OFFICE LEASING IN THE REGION OFF TO A STRONG START Demand in core markets up by 20%; driven by insurance sector Hong Kong, May 14 2015 – Despite near 20 million sf of space being completed in the region in the first quarter of 2015, vacancy rates remained well under control, increasing by just 0.4 percentage points to 9.9%. In the core markets, demand for space increased by over 20% – the insurance sector was the stand-out performer here, accounting for over 40% of the major leases inked, with the bulk of the leases signed evident of a flight-to-quality trend. In Singapore, the completion of CapitaGreen has seen a number of blue-chip tenants moving to the prime grade development while Ace Insurance relocated from a space in the suburbs to take up a 40,000 sf space in Seoul’s Gangnam business district. “There is an increased propensity of the new Grade A buildings to lease at a faster velocity than lower-grade projects,” said Sigrid Zialcita, Managing Director of Research for Asia Pacific, Cushman & Wakefield. “New buildings in gateway cities such as Tokyo, Beijing, Shanghai, Seoul and even Singapore are reporting very high pre-leasing rates,” she added. In Tokyo for example, Japan Post Insurance is consolidating its employees in Osaki Bright Tower, inking close to a million sf lease that will see the yet-to-be completed building fully precommitted. While tenants are moving to these higher-grade facilities because of very competitive rates and efficient workspaces, organic growth is also an important decision catalyst. With the Southeast Asia region on the brink of economic integration, insurers are generally upbeat on this burgeoning region’s prospects. For instance, life insurer Manulife paid $1.6 billion to local bank DBS for a 15-year exclusive deal to sell its insurance products to the bank’s client base while Berkshire Hathaway-linked Specialty Insurance has obtained a license to operate in Singapore. “Looking at the employment data for the major cities, we’ve seen the office-using sector continuing to expand. In particular, we’re seeing this in higher take-up levels in the financial sector, which has sat on the sidelines over the past quarters. The technology sector also remains very active across the region, with the likes of Apple and Facebook, benefiting from continuing phenomenal financial performance”, said Miss Zialcita. Sectoral Leasing Activity in APAC (Q1 2015) Transport/Logistic s 2% Professional Svcs 3% BPO 7% Others 9% Insurance 24% Manufacturing 15% [CATEGORY NAME]* [PERCENTAGE] Banking/Finance [PERCENTAGE] Banks/Non-banks 9% TAMI: Technology, Advertising, Media, Internet *major leases only Source: Cushman & Wakefield This is especially evident in Australia, as the country adjusts to the shifting economic structure, post the mining boom, where demand for office space were the strongest in the non-mining states. Vacancies fell in Sydney, driven by demand across a wide range of companies in the financial, technology and business and professional services sectors. In Melbourne, tenants taking advantage of the softer market are driving absorption in the CBD as they move back into the central business districts. Overall rents in the region remained on an upward trend from the last quarter of 2014. From a rental standpoint, stronger occupancies are supporting rental gains in financial hubs. In Tokyo, good projects are enjoying a rent premium. Hong Kong is also another example, where rents have started to edge up in Central after languishing for an extended period of time, driven by demand from Mainland brokerages who are backfilling spaces that are being vacated by firms relocating to lower cost submarkets. For the emerging markets, Bengaluru continued to enjoyed strong demand from the technology sectors. During the quarter, Oracle inked a 400,000 sf space in the JP Nagar submarket. However, the strong construction environment in Jakarta and other Tier-2 markets in China and India is certainly supporting higher availabilities in those markets and a modest correction in rates. “Still, we have had a good start to the year and we are maintaining a positive outlook for the region. Generally, we expect macroeconomic conditions to be generally supportive of the occupier and investment markets”, said Miss Zialcita. Net Absorption (Q1 2015) Emerging 8.5 Core 6.8 NB: in msf Source: Cushman & Wakefield Net Absorption (sf) Type Core Emerging City Adelaide Beijing Brisbane Hong Kong Melbourne Perth Seoul Shanghai Singapore Sydney Taipei Tokyo Ahmedabad Bangkok Bengaluru Chengdu Chennai Guangzhou Hanoi Ho Chi Minh City Hyderabad Jakarta Kolkata Manila Mumbai NCR Pune Shenzhen Q1 2014 190,995 1,297,262 -160,608 320,883 197,496 -229,228 1,389,201 -804,032 64,574 94,593 68,121 1,569,175 504,500 32,873 550,406 894,201 90,853 202,928 -41,010 59,707 1,746,566 210,002 114,000 434,334 667,775 1,324,053 443,556 439,410 Q1 2015 -52,528 2,533,132 -55,552 218,513 244,459 12,174 -142,568 2,031,380 -124,147 514,751 217,322 1,427,127 151,800 -4,523 3,301,513 103,624 494,844 98,619 160,828 -23,616 620,968 198,836 287,600 422,246 1,058,950 597,047 634,200 363,421 Cushman & Wakefield is the world’s largest privately‐held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world’s major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and management assignments. Founded in 1917, it has approximately 250 offices in 60 countries, employing more than 16,000 professionals. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has nearly $4 billion in assets under management globally. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge. ###