$/sf/month)

8.00
Vacancy Rate

8%
6.00
6%
4.00
4%

2.00 2%

0.00 0%
2011 2012 2013 2014F 2015F 2016F

Rent Vacancy

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SEOULOFFICE SUPPLY SURGE SET TO TRICKLE

ECONOMY
The domestic economy has bottomed out and on the recovery phase, but improvements
TOP TRENDS
are at a slow pace. Recently, the Bank of Korea lowered the base interest rate to 2.0%, 1
the lowest ever and joined the government’s attempt to stimulate the economy. The Leasing incentives will be
Korean economy relies heavily on trade. As Korea and China conclude the FTA tightened on the back of reduced
negotiation, Korea has reached free trade deals with the world’s three biggest economic office supply after 2014.
blocs — the US, EU and China. It is expected that FTA will revive Korea’s slumping
exports to China.
2
Take-up levels in the new
buildings are expected to remain
IMPLICATIONS FOR OCCUPIERS/INVESTORS brisk due to a flight-to-quality.
In the first half of 2014, Seoul’s office market witnessed an increase in demand as
3
corporations move into newly completed office buildings, often occupying larger spaces.
Although companies continue to be active in upgrades and negotiating new leases in Investors will continue to focus
newly completed buildings, the average office vacancy rate in Seoul increased due to the on safe properties with a long-
additional office building supply in the second half of 2014. Market conditions will require term lease.
landlords to continue offering incentives to mitigate the impact of new supply. However,
supply will decrease across all major districts in 2015. The current tenant market will tilt
towards landlords in 2015 and -2016. As such, incentives will be tightened along with the
reduced office supply.

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“Despite the additional office building supply, net take-up increased

significantly with all major districts experiencing an improvement “With the overall and
as large-scale tenants expanded. For these reasons, rent rolls will prime office vacancy
likely increase while rent-free periods will be cut back. Tenants rates at a controlled
should renew their contract periods on a long-term basis to save level, combined with a
costs. Occupiers should take advantage of the prevailing market slow but steady expected
conditions to negotiate new leases.” increase in rents, an
increasing number of
RICHARD HWANG overseas investors are
Managing Director, Korea
focusing on Seoul’s offices
for potential acquistions.
Korea’s economic growth
and market fundamentals
are proving to be healthier
than many of its Asian
counterparts. This trend
will continue to fuel
interest from overseas
investors in the next two
years.”
SHAWNA YANG
Director, Head of Capital Markets

SEOUL

35,000 16%

14%
30,000
Rent (KRW/sq.m./month)

12%
Vacancy Rate

25,000 10%

8%
20,000 6%

4%
15,000
2%

10,000 0%
2010 2011 2012 2013 2014F 2015F 2016F

Rent Vacancy

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TOKYOOFFICE RECOVERY TO CONTINUE

ECONOMY
Winning the 2020 Tokyo Summer Olympic Games will sustain Japan’s economic growth. TOP TRENDS
We anticipate private investment activities in the upcoming years will be backed by 1
strong corporate performance. On the other hand, due to the hike in consumption tax
from 5% to 8%, the Japanese economy witnessed a reactionary fall in private Robust demand will continue,
while leasing activities in some
consumption which was deeper and longer than expected. This is anticipated to place
submarkets should be carefully
downward pressure on inflation. As such, there has been an increasing number of calls to
monitored.
postpone the second tax hike in October 2015 because defeating deflation should be
prioritised rather than fiscal reconstruction. 2
Office market rents are forecast
IMPLICATIONS FOR OCCUPIERS/INVESTORS to rise further as landlords
remain bullish.
We anticipate robust demand to continue, and the number of new CBD construction
completions in 2015 and 2016 to be within the historical 10-year average; significant 3
completions are expected to be delivered in the Nihombashi and Yaesu submarkets next The strong, active investment
year. The take-up in these submarkets in 2015 will impact the overall Grade A market, market is forecast to continue,
contributing to tighter vacancy rates and rental increases. However, while sentiment driven by attractive yield gaps.
remain optimistic, how far landlords would be able to raise rents will, by some measure,
be restrained by the subdued economy.

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“Office market rents are

forecast to rise further
and landlords are bullish
on realizing rent increases
for lease renewals and
relocations. Renegotiating
occupier leases now
includes rent escalation
protection clauses as
an optimal strategy.
The current market is
compelling occupiers
to actively implement
workplace strategies
as a means to control
“As projected last year, Tokyo’s CBD is experiencing a occupancy costs. Tokyo
dramatic revitalization with several large-scale and landmark will remain a destination
redevelopments under construction. These assets will enter the for global capital through
market as investment products prior to the 2020 Tokyo Summer the 2020 Olympics.”
Olympic Games. New infrastructure development for the
Olympics is also stimulating the investment market. The strong, TODD OLSON
Executive Managing Director,
active investment market is forecast to continue through 2015 and
North Asia
2016, driven by a attractive yield gap due to the favorable lending
environment and brisk acquisition activity by J-REITs, providing
significant liquidity and affording an exit strategy for investors.”
YOSHIYUKI TANAKA
President, Asset Management

TOKYO

36,000 8%
Rent (JPY/tsubo/month)

27,000 7%
Vacancy Rate

18,000 6%

9,000 5%

0 4%
2012 2013 2014F 2015F 2016F

Rent Vacancy

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CHINA
HIGH LEVELS OF SUPPLY ACROSS THE COUNTRY

ECONOMY
China’s decades-long growth cycle is giving way to a more complex picture of TOP TRENDS
adjustment and cooling as the country continues to shift, or “rebalance”, from a BEIJING
manufacturing and export-led economy to a services and consumption-based model. Large volumes of future
Beijing’s gross domestic product (GDP) growth target for 2014 is 7.5%, lower than the supply to intensify market
7.7% expansion achieved in 2013. Actual growth, however, is widely expected to fall short
competition
of this target, with China’s authorities stressing that economic rebalancing and job
creation are higher priorities than GDP expansion. The World Bank forecasts that 1
China’s output growth will likely slow to 7.2% in 2015 and 7.1% in 2016. Rents will remain flat with
minor short term variations in
Tertiary industry continues to expand its share of the economy. The central government
core submarkets; market will
reported that services accounted for some 46.7% of GDP in the first three quarters of
continue to favor landlords.
2014, up 1.2 percentage points over the same period in 2013. The current government
led by President Xi Jinping and Premier Li Keqiang appears committed to pushing 2
forward China’s economic transition and rolling out liberalizing measures designed to Domestic companies will
unleash further prosperity while containing risks from excess manufacturing capacity, remain dominant in office
troubled financial institutions, local government debt, and a slumping residential property take-up.
market, among other challenges. The massive trend of urbanization will continue to drive
China’s economic development, while state investment in large-scale infrastructure 3
projects including railways, airports and urban transit is expected to lend buoyancy to Emerging submarkets are likely
the economy during potential downturns. to see transactions for large
spaces.
Multinational corporations are facing a more challenging environment in China due to
cooling growth, rising labor costs, and fiercer competition, among other factors. Foreign

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direct investment (FDI) patterns reflect the structural adjustment in China’s economy,
with overall FDI falling 0.4% in January–July 2014 compared to the same period in 2013,
but FDI in services rising 11.4%. Outbound direct investment (ODI) is climbing rapidly TOP TRENDS
and may surpass FDI within a few years, highlighting the growing presence of Chinese
SHANGHAI
investors in global markets.
A winner-takes-all market

IMPLICATIONS FOR OCCUPIERS/INVESTORS 1

Massive projected new supply is the defining trend in China’s key office markets. Across Nearly 1.3 million sq.m. of Grade A
office developments is expected to
the Shanghai, Beijing, Chengdu, Guangzhou and Shenzhen markets, anticipated supply of
be delivered in the CBD between
high quality office premises in CBD areas for the period from 2014–2016 stands at a
2015–16.
record high of 8.2 million square meters (sq.m.). As such, developers are keen to deliver
as quickly as possible before the bulk of supply hits, which should see a potential for 2
huge relocation deals. Tenants looking to move to new, high quality accommodation Tenants will look to upgrade and
should find the rental markets relatively soft, enabling them to upgrade premises without expand their office accommodation
necessarily paying more. at a reasonable price.

3
MAJOR CITIES - RENTS
Premium quality projects with
450 good metro connectivity are
400 expected to experience high pre-
commitment rates.
350
AUD/ sq. m. / yea r

300
250
200 “Although substantial volumes
150 of new supply are expected
100 to exert significant downward
50
pressure on Chengdu’s Grade
A office rents, a large number
0
Beijing Chengdu Guangzhou Shanghai Shenzhen of completions of high quality
single-owner buildings (notably
2011 2012 2013 2014F 2015F 2016F
in the Nanyanxian submarket)
are likely to stimulate more
tenants to take advantage of the
“An estimated 1.64 million sq.m. are forecast to be abundant new supply to upgrade
completed in 2015, spread across various submarkets: their office accommodation.”
77.2% are in mature downtown submarkets and 22.8% in
WANG YI
developing suburban submarkets. Despite the staggering new General Manager, Chengdu
supply, market activity in sectors such as financial (mostly
local) and technology and professional services (both local
and MNCs), may absorb new supply and therefore have only
limited impact on rents.”
MARTIN CHAVEZ
Head of Commercial, Beijing

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Many tenants, increasingly aware of the supply dynamics in individual cities, are
restructuring their leases with the intention of entering the market in one and a half to
two years when the new supply compels landlords to reduce rents. In Shanghai, TOP TRENDS
companies with large consolidation requirements (two to three floors) are waiting for SHENZHEN
more suitable premises to launch over the next two years, providing substantial pent-up Rapid growth of services to
demand. Beijing appears to be performing slightly differently from other key cities. In
drive active office market
China’s capital, it remains to be seen how much of the anticipated new supply will
actually come on-stream, and how much market movement will be stimulated by these 1
new properties, which are highly concentrated in the CBD area. Elsewhere, however, we If economic growth continues
expect core office markets to increasingly favor tenants as rents trend downward and on its current trajectory,
vacancies increase. availabilities are expected to
remain limited.

2
Annual rent increases of up to
5–6% are forecast through the
end of 2014 and into 2015.

3
Supply, expected to be
reasonable through the end
of 2015, should spike between
2016 and 2017.

“Major super tall commercial

building projects are currently
under construction in Futian
CBD in Shenzhen and Pearl
River New City in Guangzhou,
as landmark offices are
expected to launch into the
market in 2016 and 2017. Both
MAJOR CITIES - VACANCY RATES submarkets are expected to
be the focal point of leasing
40% activity in these two southern
35% commercial metropolises as
30% occupiers find opportunities
to upgrade due to the massive
Vacancy Rate

25%
amount of forecast new supply.”
20%

15%
CARY SHEIH
Associate Director of Research,
10% South China

5%

0%
Beijing Chengdu Guangzhou Shanghai Shenzhen

2011 2012 2013 2014F 2015F 2016F

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High quality office premises continue to see strong demand from Chinese companies,
partially offsetting slowing growth in FDI in China this year. In the domestic investment
market, vendors are increasingly looking to sell, creating a window of opportunity for TOP TRENDS
both Chinese and international investors who have been interested in buying into GUANGZHOU
Chinese office markets for some time. Shanghai remains a favorable destination for Cautiously optimistic for 2015
investors from China and abroad, while in Beijing, a five-year nation-wide ban on the
purchase of new buildings by state-owned enterprises has weakened sales of high-end 1
projects. Outbound investment continued to gain momentum in 2014, with Chinese Further improvement in overall
developers making a series of huge purchases of overseas properties – we expect this vacancy rate is anticipated in the
trend to continue. fourth quarter of 2014, given reports
of robust pre-leasing activities.

2
The faster growth rate of service
sector jobs should continue to fuel
office occupancy.
3
Substantial forecasted supply
in 2015 is expected to keep a cap
on large rental increases.
CHENGDU
High volumes of new supply
to stimulate office upgrades
1
Vacancy rate is expected to
rise above 30%.

2
Nanyanxian submarket will bear the
brunt of the fall in Grade A office rents.

3
High level of office upgrading
activity is expected.

“In China’s office market, high levels of new supply launched

will likely drive vacancy higher and lead to softer rentals “Tenants will likely hold off on
across the country. This new supply is predominantly office relocations now and wait
of a higher quality than the existing market stock and until new supply comes on in
frequently has superior infrastructure connectivity. Cushman 2016, to examine their long term
& Wakefield therefore anticipates an extremely active occupancy requirements.There
office leasing market over the next three years as tenants will be a flight-to-quality over
capitalize on the opportunity and seek to upgrade their the next several years as tenants
accommodation at a similar occupational cost to previous upgrade from aging buildings that
years.” do not have the infrastructure to
support their needs.”
JAMES SHEPHERD
Executive Director & Head of Research, Greater China
MICHAEL STACY
Head of China Commercial Leasing

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HONG KONG
OCCUPIERS’ COST FOCUS LIMITING DEMAND

ECONOMY
The outlook for the Hong Kong economy has clouded, stemming from weaker
TOP TRENDS
performance in the retail sector, softening domestic consumption and investment, and 1
more recently, the Occupy Movement. The protests put a temporary dent in retail sales Slight rental growth in
while the market is still adjusting to less robust spending by Mainland visitors. It is core locations, supply in
increasingly likely the sector will see marginal, if any, growth in 2014. Intra-regional trade non-core areas will push up
and more traction in some Western economies’ recoveries is supporting more stable vacancy.
trade growth, another pillar of Hong Kong’s economy. As China’s property sector
slowdown deepens, Hong Kong developers will continue to lean on local residential 2
demand. Gradual interest rate increases will impact the local property market over the Most tenants opting
medium term. for lower cost options,
including decentralization
or renewing premises.
IMPLICATIONS FOR OCCUPIERS/INVESTORS
3
Most multinationals remain focused on cost containment, while some banks in Greater
Central are continuing to shrink their footprints or relocate to escape high rents. The Office prices proved
resilient to demand-side
modest improvement in demand will continue to be led by the expansion of Mainland
policies, rising interest rates
Chinese financial firms, with multinationals unlikely to shift back into expansion mode in
are the next threat.
2015. Large pockets of vacancy still persist, but overall, most landlords will remain in a
stable position. Greater Central rents will experience a mild upswing in 2015¬¬–16, also
attributed to minimal new supply. Larger investors are still actively securing newly built
or whole-block assets, with demand more concentrated in non-core locations due to
more available opportunities and greater potential for capital appreciation.

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“It remains to be seen

when office demand will
recover due to occupiers’
focus on containing costs
and the slower economy.
However, we expect the
office vacancy rate to
remain relatively stable at
around 6% through 2016.
There will be limited new
supply of office space
for lease and rents will
not fluctuate significantly.
More supply and better
demand in 2017–18 will
likely stimulate tenant
activities.”
JOHN SIU
Managing Director, Hong Kong

“More investors have

returned to the office
market since mid-year
despite cooling measures
remaining firmly in place.
Prices have edged slightly
HONG KONG upward and we expect
this trend to continue
130 8%
in 2015, especially in
125 7%
emerging and non-core
locations where prospects
Rent (HK$/sf/month)

6%
120
5% for capital appreciation
Vacancy Rate

115
4% are greater.Yields will
110
3% remain at a low level until
105
2% we see some pressure
100 1%
from rising interest rates
95 0%
later in 2015–16.”
2010 2011 2012 2013 2014F 2015F 2016F
KENT FONG
Rent Vacancy Executive Director, Investment

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TAIPEI
TIGHTENING INVESTMENT POLICY
AND FREE TRADE AGREEMENT THREAT

ECONOMY
Taiwan’s economy is on the upswing in 2014, and rising private investments, exports and
TOP TRENDS
domestic consumption point to further growth in 2015. Global demand and the 1
electronics industry are driving private investment and are expected to sustain rapid Shift from a landlord’s market
growth in 2015. Domestic consumption has performed surprisingly well, driven by rising to tenant’s market as supply
employment, a warming stock market and tourism growth. The China-South Korea free pressures push up vacancy.
trade agreement currently under negotiation and planned to be concluded in 2015, is
expected to impact Taiwan’s panel, petrochemical and machinery industries, and reduce
2
Taiwan’s trade surplus. Tenants look to achieve rent
savings by relocating to the fringes
of Taipei City.
IMPLICATIONS FOR OCCUPIERS/INVESTORS
Abundant new Grade A supply is expected from 2015–2016, as well as a substantial 3
supply of Grade B office buildings in the fringes of Taipei City. These Grade B offices have Investors to consider income-
advantages in terms of low rent, good accessibility and surrounding infrastructure. The producing real estate with
new supply is expected to give tenants more negotiating power and incentives for percentage rents more attractive
than flat rent properties, such as
relocation. However, increasing land prices and development costs are expected to
office buildings.
prevent Grade A rents from falling. The Xinyi submarket will maintain its premium rent
levels as many MNCs will still prefer to be located there. Other office areas in the CBD
will see upward pressure on vacancy. Leasing activity is expected to increase due to
higher incentives and more available options for tenants.

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“Tenants who are seeking

rent savings will have
more options to choose
from since a large number
of high quality Grade B
buildings situated in the
fringes of Taipei City will
be completed in 2015
and 2016. CBD rents are
not likely to drop, due
to increasing land prices
and construction costs.
Decentralizing of the
office market to continue
with relocations from the
CBD to fringe areas.”
MEI CHIANG
Associate Director, Taiwan
“Investors are expected to remain active from 2015 to 2016,
despite the low yields. However, with interest rates remaining
low, investors still see income-producing real estate as a highly-
desirable. As rental growth is expected to be marginal, properties
generating income with a percentage rent structure are more
likely to be targeted by investors.”
GARY CHEN
Associate Director, Taiwan

TAIPEI

5,400 25%
5,300
5,200 20%
Rent (NT$/ping/month)

5,100
Vacancy Rate

5,000 15%
4,900
4,800 10%
4,700
4,600 5%
4,500
4,400 0%
2010 2011 2012 2013 2014F 2015F 2016F

Rent Vacancy

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INDIA
OCCUPIERS GEAR UP FOR EXPANSION

ECONOMY
The Indian economy rebounded as the GDP grew at 5.7% during the first quarter of
FY2015 (April–June) compared to sub 5% levels in FY2013 and FY2014. This can be TOP 3 TRENDS
attributed to several steps undertaken by the central government and Reserve Bank of 1
India (RBI) together, such as taming inflation, reducing twin deficits, stabilizing the foreign
Increased leasing momentum
exchange rate to INR60–62 levels against the US dollar from the lows of INR68–69 in
witnessed in 2014 due to a revival of
September 2013, amongst others.
demand from IT-ITeS, manufacturing,
Business sentiments revived significantly due to the decisive election result favoring the consulting and BFSI sectors to
growth and reform-oriented Narendra Modi-led NDA government. Since the newly continue at a healthy pace in tandem
with economic growth.
elected government came to power in May 2014, it has undertaken several economic
initiatives such as relaxing FDI norms in railways, defense and insurance and construction 2
development sectors. Also, it deregulated diesel prices and opened up the commercial
Relocations and consolidation
coal-mining sector to boost the economy. Financial markets’ regulator Securities in large offices will continue
Exchange Board of India’s (SEBI) approval for setting up Real Estate Investment Trusts as occupiers focus on space
(REITs) and Infrastructure Investment Trusts (InVITs) is expected to address the liquidity optimization and rationalizing
crunch in the real estate and infrastructure sectors. In addition, the US, Japan and China outflows.
have already committed investments worth US$96 billion together over the next five
years towards developing infrastructure projects and industrial parks across the country.
3
Rentals expected to largely remain
FY2015 so far is proving to be the inflection point from which the Indian economy is stable in 2015–16 as supply pipeline
expected to turn around. The RBI has forecast GDP to grow between 5.5–6% in FY2015 is still strong; rentals will increase
and with improving macro-economic factors such as declining inflation, narrowing thereafter as supply pipeline is poor.

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Further improvement in occupier sentiment is anticipated TOP TRENDS

next year as occupiers pursue growth strategies. Relocations AHMEDABAD
and consolidations will also continue with occupiers 1
increasingly adopting innovative workplace strategies to Vacancy levels are expected to
attain efficiency in operations and costs. Rents in suburban register a double-digit decline in the
and peripheral locations will be largely range-bound next next two years

year due to steady infusion of supply but are expected to 2

start firming thereafter as the supply pipeline shrinks. Rents are expected to remain stable
in 2015 but should increase by nearly
RITESH SACHDEV 5% in 2016
Executive Director, Tenant Advisory Group, India
3
Prahladnagar and S.G. Highway will
continue to witness majority of
current account deficit and increasing investments, the forecast for GDP growth in
leasing activity as nearly 94% of supply
FY2016 has been revised upward by most global organizations to 6–7%. The present pipeline is concentrated in these
momentum will need key reforms from the government that include implementation of markets
the much delayed Goods and Services tax (GST), clarity on FDI in multi-brand retail,
easing of land acquisition laws to provide access to land for infrastructure projects, BENGALURU
re-assessing the policy for SEZs, along with other structural and financial reforms.
1
City will continue to have the highest
IMPLICATIONS FOR OCCUPIERS/INVESTORS demand for commercial office space
Starting on a positive note, net absorption levels in 2014 saw a rapid growth post the among the prominent eight cities in
general elections and matched total 2013 levels by the end of third quarter 2014. The India
slowdown in economic growth during 2012–13 had impacted office demand adversely
2
and resulted in a spillover of many under-construction projects to subsequent years. As a
Despite having the highest supply
result, the top eight cities have a robust supply pipeline of nearly 61 million square feet
pipeline (15.6 msf) until 2016, vacancy
(msf) for 2015 and 2016. This supply is likely to favor tenants, presenting them a variety
levels are expected to fall by end of
of quality options to choose from and a greater negotiating power in the short term. 2016
Despite high levels of supply, we estimate a decline in overall vacancies to 15.5% by the
end of 2016 from an estimated 17.9% in 2014, as demand will be fuelled by companies in 3
the IT-ITeS, banking, financial services and insurance sectors (BFSI), pharmaceutical and Rental values in peripheral and
manufacturing sectors due to an anticipated improvement in India’s economic scenario. suburban submarkets are expected to
increase by 6-7% over the next two
years

MAJOR CITIES - RENTS CHENNAI

1
350
Healthy net absorption in 2015 and
300 2016 is expected to push the vacancy
250
levels down by the end of 2016.

2
INR/sf/month

200

150 Suburban and peripheral markets will

account for almost all the new supply
100
in the next two years
50
3
0
Ahmedabad Bengaluru Chennai Hyderabad Kolkata Mumbai New Delhi Pune Rentals are likely to increase steadily
by 9-10% in all submarkets by end
2011 2012 2013 2014F 2015F 2016F
2016

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With the recent revision of FDI norms and approval TOP TRENDS
of REITs regulations, India is likely to witness increased DELHI-NCR
investments in both core and development assets in the
1
coming years. Investments in leased office assets are further Vacancy is expected to decline
expected to strengthen. Delhi, Bengaluru and Mumbai will by 2.1 percentage points by
continue to attract the bulk of the investments followed by 2016-end

Pune and Chennai. 2

Rental values in CBD locations of
SHOUVIK PURKAYASTHA Delhi and Gurgaon are expected
Executive Director, Capital Markets Group, India to witness robust growth in
next two years due to limited
availabilities and continued
demand
3
Amongst the top eight cities, Bengaluru will lead with an estimated 22.8 msf net
Suburban and peripheral locations
absorption against a supply pipeline of 25.8 msf in 2015 and 2016. Delhi’s CBD in
too witness stable rental trends
Delhi-NCR will continue to remain the costliest office market in India in the coming despite increase in demand as
years as vacancy decreases with no significant under-construction supply and increase in adequate supply is available
demand. This will be followed by the Secondary Business District (SBD) of Bandra-Kurla
Complex (BKC) in Mumbai, which will witness stable rents until 2015 and a marginal HYDERABAD
increase thereafter due to increasing demand despite the supply pipeline scheduled till 1
end-2016. Pune and Ahmedabad are also expected to witness a noticeable improvement Limited supply and scarcity of
in demand as they offer sizeable supply options to occupiers at reasonable rentals. high quality spaces are likely
to push rents upward by 3.8%
Occupiers’ preference for large-scale developments offering a host of amenities is likely through 2016.
to continue in the coming years. Supplementing this trend, majority of the top eight cities
in India will see increased relocation and consolidation activity from central locations to 2
suburban and peripheral markets due to sufficient availability of quality supply, Commercial sales are picking
comparatively lucrative rentals and availability of larger floor plates. Further, with REITs up and are expected to gain
and private equity investors expected to emerge as the largest landlords in the upcoming momentum going forward. As
years, occupiers will also actively consider ‘buy versus lease’ options to protect such capital values are likely to
themselves from anticipated rental increases as the supply pipelines are limited in most grow at 2-3% annually over the
cities post-2016. next couple of years.
KOLKATA
1
Vacancy levels are expected to
MAJOR CITIES - VACANCY RATES increase substantially owing to
huge influx of supply anticipated
40% over the next two years
35%
2
30%
Salt Lake and Rajarhat will
Vacancy Rate

25%
continue attract majority of
20% demand in Kolkata
15%
3
10%
Rentals in peripheral submarkets
5%
are likely to remain under
0%
pressure due to elevated vacancy
Ahmedabad Bengaluru Chennai Hyderabad Kolkata Mumbai New Delhi Pune
levels
2011 2012 2013 2014F 2015F 2016F

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Attractive valuations and improved office demand are generating

positive interest from high net-worth investors for office assets in TOP TRENDS
prime markets to cater to demand from professionals and small MUMBAI
firms. Besides assured monthly rental incomes, these investors can
1
capitalize on growth in capital values in the next 18-24 months as Despite high supply pipeline for the
vacancies decrease in the absence of noticeable supply pipeline. next two years, vacancy levels are
likely to decline by 3.9 percentage
GAUTAM SARAF points by 2016-end owing to
Director, Office Agency & Investment Sales, India buoyant demand

2
IT-ITeS companies are expected
Net absorption should increase over the next 6-12 months to be concentrated in Thane and
along Thane-Belapur Road due to
resulting in vacancy levels for Grade ‘A’ offices falling and availability of quality developments
rentals increasing post that by 5-10% in prime districts of at competitive rentals
Mumbai. Rental values in peripheral locations are likely to 3
remain stable as their demand is driven by cost-sensitive Occupiers to continue assessing
occupiers. ‘Lease versus Buy strategies’ as
current capital values are attractive
RAVI AHUJA and potential for rentals and capital
Executive Director, Mumbai values increasing in next two years
is high
PUNE
1
Moderation in new supply by 2016 will result in increased rentals
Although absorption levels may
of quality office spaces, especially in the prime office districts of improve in 2015, rentals are
Delhi and Gurgaon. As distant micro-markets see increased leasing expected to remain stable for most
micro-markets, primarily due to
due to limited availability of office spaces (single ownership)
high supply
in prime locations some occupiers will undertake workplace
strategies to optimize space usage. 2
Overall vacancies are likely to
MANISH AGGARWAL drop by 4.6 percentage points by
Executive Director, Delhi-NCR 2016-end

3
Suburban and peripheral locations
will continue to attract majority of
The southern cities of Bengaluru, Chennai and Hyderabad demand in the next couple of years
will continue to witness majority office activity with highest
contribution to new supply and net absorption. While
vacancy levels gradually decline, the rental values are not
likely to see any significant movements and are expected to
remain stable with slight increases in prime business districts
in the next 12-18 months.
NAVEEN NANDWANI
Executive Director, Bengaluru

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AUSTRALIA
OFFICE DEMAND IMPROVES IN EASTERN STATES

ECONOMY
The Australian economy is currently in a transitional phase, as the resources sector
TOP TRENDS
moves from the capital and labor-intensive construction phase, to the royalty high, but 1
low-investment production phase. While the shift away from the mining construction Office demand will improve
boom is cause for concern, economic demand has been boosted by record-low interest on the back of improved
rates driving a rise in residential construction and retail sales growth. At the same time, business conditions in the
commitments from the federal and state governments, coupled with investment from the eastern states.
private sector, has seen infrastructure investment rise significantly in the eastern states,
2
helping to offset the reduction in employment associated with the mining downturn.
Increased supply will keep
the lid on rental growth over
IMPLICATIONS FOR OCCUPIERS/INVESTORS 2015 and –2016.
Office leasing demand across Australia remains fragmented, with the eastern states
3
beginning to witness the first stages in an improvement in demand, while the resource-
exposed capitals of Perth and Brisbane continue to feel the dual impact from a downturn Investors will continue to
in leasing activity and increased building completions. While tenants remain cautious move up the risk curve in
search of yield.
overall, improved business confidence, particularly in the financial services sector, has
seen a reduction in the availability of sub-lease space, and in some cases an expansion of
space requirements. This improvement in demand remains focused on small to medium-
sized firms, as opposed to larger institutions.

From an investment standpoint, demand for office investments remains at near-record

levels, with appetite from both local and offshore entities continuing to grow. Over the
next 12 months, we would expect investors to continue moving up the risk curve in
search of stock.

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“Investor demand is now approaching pre-GFC levels within

Australia, with local institutions, wholesale funds and syndicators “The green shoots in
all competing against the influx of offshore investors for a limited tenant demand, which
number of assets. With some prime transactions pointing to cap we commented on at
rates below 6%, yield-hungry investors are now taking on more the beginning of 2014,
risk in order to reach their return hurdles.” have now transpired into
a sustained rise in the
JOSHUA CHARLES demand for office space.
Managing Director, NSW
With over 400,000 sq.m.
of space requirements
AUSTRALIA - GRADE A RENTS
currently in the Sydney
1000
market alone, it is clear
900
that tenants are taking
800
a positive view of the
700
outlook for business
AUD/ sq. m. / yea r

600
conditions within
500
Australia.”
400
300 DAVID WOOLFORD
200 Managing Director, Australia

100
0
Adelaide Brisbane Melbourne Perth Sydney

2010 2011 2012 2013 2014F 2015F 2016F

AUSTRALIA - GRADE A VACANCY RATES

20%
18%
16%
14%
Vacancy Rate

12%
10%
8%
6%
4%
2%
0%
Adelaide Brisbane Melbourne Perth Sydney

2010 2011 2012 2013 2014F 2015F 2016F

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AUCKLAND
PRIME MARKET OUTPACES SECONDARY RECOVERY

ECONOMY
Growth will continue at a healthy pace but will likely be more moderate. GDP growth is
TOP TRENDS
expected to peak at 3.3% in 2015 and gradually slow from there. Higher interest rates 1
and falling home sales are consistent with slowing economic momentum. The economy Paucity of prime office
remains on a relatively slow recovery path due to debt aversion. This is in sharp contrast space for lease will push
to previous recoveries, which were accompanied by more borrowing and investment. up top-end rents in 2015
This missing ingredient means recovery have been slower but it also suggest that the and 2016.
recovery cycle will be longer and more sustainable, as it is not debt-fueled. 2
Leasing incentives will
IMPLICATIONS FOR OCCUPIERS/INVESTORS be minimal across the
Auckland’s office market has continued to be polarized between an active prime sector market.
and a steady to subdued secondary sector. It is expected that this will be maintained
3
through to 2016. Prime grade vacancy has continued to reduce over the last three years,
now sitting at just 3.2%. There will not be a dramatic shift in this trend over the next 12 Tenants will continue to
to 18 months as prime grade offices, particularly at the northern end of the CBD, demand high quality space,
which will prompt further
continue to be sought after.
office development that
CBD office investment returns are also likely to maintain a steady incline over the are well-located.
forecast period driven mainly from demand at the prime end. Investment Property
Databank has recorded total returns on CBD office investments well over at 10% per
annum.

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“The availability of quality

office stock for lease is
at a record low, which
has prompted sustained
rental growth. Although
the majority of rental
increases are evident in
the high quality office
space, tenants in offices
all along the spectrum
should expect rental
increases in the central
office market. Tenants
need to engage in the
market well before their
lease expires to ensure
security of tenure in their
current premises, or to
search out alternatives.
Incentives, which
were common-place
immediately post-GFC,
have all but disappeared.
As a consequence of a
strong economy and a
well-performing office-
occupancy sector,
the interest in office
AUCKLAND investment has been
robust over 2014. 2015
700.0 14%
is likely to bring more
600.0 12%
commercial sales with
big price tags, although
Rent (NZ$/sq.m./year)

500.0 10%

the availability of prime

Vacancy Rate

400.0 8%
investment opportunities
300.0 6%
will be the most
200.0 4% constraining factor.”
100.0 2%
JOHN CHURCH
0.0 0% National Director
2010 2011 2012 2013 2014 2015F Commercial Real Estate
Bayleys Realty Group
Rent Vacancy

35
DECEMBER 2014

ASIA PACIFIC SOUTHEAST ASIA NORTH ASIA GREATER CHINA SOUTH ASIA AUSTRALASIA

ASIA PACIFIC OFFICE FORECASTS

GRADE A RENTS VACANCY RATE SUPPLY1

LOCAL LOCAL USD/SF/YEAR LOCAL USD/SF/YEAR 2014 2015 2014 2015
MEASUREMENT 2014 2014 2015 2015 % % MILLION SF MILLION SF
SOUTHEAST ASIA
Bangkok THB/Sqm/Month 830.00 28.07 856.35 28.96 6.4 3.8 0.00 0.48
Hanoi USD/Sqm/Month 28.89 32.21 27.28 30.41 30.3 29.4 0.48 0.00
Ho Chi Minh USD/Sqm/Month 46.00 51.28 44.00 49.05 8.0 15.0 0.10 1.12
Jakarta IDR/Sqm/Month 427,900.00 37.04 449,290.00 38.89 9.4 15.4 1.49 6.53
Kuala Lumpur MYR/Sf/Month 8.35 28.68 8.27 28.40 17.6 16.5 1.14 1.65
Manila PHP/Sqm/Month 968.16 24.15 1,011.72 25.24 4.4 4.7 4.59 9.01
Singapore SGD/Sf/Month 10.40 95.07 11.04 100.92 5.7 3.3 1.20 0.18

NORTH ASIA
Seoul KRW/Sqm/Month 31,579.00 31.96 32,211.00 32.60 13.0 13.5 4.432 0.00
Tokyo 3
JPY/Tsubo/Month 28,000.00 79.67 30,000.00 85.36 5.6 5.6 4.93 6.63

GREATER CHINA
Beijing RMB/Sqm/Month 417.50 75.19 418.28 75.33 7.5 8.2 6.21 7.98
Chengdu RMB/Sqm/Month 120.70 21.74 118.90 21.41 33.4 35.9 5.24 7.64
Guangzhou RMB/Sqm/Month 186.05 33.51 186.55 33.60 11.5 12.4 1.57 4.05
Shanghai RMB/Sqm/Month 344.41 62.03 343.21 61.81 6.8 10.2 2.87 6.76
Shenzhen RMB/Sqm/Month 222.70 40.11 233.37 42.03 7.8 11.5 0.89 4.41
Hong Kong HKD/Sf/Month 108.63 168.15 110.98 171.79 6.1 5.4 0.05 0.00
Taipei NTD/Ping/Month 5,093.00 54.91 5,195 56.00 11.6 17.7 0.09 0.92

SOUTH ASIA
Ahmedabad INR/Sf/Month 37.50 7.12 37.50 7.12 30.6 26.5 1.15 1.00
Bengaluru INR/Sf/Month 59.50 11.30 60.50 11.49 10.7 12.5 10.97 14.78
Chennai INR/Sf/Month 56.50 10.73 59.00 11.20 14.5 10.8 1.68 0.86
Hyderabad INR/Sf/Month 49.50 9.40 49.50 9.40 12.2 8.2 4.50 2.79
Kolkata INR/Sf/Month 46.50 8.83 46.00 8.73 30.1 35.3 0.53 1.40
Mumbai - CBD/SBD INR/Sf/Month 296.50 56.30 296.50 56.30 18.0 15.3 0.75 0.75
NCR INR/Sf/Month 84.00 15.95 83.00 15.76 27.1 27.1 7.54 8.08
Pune INR/Sf/Month 60.50 11.49 60.50 11.49 22.0 23.9 2.43 5.03

AUSTRALIA
Adelaide AUD/Sqm/Year 500.00 38.13 500.00 38.13 11.4 11.4 0.13 0.23
Brisbane AUD/Sqm/Year 655.00 49.95 650.00 49.57 10.5 12.6 0.14 0.49
Melbourne AUD/Sqm/Year 624.00 47.58 620.00 47.28 7.2 8.2 0.54 0.83
Perth AUD/Sqm/Year 730.00 55.67 710.00 54.14 10.9 18.3 0.13 1.09
Sydney AUD/Sqm/Year 875.00 66.72 875.00 66.72 9.9 14.8 0.32 1.89
Auckland NZD/Sqm/Year 610.00 43.87 640.00 46.03 4.0 3.5 0.23 0.20
1. as of Q3 2014; subject to change due to deferments
2. completion of 0.9 million sf to be deferred to H1 2015
3. Buildings with floor plates of over 200 tsubo

36
 ASIA PACIFIC
OFFICE FORECAST
2015-16

ASIA PACIFIC SOUTHEAST ASIA NORTH ASIA GREATER CHINA SOUTH ASIA AUSTRALASIA

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Kapil Kanala John Stinson

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Research, Asia Pacific Capital Markets, Asia Pacific
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Director Senior Manager Executive Director
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Jonathan Tizzard Judy Jang Teo Li Kim

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Valuation & Research,Vietnam Research, Korea Research, Singapore
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37
DECEMBER 2014

ASIA PACIFIC SOUTHEAST ASIA NORTH ASIA GREATER CHINA SOUTH ASIA AUSTRALASIA

For general requirements across Asia Pacific, please contact:

AUSTRALIA JAPAN MALAYSIA

David Woolford Todd Olson Tiffany Goh
Managing Director Managing Director Managing Director
+(612) 9229 6880 +(81) 3 3596 7050 IVPS Real Estate Sdn Bhd
david.woolford@ap.cushwake.com todd.olson@ap.cushwake.com +(603) 7728 4117
tiffanygoh@ivpsmalaysia.com
CHINA PHILIPPINES
Jonathan Davis Joe Curran NEW ZEALAND
Managing Director, Eastern China General Manager Gerald Rundle
+(86) 21 2320 0828 +(63) 2 830 8587 National Research Manager
jonathan.davis@ap.cushwake.com joe.curran@ap.cushwake.com Bayleys Realty Group
+(64) 9 375 8668
HONG KONG SINGAPORE gerald.rundle@bayleys.co.nz
John Siu Toby Dodd
Executive Director Executive Director THAILAND
+(852) 2956 7088 +(65) 6232 0898 Teerawit Limthongsakul
john.siu@ap.cushwake.com toby.dodd@ap.cushwake.com Executive Director, Advisory Services
Nexus Property Consultants Co Ltd
INDIA SOUTH KOREA +(66) 2 286 8899
Sanjay Dutt Richard Hwang teerawit@nexus.co.th
Executive Managing Director Managing Director
+(91) 22 6657 5555 +(82) 2 3708 8850
sanjay.dutt@ap.cushwake.com richard.hwang@ap.cushwake.com

INDONESIA VIETNAM
David Cheadle Tim Horton
Managing Director General Manager
+(62) 21 2550 9580 +84 8 3823 7968
david.cheadle@ap.cushwake.com timothy.horton@ap.cushwake.com

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