Asia Pacific: An oasis of calm amidst global political instability - Q1 2017 Asia Pacific Property Digest - JLL
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Asia Pacific Property Digest Q1 2017 Asia Pacific: An oasis of calm amidst global political instability
13
Office
35
14 Hong Kong
4
15 Beijing
16 Shanghai
17 Shenzhen
18 Taipei
19 Tokyo
20 Osaka
21
22
Seoul
Singapore Retail
Feature 23
24
Bangkok
Jakarta
36
37
Hong Kong
Beijing
Articles 25
26
27
Kuala Lumpur
Manila
Ho Chi Minh City
38
39
40
Shanghai
Shenzhen
Tokyo
04 Asia Pacific Economy and Property
28 Delhi 41 Seoul
Market
29 Mumbai 42 Singapore
08 A growing appetite for foreign F&B
in China 30 Bangalore 43 Bangkok
09 Is it the end for Japan’s retail rally? 31 Sydney 44 Jakarta
10 Cold storage in a heated logistics 32 Melbourne 45 Delhi
market? 33 Brisbane 46 Sydney
11 Is Singapore residential warming up? 34 Auckland 47 Melbourne
Editor's Note
I’m pleased to share our latest Asia Pacific Property Digest in an exciting new format that’s part of our
brand launch.
We started the year on a positive note with investment volumes of USD 25 billion, up 1% from 1Q
2016. The International Monetary Fund’s April forecast projects economic growth for Asia Pacific at
above 5% from 2017 to 2018.
The region continues to be stable, with describing it as an oasis of calm following Brexit, a new US
president and upcoming elections in two of Europe’s largest economies, France and Germany.
You can view this report online at http://www.jllapsites.com/research/appd-online/.
I hope you enjoy reading this report and as always, we welcome your feedback on our reports and
service.
Thanks,
Dr Megan Walters
Head of Research – Asia Pacific
49 59 67
Residential Industrial Hotel
50 Hong Kong 68 Hong Kong
51 Beijing 60 Hong Kong 69 Beijing
52 Shanghai 61 Beijing 70 Shanghai
53 Singapore 62 Shanghai 71 Tokyo
54 Bangkok 63 Tokyo 72 Singapore
55 Jakarta 64 Singapore 73 Bangkok
56 Sydney 65 Sydney 74 Jakarta
57 Melbourne 66 Melbourne 75 Sydney
4 – Features
ASIA PACIFIC ECONOMY
Signs of improvement in the region
The stream of positive economic news that started last summer persisted into 2017, with many indicators signalling
a broadening global recovery. Strengthening market sentiment along with renewed optimism about the economic
outlook helped bolster financial markets, including US markets reaching new record highs. These positive economic
developments have shifted expectations upwards, with the region’s two largest economies – China and Japan – as
beneficiaries of positively revised growth forecasts, and indicating a possible resynchronisation in the global cycle.
Trade dynamics improve consumer confidence, low unemployment Strong growth track
and rising disposable income in emerging After a turbulent 2016, global output
A widening recovery in demand is another
markets are underpinning solid household is expected to pick up with Asia Pacific
promising sign that trade is gaining
demand. Retail sales growth in China grew leading the way. A broadening global
a firmer footing. Many Asian markets
at a robust pace of 10.7% y-o-y in April, with recovery in tandem with domestic policy
recorded positive growth in exports
online shopping remaining a key driver support have buoyed recent strong results
recently including Korea, which shrugged
of growth. In advanced economies, retail and lifted growth prospects for many
off political tension with its largest trading
spending has been less rosy as economic major economies. In this region, domestic
partner to rise for a sixth straight month in
uncertainty weighed on consumer demand will continue to underpin healthy
April, and Japan, which posted its biggest
sentiment. However, there have been growth, while gaining momentum in the
gain in more than two years in March. Trade
positive signs recently with some markets global economy should catalyse better
data out of China also showed resilience in
returning to growth including Hong Kong, performances for the region’s exporters and
2017 with both imports and exports rising
which recorded its first rise (3.1% y-o-y) in producers. The outlook remains cautiously
in April. This is consistent with the broader
over two years in March. optimistic with existing global political
data observed so far, which includes
expanding manufacturing activity. risks arising from growing protectionist
Rates remain low policies.
Consumer spending trends The US Fed hiked rates again in March and
there are expectations for further rises this
varied year; however, most central banks in the
Consumer spending remains a catalyst region have not followed suit and domestic
for growth in many markets as a healthy factors rather than the Fed’s actions are
labour market flows through to wage likely to remain the main determinants of
gains. Nonetheless, the performance monetary policy in the short to medium
remains mixed across Asia Pacific. Buoyant term.
5 – Features
Table 1: Outlook for Major Economies
Real GDP Growth (%)
Country 2017 Outlook
2016 2017F
China 6.7 6.6 Growth supported by infrastructure spending and buoyant consumption.
Business investment and robust growth in exports to underlie modest rise. Government policy to
Japan 1.0 1.4
remain supportive.
Demonetisation concerns diminish. Consumption to lead recovery with backing from spending on
India 7.5 7.2
infrastructure.
Weak domestic demand to offset strength from exports. Softer construction activity and subdued
South Korea 2.8 2.5
private consumption.
Improving external demand and increased production capacity to bolster exports, but domestic
Australia 2.5 2.8
demand to remain subdued.
Indonesia 5.0 5.1 Consumer spending and infrastructure investment to remain key drivers.
Uneven growth and with the pick-up driven by externally focused sectors. Fiscal stimulus to support
Singapore 2.0 2.7
investment.
Improving global demand to support trade, while a resilient labour market underpins healthy do-
Hong Kong 1.9 2.2
mestic demand.
Source: Oxford Economics, May 2017
ASIA PACIFIC PROPERTY MARKET
A steady start to the year
The commercial real estate market in Asia Pacific began the year on steady ground as both leasing and investment
transactional volumes held relatively firm from a year earlier. The trend of divergence in occupier markets persisted with
several recording buoyant conditions. On the investment front, real estate’s attractive yield profile in a low interest rate
environment is helping sustain investor interest and five of the top 15 most active cities globally for investment volumes
were in the Asia Pacific region. Interestingly, China remained the largest source of outbound capital globally for the hotel
sector in 1Q despite tight capital controls.
Supply and demand office dynamics Less new office supply across Asia submarket. Vacancy remained below 5% in
neutral across most markets Pacific markets such as Bengaluru, Beijing, Hong
Kong and Tokyo. Meanwhile, Shanghai
Overall leasing activity in the region was Around half of all Asia Pacific markets
saw the largest jump in vacancy, rising
relatively stable, down slightly by 4% y-o-y saw new completions in 1Q; however, the
by 4 percentage points on huge supply
in 1Q17 but with a varied performance total volume of supply dipped by 19%
additions.
across the region. At the city-level, Delhi y-o-y. Shanghai received a large volume of
remained the regional leader with leasing supply in both the CBD and Decentralised Robust office rental growth in a few
volumes at 220,000 sqm but healthy levels markets, and accounted for nearly 60% key markets
of activity were also recorded in Melbourne, of the total volume of new completions,
Manila and Tokyo. In terms of industry with smaller supply volumes completed In aggregate, rents increased 1.0% q-o-q
drivers, financial and tech firms were the in Beijing and Guangzhou. One new and 3.1% y-o-y. Sydney continued to record
most active. building was completed in Tokyo with a the strongest quarterly and annual growth,
relatively low pre-commitment rate while a a result of persistent demand for prime
Similarly, 1Q net absorption fell slightly by Singapore project scheduled for 1Q delayed office space and declining vacancy. The
3% y-o-y, mostly evident in the India Tier completion. rental decline accelerated in Jakarta, but
1 markets and Tokyo as supply additions held steady in Singapore as commitment
dropped off. However, Melbourne recorded Vacancy rates continued to decline in many rates at upcoming supply improved. Perth
strong quarterly net absorption with broad- Asia Pacific markets. Mumbai saw one of returned to positive rental growth (on a
based demand, while traditional financial the largest quarterly falls with vacancy prime net effective basis).
institutions (e.g. banks) drove activity in down around 1 percentage point and
China’s Tier 1 markets. with the biggest drop recorded in the BKC
F&B leading the way rang in at USD 25.3 billion, up 1% on the Chinese buyers were quieter in the region.
6 – Features
same quarter a year ago, but down 43% Offshore investors’ activity in Australia
F&B operators and kids’ brands were
on the previous quarter. The shortfall was remained vibrant as cross-border buyers
still the main demand drivers in China’s
largely confined to Australia and Hong continued to outpace cross-border sellers.
Tier 1 cities, while in Hong Kong the
Kong, due to a shortage of product. Japan
primary sources of demand were local Capital value growth outpaces rents
and Singapore were regional standouts.
and international F&B brands along with again
The office sector accounted for roughly half
mid-tier retailers. The performance of retail
of total transaction volumes regionally, In the office sector, Asia Pacific quarterly
sales in Singapore continued to be patchy
while retail and industrial each accounted capital value growth moved higher by 1.8%
and occupier demand was weak with many
for 15-20% and the rest mainly comprising in aggregate in 1Q17. Sound fundamentals
tenants still looking for early termination.
of hotel assets. and rent growth supported robust capital
Retailer performance in Sydney continued
to vary across categories, with strong value increases in Sydney (+6.4% q-o-q)
Cross-border investors remained active and Melbourne (+4.6%). Price benchmarks
competition in the apparel category in 1Q, accounting for around one-third of
resulting in discounting and bankruptcies. indicate that Hong Kong capital values
total transaction volumes. Inter-regional reached new highs, while growth in
purchaser activity dominated intra-
Demand drivers of logistics sector regional in the quarter, and accounted
Shanghai was in line with rents. The
consistent with recent periods for about 67% of cross-border purchaser
pace of decline picked up pace in Jakarta
while ample liquidity saw the decline in
Strong demand from e-commerce retailers activity. International funds continued to Singapore ease.
and third-party logistics companies acquire core assets in Japan, Korea and
continues in several Asia Pacific markets, Shanghai. Asian investors were active but
including Tokyo and Sydney. Against
mixed trade data in Hong Kong, most 3PLs
as well as retailers who were previously
active in expansion adopted a wait-and-see Figure 2: Office Rental & Capital Value Changes, Yearly % Changes, 1Q17
attitude with leasing largely centred on
renewals. Take-up of business park space in 30
Singapore focused on existing and recently 25
completed premises given the lack of new
completions during the quarter, while 20
demand for logistics premises remained 15
relatively subdued. Demand continued to 10
y-o-y %
be robust in Sydney with limited available
5
options for immediate use, and quarterly
take-up was supported by several large 0
scale ‘design and construct projects’ and –5
speculative facilities getting leased up.
–10
China tightens residential policy –15
measures while Singapore loosens
ey
ne
ng
ila
o
i
ai
k
ng
l
e
rta
ba
ou
ko
or
ky
gh
an
dn
ur
Ko
iji
ka
um
Se
ap
To
ng
Be
an
bo
M
Sy
Ja
ng
ng
Ba
M
Sh
el
Additional policy restrictions were
Ho
Si
M
introduced in many cities in China during Rental Values Capital Values
the quarter, including refined definitions
for first- and second-time home buyers, Figures relate to the major submarket in each put a period after city
and higher down payments. The tight Source: JLL (Real Estate Intelligence Service), 1Q17
policy stance on home purchases and
new launches continued to impact sales
volumes in China’s Tier 1 markets. In
Singapore, the government moved in the
opposite direction by slightly relaxing Figure 3: Direct Commercial Real Estate Investment 2008–1Q17
cooling measures in March. Market
140
sentiment improved further in the city-
state with sales volumes in the prime 120
areas slightly above levels from a year
earlier despite a lack of new launches. 100
Despite the stamp duty in Hong Kong
USD Billion
80
being raised to 15% in November and
growing expectations that interest rates 60
will rise, sales activity gathered pace as 1Q 2017
more developers launched units for sale. 40 $25.3 bill
1% y-o-y
Many wealthy first-time buyers purchased
multiple units on one sales agreement in 20
order to avoid the stamp duty; however,
0
this loophole was closed in mid-April.
2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q17
Capital continues to chase real estate Japan China Australia Singapore Hong Kong
South Korea Other
Investment volumes across Asia Pacific
commercial real estate markets started the
year at the same pace as a year ago. 1Q17 Figures refer to transactions over USD 5 million in office, retail, hotels and industrial.
final transaction volumes in Asia Pacific Source: JLL (Real Estate Intelligence Service), 1Q17
7 – Features
Figure 4: Rental Property Clocks, 1Q17
Grade A Office Prime Retail
Beijing Beijing
Hong Kong Auckland
Shanghai
Auckland
Tokyo Jakarta
Kuala Lumpur Bangkok, Tokyo^,
Wellington
Sydney
Growth Rents Kuala Lumpur Growth Rents
Manila Slowing Falling Slowing Falling
Guangzhou, Manila,
Melbourne Jakarta
Osaka, Seoul, Hong Kong^
Wellington Rents Decline Singapore, Rents Decline
Adelaide Shanghai
Bangkok
Rising Slowing Rising Slowing Singapore
Canberra Mumbai
Bengaluru
Ho Chi Minh City Delhi
Hanoi Bengaluru
Delhi, Chennai Brisbane Chennai, Melbourne*,
Mumbai Taipei SE Queensland*
Sydney*
Perth Guangzhou
*Regional
Note: Clock positions for the office sector relate to the main submarket in each city. ^High Street Shops/Multi-level High Street
Prime Residential Industrial
Jakarta Hong Kong
Tokyo
Beijing, Auckland
Shanghai
Wellington
Growth Rents Kuala Lumpur Growth Rents
Guangzhou,
Manila Slowing Falling Slowing Falling
Manila
Beijing,
Bangkok Rents Decline Rents Decline Singapore
Rising Slowing Rising Slowing (Logistics)
Sydney
Hong Kong
Singapore*
Brisbane
Shanghai Melbourne Singapore (Business Park)
*Luxurious
*Logistics (Hong Kong, Shanghai, Beijing, Greater Tokyo)
Source: JLL (Real Estate Intelligence Service), 1Q17
2017 office leasing volumes to hold up
Lingering uncertainty surrounding the About the Author
economic and political backdrop leads to Dr Megan Walters joined JLL in 2010 and in October 2016 was
the expectation that gross leasing volumes appointed as Head of Research – Asia Pacific. In this role, Megan
should be relatively in line with 2016, leads a team of 160 professional researchers in the region, which
and with a varied performance amongst forms part of a network of over 400 researchers in 65 countries
markets expected to continue. However, around the globe.
there have been encouraging signs in 2017
that activity is improving in many areas.
8 – Features
A growing appetite for foreign F&B in China
While Chinese food is the first love of In our new whitepaper Foreign F&B • Regional bias within China is strong
most Chinese consumers, much of China’s Expansion in China, we explore the among most foreign chains, which tend
middle class has also embraced foreign recent store openings of 32 well-known to flock to South China.
cuisine. This has helped foreign food international F&B brands in China, • Most brands have an established
and beverage (F&B) chains find success identifying patterns in the market as well as presence in East China, but their
in the country, backed by their novelty, the lessons that can be learned from these demographics indicate that there is still
quality, competitive prices, and air of retailers. Our key insights include: room in the market for them to further
sophistication. expand in this wealthy region.
• China’s strong consumer sector makes
Sensing opportunity, foreign restaurants F&B one of the country’s most active Given that capturing even a small slice
have expanded aggressively across the areas of growth. of the pie translates into huge absolute
country, and many are now fixtures at volumes, many foreign F&B retailers view
• While expansion continues along the
urban malls, department stores, and the China market with understandable
coastal areas and Tier 1 cities, foreign
shopping streets in China. enthusiasm. Yet the road to successfully
F&B retailers are now more active
taking advantage of the China opportunity
in lower-tier cities, despite the risks
This begs the question: is there a pattern is a difficult one, as some restaurant chains
associated with entering these less
to the kind of roll-out strategies unleashed have discovered too late.
wealthy provincial capitals.
by foreign F&B brands in China? If so, what
• Smaller café-format shops selling F&B retailers have several critical questions
lessons do they hold for others looking
coffee, tea, and ice cream are a highly to address before plunging ahead,
to deepen or establish a presence in the
active category, expanding quickly at 30 including: “How fast can I build out and
country over the coming years?
percent y-o-y in 2015. where?” The results of our study offer
In answering these questions, we partnered direction on this and more. Download our
with retail data collection specialist report here.
LocalGravity, which catalogues the location
of retail stores across every city in China on
a regular basis.
About the Author
Steven McCord is Head of Research, North China and Head of Retail
Research, Asia. He regularly monitors major commercial real estate
trends in China and trends in the shopping centre industry across
Asia. He has been with the firm for over ten years.9 – Features
Is it the end for Japan’s retail rally?
In Japan, the days of rapidly rising luxury 2. More diverse shopping habits are 4. Threats posed by the rise of
goods consumption – particularly from forming among younger generations. e-commerce are limited in the luxury
Chinese tourists – is now over. Tighter While department store sales in the goods market. Direct service plays
mainland Chinese customs controls, aimed country hit a 36 year-low in 2016 – in an important role in luxury goods
at thwarting those who shop abroad for part due to the warmer climate shopping, and this shows no signs of
resale at home, have made it harder for impacting fashion sales and slowing fading anytime soon. Physical stores
Chinese tourists to purchase large amounts demand for duty-free from visitors – remain important for certain areas of
while abroad since last year. there was a noticeable uptick in the retail sector. Meanwhile, fast fashion
cosmetic sales. In contrast with the outlets often generate high foot traffic
As Chinese visitors spend less, the prime respective 6 per cent y-o-y declines in for malls, while suburban shopping
retail sector in Japan is also facing women’s fashion and luxury sales, centres – packed with food and
flattening domestic consumption. cosmetics sales grew 10 per cent y-o-y, entertainment options – serve shoppers
Meanwhile, record-high commercial across both domestic and foreign with needs that cannot be met online.
land prices and rents in retail hotspots shoppers. This is a bright spot on the 5. Japan remains a popular regional
are creating additional stress for both horizon, suggesting that department shopping destination. In 2016, the
landlords and retailers. stores are commanding interest from number of tourists to Japan rose 22
younger generations, which helps per cent y-o-y. Relaxed visa rules make
Yet, we remain optimistic about the future
ease ongoing concerns that they have visiting Japan easy for many tourists
of the retail sector in Japan:
become overly dependent on an older, from nearby countries such as China
1. The local wealth effect has enabled wealthy consumer base. and Thailand. Further, as political
international luxury retailer sales to 3. Major prime retail hotspots continue to tensions between Seoul and Beijing
grow at healthy rates. Select foreign thrive. With a growing collection of fast remain high, nearby markets like Tokyo
brands are recording a surge in sales, fashion retailers, an enviable maze of could benefit from a boost in Chinese
and in some cases, Japan sales are flagships, department stores, and street- travellers looking to spend elsewhere in
outperforming global sales averages. side retail stores, the world-famous the region.
The strong performance of international Ginza shopping district maintains huge
brands in the market indicates that local crowds that drive annual retail sales for
spending power – underpinned by rising the area that tops out at hundreds of
stock prices, if slower than the past – billions of yen.
remains steadfast.
About the Author
Naoko Iwanaga is a Research Manager based in Tokyo, Japan. In
her current role, she authors market commentary and analysis
for various JLL publications and media releases. Naoko also
regularly contributes to consulting projects on behalf of clients and
investors.10 – Features
Cold storage in a heated logistics market?
Traditionally considered a niche category of specialised nature of cold storage assets escalations are generally set higher than
industrial assets and often overlooked, cold encourages tenants to commit to longer market. For example, at a major industrial
storage assets are now highly sought-after. lease terms (typically 15–20 years). estate in Sydney’s Outer Central West, a
Last year was a record-setting year for the speculatively constructed warehouse,
industrial real estate sector in Australia. We have tracked over AUD 1.86 billion leased to an online grocery retailer,
Record transaction volumes were recorded (USD 1.27 billion) of cold storage achieved a 40 per cent rent premium in
for the third year in a row in 2016, with transactions nationally since 2007. The comparison to a standard distribution
sales transactions volumes totalling ten largest sale transactions showed an warehouse of similar size located next
AUD 7.909 billion (USD 5.279 billion) average lease expiry (WALE), weighted by door, in the same estate. This is despite the
nationally. Cold storage sales volumes have income, of 14 years. High-quality tenants, 9,500 sqm warehouse/office facility being
also grown in recent years. such as Coles, Woolworths, Metcash generically designed, then fitted out for
and Inghams were involved in all 10 refrigerated warehousing accommodation.
We identify two major reasons for this: transactions.
Investors seeking prime industrial property
Positive top-down fundamentals The specialised machinery and associated should consider cold storage/refrigerated
Food and beverage export and import software required to run cold storage assets. Given that investors find it
growth over the past three years has been assets typically involve higher fit-out increasingly difficult to replace secure
well above the 20-year average (Figure and maintenance costs than traditional income streams, these assets are also likely
1). In 2016, food and beverage exports warehouses. In order to compensate for to continue to be highly sought after.
totalled AUD 26.1 billion (USD 20.0 billion) higher initial capital outlay, rents and
while imports totalled AUD 17.0 billion
(USD 13.0 billion). Growth in the value of Figure 1: Australian Imports and Export Volumes: Food and Beverage
cross-border trade has been supported 30,000 $1.20
by the depreciation of the AUD and recent
25,000 $1.00
free-trade agreements.
AUD millions
20,000 $0.80
The expansion of cross-border trade is
15,000 $0.60
evident in our recent industrial take-up
10,000 $0.40
figures. Owner-occupiers and tenants such
as PFD Food Services, Hello Fresh, Martin 5,000 $0.20
Brower, Rand and Newcold (a new entrant 0 $0.00
to Australia) have all taken up new cold-
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storage warehouse space in Australia. In
Imports: Food and Beverage Exports:Food and Beverage AUD/USD (December) (RHS)
Sydney, where residential developers are
displacing industrial tenants from sub-
markets such as South Sydney and the
Inner West, a lack of smaller
accommodation options will see growth in About the Author
demand for secondary assets or a ‘flight-to- Keith Lee is a Research Analyst based in Sydney. He works in the
quality’ to high-end facilities. market research team, with a focus on Sydney and Melbourne
industrial markets. In his current role, Keith services the broader
Increased tenant retention and Australian REIS clientele but has recently been involved in more
premium to market rents
client-specific research projects. Keith’s focus is to improve the
In an environment where institutional quality of the national industrial offering with regards to the
landlords compete fiercely, owners have industrial data methodologies, analysis and reporting.
sought new measures to retain tenants. The11 – Features
Is Singapore residential warming up?
Between 2010 and 2013, the Singapore The second relaxation was to the TDSR, 15 per cent and payable for the transfer of
government implemented a series of which was lifted for mortgage equity equity interest in a property holding entity
measures to cool the residential property withdrawal loans with loan-to-value ratios instead of just the 0.2 per cent stamp duty
market, including the Seller’s Stamp Duty of 50 per cent and below to enable some for share transactions. This would prevent
(SSD), Additional Buyer’s Stamp Duty owners, especially those in their retirement developers under pressure from Qualifying
(ABSD), reduction of borrowing limits and years, to borrow against the value of their Certificate extension charges and ABSD
Total Debt Servicing Ratio (TDSR). The properties to obtain additional cash. remission claw-back from disposing of
effect of the cooling measures was a two- unsold stock through the transfer of equity
thirds fall in sales volumes between 2010 While the adjustments to the SSD and TDSR interest with minimal penalty.
and 2014 while prices eased by a moderate by themselves may not have a significant
11.6 per cent from 3Q13 to 1Q17. impact on the market, it is the signal that The ACD for sale is at a flat rate of 12 per
they are sending that is expected to have cent if the interest is transferred within
Previous appeals by the industry to relax a positive impact. The policy relaxation is three years, making it more punitive than
the cooling measures had been likely to be seen as the beginning of the SSD for individual sellers. The effect of the
unsuccessful, so it came as a surprise that unwinding of cooling measures and this ACD is that bulk purchases by investors
on 10 March 2017, the authorities is expected to lead more buyers back to could be at wider discounts.
announced tweaks to the cooling the market. Buyers would perceive the
measures. market as bottoming and be hopeful of a The long-awaited easing of cooling
price recovery. Transaction volumes which measures has finally begun but the
The first relaxation was to the SSD, with the have been increasing in the last two years, adjustments of the other measures are
holding period being reduced to three years are likely to pick up further and we expect likely to be cautious and gradual, with the
and the rates to between four and 12 per some upside to prices. authorities sizing up the impact of each
cent. Prior to this, SSD had been payable adjustment before moving on to the next.
by those who purchased a residential Another announcement was the Additional For now, there is ‘candlelight at the end of
property and sold it within four years, at Conveyance Duties (ACD) for purchase the tunnel’, possibly leading to a revival in
rates of between four and 16 per cent of the which is identical to the buyer’s stamp the Singapore residential market.
purchase price. duty of up to three per cent and ABSD of
About the Author
Ong Teck Hui is a National Director, Research & Consultancy, based
in Singapore. His research work focuses more on the Singapore
residential sector, which he comments on regularly in response to
the media. He also engages clients, investors, developers and other
industry professionals in providing advisory service.Office
Hong Kong
“Tenant decentralisation
quickens as Central rents
close in on record highs.”
14 – Office
Denis Ma, Head of Research, sq ft per month, Stage in Cycle
Rental Growth Y-O-Y
Hong Kong
9.1%
net effective on NLA Growth
HKD 114.6 Slowing
Financial Indices
Cost-saving relocation requirements underpin leasing
140
• Leasing activity remained relatively subdued against a tight vacancy
130
environment and the Chinese New Year holidays, with the number of new
lettings decreasing about 7% q-o-q in 1Q17. Driven by cost-saving relocation
120 requirements from foreign legal and financial services firms, net absorption
amounted to 166,500 sq ft.
Index
110
• In Central, leasing demand was largely supported by tenants seeking cost-
100 effective options in the submarket’s fringe areas (i.e. Sheung Wan and
Admiralty) and the ongoing expansion of PRC tenants, with the occupier market
90 growing 53,500 sq ft after two quarters of contraction.
80 Government tenders first commercial site in Central in 20 years
4Q12 4Q13 4Q14 4Q15 4Q16 4Q17
• Three commercial/hotel sites in Central, Kai Tak, and Cheung Sha Wan area
Rental Value Index Capital Value Index
were put up for sale via tender in March, with closing dates in May. The Murray
Arrows indicate 12-month outlook Road Carpark (IL 9051), which has a site area of 31,000 sq ft and a maximum
Index base: 4Q12 =100
Financial Indicators are for Central.
buildable GFA of 465,000 sq ft will be the first government site sold in Central in
Source: JLL 20 years.
• The government’s 2017/18 Land Sale Programme included three commercial/
Physical Indicators hotel sites, which could potentially yield about 1.9 million sq ft of commercial
and office floor space, about a third of the 5.9 million sq ft delivered from the
300 6 eight sites included in the 2016/17 Land Sale Programme.
250 5
Rents in Central closing in on historic highs
200 4
• Led by growth in Grade A1 office buildings, rents in Central advanced 2.0%
Thousand sqm
150 3 q-o-q, reaching a level within 2% of the pre-GFC record high set in 2008. In
Percent
contrast, rents in Kowloon East remained under pressure from subdued pre-
100 2
leasing activity and high vacancy in a handful of buildings.
50 1
• Investment volumes were down 34% q-o-q in 1Q17. Capital values continued to
0 0 climb higher with strata-titled properties fetching new record highs across the
–50 –1 market.
12 13 14 15 16 17F
Take-Up (net) Completions Outlook: Capital values to maintain growth momentum
Future Supply Vacancy Rate • With PRC demand showing no signs of abating and vacancy remaining below
2%, we have upgraded our rental forecast for Central to grow in the range of
For 2012 to 2016, take-up, completions and vacancy rates are year-end 5–10% in 2017.
annual. For 2017, take-up, completions and vacancy rate are as at 1Q17,
while future supply is for 2Q17 to 4Q17. • Sustained investor demand coupled with record high prices and strong
Physical Indicators are for the overall market. government land sales results should buoy the investment market over the
Source: JLL
coming 12 months, and we remain optimistic for capital values to grow in the
range of 0–5% in 2017.
Note: Hong Kong Office refers to Hong Kong’s overall Grade A office market.Beijing
“The CBD starts to shift
towards a tenant’s market,
as rents fall and landlords
give more incentives.”
15 – Office
sqm per month, Stage in Cycle
Rental Growth Y-O-Y Steven McCord, Head of Research,
–2.3%
net effective on GFA Rents North China
RMB 382 Stable
Financial Indices
Finance Street demand remains strong despite high rents
120
• Despite extremely high rents in Finance Street, the submarket continued to
receive strong interest in the quarter.
• Enquiries from securities firms dominated, as these firms look to tap into 110
capital from homebuyers who are locked out of the restrictive housing market.
Index
Two projects for lease enter the market 100
• Tianrun Fortune Centre (48,000 sqm) was completed in East Chang’an. A
domestic telecom giant and foreign insurance brokerage relocated and led an 90
80% commitment rate at the project, which reached 50% physical occupancy
by end-1Q17.
80
• Sinotrans Building B (74,000 sqm) in the Olympic Area received the green light 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17
to start leasing in the quarter, and the project reached 5% physical occupancy Rental Value Index Capital Value Index
by end-1Q17.
Arrows indicate 12-month outlook
Index base: 4Q12 =100
CBD rents decline slightly for second straight quarter Financial Indicators are for the CBD.
Source: JLL
• CBD landlords continued to be flexible on rents and increased leasing
incentives, as they competed to secure reputable tenants in advance of
incoming new supply. Other submarkets were stable. Physical Indicators
• No major Grade A investment deals were closed in the quarter. Yields showed
700 7
further compression as capital outflow restrictions encouraged more domestic
investors to consider opportunities in Beijing. 600 6
500 5
Outlook: CBD rents to remain under pressure
Thousand sqm
400 4
• Strategic landlords should set the pace and lead a step-wise rental decline in
Percent
the CBD, as the mature submarket receives a large and steady stream of new 300 3
supply from 2Q17. 200 2
• The increasingly competitive market should reward landlords with well- 100 1
planned leasing strategies. The huge amount of future supply provides tenants
0 0
with more options and drives the shift towards a tenant’s market. Market- 12 13 14 15 16 17F
informed landlords who make strategic adjustments to be more attractive to
Take-Up (net) Completions
tenants are likely to benefit from strong leasing performance.
Future Supply Vacancy Rate
For 2012 to 2016, take-up, completions and vacancy rates are year-end
annual. For 2017, take-up, completions and vacancy rate are as at 1Q17,
while future supply is for 2Q17 to 4Q17.
Physical Indicators are for the overall market.
Source: JLL
Note: Beijing Office refers to Beijing’s overall Grade A office market.Shanghai
“Emerging CBDs are
becoming increasingly
attractive to both tenants
16 – Office
and investors.” Stage in Cycle
Rental Growth Y-O-Y sqm per day,
Daniel Yao, Director - Research,
Shanghai –0.8%
net effective on GFA Rents
RMB 10.5 Falling
Financial Indices
Net absorption in Decentralised market outshines the CBD
130
• Leasing demand remained stable in 1Q. In the Pudong CBD, newly completed
projects captured upgrade and expansion demand. Legal, financial services,
120 and technology, media and telecommunications sectors drove leasing demand
in the Puxi CBD. However, demand in the Puxi CBD faced competition from the
110 rapidly growing decentralised market.
Index
• The decentralised market saw strong leasing activity and recorded net take-
100
up of over 120,000 sqm. Notable deals included PepsiCo’s 8,000 sqm lease in
Gopher Center and Metlife’s 3,500 sqm lease in Landmark Center.
90
New wave of supply enters the market
80
4Q12 4Q13 4Q14 4Q15 4Q16 4Q17
• Four projects with a total GFA of 528,600 sqm reached completion in the CBD,
including the 632 metre skyscraper Shanghai Tower. In the decentralised
Rental Value Index Capital Value Index
market, seven projects with a total GFA of 442,000 sqm entered the market.
Arrows indicate 12-month outlook
Index base: 4Q12 =100 • Vacancy increased in both the CBD and the decentralised markets as the
Financial Indicators are for the CBD. large volume of new supply will take time to be absorbed. Vacancy rose 3.0
Souce: JLL
percentage points q-o-q to 12.1% in the Pudong CBD, while Puxi CBD vacancy
rose 6.1 percentage points to 14.0%. In the decentralised market, vacancy
Physical Indicators increased 4.5 percentage points q-o-q to 22.5%.
1,000 15 Emerging CBDs outperform
• CBD rents remained flat as a large amount of supply entered the market and
800 12 landlords were conservative on rents amidst increased competition. In the
decentralised market, rents grew moderately by 1.0% q-o-q, led by emerging
Thousand sqm
600 9 CBDs such as the Railway Station and North Bund clusters.
Percent
400 6
• The investment market continued to be active. A state-owned enterprise
purchased an office tower with a GFA of about 20,500 sqm at Poly Greenland
200 3 Plaza. There also was a revival in activity by foreign investors, as BlackRock and
Ascendas acquired Grade B office buildings in Putuo and Huangpu.
0 0
12 13 14 15 16 17F Outlook: Large supply to put pressure on rental performance
Take-Up (net) Completions • Both the CBD and decentralised markets will see a large volume of supply in
Future Supply Vacancy Rate 2017, and vacancy is expected to rise in the near term. While expansion and
upgrade demand should help absorb new space, supply pressures are expected
For 2012 to 2016, take-up, completions and vacancy rates are year-end to impact rent performance in the near term.
annual. For 2017, take-up, completions and vacancy rate are as at 1Q17,
while future supply is for 2Q17 to 4Q17. • A positive rental outlook over the mid to long term should continue to entice
Physical Indicators are for the overall market. investors to acquire office assets in Shanghai. As assets for sale in the CBD
Source: JLL
become scarce, more investors are likely to look to the rapidly developing
decentralised market for opportunities.
Note: Shanghai Office refers to Shanghai’s overall Grade A office market, consisting of Pudong, Puxi and
decentralised areas.Shenzhen
“Strong end user demand
amid limited availability of
en bloc assets in the
CBD area.”
17 – Office
sqm per month, Stage in Cycle
Rental Growth Y-O-Y Tom Liu, Head of Capital Markets,
–2.4%
net on GFA Rents South China
RMB 289 Stable
Financial Indices
Expansion demand driven by finance companies
150
• Leasing demand continued on an upward trend, supported by enquiries from
finance and high-tech companies. In Futian, we observed active expansion 140
from banks, securities firms and fund companies. However, some insurance
130
companies slowed down their expansions due to stricter supervision by the
China Insurance Regulatory Commission. 120
Index
• Real estate companies from outside of Shenzhen were more active than 110
in previous quarters. With more projects being launched, new set-up and
100
expansion demand increased.
90
Completions top 400,000 sqm for third consecutive quarter
80
• In 1Q17, there were five new completions located in Futian and Nanshan 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17
submarkets. These new buildings pushed total Grade A office stock in Shenzhen
Rental Value Index Capital Value Index
to 5.6 million sqm.
Arrows indicate 12-month outlook
• The vacancy rate in most existing Grade A office building remain unchanged in Index base: 4Q12 =100
the quarter. However, there was a large amount of vacant space in some new Financial Indicators are for Futian.
Source: JLL
completions due to limited pre-leasing activity by landlords. As a result, the
overall vacancy rate rose 3.0 percentage points to 15%.
Physical Indicators
Rents remain broadly stable
• Rents were generally stable as steady occupancy in most mature buildings 1,600 16
helped counter rental pressures from new supply and landlords of select older 1,400 14
buildings lowering rents in a bid to boost occupancy. Several landlords of high 1,200 12
quality buildings raised rents.
Thousand sqm
1,000 10
• In 1Q17, there were investment inquiries from insurance and high-tech
Percent
800 8
companies for bulk strata-titled purchases and en bloc assets. A lack of
600 6
investment options in the core area saw some investors considering options in
prime projects in emerging submarkets or lower grade options on the edge of 400 4
the core area. 200 2
0 0
Outlook: Healthy economic outlook attracting domestic capital 12 13 14 15 16 17F
• About 1 million sqm of new supply will come on-stream in the next 12 months, Take-Up (net) Completions
with most new projects located in Futian and half of which will be headquarter Future Supply Vacancy Rate
buildings. Although overall leasing demand is likely to remain steady, new
supply will likely drive up the overall vacancy rate. For 2012 to 2016, take-up, completions and vacancy rates are year-end
annual. For 2017, take-up, completions and vacancy rate are as at 1Q17,
• Domestic investors are expected to continue to look for opportunities in while future supply is for 2Q17 to 4Q17.
Shenzhen, attracted by its healthy fundamentals and solid outlook. Self-use Physical Indicators are for the overall market.
Source: JLL
requirements are likely to be the primary driver of investment activity.
Note: Shenzhen Office refers to Shenzhen’s overall Grade A office market.Taipei
“Occupiers and investors
remain observant.”
18 – Office
Jamie Chang, Head of Research,
Taiwan ping per month, Stage in Cycle
Rental Growth Y-O-Y
net on GFA Rents
0.3% NTD 3,109 Stable
Financial Indices
Relocations support demand
140
• Most new leases in the quarter were commitments to small-to-mid sized units
which began negotiations last year. In 1Q17, net take-up reached 3,100 ping and
130
was primarily driven by occupiers from finance, tech and medical industries.
120
• Office buildings with affordable rents in the city fringe continued to attract
corporate occupiers. Continual demand pushed the vacancy rate down by
Index
110
0.9 percentage points to 3.1%. We saw demand mainly driven by financial
100 institutions establishing back offices and tech firms setting up operations.
90 No new supply
• There was no new supply entering the market in the quarter.
80
4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 • The overall Grade A market vacancy rate declined by 0.5 percentage points to
Rental Value Index Capital Value Index 8.6%. Nonetheless, many tenants remained on the side-lines awaiting higher
quality space. Leasing activity was concentrated in Xinyi and pepherial areas of
Arrows indicate 12-month outlook
Index base: 4Q12 =100 the CBD. However, leasing activity slowed in Dunhua North and South.
Financial Indicators are for Xinyi.
Source: JLL Landlord offer better deals
• Overall rents remained stable at NTD 2,644 per ping per month as landlords
Physical Indicators remained hesitant to raise rents amid a seasonal lull in leasing activity and
prolonged negotiation processes.
250 15
• Investment volumes declined 6.8% y-o-y to NTD 8.4 billion in 1Q17, with
200 12
uncertainty surrounding political, economic and monetary policies weighing on
investor sentiment.
Thousand sqm
150 9
Outlook: Occupiers and investors remain cautious
Percent
100 6
• Leasing demand is likely to continue to be driven by finance, IT and high-tech
industries. Several biotech and medical firms have enquired about expansion
50 3 opportunities within the Grade A office market. However, with businesses
expected to remain cautious, leasing activity should remain centred on small-
0 0 to mid-sized units.
12 13 14 15 16 17F
• Retailers entering Taiwan and corporates seeking self-occupied properties
Take-Up (net) Completions
may help shore up demand in the office market. This coupled with developers
Future Supply Vacancy Rate
actively looking for land parcels suggests some heightened confidence in the
For 2012 to 2016, take-up, completions and vacancy rates are year-end market.
annual. For 2017, take-up, completions and vacancy rate are as at 1Q17,
while future supply is for 2Q17 to 4Q17.
Physical Indicators are for the overall market.
Source: JLL
Note: Taipei Office refers to Taipei’s overall Grade A office market.Tokyo
“Rental growth slows as
vacancy rises, while the
investment market is
characterised by a lack of
19 – Office
Rental Growth Y-O-Y
tsubo per month, Stage in Cycle product for sale.”
gross on NLA Growth
2.2% JPY 36,439 Takeshi Akagi, Head of Research,
Slowing Japan
Financial Indices
Tenants are looking to future supply to fill space requirements
170
• The labour market tightened further in February with the unemployment rate
decreasing to 2.8%, while the jobs-to-applicant ratio rose to 1.43. In the March 160
Tankan Survey, sentiment among large manufacturers and non-manufacturers 150
improved relative to the previous survey. 140
• Despite demand for new setups and expansion, negative net absorption 130
Index
was recorded in 1Q17 as space was vacated in Akasaka/Roppongi and Ebisu 120
submarkets. Finance and insurance, professional services and manufacturing 110
firms were the most active occupier categories. With a large supply pipeline, 100
occupiers are adopting a longer-term perspective in their decision making and
90
many are pre-committing to upcoming supply. Around 40% of the space due to
80
come online this year has been committed while a healthy amount (50%) of the 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17
2018 supply has also been pre-leased.
Rental Value Index Capital Value Index
Vacancy rises above 2% Arrows indicate 12-month outlook
• Otemachi Park Building (60,000 sqm) was completed in the quarter and with a Index base: 4Q12 =100
Source: JLL
commitment rate of about 60%. Anchor tenants included PwC and Citi Group.
New projects added to the development pipeline included Kojimahci 5-chome
Project (NLA 19,000 sqm) and Marunouchi 1-2 Tower Building (NLA 64,000 sqm).
Physical Indicators
• The vacancy rate stood at 2.7% at end-1Q17, increasing 80 bps q-o-q and 40 bps
y-o-y. The rise was attributed to new supply in Otemachi/Marunouchi and 600 6
higher vacancy in submarkets such as Akasaka/Roppongi and Ebisu. 500 5
Capital values maintain growth trend 400 4
Thousand sqm
• Rents rose for the twentieth consecutive quarter in 1Q17 and growth was largely 300 3
Percent
driven by Otemachi/Marunouchi and Toranomon submarkets.
200 2
• Capital values increased 2.2% q-o-q and 3.4% y-o-y. This marked the twentieth 100 1
straight quarter of growth and the second successive quarter of acceleration. A
notable sales transaction in the quarter was Japan Prime Realty’s acquisition of 0 0
a stake in Tokyo Square Garden for JPY 18.4 billion (NOI cap rate of 3.1%). –100 –1
12 13 14 15 16 17F
Outlook: Rent and capital value growth to moderate Take-Up (net) Completions
• The Japanese economy is expected to recover moderately in 2017, with Oxford Future Supply Vacancy Rate
Economics projecting real GDP growth of 1.4%.
For 2012 to 2016, take-up, completions and vacancy rates are year-end
• Healthy demand alongside moderate supply in 2017 should see vacancy remain annual. For 2017, take-up, completions and vacancy rate are as at 1Q17,
while future supply is for 2Q17 to 4Q17.
below 3%. Nonetheless, the trend of modest rental growth is expected to persist Source: JLL
as occupiers are mindful of the large supply pipeline due in 2018. With cap rates
at or near record lows, there is likely little room for further compression and
capital values are expected to grow in line with rents.
Note: Tokyo Office refers to Tokyo’s 5 Kus Grade A office market.Osaka
“Vacancy decreases amid
robust demand;
while investor appetite
20 – Office
remains strong.”
Stage in Cycle
Takeshi Akagi, Head of Research, Rental Growth Y-O-Y tsubo per month,
Japan 5.9%
gross on NLA Rents
JPY 17,710 Rising
Financial Indices
Healthy demand from various sectors
180
• The labour market in Greater Osaka continued to tighten with the
170 unemployment rate dipping 10 bps m-o-m to 2.8% in January, slightly
160 outperforming the national average. At the same time, the jobs-to-applicant
150 ratio rose to 1.34. According to the March Tankan Survey, sentiment indexes for
140
both large manufacturers and non-manufacturers improved.
Index
130 • Upgrade and expansion demand from wholesale and retail trade, as well as
120 information and communications industries were the main contributors to
110
net absorption in the quarter, which totalled 10,000 sqm. Positive take-up
by these industries helped offset a major relocation by an information and
100
communication firm to its new headquarters building which completed in
90
4Q12 4Q13 4Q14 4Q15 4Q16 4Q17
Osaka Business Park.
Rental Value Index Capital Value Index Vacancy decreases to 3.3% amid solid demand
Arrows indicate 12-month outlook • No new supply entered the Grade A office market in Osaka in 1Q17.
Index base: 4Q12 =100
Source: JLL • The vacancy rate stood at 3.3% at end-1Q17, decreasing 60 bps q-o-q and 120
bps y-o-y. Amid a healthy level of demand and no new supply, submarkets
including Umeda, Dojima and Midosuji saw vacancy decrease. Meanwhile,
Physical Indicators Nakanoshima recorded an increase in vacancy due to a relocation following the
completion of a redevelopment.
180 12
Rent growth slows while capital value growth picks up
150 10
• Rents in the Grade A office market in Osaka averaged JPY 17,710 per tsubo
120 8 per month at end-1Q17, increasing 1.3% q-o-q and 5.9% y-o-y. This was the
Thousand sqm
eleventh consecutive quarter of rising rents and growth was driven by Umeda
Percent
90 6 and Midosuji submarkets.
60 4 • Capital values increased 4.9% q-o-q and 14.0% y-o-y, reflecting rental growth
as well as cap rate compression. This was the fourteenth consecutive quarter
30 2
of growth. A notable investment transaction in in the quarter involved MCUBS
0 0 MidCity disposing of Midosuji MID for JPY 9 billion.
12 13 14 15 16 17F
Take-Up (net) Completions Outlook: Rents and capital values to grow moderately in 2017
Future Supply Vacancy Rate • The Greater Osaka economy is expected to grow moderately in 2017, with
Oxford Economics projecting real GDP to rise 0.9%. Nevertheless, global
For 2012 to 2016, take-up, completions and vacancy rates are year-end economic uncertainty presents a risk to the outlook.
annual. For 2017, take-up, completions and vacancy rate are as at 1Q17,
while future supply is for 2Q17 to 4Q17.
Source: JLL • Vacancy is projected to remain below 5% in 2017 despite the expected
completion of a new building - the first since early 2015, and this should support
further rental growth. In the investment market, investor interest should remain
strong as investors look outside of Tokyo for opportunities. However, the scope
for further cap rate compression is likely to be limited.
Note: Osaka Office refers to Osaka’s 2 Kus Grade A office market.Seoul
“Moderate tenant demand
and a lack of new supply
boosts occupancy rates.”
21 – Office
Stage in Cycle Yongmin Lee, Head of Research,
Rental Growth Y-O-Y pyung per month,
Korea
–3.5%
net effective on GFA Rents
KRW 93,560 Falling
Financial Indices
Leasing activity focused on the CBD
130
• Overall net absorption was recorded at 15,000 pyung and was led by the CBD
where a technology division of KB Card leased 4,300 pyung at Tower 8, and 125
pharmaceutical company MSD (2,400 pyung) relocated to Seoul Square from 120
the Mapo sub-district.
115
• The Gangnam market was also active, with Samsung’s Enterprise Resource
Index
110
Planning team taking up 2,800 pyung at Samsung Secho Town, Medidata Korea
leasing 700 pyung at Gangnam Finance Center and Analog Device occupying 105
540 pyung at Posco Center. 100
Lotte World Tower completes in Jamsil 95
90
• Aided by positive absorption and a lack of Grade A supply, overall vacancy 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17
declined 100 bps q-o-q to 10.8%.
Rental Value Index Capital Value Index
• Outside of our Grade A basket, SK D&D completed refurbishment of Susong
Arrows indicate 12-month outlook
Square in the CBD and the landmark Lotte World Tower completed in Jamsil. Index base: 4Q12 =100
The office portion of the 123 floor tower is 56.2% committed, predominantly by Financial Indicators for the CBD.
Source: JLL
affiliates of Lotte.
Rents decline in the CBD and Yeouido
Physical Indicators
• Overall rents declined 0.8% q-o-q reflecting the subdued occupier market and
competition between CBD and Yeouido landlords to lease several large vacant 500 15
units.
400 12
• Investment volumes softened to KRW 757 billion following record deal volumes
in 4Q16. Concluded transactions were dominated by Samsung affiliates which
Thousand sqm
300 9 Percent
disposed of three office buildings: Samsung Fire & Marine Insurance’s Euljiro
HQ, Samsung Life’s Taepyeongro Building in the CBD and Metro Tower in 200 6
Gangnam.
100 3
Outlook: Robust investment despite soft leasing demand
• Net absorption may swing into negative territory as local conglomerates depart 0 0
leased buildings for owner-occupied stock. Sluggish tenant demand may result 12 13 14 15 16 17F
in further pressure on rent incentives, although Gangnam looks likely to Take-Up (net) Completions
outperform given the lack of expected departures from the district as well as the Future Supply Vacancy Rate
comparably low vacancy rate of the district.
• In contrast to the leasing market, the investment market is expected to remain For 2012 to 2016, take-up, completions and vacancy rates are year-end
annual. For 2017, take-up, completions and vacancy rate are as at 1Q17,
robust aided by significant domestic and international liquidity, although rising while future supply is for 2Q17 to 4Q17.
interest rates may provide some headwinds over the medium term. Physical Indicators are for the overall market.
Source: JLL
Note: Seoul Office refers to Seoul’s Grade A office market.Singapore
“Pressure on rents easing
on the back of improved
pre-commitments and
22 – Office
short-term tapering
Stage in Cycle
of supply.” Rental Growth Y-O-Y sq ft per month,
Tay Huey Ying, Head of Research, –6.8%
gross effective on NLA Rents
Singapore
SGD 8.44 Falling
Financial Indices
CBD take-up remains positive on the back of attractive rents
130
• Net take-up in 1Q17 improved slightly from 4Q16 on the back of more
125 affordable rents and leasing incentives. The increase in net absorption was also
120
due to tenants moving into Guoco Tower, with the physical occupancy rate of
the building increasing at a moderate pace.
115
• Similar to previous quarters, overall CBD leasing activity was mixed and came
Index
110
from the business services, finance and insurance, and technology sectors. A
95 major bank renewed its lease, and if this renewal is excluded, approximately
90 half of the deals overseen by JLL were for expansion and/or relocation.
85
Near-term supply expected to peak in 2Q17
80
4Q12 4Q13 4Q14 4Q15 4Q16 4Q17
• Guoco Tower (0.9 million sq ft) was completed in 3Q16 and the building is
almost fully committed as of 1Q17. No major en bloc supply was completed in
Rental Value Index Capital Value Index
the CBD in 1Q17.
Arrows indicate 12-month outlook
Index base: 4Q12 =100 • A total of 2.2 million sq ft of prime office space in the CBD will be completed
Financial Indicators are for the CBD. by end-2Q17 – Marina One’s completion was delayed from 1Q17, while UIC
Source: JLL
building is expected to come on stream in 2Q17. Both buildings have achieved
healthy pre-commitment rates.
Physical Indicators
Decline in rents slowed as the leasing market briefly stabilises
250 10 • Overall CBD rents declined at a pace that is similar to the modest correction
of the preceding quarter, an indication that rents may be finding support from
200 8 occupiers. Furthermore, the healthy pre-commitments in Marina One and UIC
Building have partially assuaged landlords’ anxiety over maintaining
Thousand sqm
150 6 occupancy.
Percent
100 4 • Institutional investors continued to be active in the office market and the
increase in interest rates did not dampen the long-term market view held by
50 2 many investors. The availability of capital provided support to the market and
countered any drastic correction in capital values.
0 0
12 13 14 15 16 17F Outlook: 2017 leasing market could perform better than 2016
Take-Up (net) Completions • Supply pressure on CBD rents is easing as upcoming buildings achieved healthy
Future Supply Vacancy Rate pre-commitments before their completion. The upgrade in the 2017 GDP
forecast by most private economists could lift business sentiment and drive
For 2012 to 2016, take-up, completions and vacancy rates are year-end further activity within the office market.
annual. For 2017, take-up, completions and vacancy rate are as at 1Q17,
while future supply is for 2Q17 to 4Q17.
Physical Indicators are for the CBD. • While office rents are expected to continue to trend down in the next few
Source: JLL quarters, the pace of correction is likely to stay moderate as space in the newer
buildings is taken up and new supply starts to taper.
Note: Singapore Office refers to Singapore’s CBD Grade A office market in Marina Bay, Raffles Place, Shenton
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