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ASIA MARKET SNAPSHOT Q3 17CAPITAL MARKETS & INVESTMENT SERVICES

Demand stayed robust for investment property across Asia in the third quarter. The increase in deal volumes in the major markets of Hong Kong, Singapore and Shanghai maintained strong momentum, again securing their position as the top three investment destinations in the region. The office, retail, residential and hospitality sectors all noted strong activity, with higher yields noted for retail and industrial assets.

Opportunities for Chinese capital further into Asia are well underway beyond the gateway cities. We are seeing signs of increased capital flows into the Belt & Road markets of Southeast Asia, which is expected to be an ongoing trend, as the stricter Chinese capital controls announced in August appear to exclude investments targeted at emerging Belt & Road countries. Markets like Vietnam are noting strong inbound interest from Chinese investors. Within China, Chengdu is expected to benefit from the Belt & Road initiative and the Chengdu-Europe Express, with the logistics sector and residential development sites already experiencing increased activity this quarter.

Major markets to note:

Hong Kong performed strongly in Q3, with a number of large ticket size deals offered in the market. Of all the sectors, the industrial and logistics sectors were the strongest performing, with HKD10 billion (USD1.28 billion) in deal value transacted in Q3. The sector is foreseen to maintain an upward momentum, driven by the expected reboot of the industrial revitalisation policy following Carrie Lam’s inauguration.

Singapore fared extraordinarily well with high levels of activity in both the commercial and residential sectors, reinforcing strong investor confidence in the country’s long-term economic performance and multi-year growth. The SGD2.09 billion (USD1.54 billion) sale of Asia Square Tower 2 in Marina Bay was easily the year’s biggest office property deal, while several residential sites and residential government land sales were likewise concluded. Collective sales are expected to dominate transactions for the rest of the year.

Shanghai recorded robust investment activity across all sectors in Q3, with offices attracting the highest investment volume from both domestic and foreign capital sources.

A REGIONAL VIEW

The industrial sector was one of the best performing sectors across the region, with 1,496 industrial properties changing hands in Hong Kong, increased investment in decentralized locations in Vietnam and a boost in the logistics and warehouse markets in Chengdu due to the International Railway Port and Freetrade Zone.

Beijing and Shanghai are seeing a surge in office and business parks activities in both CBD and DBD areas, due to government policies aimed at attracting FDI for the former and a strategic geared move to become a global science and innovation centre for the latter.

The hotel sector remained in high demand, from large sized deals in Hong Kong to the healthy demand for hospitality assets in Vietnam’s main cities and attractive coastal locations.

TERENCE TANGManaging DirectorCapital Markets & Investment Services I Asia

USD1.4 billiion in value over 8 transactions were concluded in the third quarter, 5 of which were office buildings or mixed-used projects with sizable office components. Continued momentum in office, serviced apartments and business parks is expected in Q4.

Please feel free to contact our relevant investment market experts for an in-depth discussion on market trends and investment opportunities across the Asian region.

CAPITAL MARKETS & INVESTMENT SERVICES ASIA MARKET SNAPSHOT Q3 2017 | 3

BEIJING

A growing number of listings including large-sized offices and business parks entered the market in Q3, not only from CBD areas but also DBD areas such as Tongzhou and Wangjing. The restrictions on strata-titled commercial apartment buildings in H1 2017 led to a growing supply of the en-bloc sales listings in this sector.

The office market remained active in Q3 2017, with one major deal closed in Dongcheng District.

The government’s new round of the “pilot scheme for expanding the service industry” will help attract more foreign direct investment to Beijing and lead a positive outlook for the office and business park sectors.

Besides the growth in office and business park en-bloc listings in the market, there was also an increased number of en-bloc commercial apartment projects following the government’s regulation to strata-title sales in H1 2017.

Investors have continued to show great interest in the Beijing investment market and are actively looking for opportunities. Offices in prime locations and DBDs with improving infrastructure are the top priority for investors.

Major Deal to Highlight

» Jinzhi Investment acquired Hopson International Building, an office building with total GFA 56,161 sqm, from Hopson and BMI for RMB3.67 billion (USD550 million). The office building is located at East 2nd Ring Road, Dongcheng District

Beijing will continue to develop its decentralised areas, such as Tongzhou and Wangjing, by improving their infrastructure and functionality, therefore, we expect these areas to have a positive outlook in Q4.

The Beijing government announced plans to institute more policies aimed at attracting FDI from the service sector as it enters the last year of the “pilot scheme for expanding the service industry”. The program was established by China’s Central Government in order to transform Beijing into a service-orientated city by 2020. As such, we expect the investment market outlook in the next quarter to be optimistic, especially in the office and business park sectors.

LI JIEManaging Director+86 10 8518 [email protected]

SECTOR TO WATCH Q4 2017

» Office » Business Parks

BIGGEST DEAL

USD550mHopson International Building | Office

EN-BLOC TRANSACTIONS

1 transaction / USD550m

MAJOR MOVER Q3 2017

Office


CHENGDU

The Chengdu investment market remained active in Q3 2017, due to the implementation of the “Belt & Road” initiative and the Chengdu-Europe Express. Developers have been showing great interest in second-hand residential development sites, with four projects transacted during Q3.

High-quality office buildings in prime locations and business parks in mature Hi-tech zones, together with second-hand logistics development sites around the International Railway Port and Shuangliu Airport, have also caught investors’ attention.

Limited supply dominated as the driving force in activity during Q3. Despite the tight restrictions upon the residential market, interest remains in purchasing apartments. Therefore domestic developers have been forced to invest in second-hand residential development sites due to limited land supply.

The establishment of the International Railway Port and Free Trade Zone has boosted the logistics and warehouse markets in Chengdu. However, due to the limited supply of development sites in the industrial areas of Shuangliu, Longquanyi and Xindu we have seen investors shift their focus to second-hand logistics development sites.

In the office sector, investors continued looking for high quality assets in prime locations and mature areas, i.e. Financial City and Dayuan, but due to the lack of supply, there were few transaction in the market in Q3.

Major Deals to Highlight

» Yango Group acquired the Chateau Ermiats and Huayang Luye from Chevalier International, a 140,000 sqm development project in Tianfu New Area, with a total value of RMB1.681 billion (USD255 million)

» OCT purchased an 80% share of the Palazzo from Sino Group for RMB8.7675 billion (USD1.335 billion). The project is a 244,400 sqm residential development site in Chenghua District, Chengdu

Due to the rapid urbanisation in Western China, second-hand development land will continue to be the top investment target in Chengdu. High quality office assets in prime locations and mature areas will also draw the attention of investors. In addition, industrial properties, especially logistics projects around the Chengdu International Railway Port, will provide strong investment opportunities.

TAMMY TANGExecutive Director+86 21 [email protected]


» Development Site » Office » Logistics

BIGGEST DEAL

USD1.335bThe Palazzo | Development Site


4 transactions / USD1.772b

MAJOR MOVER Q3 2017

Development Site


HONG KONGANTONIO WUDeputy Managing Director+852 2822 [email protected]

The Hong Kong market has fared well in Q3 2017 with some large ticket size deals offered in the market. The two biggest draws of the market so far have been the offering of Excelsior Hotel and Langham Place that were both offered for sale. While the Excelsior Hotel was reported to have multiple purchasers participating in the private tender, Mandarin Oriental (SGX:M04) has decided to withdraw the Property from the market, citing bids not matching their pricing expectation or proposed transaction mechanism.

Another noteworthy aspect we are seeing is that, overall, Chinese capital is receding in real estate investments in Hong Kong following a circular by the State Council, discouraging overseas real estate investment by Chinese companies.

Fanned by the fact that Carrie Lam was inaugurated as Chief Executive of the Government of HKSAR in July 2017, investors became increasingly bullish on the industrial sector in Q3. According to figures from the land registry, there were 1,496 industrial properties transactions in Q3, dwarfing 369 transactions in office properties and 411 in retail properties. The total of industrial deals concluded in Q3 was nearly HK$10 billion (USD1.28b), the highest among the three sectors.

The office sector has seen capital value continuing to grow gradually, but transaction volume has shrunk compared to Q2, with a lack of a catalysts comparable to that of the Murray Road tender sale.

The retail sector is relatively soft with core retail stabilised, but no strong signals of a quick recovery, while decentralised retail locations are sought after by investors from a value-add angle.


» Kowloon City Plaza, 138 Carpenter Road , USD 641m , largest deal in Q3

» 83% undivided shares of Tin Fung Industrial Mansion, USD 221.7m, largest industrial deal in Wong Chuk Hang in Q3

» 79/F of The Centre, 99 Queen’s Road Central, USD94.6m, highest unit rate of office properties in Hong Kong history

Industrial and retail sectors are the ones to watch in Q4. Industrial properties are likely to continue their momentum into Q4 following the optimism in the sector, fuelled by an expectation of a reboot of the revitalisation policy.

SECTOR TO WATCH Q4 2017Industrial, driven by investors’ expectation of a re-boot of the industrial revitalisation policy

BIGGEST DEAL

USD641mKowloon City Plaza | Retail



MAJOR MOVER Q3 2017

Industrial


INDIA

Q3 2017 marked the first quarter of the new age for Indian real estate, marked by the implementation of the much awaited regulation – The Real Estate Regulatory Act (RERA) – along with the implementation of Goods and Services Tax (GST), the biggest tax reform in India’s democratic history.

A large number of developers and institutional players are adopting a cautious approach on the execution of their investment and expansion plans, hence business was slow across most sectors.

Despite the sluggish start, these new regulations will bring about a paradigm shift by increasing transparency and accountability which will, in turn, drive investor and end user confidence. This will provide much needed impetus for the housing sector which has witnessed a slowdown in recent years.

SURESH CASTELLINOExecutive National Director+91 20 6649 [email protected]

GAGAN RANDEVNational Director+91 124 456 [email protected]

Commercial office space continued to dominate fund flows, accentuated by strong end-user demand. Consequently, institutional players have focused on acquiring well-leased, investment grade office space to ramp up their REIT compliant portfolios.

Investment flows in retail remained largely muted with investors starting to look towards alternative segments such as warehousing. In recent quarters, a number of grade A institutional players showed strong interest in entering the logistics space, to generate higher returns by being early adopters.

Q3 witnessed some traction across the residential segment, largely driven by rising end-user interest for completed and near completion projects. The affordable housing segment continued to garner strong interest from developers and buyers alike.


» Ascendas invested USD 600m in a JV with Firstspace Realty to invest in the warehousing space

» Blackstone acquired a 15% stake in the commercial space unit of K Raheja for USD 250m

The market is expected to remain stable in the short to medium term, largely driven by cautious optimism among investors towards the industry and economy as a whole. We expect the market to gain further momentum following stability of the new regulatory environment, in turn driving investment flows supported by stronger industry practices and increased confidence from investors and buyers.


Warehousing

MAJOR MOVER Q3 2017

Commercial

While commercial space will continue to drive industry and investments, we expect investors to refocus on the affordable residential sector. We also expect equity transactions to make a comeback with players adhering to strict corporate governance standards and customer-centric industry practices. The increasing demand for large scale grade A warehousing spaces across the country will drive investment in the sector.


INDONESIA

While the recent rating upgrade by S&P to investment grade should give a boost to the next investment rounds of Foreign Direct Investment (FDI) for Indonesia overall, local investors still need more assurance and government stability in order to execute their investment plans. More local developers and landowners are seeking value-added partnerships that can bring regional brand names, development expertise, product expertise and capital. And, fortunately for local landowners and developers, despite the sluggish property market, reduced sales momentum and ability to increase prices, many new foreign developers and investors continue to explore the market for the right partnerships to build new apartments, mixed-use projects, offices, hotels and logistics.

Even with the tax amnesty program having accomplished significant repatriated monies, those monies are largely still sitting in the bank and have not been realised into property or infrastructure investments, as hoped for by the government. This is partly due to the ongoing medium-term political uncertainty around the next presidential election in 2019, pending regional elections over the next year and the fact that the newly elected Governor of Jakarta will only take office in October (2017) and the policies and regulations going forward affecting the Jakarta property market are not clear yet. Also, there remains the fact that financial instruments like government bonds currently are offering more competitive returns compared to the sluggish property sector.

Due to the sluggish absorption of office space and recent development of record-level new supplies in excess of 500,000 m2 per year (in Jakarta CBD), some new office building owners are willing to sell their built but not fully leased or fully sold strata projects at lower prices than we have seen historically. Taking into consideration lease-up periods and costs to achieve full occupancy or full sales, we are not achieving the expected yield for core or core-plus type regional investors. While there’s been some office project completions slowed or delayed in 2017, we are still forecasting almost 700,000 m2 per year of new supply from 2017-2019. Office asking rents and asking prices have remained relatively stable and slightly declining respectively.

For the apartment market, 3,310 new units entered the market in the first half of the year with nearly another 18,000 units expected to be added to the market by year end. In light of the lackluster hiring of expatriates over the last year and longer, prospects for investors to lease-out upper scale and luxury apartments has gone down. Therefore, the market has moved toward preference to build middle-up, middle class and lower middle priced apartments for the end user market and more moderately priced investor segment.

STEVE ATHERTONDirector+62 21 3043 [email protected]


» Foreign JV for Apartments

» Foreign JV for Mixed-use

» Land near planned new airport

Generally speaking, retail and industrial land sales prices have held steady over the last quarter with hotel average occupancies dropping further to 54.7% and ADR down 2.7% in the last quarter to USD 79.20 per night.

BIGGEST DEAL

USD74,300,000Ascott Tower, Ciputra World II | Serviced Apartments

MAJOR MOVER Q3 2017

Industrial


MYANMAR

Overall investment activity picked up in Q3 2017 despite the conflict in the northern part of Rhakine state. The general sentiment has been that although the economic reform process over the past two years has been slow, it is starting to show some pace with the first investment under the new Investment Law taking place and a new Companies Act scheduled for early 2018. In addition, further financial liberalisation measures are in the pipeline as well as a new condominium law that may finally be implemented. Liberalisation of foreign trading regulations are likely to further spur the retail market.

Investors are still focusing on mixed use projects with a PPP model on large land plots owned by government ministries, as access to smaller plots which are largely owned by the private sector remain challenging due to the very high land prices being asked for.

Serviced apartments are of great interest, taking advantage of the inherent weaknesses in the condominium market. Offices are also seen in a positive light given the future demand on the back of anticipated economic liberalisation measures. Significant changes have been made in the industrial sector with further investments in the Thilawa SEZ, amid growing demand from both foreign manufacturers and logistics companies.


» Mixed-use Japanese and local JV project close to downtown Yangon comprising office, Okura Prestige hotel and commercial facilities on 16,000 sqm of land and a total floor space of around 92,000 sqm. The investors are Fujita Corporation and Tokyo Tatemono Co., Ltd. and the local partner an affiliate of Ayeyar Hinthar Holdings Co., Ltd. Total investment is expected to be USD 320 million with expected completion in 2020

» Mandalay Hill Resort, MGallery by Sofitel in Mandalay with 150 guest rooms and villas. The investor is LP Holding from Thailand, currently owner of Centrepoint Towers and soon to be opened Pullman hotel in Yangon. Completion is expected in 2020 and the investment amount has not been disclosed

The industrial sector is of growing interest due to lower wage costs and opportunities for import substitution for a population of 50 million. Logistics companies are looking to benefit by making good of the enormous supply chain deficiencies throughout the country.

A future condominium law could create renewed interest, although the foreign ownership quota seems to be reduced from 40% to 25% of the units and parking requirements hinder the development of affordable smaller units.

ANTONY PICONVice Chairman+95 (0)931 491 [email protected]

The issues with the condominium sector will help support growth in the serviced or limited/non-serviced apartment sector which can absorb the studio or one-bedroom market. The success of Junction City shopping centre has enlivened investors in the retail sector with further opportunities to cater for a population eager for destination retail centres.


» Limited or non-serviced apartment (singulary owned residences)

» Destination retail

BIGGEST DEAL

USD320mMixed use project


2 transactions / USD320m


The increasing demand for talent in Shenzhen will encourage the government to provide more support in attracting talent. Therefore, we expect the increasing quantity of talent in the city to draw investors’ attention to the residential and serviced apartment sectors.

PEARL RIVER DELTA

The government continued to have a very strong influence on the real estate market in the Pearl River Delta (PRD) region. Tight restrictions have encouraged investors and developers to build properties for their own use. In Qianhai, for example, Webank acquired one commercial parcel that cannot be transferred to a third party within 30 years and CNC Venture Capital Fund acquired one commercial land parcel which is required to be self-sustaining for 10 years.

We expect the residential and serviced apartment sectors to offer potential investment opportunities due to the increasing quantity of talent in the PRD region.

Local governments in the PRD region continued to impose tight regulations on land supply by encouraging investors to build for self-use and contribute tax to the area in the long-term.

The Qianhan district of Shenzhen continued to be one of the most attractive markets in the PRD region. With phase one of Qianhai’s infrastructure project nearly complete, the area attracted more investment from both end-users and developers in Q3.


» Webank, the 1st private internet bank in China, acquired one commercial parcel with GFA 110,000 sqm as their headquarters in Qianhai for RMB 2.39 billion (USD 360m). The land cannot be transferred for 30 years

» CNC Venture Capital Fund acquired one commercial land parcel which is required to be self-sustaining for 10 years with GFA 127,200 sqm in Qianhai for 2.51 billion RMB (USD 379m)

» Country Garden injected RMB926 million (USD143m) for the capital increase of CIMC Skyspace, a subsidiary of CIMC, resulting in a 25% shareholding in CIMC Skyspace upon the capital increase

The development of infrastructure projects in the Greater Bay Area, i.e. Hongkong – Zhuhai – Macau Bridge; The Express Rail Link Bridge; and the Shenzhen-Zhongshan Corridor, will greatly improve the accessibility of PRD cities and lead to a positive outlook for the investment market.

City renewal will continue to be the main task for the central districts in Shenzhen and Guangzhou, as industrial enterprises will be relocated away from the city centres while vacated land will be re-positioned for commercial use.

ERIC LAMManaging Director+86 20 3819 [email protected]


» Shenzhen Qianhai » Urban renewal projects

» Residential/ Serviced Apartments

MAJOR MOVER Q3 2017

Development Sites

Note: The currency rate is quoted from http://finance.sina.com.cn/money/forex/hq/USDCNY.shtml, Sep 26th.


PHILIPPINES

The Philippine GDP grew by 6.5% in 2Q 2017. The outlook for the year remains positive with financial and credit rating agencies projecting a 6.4% to 6.9% growth for the full year. Philippine economic growth is essentially driven by sound macroeconomic fundamentals, aggressive infrastructure government spending and sustained private sector confidence.

The property sector in general remained positive in Q3. Office vacancy in Metro Manila CBD is currently at 2% and even with the imminent supply by year end, we see the vacancy rate staying in single digits. The other bright spots are the industrial sector, due to the increasing demand for industrial space, and the housing sector with its 500,000 units of unserved demand.

Q3 transaction volume in the office sector has held up, primarily driven by offshore gaming companies and the slight recovery of Knowledge and Business Process Outsourcing demand. Despite the 2017 projected total supply of 862,000 square meters, the vacancy rate hovers at 4%. Consequently the rental rate is forecast to grow from 5% to 7% in 2018.

The influx of manufacturing investments, expansion of existing industrial locations, as well as the diversification of Filipino conglomerates into manufacturing will further raise the demand for industrial space and facilities. The high demand has hiked lease rates and industrial land values by 5% QoQ, particularly in the south of Metro Manila.

Foreign investors, as well as developers traditionally focused upon high rise residential developments, are now venturing into the horizontal housing market. Joint ventures were forged between Century Properties and Mitsubishi Corporation, PA Properties and Development Corporation and Hankyu Realty Co. Ltd. as they see the opportunities in the affordable and mid-income segment, which represents more than a 50% share in the Philippine housing sector.


» A number of Japanese investors concluded joint venture deals in the first half of 2017. These include Nomura Real Estate Holdings and Isetan Mitsukoshi with Federal Land for a USD 400m mixed-use development in Bonifacio Global City and Mitsui Fudosan Co., Ltd. and Rockwell Land for a USD 180m residential project

The office sector is forecast to sustain its positive performance in Q4 as most buildings that are due for completion by year end have been pre-committed. This scenario may not continue into 2018 and 2019 due to the volume of incoming supply.

The country’s manufacturing prospects looks bright with Q3 registering a total of USD 2.4b in approved investments by foreign and local investors, up by 5% QoQ. 25% of this is funneled into manufacturing, doubling its growth on the same period last year.

IEYO DEGUZMANDeputy Managing Director+63 2 858 [email protected]


» Industrial » Office

BIGGEST DEAL

USD400mGrand Central Plaza | JV on mix-use development

MAJOR MOVER Q3 2017

Office


SHANGHAI

Shanghai ranked third in transaction volume in Asia in the first half of 2017, according to the latest RCA data, and the market remained active as projects across all asset classes were transacted throughout Shanghai. Domestic investors accounted for all eight transactions, with a combined value of approximately RMB9.5 billion (USD1.4b). We expect the market to remain dynamic in Q4 and for investors to continue targeting office, serviced apartment and business park sectors.

The office sector continued to attract the attention of both domestic and foreign investors and act as the strongest driver of growth for the Shanghai investment market through Q3, with five out of the eight transacted projects being either office building or mixed-use projects containing sizable office components.

Due to the rapid development of city infrastructure, investment activity was not limited to the CBD and DBD areas, but also took place in suburban districts, such as Qibao and Songjiang.

We have also seen successful deals in other sectors including serviced apartments, hotels and residential buildings in Q3.


» Lotus Center, a business park project located in Pudong, transacted for approximately RMB1.08 billion (USD165m) and was sold to Zhangjiang HJ Fund

» CURA International Center, located in Xuhui, transacted for approximately RMB2.81 billion (USD430 million) and was sold to Five Bulls Fund

» Qibao Powerlong City Plaza, located in Qibao, transacted for approximately RMB1.11 billion (USD170m) and was sold to Sunkwan

The office sector will continue to be the most important driver for the investment market in Q4. We expect more good, long-term investment opportunities, not only in traditional CBD, DBD and business park areas, but also in areas with improving infrastructure.

Since building a global science and innovation centre is an important strategic mission for Shanghai, the business park sector is appealing to both domestic and foreign investors.

We also foresee a positive market outlook for the serviced apartment sector, as the government has announced plans to provide support to the apartment leasing market in late Q3.

BETTY WONGExecutive Director+86 21 [email protected]


» Office » Serviced Apartments » Business Parks

BIGGEST DEAL

Approx. USD430mCURA International Center | Office



MAJOR MOVER Q3 2017

Office


SINGAPORE

It was an extraordinary Q3 for both the commercial and residential sectors in Singapore with very significant transactions concluded in both, signifying the bottoming of the market and return of investor confidence. Encouraging economic growth figures and anticipation of multi-year growth in both sectors clearly led to the high number of bidders for available opportunities in both sectors.


» CapitaLand Commercial Trust (CCT) acquired Asia Square Tower 2 in Marina Bay from BlackRock for S$2.09 billion (USD1.54b) or S$2,689 (USD1,978) per square foot

» GuocoLand acquired the commercial site at Beach Road under the Government Land Sales programme, at S$1.62 billion (USD1.19b) or S$1,706 (USD1,255) per square foot per plot

» Sim Lian were awarded the Tampines Court residential site for S$970 million (USD714m), translating to S$676 (USD497) per square foot per plot inclusive of differential premium and lease upgrading premium payable

» SC Global were awarded the Jervois Garden residential site, their first purchase in 10 years, for S$72 million (USD53m), translating to S$1511 (USD1,111) per square foot per plot

» A consortium led by Oxley Holdings were awarded the Serangoon Ville residential site for S$499 million (USD367m), translating to S$835 (USD614) per square foot per plot inclusive of differential premium and lease upgrading premium payable

» The Amber Park residential site was purchased by CDL and joint venture partner Hong Realty, at a price of S$906.7 million (USD667m), equating to S$1,515 (USD1,114) per square foot per plot, in Singapore’s largest freehold collective sale by dollar value.*

We anticipate the next quarter to be dominated by collective sales as hungry developers continue to replenish land with depleting record low pipelines. Clearly, the pent-up demand has also led to the triggering of a residential Government Land Sale site at Jiak Kim Street which was previously under the reserve list.

TANG WEI LENGManaging Director+65 6531 [email protected]

* Deals transacted in October, accurate at the time of printing.


» Residential » Commercial

BIGGEST DEAL

USD1.54bAsia Square Tower 2 | Commercial

MAJOR MOVER Q3 2017

» Residential » Commercial


TAIPEIDEREK HUANGExecutive Director+886 2 8101 [email protected]

Overall market sentiment remains poor due to harsh property-holding taxes. Although the total transaction volume in Q3 increased to TWD16.6 billion (USD553m), the transaction volume did not essentially increase much compared to the previous quarter, because a quarter of it was contributed by related-party transactions. Chinatrust Commercial Bank transferred some vacant assets to their affiliated asset management company because commercial banks are not allowed to own non-self-use properties. The combined transaction volume from Q1 to Q3 was TWD34.6 billion (USD1.15b), a reduction of 36% compared to the same period last year.

End-users remained the most active buyers in Q3. Most of the transactions among sectors were for self-use purpose. In the office sector, a number of companies in the manufacturing industry purchased strata-titled offices or en-bloc industrial office buildings, not only in the Taipei metropolitan area but also in secondary cities such as Taoyuan, Hsinchu and Miaoli. In the retail sector a clothing importer forward-purchased a prime retail shop in the CBD of Taichung for TWD930 million (USD31m). In addition, we’ve seen a number of manufacturers purchase industrial plots in order to build their own industrial offices, factories and warehouses.

Major Deal to Highlight

» Fubon Life Insurance purchased Les Enphants Neihu Building for TWD1.3 billion (USD43.3m)

» Nice Enterprise Co. Ltd. purchased Nice Plaza in Chiayi City, a mixed-use complex comprising Nice Shopping Center and Nice Prince Hotel, for TWD4.83 billion (USD161m)

» Maxchip Electronics Corp. purchased an industrial office building in Zhunan Science Park in Miaoli County for TWD1.25 billion (USD41.7m).

Traditionally, local insurance companies are the most important buyers, particularly in the office sector. By the end of Q3, there were only 3 investment deals with a total investment amount of TWD4 billion (USD133 million) done by insurance companies. They may be more active in Q4 because they have sizeable amounts of capital allocated for real estate investment. Meanwhile, occupational buyers continue to look for office/industrial office assets. We therefore expect office sector to remain the major mover in Q4.


Office

BIGGEST DEAL

USD161mNice Plaza | Mixed Use: Hotel and Shopping Center



MAJOR MOVER Q3 2017

Office


THAILANDBARNY SWAINSONDirector+66 2 656 [email protected]

During Q3 2017 we saw the continued take up of REITs as investment vehicles, particularly following completion of development projects.

Thailand, and Bangkok in particular, has seen a rise in interest levels from international investors who are attracted by returns that may not be possible in their country of origin.

Transaction levels have remained steady.

Office demand, particularly for CBD grade A stock remains strong, resulting in a number of developers focusing their attention in this area. The shortage of supply for office accommodation is expected to remain until 2020, when an increasing number of office developments will begin to complete. Tourism volume in Thailand continues to rise, fuelled in particular by an increase in Chinese tourists, which is helping occupancy rates in the hospitality sector. The industrial sector remains steady, with the government increasingly focusing on attracting foreign investors with a variety of Thailand 4.0 measures.


» A joint venture has been announced between Sumitomo, a Japanese company, and Property Perfect Plc, to develop a condominium project on Sukhumvit 59. Property Perfect, with their subsidiary Grand Asset Hotels, will take a majority stake in Grand Star Co limited and 49% will be held by Sumitomo Forestry

» There has also been another joint venture with a Japanese company, Hoosiers, who have partnered with All Inspire. Hoosiers plan to invest significantly overseas and a Thailand project worth USD 60m on Sukhumvit 50 will be their first project

We expect the Bangkok market to continue to remain robust, as international investor interest continues on an upward trajectory, coupled with significant local demand. Tenant demand in the office sector is expected to remain buoyant and continue to drive rent levels upwards. The residential sector is the one to watch with many developers competing to sell completed projects in central and outer Bangkok.


Office

BIGGEST DEAL

USD161mNice Plaza | Mixed Use: Hotel and Shopping Center



MAJOR MOVER Q3 2017

» Office » Hospitality


VIETNAM

Vietnam real estate maintained its position near the top of many foreign investors’ hit lists at the end of Q3. The most noticeable surge of enquiries came from China with some sources quoting a growth of over 400% in Chinese enquiries for Vietnam property. With a relaxation in foreign ownership rules (since the 2015 reforms), more visa friendly policies, stable economic growth of around 6% y-o-y and new transport links bringing the market even closer to regional locations, more Chinese investors are looking to dip their toes into the booming Vietnam property market for the first time. Although there has been substantial tightening of regulations over Chinese outbound investment in property, the regulations appear to exclude investment in Belt and Road markets, which can easily be construed to include Vietnam.

JONATHON CLARKE Director+84 28 3827 5665 [email protected]

Despite 100% foreign ownership becoming more common in Vietnam real estate, foreign investor sentiment is still to partner with trusted local developers in order for a smooth transition into the market and the chance to capitalise on advantageous administrative connections. The limited supply of high-quality assets is pushing capital values up and compressing yields. However, this is mainly based on sentiment and expectation rather than clearly analysed open-market transactions. Property prices and investment returns on the whole remain attractive to foreign investors from more developed but dampened regional markets.


» A Hongkong based investment fund acquired Lim Tower 1, A Grade A office tower in District 1 HCMC (25,200 sqm) from Hoa Lim Corporation for a currently undisclosed figure

» Tien Phuoc Co Ltd sold their stake in Le Méridien mixed use Hotel and Office building for a price believed to be USD42 million to Mitsubishi.

» Tan Hoang Minh obtained the prime land site of 23 Le Duan, District 1 HCMC (3,000 sqm) via public auction for a record fee of approx. USD74.3million (USD24,766/sqm)

The hospitality and industrial sectors are the ones to watch in Q4. Core assets within the main cities are limited, with most transactions undertaken off market to local investors. Impending improvements to infrastructure will allow for faster and more convenient transport connectivity. Smart investors are therefore looking to decentralised areas with lower land costs to fill the undersupply of quality industrial space. Rapid and consistent growth in tourist numbers, both foreign and domestic, along with the newly reformed gambling laws, will strengthen the already healthy demand for hospitality real estate within the main cities and attractive coastal locations.


» Industrial » Hospitality » Grade A Commercial

MAJOR MOVER Q3 2017

Decentralised Land

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TERENCE TANGAsia

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KICHOON JUNG

East [email protected]

JIMMY GUBETTY WONG

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[email protected]

KATSUJI TOKITA

South [email protected]

ERIC LAM

Hong [email protected]

ANTONIO WU

Hong [email protected]

DOMINIC CHUNG

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IEYO DE GUZMANVietnam

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DAVID JACKSON

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DEREK HUANG

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IMRAN MOHIUDDIN

[email protected]

SURESH CASTELLINO

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GAGAN RANDEV

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ANTONY PICON

[email protected]

TANG WEI LENG

[email protected]

STEVE ATHERTON

North [email protected]

LI JIEKazakhstan

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BAYAN KUATOVA

West [email protected]

TAMMY TANG

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BARNY SWAINSON

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