CAPITAL MARKETS & INVESTMENT · PDF fileCAPITA MARKETS INVESTMENT SERVICES ASIA MARKET SNAPSHOT Q2 2017 | 4 CHENGDU The property investment market in Chengdu has always been active

ASIA MARKET SNAPSHOT Q2 17CAPITAL MARKETS & INVESTMENT SERVICES

Global growth is strengthening, reflecting improving international trade, investment and manufacturing. In Asia China, Hong Kong, Singapore–and probably Japan and India—should all achieve stronger economic growth in 2017 than most observers predicted six to nine months ago.

In Q2 2017, the office sector has emerged as the strongest growth driver in most Asian countries, with several markets recording record-high transaction prices, particularly in Hong Kong and Singapore. However, investment activity in the retail, industrial, hotel and residential sectors has also been robust.

Hong Kong has affirmed itself as the most expensive commercial property market in Asia, with a number of record-breaking transactions and all-time high CBD rents. Land sales were also active with two record-high transactions for Murray Road carpark and Kai Tai commercial land. The hospitality sector has rebounded with a total of 9 hotels sold within the last 6 months. Coming into Q3, investors should look out for new opportunities in decentralised retail, industrial and hotel assets.

Singapore continued the momentum generated in Q1, with a total of USD7.5 billion in transactions including government land sales, reflecting a YOY increase of 19.6%. In the residential sector, a record total of four land parcels was sold within just one month with aggressive bidding. The commercial sector was just as buoyant with two major transactions and the upcoming sale of the Beach Road site also triggered under the Reserve List of the Government Land Sales (GLS) programme. 30+ Collective Sales processes and a few good land parcels are also under way for sale, reinforcing positive market sentiment around the Singapore office market.

Shanghai’s office sector continued to stay active through Q2, particularly for domestic investors who accounted for seven en-bloc transactions with a combined value of around USD2.4 billion, all being office or mixed-use assets . We expect the office market to remain dynamic in Q3, in CBD, DBD and business park locations. We expect the active buyers in Q3 to include RMB funds, local asset management companies, and foreign institutions that are capital-ready.

A REGIONAL VIEW

The tourism and hospitality sector is also gaining good momentum, particularly with increased visitor numbers and reinvigorated hotel transactions, particularly in Hong Kong. We also expect the land and hotel deals to grow further in Thailand and Vietnam.

The industrial and logistics sector saw increased activity as manufacturers, logistics companies and industrial office developers look for good long-term investment opportunities, particularly in countries such as Taiwan, India, Indonesia, Thailand and Philippines.

TERENCE TANGManaging DirectorCapital Markets & Investment Services I Asia

In Q2, India saw the long-awaited implementation of the Real Estate Regulatory Act (RERA) and the Goods and Services Tax reforms. With these in place, will the real estate prices go up across all sectors, especially residential? While stricter compliance rules and greater transparency are likely to impact new project prices, we expect little change for ongoing projects, due to substantial inventory overhang. Demand for commercial office and retail space continued to drive flows from institutional players. For the rest of the year we expect the warehousing sector to strengthen as an increased number of international players are looking to disrupt the largely disorganised logistics market.

Other notable key trends we note across Asia:

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

CAPITAL MARKETS & INVESTMENT SERVICES ASIA MARKET SNAPSHOT Q2 2017 | 3

BEIJING

In Q2 2017, investors continued to focus on decentralised assets and adaptive re-use investment opportunities in the office, retail and business park sectors.

As a first-tier city, Beijing is experiencing an overall property market bottleneck where new investment opportunities are relatively scarce.

Nevertheless, we continue to see new transactions, especially in the decentralised markets.

Active investors, who are familiar with the local market, should still be able to find investment projects that can meet their requirements. In addition, domestic investors tend to be more active than their foreign counterparts.

Beijing will likely continue to develop its decentralised areas Wangjing and Tongzhou. The government plans to gradually relocate some of its functions to a rising satellite city, Tongzhou, about 17km east of the nation’s capital. Many new infrastructure projects are also under construction, including future subway lines and the planned Daxing International Airport, located 46km south of the city centre, which will continue to drive development and improve the decentralised areas. Three major deals were completed in Q2, which demonstrates investors’ strong interest in value-add assets within decentralised areas. We expect this trend to continue in Q3.

Major Deals to Highlight

» China Resources purchased ZTE Tower (29,982 sq m) from the ZTE Corporation for RMB1.7 billion (USD250.7 million). The project is a value-add office building located in Haidian District, Beijing

» China Ping An Trust acquired Beijing New City Mall (50,086 sq m) for RMB1.25 billion (USD184.4 million). This project is located in Wangjing, Beijing

» An R&D building (34,364 sq m) in Zhongguancun Science Park, Shangdi, was sold to a local investor for RMB731 million (USD107.8 million)

LI JIEManaging Director+86 10 8518 [email protected]

COMBINED VALUE

USD542.9m

SECTOR TO WATCH Q3 2017

Value-add Assets

BIGGEST DEAL

USD250.7mZTE Tower | Office

EN-BLOC TRANSACTIONS

3 transactions

MAJOR MOVER Q2 2017

Decentralised Office


CHENGDU

The property investment market in Chengdu has always been active among domestic clients. However, the limited growth potential of the residential market has led domestic developers to shift to the office sector, with a preference for Grade A office buildings located in prime locations. The office property market in Xi’an is still very much in its infancy with only 15 single-ownership office buildings, the majority owned by local developers. We expect Xi’an’s office market to be the next investment opportunity to watch.

The overall sentiment was positive for Chengdu’s property market in Q2 2017. Although the residential market is still popular, the growth opportunity remains limited. In the office sector, Grade A office buildings located in prime locations have still been very popular among domestic investors. Business Parks are also popular in the mature areas of Chengdu and Xi’an’s hi-tech zone, featuring low vacancy and high-profile tenants. The industrial waste and disposal sector is particularly active but buyers are only interested in mature locations. The logistics and warehousing market is very active in mature hi-tech zones, i.e. Shuangliu, Longquanyi and Xindu, however, land supply remains limited within these areas.

In Q3 domestic investors will continue to focus on the office market, with a preference for Grade A office buildings in prime locations in Chengdu. Business Parks in Chengdu and hi-tech zones in Xi’an remain the main areas worth investing in, given the stable tenancy and lower capital value. We can expect exponential growth due to the rapid urbanisation and infrastructure development within these areas.

TAMMY TANGExecutive Director+86 21 [email protected]


Chengdu Grade A office buildings in Prime locations


HONG KONG

The Hong Kong investment market continued to be highly active in Q2 2017. The office market was once again the most dominant sector, with PRC developers securing the government’s residential land sales in the first two quarters. The primary residential market continued to be buoyant while the secondary market was mostly quiet.

Decentralised retail, industrial and hotel properties have all seen some level of activity with increased transaction volume.

After the sale of the Murray Road site last quarter, we have seen a number of record-breaking transactions concluded in the office sector, namely the sale of 11/F of Worldwide House for USD78.2 million, or USD52,250 per sq m and 41/F of Lippo Centre Tower 1 for USD59.7 million, or USD52,926 per sq m.

Two major government commercial land sales were concluded on top of the government land sales. Murray Road carpark was sold at USD2,985 million or USD68,929 per sq m, setting a new record-breaking price per sq m for a commercial land sold in Hong Kong’s history. Whilst Murray Road was sold at a record price, Kai Tak commercial land also sold at USD3,150 million, equating to USD17,721 per sq m, marking a new record price for commercial land in Kowloon.

The office sector remained the most active with 8 en-bloc offices transacted in Q2 compared to only 4 en-bloc transactions completed during the same period last year. The positive sentiment should carry on well into Q3 as we now see more and more en-bloc properties for sale such as 7 floors of the Centrium, 60 Wyndham Street and Octa Tower in Kowloon East. The Excelsior Hotel is also available for sale, offering 63,174 sq m of potential office and retail redevelopment.

Hong Kong’s Chief Executive, Carrie Lam, is considering reviving the Revitalisation and Conversion of Industrial Buildings (RCIB) scheme, which should help with the redevelopment and wholesale conversion of older industrial stock. The value of older industrial properties would then potentially increase, but in any event, none of this will happen until the next CE addresses the subject again by Q1 2018. Property speculators would likely rush in and inflate the prices of industrial properties in the short term.

The local hospitality and tourism sector has seen a rebound in the last few quarters. The recent increased number of visitors has caught the investors’ attention:

COMBINED VALUE

USD3,124mSECTOR TO WATCH Q3 2017

» Industrial » Hospitality

BIGGEST DEAL

USD295m below 4% yieldNewton Place Hotel


26 transactions

MAJOR MOVER Q2 2017

Office

ANTONIO WUDeputy Managing Director+852 2822 [email protected]

9 hotels were sold in the last 6 months, marking an unprecedented number of hotel transactions in HK. Coming into Q3, investors show great confidence in future hotel developments, although most of the new hotels are 3-star only, and located in decentralised areas.


INDIA

Q2 saw the implementation of long-awaited regulatory reforms in various parts of the country. The Real Estate Regulatory Act (RERA) came into effect on 30 April 2017, quickly followed by the Goods and Services Tax (GST) implemented on 1 July 2017.

Real Estate developers are gearing up to adapt and thrive in this new economic environment, with an increased focus on affordable housing.

We do not expect much change in prices of ongoing residential projects, at least in the short term, due to the substantial inventory overhang in the market.

The stricter compliance standards, however, may increase prices of new projects. We look forward to more transparent pricing, timely completion of projects and certified real estate professionals within India’s Real Estate industry.

The residential market demand remained relatively low but stable in Q2. As more and more banks are focused on reducing the interest rates on home loans, we expect this trend to strengthen further for the remainder of the year.

The demand for commercial office space and retail properties continued to drive fund flows, with a major contribution from institutional players focusing on REIT-compliant portfolios and key commercial and business hubs.

For the rest of year, we expect the warehousing sector to emerge as a dark horse as an increasing number of players, such as Warburg Pincus, Canadian Pension Plan Investment Board and Ascendas-Singbridge, are looking to disrupt the largely disorganised logistics market in the country.


April 2017:

» Singapore’s Ascendas-Singbridge Group acquired six warehouses for USD83 million from Mumbai-based logistics and supply chain company Arshiya Ltd

» L&T Financial invested a combined sum of USD132 million in project development by top developers such as Ajnara India, Prateek Group and Paramount Group

May 2017:

» The Xander Group Inc. and APG Asset Management NV purchased IT-SEZ in South Chennai for approximately USD350 million from a joint venture of Shriram Properties’ and Infrastructure Pvt. Ltd. and PE fund SUN-AREA Property Partners

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

GAGAN RANDEVNational Director+91 124 456 [email protected]

» Virtuous Retail South Asia Pte. Ltd, a joint venture between alternative investments firm The Xander Group Inc. and Dutch pension fund APG, purchased a retail property in Mohali (North Country Mall), Punjab for USD109 million from SUN-Apollo Real Estate Fund and Gumberg Retail

» ASK Property Investment Advisors invested USD31 million in ATS Infrastructures’ premium mixed-use project, Knights Bridge, located at Sector 124, Noida

» Kohlberg Kravis Roberts & Co Ltd (KKR) invested USD31 million across a portfolio of affordable housing projects from Signature Global, a Gurgaon-based developer


» Commercial » Industrial (Warehousing)

MAJOR MOVER Q2 2017

» Commercial » Retail


INDONESIA

Foreign investor demand for new property development projects remained high in Q2, despite the continued slow absorption of a record supply of new office space and strata title apartments for sale.

Developers are predominantly targeting the middle market apartments segment, shifting from a previous focus on upscale & luxury segments.

Foreign investors looking for high yield from existing income- producing assets continue to search for such opportunities, despite the lingering mismatch between buyers’ and sellers’ price expectations.

The office market in Jakarta CBD continues to trend downwards due to oversupply and decreasing demand.

The office market is comprised of 731,164 sq m of new office supply in the CBD and 197,609 sq m outside the CBD. The CBD office space occupancy fell from mid-90% less than 3 years ago to 83.3% today. Amid oversupply, landlords are slashing rent prices for medium to large tenants, reducing rents by up to 50% from rent levels 2-3 years ago. New offices originally built for lease are now available for en-bloc bulk purchase despite the significant leasing risks. Other offices originally built for strata title sale can now be purchased en-bloc with an option to recover the units that were pre-sold and resell them to the new buyer.

Before 2013, landowners or developers were reluctant to joint venture and build new apartment projects for sale in Jakarta. Healthy absorption rates above 85% with an option to pre-sell apartments allowed developers to build with a chance to make good profits, requiring little-to-no bank financing at all. Times have dramatically changed. Now, due to the slower absorption of new units in the market and with Indonesian banks less willing to finance new property projects, many developers seek joint venture partners and/or new forms of financing in order to construct their projects or create the financial support necessary to buy time and finish sales. Investors can also enter a joint operation and be compensated with a bartered number of units as a return on investment.

At the start of Q2 2017, a total of 59,017 apartment units were under construction, of which 21,167 units are expected to reach completion before the end of 2017, followed by 28,303 and 9,547 units in 2018 and 2019 respectively.


Industrial

STEVE ATHERTONDirector+62 21 3043 [email protected]

MAJOR MOVER Q2 2017

Industrial

The industrial sector saw more activity, as regional logistics developers are preparing new projects for their international clients, including a new 3-story logistics facilities.

Coming into Q3 2017, due to the recent infrastructure development in and around Jakarta, we believe that Transportation-Oriented Development (TOD) will start to get more attention and higher valuation. TOD development will primarily consist of mixed-use, retail, office & for-sale apartments.


MYANMAR

While Myanmar’s outlook is relatively favourable, we saw limited activity occurring in Q2 2017. Investors remained cautious while they are still digesting the recent notifications released for the new Myanmar Investment Law. Generally the overall sentiment has improved, but investors are waiting to see how the new procedures pan out in practice. The ability to long-term lease property without full approval from the Myanmar Investment Commission (MIC) is still uncertain, so we need to “walk the walk” to evaluate how this happens in practice. MIC is the government body responsible for verifying and approving investment proposals and regularly issues notifications about sector-specific developments.

The new government is taking steps to improve the clarity, communication and credibility of its economic policies as well as providing a clearer overall structure including tax exemptions and approval times, which should help anchor economic expectations and sustain investor confidence.

The business community is hoping the new Myanmar Companies Act will have a smooth passage through parliament when it arrives. The draft law is “still in the pipeline for inter-ministerial review” and is expected to pass towards the end of the year.

Overall market sentiment in commercial real estate is becoming more positive following the success of the newly opened high-end real estate project in downtown Yangon, Junction City Shopping Centre, which is complete and officially opened. The developer, Shwe Taung Group, started the construction in 2014.

Myanmar’s overall residential market and the condominium sector are still in doldrums due to an ambiguous law that permits foreigners to purchase condo units, which is extending a slowdown in the country’s housing market. While the law allows overseas buyers to own 40 percent of a residential project there are missing details, such as the requirements for a development to qualify as a condominium, and parking requirements make it difficult to reduce the size of units and thus affordability. Currently, the selling prices of Yangon’s condominiums are still generally higher than other countries in South East Asia, which makes them a very risky investment in the short term.

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


Serviced Apartments

MAJOR MOVER Q2 2017

Retail

The retail sector is especially interesting given the success of the newly opened Junction City. We expect the new high-end shopping mall to be a world-class destination for residents, tenants, and tourists in Yangon.

Retail and serviced apartment sectors are the two main sectors to watch for Q3 for both local and foreign investors looking for high return investments in Myanmar.


PEARL RIVER DELTA

The real estate market in the Pearl River Delta region (PRD) has adopted a policy-oriented approach in 2017. With the implementation of new income tax rates and other preferential arrangements for foreign investors regarding land use rights, residence and immigration permits as well as simplified operation processes, the region has started to attract more and more foreign direct investment (FDI) and has caught the attention of real estate developers.

Following the guidance from the government’s policy, office investors and developers in the PRD market, mostly led by Shenzhen, are now more inclined to develop buildings for their own usage.

The retail market remained robust in Q2 2017, with one major deal closed in Guangzhou.

Three commercial parcels in “Shenzhen Bay Headquarters Base” have been sold for RMB9.8 billion (USD1.4 billion) at an average price of RMB17,529 per sq m (USD2,589 per sq m). The new land owners are Digital China Group, ZTE Group, and China Electronic Group.

Link REIT recently acquired Metropolitan Plaza, located in Liwan District Guangzhou for RMB4 billion (USD601 million). At the time of the acquisition, Metropolitan Plaza had 94.1% occupancy rate. The net operating income (NOI) yield has been estimated at approximately 4%.

The government continues to regulate the land market and is encouraging the unified property rights for both commercial and industrial land. On the commercial side, the government expects to guide the office market and promote more function-oriented investments through long-term leasing and own-usage. On the industrial side, the government’s regulations are helping to ensure space is properly reserved before starting any new development or production.

Led by land investors and developers building for their own use, the office market will mostly stay active.

We expect the government to provide further land use directives to encourage finance and tech companies to move to premium locations to remain attractive to potential investors.

Besides those new directives, the urban renewal scheme should soon become a major source of land supply for investors and developers.

In Q3, the retail sector will likely continue to be robust.

ERIC LAMManaging Director+86 20 3819 [email protected]


12% of total Shenzhen land are potentially subject to renewal

BIGGEST DEAL

RMB3.5b (USD523m) Land parcelShenzhen Bay Headquarters Base Land Transaction | Office / Commercial


USD600.4mMetropolitan Plaza (Guangzhou)

MAJOR MOVER Q2 2017

Land parcels SZ Bay Headquarters Base Area

Note: USD1 = RMB6.7704


PHILIPPINES

Philippine real estate continued to be robust through Q2. We expect GDP to linger at 6% growth, supported by strong trades, solid performance services and still very good remittance inflows.

The government recently launched its railway project, connecting Metro Manila to Bulacan and Pampanga, with a target completion date by 2021. This should jumpstart the government plan to make the next six years the “golden age of infrastructure development”, and consequently unlock suburban real estate potential.

The office sector continues to see a diversified tenancy mix. Notably, Q2 saw a slight rebound from BPOs with a total transactions share close to 30% from a low 21% in Q1.

Several voice BPOs and KPOs closed sizeable deals, i.e. Google recently increased their office space by 18,000 sq m, on top of the space transacted a year ago. Offshore gaming and traditional companies also contributed significantly to sustain the market.

The residential sector saw continuous growth in pre-sales as condominiums in township developments show positive numbers. New condominium projects for mid-income buyers in Vista City and Arca South areas and luxury projects such as Proscenium and Park Central are more than 80% sold to date.

As a result, capital values should keep rising as we expect the slowdown in rents to continue.

We expect the industrial sector to provide good long-term investment opportunities in Q3.

Retail conglomerates are particularly interested in purchasing logistics businesses, hence increasing warehouse market demand from Chinese, Japanese and Taiwanese manufacturing firms, on the back of fresh investments. Given these, we deem industrial and retail to be the sectors to watch in Q3.


» En-bloc sale of Novartis Building, with a land area of 1,211 sq m and gross floor area of 5,482 sq m. The building was acquired by Alveo Land for USD10 million from Novartis


» Industrial » Retail

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

BIGGEST DEAL

USD10mNovartis Building | Commercial / Office

MAJOR MOVER Q2 2017

Office

» En-bloc sale of former Philippine Stock Exchange space in Tektite Towers. The floors were bought back by the developer, Philippine Realty & Holdings Inc. for USD5.1 million


SHANGHAI

The en-bloc transaction market remained mostly active through Q2. Shanghai domestic investors accounted for seven en-bloc transactions during the second quarter, with a combined value of approximately RMB16.2 billion (USD2.4 billion).

The office sector remained dynamic in Q2, with seven out of the eight transacted projects being either office buildings or mixed-use projects including sizable office components.

As much as Chinese developers want to enter the Shanghai market, it is almost impossible for these groups to acquire land. As a result, these developers are beginning to purchase existing stock in Shanghai or looking to form JV partnerships, as seen below with the Qinghai Garden project.

We expect the active buyers in Q3 to include RMB funds, local asset management companies, and foreign institutions that are capital-ready.


» Qinghai Garden, located in Huangpu, transacted for approximately RMB2.3 billion (USD337 million) – the Binjiang Group purchased a 49% equity stake to enter a JV partnership with China Minsheng Investment

» SOHO Hongkou, located in Hongkou, transacted for approximately RMB3.6 billion (USD524 million) and was sold to Keppel, Keppel Capital, and another co-investor

» The Guozheng Center, located in Yangpu, transacted for approximately RMB2.6 billion (USD387 million) and was sold to CapitaLand

BIGGEST DEAL

Approx. USD524m Net yield: Approx. 3.2%SOHO Hongkou | Office


7 transactions

MAJOR MOVER Q2 2017

Office

BETTY WONGExecutive Director+86 21 [email protected]

COMBINED VALUE

USD2.4b


» CBD » DBD » Business Parks


SINGAPORE

Keeping up with the momentum generated in Q1 2017, the investment market continued to be energetic in Q2, with a total of SGD10.3 billion (USD7.5 billion) transacted, reflecting a YOY increase of 19.6%.

A new record of four parcels of residential land sold in Singapore with a total value of SGD1.5 billion (USD1.08 billion) in just one month! Market confidence was clearly demonstrated by the huge number of bidders and aggressive pricing, some setting new highs in Singapore. We continue to receive interest from both sellers and buyers for residential land. The commercial sector was just as buoyant with the major transaction of Jurong Point retail mall for SGD2.2 billion (USD1.6 billion) and the 50% stake in One George Street, transacted at SGD591.6 million (USD428.7 million).

Both domestic and foreign investors continue to keep a keen eye on the tight investment market in Singapore. A commercial site at Beach Road with at least a 70% office component has been triggered for sale under the Reserve List of the Government Land Sales (GLS) programme. An estimated 30 or more Collective Sales processes are at various stages island-wide, reinforcing positive market sentiment in Singapore. We are preparing a few good land parcels to be offered for sale in the coming months.


» Two GLS sites: Bidadari, a mixed-use site, transacted at SGD1.1 billion (USD797 million) and Stirling Road site at SGD1 billion (USD725 million)

» Two Collective Sales: Eunosville transacted at SGD765.8 million (USD554 million) and Rio Casa at SGD575 million (USD416 million), amongst others

COMBINED VALUE

SGD10.3b (USD7.5b)TANG WEI LENGManaging Director+65 6531 [email protected]


» Residential » Commercial

BIGGEST DEAL

SGD2.2b (USD1.6b)Jurong Point | Retail / Commercial

MAJOR MOVER Q2 2017

Residential

Note: 1 USD = 1.38 SGD


TAIPEI

Mainly driven by the industrial and office sectors, the total transaction volume in Q2 increased to TWD10.7 billion (USD356 million) compared to last quarter. Industrial/office accounted for 68% of the total commercial transaction volume. However, the total transaction volume in Q2 still reflects a decrease compared to the average quarterly transaction amount of TWD20.7 billion (USD690 million) over the last five years.

As we expected, the office/industrial sector for occupational purposes was the major mover in Q2.

Yuanta Financial Holdings purchased two floors of Tatung Building for TWD1.65 billion (USD55 million). It’s been reported that Yuanta plans to further consolidate the ownership of the building and redevelop it into its headquarters through an urban renewal scheme.

In addition, hi-tech companies are looking for industrial office buildings for their own headquarters.

Manufacturers, logistic investors and industrial office developers are all looking for new opportunities in the industrial sector. For instance, the New Taipei City government successfully auctioned 4 industrial plots in Xinzhuang District. Moreover, several industrial plots were purchased for more than TWD305.6 million (USD10 million) in Miaoli County, Yunlin County, Chiayi County and Pingtung County.

The office and industrial sectors are expected to remain the key growth drivers in Q3, with softening prices and solid continuous demand from occupational buyers. Due to land scarcity in Taipei, reasonably priced development sites and en-bloc buildings will still continue to draw investors’ attention, especially those in prime locations and eligible to enter the urban renewal scheme.


» Vedio Brain Electronics Ltd. purchased the Yoko international office building in Zhonghe Industrial Park, New Taipei City, for TWD1.45 billion (USD48.3 million)

» Axiomtek Co., Ltd. forward-purchased an industrial office building in Xizhi Industrial Park, New Taipei City for TWD965 million (USD32.1 million)

BIGGEST DEAL

USD55mNet Yield: 2.5%(Assume 100% leased)

Tatung Building | Strata Office and retail


4 transactions

MAJOR MOVER Q2 2017

Office

DEREK HUANGExecutive Director+886 2 8101 [email protected]


» Office » Industrial

» Mstar Semiconductor Inc. purchased an industrial office building in Tai Yuen hi-tech Industrial Park, Hsinchu County, for occupational purposes for TWD950 million (USD31.6 million)


THAILAND

The market saw moderate growth in Q2, mostly led by better performing export and tourism sectors. The government’s commitment and spending on infrastructure have helped boost business confidence, particularly in relation to the new mass transit bidding process in Bangkok e.g. the Yellow, Orange, and Pink lines. Residential developers are encouraged by the prospect of improved transport links, although confidence is still fragile because of relatively high household debt. Large listed residential developers are still buying or leasing prime land for new mid-to high-end projects and acquiring new assets through mergers and acquisitions.

The investment sector continues to grow, fuelled by new projects from large listed developers. For example, One Bangkok project on RAMA IV road is a mixed-use development on a 167,000 sq m plot, with an investment value of approximately USD3.5 billion.

Demand for Grade A and B offices continues to be robust in all CBD locations.

In the residential sector, the strongest demand came from very high-end condominiums situated in central locations, although we are starting to see signs of slowing growth rates in prime locations.

Tougher bank lending policies and high household debts continue to keep pressure upon the general market.

Demand in the industrial sector is improving on the Eastern Seaboard according to Thailand’s Eastern Economic Corridor (EEC), a program launched by the government.

We foresee a relatively positive market outlook for Q3, with the volume of Thailand’s exports rising and the tourism sector continuing to grow.

The general business outlook is also driven by low interest rates, low inflation rate and good progress in the bidding process of the mass transit and related infrastructure projects.

We expect the transactions volume for land and hotel deals to increase in Bangkok and its surrounding areas in Q3.


Office

BIGGEST DEAL

USD4m Industrial Land in Bangplee IE | Land for industrial use

SUNCHAI KOOAKACHAIDeputy Managing Director+66 2 656 [email protected]

BARNY SWAINSONDirector+66 2 656 [email protected]

MAJOR MOVER Q2 2017

Office


VIETNAM

It’s been another solid quarter for the Vietnamese real estate market as Foreign Direct Investment (FDI) inflows continue their steady and strong increase in the country. FDI rose 10.4% YOY to USD12.1 billion.

We expect the FDI volume to accelerate significantly in coming quarters, due to the government’s pledge to speed up the approval process of new investment projects.

US President Donald Trump’s decision not to join the Trans- Pacific Partnership (TPP) seems not to have impacted appetite from overseas investors.

Real estate deals in Vietnam were again dominated by off-market transactions this quarter, with limited advisory roles from the large agencies. The retail market was on alert with the impending opening of Vietnam’s first 7-Eleven by the team behind McDonalds. Ambitious expansion plans will further heat up demand due to limited availability of quality retail options in the market, which reflects Vietnam’s growth in popularity among operators, with its population of 94.5 million people, 60% being 35 or younger.

The market sentiment in Q2 is a continuation of Q1, with significant enquiries for well-located operational assets, particularly office buildings and hotels. The limited supply of high-quality assets is pushing capital values up and compressing yields–but this is mainly based on sentiment and expectation rather than clearly analysed open-market transactions. There is currently a mismatch between owners’ asking prices that are too high and yields on income-producing assets that are too low. Institutional investors will look to a more mature market for these yields or expect higher returns when investing here.

In Q3, we expect all sectors to perform well, especially the industrial sale & leaseback market and high-end hospitality assets.

The office market will lead the way with the recent boom in coworking space. Indochina Capital, a leader in Vietnam’s growing real estate, has recently partnered with the coworking operator, Toong, to develop new coworking space outlets. The overall positive sentiment is a reflection of Vietnamese real estate maturing, thanks to the entrepreneurial spirit of local developers and the growing maturity of the real estate market and occupiers’ expectations.


» Industrial » Hospitality

MAJOR MOVER Q2 2017

Hospitality

ADAM FITZPATRICKDirector+84 28 3827 [email protected]

Capital Markets & Investment Services (CMIS)We have Asia covered.

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TERENCE TANGAsia

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TERENCE TANG

East [email protected]

JIMMY GUBETTY WONG

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[email protected]

JAMES FINK

South [email protected]

ERIC LAM

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SUNCHAI KOOAKACHAI

Hong [email protected]

ANTONIO WU

Hong [email protected]

DOMINIC CHUNG

[email protected]

IEYO DE GUZMANVietnam

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DAVID JACKSON

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DEREK HUANG

[email protected]

IMRAN MOHIUDDIN

[email protected]

SURESH CASTELLINO

[email protected]

GAGAN RANDEV

[email protected]

ANTONY PICON

[email protected]

TANG WEI LENG

[email protected]

STEVE ATHERTON

North [email protected]

LI JIEKazakhstan

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BAYAN KUATOVA

West [email protected]

TAMMY TANG

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BARNY SWAINSON

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CAPITAL MARKETS & INVESTMENT · PDF fileCAPITA MARKETS INVESTMENT SERVICES ASIA MARKET SNAPSHOT Q2 2017 | 4 CHENGDU The property investment market in Chengdu has always been active