AMERICAS WATCH 2, % $ % STRONG SHOWINGS FROM ISM INDICES JANUARY 2017 S&P 500. Fed Funds Rate 25 bps. 10-yr.

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1 AMERICAS WATCH JANUARY 217 A week into 217, it doesn t feel all that different from 216. Nothing really changed at the stroke of midnight except for the promise of resolutions for the new year and a sense of deja vu about unkept ones from 216. Sentiment regarding the momentum of the economic expansion remains positive. But there are many unanswered questions and uncertainty about the potential impacts of policy positions of the incoming administration. The U.S. economy is in fundamentally good shape and a business-friendly unified government in power can certainly add more fuel to the ongoing expansion. However, inflation expectations, a stronger dollar, rising interest rates, a pretty tight labor market and an increasingly fractious and anti-globalization world order could disrupt expectations of a strong resurgence in growth. As we clear the confetti and rinse out the champagne glasses, the real countdown is probably a few days away, when the new President is sworn in on January 2th. The year promises to be exciting as we await policy decisions communicated through 14 characters. 2,238.8 S&P 5 1.8%.5-.7 Fed Funds Rate 25 bps yr. T-Note 8 bps STRONG SHOWINGS FROM ISM INDICES The ISM manufacturing index closed out the year with a bang, recording an unexpectedly high reading of This was above consensus and brought up the 216 average to about 51.5, similar to the 215 average. So far, strong domestic demand is helping offset the impact of a strong dollar, but for how long remains to be seen. In the absence of a coherent and cohesive trade policy, it is quite difficult to postulate the unintended consequences of tariffs and renegotiating trade treaties on domestic production. The ISM non-manufacturing index is also at a high of 57.2 (December reading), a good showing for the sector that makes up the bulk of the economy. Growth has broadened as 16 of the 17 industry sectors reported expansion in business activity and employment indices, signaling good tidings for the sector in the near term. $53.72 Oil 8.7% Data points through end of December 216. Change represents month-over-month change. ISM INDICES Institute of Supply Management Manufacturing & Non-Manufacturing Indices PRINCIPAL CONTRIBUTORS: 5 Shubhra Jha Ryan Patap Jeremiah Lee : Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec Non-Manufacturing Source: Institute of Supply Management Manufacturing

2 MIXED MESSAGES FROM RETAIL SALES November retail sales figures came in lower than economists had forecast, up.1% from October. Sales were most constrained by a. decline in auto sales during the month. Results were mixed, with the most prominent gains seen in furniture, restaurants and electronics. By and large, however, the consumer remains in healthy shape and the previous two months saw significantly stronger month-over-month gains. Year over year, sales are up a solid 3.8%., which after October 216 is the strongest month seen since January 215. The November figures also suggest that the holiday shopping season started off on a better note than in 215. Total Retail Sales & Sales Ex Autos YoY, % Change Nov-6 Nov-7 Nov-8 Nov-9 Nov-1 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Source: U.S. Census Bureau Total Retail Sales RETAIL SALES Total Retail Sales Ex. Autos CAP RATE SPREAD NARROWS Growing optimism and the resulting risk-on environment following Trump s victory placed upward pressure on Treasury yields, restraining REIT performance through the final weeks of 216. As a result, implied cap rate spreads tightened. While the average transaction cap rate continued to decline through the end of 216, implied cap rates edged upwards, rising to 5.6% in December 216 from 5. in August. During this time, the 1-year Treasury yield rose by more than 9 bps to 2.49% the highest level since late 214. As a result, the implied cap rate-toten-year Treasury yield spread slipped to 315 bps, falling below the long-term average spread of 335 bps. Despite the recent contraction in the cap rate spread, the current 3+ bps spread indicates that real estate prices remain fairly priced relative to the 1-year Treasury CAPTILIZATION RATES Avg Spread = 335 bps ('-'16 YTD) 4. Dec-1 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Implied Cap Rate and 1-yr Treasury Spread (R) Implied REIT Cap Rate (L) Transaction Cap Rate (L) (bps) Sources: Real Capital Analytics, Green Street Advisors, Federal Reserve CONSTRUCTION LOANS NOTABLY TIGHTEN According to the October 216 survey, respondents reported that, on net, standards for commercial real estate loans tightened over the last three months. In particular, a moderate net fraction of banks reported tightening standards for loans secured by nonfarm nonresidential properties, whereas significant net fractions of banks reported tightening standards for construction and land development loans and loans secured by multifamily residential properties. Regarding the demand for CRE loans, a moderate net fraction of banks reported stronger demand for construction and land development loans, while demand for loans secured by multifamily residential and nonfarm nonresidential properties remained basically unchanged. Net Percentage of Domestic Respondents Source: Federal Reserve Board SENIOR LOAN OFFICER OPINION SURVEY -8 Oct-4 Oct-6 Oct-8 Oct-1 Oct-12 Oct-14 Oct-16 Tightening Standards for CRE Loans Reporting Stronger Demand for CRE Loans REIT DIVIDEND YIELDS RISE Treasury yields have recently surged, largely due to heightened inflation expectations. REIT share prices have dropped, causing dividend yields to rise to plus-4% levels in early December. Since 21, the REIT dividend yield averaged 3.81%. The precipitous rise in the risk-free rate pushed the dividend-yield-to-1-year spread down to 156 bps. While this spread has narrowed in comparison with recent periods, it remains above the long-term average (148 bps). Despite still-positive market fundamentals across most commercial property sectors, the continued increase in borrowing costs will continue to weigh on REIT performance, while lingering uncertainty surrounding the direction of the incoming administration s fiscal policy will drive volatility through the near-term Sources: Reuters, NAREIT REIT PERFORMANCE Avg REIT Div Yield 3.81% ('1-'16YTD) 1. Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 REITs 1-Year Treasury S&P 5 This information is for our clients and investors only. Please note that the content of this report is for informational purposes only and should not be viewed as investment advice or an offer or solicitation. Any opinions are solely those of the Strategy & Research Team of CBRE Global Investors and are subject to change without notice, and may not be consistent with market trends or future events. This research is based on current public information that we consider reliable, but we do not represent it as accurate, updated or complete, and it should not be relied on as such. Copyright 217, CBRE Global Investors, LLC. All rights reserved.

3 EUROPE WATCH JANUARY will be remembered as a turbulent year that provided more than its fair share of surprises, especially in terms of politics. Many will be hoping for a calmer 217, but they may well be disappointed. Key elections are scheduled to take place in the Netherlands (March), France (April/May) and Germany (by October); instabilities persist in the Italian banking sector; Brexit negotiations will begin; we can expect policy changes in the US; and oil price volatility is a distinct possibility following the OPEC-led deal to cut supply. None of this is to say that 217 need be a bad year, either for the economy or property markets. After all, the disruptions of 216 didn t keep it from being a very positive year for commercial real estate in Europe. We did feel the impact of global events in limiting risk appetite, with a renewed investor focus on high quality assets and core locations. Investment volumes moderated from their 215 high but remained above the 1-year average, as demand for prime property proved resilient. Prime yields reached all-time lows and prime rental growth continued across all sectors, driving strong returns. This year property returns, while still healthy, are unlikely to match those of 216. With the majority of yield compression now behind us, it will increasingly fall to occupier markets to drive returns in 217. ROBUST EUROPEAN ECONOMIC GROWTH OUTLOOK Despite disruptive political events, as yet there are no obvious signs of the Eurozone economy slowing. The final Q3 GDP release showed that the economy expanded by.3% for a second successive quarter, and the high frequency data released in Q4 was encouraging. It is likely that the economy actually gained some momentum in the latter stages of 216. Growth expectations for 217 have moderated somewhat since early-216 though, with rising inflation likely to weigh on consumer spending growth and political uncertainty limiting investment gains. However, Oxford Economics GDP growth forecast for 217, at 1., is still in line with the average rate over the past 2 years and easily ahead of the average over the past 1 years. This, combined with limited new development and vacancy rates that are already falling in many places, bodes well for occupier markets. 3,1.5 Euro Stoxx 5 6.4%. ECB Policy Rate.1% 9 bps 1-yr. German Bond $56.71 Brent Crude 13.2% Data points through end of December 216. Change represents month-over-month change. EUROZONE GDP GROWTH FORECASTS THROUGH % y/y 2. PRINCIPAL CONTRIBUTORS: David Inskip Simon Kristiansen : Mar'16 Source: Oxford Economics (various dates) Jun'16 Sep' Dec'16

4 PROPERTY RETURNS REMAIN ATTRACTIVE We have long been an advocate of the relative argument, the notion that property returns are attractive despite low yields since spreads over fixed income yields are particularly wide. As we enter 217 the relative argument will be a phrase that we continue to hear frequently. Prime yields for almost all property sectors and markets across Europe are now either at or below their previous cyclical lows. However relative to German 1-year bunds, the yields on commercial property for the EU-15 prime markets enjoy a spread of between 3 bps and 53 bps depending on the sector. Office spreads are the narrowest and industrial the widest. With interest rate rises in Europe still seeming some way off, limited further prime yield compression is likely in 217. However, all good things must come to an end and we acknowledge that 217 will likely be the last year of falling yields. Bps GAP BETWEEN EU-15 PRIME PROPERTY YIELDS AND 1 YEAR GERMAN BOND YIELD INVESTMENT MODERATES FOLLOWING RECORD YEAR 216 has in many ways been characterized by increased economic and political uncertainty, whether it be international or domestic. This has contributed to reduced investment volumes as some investors adopted a wait and see approach. It is important to remember, however, that investment volumes were coming off a historical high in 215 and thus a slowdown was widely expected. In the first nine months of bn of direct property transacted in Europe. Investment volumes are typically strong in the final quarter of the year, which suggests that investment volumes for 216 as a whole could come in at around 21bn, roughly in line with 214 levels and above the 1-year average. Looking at individual countries, uncertainty over the UK s future path pulled its share of European investment below its 1-year average. Germany, Iberia and the Nordics, on the other hand, all saw their share of the European total rise above historical averages. bn EUROPE INVESTMENT VOLUMES Retail Industrial Office Q1-Q3 Office Retail Industrial Other Sources: Thomson Reuters, CBRE (latest Sep 16) HEALTHY OCCUPIER MARKETS With an end to yield compression in sight, we look for the occupier market to take over in driving returns, and news on the European economy has been largely encouraging of late. Some of the variables most important for property, such as GDP growth, retail sales and employment, are all largely supportive across the region. Rental growth has lost a little momentum during 216 but is still positive. Retail remains the best performing sector, benefitting from strong consumer spending growth. Industrial rental growth has lost some of its pace, perhaps partially attributable to the slowdown in global trade. Office rents by contrast have gained speed and are growing at 4% p.a. across the EU-15 markets in aggregate. Looking forward we expect the occupier markets to remain strong and further rental growth to come in EU-15 NOMINAL PRIME RENTAL GROWTH Source: CBRE (latest Sep 16) GLOBAL EVENTS LIMITING RISK APPETITE The impact of greater uncertainty was mainly felt in secondary property markets. From 213 to mid-215 the spread between prime and secondary property yields was in decline, as the economic backdrop improved and risk appetite returned. However since then global events have acted to keep a lid on investors risk tolerance and we have seen a renewed focus on high quality assets and core locations. Secondary yields have continued to drift down, but no more rapidly than the prime yield, so the gap between the two has stabilized. With more potentially disruptive political events to come in 217, this trend is likely to persist at least into the second half of the year. After all, the yield premium offered by property over other asset classes is only attractive if you have sufficient confidence in the security of the income, and income is naturally less secure in uncertain times. 9% EUROPE PRIME & SECONDARY OFFICE YIELDS 2 % y/y Initial Yields 8% 7% 6% 4% Yield Gap, bps Retail Industrial Office 3% Secondary Prime Source: CBRE (latest Sep 16) Source: CBRE (latest Sep 16) This information is for our clients and investors only. Please note that the content of this report is for informational purposes only and should not be viewed as investment advice or an offer or solicitation. Any opinions are solely those of the Strategy & Research Team of CBRE Global Investors and are subject to change without notice, and may not be consistent with market trends or future events. This research is based on current public information that we consider reliable, but we do not represent it as accurate, updated or complete, and it should not be relied on as such. Copyright 217, CBRE Global Investors, LLC. All rights reserved.

5 ASIA PACIFIC WATCH JANUARY 217 Australia has been one of the developed world s standout economies, with positive impacts on real estate investment. Sanguine conditions should continue, as the Australian economy is forecasted to have an average annual GDP growth rate of 2.7% for the period, in line with the 1-year historical average growth rate. Notable sub-national differences are likely to persist, with Sydney and Melbourne s broad-based, diversified economies benefiting from the weaker AUD and outperforming other cities. The national unemployment rate is forecasted to decrease from the high of 6.1% in 215 to just 5. by 221 (Oxford Economics, September 216) with a November 216 actual of 5.6%. The Reserve Bank of Australia normally among the most prudent Central Banks has cut the policy rate to a record low to spur growth, but at some stage in the outlook it must likely follow the US Federal Reserve and hike rates. This will hopefully correspond with rising inflation and real estate rents. Indeed the CPI forecasts are 1.3% for 216 and 2.1% for 217, according to the Consensus Economics mean survey of December ,114.4 Nikkei ,.6 4.4% -3. Hang Seng 3, Shanghai Composite TOTAL RETURNS MODERATING BUT ABOVE AVERAGE The latest data (September 216) for the Australian MSCI/IPD index showed a moderating, yet still above-average performance for commercial property. With a capital value of more than AUD 166 billion, the all-property total return performance of 12.2% (unlevered and in local currency units) is still above its 5, 1 and 15-year LTAs. While income returns have been fairly stable in the mid-6% to mid-7% range for all property since 29, capital returns have increased gradually, peaking at 6.7% in the year-to-march 216 from the trough (of -12.3%) in June 29. All three major property types delivered robust, doubledigit total returns for the year through Q Leading the out-performance was the office sector, which reported 13.4% total returns for the year % Yen/Dollar Data points through end of December 216. Change represents month-over-month change. ANNUALIZED TOTAL RETURNS BY SECTOR 3 1 PRINCIPAL CONTRIBUTORS: Shane Taylor Juliet Cha 17: Source: MSCI/IPD Office Industrial Aug-16 Apr-15 Dec-13 Aug-12 Apr-11 Dec-9 Apr-7 Aug-8 Dec-5 Apr-3 Aug-4 Dec-1 Apr-99 Retail Aug- Dec-97 Apr-95 All Property Aug-96 Dec-93 Apr-91 Aug-92 Dec-89 Apr-87 Aug-88-2 Dec-85 Annualised Total Return 4

6 THE COUNTRY REMAINS A TARGET FOR GLOBAL INVESTORS Strong commercial real estate transaction volumes have taken place in the last few years, with foreign capital representing a high proportion of buyers. Recently, institutional Mainland Chinese capital has been entering Australia in sizable volumes for the first time. Though investment activity slowed in 216, Australian commercial real estate continued to be very attractive on a risk-return basis. Its high ranking as one of the world s largest, most liquid and transparent markets encouraged many foreign buyers. Total property investment volume was around USD 19.5 billion for the first three quarters of 216: a 48% share of the total transaction volume for the full year of 215. Volumes fell across all income-producing property sectors. Retail sector transaction volumes declined by 73% YoY in Q TRANSACTION VOLUME BY SECTOR GLOBAL RETAILERS ARE ACTIVE OCCUPIERS The pace of international retailer entrance and expansion remained strong in major Australian cities in 216, although inner city prime rental growth was not as strong as 215. CBRE expects up to 1.6 million sqm (approximately 1 of existing retail stock) to be sought by international retailers. Prime CBD rent growth has slowed as international retailers are resisting higher rents, especially in Sydney. However rents continue to benefit from retailers seeking alternative spaces in the CBD. National retail yields compressed further in 216 amid lower interest rates. A-REITS have been selling non-core assets and recycling proceeds into prime stock. The larger REITs have been net sellers of assets and recycling capital into development pipelines. SYDNEY RETAIL RENTAL GROWTH BY TYPE (USD, Billions) (yoy, change) Q 216 Office Industrial Retail Apartment Hotel -1-2 Q1 2 Q3 2 Q1 21 Q3 21 Q1 22 Q3 22 Q1 23 Q3 23 Q1 24 Q3 24 Q1 25 Q3 25 Q1 26 Q3 26 Q1 27 Q3 27 Q1 28 Q3 28 Q1 29 Q3 29 Q1 21 Q3 21 Q1 211 Q3 211 Q1 212 Q3 212 Q1 213 Q3 213 Q1 214 Q3 214 Q1 215 Q3 215 Q1 216 Q3 216 Retail - High Street Retail - Shopping Centres Note: Transactions include properties and portfolios USD 1 million and greater in the office, industrial, retail, apartment and hotel sectors. Source: Real Capital Analytics Note: Data are based on prime rents. Source: CBRE ERIX YIELDS CONTINUED TO COMPRESS IN 216 Australia s CBD office markets saw national vacancy hold relatively stable, albeit with diverging vacancy trends per city. The office markets of Sydney and Melbourne continue to see their prime vacancy rates stabilizing/falling and we expect them to fall into the low single digits going forward. But weaker demand and some stronger supply growth in Perth and Brisbane will likely keep their currently high vacancy rates well in the double digits for the next few years. Office market performance per city continued to be impacted by divergent state economic performance in terms of demand growth. The MSCI-IPD cap rate (appraisal-based, all quality offices) for major office markets continued to compress in 216. Sydney, Melbourne and Brisbane CBD office yields are at new cyclical lows as of September 216. INDUSTRIAL RENTS GROWING IN THE TWO MAJOR CITIES Modest rental growth was witnessed in industrial markets, led by Sydney and Melbourne, with and 2% growth YoY respectively in 3Q 216, while Perth industrial market rents continue to fall. Yields in the Sydney and Melbourne markets have been compressing with prime yields reaching new lows as investors demonstrated a strong appetite for high-quality, well-tenanted logistics assets. However, yields in non-core markets have not compressed at the same rate as in the main submarkets of Sydney and Melbourne. The rapid adoption of e-commerce in Australia in recent years has been an important driver of occupancy in recent years and of new/higher standards in the sector. The development or repositioning of older assets to modern specifications is a key strategy to capture this demand. OFFICE CAP RATES INDUSTRIAL RENTAL GROWTH BY CITY Cap Rate (%) Mar-5 Aug-5 Jan-6 Jun-6 Nov-6 Apr-7 Sep-7 Feb-8 Jul-8 Dec-8 May-9 Oct-9 Mar-1 Aug-1 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jan-16 Jun-16 (yoy, change) % Sydney - CBD Office Melbourne - CBD Office Brisbane - CBD Office Perth - CBD Office Sydney Melbourne Brisbane Perth Note: Above cap rates are appraisal-based and are weighted average cap rates based on all quality offices. Source: MSCI/IPD Note: Data relates to prime warehouses. Source: CBRE ERIX This information is for our clients and investors only. Please note that the content of this report is for informational purposes only and should not be viewed as investment advice or an offer or solicitation. Any opinions are solely those of the Strategy & Research Team of CBRE Global Investors and are subject to change without notice, and may not be consistent with market trends or future events. This research is based on current public information that we consider reliable, but we do not represent it as accurate, updated or complete, and it should not be relied on as such. Copyright 217, CBRE Global Investors, LLC. All rights reserved.