global market-perspective-q1-2014

Global Real Estate Markets

Gaining Traction

Global Market Perspective | Q1 2014

COPYRIGHT © JONES LANG LASALLE IP, INC. 2014. All Rights Reserved 2

Global Market Perspective, First Quarter 2014

Global Market Perspective First Quarter 2014

Global Real Estate Markets Gaining Traction

The world’s dominant commercial real estate markets have moved into 2014 in better shape than at any time since the

Global Financial Crisis of 2008-2009. Capital markets are exhibiting remarkable strength and the disconnect, that has

emerged over the past two years between a more cautious occupational market, is showing signs of narrowing.

This latest edition of Global Market Perspective presents an encouraging picture of a global real estate market that is

regaining its pre-crisis vigour:

The global economy is steadily improving, GDP growth is accelerating, and higher business confidence and

perceptions of fewer downside risks are spurring corporations to spend again. Crucially, the U.S. economy and real

estate market look finally to be gaining some traction.

The real estate investment market is displaying exceptional liquidity in both the equity and debt markets, with a

huge weight of money chasing commercial property, as evidenced by:

– Full-year 2013 sales transactions up 21% to US$563 billion

– Q4 2013 volumes hitting nearly US$200 billion; a level not seen since mid-2007

– 24 countries achieving in excess of US$1 billion in transactions during Q4

– Several major markets registering record transaction levels in 2013, including China, Australia, Canada and

Singapore

– Further prime yield compression and an acceleration in capital value growth, increasing by an average of 7.5%

year-on-year for prime office assets

Very strong competition for a limited stock of core assets is forcing investors up the risk curve, into ‘non-core assets

in core markets’ and ‘core assets in non-core markets’. For example:

– Global investment volumes in the hotel sector were up a massive 40% in 2013, while industrial transactions in

Europe grew by 70%

– Second-tier cities, such as Seattle, Atlanta, UK regional cities and Osaka, are capturing a greater proportion of

real estate capital

– Investors are seeking out markets that until recently were considered ‘out of bounds’, notably in Southern Europe

where there has been a rapid change in sentiment

– Investors are also targeting value-added opportunities and moving into development in order to access product

A buoyant investment market is being assisted by a robust recovery in the debt markets. This is most evident in the

U.S where debt capital providers are boosting funding levels to new post-recession highs. CMBS issuance was up a

significant 78% in 2013 to US$86 billion, a level that could well exceed US$100 billion this year. The European debt

markets are lagging, but are nonetheless also showing strong improvement.

Deals already in the pipeline point to further growth in global investment activity during 2014. JLL’s initial forecasts

indicate volumes of US$650 billion, a 15% uplift on 2013 levels and representing the fifth consecutive year of growth.

Several factors point to continued investment market momentum over the coming year:

– A substantial weight of capital is sitting on the sidelines looking for product; and a broad range of investors have

announced intentions to make fresh commitments in 2014



– New capital sources are constantly emerging, with a surge of new capital anticipated from Asia and specifically

China, which is exporting capital on a large and increasing scale

– More product is expected to come onto the market as vendors take advantage of the current market cycle

– Further growth in activity in secondary markets and assets is anticipated, supported by better access to finance

Direct Commercial Real Estate Investment, 2006-2014

Source: Jones Lang LaSalle, January 2014

Meanwhile the occupational markets are exhibiting early signs of a more sustainable recovery. Improvements are

uneven however - corporate occupiers are still exercising caution and remain firmly focused on value:

– The office leasing markets in the U.S. are now showing a much more cohesive recovery, with volumes up 7%

year-on-year. Europe’s volumes bounced back by 18% during Q4, with London taking a clear lead. In Asia

Pacific, volumes rose by 6% in Q4, although leasing activity remains mixed across this diverse region.

– The technology and energy sectors continue to be the main drivers of corporate occupier activity, while improving

prospects are also apparent in insurance and life sciences. Confidence is gradually spreading to other business

sectors, and corporate demand in 2014 is likely to be more broadly based than in either of the last two years.

Even the finance sector is showing ‘signs of life’, accounting for the largest deal in London during the last quarter.

During 2014, corporates will be less capital constrained and, with higher business confidence, there should be

greater willingness among senior business leaders to authorise capital expenditure, contributing to a 5-10% uplift in

leasing volumes during the year. We also predict more expansion demand, with net absorption up by 20-25%

globally, although the paucity of supply may constrain some expansion plans.

0

100

200

300

400

500

600

700

800

Americas EMEA Asia Pacific Global

US

$ b

illio

ns

2006 2007 2008 2009 2010 2011 2012 2013 2014 (F)

20%

10%

10%

c. 15%

c. 15% Projected Change

2013-2014



The development pipeline across all commercial sectors is largely under control, and shortages of high-quality space

will intensify during the year. Construction levels are well below trend, but early evidence points to an uptick in

development starts during 2014 and 2015. Even so, new deliveries will be below trend until 2016.

Rental growth for prime offices is expected to gain pace from the weak 1-2% rates of 2012 and 2013, increasing over

4% in 2014. Growth will be led by several supply-constrained global gateway cities – such as Singapore, Tokyo,

London, New York and San Francisco - where there is potential for double-digit rent increases.

Prime Offices – Projected Changes in Values, 2014

*New York – Midtown, London – West End, Paris - CBD. Nominal rates in local currency.


As we move into 2014, optimism is certainly the prevailing mood in the global real estate markets, but downside risks

remain that could temper activity and suppress confidence during the year. The impact of tapering and rising interest

rates on global capital flows is an underlying concern, particularly for emerging markets. In the occupational markets,

cost and efficiency are still at the forefront of corporate mindsets, and business sentiment could quickly be dented by

renewed macroeconomic instability. Nevertheless on balance, our prognosis for the global real estate market is more

positive than at any time since launching our Global Market Perspective in 2008.

+ 10-20%

+ 5-10%

+ 0-5%

- 0-5%

- 5-10%

Tokyo, Dubai, London*San Francisco, New York*Hong Kong, Mumbai

Singapore

Capital ValuesRental Values

Beijing, Los Angeles, MoscowShanghai, Washington DCMexico City, Toronto, SydneySeoul, Chicago, Boston, FrankfurtMadrid, Paris*, Stockholm, Brussels

Sao Paulo

Tokyo, New York*, San Francisco

Dubai, London*, Boston, Chicago, Los AngelesMadrid, Mumbai

Moscow, ShanghaiWashington DC, TorontoMexico City, Beijing, Hong KongSeoul, Singapore, SydneyParis*, Stockholm, Frankfurt

Brussels

Sao Paulo



Global Market Perspective

Contents

Global Real Estate Markets Gaining Traction ................................................................................................................. 2

Global Economy ................................................................................................................................................................ 6

Real Estate Capital Markets ............................................................................................................................................. 8

Investment Volumes ............................................................................................................................................................ 8

Capital Values and Yields ................................................................................................................................................. 11

Corporate Occupiers ...................................................................................................................................................... 13

Global Real Estate Health Monitor ................................................................................................................................. 14

Office Markets ................................................................................................................................................................. 15

Office Demand Dynamics ................................................................................................................................................. 15

Office Supply Trends ......................................................................................................................................................... 17

Office Rental Trends ......................................................................................................................................................... 21

Retail Markets .................................................................................................................................................................. 23

Industrial Warehousing Markets .................................................................................................................................... 25

Hotel Markets ................................................................................................................................................................... 26

Residential Markets ........................................................................................................................................................ 29

Recent Key Investment Transactions ........................................................................................................................... 30



Global Economy

Quiet start to an important year for the global economy

The past two years have started in a mood of crisis with grave concerns about global economic prospects. This year

has been refreshingly different. The recent news has not all been positive, but there is a sense of steady economic

improvement and of reducing risk as the developed world emerges from its long slump. The upheaval of the autumn’s

U.S. budget crisis appears to be past now and the figures are generally pointing to a healthier 2014.

The year ahead will be critical for policymakers in setting the tone for the recovery. In the West, the focus of the past

five-years has been simple: healing the damage from the financial crisis and restarting growth. With that largely

achieved, the choices become more complex. The list of challenges ahead will include: resetting interest rates back to

‘normal’ levels; cutting still-bloated fiscal deficits; unwinding the QE stimulus; and dealing with early signs of overheating

in financial markets. In the emerging world, the emphasis will be on reforms to sustain growth and dealing with greater

competition from the developed world for investment capital.

U.S. tapering marks start of sea change in monetary conditions

After all the previous upheaval, when the Fed eventually finally announced a tapering in its QE programme just before

Christmas, the market response was surprisingly muted. Few felt the previous postponement was anything but a

temporary pause with the economy strengthening, while the Fed has underpinned its latest statement with some

cautious guidance on future interest rates rises. Nonetheless, Bernanke has confirmed that tapering could be complete

by year’s end and many now expect rates to rise again next year.

The consequences for the U.S. economy should not be too painful. Elsewhere there are more concerns. In the

Eurozone, for instance, the recovery is not yet as well established; a recent ECB cut in policy rates highlights the very

different monetary environment. Of even more concern will be how monetary changes impact on emerging markets,

which have thrived in recent years. The risk is that tapering will boost the dollar and weaken commodity prices,

adversely affecting the more vulnerable parts of the developing world.

GDP Projections 2014 in Major Economies – Recent Movements

Australia China France Germany India Japan UK USA

October 2013 2.4 8.0 0.6 1.8 5.6 2.0 2.4 2.5

January 2014 (Latest) 2.4 8.0 0.5 2.1 5.4 1.8 2.7 2.7

Change (bps) 0 0 -10 +30 -20 -20 +30 +20

India relates to fiscal year. Source: IHS Global Insight, January 2014

Recovery appears on track, but outlook remains cautious into 2014

Data releases have generally been more encouraging, and over the last three months, there have been notable upward

movements in GDP growth expectations for 2014 in the U.S., the UK and Germany. A key point to note is that even

though an improvement on last year is generally expected, most economies will still only be returning to their historic

trend after five years of below-par expansion.



U.S. leads the revival in the developed world

Global GDP is expected to rise by 3.3% during 2014, a rate slightly ahead of the historical average. This expansion is

supported by emerging markets, where growth rises to 5.3% this year, with reviving exports to the West an increasingly

important factor. In the developed world, after anaemic growth since 2010, an acceleration is also in prospect. Global

expansion is then anticipated to build over the medium term as recovery in both emerging and developed markets

broadens.

Emerging markets in Asia will continue to drive global growth this year and beyond. In China’s maturing economy,

medium-term prospects will be constrained by the need to shift growth towards consumers and avoid asset price

bubbles; sub-8% growth rates are becoming the new norm in China. India faces even more challenges in the immediate

future, but GDP growth is likely to recover steadily over the medium term.

The U.S. is forecast to lead the upturn in the developed world, with 2.7% growth predicted in 2014 and returning to trend

in 2015, even as the Fed begins to tighten interest rates. Japan’s near-term prospects have improved with ‘Abenomics’

and 2014 is expected to see further respectable activity, but there remain doubts over the sustainability of the upturn

beyond.

The Eurozone is projected to emerge from recession this year. Germany is expected to show the strongest upturn

during 2014, while France’s recovery is weaker. Recessions in Spain and Italy are forecast to continue into a third

successive year, though the contraction is less severe and growth is in prospect from 2015.

In the rest of Europe, prospects are more solid. The UK has seen a further upward revision in projections for this year,

while the Nordics are slightly less buoyant, but are also expected to see growth rates above those of their Eurozone

neighbours. Emerging Europe is likely to see the continent’s strongest growth, led by Turkey.



Real Estate Capital Markets

Investment Volumes

Investment markets finish 2013 with a bang

Investment markets have barely missed a beat over the holiday period as the momentum created towards the end of the

year continues into the first few weeks of 2014. Final quarter volumes exceeded our expectations at US$198 billion,

41% higher than an already busy Q3 2013 and 22% ahead of a strong Q4 2012. The consistent quarter-on-quarter

growth that was recorded throughout 2013 took final year volumes to US$563 billion, 21% higher than 2012 and the first

time the market has broken above US$500 billion since 2007. The growth in transactional volumes is broadly based,

with both large and small markets across all three regions seeing growth, a trend we expect to continue into 2014.

Direct Commercial Real Estate Investment - Quarterly Trends, 2007-2013


Record year for Asia Pacific as Japan’s volumes double

Asia Pacific has now surpassed volumes recorded at the peak of the last cycle; the first region to do so. Final quarter

transactions of US$37 billion helped push full-year volumes above the previous peak of US$121 billion in 2007 to

US$127 billion. Investment activity has been buoyed by the ongoing improvements in both debt and equity markets,

heightened liquidity across the asset class, and higher allocation to the real estate sector from multi-asset managers.

The standout market in 2013 was Japan, where volumes doubled in local currency terms and were 66% higher in US$

terms. The boom in Japan was accompanied by record-breaking years in Australia (US$22 billion), China (US$25

billion) and Singapore (US$12 billion). Momentum continues to build in Q1 2014, with a number of funds raising

significant equity in line with strong acquisition plans for the year.

0

30

60

90

120

150

180

210

240

Q10

7

Q20

7

Q30

7

Q40

7

Q10

8

Q20

8

Q30

8

Q40

8

Q10

9

Q20

9

Q30

9

Q40

9

Q11

0

Q21

0

Q31

0

Q41

0

Q11

1

Q21

1

Q31

1

Q41

1

Q11

2

Q21

2

Q31

2

Q41

2

Q11

3

Q21

3

Q31

3

Q41

3

Americas EMEA Asia Pacific Rolling Four-Quarter Average

US

$ bi

llion

s

205

107110100

113

7369666666

100

118120

159

204

190

119

91

110100

163

40 4335

104

121

140

198



Direct Commercial Real Estate Investment - Regional Volumes, 2012-2013


Resurgent smaller markets combine with the majors to take European volumes higher

While the major markets of the UK, France and Germany continued to grow during 2013 on the back of consistent

demand for core product, the year also saw the return of the peripheral European markets; Ireland, Portugal and Italy all

experiencing triple-digit percentage growth. Final quarter volumes of US$72 billion are well ahead of the final quarter of

2012, and the fact that the previous three quarters all exceeded their 2012 equivalents has seen the market move 21%

higher to US$195 billion over the full-year. The wider spread of activity across the continent did raise fears that volumes

in London, Paris and the German cities may contract, but demand for prime real estate is as strong as ever.

Lack of political problems and growing U.S. economy should benefit the Americas in 2014

In the Americas, sales transaction activity during 2013 has exceeded expectations, the region witnessing in the final

quarter the highest investment volumes in the past six and a half years at US$88 billion. For the year, overall volumes

totalled US$241 billion, representing an 18% increase on 2012, and easily the highest annual activity level since 2007.

Investors in the U.S. market overwhelmingly brushed off any concerns regarding 2013 increases in interest rates, as well

as the Federal Reserve’s late-quarter decision to begin tapering its asset purchase programme. For 2013 in its entirety,

investment volumes in the U.S. reached US$215 billion, the greatest annual transaction activity since 2007.

Both Canada and Mexico experienced very robust investment trading in the closing months of 2013. Volumes in

Canada at US$18 billion were at record levels, while in Mexico volumes were up 27% for the full-year, boosted by the

activities of its REIT sector. Softer capital markets conditions were evident in Brazil, as still sluggish economic growth,

higher interest rates and weak equity markets created a challenging environment.

JLL forecasts volumes of US$650 billion for 2014

On the back of much stronger than expected growth in 2013, we predict global transactional volumes to break through

the US$600 billion level in 2014 with our initial forecast at around US$650 billion. The momentum of 2013 has been

carried over immediately into 2014 with a number of new buyers emerging and vendors increasingly willing to offer

product as pricing continues to improve. New capital sources are constantly entering the market, especially in Asia

where investors continue to look at opportunities in the U.S. and Europe on the back of continued residential cooling

measures in their domestic markets.

Asia Pacific is expected to have another record year in 2014, supported by further growth in Japan and China. The

Americas, and specifically the U.S., is expected to show the strongest momentum, up 20% in 2014. Many different

investor types – from institutional capital, private equity sources, non-traded REITs to overseas investors – have large

property appetites, and bidding for desirable product in the U.S. will be highly competitive. In Europe, the broad range of

investors targeting the continent points to further uplift in volumes during 2014 of approximately 10%.

$US billions Q3 13 Q4 13

% change

Q3 13-Q4 13 Q4 12

% change

Q4 12-Q4 13 2012 2013

% change

2012-2013

Americas 63 88 39% 75 18% 204 241 18%

EMEA 47 72 53% 61 18% 161 195 21%

Asia Pacific 30 37 24% 27 39% 98 127 29%

TOTAL 141 198 41% 162 22% 463 563 21%



Direct Commercial Real Estate Investment - Largest Markets, 2012-2013


Direct Commercial Real Estate Investment – Top 20 Cities in 2013


$US billions Q3 13 Q4 13

% change

Q3 13-Q4 13 Q4 12

% change

Q4 12-Q4 13 2012 2013

% change

2012-2013

USA 55.0 80.2 46% 66.7 20% 177.5 214.6 21%

UK 18.5 25.0 35% 14.4 73% 51.2 67.8 32%

Germany 7.4 14.7 99% 13.4 9% 31.1 38.2 23%

Japan 8.7 12.2 41% 7.7 59% 25.2 41.7 66%

China 7.0 8.5 21% 2.2 278% 14.7 25.1 71%

France 6.2 6.6 7% 9.7 -32% 22.2 22.4 1%

Australia 4.9 6.4 30% 4.0 62% 16.5 21.9 33%

Canada 4.5 5.7 28% 3.3 73% 15.2 18.1 19%

Sweden 2.2 3.6 65% 6.2 -42% 12.4 10.3 -17%

Singapore 4.2 3.3 -21% 2.6 26% 8.4 11.6 38%

Italy 0.8 2.6 228% 0.7 261% 2.3 5.3 128%

Russia 1.7 2.5 47% 3.3 -23% 7.3 7.3 -1%

South Korea 1.9 2.3 22% 4.8 -52% 11.2 8.3 -26%

Norway 0.5 1.9 254% 2.3 -15% 6.0 5.1 -16%

Hong Kong 0.8 1.8 122% 3.2 -45% 11.3 7.3 -35%

Denmark 0.8 1.6 111% 0.4 334% 1.5 3.9 160%

Switzerland 1.2 1.6 38% 2.6 -39% 4.3 2.9 -31%

Netherlands 1.8 1.6 -11% 0.8 100% 3.8 4.8 28%

Poland 1.4 1.3 -3% 2.1 -37% 3.5 3.9 13%

Mexico 2.9 1.3 -55% 0.8 74% 4.5 5.8 27%

Taiwan 1.0 1.3 30% 1.3 -1% 5.2 4.2 -20%

Spain 1.0 1.3 24% 1.2 9% 2.6 3.6 37%

Finland 0.2 1.2 470% 0.4 196% 1.8 2.0 8%

Ireland 0.7 1.2 74% 0.4 212% 0.9 2.5 190%

0 5 10 15 20 25 30 35 40

Moscow

San Francisco

Munich

Sydney

Seattle

Silicon Valley

Houston

Dallas

Boston

Hong Kong

Seoul

Washington DC

Shanghai

Singapore

Chicago

Los Angeles

Paris

Tokyo

New York

London

Americas

EMEA

Asia Pacific

US$ billions



Capital Values and Yields

Capital values accelerate; yields compress further

A re-energised investment market has provided a boost to capital value appreciation. Growth on prime office assets

shifted up a gear during the second half of 2013, achieving 7.5% uplift by year-end (across 25 major markets); more

than double the rate recorded in 2012. The weight of money has continued to push prime yields down to new lows, with

more than half a dozen major office markets recording 20-30 basis point yield compression during Q4 2013 alone,

including the U.S. gateway cities of New York, Washington DC and San Francisco, as well as Paris, Madrid and

Stockholm.

Capital appreciation to continue into 2014

With more buyers than sellers, capital values are likely to continue to appreciate during 2014, at a rate in excess of 5%

for prime office assets (across 25 major markets). Expectations of further yield compression are not widely anticipated,

with most investors looking to rental growth. The gateway cities of Tokyo, San Francisco, New York and London are

forecast to register the strongest uplift in values over the next 12 months.

Yield Compression and Capital Value Change, 2010-2013

Unweighted average of 25 major office markets across the globe


6.62%

5.52%

23.3%

12.7%

3.2%

7.5%

0

5

10

15

20

25Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013% pa

5.4

5.8

6.2

6.6



Prime Offices – Capital Value Change, Q4 2012–Q4 2013

Prime Offices – Capital Value Clock, Q4 2012 v Q4 2013

Notional capital values based on rents and yields for Grade A space in CBD or equivalent. In local currency.


-15 -10 -5 0 5 10 15 20 25

Beijing

Paris

Sao Paulo

Mumbai

Toronto

Hong Kong

Moscow

Shanghai

Brussels

Mexico City

Sydney

Chicago

Singapore

Tokyo

Seoul

Boston

Frankfurt

Los Angeles

Washington DC

Stockholm

Madrid

New York

London

San Francisco

% change

Americas

EMEA

Asia Pacific

Capital value

growth slowing

Capital value

growth

accelerating

Capital values

bottoming out

Capital values

falling

Americas EMEA Asia Pacific

Q4 2013

Capital value

growth slowing

Capital value

growth

accelerating

Capital values

bottoming out

Capital values

falling

Sao Paulo

Dallas

Mexico City

Sydney

Washington DCToronto

Houston

San Francisco

Hong Kong,

Singapore, Paris

Mumbai

Tokyo

Seoul, Brussels

Milan

Madrid

Frankfurt

Moscow

BerlinStockholm

New York, Boston, Chicago

Los Angeles, Shanghai, Beijing

Amsterdam

London

Q4 2012

Beijing

Hong Kong

Singapore,

Chicago, Toronto,

Washington DC

Mumbai

Brussels

Shanghai

Madrid

Tokyo

Seoul

Sydney, New York,

Frankfurt Sao Paulo

Mexico City

Boston, Los Angeles,

Berlin, Stockholm

Houston,

San Francisco,

MoscowDallas

Amsterdam

London

Milan

Paris



Corporate Occupiers

A mixed picture in 2013

2013 was a year of marked variation in corporate occupier activity. While certain markets (including several U.S. cities,

London and Mexico City) and industry sectors (i.e. technology and energy) experienced increasing levels of activity, the

majority of corporate occupiers still exercised caution and conservatism. In many core global markets, the continued

domination of financial services occupiers as value players served to suppress activity levels.

2014 marks a turning point

Early indicators point to a turning point in 2014. Corporate confidence is returning to long-run averages amid a more

stable macroeconomic environment; PMI surveys show increased demand for products; corporate balance sheets

remain strong and are now supplemented by supportive debt markets; and there is a greater willingness among senior

business leaders to authorise capital expenditure.

Increasing workplace investment

While significant expansionary activity is unlikely to emerge outside of the technology and energy sectors during 2014,

there are other industries, such as insurance and life sciences, that are showing improving prospects. Across the board,

corporate occupiers in 2014 will continue to get to grips with their occupied portfolios through a mix of consolidation,

space acquisition and workplace investment. This will be influenced by a number of broad corporate themes, namely:

A renewed war for talent – placing the workplace at the heart of attracting and retaining human capital

A growing corporate focus on employee well-being - a further driver to changes in working styles and the workplace

Improving M&A volumes, which will fuel portfolio restructuring

Selective emerging market investment. Africa is an increasing target

The re-emergence of sustainability considerations amid rising utility costs and concerns about energy efficiency

A desire to increase worker productivity and innovation – leading to a stronger consideration of the workplace at a

macro and micro level.



Global Real Estate Health Monitor

Economy Real Estate Investment Markets Real Estate Occupier Markets

National

GDP

OECD

Leading

Indicator

City

Investment

Volumes

Capital

Value

Change

Prime

Yield Yield Gap

Rental

Change

Net

Absorption

Vacancy

Rate

Supply

Pipeline

Dubai 3.5% na 32% 30.4% 7.3% na 14.6% na 29.0% 18.2%

Frankfurt 2.1% 0.13 17% 8.3% 4.7% 350 6.1% 1.4% 11.1% 4.4%

Hong Kong 3.7% na -35% 2.5% 2.9% 196 -1.2% -0.3% 4.3% 5.6%

London 2.7% 0.08 16% 17.9% 3.8% 208 10.5% 1.0% 5.4% 5.4%

Moscow 2.7% 0.02 -19% 2.9% 8.8% 222 0.0% 5.2% 13.3% 11.0%

Mumbai 5.4% -0.06 -90% 1.3% 10.1% 238 1.4% 9.8% 23.0% 16.9%

New York 2.7% 0.12 5% 15.9% 4.2% 253 3.6% 1.0% 11.1% 1.2%

Paris 0.5% 0.17 -5% -2.4% 4.3% 254 -7.8% 0.2% 7.5% 5.0%

Sao Paulo 3.0% 0.01 -1% 0.2% 8.5% na -10.3% 5.2% 18.4% 33.0%

Shanghai 8.0% 0.13 72% 3.0% 5.9% 248 2.6% 11.4% 12.8% 36.2%

Singapore 3.4% na 38% 5.9% 3.4% 202 5.7% 3.0% 6.5% 4.4%

Sydney 2.4% 0.15 2% 4.3% 6.8% 366 -5.0% -0.9% 10.5% 3.0%

Tokyo 1.8% 0.18 34% 6.1% 3.7% 310 3.3% 4.5% 3.4% 11.1%

Real estate data as at end Q4 2013

Definitions and Sources

National GDP: Change in Real GDP. National Projection, 2014. Source: IHS Global Insight

OECD Leading Indicator: Composite Leading Indicator. Change in Index. Latest Month. Source: OECD

City Investment Volumes: Direct Commercial Real Estate Volumes. Metro Area Data. Rolling Annual Change. Source: Jones Lang LaSalle

Capital Value Change: Notional Prime Office Capital Values. Year-on-Year Change. Latest Quarter. Source: Jones Lang LaSalle

Prime Yield: Indicative Yield on Prime/Grade A Offices. Latest Quarter. Source: Jones Lang LaSalle

Yield Gap: Basis Points that Prime Office Yields are above or below 10-year Government Bond Yields. Latest Quarter. Source: Jones Lang LaSalle, Datastream

Rental Change: Prime Office Rents. Year-on-Year Change. Latest Quarter. Source: Jones Lang LaSalle

Net Absorption: Annual Net Absorption as % of Occupied Office Stock. Rolling Annual. Source: Jones Lang LaSalle

Vacancy Rate: Metro Area Office Vacancy Rate. Latest Quarter. Source: Jones Lang LaSalle

Supply Pipeline: Metro Area Office Completions (2014-2015) as % of Existing Stock. Source: Jones Lang LaSalle



Office Markets

Office Demand Dynamics

Signs of improvement following a disappointing 2013

2013 turned out to be a disappointing year for the office leasing market, with full-year global leasing volumes virtually

unchanged on the subdued 2012 levels; Europe and Asia Pacific witnessed annual volumes down by 4% and 12%

respectively. Nonetheless, there were definite signs of improvement during the final quarter of 2013, with volumes up

18% quarter-on-quarter in Europe and by 6% in Asia Pacific. The U.S. was the most active leasing market in 2013 –

where full-year volumes were an encouraging 7% higher than in 2012.

Office Leasing Volumes – 2013 v 2014


Modest upswing in demand in 2014

The recovery in global leasing volumes is expected to build during 2014 (subject to macroeconomic stability). Business

confidence is improving, corporations will be less capital constrained and we anticipate a greater willingness to commit to

longer-term real estate. Global gross leasing volumes for the year are projected to be 5-10% higher than in 2013 in all

three global regions. We also expect more expansionary demand, with global office net absorption likely to be

20-25% higher than in 2013.

Momentum builds in the U.S.

The U.S. office market in particular is showing the brightest signs of a more cohesive, across-the-board uptick in leasing

activity. Net absorption levels are at their highest since 2007, and more than 65% of U.S. markets have reported higher

tenant touring activity.

Europe Asia Pacific USA Global

FY 2013

FY 2014

+7%

+5-10%

-12% Flat

+5-10% +5-10%

-4%

+5-10%



Gradual improvements in Europe

Europe’s occupational markets have maintained their recovery, but at a slower pace than the investment market.

Aggregate statistics show only a gradual recuperation, but sentiment is improving strongly in line with hardening

evidence of economic expansion. London continues to see the strongest office market momentum in Europe, but

conditions in Paris remain impacted by ongoing headwinds (in sharp contrast to its robust investment market). The

German cities are still experiencing solid demand and, encouragingly, there were significant quarterly increases in the

Dutch markets, Dublin, Milan and Madrid.

For the year ahead the vast majority of European leasing activity will, again, involve consolidations or portfolio

improvements. Corporate occupiers will continue to be cost-conscious, focusing on modern, grade A space to drive both

efficiency, productivity and hence return on real estate expenditure. Overall, we expect total European leasing volumes

to increase by 5-10%.

Office leasing activity starting to improve in Asia, but still slow in Australia

For Q4 2013, both net and gross absorption increased year-on-year in aggregate for Asia (by 5% and 7% respectively).

However, at this stage, the improvement is patchy and there are no sub-regions which are unambiguously improving.

Australia witnessed a further contraction in occupied space in Q4, and gross leasing was down almost 50% year-on-

year. As a result, quarterly net absorption across the whole region fell 12% year-on-year while gross leasing was down

10%.

Global Office Demand – Net Absorption Trends, 2004-2014

24 markets in Europe; 25 markets in Asia Pacific; 44 markets in the U.S. Asia related to Grade A only. Australia relates to all grades.


-5

0

5

10

15

20

25

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

mill

ions

sq

m

Pro

ject

ion



Office Supply Trends

Vacancy rates broadly unchanged

The global office vacancy rate (across 98 markets) has hovered at around the 13.0-13.5% level for the past five quarters

– and as at Q4 2013 stood at 13.2%. Over the past year, the largest falls in vacancy have occurred in the U.S. markets,

while London and Tokyo have also seen a significant decline in new supply. By contrast, vacancy rates have continued

to rise in some cities in India and China, and across a number of Latin American markets.

As global leasing activity improves, and with new deliveries well below trend, we expect the global vacancy rate to

gradually fall into the 12.5-13.0% range. However, persistently high structural vacancy in the advanced markets, as

corporates shed excess space, will prevent a more rapid decline in rates, despite low levels of new supply.

Office Vacancy Rates in Major Markets, Q4 2013

Regional vacancy rates based on 49 markets in the Americas, 24 markets in Europe and 24 markets in Asia Pacific.

Covers all office submarkets in each city. All grades except Asia and Latin America (Grade A only). Tokyo relates to CBD – 5 kus.

Source: Jones Lang LaSalle, 2014

Single-digit vacancy rates in the major Asian markets

Most major Asian markets still feature single-digit vacancy rates (the main exceptions being Seoul, Shanghai and most

Indian cities). The lowest rates were seen in Hong Kong, Tokyo, Manila and Jakarta (at between 3 and 5%). At the

same time, rates have risen across all CBD office markets in Australia.

0

5

10

15

20

25

Tor

onto

San

Fra

ncis

co

New

Yor

k

Mex

ico

City

Was

hing

ton

DC

Los

Ang

eles

Sao

Pau

lo

Chi

cago

Bos

ton

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is

Sto

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Bru

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bai

Europe 9.7% Asia Pacific 11.9%Americas 15.7%%

Quarterly movement

Increased

Decreased

Stable

Global 13.2%



Stable vacancy rate in Europe

The European regional vacancy rate has remained static at 9.7% for a fourth consecutive quarter, and while new space

is being quickly absorbed, the overhang of low-quality supply will hinder further falls in the regional vacancy rate in 2014.

London, Stockholm and Dublin are bucking the regional trend, and have seen notable reductions in vacancy during

2013.

U.S. vacancy at lowest level for five years

With net absorption in the U.S. at it strongest rate since 2007, vacancy levels over the past 12 months have declined 40

basis points to 16.6%, the lowest rate in five years. Vacancies are projected to fall below 16% by the end of the year,

another key milestone in migrating back to full equilibrium levels (at circa 14% on the overall national basis).

Global development activity below trend

At a global level, office development activity remains low – office completions in 2013 totalled only 11.2 million square

metres; 20% below the long-term trend. As yet, there is little firm evidence of a surge in development activity – JLL is

projecting a modest increase in completions during 2014 of 6%, with a further 19% rise in 2015, by which time

completion levels will be at the historic average of around 14 million square metres.

Construction levels rising in the U.S. and Europe

A loosening of the construction lending market in the U.S., an increase in the weight of money looking to invest in new

construction and an improvement in market fundamentals all point to an uptick in development starts during 2014 and

2015. Significantly, most of this new supply is unlikely to begin hitting the market until at least late 2015.

Likewise in Europe, improved confidence among developers and investors as well as enhanced access to finance is

feeding through to higher construction levels. As a result, completions for 2014 are anticipated to increase by 19%, with

a further 21% forecast for 2015. Yet, it should be recognised that 2014 volumes will still be below trend, and that almost

50% of new completions this year are already pre-let or for owner-occupation.

In Asia Pacific, full-year 2013 office completions at 5 million square metres were comparable with levels in 2012, and

we expect volumes to remain within the 4.5 to 5.5 million square metre range in both 2014 and 2015.

A few markets across the globe will continue to struggle with high and/or increasing supply, notably in Latin America,

with São Paulo and Mexico City witnessing a surge in new supply. The development pipeline in several Canadian

cities will also present a challenge over the next couple of years. In the Middle East, Dubai, Abu Dhabi, Riyadh and

Cairo are all dealing with excessive levels of supply, with demand focused on a limited number of prime buildings.



Global Office Completions, 2000-2015

24 markets in Europe; 25 markets in Asia Pacific; 44 markets in the U.S. Asia relates to Grade A only.


Office Supply Pipeline - Major Markets, 2014-2015

Source: Jones Lang LaSalle, January 2014. Covers all office submarkets in each city. Tokyo – CBD - 5 kus

0

5

10

15

20

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(F)

2015(F)

USA Europe Asia Pacific

mill

ions

sq

m

Average

0 5 10 15 20 25 30 35

ChicagoLos Angeles

MadridNew York

Washington DCToronto

BrusselsStockholm

SeoulSydneyBoston

San FranciscoSingaporeFrankfurt

ParisBeijing

LondonHong Kong

MoscowTokyo

MumbaiDubai

Mexico CitySao PauloShanghai

Completions as % of existing stock

2014 2015



Prime Offices – Rental Change, Q4 2012–Q4 2013

Based on rents for Grade A space in CBD or equivalent. In local currency.


-15 -10 -5 0 5 10 15

Sao Paulo

Paris

Beijing

Sydney

Seoul

Hong Kong

Chicago

Brussels

Madrid

Moscow

Stockholm

Mumbai

Washington DC

Shanghai

Tokyo

New York

Mexico City

Boston

Toronto

Los Angeles

Singapore

Frankfurt

San Francisco

London

Dubai

% change

Americas

EMEA

Asia Pacific



Office Rental Trends

Weak rental growth characterises 2013

A quiet leasing market during 2013 was reflected in weak rental performance, with 25 major office markets achieving

growth averaging only 1.6% during the year; this follows a disappointing 2.1% increase in 2012. A few cities have stood

out and managed to achieve double-digit rental growth, including London whose leasing market is recovering strongly

and Dubai, which is still benefiting from its ‘safe haven’ status in a turbulent region. Meanwhile, demand from the

technology sector continues to boost rents in supply-constrained San Francisco.

Momentum builds in 2014, notably in the major gateway cities

Rental growth is likely to be a feature of many more markets in 2014, with a combination of brighter economic prospects,

improving corporate demand and a low supply pipeline pushing leverage in favour of landlords. Prime rents are

projected to rise by an average of more than 4% in 2014 (across 25 major markets), with the strongest growth projected

for a number of gateway cities including Singapore, Tokyo, Dubai, London, New York and San Francisco.

Rental Growth on Prime Assets, 2010-2014

Jones Lang LaSalle – Prime Office Rental Growth, Unweighted average of 25 major markets.


Increased leasing activity and shrinking options drive rents up in the U.S.

In the U.S, landlords lifted rents for the twelfth consecutive quarter in Q4 2013, increasing 0.4% over the past three

months and 3.5% in the past 12 months. Leverage, in the form of concessions, continues to shift away from tenants.

The tech-rich markets such as San Francisco Bay, Seattle and Austin have led the recovery in 2013, but growth is

0

1

2

3

4

5

6

7

8

9

10

2010 2011 2012 2013 2014

8.6%

7.6%

2.2% 1.6%

Ren

tal C

hang

e (%

Y-o

-Y)

4.5%



likely to be more broadly based this year. A combination of a lack of new supply coming to the market in 2014-2015, a

dwindling number of large and mid-sized blocks, and increasing tenant activity will help enhance rents and reduce

concessions in 2014.

London boosts Europe’s performance

The European Office Rental Index increased by 0.7% over the quarter, the largest uplift since mid-2011. This is primarily

due to the continued strong performance of London, and the stabilisation of rents in Paris following a sharp decline in

mid-2013. Going forward, a shortage of quality supply together with improving occupier sentiment is expected to filter

through to more robust rental growth, with a 3.3% increase projected for the 24 European Index cities in 2014.

Net effective rents grew in just one-third of all Asia Pacific markets

Net effective rents grew in just one-third of Asia Pacific markets in Q4 2013. The healthiest rental growth was in

Singapore and Jakarta, and small rental increases were seen in Tokyo, Shanghai and a few other emerging SEA

markets (e.g., Manila). Rents trended slightly lower in Hong Kong and continued to fall in Beijing and all Australian

CBD markets due to weak leasing demand. Single-digit rental growth is generally expected for 2014 and the most

significant uplifts are likely to be seen in Singapore and Tokyo, due to low and falling vacancy.

Prime Offices – Rental Clock, Q4 2012 v Q4 2013

Based on rents for Grade A space in CBD or equivalent. U.S. positions relate to the overall market.

Source; Jones Lang LaSalle, January 2014

Rental value

growth slowing

Rental value

growth

accelerating

Rental values

bottoming out

Rental values

falling

Q4 2013


Rental value

growth slowing

Rental value

growth

accelerating

Rental values

bottoming out

Rental values

fallingToronto

New York

Mumbai

Johannesburg

Istanbul

Dallas, London

Chicago, Brussels

Dubai, Frankfurt

Washington DC

Los Angeles, Tokyo

Mexico City

Sao Paulo

Stockholm

Houston

Boston

Hong Kong

Singapore

Madrid

Shanghai, Beijing

Amsterdam, Paris

MilanBerlin

San Francisco

Seoul

Q4 2012

Seoul

Paris, Milan

Beijing

Hong Kong

Washington

DC

Shanghai

Singapore

Mumbai,

Istanbul, Dubai

Tokyo

Los Angeles

New York

Toronto

Sao Paulo

Mexico City

Dallas

Houston

San Francisco

Frankfurt

Boston

Amsterdam, Johannesburg

Berlin, Moscow

Brussels, Madrid

Sydney, Chicago

Stockholm

London

Sydney, Moscow



Retail Markets

Eurozone retail sales in surprise surge

Retail sales in the Eurozone grew at their fastest pace for 12 years during November 2013 (up 1.4%), highlighting the

improved confidence among consumers. After a year of near zero growth (0.1%), sales across the EU are predicted to

see a moderate increase of 1.4% during 2014.

Polarisation of Europe’s retail markets

Retailer demand is expected to improve in 2014, but performance remains a top priority for retailers. Portfolio

‘rightsizing’ will drive new store closures in some less attractive markets, while the search for growth will increase

demand in prime markets. Prime high street rents have been stable in most major European cities, but grew by 9.1%

over the quarter in Moscow, by 7.3% in Copenhagen and 3.8% in Düsseldorf. London’s luxury quarter, Cologne,

Düsseldorf and Moscow are likely to see the strongest rental growth during 2014.

Pace of improvement in U.S. retail still gradual

U.S. retail property market conditions have continued on the same, gradually-improving path. Demand for space from

retailers has maintained its moderate levels, and the market’s recovery is being aided by only minimal levels of new

construction, a trend that will not change over the near term. Rents are now increasing nationally, however growth is still

very slow, at approximately 0.6% for the full-year 2013.

2014 does look more encouraging for the U.S. market as fundamental drivers for demand are firming. Discretionary

consumer spending is expected to strengthen in 2014 given increased confidence, a much-improved housing market,

and a probable lack of self-induced political crises. As such, dividends should begin to flow through to retail property

sector fundamentals later in the year.

Healthy retailer demand in Asia Pacific despite mixed retail sales

Across the Asia Pacific region, retailer demand remains healthy despite mixed retail sales. In Greater China, demand

from mid-tier retailers and F&B operators has helped to offset slow expansion by luxury brands. Elsewhere, leasing is

slow in India but demand in SEA cities (e.g., Jakarta and Manila) is buoyant as international brands continue to open

stores and/or expand their footprints. Meanwhile, Australia has seen limited evidence of improving leasing activity.

Rents across the region were generally flat in Q4 2013.



Prime Retail – Rental Clock, Q4 2013

Prime Industrial – Rental Clock, Q4 2013

Relates to prime space. U.S. positions relate to the overall market


Rental Value

growth slowing

Rental Values

falling

Rental Value

growth

accelerating

Rental Values

bottoming

out


Singapore

Chicago

Madrid

Dubai, Mumbai, San Francisco, Miami

Moscow

Beijing

New York, Houston, Delhi

Berlin, Paris, Hong Kong

London

Tokyo

Boston, Los Angeles, Shanghai Milan, Sydney

Washington DC

Rental Value

growth slowingRental Values

falling

Rental Values

bottoming

out

Atlanta

Madrid, Warsaw


Rental Value

growth

accelerating

Hong Kong

Boston, Amsterdam, Paris

San Francisco

Chicago, New York, Los Angeles

Frankfurt, Singapore

Beijing

Tokyo, Dallas

London, Houston

Sydney

Shanghai

Philadelphia



Industrial Warehousing Markets

U.S. industrial quietly approaching previous cycle’s vacancy low

Industrial markets across the U.S. have been quietly recovering for more than two years, demonstrated by 15

consecutive quarters of positive net absorption. Widespread demand across size segments has resulted in the U.S.

vacancy rate falling to 8%, inching closer to its prior cyclical low of 7.5%. Warehouse rents continue their gradual climb

across most U.S. markets.

U.S supply pipeline increasing, yet speculative construction measured

From 2010 to 2012, only 10 million square metres of warehousing inventory was built in the U.S. – a record-setting,

three-year low (since records began in 1950). New construction is increasing, but speculative ground-breakings will be

measured, as the lessons developers learned from overbuilding during the last cycle’s peak still linger. As a result, build-

to-suits account for half of current development activity. Rent growth is expected to continue to be solid in 2014, and

West Coast markets (the first to recover) will show the strongest uplift.

European logistics demand maintained at high levels due to supply chain reconfiguration

Corporate occupier activity in Europe has remained at a high level, with the strongest demand being for large-size/mega

units along with urban sortation centres and parcel hubs, as corporate occupiers adjust to the growth in online sales and

omni-channel distribution models. Indeed we are now seeing demand spreading from the more advanced e-commerce

markets into a wider geographical area, and particularly into CEE and Russia.

A lack of modern supply supports a return of limited speculative development in Europe

A lack of suitable modern supply led to a significant growth in development activity in 2013, albeit largely build-to-suit

and owner-occupied schemes. However, with supply levels at historical lows there has been a move back into

speculative development, although this will continue to comprise only a small part of the market.

Rental outlook brightens for 2014

Continued rent adjustments in Europe’s most challenged markets pushed the European Warehousing Index down by a

marginal 0.2% year-on-year, thus marking the seventh consecutive quarter of falling rents. This trend is expected to

reverse in 2014 however, with rents returning to growth in several markets over the next 12 months.

Asia Pacific warehousing demand underpinned by retailers

Across the Asia Pacific region, retailers have continued to drive leasing demand, while the export-related segment has

remained subdued as exports from some major markets remain weak. E-commerce and logistics companies are

underpinning leasing demand in China, while activity has continued to be quiet in Hong Kong and Australia. Moderate

rental growth is projected for most major Asian markets this year on gradually improving exports and retail sales, even if

somewhat constrained by cost-sensitive occupiers.



Hotel Markets

Hotel investment on the rise

2013 proved to be an extraordinarily strong year for hotel investment, with transaction volumes increasing 40% year-on-

year to total US$46.7 billion, marking a five-year high. Deal volumes for the year exceeded expectations, driven by

steady hotel operating performance, increased debt market activity and investors’ quest for yield.

Hotel Investment Volumes, 2012-2013

US$ billions 2012 2013 % change 2012-2013

Q4 2012 Q4 2013 % change

Q4 12 -Q4 13

Americas 18.3 24.0 31% 7.1 7.2 2%

EMEA 11.2 13.2 17% 4.4 2.8 -35%

Asia Pacific 3.7 9.5 157% 1.3 3.3 152%

TOTAL 33.2 46.7 40% 12.7 13.3 5%

Figures include hotel property transactions of US$5 million and above and exclude note sales, land sales, foreclosures and recapitalisations.


Deal volumes to hit US$50 billion in 2014

In 2014 we anticipate that global deal volumes will hit the US$50 billion mark, representing an 8-10% increase on 2013.

The further uplift in transactional activity will be supported by a combination of factors including strong hotel operating

fundamentals, improving debt financing for hotels in mature markets, growing interest in assets located in secondary

markets, more deals in the select service and budget sectors, and increasing cross-border activity.

Regional Investment Volumes, 2012-2014


18.324.0

28.0

11.2

13.2

16.0

3.7

9.5

6.0

0

10

20

30

40

50

60

2012 2013 2014F

US

$ bi

llion Americas

EMEA

Asia Pacific

50.0

46.7

33.2



Private equity continues to dominate the market

Private equity investors continue to dominate hotel acquisitions, particularly in the U.S. and Europe, accounting for one-

third of investment in 2013. Hotel operators, REITs and Middle Eastern Sovereign Wealth Funds were also very

acquisitive. Hotel operators used their balance sheets for selective buys, encouraged by opportunities to acquire single

assets in key markets as well as attractive portfolio plays. REITs maintained their strong interest in core markets where

the investments are accretive to their share prices; however, they are increasingly seeking opportunities to diversify their

portfolios, particularly in the U.S. and some markets across Europe. Sovereign Wealth Funds from Qatar and Abu

Dhabi kept their focus on trophy opportunities, but are gradually starting to look outside of gateway markets.

Private equity firms were also the most active players on the sell-side as their hold periods are shorter than those of

more traditional investors. Hotel operators were the second most active sellers in 2013, selectively disposing of their

non-core assets. Developers and property companies accounted for 15% of all transactions in 2013, selling some of

their properties in pursuit of additional capital to repay their loans and finance new projects.

Extraordinary momentum in Americas

The Americas experienced a particularly strong year with investment volumes up 30% year-on-year, representing a five-

year high. Leverage continues to flow back into the U.S. capital markets and this, along with active private equity funds

and REITs, are the primary drivers of the significant uptick.

Investment activity in the U.S. had a greater geographical and asset type spread in 2013, with markets such as Atlanta,

Houston and New Orleans joining the top ranks of deal flow. As a result, the share of investment volume in secondary

markets doubled in 2013.

Canada was the second most liquid market in the Americas in 2013 with transaction volumes having nearly tripling to

US$1.5 billion. Activity was boosted by the sale of a number of single, large full-service hotels in major cities where

pension funds and institutional investors sought to dispose of high-value assets.

Traditionally a market dominated by local investors, the hotel real estate market in Mexico is increasingly attracting

foreign buyers, notably from Spain and the U.S. Although sales volumes remained muted with only US$0.5 million in

transactions closed in 2013, liquidity is expected to be boosted further by the formation of several new investment

vehicles focusing on the hotel sector, including the first two Mexican hotel-focused REITs – FIBRA Hotelera Mexicana

and Fibra Inn.

Further improving operating fundamentals in most markets across the Americas, an abundance of equity capital and a

strong and growing debt market will create an attractive environment for acquisitions and financings throughout 2014.

JLL forecasts a 15% rise in transaction volumes across the Americas for the year. This would mark the third highest

level of transactions on record, following 2007 and 2006.

A successful year and positive outlook for EMEA

2013 was a resurgent year for the hotel investment market in EMEA, with transaction volumes up 17%. Together, the

U.K. and France accounted for more than half of the deals and attracted three-quarters of all the cross-border

investments into the region. Activity in these two core markets is being boosted by their familiarity, maturity and good

economic and hotel trading fundamentals.

Middle Eastern capital continued to focus on trophy assets in Europe’s key markets, such as Paris and London,

investing US$2.8 billion in European hotels in 2013, a sum that represents half of all cross-border transactions in the

region completed in the year.

Despite the continued economic challenges across Europe, we are forecasting hotel investment volume to grow by more

than 20% in 2014, to approximately US$16 billion. The increase will be bolstered by a continued sell-down of over-



leveraged assets in the control of the lenders, as well as a number of private equity funds reaching the end of their life

cycle. We also expect brands to continue their ‘asset light / asset right’ strategy, which could lead to more asset

disposals that take advantage of strong investor sentiment.

We anticipate that more U.S.-based private equity funds and other investors will look towards Europe, focusing primarily

on core markets and institutional or opportunistic assets. Asian capital is also keen to tap into this region, and in the last

12 months Chinese investors have completed a number of deals. We expect this trend to continue as the number of

outbound travellers from China swells.

A landmark year in Asia Pacific

2013 represented a landmark year for the Asia Pacific hotel market, with investment volumes more than doubling to

US$9.5 billion. Activity predominantly took place in four key markets - Japan (28%), Singapore (23%), Australia (20%)

and China (12%), with all four markets recording the highest annual volumes in the post-crisis era.

Japan topped the Asia Pacific investment charts in 2013 with Tokyo taking the lion’s share of activity, as confidence

flourished in line with policy changes in the era of ‘Abenomics’ policies.

South East Asia has been a hotbed for transaction activity, largely driven by unprecedented deal flow in Singapore and

renewed investor interest in resorts. Bali, The Maldives, Mauritius, Malaysia, Thailand and Vietnam all recorded

resort deals in line with improving connectivity across the region and burgeoning outbound travel from China and India.

China’s hotel market has experienced a general slowdown, following the crackdown on conspicuous consumption which

was announced earlier in 2013. However, despite the moderating pace, China still witnessed a 68% surge in hotel

market liquidity during the year.

In Australia, corporate activity and portfolio sales underpinned volumes in 2013. However, after a record four years, the

opportunities are becoming scarce, which is likely to affect transaction volumes in 2014.

Asia Pacific hotel transaction volumes are projected to moderate in 2014 to around US$6 billion. Fewer landmark deals

will result in a reduction in volumes, while deal flow will remain buoyant due to a greater depth of small asset sales.

Volumes will also be constrained by a lack of investment opportunities.



Residential Markets

U.S. apartment market – demand rising to the supply challenge

Multifamily occupancy in the U.S. stands at a 10-year high of 95.8%, gains having averaged 13 basis points a quarter in

2013, maintaining the 2012 pace despite the increasing delivery pipeline. There is a clear trend of recovering secondary

Sunbelt markets leading the overall occupancy gains; however, the gateway markets continue to have the tightest

conditions, with occupancy at or above 97% in San Diego, New York and San Francisco.

While renter demand is expected to remain strong over the next few years, primarily as a result of the organically

expanding base of ‘baby boomers’ and ‘echo boomers’, the implications surrounding the very active multifamily

development cycle are at the forefront of interest. While there are some supply concerns that will slow the pace of

occupancy and rental growth, the anticipated increase in job growth and household formation will help to mitigate the

threat of oversupply and keep conditions balanced across the country.

Subdued residential sales and leasing across Asia

Subdued high-end residential sales characterise most major Asian markets, with policy restrictions remaining in place

(e.g., HPR in China, extra stamp duties in Singapore and Hong Kong). Meanwhile, China imposed new measures in

November in order to slow price increases. Over the next 12 months, sales in the high-end residential segment in

Greater China and Singapore are likely to remain broadly similar to levels seen last year; low interest rates should help

limit any downside in prices. Residential leasing is expected to be generally in line with trends in the office sector.

UK market accelerates, London continues to lead

UK residential markets finished 2013 on a high, having experienced circa 6% price growth nationally. Much of this

growth has come off the back of a significant improvement in consumer sentiment. In addition, government stimulus

programmes also contributed to the more positive outlook. Concerns of a price bubble have been overblown, although

stimulus packages are already being withdrawn and there have been clear signals from both the government and the

Bank of England of a willingness to stem unhelpful acceleration in prices. Housing affordability remains a key concern

and will likely feature more prominently in electioneering later in the year. Our forecasts are for national price growth of

5% this year, with London prices expect to lead at circa 8%.

German residential investment market as strong as 2005

In 2013, Germany witnessed one of the strongest residential investment markets of the last 10 years. Two very large

transactions took place during the year - the Bavarian housing association GBW was sold for €2.5 billion, and the

second largest housing company Deutsche Wohnen AG took over the Berlin based GSW AG for €3.3 billion. The price

for portfolios rose from €860 per square metre in 2012 to more than €1,000 in 2013, not only because of the value of the

two aforementioned transactions but also due to an increased volume of sold residential developments. €1.6 billion was

invested in forward deals in 2013, 90% higher than in 2012. For 2014 we expect above-average transaction volumes

due to portfolio realignments, a further increase in forward development deals and market consolidation.

Dubai experiencing broad-based recovery

The Dubai residential market is now experiencing a broad-based recovery, with prices and rents picking up in most

locations. Values increased by around 20% in 2013 which has led to fears of another bubble developing. JLL’s view is

that the current levels of price increases are unsustainable and that the market will see values increase at a more

modest pace in 2014.



Recent Key Investment Transactions

Europe

Country City Property Sector

Sales price

US$ m Comments

Multiple Various Segro Industrial Portfolio (50% stake)

Industrial 680

Canada’s Public Sector Pension Investment Board has formed a joint venture with Segro, acquiring a 50% stake in its core logistics platform across Europe. The portfolio consists of 34 properties valued at approximately €1bn in countries including France, Germany and Poland.

France Various Les Docks Lyonnais Portfolio

Mixed 880

Abu Dhabi Investment Authority (ADIA) has bought Les Docks Lyonnais from UBS Wealth Management for circa €650m. The assets include L’îlot Grolée in Lyon and, in Paris, 6/8 boulevard Haussmann, Le Capitole in Nanterre and Antony Parc in the south of Paris. The portfolio was valued at €744m in January last year.

Germany Various Hessen Portfolio Office 1,090

German-listed Patrizia has agreed, on behalf of an investor consortium, to buy 36 offices leased to the state of Hessen from Austria's CA Immo at a price said to be close to the market value of €800m, marking it the biggest German CRE deal this year. The portfolio comprises properties at 19 locations across Hesse, including the State Statistical Office and the Ministry of Economy in Wiesbaden as well as several police stations and administrative centres.

Germany Various TIAA-CREF Portfolio (49% stake)

Retail 630

TIAA-CREF has sold a 49% stake in a German shopping centre portfolio to listed French insurer CNP Assurances for a gross value of circa €460m. The portfolio comprises PEP in Munich, Erlangen Arcaden in Erlangen and Gropius Passagen in Berlin. TIAA-CREF will manage the assets on behalf of the newly-created joint venture.

Ireland Dublin Ulysses Portfolio Mixed 210

Lloyds, advised by JLL, has sold the 25 properties in the Ulysses portfolio to Californian investment firm PIMCO and Dublin-based Brehon Capital Partners for circa €155m, reflecting a net initial yield of 8.7%. The mixed-use portfolio, which is the former Irish property empire assembled by developer Liam Carroll’s Zoe Developments, was put into receivership by Lloyds.

Italy Various Auchan Portfolio Retail 520

Immochan's Italian subsidiary GCI has sold a 60% stake in a portfolio of 13 shopping malls and two retail parks to a fund managed by Morgan Stanley SGR for circa €380m. The retail assets have a total surface area of nearly 200,000 sq m and are located in cities across Italy, including Torino, Vicenza and Catania. Jones Lang LaSalle Corporate Finance provided debt advisory services to Morgan Stanley, arranging a €363m pre-placed CMBS deal – the country’s first since the financial crisis.

Russia Moscow White Gardens Office 700-800

This Class A office centre has been sold to Roman Abramovich’s Millhouse company. Jones Lang LaSalle facilitated the deal, representing both the buyer and the seller - a consortium led by Russia’s leading investment bank VTB Capital, including TPG Holdings and China Investment Corporation, international developer AIG/Lincoln, and Coalco Development. It is the second largest transaction in Moscow’s office market, after the recent sale of ‘White Square’ business center.

Spain Barcelona Torre Agbar (future Grand Hyatt Barcelona)

Hotels 200 Emin Capital investment fund has bought Barcelona’s Torre Agbar to transform it into a Grand Hyatt luxury hotel. Hyatt will invest a further €35m in its conversion.

Spain Oviedo Parque Principado

Retail 220

British-listed Intu Properties and Canada Pension Plan Investment Board (CPPIB) have agreed to pay CBRE Global Investors and developer Sonae Sierra €162m for the Parque Principado shopping centre in the northern Spanish city of Oviedo. The acquisition reflects a yield of 7.2% based on net income of €11.7m.

Sweden Various GE Portfolio Office 850 Kungsleden has acquired a portfolio of 84 commercial properties valued at SEK5.5bn from GE Capital Real Estate. The portfolio has a total leasable area of 567,000 sq m and consists mainly of office buildings in Stockholm and Gothenburg.

UK London City More London Office 2,750

London Bridge Holdings has sold the More London estate for circa £1.7bn to St Martins, the UK-based real estate investment vehicle of the State of Kuwait. The site exceeds 2 million sq m, faces the River Thames and has more than a dozen buildings, including the City Hall and offices for businesses that include EY, PwC, Terra Firma Capital Partners and law firm Lawrence Graham.

UK London City Broadgate Office 2,750

GIC has bought a 50% stake in Broadgate from Blackstone for circa £1.7bn. Blackstone bought the stake in the 4 million sq ft estate from British Land four years ago, in a deal that valued the entire property at £2.1bn. British Land remains the owner of the other 50% of the site.



Asia Pacific


Sales

price

US$ m Comments

Australia Brisbane 1 William Street Office 366

Acting for Cbus Property, JLL has brokered the sale of a 50% share of the 1 William Street development for AUD 395m. The 75,000 sq m asset will be Brisbane's largest office tower and is expected to complete in 2016. The project is 100% pre-leased by the Queensland state government. The 50% share was acquired by ISPT with the remainder to be retained by Cbus Property.

Australia Sydney 177 Pacific Highway

Office 383

JLL, acting on behalf of Leighton, has advised on the sale of 177 Pacific Highway in the largest ever recorded transaction in North Sydney. The asset was purchased on a fund-through basis by Singaporean-listed REIT Suntec for AUD 413m, and the completed asset is expected to yield around 6.85% on a fully-leased basis.

Australia Sydney Sydney Corporate Park

Industrial 318 Goodman Group’s Australia Industrial Fund (GAIF) has acquired the 14.4 hectare Sydney Corporate Park in Alexandria from Rathdrum Properties for AUD 343m.

Australia Sydney Centennial Plaza

Office 283 Invesco, acting on behalf of China Investment Corporation, has acquired Centennial Plaza for AUD 305m. The south CBD asset was sold by joint owners Investa and Australian Unity.

Australia Sydney Northpoint Office 258 Cromwell Property Group, in conjunction with South Africa-based partner Redefine Properties, has acquired Northpoint Tower, a North Sydney office building, for AUD 278.7m from Centuria.

China Chongqing Corporate Avenue 2

Office 396 JLL, acting on behalf of Shui On Land, has sold a majority share of Corporate Avenue 2. The asset has been acquired by Sunshine Life Insurance for over RMB 2.4bn.

China Nanjing Nanjing IFC Office 407 Acting on behalf of ARA Asset Management, JLL has negotiated the sale of the Nanjing IFC office asset to SanPower Group.

China Shanghai Oriental Financial Center

Office 1,162

Partners Cheung Kong Holdings and Hutchison Whampoa have sold the Oriental Financial Center in the Lujiazui financial district for RMB 7.1bn. The project was acquired by the Bank of Communications and China Everbright Group on a forward purchase basis and is expected to complete in mid 2014.

China Shanghai 5 Corporate Avenue

Office 551 China Life has acquired 5 Corporate Avenue from listed developer Shui On Land. The 79,000 sq m (GFA) office asset was sold for a net cash consideration of around RMB 3.4bn.

China Shanghai CITIC Plaza Shenhong

Office 300 On behalf of CITIC Pacific, JLL has sold CITIC Plaza Shenhong to Bank of China Group Investment Ltd, a wholly owned subsidiary of the Bank of China. The 970,000 sq ft building consists of retail and office units.

Hong Kong Hong Kong DCH Commercial Centre

Office 503 CITIC Pacific has sold the DCH Commercial Centre, an office tower in Quarry Bay, to a consortium led by Swire Properties for HKD 3.9bn.

Singapore Singapore TripleOne Somerset

Office & Retail

776 JLL, acting on behalf of Pacific Star Group, has sold TripleOne Somerset, a mixed office and retail asset, for SGD 970m. The asset was purchased by a consortium led by Perennial Real Estate.

Singapore Singapore The Westin Singapore

Hotels 370

A 305-room hotel within the Asia Square Tower 2 commercial development in the Marina Bay area has been sold by BlackRock Asia Property Fund III to Daisho Group one month after the hotel's opening. The fund is part of MGPA, a private-equity property investment advisory firm that BlackRock bought in 2013 to expand its real estate business in Asia Pacific and Europe.

South Korea Seoul KDB Life Tower (Asterium Seoul)

Office 327 Dongbu Corporation has sold the KDB Life Tower located in Dongja-dong to Consus Asset Management for KRW 347bn.

Taiwan Taipei City Elitegroup Neihu Headquarters Building

Office 227 Acting on behalf of Elitegroup, JLL has sold the Elitegroup Computer Systems HQ building to Mercuries Life Insurance. Totalling some 400,000 sq ft of Grade A office space, the en-bloc transaction was the largest in Taiwan in 2013.



Americas


Sales price

US$ m Comments

Brazil Campinas Shopping Center Galleria

Retail 37 Iguatemi Empresa de Shopping Centers S.A. has bought a 30% stake in the more than 33,000 sq m retail centre from private investor Luis Roberto Coutinho Nogueira.

Brazil São Paulo Brazilian Financial Center

Office 110 FII BTG Pactual Corporate Office Fund has purchased a 40% interest in the circa 40,000 sq m office asset located in the Paulista submarket from Top Center Empreendimentos e Participações Ltda. at a reported 9.1% initial yield.

Canada Montreal Place Ville Marie

Office 297 Caisse de dépôt has acquired a 50% interest in the office component of the overall more than 233,000 sq m asset in the CBD from AIMCo.

Canada Toronto Bayview Village Retail 476 Orlando Corporation has sold this Toronto shopping centre, totalling nearly 41,000 sq m, to institutional investment manager bcIMC.

Canada Vancouver 1770 W 7th Ave Office 174 Private investor Chip Wilson has purchased this suburban Vancouver office property.

Mexico Apodaca Plaza Bella Huinala

Retail 21 U.S. REIT Kimco has sold the approximately 17,000 sq m shopping centre in the Nuevo Leon state city of Apodaca to Planigrupo.

Mexico Mexico City Santa Fe 4 Office 100 Germany's Union Investment has bought the nearly 25,000 sq m office asset from REIT Tenaves/Clover Foundation.

United States Boston Riverview Center

Office 193 German investor Jamestown Properties has purchased the nearly 28,000 sq m flex asset in Cambridge from private equity firm Blackstone.

United States Chicago Water Tower Place

Retail 405 UBS has bought a 50% interest in the circa 72,000 sq m North Michigan Avenue trophy urban retail centre from AEW Capital Management.

United States Minneapolis Eden Prairie Mall

Retail 100 U.S. mall REIT General Growth Properties has sold the over 63,000 sq m shopping centre in suburban Eden Prairie to Cypress Equities at a reported 5.75% initial yield.

United States Multiple Kimpton Monaco Portfolio

Hotels 190

Cornerstone Real Estate Advisers has sold three Hotel Monaco properties to an affiliate of Inland American Real Estate Trust, Inc. The portfolio includes the 191-room Hotel Monaco Chicago, 189-room Hotel Monaco Denver and 225-room Hotel Monaco Salt Lake City, all managed by Kimpton Hotels & Restaurants.

United States New York 7 Times Square Office 684 Norges Bank Investment Management has purchased a 45% stake in the approximately 116,000 sq m office tower from REIT Boston Properties.

United States Orlando Hyatt Regency Orlando

Hotels 717 The 1,641-room Peabody Orlando Hotel, attached to the Orange County Convention Center, has been acquired by Hyatt Hotels Corp. and renamed under the Hyatt Regency brand.

United States Seattle Regence BlueShield HQ

Office 150 Investment manager Heitman has bought the circa 29,000 sq m office property in Seattle's CBD from Prudential Real Estate Investors.

United States San Francisco 333 Bush Street Office 265 Brookfield Asset Management has sold the 31-floor, approximately 50,000 sq m financial district office tower to DivcoWest Properties.

United States San Francisco Hyatt Regency San Francisco

Hotels 263

The 802-room hotel has been acquired by Sunstone Hotel Investors at a 6.0% capitalisation rate on 2014 forecasted hotel net operating income. The transaction was equity-funded, using proceeds from issuance of a common stock. The property will continue to be operated by Hyatt.

COPYRIGHT © JONES LANG LASALLE IP, INC. 2014.

This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report

COPYRIGHT © JONES LANG LASALLE IP, INC. 2014.

This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report