Global Market Perspective

Transcription

1 February 2018 Global Market Perspective JLL Global Research

2 Global Market Perspective 3 Global real estate markets finish 2017 strongly, with a robust 2018 in prospect Global Economy 7 Growth edges higher with improvements across most major markets Global Real Estate Health Monitor 10 Sydney, Stockholm and Singapore lead office rental performance Real Estate Capital Markets 11 Investment activity ends 2017 on a high note; 2018 volumes set to soften slightly Capital Values and Yields 17 Income growth supports continued office capital value appreciation; European yields fall to record low Corporate Occupiers 19 Co-working and shared space on the rise Office Markets 21 Leasing activity ends 2017 at highest levels in a decade; rental growth exceeds expectations Retail Markets 32 Retail markets focus on new business models, asset enhancements and tenant mix Industrial Markets 34 Record demand pushes vacancy rates to historic lows Hotels Markets 35 Economic growth extends hotels investment cycle with transaction volumes on par with 2016 Residential Markets 38 Peak in new supply outpacing solid demand in U.S. multifamily market Key Investment Transactions in Q Noteworthy cross-border deals dominated by European portfolios Illustrative Office Occupational Transactions in Q Co-working operators active in all three global regions 2

3 Real Estate Markets Enter 2018 on a High Note Synchronised growth provides strong platform for 2018 Global real estate markets ended 2017 in impressive fashion, with 2018 projected to be another solid year barring major financial, economic or political shocks. Office leasing volumes in the final quarter of 2017 were at their highest level in a decade, while the global vacancy rate defied expectations and continued to fall, despite being near the peak of the development cycle. This helped to propel office rental growth to over 4% for the full year, above earlier forecasts and the strongest increase since At the same time, absorption levels in the logistics sector were at record levels, while vacancy fell to historic lows. Investors remain confident in the real estate sector, with transaction volumes in the final quarter of 2017 surpassing the previous quarterly peak in The synchronised global economic upswing provides a strong platform for 2018, although it will be difficult to match the robust levels of last year and investment volumes are likely to soften slightly due to a lack of product and continued investor discipline. Global Commercial Real Estate Market Prospects, 2018 Investment -5-10% Lower Capital values 3% Higher Leasing -0-5% Lower 2018 prospects Rents 3% Higher Vacancy rate Rising Development Peaking Leasing, vacancy, development, rents and capital values relate to the office sector. Source: JLL, January 2018 Fourth quarter bounce lifts global investment volumes Global real estate transaction volumes for the fourth quarter of 2017 came in at US$228 billion, 10% higher relative to the same period last year. This brings full-year volumes for 2017 to US$698 billion, 6% above last year s total. While political uncertainty still looms, investors remained 3

4 confident in the performance of the real estate sector, reflected in Q global investment volumes surpassing the previous quarterly peak set in Despite being in an extended cycle, the weight of capital seeking to enter the sector is still significant. Although global markets continue to be liquid, the relative lack of product combined with continued discipline are likely to limit investment growth in 2018 and we expect global investment volumes to soften by 5%-10% to around US$650 billion. Nevertheless, investors are still keen to access the sector and are now looking to new strategies such as debt financing, M&A and alternative sectors as the search for yield continues. Global office leasing volumes at highest levels for a decade The global office leasing markets finished the year on a high note, with 11 million square metres leased in the final quarter of 2017 across 96 markets, the strongest quarterly volume since For the full-year 2017, gross leasing volumes were a healthy 4% higher than 2016 and at the top end of our forecast range. Europe was the outstanding leasing market performer with activity up an impressive 10%, while volumes in the U.S. were up by 3% on 2016 levels with new supply providing greater choice for tenants is set to be another good year and we have revised our global volume projections upwards to close to 40 million square metres. Yet due to the exceptional 2017 result, this translates into a modest 3% decline year-on-year, with volumes unlikely to hit last year s impressive tally. Global office vacancy rate falls, defying expectations Office leasing markets ended the year a lot tighter than predicted, with the global office vacancy rate defying expectations by falling marginally to 11.9% in Q4 2017, testimony to the capacity of the market to absorb additional space. Most of the vacancy rate decline was due to the continued falls in Europe, where vacancy dropped further to 7.4% in Q4. Vacancy rates remained broadly flat in the Americas (at 14.9%) and Asia Pacific (at 11.1%). Nonetheless, with the delivery of new offices expected at a relatively elevated level during 2018, vacancy is projected to edge up in 2018 to around 12.2%. Office rental growth strongest since 2011 Rents for prime offices across 26 major markets grew by 4.1% for the full-year 2017, double our forecasts at the beginning of 2017 and the largest increase since More of the same is expected for 2018, with growth projected to average 3% and top performances going to Singapore and Sydney. Only Shanghai, Mexico City and Beijing are slated for rental corrections over the coming year. 4

5 Rental change (y-o-y %) Rental Growth for Prime Offices, % 8.0% % 4.0% 2.9% 4.1% 3.0% 2 1.8% 0.9% F Unweighted average of 26 markets Source: JLL, January 2018 Retail markets focus on asset enhancement and tenant mix Retailers are adapting and re-evaluating their existing physical space in response to the structural change impacting the sector, with a notable acceleration in new business models and owners investing to create mixed-use destinations for the evolving shopper. The U.S. retail market expansion continues to slow as low vacancy and a focus on renovation of existing space rather than construction keeps rents inching up, though at a reduced pace. Strong confidence and job creation continue to drive consumer spending in Europe, although prime high street rents are broadly stable in most markets. In Asia Pacific, many retail landlords are adjusting tenant mixes while retailers focus on consumer engagement and experience, with generally flat rents across the region. A banner year for global logistics markets Global logistics markets ended 2017 on a high, with robust demand and vacancy at historic lows propelling further rental growth. The U.S. industrial market registered its best fourth quarter of net absorption on record in Q4 2017, driving vacancy to an all-time low and spurring additional rental growth. In Europe the regional vacancy rate has also fallen to a new low with 2017 take-up well above the long-term average. Rents continued to edge up in most markets across Asia Pacific, supported by the uplift in global trade. With buoyant demand and a lack of modern vacant space, we expect continued rental growth momentum in Continuing economic growth extends hotel cycle The global travel market remains robust, leading to positive hotel operating performance in all three global regions. Continuing economic growth is supporting a healthy hotel investment environment, with global hotel transaction volumes totalling US$62.5 billion in 2017, on par with the levels seen in Investment funds and private equity firms stayed the most active buyer 5

6 group in 2017, while institutional investors continued to increase their allocation to real estate, more than doubling their share of acquisitions since 2014, from 4% to 10% in New supply outpaces still solid demand in U.S. multifamily market The U.S. multifamily rental market continues to adjust to an influx of new supply being delivered across the country marked the expected peak of the development cycle, with annual rental growth decelerating and a slight rise in the national vacancy rate to 5.2%. With new groundbreakings in the multifamily sector now slowing, fundamentals are well positioned to stabilise over the next 18 to 36 months. Institutional investor demand remains buoyant in continental Europe, with investment volumes climbing higher in Germany while the Netherlands registered a record year for transactional activity. The UK institutional market remained on its growth trajectory, with investment volumes 20% higher in 2017 and expectations of continued strong growth this year. In Asia Pacific, a tight housing policy stance and limited issuance of pre-sales certificates have impacted sales activity in Shanghai. Elsewhere, market sentiment has led to sustained sales momentum in Singapore as well as Hong Kong, where buyers have snapped up flats in new launches. 6

7 Global Economy High hopes for 2018 The recent strong tone of economic data has led to a more-than-usually buoyant sentiment at the start of There have often been high hopes in the past, but since 2012 these have swiftly been dashed as challenges emerged to prevent lift-off. The big difference this time seems to be a greater confidence that the long stagnation in the major economies may be ending a decade after the Global Financial Crisis (GFC) and that this is synchronised with improvements elsewhere in the world. After the Trump administration passed its major tax stimulus package in late 2017, much is expected of the U.S. economy. Strong consumer-led momentum in H pushed growth for last year up to an estimated 2.4%, below its historic potential but much better than a poor The tax package is expected to push this up to 2.7% in the current year still short of Trump s 3% goals, though a three-year high nonetheless. Many are still cautious about the longer-term impact of the tax cuts, however, and the recovery will be accompanied by rising interest rates as the Fed continues to normalise. In Europe, the end of an intense election year (if not yet of political uncertainty) has allowed the economic upturn to move centre stage. Estimates for last year s Eurozone growth have increased to 2.4%, the highest in a decade. A slight dip is in prospect for the current year to 2.2%, but this forecast was recently revised upwards with a significant hike to Germany, and upside remains possible. In the UK, by contrast, another year of Brexit negotiations is expected to constrain activity to a slightly disappointing 1.5%, a similar rate to Fortunes in the dynamic Asia region have continued to be uneven. China s performance has outstripped expectations over recent quarters and the outlook for this year has edged higher. Although India underachieved by a significant margin in 2017, forecasts for the next 12 months remain significantly above trend and it is projected to outstrip China once again. Japan has also seen its growth predictions edge higher thanks to strong investment and exports. GDP Projections for 2018 in Major Economies Recent Movements Australia China France Germany India Japan UK U.S. October January 2018 (Latest) Change (bps) Source: Oxford Economics, January

8 Policy-makers plot the path back to normal Major central banks continue to move gradually towards interest rate renormalisation. The most important changes in Q were very well signalled, with a 25 bps rise in UK rates in November and a similar U.S. hike in the following month creating few ripples. U.S. action is expected to continue this year with three further increases currently pencilled in. Other central banks will be reigning in asset purchase schemes (Eurozone and Japan) with interest rate rises still a year or more away, while the Bank of England is odds-on to hold fire during The main challenge for policymakers continues to be returning the global economy to its pre-crash growth norms. Sustained monetary stimulus and numerous fiscal packages have failed to do this and few are convinced that the recent U.S. package will buck the trend. Many see the underlying problem as the corrosive impact of the GFC on productivity and (by implication) on income growth. With real pay effectively unresponsive, growth rates tend to flounder once any immediate stimulus is removed. Unfortunately, there are few tools available to address this productivity problem witness Japan, which has not found a solution a generation on from its 1980s financial crisis. Restoring real wage growth remains crucial to a return to past cyclical norms, though as yet evidence is still patchy. Until it re-emerges, economic growth in the developed world is likely to underachieve. Global growth edges higher, but not quite lift-off Given this half-decade of below-par global growth, it is probably not surprising that commentators are still cautious about prospects beyond the current year. Clearly data and sentiment suggest risks are shifting to the upside, and the latest view from Oxford Economics shows global growth sustaining its recent clip of over 3.5% a year. This is above the subdued rates of , but not especially favourable compared with the past and certainly well below the strong mid-2000s expansion. One uncertainty remains the durability of the U.S. upturn. As noted, the U.S. fiscal stimulus is expected to raise growth in the short-term and is a major contribution to the peaking world cycle this year. But forecasts suggest that there will be no acceleration and activity will ease again in This implies that 3% growth targets will be elusive, due to underlying demand fragilities, subdued productivity and the ongoing impact of interest rate tightening. Another challenge to a stronger global acceleration will be emerging markets. Here growth rates continue to be relatively impressive at almost 5% a year. However, factors such as weaker commodity prices, rising U.S. interest rates and the dollar, and geopolitical volatility have prevented these dynamic economies regaining the momentum that was typical over the recent past. These headwinds are not expected to ease and the outlook for the developing world is stable at a slightly below-par rate. Asia has the world s most important emerging markets and is still the fastest-growing region. Active policy averted the feared slowdown in China over the last 12 months, with GDP growth projected to drift down towards 6% over the next two years in line with long-term goals to rebalance economic activity. Indebtedness remains a downside risk, but the central view is of benign transition. 8

9 In 2016, India seemed to be turning a corner after taking over as Asia s growth engine, but the economy has since faltered. Special factors in part explained this slowdown however, and a reversal is in prospect over the next two years provided reform stays on track. Asia s most important developed economy, Japan, has now been in a low-growth rut for two decades. Nearterm prospects are brighter, but this expansion is expected to fizzle out by the turn of the decade. There remain some sources of global upside. The European recovery reached a post-gfc high in 2017 driven by a resurgent Eurozone. Stimulative monetary policy, solid domestic demand and job creation are supporting activity. German growth is set to stabilise at close to 2.5% this year, while France also sees further gradual improvement. Elsewhere, Brexit provides a contrast for UK fortunes, with growth falling well behind its neighbours. Although the UK s slowdown has been more modest than feared, activity is set to stall at a five-year low until 2020, with downside potential if a cliff-edge Brexit looms. Global Outlook, GDP Change, Global Asia Pacific Australia China India Japan Americas U.S MENA Europe France Germany UK Source: Oxford Economics, January

10 Global Real Estate Health Monitor Economy Real Estate Investment Markets Real Estate Occupier Markets City Metro City Investment Capital Area Investment Volumes Value Prime Yield Rental Net Vacancy Supply GDP Volumes Change Change Yield Gap Change Absorption Rate Pipeline Beijing 7.0% % 0.9% 6.2% % 4.4% 7.1% 19.9% Boston 2.9% % -4.1% 4.1% % 0.4% 13.6% 1.4% Brussels 1.6% % 15.2% 4.5% % 2.0% 8.2% 2.8% Chicago 2.5% % 1.0% 5.3% % 0.1% 16.6% 1.9% Dubai 3.5% 0.9 8% 0.0% 7.5% na 0.0% na 10.0% 4.7% Frankfurt 2.7% 5.5 1% 20.1% 3.3% % 1.1% 7.6% 3.8% Hong Kong 2.8% % 23.6% 2.7% % 1.0% 5.1% 4.6% London 1.6% % 0.0% 3.5% % -0.4% 5.1% 6.3% Los Angeles 2.8% % 3.0% 4.3% % 0.5% 15.0% 1.0% Madrid 3.3% % 7.8% 3.8% % -2.5% 10.9% 2.1% Mexico City 2.8% % -0.5% 7.6% % 4.8% 16.0% 14.0% Milan 1.7% % 19.6% 3.8% % 0.4% 13.3% 2.6% Moscow 2.0% 3.4-2% 0.0% 10.0% % 3.1% 14.4% 4.9% Mumbai 8.0% % 2.5% 9.6% % 7.0% 16.8% 12.6% New York 2.7% % 1.4% 3.6% % 0.6% 10.1% 2.8% Paris 1.8% % 1.3% 3.0% % 0.9% 6.4% 4.4% San Francisco 3.1% % -5.1% 3.8% % 0.1% 8.1% 7.4% Sao Paulo 2.8% % 11.7% 9.3% % 2.3% 25.4% 6.8% Seoul 2.1% % -3.6% 4.4% % 0.9% 11.7% 6.3% Shanghai 6.6% % 0.5% 5.6% % 13.3% 18.4% 25.6% Singapore 2.9% % 11.2% 3.6% % 3.0% 10.8% 2.5% Stockholm 3.3% % 21.0% 3.5% % 0.6% 7.7% 2.4% Sydney 2.4% % 20.6% 4.8% % -0.1% 6.0% 3.1% Tokyo 1.6% % 2.9% 2.9% % 2.0% 2.5% 12.7% Toronto 2.4% % 7.0% 4.3% % 1.4% 8.7% 1.1% Washington DC 2.4% % -2.8% 4.5% % 0.0% 17.0% 3.4% Real estate data as at end Q See page 49 for definitions and sources. 10

11 Real Estate Capital Markets Investment Volumes Fourth quarter bounce lifts global investment volumes Global real estate transaction volumes for the fourth quarter of 2017 came in at US$228 billion, 10% higher relative to the same period last year. This brings full-year volumes for 2017 to US$698 billion, 6% above last year s total. While political uncertainty still looms, investors remained confident in the performance of the real estate sector, reflected in Q global investment volumes surpassing the previous quarterly peak set in Despite declines in the U.S., pockets of outperformance across Americas Continuing the trend seen throughout 2017, fourth quarter volumes in the Americas are 15% lower than we recorded in 2016, coming in at US$66 billion. Full-year activity is down 12%, with investment levels dipping to US$249 billion. Once again the U.S. is the epicentre of this decline, as full-year volumes fell 16% to US$224 billion, the lowest level since On the other hand, Canada continues to be a bright spot in the region as 2017 volumes are up 29% to US$18 billion, 29% higher than the long-run average. In Latin America, Brazil outperformed after back-to-back years of relatively slow activity; full-year volumes in 2017 are up 166% to US$4 billion. The UK and Germany help Europe finish on a high note Sustained investor appetite for European real estate led to a fourth quarter surge as volumes jumped by 31% to US$110 billion. This concluded a strong year for the region with full-year volumes up 22% to US$300 billion. Markets across much of Europe received a further boost as the continued weakness of the U.S. dollar pushed up volumes in dollar terms. Driving this performance was the UK, where annual volumes were up 37% in the year after the Brexit vote. Robust fourth quarter activity in Germany combined with a vigorous start to the year brought fullyear volumes up 9%. Similarly, a very solid fourth quarter in France helped reverse the early year slow-down and brought full-year volumes up 12%. In the Netherlands, a record breaking year saw volumes reach US$21 billion, 44% higher than the previous peak in Markets in Southern Europe also continue to perform well as Italy and Spain witnessed activity pick up by 17% and 23% in 2017, while Greece and Portugal are up even more, posting annual gains of 56% and 66% respectively. Record Q4 pushes Asia Pacific forward For the second year in a row, the fourth quarter of 2017 set a new record for quarterly transactional volumes in Asia Pacific as investment activity ticked up 16% from the record levels set in the fourth quarter of 2016 to US$52 billion. This brings annual activity to US$149 billion, 13% higher than Leading the way were the region s two largest markets, China and Japan, where annual volumes are up 5% and 10% respectively. Robust investor demand for property in Hong Kong resulted in a strong Q4, which in turn brought full-year volumes to a record high of US$16 11

12 US$ billions billion, 58% up on Growth in South Korea (10%), Australia (14%) and Singapore (18%) rounded off the very solid year for the region. Softer investment activity expected in 2018 The global Goldilocks economy of 2017 produced a record year in the post-crisis era as markets hit new highs around the globe. Broad-based growth, low interest rates and the lack of inflationary pressure have created an ideal environment for investors. Even though central banks across the developed world are looking to unwind asset purchase programmes, and interest rates are beginning to slowly rise, forward guidance, strong fundamentals and positive market sentiment have prevented any major dampening in global markets. Real estate markets have seen much the same trends. The weight of capital seeking to enter the sector is still significant despite being in an extended cycle. While yields in many global markets are at record lows, healthy cash flow fundamentals have underpinned pricing. We expect global investment volumes in 2018 to soften by 5%-10% to around US$650 billion. Although global markets remain liquid, the relative lack of product combined with continued discipline are likely to limit investment growth in Nevertheless, investors are still keen to access the sector and are now looking to new strategies as the prominence of traditional single-asset transactions has started to decline. Greater focus has been placed on debt financing, M&A, and alternative sectors as the search for yield continues. Direct Commercial Real Estate Investment, (F) -15% -5% ~0% Americas EMEA Asia Pacific Global xx% Projected change % Source: JLL, January

13 Direct Commercial Real Estate Investment Regional Volumes, US$ billions Q Q % change Q3 17-Q4 17 Q % change Q4 16-Q4 17 FY 2016 FY 2017 % change FY 16-FY 17 Americas % 78-15% % EMEA % 84 31% % Asia Pacific % 45 16% % Total % % % Source: JLL, January 2018 Direct Commercial Real Estate Investment Largest Markets, US$ billions Q Q Source: JLL, January 2018 % change Q3 17-Q4 17 Q % change Q4 16-Q4 17 FY 2016 FY 2017 % change FY 16-FY 17 U.S % % % UK % % % Germany % % % France % % % China % % % Japan % % % Hong Kong % % % Australia % % % Netherlands % % % South Korea % % % Italy % % % Spain % % % Canada % % % Sweden % % % Finland % % % Norway % % % 13

14 Regions in focus Lower activity levels in U.S. set tone for the Americas Sales transaction volumes across the Americas region continued to decelerate moderately in the fourth quarter, with US$66 billion in closed deals during the period. This is down 15% from the last quarter of For 2017 overall, total volumes reached US$249 billion, 12% lower than 2016 levels. These declines continue to be squarely driven by U.S. trends, where total activity for 2017 of US$224 billion represented a 16% fall on the previous year. For 2018, we anticipate a broad continuation of the underlying factors behind these trends, with lower activity in the U.S. leading to a regional Americas volume projected to be around 15% lower than in Recapitalisations, larger portfolio and platform-level deals continue to be in demand from an array of investors including, notably, foreign capital sources. Overseas investors remain keen on the U.S. market, and it is at the top of many target market lists in fact, foreign buyer market share in the U.S. office sector for 2017 exceeded 17%, trailing just behind the highest percentage on record established in Value-add continues to be the favoured investment strategy for raising and deploying capital in the U.S., while there is an incremental shift underway towards debt strategies as an alternate path to yield in the current yield-starved environment. Outside of the U.S., the trend is generally toward stable or increasing transaction activity within the Americas Region. In Canada, although total volumes declined moderately in the fourth quarter from a year earlier to US$4 billion, the country enjoyed sturdy growth in volumes for 2017 overall. Investment volumes exceeded US$18 billion for the year, an increase of 29% from In Brazil, investor appetite for assets continues to grow as confidence about the economic recovery takes hold. Q marked the second consecutive quarter of total volumes reaching US$1.5 billion, driving full-year 2017 activity to US$4 billion, more than doubling that in Finally, investment volumes in Mexico were largely unchanged from the previous year in 2017 at US$2 billion. Subsiding inflation in 2018, as well as recovery from temporary economic wobbles, bode well for investment in the market this year; however, potential uncertainty around the mid-year general election might be a source of caution. EMEA transaction volumes exceed expectations EMEA investment volumes came in at US$110 billion in Q4 2017, a 31% increase on the fourth quarter of While part of this can be attributed to an appreciating exchange rate over the course of the year, the growth in local currency terms (24%) was also significant. Over the full year, volumes reached US$300 billion, an increase of 22% on 2016 and the strongest year since Looking to the current year, sentiment across the region is likely to be supported by the favourable economic backdrop in the Eurozone, although there remain challenges including ongoing political uncertainties and Brexit negotiations moving into a critical phase. On balance, investors are expected to be more cautious and volumes are likely to soften marginally on a strong 2017, with a 5% fall predicted. The UK is in recovery mode following the Brexit-related slump in activity during 2016, with Q investment volumes up 80% on the previous year to US$27 billion. Over the full year volumes increased by 37% to US$79 billion, but were still below annual totals. 14

15 Buoyant investment activity in Germany saw volumes at the end of 2017 rise 8% on Q Combined with the strong start to the year, full-year volumes rose to US$60 billion, a 9% increase. Meanwhile, a lively fourth quarter in France helped reverse the slowdown in activity seen in Q2 and Q3, with Q4 investment volumes up 61% year-on-year. This raised 2017 totals by 12% to US$32 billion. Robust growth across European regions Reflecting the region s strong overall performance, investment activity increased in all European regions during Volumes in the Benelux region (+ 57%), Southern Europe (+24%) and the Nordics (+27%) all rose by double digits compared with 2016, while activity in Central and Eastern Europe (CEE) rose 3% to US$19 billion, surpassing the previous cyclical peak in 2006 by 29%. London reclaims top position in 2017 London reclaimed the top position as the world s most traded city during 2017 as investment activity rebounded by 35% from 2016 lows. A resurgence in foreign investment, which increased by 67%, meant London also headed the rankings as the largest recipient of cross-border capital for the year. Los Angeles registered its strongest year on record to displace New York, where transactional activity fell by 48%, and climb into second place. In Europe, Berlin posted its best year on record to enter the Global Top 20, as volumes doubled from 2016 levels. All six Asia Pacific markets represented in the Top 20 witnessed an increase in activity, with Shanghai and Hong Kong also setting new annual records as volumes climbed by 11% and 58% respectively. Direct Commercial Real Estate Investment, Top 20 Cities, 2017 London Los Angeles New York Paris Shanghai Hong Kong Tokyo Seoul Washington, DC Singapore Boston Sydney Silicon Valley Toronto Chicago Atlanta Dallas Seattle Berlin Houston Source: JLL, January 2018 Americas EMEA Asia Pacific US$ billions Investment volumes reach new record in Asia Pacific Investment activity across the Asia Pacific region surprised on the upside in the final quarter of 2017, reaching a new record at US$52 billion, up 16% on the same quarter of As a result, fullyear transaction volumes also set a new high, coming in at US$149 billion, up 13% on the previous year. 15

16 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 US$ billions Cross-border investment activity lifted again in Q4, accounting for 40% of total transaction volumes. Cross-border investors remained net purchasers during the quarter, with Singaporeans the largest cross-border buyers in the region, representing US$3 billion worth of deals. Foreign investors active in Japan Transaction volumes in Japan totalled US$37 billion in 2017, up by 10% year-on-year. Foreign investors were very active in the market, with the notable entry of Norges Bank Investment Management making their first foray in the Asia Pacific region. Investor interest in other regional cities continues to build, with a particular focus on Osaka and Fukuoka. Investor interest in Australia moving beyond Sydney and Melbourne Investment volumes in Australia came in at US$21 billion in 2017, up 14% on Capital continues to focus on the upper prime end of the market; however, there is limited opportunity to deploy in this segment of the market, leaving a lot of unsatisfied capital. Interest has been shifting towards secondary cities such as Brisbane. Another record year for Greater China Transaction volumes during 2017 in China reached US$36 billion, up 5% on the year and marking a new all-time record. Despite the increase in transaction volumes, most sectors saw year-on-year declines with total volumes propped up by the Q3 sale of Wanda s portfolio of 76 hotels for around US$3 billion. Deal flow continues to be concentrated in Shanghai, which accounted for nearly 60% of transaction volumes in mainland China. Investment volumes in Hong Kong established a new record in Q4 2017, coming in at US$7.5 billion and up 171% year-on-year. Full-year volumes totalled US$16.4 billion, up an impressive 58% on Pricing across the market continues to show upward momentum despite the already heated environment. Direct Commercial Real Estate Investment Quarterly Trends, Source: JLL, January 2018 Americas EMEA Asia Pacific Rolling Four-Quarter Average 16

17 Asia Pacific Americas Europe Capital Values and Yields Income growth supports capital appreciation Income growth on prime assets across 26 major office markets underpinned capital appreciation of 6.0% in Capital growth for prime office assets in 2018 is expected to slow to around 3%- 4%. Eight of the 26 major office markets have recorded double-digit capital value growth over the past year, as a result of steady income growth and further yield compression. Hong Kong (+24%), Stockholm (+21%), Sydney (+21%) and Frankfurt (+20%) topped the table of capital appreciation in This year should see Moscow and Sao Paulo record strongest capital growth, as they move into a recovery phase. Continental Europe drives further yield compression Prime office yields were virtually unchanged in the majority of major office markets in the final quarter of 2017, with only Sao Paulo (-25 bps) and Sydney (-12 bps) showing notable compression. In Europe, however, office yields continue to compress, with the mean prime office yield falling below 4% for the first time since our records began. The largest inward movement was recorded in Germany, with Berlin s prime office yield now standing at 2.9%. Prime Office Yield Shift, Q Q Brussels Q Q Frankfurt London Q Q Madrid Milan Moscow Paris Stockholm Boston Chicago Los Angeles New York San Francisco Toronto Washington DC Sao Paulo Mexico City Beijing Hong Kong Mumbai Seoul Shanghai Singapore Sydney Tokyo Basis point change Source: JLL, January

18 Prime Offices - Projected Change in Values, 2018 Rental Values Capital Values 10-20% Singapore Moscow, Sao Paulo 5-10% Sydney, Toronto Sao Paulo, Moscow, Madrid Hong Kong, Sydney, Toronto, Madrid 0-5% Hong Kong, Brussels, Stockholm, Frankfurt Dubai, Boston, Chicago, Los Angeles New York, San Francisco, Washington DC Milan, Seoul, Paris, Mumbai, London, Tokyo Singapore, Brussels, Frankfurt, Dubai Boston, Chicago, Los Angeles, New York San Francisco, Washington DC, Milan, Paris Mumbai, Shanghai, Stockholm, London, Tokyo 0-5% Shanghai, Mexico City, Beijing Beijing, Mexico City, Seoul New York Midtown, London West End, Paris CBD, Dubai DIFC. Nominal rates in local currency. Source: JLL, January 2018 Prime Offices Capital Value Change, Q Q Hong Kong Stockholm Sydney Frankfurt Milan Brussels Sao Paulo Singapore Madrid Toronto Los Angeles Tokyo Mumbai New York Paris Chicago Beijing Shanghai London Dubai Moscow Mexico City Washington DC Seoul Boston San Francisco Americas EMEA Asia Pacific % change Notional capital values based on rents and yields for Grade A space in CBD or equivalent. In local currency. Source: JLL, January

19 Corporate Occupiers Global corporate occupier activity remained at a high level in the final quarter of Flex space providers accounted for about one-fifth of activity in London alone, while broad-based demand from corporates in the financial and technology sectors and the co-working industry underpinned activity in the U.S and Asia Pacific. Corporate sentiment is improving as global economic growth creates expansion opportunities in both developed and emerging markets. Robust levels of occupier activity are expected to continue in Co-working and shared office space on the rise globally The burgeoning flex space and co-working market is transforming real estate across the world and is fast becoming an important part of wider corporate real estate (CRE) and portfolio strategies. SMEs, mobile and contingent workforces remain the backbone of flexible space operations, although medium and large companies have also begun to realise the potential of leveraging flexible space arrangements to better manage their liquid workforces, which is evident through some large-block corporate leasing. Shared workspaces have grown at an incredible rate of 200% over the past five years. In global cities like London, New York and Chicago they are expanding at an annual rate of 20%, making coworking an institutional part of the market. Increasing interest and a lot of aggressive growth from a number of the key providers is translating into investment, JV and acquisition activity from real estate investment players. Demand for flex space is projected to grow as corporates and large enterprises are looking more and more to enlarge the flexible proportion of their portfolios to benefit from a range of the advantages that such flexibility can bring. A rising share of enterprise users is likely to continue to underpin the demand for flexible space over 2018 and beyond. Talent and technology continue to drive CRE strategies Competition for top talent has sparked renewed interest in firms location decisions, as many of the world s largest technology and financial companies review their expansion strategies in a search for affordable but high-quality and educated talent. Companies are also leveraging workplaces as a key differentiator to attract and retain top talent. Our research shows that increasingly mobile and tech-enabled employees are demanding greater choice on when and where they work. In response, corporates are introducing a range of innovative workspaces and offering more choices to improve employee performance and quality of life. Smart buildings is another other area of focus within corporate real estate. A variety of companies and developers are now innovating and exploring the impact of digitisation on buildings, portfolios and workplaces. This rapidly evolving trend is driving closer alignment between real estate and technology functions, as they work together to drive performance outcomes for firms and to enhance the employee experience. 19

20 Global Office Market Conditions Matrix*, Chicago Brussels Beijing Los Angeles Frankfurt Hong Kong New York San Francisco London (West End) Madrid Mumbai Shanghai Toronto Washington DC Moscow Paris Singapore (CBD Overall) Sydney Mexico City Sao Paulo Stockholm Dubai Tokyo (CBD 5-kus) Tenant Favourable Neutral Market Landlord Favourable *Relates to conditions in the overall office market of a city. Conditions for prime CBD space may differ from the above. Source: JLL, January

21 Office Markets Office Demand Dynamics Global leasing volumes at highest level for a decade The global office leasing markets finished the year on a high note, with 11 million square metres leased in the final quarter of 2017 across 96 markets, the largest quarterly volume since For the full-year 2017, gross leasing volumes reached 40.7 million square metres, a healthy 4% higher than 2016 and at the top end of our forecast range: Europe was the outstanding leasing market performer in 2017, with levels up an impressive 10%, far stronger than expected; Leasing volumes in the U.S. were exactly on forecast, up by 3% on 2016 levels; Asia Pacific also exactly matched projections, falling as predicted by 5% from the exceptional levels of is set to be another good year, and we have revised our volume forecasts upwards to close to 40 million square metres. Yet due to the exceptional 2017 result, this translates into a modest 3% fall year-on-year, with volumes unlikely to hit last year s impressive tally. European leasing volumes hit record levels in Q European office take-up rose to 4.0 million square metres in Q4 2017, the highest quarterly leasing volume on record. Robust activity in the final quarter pushed 2017 take-up to 13.3 million square metres, up 10% on 2016 and the highest level since the previous peak of the market in In particular, Paris and the Big 5 German markets outperformed, while London also continued to see strong take-up levels: London s take-up for the full-year 2017 was up 9%, representing a robust year for leasing activity and outperforming expectations. Flexible-space operators continue to be a major contributor to activity, with the sector accounting for around 20% of London s take-up. The strong sentiment recorded in Paris over the last 18 months translated into a 20% yearon-year increase and the best year-end on record. In Germany, the Big 5 office markets showed no signs of weakening, with Q4 take-up rising by 38% year-on-year. Frankfurt registered its strongest quarter on record, highlighting the strengthening sentiment across the wider market. Central and Eastern Europe also recorded an active Q4, with volumes up one-third on a year ago. Moscow, Prague and Warsaw all experienced significant growth in leasing activity in Q4. Spain also deserves highlighting, where volumes were up 31% in Madrid witnessed a particularly strong recent uplift, with Q4 leasing levels 74% higher year-on-year. 21

22 Demand across Europe continues to strengthen, and we have therefore increased our full-year 2018 take-up forecast to 12.3 million square metres (slightly down on a robust 2017, but 11% ahead of the 10-year average). U.S. tenants have increasing choice in 2018 Fundamentals remain positive in the United States and organic growth continues as the economy powers on, with leasing volumes up 3% for the full-year There has been a slowdown in net absorption however, driven by a combination of reduced expansionary activity among large users, movement into new space and give-backs of commodity blocks faster than the market can absorb. Among the U.S. s larger office markets, Houston saw the greatest improvement in gross leasing volumes in 2007, but it is several secondary cities that are registering the fastest growth notably Nashville, Minneapolis, Indianapolis and Phoenix will see continued growth for the U.S. office market, even though net absorption will stay at its newer and slower pace. Leasing activity has yet to show a sign of slowing and economic growth should again be solid. This will keep demand for space buoyant, while more balanced conditions will ease the cost and space burdens on tenants. Over the border, Canada saw its best year for occupancy growth since 2012, reflecting the robust performance of the Canadian economy. Businesses continue to expand in Vancouver, Toronto and Montreal. New leasing slows in Asia Pacific Overall leasing activity in Asia Pacific dropped 26% year-on-year in Q4, contributing to a full-year decline of 5%, in part due to low vacancy and high pre-commitment rates for quality buildings in several key markets. Most Asia Pacific cities experienced healthy broad-based occupational demand driven largely by financial and technology firms: Gross leasing for the China Tier 1 cities was up 17% in Leasing volumes in Shanghai were bolstered by demand from co-working operators, while new supply in Beijing s core areas allowed pent-up demand to be released which pushed new leasing higher. In Japan, gross leasing activity remained robust, rising a healthy 8% in 2017 with improved market sentiment amid optimism about the economy. Pre-leasing activity maintained its vigorous pace and bolstered leasing volumes. Gross leasing for the India Tier 1 cities dropped by 10% in High occupancy, strong commitments to high-quality properties and a slight softening of demand from the technology sector (following job automation and cost-related consolidations) impacted new leasing activity. Even so, Delhi and Bengaluru registered the highest leasing volumes in the Asia Pacific region during In Australia, gross leasing volumes declined 25% in 2017, but from a high base in Demand stayed healthy in Sydney, but leasing activity is constrained by low vacancy and low deliveries of new space. In Melbourne, most large deals were concentrated in upcoming developments. 22

23 Projection millions sq m With a positive outlook for regional and global economies in 2018, we are optimistic that leasing activity will hold up relatively well and remain within reach of 2017 s level. The performance among markets will continue to be mixed, and new tech firms (e.g. e-commerce, co-working) should be key sources of demand growth as their business expands. Global Office Demand Annual Gross Leasing Volumes, markets in Europe; 50 markets in the U.S.; 22 markets in Asia Pacific Source: JLL, January

24 Office Supply Trends Global office vacancy rate falls, defying expectations Office leasing markets finished the year a lot tighter than predicted, with the global office vacancy rate defying expectations by falling marginally to 11.9% in Q4 2017, testimony to the capacity of the market to absorb additional space. Most of the vacancy rate decline was due to the continued falls in Europe, where vacancy dropped further to 7.4% in Q4. Vacancy rates in the fourth quarter kept broadly flat in the Americas (at 14.9%) and Asia Pacific (at 11.1%). Nonetheless, with the delivery of new offices expected at a relatively elevated level during 2018, vacancy is projected to edge up in 2018 to around 12.2%. Peak in global development cycle hides regional differences Delays in new deliveries have pushed the peak of the global office development cycle into 2018 at 17.5 million square metres (compared to over 19 million square metres at the peak of the last cycle in 2008). There remain differences in the timing of development cycles between the three global regions: U.S. development peaked last year, with new completions expected to decline progressively between 2018 and In Asia Pacific, peak development is likely to be this year, with high levels of completions forecast in Shanghai, Beijing, Tokyo, Jakarta, Manila and India s Tier 1 cities. In Europe, development is now gearing up, with deliveries peaking in 2019 and European office vacancy decreases further Robust leasing activity continues to erode available space, with the European office vacancy rate decreasing to 7.4% in the final quarter. This fall was particularly strong in Amsterdam, Warsaw, Budapest and Berlin. In 2018 we expect vacancy to stabilise as the pipeline grows further this year and next. The development pipeline is likely to be more significant this year, with most of the increase concentrated in London, Paris, Dublin, Berlin and Munich. However, completions of 5 million and 6.5 million square metres in 2018 and 2019 respectively are still well below the levels in excess of 7 million square metres recorded annually in 2008 and Both quality and cost-effective space options increase in the United States As a result of new construction outstripping absorption, vacancy in the U.S. has increased to 15.0% and is set to grow even more in 2018 and 2019 as deliveries intensify. Flight to quality is accelerating the rise in vacancy in Class A space, although it remains tighter than that of Class B vacancy. Developers are taking note of this upward trend in vacancy and have scaled back on construction starts. In 2017, starts dropped sharply by 29% to 42.9 million square feet, ultimately 24

25 leading to construction activity falling below the 100 million square foot mark for the first time since Canadian markets tighten Canada s Downtown Class A vacancy dropped an impressive 380 bps during 2017 to 10.9%; if Calgary is removed, the vacancy rate is only 5.8%. Vacancies in Toronto and Vancouver have been in virtual free-fall for several quarters, although vacancy is likely to see less movement in Robust demand counters surging supply in Mexico The historic wave of new supply landing in the Mexico City office market resulted in a 9% growth in the office stock in 2017 alone, which explains the currently elevated 16% vacancy rate. That rate was stable over the course of Q4 however, as tenant demand was also strong will see supply-side challenges continue and the vacancy rate is likely to drift upwards. Major improvement on offer in Brazil Brazil s turning economic fortunes will rather quickly translate into markedly improving conditions in its office market. In Sao Paulo, the vacancy rate has peaked at 25%. As a further boost, new deliveries will be on the decline during 2018, and by year-end the pipeline should be low historically. Large supply volumes offer tenants options in growth markets China and most Southeast Asian markets saw more new buildings enter the market while the Australian cities recorded very limited or no new supply. Over 1.5 million square metres of new supply entered the Shanghai market in Huge volumes of supply have come online in Jakarta since early 2015 and 2017 volumes were at a record high. Vacancy rates continued to decline in the majority of Asia Pacific markets during Q4, with those in Taipei, Brisbane and Singapore having dropped the most. With a healthy level of new supply projected in 2018, regional vacancy is anticipated to edge up, led by higher rates in markets such as Hanoi and Jakarta, which are expecting new waves of supply. 25

26 millions sq m Global Office Completions, U.S. Europe Asia Pacific 15 Average (F) (F) (F) 24 markets in Europe; 25 markets in Asia Pacific; 50 markets in the U.S. Asia relates to Grade A only. Source: JLL, January 2018 Office Supply Pipeline Major Markets, Shanghai Beijing Mexico City Tokyo Mumbai San Francisco Sao Paulo London Seoul Moscow Dubai Hong Kong Paris Frankfurt Washington DC Sydney Brussels New York Milan Singapore Stockholm Madrid Chicago Boston Toronto Los Angeles Completions as % of existing stock Covers all office submarkets in each city. Tokyo CBD - 5 kus Source: JLL, January

27 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Vacancy Rate (%) San Francisco Toronto New York Boston Los Angeles Mexico City Chicago Washington DC Sao Paulo London Paris Frankfurt Stockholm Brussels Madrid Milan Moscow Tokyo Hong Kong Sydney Beijing Singapore Seoul Mumbai Shanghai Office Vacancy Rates in Major Markets, Q Global 11.9% 30% 25% Americas 14.9% Europe 7.4% Asia Pacific 11.1% Quarterly movement Increased Decreased Stable 20% 15% 10% 5% 0% Regional vacancy rates based on 62 markets in the Americas, 24 markets in Europe and 25 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: JLL, January 2018 Global and Regional Office Vacancy Rates, % % 14.9% Americas % 10.3% 11.9% GLOBAL 11.1% Asia Pacific % Europe 62 markets in the Americas; 24 markets in Europe; 25 markets in Asia Pacific. All grades except Asia and Latin America (Grade A only). Source: JLL, January

28 Office Rental Trends Prime rental growth hits 4%, strongest since 2011 Rents for prime offices across 26 major markets grew by 4.1% for the full-year 2017, double our expectations at the beginning of the year and the highest rate since 2011: Strong double-digit uplift was recorded in 2017 in Sydney (+26%), with Stockholm (+13%) following in second place globally; Only three major office markets (Shanghai, Beijing and Seoul) registered a decline in prime rents during 2017, all falling modestly by less than 5%; 2017 was marked by the return of rental growth in Singapore (+9%) and Sao Paulo (+1%) after several quarters of rental corrections. More of the same is forecast for 2018, with growth projected to average 3% and top performances going to Singapore and Sydney. Only Shanghai, Mexico City and Beijing are slated for rental corrections over the coming year. Strength of Europe s occupier markets supports robust rental growth The European Office Rental Index increased by 4.1% during 2017, the strongest annual rate of growth since Excluding the UK, Western European rental growth reached 5.4% year-on-year, underlining the strength of the occupier market: Germany continues to lead Europe in terms of rental growth, with Berlin (+3.4%), Dusseldorf (+1.9%), Hamburg (+1.9%), Munich (+1.4%) and Frankfurt (+1.3%) all seeing quarterly increases as a result of tightening supply and elevated demand. In the Netherlands, Amsterdam also witnessed another quarter of rental growth. In London, prime rents held firm in Q as the occupier market continues to stabilise, while in Paris, prime rents increased by 4.0% in the quarter with the recent positive market sentiment continuing. In Southern Europe, prime rents in Milan, Madrid and Barcelona continued to rise on the back of tight Grade A supply and solid demand. At 2.3%, projections for prime office rental growth across Europe in 2018 should comfortably outpace the five-year average (1.4%). However, there is potential for outperformance in Western Europe s tightest markets. New premium-priced spaces are helping to boost U.S. asking rents The injection of new supply in the U.S. is providing landlords with a short-term bump in asking rents. New supply averages US$56 per square foot, a 43% premium compared to existing Class A 28

29 space; this has contributed to a 3.8% increase in asking rents over the year, 60 bps greater than the market as a whole. Growth has been highest for quality space in the suburbs, where greater volumes of new, non-preleased supply are coming online. Landlords are taking advantage of the faster flight to quality in suburban geographies to push rents higher. Rental growth in Asia Pacific maintains pace For the full-year 2017, Asia Pacific rents increased by 3.6%, the strongest of the three global regions: Sydney remained the regional leader for annual growth, with incentives continuing to decline. Singapore recorded the strongest quarterly rental growth on the back of improved occupancy levels, as landlords of quality buildings increased rents and some scaled back incentives. Mixed rental trends were evident in Beijing with supply putting pressure on CBD rents, while robust demand in the Finance Street submarket sustained its rental growth. Shanghai CBD rents edged lower again, while the Decentralised market saw rents rise. Quarterly rental growth was limited in Tokyo as landlords kept focused on securing tenants ahead of a supply wave. Sustained demand from mainland Chinese firms against a tight vacancy environment supported a further uplift in Hong Kong Central rents. 29

30 Rental change (y-o-y %) Prime Offices Rental Change, Q Q Sydney Stockholm Singapore Brussels Madrid Chicago Toronto Milan Hong Kong New York Los Angeles Frankfurt Mexico City Washington DC Mumbai Paris Tokyo Boston Sao Paulo San Francisco London Dubai Moscow Shanghai Beijing Seoul Americas EMEA Asia Pacific % change Based on rents for Grade A space in CBD or equivalent. In local currency. Source: JLL, January 2018 Prime Offices Rental Change, % 8.0% % 4.0% 2.9% 4.1% 3.0% 2 1.8% 0.9% F Prime office rental growth: unweighted average of 26 major markets. Source: JLL, January

31 Prime Offices Rental Clock, Q Beijing, Chicago, New York Paris, San Francisco Tokyo, Hong Kong Boston, Dallas Los Angeles Frankfurt Stockholm, Prague Berlin Rental Growth Slowing Rental Values Falling Washington DC Shanghai Amsterdam, Madrid, Sydney, Toronto Milan Brussels Rental Growth Accelerating Rental Values Bottoming Out Houston Singapore Delhi Mumbai Seoul Istanbul, Mexico City London Dubai Sao Paulo Moscow, Johannesburg, Warsaw, Zurich Americas EMEA Asia Pacific Based on rents for Grade A space in CBD or equivalent. U.S. positions relate to the overall market. Source: JLL, January

32 Retail Markets U.S. retail market expansion slowing amid rapid structural change The U.S. retail story in the fourth quarter remains largely consistent with the broader trends of Retail construction continues to slow, rents are still rising but at a slower rate than in previous quarters, and vacancy continues to be low at 4.3%. Developers are conservative on new retail construction, in line with the mall renovation pattern of converting traditional retail spaces into non-retail uses, with owners investing to create mixed-use destinations for the evolving shopper including adding residential units, office and hotel space, entertainment, and community and open spaces. Retail closures continue to make headlines, but the market could breathe a bit easier as 2017 closed with the holiday season seeing a 4.9% growth in sales will most likely experience more closure announcements as struggling retailers continue to lose footing, but at a slower pace than in However, a significant number of openings have been announced for the year and should help keep vacancy lower than might be expected considering this year s slew of closures and bankruptcies. Consumer confidence in Europe at historically high levels Strong confidence and job creation continue to drive consumer spending across Europe, with retail sales in the EU28 increasing by 2.8% in While there is a slight deceleration in prospect, EU retail sales are forecast to grow by 2.3% this year and by 2.0% in E-commerce growth, the rise of technology and changing consumer spending patterns continue to shape European retail demand. As a result, retailers are adapting and re-evaluating their existing physical space. There has been a notable acceleration in initiatives addressing this evolving retail environment; responsive retail, new business models and omni-channel will continue to thrive in this context. Prime high street rents were broadly stable during Q4, while shopping centres and retail warehouses experienced more variation. High street rents rose most in Birmingham (+7.5% quarter-on-quarter) and Leeds (+4.0%), while shopping centre prime rents saw the largest increase in Ukraine (+11.1%) and the Czech Republic (4.2%). Germany s shopping centres witnessed the widest variation in rental growth, ranging from a 16.7% rise in Stuttgart to an 8.0% decline in Berlin over the quarter. A focus on asset enhancement initiatives and tenant-mix adjustments in Asia Pacific Many retail landlords in Asia Pacific continued to adjust tenant mixes in Q In Sydney, retailers are opening new concept stores that offer greater customer engagement and experience. Mass market fashion brands were among the most active retailers in Beijing and Shanghai, while leasing activity in Hong Kong was dominated by renewals and cost-saving initiatives. In general, stagnant rents were evident across Asia Pacific. Sydney and Melbourne recorded rental growth on renewals, but discounts were offered to replacements with landlords focused on tenant retention. Hong Kong s prime shopping centre rents held firm and several malls recorded positive sales growth, while in Singapore the pace of rental declines in the Marina submarket tapered. 32

33 Prime Retail Rental Clock, Q Boston, Chicago, Houston Beijing Tokyo Los Angeles, San Francisco Washington DC New York London, Milan Shanghai, Madrid Rental Growth Slowing Rental Values Falling Mumbai Rental Growth Accelerating Rental Values Bottoming Out Berlin Dubai Singapore Delhi Paris Moscow, Sydney Hong Kong Americas EMEA Asia Pacific Prime Industrial Rental Clock, Q San Francisco New York, Dallas Tokyo Beijing Amsterdam Philadelphia Chicago, Atlanta, Los Angeles Houston Rental Growth Slowing Rental Values Falling Boston, Sydney Istanbul Milan, Stockholm Frankfurt Shanghai Rental Growth Accelerating Rental Values Bottoming Out London, Madrid Paris, Hong Kong, Singapore Moscow Americas EMEA Asia Pacific Relates to prime space. U.S. positions relate to the overall market. Source: JLL, January

34 Industrial Markets 2017 another banner year for U.S. industrial sector The U.S. industrial market had a stellar fourth quarter with total net absorption at million square feet, the best fourth quarter historically. Compared to Q4 2016, absorption levels increased by nearly 10% and the vacancy rate has consequently dropped by 20 bps points to an all-time low of 5.0%. On an annual basis, both new completions and net absorption for the full year tallied over 200 million square feet, making 2017 another strong year. U.S. rents continue to rise to record levels Spurred by an increase in absorption of warehouse space as the tectonic shifts brought about by e- commerce continue, U.S. industrial rents increased further in 2017, registering year-on-year growth of 5.2%. New construction and steady development activity have continued to add pressure on land prices. With rising labour, material and land costs, there is an increased pressure to push rents higher to justify increased construction costs. Overall, leasing sentiment remains stable going into The industrial market has seen positive growth for over seven years and, while the Class A market continues to be hot, there is increased competition between Class B and Class C product. European warehousing markets set for continued strong performance in 2018 The European occupier market for logistics ended 2017 on a high, with total take-up well above the long-term average. Driving this activity was robust demand for large warehouse facilities, along with urban sorting, distribution and fulfilment centres to support the continued growth in online sales. There are no signs of an imminent slowdown in activity and, with a strong economic outlook, we expect occupier demand to maintain its momentum in The main risk to take-up remains a lack of modern vacant space, with buoyant demand reducing European vacancy to a new low of around 5% at end Given strong demand and low levels of vacancy, rental growth, which has been quite patchy, should become more widespread in PLs and e-commerce firms continue to drive demand for logistics space in Asia Pacific E-commerce and 3PLs were the most active occupiers in the China Tier 1 leasing markets and Tokyo in the fourth quarter. Demand for logistics space in Singapore was supported by the uplift in trade performance. Given the slowdown in container throughput, 3PL leasing activity in Hong Kong was largely characterised by relocation and downsizing, while some retailers were active amid strong domestic consumption. Rents edged up further in most markets across the region, reaching a record high in Shanghai. After declining for the last 10 quarters rents for Singapore s logistics premises held flat on improved sentiment, while overall rents in Hong Kong dropped slightly as landlords facing high vacancy continued to provide longer rent-free periods. 34

35 Hotel Markets Robust economic growth extends hotel cycle The beginning of 2017 was overshadowed by macroeconomic and geopolitical concerns in different parts of the world. However, as the year progressed, the economy responded better than expected with improved economic indicators reported in both the U.S. and major European countries. Global economic sentiment has gradually improved and investors continue to pursue purchases in the hotel sector, albeit with disciplined underwriting. The travel market continues to be buoyant. The latest data from UNWTO reveals that as of October YTD 2017, the number of international travellers grew 7% to 1.1 billion, despite ongoing political and economic uncertainties. Growth has also been underpinned by recovery in visitor arrivals in key cities such as Paris which had previously suffered declines. Global hotel operating performance remains positive, and all three global regions posted RevPAR growth in Europe was in top position, reporting an uplift of 6.9% in YTD November 2017, with both Madrid and Paris delivering double-digit RevPAR increases. North America is enjoying an extended cycle with RevPAR climbing over 3% in Asia Pacific achieved a 2.8% year-on-year increase in occupancy, resulting in a rise in RevPAR. Cities such as Sydney, Beijing and Hong Kong all experienced robust RevPAR growth. Hotel transaction volumes lower despite investor confidence The aforementioned factors supported a healthy hotel investment environment with global hotel transaction volumes totalling US$62.5 billion in 2017, on par with the levels seen in Asia Pacific posted an impressive uplift in volumes, up 42% compared to The result was largely due to R&F Properties investment in Dalian Wanda Group, a portfolio of over 60 hotels located across China. The Americas saw an 11% year-on-year decline in volumes, in part due to a 40% decrease in portfolio transaction volumes in the U.S. EMEA achieved a steady rise in transactions levels on 2016 at US$22 billion, a sign that political uncertainty surrounding the multiple elections did not suppress investor appetite. Global Hotel Investment Volumes, US$ billions % change Americas % Asia Pacific % EMEA % Total % Source: JLL, January

36 Portfolio sales globally accounted for 34% of total volumes, which was around the same level as in In addition to R&F Properties acquisition of Dalian Wanda Group, a number of notable portfolio transactions took place in other regions including, in the Americas, RLJ Lodging Trust s acquisition of FelCor Lodging Trust for a reported US$2.4 billion and, in EMEA, the Jury s Inn portfolio consisting of 37 hotels located across the UK and Ireland. The U.S. upheld its position as the most liquid hotel investment market in 2017, accounting for 38% of all deal flow globally despite an 18% drop in total sales. Domestic investors returned to the market, with 87% of transactions made by local buyers, compared to 58% last year a firm indication of their confidence in the U.S. economy. The UK was the second most liquid market, reporting a 24% uplift in volumes to reach US$5.5 billion. A number of high-profile portfolios traded during 2017 in addition to the Jury s Inn portfolio, including Q Hotels and the Hilton Metropole Hotels portfolio. International capital into the UK increased significantly, with investors from North America and Asia (excluding mainland China) acquiring a significant share of transacted UK hotel properties during Spain observed a 71% increase in transaction volumes in 2017 to reach US$4 billion. Growing travel demand was reflected through positive hotel performance across the country and this attracted more buyers to the market. Several hotel portfolios transacted during the year, including the 230m Melia portfolio, IFA portfolio and Intertur portfolio. Hong Kong also saw notable growth in activity after a quieter 2016, with transaction volumes in 2017 totalling US$1.7 billion. Sales activity was driven by investors acquiring mid-market hotels for conversion to office use, given that these hotels sell for discounted pricing per square metre compared to other asset types. Private equity groups remain most active buyer group Investment funds and private equity firms were the most active buyers in 2017, representing 30% of the market. Developers and property companies ranked second with 18% market share, driven by R&F Properties purchase of hotel assets from Dalian Wanda Group and the US$1 billion Jury s Inn portfolio deal. REITs were the third most active buyer group, resulting from RLJ Lodging Trust s purchase of FelCor Lodging Trust. Institutional investors continue to increase their allocation to real estate. Their share of acquisitions has more than doubled since 2014, from 4% to 10% in

37 Hotel Transactions: Capital Outflows and Inflows, 2017 Asia North America Mainland China Europe Middle East South America Australasia US$ billions Outflows Inflows Excludes multijurisdictional portfolio transactions Source: JLL, January 2018 Asian investors overtake mainland China as largest outbound capital source International capital continues to play a key role in the hotel investment landscape. During 2017, 15% of investment, worth US$10 billion, originated from international investors. Asian investors, notably from Southeast Asian countries, have increased their offshore investment largely due to their need to diversify both in terms of location and product, and they overtook mainland Chinese buyers as the largest group of outbound capital in 2017, accounting for 30% of offshore investments. Brand M&A continues, but on a smaller scale Following the acquisition of Starwood Hotels & Resorts by Marriott International in 2016, there were more M&A announcements during 2017 with AccorHotels being an active buyer; a particularly notable announcement was their US$903 million purchase of Australia s Mantra Group. We expect to see more hotel M&A activity due to operators desire for unit growth, operational efficiency and profitability through scale. Through consolidation, companies are able to expand their reach to more customers, acquire more advanced platforms and achieve higher revenue. 37

38 Residential Markets New supply outpaces still solid demand in U.S. multifamily market U.S. multifamily rental fundamentals flattened through Q as the sector continued to adjust to an influx of new supply being delivered across the country marked the expected peak of the development cycle with roughly 390,000 new units being delivered at year-end. As a result, annual rental growth decreased 100 bps year-on-year to 2.3%. While rental growth decelerated, national vacancy rose 20 bps year-on-year to 5.2%. As we look forward to 2018, we will continue to see elevated deliveries, albeit less than With this in mind, it is likely that rental growth and vacancy will be held back from any major improvements as the market continues to absorb new product. With new ground-breakings in the multifamily sector also slowing, fundamentals are well positioned to stabilise over the next 18 to 36 months. UK institutional market continues its upward trajectory The UK housing market finished the year in modestly positive territory, with the main indices suggesting price growth of between 4%-5% for London s decline was more material, with the 12-month price change turning negative. Sales volumes remain buoyant, aided by the government s flagship Help to Buy programme and the more important - but less celebrated - continuance of record low mortgage rates. Institutional investment continued its trajectory of growth, with several bigger deals in secondary and tertiary towns and cities adding to the total amount of large-scale rental assets under construction. The overweight of capital against available opportunities is driving greater attention towards joint-venture deals where investors can get access to suitable land and development opportunities. Investment volumes in 2017 were up 20% to 2.4 billion, with expectations of continued strong growth this year. Transaction activity climbs higher in Germany Residential transaction volumes in Germany totalled 15.7 billion in 2017, almost 15% above the previous year s level and the third-best result in the last 10 years, following the standout performances in 2013 and Berlin accounted for nearly a quarter of national investment in 2017 with volumes of 3.6 billion, an increase of 25%. Hamburg (with 1 billion of transactional activity), Düsseldorf ( 820 million) and the Ruhr region ( 650 million) were the next largest markets. Investor demand remains buoyant in the Netherlands The investment market in the Netherlands witnessed a record year in 2017, with total transactional activity exceeding 4.4 billion. Due to increasing competition, prime yields sharpened in the final quarter to a historical low of 3.2%. Investor demand remains buoyant, with the first half of 2018 expecting a variety of large-scale portfolio transactions to take place. Numerous investors that acquired portfolios three to five years ago have now started to dispose of parts of these portfolios and, as a result, investment volumes in the first half of 2018 are likely to remain on par with 2017 s levels. 38

39 Investment volumes dip from record-breaking 2016 in Sweden Investment volumes for the residential market in Sweden totalled SEK 55 billion in 2017, which represents a drop from 2016 s record-breaking number, albeit still significantly above the longterm average. SEK 15 billion was transacted in the fourth quarter due to a number of large deals, with Akelius and Swedish municipalities particularly active. Significant capital entering the residential market in Spain Total residential institutional investment volumes in Spain reached 2.15 billion in 2017, versus 802 million in There is now significant equity entering the residential market either through residential SOCIMIS (REITs) seeking buildings to acquire and lease or through private equity or institutional-backed Spanish property developers acquiring land. The market is currently undergoing a large transfer of ownership, with the banks selling or transferring residential loans and assets to private equity or development platforms. While the residential leasing market is still in its infancy in terms of institutional ownership, there are now over 20 residential REITs active in Spain with over 20,000 units under lease, the largest being Testa Residencial, Blackstone through Albirana and Fidere, and Sareb with its Tempore Properties. Spanish developers are also undergoing a significant phase of expansion with Metrovacesa and Via Celere expected to join Neinor and Aedes Homes on the Spanish stock market during Sustained sales momentum in Hong Kong and Singapore A tight housing policy stance remained in place across much of Asia in the fourth quarter, and some local governments in China have taken further steps towards supporting development of the leasing market. In Shanghai, the tight policy stance such as HPRs and limited issuance of pre-sales certificates impacted sales activity. With limited new measures announced in the latest policy address in Hong Kong, market sentiment kept intact and buyers snapped up flats in new launches. Sales activity in Singapore was dominated by secondary transactions as there were limited new launches in the prime districts. Leasing activity was in line with expectations during the final quarter. A seasonal slowdown was evident in many markets as expats put off decision-making during the holiday season. In Shanghai, cyclical year-end lease terminations and renewals impacted landlords rental stances and rents held generally stable, while modest rental growth was recorded in Beijing amid stable demand. Growth of luxury rents in Hong Kong slowed due to the holiday season; with leasing activity largely focused on renewals, most landlords held firm on their asking rents. Hit by slower leasing activity, rents in Singapore edged lower after recording growth in the previous quarter. 39

40 Key Investment Transactions in Q Europe, Middle East and Africa Country City Property Sector Denmark Multiple Project Ocean France Paris 6-8 Boulevard Haussmann Sales price US$m Comments Retail 1,092 Danish pension fund Danica has sold a 50% stake in its shopping centre portfolio to ATP Real Estate, in the highest value real estate transaction in Denmark to date. The portfolio consists of 16 shopping centres, including some of the largest and most prestigiously-located in the country. Office 557 Norges Bank Real Estate Management has acquired the building in the centre of Paris from Tamweelview European Holdings SA and Tamweelview Listed Securities Holdings, wholly-owned subsidiaries of the Abu Dhabi Investment Authority (ADIA). The property, comprising 24,500 sq m of office space, was sold for a yield of 3.1%. Germany Frankfurt Tower 185 Office 913 JLL has advised CA Immo and its JV partners on the sale of the property to Deka for 775 million. Located in the Europaviertel district, the 102,000 sq m building was developed in 2011 by CA Immo and is around 90% occupied, with PwC occupying more than 60% of the rentable area. Germany Multiple RFR Portfolio Mixed 1,766 Signa has bought five trophy assets in Berlin, Hamburg, Frankfurt and Munich from RFR for 1.5 billion. Israel Jerusalem Waldorf Astoria Jerusalem Hotel 130 Financière Immobilière Bordelaise has purchased the 5-star, 226-room luxury hotel from the Reichmann family. Italy Multiple Humanitas Portfolio Healthcare 330 AXA Investment Managers has acquired the portfolio of five assets in Milan, Bergamo and Turin from Techint for 280 million in a sale and leaseback transaction. Multiple Multiple Gazeley Portfolio Multiple Multiple Jurys Inn Portfolio (37 hotels) Industrial 2,800 JLL has advised GLP on its acquisition of European logistics business Gazeley. The properties, previously owned by funds affiliated with Brookfield Asset Management, are spread across the UK, Germany, Italy and the Netherlands and comprise 3 million sq m of total gross leasable area. Hotel 1,067 Swedish developer and property company Pandox AB, together with Israel's Fattal Group, have acquired the portfolio of properties located across the UK and Ireland. Poland Wroclaw Magnolia Park Retail 450 JLL has advised Blackstone on the sale of the shopping centre to Union Investment for its openended real estate fund Unilmmo Europa for nearly 380 million. 40

41 Country City Property Sector Sales price US$m Comments Romania Bucharest Radisson Blu & Park Inn by Radisson Hotel 193 Cerberus Capital Management, a U.S.-based investment fund, has acquired the two-property portfolio totalling 697 rooms from Israel's Elbit Imaging Ltd. Russia Moscow Moscow malls Retail 900 Immofinanz has sold the portfolio of malls to Russia s Fortgroup. The shopping centres, all located in Moscow, are: Golden Babylon Yasenevo, Golden Babylon Rostokino, Golden Babylon Otradny, GoodZone and 5th Avenue. Spain Multiple HI Partners Portfolio (14 hotels) Sweden Stockholm Comfort Hotel Arlanda UK London 15 Canada Square UK London Devonshire Square Hotel 742 Blackstone has acquired the portfolio from Banco Sabadell. Hotel 153 The 503-key budget hotel has been purchased in equal parts by Norwegian developers Wenaasgruppen AS and O.G.Ottersland AS from Swedish Swedavia Real Estate AB. Office 531 JLL has advised KPMG on the sale and leaseback of its London HQ to Kingboard Investments for c. 400 million. KPMG will continue to occupy the building, which comprises 40,328 sq m and is located next to the new Crossrail station in Canary Wharf. Office 770 WeWork has agreed to buy Blackstone s estate in the City of London for c. 580 million. Blackstone acquired the campus from ADIA and Rockpoint in 2012 for 330 million and has since carried out an asset management programme, including the transformation of the square into a piazza-style courtyard framed by warehouse buildings, bars, restaurants and shops. 41

42 Asia Pacific Country City Property Sector Sales price US$m Comments Australia Brisbane Indooroopilly Shopping Centre Australia Sydney Chatswood Chase Retail 615 AMP Capital Funds has acquired a combined 50% stake in the shopping mall from Eureka, which is now controlled by AXA. Each of the two funds (AMP Capital Shopping Centre Fund and AMP Capital Diversified Property Fund) will acquire a 25% stake. Retail 859* Vicinity Centres has exchanged its 49% stake in Chatswood Chase for a 50% stake in GIC's Queen Victoria Building, The Galeries and The Strand Arcade. *Price is the combined value of both the 49% stake in Chatswood and the 50% stake in the three other assets. China Beijing W Beijing Hotel 298 The full-service 349-room property has been sold by Joy City Property Ltd. to Tianfu Fund Management. China Guangzhou Rock Square Retail 508 CRCT and CapitaLand have acquired a 51% and 49% interest respectively in the mall from PGIM Real Estate. China Multiple Dalian Wanda China Portfolio Hotel 2,496 R&F Properties has acquired the portfolio from Dalian Wanda Group. China Shanghai Eco City Office 953 Sanpower Group has sold the 67,106 sq m Grade A building to Ting Hsin International Group. China Shanghai Shanghai Star Harbour International Centre Project Mixed 907 China Jinmao has sold the 427,621 sq m development to Shanghai International Port Group. China Shanghai Cross Tower Office 402 Gaw Capital has sold the 24-storey building with a GFA of 41,662 sq m to World Union Investment Management. China Shanghai Mingyue Hotel Hotel 203 Everbright Ashmore Investment Beijing has acquired the 352-key asset. China Shanghai Sky SOHO Project China Shenzhen Hongshan 6979 Hong Kong Hong Kong King s Hotel Wanchai Office 757 Gaw Capital has acquired a group of Class A properties with a total GFA of 128,175 sq m from SOHO China. Mixed 355 The project, previously owned by OCT Investment Real Estate and China Merchants Property Development in a 50:50 JV, has been sold to Shanghai ICY Capital Management. Hotel 176 The 193-room property has been sold by HNWI Tang Shing-bor to Chinese investment fund KaiLong REI Project Investment. 42

43 Country City Property Sector Sales price US$m Comments Japan Kanagawa Mitsubishi Heavy Industries Yokohama Building Japan Kunigami Renaissance Okinawa Resort Japan Tokyo Hilton Tokyo Odaiba Japan Tokyo Sheraton Grande Tokyo Bay Hotel Japan Tokyo Amway Plaza Tokyo Office 436 Hulic has sold the 34-storey building to Kenedix Real Estate Fund Management. Hotel 172 The 377-room resort has been acquired by Gaw Capital Partners from GreenOak Investment Management. Hotel 522 The 5-star hotel, with a total of 453 rooms, has been sold to Hulic and Fuyo General Lease in a 50:50 JV. Hotel 867 Fortress Investment Group (Japan) GK has sold the 1,016-room property to GIC (Japan) K.K. and Invincible Investment Corporation. Office 297 Amway Japan has sold the 13-storey building in Tokyo's Shibuya ward to Blackstone on a sale and leaseback agreement. Malaysia Kuala Lumpur Hilton Kuala Lumpur Hotel 124 The 503-key property has been purchased by Japanese developer Daito Trust Construction Co., Ltd. from Malaysian hotel operator Daisho Asia Development. Singapore Singapore Chevron House Singapore Singapore Florence Regency Office 487 Oxley Holdings has purchased the 32-storey building located in Raffles Place from Deka Singapore, a unit of Germany s DekaBank Group. Residential 465 JLL has advised on the sale of the 336-unit former Housing and Urban Development Company (HUDC) estate in Hougang to Chinese developer Logan Property. The collective sale is likely to yield close to 1,000 apartments once redeveloped. Americas Country City Property Sector Sales price US$m Comments Brazil Guarulhos Internacional Shopping Guarulhos Brazil Sao Paulo Hipermercado Extra Itaim Retail 289 Gazit-Globe has acquired a 70% stake in this nearly 54,000 sq m shopping centre from General Shopping. Retail 108 GTIS Partners has purchased this roughly 57,1000 sq m shopping centre located in the Itaim submarket from Gazit-Globe. Canada Toronto 26 Cumberland Street Retail 211 KingSett Capital has sold the asset to Cresford for redevelopment. Canada Toronto 284 King Street West Office 134 Great Gulf Homes has purchased this CBD asset from Mirvish. 43

44 Country City Property Sector Sales price US$m Comments Canada Vancouver 2025 Willingdon Avenue Office 92 Bentall Kennedy has acquired the CBD property from Appia Developments. Canada Vancouver 4403 Eton Street Industrial 72 Chevron Canada Limited has sold this warehouse asset located in the Burnaby submarket to Parkland Fuel Corporation. Mexico Mexico City Montes Urales 620 Office 60 REIT Fibra Uno has purchased the asset from BBVA Bancomer at a reported 8.1% initial yield. U.S. Arlington Key Bridge Marriott Hotel 182 The 4-star property has been sold by Host Hotels & Resorts REIT in equal parts to Oaktree Capital Management and Woodridge Capital Partners. U.S. Chicago CH2 Data Center Industrial 315 REIT Digital Realty has purchased the roughly 23,000 sq m data centre located in suburban Melrose Park from Carter Validus Mission Critical REIT. U.S. Dallas/Fort Worth Trinity Towers Office 70 JP Realty Partners has sold the nearly 59,000 sq m North Stemmons Freeway property to Stanton Road Capital. U.S. Denver 1401 Lawrence Office 225 Great Gulf Homes has sold this over 29,000 sq m suburban asset to Heitman at a reported 5% initial yield. U.S. Detroit Millennium Park Retail 75 Grand Sakwa Properties has acquired the roughly 26,000 sq m Livonia shopping centre from Ramco- Gershenson Properties Trust. U.S. Kahuku - Oahu Turtle Bay Resort Kahuku - Oahu Hotel 333 The full-service 4-star coastal resort has been acquired by Blackstone from Highland Capital Management, an investment fund from the U.S. U.S. Los Angeles Pacific Corporate Towers U.S. Los Angeles Centergate Distribution Park Office 611 GE Asset Management has sold the three-building, approximately 147,000 sq m El Segundo property to Starwood Capital at a reported initial yield of 5.1%. Industrial 96 Westcore Properties has purchased the approximately 95,000 sq m San Bernardino warehouse asset from Bentall Kennedy at a reported 4.25% initial yield. U.S. Miami Miami Free Zone Industrial 90 Somerset Partners has sold the nearly 79,000 sq m flex property to Foundry Commercial. U.S. Multiple Noble Portfolio (four hotels) Hotel 164 Summit Hotel Properties, a U.S. REIT, has bought the portfolio of full-service midscale hotels, located across the country, from Noble Investment Group LLC. U.S. Northern New Jersey Montville Corporate Center III Industrial 53 AEW Global has sold this approximately 50,000 sq m flex asset to Camber Real Estate Partners. U.S. Orange County The Triangle Retail 55 Unimat Commercial has acquired this 19,000 sq m Costa Mesa property from a venture involving Greenlaw Partners, Westbrook Partners and Walton Street at a reported 6% initial yield. 44

45 Country City Property Sector Sales price US$m Comments U.S. Philadelphia Centerton Square Retail 130 Prestige Properties & Development has acquired the over 40,000 sq m Mount Laurel shopping centre from Black Creek Diversified Property Fund. U.S. Phoenix State Farm at Marina Heights U.S. San Francisco Hotel Zelos San Francisco Office 928 Transwestern Investment Group has purchased the two-building, nearly 197,000 sq m asset located in suburban Tempe from Sunbelt Holdings. Hotel 132 The 202-key asset has been acquired by a HNWI from JPMorgan Chase & Co. U.S. Seattle- Bellevue Millennium Tower Office 120 Metzler Real Estate has sold the nearly 19,000 sq m CBD property to TIAA. 45

46 Illustrative Office Occupational Transactions in Q Europe Country City Property Tenant Industry Sector Floorspace sq m France Paris Campus SFR SNCF Transport 43,000 France Paris Kosmo Parfums Christian Dior Manufacturing 24,000 France Paris Grand Central Pernod Ricard Manufacturing 18,000 France Paris Le Belvédère Regus/Spaces Real Estate 17,000 Germany Berlin Atrium Tower WeWork Business Services 12,900 Germany Frankfurt FBC Deutsche Bundesbank Banking & Financial Services 44,400 Germany Frankfurt Boulevard Mitte & Europa-Allee: Baufeld 42c Ost & The Brick Deutsche Bahn Transport 52,600 Russia Moscow Aquamarine Gazprombank Banking & Financial Services 43,000 Russia Moscow Oasis Gazprombank Banking & Financial Services 12,000 Russia Moscow Bolshevik VEON Telecommunications 17,000 UK London 1 Embassy Gardens, SW8 UK London Nova South, Victoria Street, SW1 UK London The Bard Shoreditch, The Stage, EC2 UK London One Creechurch Place, EC3 Penguin Random House Media 7,863 Vitol Utilities 4,459 WeWork Business Services 12,590 Hyperion Insurance Group Banking & Financial Services 10,768 46

47 Asia Pacific Country City Property Tenant Industry Sector Floorspace sq m Australia Brisbane 310 Ann Street Allianz Banking & Financial Services 8,024 Australia Melbourne One Melbourne Quarter, Collins Street AMP Banking & Financial Services 9,720 Australia Melbourne 130 Lonsdale Street CBUS Banking & Financial Services 9,176 China Beijing Ericsson Building Zhonghuhang IT 16,320 China Shanghai China Overseas International Center, Tower B WeWork Business Services 18,440 China Shanghai Crystal Plaza Covestro Manufacturing 7,100 Hong Kong Hong Kong Manulife Financial Centre Tower B China Merchants Securities Banking & Financial Services 2,257 Hong Kong Hong Kong Two Exchange Square LGT Banking & Financial Services 2,583 India Delhi Ambience Corporate Tower, NH-8 Amazon IT 7,200 India Mumbai Gigaplex B2, Airoli HERE ITES 10,300 Japan Tokyo* Shibuya Stream Google IT 46,000 Malaysia Kuala Lumpur Mercu 2, KL Eco City Gibraltar BSN Banking & Financial Services 4,328 Singapore Singapore One Raffles Place Tower 2 INTL Asia Business Services 770 Singapore Singapore Clifford Centre Bellerbys Educational Services Business Services 428 South Korea Seoul Seoul Square WeWork Business Services 11,270 *JLL estimate 47

48 Americas Country City Property Tenant Industry Sector Floorspace sq m Brazil São Paulo WTorre Morumbi - Tower B Unilever Brasil Consumer Products 12,340 Brazil São Paulo São Paulo Corporate Towers - South Tower XP Investimentos Banking & Financial Services 12,145 Canada Edmonton CN Tower Alberta Health Services Public Administration 12,657 Canada Montreal 1350 Réne- Lévesque W GWL Realty Advisers Real Estate 9,129 Canada Toronto 2440 Winston Park Geotab Logistics and Distribution 8,217 Canada Vancouver The Bay WeWork Business Services 8,268 Mexico Mexico City Periférico Sur 4277 Grupo Salinas Media 19,355 Mexico Mexico City Torre Manacar MetLife Banking & Financial Services 17,059 Mexico Mexico City ARTZ Towers II and III U.S. Dallas The Campus at Legacy West WeWork Business Services 12,660 NTT IT 21,623 U.S. Houston Westway II McDermott Engineering 17,369 U.S. New York 1 Manhattan West EY Business Services 56,141 U.S. New York 1100 Avenue of the Americas Bank of America Banking & Financial Services 35,861 U.S. New York 1271 Avenue of the Americas Mizuho Banking & Financial Services 25,084 U.S. New York 390 Madison Avenue Shiseido Manufacturing 20,979 U.S. New York One Liberty Plaza NYC Economic Development Corporation Public Administration 20,391 U.S. New York 150 5th Avenue Mastercard Banking & Financial Services 19,742 U.S. San Francisco The Exchange Dropbox IT 69,793 U.S. San Francisco 100 1st Street Okta IT 19,237 U.S. Silicon Valley The Village at San Antonio WeWork Business Services 42,434 U.S. Washington, DC 2100 Pennsylvania Ave NW WilmerHale Legal Services 26,477 48

49 Global Real Estate Health Monitor Definitions and Sources Metro Area GDP: Change in Real GDP. Metropolitan Area Projection, Source: Oxford Economics City Investment Volumes: Direct Commercial Real Estate Volumes. Metro Area Data. Rolling Annual Total in USD Billion. Source: JLL City Investment Volumes Change: Direct Commercial Real Estate Volumes. Metro Area Data. Rolling Annual Change. Source: JLL Capital Value Change: Notional Prime Office Capital Values. Year-on-Year Change. Latest Quarter. Source: JLL Prime Yield: Indicative Yield on Prime/Grade-A Offices. Latest Quarter. Source: JLL Yield Gap: Basis Points that Prime Office Yields are above or below 10-year Government Bond Yields. Latest Quarter. Source: JLL, Datastream Rental Change: Prime Office Rents. Year-on-Year Change. Latest Quarter. Source: JLL Net Absorption: Annual Net Absorption as % of Occupied Office Stock. Rolling Annual. Source: JLL Vacancy Rate: Metro Area Office Vacancy Rate. Latest Quarter. Source: JLL Supply Pipeline: Metro Area Office Completions ( ) as % of Existing Stock. Source: JLL 49

50 For further information contact: Jeremy Kelly Director Global Research Matthew McAuley Senior Analyst Global Research About JLL JLL (NYSE: JLL) is a leading professional services firm that specialises in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At year-end 2016, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 77,000. As of December31, 2016, LaSalle Investment Management has $60.1 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit About JLL Research JLL s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today s commercial real estate dynamics and identify tomorrow s challenges and opportunities. Our more than 450 global research professionals track and analyse economic and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives. Our research and expertise, fuelled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions. Our regional offices Chicago 200 East Randolph Street Chicago, IL London 30 Warwick Street London, W1B 5NH +44 (0) Singapore 9 Raffles Place #39-00 Republic Plaza Singapore COPYRIGHT JONES LANG LASALLE IP, INC All Rights Reserved 50