Global-Market-Perspective-Q3-2014

Strengthening markets trigger real estate development cycle Global Market Perspective | Q3 2014

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Global Market Perspective, Third Quarter 2014

Global Market Perspective Third Quarter 2014

Strengthening markets trigger real estate development cycle An abundance of equity, new capital formation and improving debt liquidity are supporting a robust global commercial real estate investment market. With the market on track to achieve the highest transaction volumes since 2007, JLL’s forecasts for full-year 2014 have been upgraded. In the occupational markets, most indicators show steady progress across all the main commercial sectors. Shortages of high-quality space are intensifying, which is helping to boost developer confidence and trigger an uptick in new construction.

Momentum continues to build in the global real estate investment market

The second quarter of 2014 has maintained the strong momentum of recent quarters. First half 2014 investment volumes are 28% higher than a year ago, prime yields in core markets have defied expectations by compressing further, and office capital values are accelerating once again, up 8.8% over the past year. The Americas and EMEA regions continue to demonstrate the strongest volume growth. Asia Pacific has struggled to sustain the record pace of 2013, but investor interest remains robust. Given capital availability and the transactions pipeline, full-year 2014 global investment volumes are expected to hit US$700 billion, an uplift of about 20% on 2013 levels.

Direct Commercial Real Estate Investment, 2006-2014

Source: JLL, July 2014

0

100

200

300

400

500

600

700

800

Americas EMEA Asia Pacific Global

US$ b

illion

s

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

XX% Projected Change 2013-2014

10%

15%25%

20%



Investors targeting multiple geographies Investors are predominantly targeting the large liquid markets; the ‘Big 7’1 countries accounted for 77% of total transactions in H1, while the four ‘Super Cities’ – London, New York, Tokyo and Paris – were the destinations of 20% of all capital flows. But investors are also now aggressively targeting opportunities in smaller geographies, as well as those markets further up the risk curve. For example, Brazil, Mexico, the Benelux countries, Spain and Ireland all registered notable uplifts in activity during H1.

Office leasing market recovery is still patchy The global office leasing markets are moving in a positive direction, although the signs are more ambiguous than in the investment market. The United States has registered the highest net absorption rate of the current cycle, and London and Paris are leading the recovery in demand in Europe; in Asia Pacific, leasing volumes have rebounded by 20% compared to 2013 levels. However, global leasing volumes in Q2 were still only 5% higher than in 2013, with corporate occupiers keeping a close eye on space usage and efficiency.

Space shortages trigger office development cycle Shortages of quality office space in the world’s dominant office markets are intensifying. While the recent uptick in new construction marks the start of a new development cycle, it will not translate into deliverable space until late 2015 and 2016, leaving a period of 15-18 months of Grade-A supply shortages and rental uplift. Singapore is expected to show the strongest rental growth this year – however the top performers will increasingly be dominated by U.S. cities. The U.S. office market overall is expected to see rental growth at well over double the pace of inflation over the next 2-3 years.

Global Office Completions, 2000-2015

24 markets in Europe; 25 markets in Asia Pacific; 44 markets in the U.S. Asia relates to Grade A only. Source: JLL, July 2014

1 Australia, China, France, Germany, Japan, UK and the U.S.

0

5

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15

20

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

2015(F)

U.S. Europe Asia Pacific

millio

ns sq

m

Average



Prime Offices – Projected Changes in Values, 2014

*New York – Midtown, London – West End, Paris - CBD. Nominal rates in local currency. Source: JLL, July 2014

Retail revival, polarisation and consolidation Retail markets in the U.S. and Europe have continued their steady recoveries despite ongoing structural shifts in the retail industry. Polarisation remains pronounced and many mid-priced retailers are being squeezed. Retailer consolidation will continue to be a trend this year and M&A activity is likely to tick upwards as retailers respond to changes in consumer demand. In Asia, international retailers are looking for growth opportunities although some caution was evident in the second quarter of 2014.

Supply chain realignment boosts warehousing sector Supply chain realignment and massive structural changes in the retail sector are driving robust demand for functional modern warehousing across all three global regions. Rental growth and supply shortages are stimulating construction in both North America and Europe, an increasing proportion of which is being built on a speculative basis.

Hotel investment maintains momentum Hotel investment volumes have maintained the strong levels of 2013, with activity dominated by private equity and single-asset transactions. Activity remains strong, and we now expect the full-year 2014 volumes to reach US$54.5 billion, compared to US$52 billion in 2013.

Mixed picture in residential sector London and Dubai are leading price growth in the high-end residential sector, boosted by international demand, although there are early signs of cooling in both markets. The U.S. apartment market has continued its growth run, with the tightest conditions apparent in the gateway cities. The Asia Pacific high-end residential sales market remains subdued due to a combination of softer economic growth and policy restrictions.

+ 10-20%

+ 5-10%

+ 0-5%

- 0-5%

- 5-10%

Dubai, London*, TokyoBeijing, San Francisco, New York*Boston, Mexico City

Singapore

Capital ValuesRental Values

Stockholm, Hong Kong, SeoulParis*, Sydney, FrankfurtChicago, Los Angeles, Toronto, Washington DC Shanghai, Madrid, Brussels, Mumbai

Moscow

Tokyo, Boston, ChicagoMadrid, New York*, Los Angeles San Francisco, Mexico CityDubai, London*Seoul, Sydney, BeijingFrankfurt, Singapore

Stockholm, Paris*, TorontoWashington DC, Shanghai, MumbaiBrussels, Hong Kong

Moscow, Sao Paulo Sao Paulo



Global Market Perspective

Contents

Global Economy ................................................................................................................................................................ 6 Real Estate Capital Markets ............................................................................................................................................. 8 Investment Volumes ............................................................................................................................................................ 8 Capital Values and Yields ................................................................................................................................................. 12 Corporate Occupiers ...................................................................................................................................................... 15 Global Real Estate Health Monitor ................................................................................................................................. 17 Office Markets ................................................................................................................................................................. 18 Office Demand Dynamics ................................................................................................................................................. 18 Office Supply Trends ......................................................................................................................................................... 21 Office Rental Trends ......................................................................................................................................................... 24 Retail Markets .................................................................................................................................................................. 26 Industrial Warehousing Markets .................................................................................................................................... 28 Hotel Markets ................................................................................................................................................................... 29 Residential Markets ........................................................................................................................................................ 33 Recent Key Investment Transactions ........................................................................................................................... 34



Global Economy

Recovery continues, but progress remains slow The global economy experienced an uneasy start to the year, with factors such as political disruption and poor weather undermining the healthy sentiment of the previous six months. Conditions have stabilised in the emerging world over the last quarter with currencies reversing some of their losses, but ongoing geopolitical concerns remain about Ukraine and the Middle East, as well as the risks in China.

For the developed world, statistics have been slightly disappointing and downgrades to forecasts have been the norm. The most disturbing news was a big contraction in the United States economy in Q1. This was largely caused by the unusually bad weather in the U.S. winter. The underlying strength of the economy remains and activity is set to rebound over the rest of 2014, but the poor figures have halved growth expectations for the current year at a stroke.

In Europe, recent statistics have presented a mixed picture. The UK and Germany appear the healthiest of the larger economies. By contrast, concerns about some of the other Eurozone economies linger. France has held up in terms of its GDP outlook, but prospects remain relatively weak as high unemployment and fiscal consolidation weigh heavily on demand.

GDP Projections 2014 in Major Economies – Recent Movements

Australia China France Germany India Japan UK USA

April 2014 2.9 7.2 0.7 1.8 4.6 1.3 3.0 2.9

July 2014 (Latest) 3.1 7.4 0.7 1.8 4.8 1.1 3.2 1.5

Change (bps) +20 +20 0 0 +20 -20 +20 -140

Source: Oxford Economics, July 2014

ECB cuts to avert deflation – elsewhere, tightening edges closer Nothing highlights the polarised nature of the recovery in the Western economies more than the European Central Bank’s policy loosening in June. By its sober standards, the move was surprisingly bold, not just in cutting official rates to almost zero but also in introducing negative interest rates for deposits and other credit-boosting measures. The ECB only fell short in rejecting calls for QE. At a time when markets are highly sensitive to monetary policy speculation, the move was well received, not least because it implies that a Eurozone tightening is still several years away.

Despite the emergence from recession over the last 12 months, the Eurozone economy continues to face challenges, most notably the spectre of deflation. Inflation rates have fallen to very low levels in recent months, currently averaging around 0.5% year-on-year compared with a 2% official target. A strong euro and a weak recovery mean there is a risk that prices could soon fall in the more sluggish economies.

In the UK the picture could not be more different, with the Bank of England’s bearish statements leading markets to bring in their expectations for the first hike since the financial crisis to late 2014. The economy is strong enough to justify an early move and the UK may now lead the major economies of the developed world in raising rates. In the U.S., tapering continues apace, with liquidity injections set to be withdrawn by the autumn. Despite poor Q1 data, market forecasts for the timing of Fed hikes have moved slightly earlier to mid-2015.



Near-term outlook weaker, though steady upturn in prospect for the medium term World GDP output is now forecast to rise by 3% in 2014. The prediction has been revised lower this quarter largely as a consequence of the steep U.S. downgrade, and GDP growth now stands at a similar rate to last year. Even before this change, emerging markets had the most dynamic outlook, continuing the post-crisis trend. But the balance is still slowly tipping back towards the developed world, where a steady upturn is in prospect.

Asia Pacific continues to be the fastest growing region. Expansion rates remain close to 5% a year, broadly flat overall, as deceleration in China and Japan is offset by improvements elsewhere. China’s slowdown is in part a reflection of an economy that is rebalancing, and the country’s authorities will manage this to prevent too sharp a deceleration. India has seen activity disappoint over recent years and still faces many policy challenges even after the election of the first majority government in 30 years. Japan’s economy likely pulled back in Q2 after April’s sales tax hike, although some progress was seen on structural reforms, i.e. the third arrow of the “Abenomics” policy package announced in June. Further monetary loosening may be needed or Japan risks returning to a similar low-growth trajectory to that seen since the mid-1990s.

The setback to U.S. activity is likely to postpone recovery in the Americas region, but a strong rally is anticipated during 2015. The U.S. had previously led the upturn in the developed world, but the one-off Q1 contraction means that growth has been revised significantly lower this year. The underlying health of the economy is not in question, however, and a return to trend next year is forecast.

Europe remains the global laggard but, promisingly, is the only region where growth prospects have been revised upwards this quarter. The Eurozone is projected to emerge from recession this year, although growth rates will continue to trail other regions and the rest of the EU. Germany shows the most consistent expansion during 2014-2015, while France’s recovery is slower than the sluggish European average. By contrast, fortunes for the troubled ‘fringe economies’ have improved more than expected, with Spain and Italy forecast to return to growth.

In the rest of Europe, prospects are healthier. The UK has seen a further upward revision in forecasts and is now predicted to be the most dynamic of the larger developed economies. Growth will not be sustained at this high rate but will remain above that of its Eurozone neighbours. The Nordic recovery is slightly behind the UK yet still ahead of the Eurozone, while the improvement in CEE markets continues, with Poland performing strongly. Elsewhere in the East, the most notable change has been a further sharp downgrade for the Russian forecast.

Global Outlook - GDP Growth % pa, 2013-2015 2013 2014 2015 Global 3.0 3.0 3.7 Asia Pacific 5.2 4.9 5.1

Australia 2.4 3.1 2.8 China 7.7 7.4 6.9 India 4.7 4.8 5.1 Japan 1.5 1.1 1.1

Americas 2.1 1.6 3.0 U.S. 1.9 1.5 3.1

Europe 0.5 1.6 2.0 France 0.4 0.6 1.1 Germany 0.5 1.8 1.9 UK 1.7 3.2 2.5

Source: Oxford Economics, July 2014



$US Billions Q1 14 Q2 14% change

Q1 14-Q2 14 Q2 13% change

Q2 13-Q2 14 H1 2013 H1 2014% change H1 2013-H1 2014

Americas 62 67 9% 52 30% 90 129 44%EMEA 54 59 9% 40 49% 83 113 37%Asia Pacific 23 32 38% 32 -2% 59 55 -8%TOTAL 139 158 14% 124 28% 232 297 28%

Real Estate Capital Markets

Investment Volumes Increasing equity allocations and improved debt markets help to drive volume growth The second quarter of 2014 has maintained the momentum seen in Q1, underpinned by increasing equity allocations and improving debt markets. The US$158 billion transacted was 14% ahead of the first quarter and means that first half 2014 volumes were 28% higher at US$297 billion. Over the last five years we have seen an improvement in transactional activity globally, but now the markets are diverging; the Americas and EMEA continue to grow, while Asia Pacific has, so far in 2014, struggled to keep pace with 2013 activity, although a strong second half is anticipated.

Direct Commercial Real Estate Investment – Regional Volumes


Direct Commercial Real Estate Investment – Quarterly Trends, Q1 2007-Q2 2014


0

30

60

90

120

150

180

210

240

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

Americas EMEA Asia Pacific Rolling Four-Quarter Average

US$ b

illion

s

205

107110100

113

7369666666

100

118120

159

204190

119

91

110100

162

40 43 35

106124

146

210

139

158



$US Billions Q1 14 Q2 14% change

Q1 14-Q2 14 Q2 13% change

Q2 13-Q2 14 H1 2013 H1 2014% change H1 2013-H1 2014

USA 55.8 56.8 2% 45.4 25% 79.4 112.7 42%UK 19.1 19.9 4% 13.5 47% 29.1 38.9 34%France 5.4 10.3 91% 5.0 106% 10.1 15.6 55%Germany 11.8 8.5 -28% 6.9 24% 15.7 20.3 30%Japan 12.2 8.4 -31% 10.2 -18% 20.8 20.6 -1%Australia 4.2 7.8 85% 7.3 7% 10.5 12.0 14%China 3.0 5.1 73% 6.0 -14% 9.6 8.1 -15%Mexico 1.5 4.2 180% 1.2 255% 1.5 5.7 279%Sweden 3.1 3.9 25% 2.7 44% 4.6 7.0 53%Brazil 0.4 3.7 816% 0.5 655% 0.8 4.1 422%South Korea 0.4 2.9 560% 2.3 26% 4.2 3.3 -20%Canada 3.8 2.8 -27% 4.9 -44% 8.0 6.5 -18%Netherlands 2.0 2.7 37% 0.9 190% 1.5 4.7 214%Singapore 1.2 2.4 100% 2.1 15% 4.1 3.6 -14%Norway 0.8 2.0 150% 2.4 -17% 7.4 2.8 -62%Hong Kong 1.0 1.9 89% 1.5 24% 4.8 2.9 -39%Spain 1.5 1.8 14% 0.8 109% 1.2 3.3 171%Belgium 0.3 1.6 449% 1.3 24% 1.7 1.9 16%Italy 1.1 1.4 22% 1.2 18% 2.0 2.5 28%Ireland 1.4 1.2 -12% 0.3 360% 0.7 2.6 262%Thailand 0.2 1.1 437% 0.4 173% 0.6 1.3 122%

United States - the main contributor to growth in H1 2014 The Americas has led the other regions in volume growth this year. Quarterly volumes of US$67 billion pushed first half transactional activity to US$129 billion, 44% above the same period in 2013. Growth in the United States has been driven by strong interest on the part of equity capital sources across the spectrum of investor types - both domestic and foreign investors. However, activity is underpinned by very liquid debt markets, as balance sheet lenders remain very competitive and have gained market share from CMBS lenders.

Central and South America pulled along by their northern neighbours While the U.S. continues to be the main contributor to Americas growth, in the second quarter it was accompanied by Brazil and Mexico, where large industrial and retail portfolio deals moved transactional activity to US$4 billion in each market and ensured that both have transacted more in the first half of 2014 than they did in the whole of 2013. Canada – where first half volumes were down 18% year-on-year – is the only weak spot in the region, as investors’ contemplated sustained upward pressure on vacancy rates amid a sluggish overall economy.

Direct Commercial Real Estate Investment – Largest Markets


Asia Pacific volumes remain below 2013 pace Second quarter volumes of US$32 billion in Asia Pacific were 38% up on Q1, but a weak start to 2014 continues to hold the region back with first half volumes 8% behind the record pace set in 2013. Japan continues to be the favoured country for investors with volumes roughly in-line with last year. Q2 2014 activity was down on last year, but this was primarily due to a slowdown in IPO activity and a smaller pipeline of deals following a very active first quarter. The investment climate remains highly active with a huge pipeline of large deals and a growing wave of investors seeking exposure to Japan’s improving occupier markets. The fortunes of Australia and China continue to diverge with volumes in Australia boosted by a large REIT privatisation this quarter, while Chinese volumes for H1 2014 are 15% below 2013



0 5 10 15

Hong KongSeoul

Silicon ValleyStockholmMelbourne

PhiladelphiaToronto

DallasShanghai

SingaporeChicagoBoston

San FranciscoSydney

Washington DCLos Angeles

ParisTokyo

New YorkLondon

AmericasEMEA

Asia Pacific

US$ billions

as the market struggles to find direction, which in turn is causing uncertainty and investor hesitation in many of the smaller markets across the Asia Pacific region.

Broadening demand sees big and small markets moving in unison across Europe Investor activity in Europe continues to follow the theme highlighted at the end of last year, with investors looking across multiple geographies and sectors for opportunities along the risk curve. This trend is reflected in improved transactional activity with the US$59 billion recorded this quarter almost 50% above Q2 2013. Evidence of this broadening trend is shown by volumes in the Benelux countries, Central and Eastern Europe, and Southern Europe all registering at least 50% more transactions by value than the first half of 2013. This - combined with the ‘Big 3' markets of the UK, France and Germany growing by 38% over the first half of 2014 - is maintaining buoyant investor sentiment, with the market witnessing more large single-asset and cross-continental portfolio deals.

‘Super Cities’ lead volumes growth While investors are widening their search into smaller geographies, the four ‘Super Cities’ – London, New York, Tokyo and Paris – have continued to account for 20% of total global investment volumes (in H1 2014). The 20 most active markets are dominated by the gateway North American cities. Australian cities, notably Sydney, have also been moving steadily up the ranking.

Direct Commercial Real Estate Investment – Volumes in Top 20 Cities, H1 2014




JLL increases 2014 forecast to US$700 billion as transactional activity broadens

Given the significant growth in transaction volumes recorded in the Americas and Europe in particular, as well as a large transaction pipeline, JLL has raised its full-year 2014 forecasts to US$700 billion from US$650 billion. At the global level, volumes are currently running 28% ahead of the 2013 pace; a full-year outcome of US$700 billion would represent a 19% increase on 2013 volumes of US$588 billion. Much is dependent on the final quarter when 30%-35% of all transactions for the year take place, but given the level of activity and deals in the pipeline, an upward revision is justified.

Strongest uplift expected in the U.S. As we move further along the cycle, the U.S. is expected to attract greater investment activity across a larger number of geographies, sectors and asset classes. Both local and overseas investors are taking note of the improving occupational markets and are increasingly trading in both primary and secondary cities. With the added support of a highly favourable lending environment, we are projecting full-year 2014 volumes in the Americas to be up 25% on 2013 levels. In Europe, investment volumes are expected to be 15% higher (in US$ terms), while a strong second half of the year in Asia Pacific could push volumes in this region to another record high.

Direct Commercial Real Estate Investment, 2006-2014


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Americas EMEA Asia Pacific Global

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

XX% Projected Change 2013-2014

10%

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Capital Values and Yields

The weight of demand continues to compress prime yields across the world’s major office markets

Core yields have defied expectations and continued to compress, often to new lows:

� Robust investor demand has pushed down yields during Q2 in several U.S. cities – notably Chicago (-20 bps), Boston (-20 bps), New York (-10 bps) and Los Angeles (-10 bps).

� Prime yields were stable in Q2 in the dominant European investment locations such as London, Paris, Stockholm and the German ‘Big 5’ cities, but have continued to move in elsewhere in the region, notably in Brussels (-5 bps) and recovering markets such as Madrid (-25 bps).

� The yield trend is, in general, flat in most Asia Pacific markets, although yields have compressed in Tokyo (-10 bps) and Sydney (-25 bps) on the back of very strong investor demand.

7% capital appreciation predicted for 2014 Capital values on prime assets across 25 major markets accelerated to 8.8% year-on-year in Q2, the strongest for two years. Expectations for full-year 2014 have been upgraded to 7%, with Tokyo projected to show the highest growth at close to 20%. Large increases are also expected for the U.S. gateway cities, as well as Madrid and Mexico City. By contrast, Moscow and Sao Paulo are likely to see further falls in office capital values during 2014.

Prime Offices – Annualised Capital Value Change, 25 Major Office Locations, Q1 2010-Q2 2014

Unweighted average of 25 major office markets across the globe Source: JLL, July 2014

0

5

10

15

20

25

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

% pa

23.3%

12.7%

3.2%

8.8%7.4%



Prime Office Yield Trends, Q2 2013-Q2 2014

*Across 25 major office markets.


Prime Offices – Capital Value Clock, Q2 2013 v Q2 2014

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


-100 -50 0 50

TokyoSydney

SingaporeShanghai

SeoulMumbai

Hong KongBeijing

Mexico CitySao Paulo

Washington DCToronto

San FranciscoNew York

Los AngelesChicagoBoston

StockholmParis

MoscowMadrid

LondonFrankfurtBrussels

Q1 2014 - Q2 2014

Q2 2013 - Q1 2014 Basis point change

Amer

icas

Euro

peAs

ia Pa

cific

Capital Value growth slowing

Capital Value growth

accelerating

Capital Values bottoming out

Capital Values falling

Americas EMEA Asia Pacific

Q2 2014

Capital Value growth slowing

Capital Value growth

accelerating

Capital Values bottoming out

Capital Values falling

Q2 2013

Boston, Chicago

San Francisco, Houston, Berlin

Washington DC, AmsterdamToronto Sao Paulo, Paris

Mexico City, Frankfurt

Dallas, Singapore

New York, Los Angeles, Stockholm

Beijing

Shanghai

MumbaiSeoul, Tokyo

Sydney

Milan

MadridBrussels

London

Moscow

`

Hong KongHong KongSydney, Singapore

Shanghai

London Seoul

Tokyo

Mumbai, Beijing

AmsterdamParis

Madrid

Milan

Brussels

Stockholm

San FranciscoHouston, Frankfurt

Berlin

Toronto, Mexico CityMoscow

Washington DC

Dallas

Boston, ChicagoNew York, Los Angeles

Sao Paulo



Prime Offices – Capital Value Change, Q2 2013-Q2 2014

Notional capital values based on rents and yields for Grade A space in CBD or equivalent. In local currency. Source: JLL, July 2014

Prime Offices – Rental Value Change, Q2 2013-Q2 2014

Based on rents for Grade A space in CBD or equivalent. In local currency. Source: JLL, July 2014

-10 -5 0 5 10 15 20 25 30

MoscowSao Paulo

BeijingMumbai

Hong KongBrusselsToronto

SingaporeSeoul

FrankfurtShanghai

Washington DCMexico City

ParisSydney

Los AngelesTokyo

LondonStockholm

ChicagoNew York

MadridBoston

DubaiSan Francisco

% change

AmericasEMEA

Asia Pacific

-15 -10 -5 0 5 10 15 20

Sao PauloMoscow

ParisSeoul

Washington DCBrusselsMumbaiBeijing

Hong KongMadrid

SydneyStockholm

FrankfurtNew YorkShanghai

ChicagoToronto

Los AngelesTokyo

BostonLondon

DubaiSan Francisco

Mexico CitySingapore

% change

AmericasEMEA

Asia Pacific



Corporate Occupiers Occupational activity increasing steadily Activity continues to edge upwards in occupational markets across the globe. Despite signs of a slight softening in corporate sentiment in response to recent geopolitical instability, take up of space has improved fractionally in key markets across Asia Pacific, the Americas and EMEA.

Workplace as a driver of productivity and talent retention While cost and space efficiency remain important drivers of corporate real estate strategies across sectors and markets, signs of a subtle change are appearing. There is growing evidence of corporate occupiers using the workplace as a tool to attract and retain talent and drive greater productivity from human capital as well as physical real estate. In the U.S. there are indications of a plateau in the space density trend, and across international markets the emergence of the ‘Millenials’ is beginning to impact upon workplace design and portfolio location. While workplace innovation is high on the agenda, many occupiers are also exploring structural savings through lower-cost offshore and nearshore hubs, with some looking to raise capital from asset sales in rising investment markets.

Technology sector boosts leasing activity in key markets Financial services occupiers are demonstrating greater activity in some markets such as London, although major international banks remain focused on portfolio consolidation and driving better workplace productivity. Demand from the technology sector continues to grow, propelling leasing activity in major markets including Silicon Valley, San Francisco and several across Asia Pacific. Life Sciences occupiers have also been particularly active in the midst of a substantial number of mergers and acquisitions within the sector and their associated portfolio churn.

Strong growth in U.S. net absorption In the U.S. a brightening employment picture has driven a 6.2% jump in leasing activity over the first quarter, with large transactions returning to the markets and helping to fuel a 63% year-on-year leap in net absorption. For many office occupiers in the U.S., rental increases are now having an impact across portfolios, with industrial assets also facing rising costs amid strong demand and portfolio realignment.

Asia Pacific improving, but remains patchy Sentiment is improving across the board in Asia, with demand for space increasing on average in most markets. Yet the depth of demand remains patchy with activity unevenly spread and varying by city, submarket and asset type. Singapore, Tokyo and Seoul are seeing strong levels of activity and rising rents are posing challenges for cost-conscious occupiers. Manila also stands out as a market in demand from international corporates, with a growing number of BPO entrants to the Philippines. Demand in Australia remains weak having recorded negative net absorption across all CBDs in five out of the past six quarters.

Paris and London bolster growth in Europe Europe continues to see variation between markets but occupiers are showing an increasing willingness to transact across the region. Paris has witnessed large deals return to the market, recording a 25% quarterly rise in leasing transactions. London has maintained its strong momentum, while Germany is still experiencing broad-based demand for space. However, Moscow has seen more subdued activity as a result of growth downgrades and the continuing geopolitical tensions over Ukraine. Once again the impact of such tensions remains the biggest risk factor to sentiment, investment and growth in the occupational market.



Global Office Market Conditions Matrix*, 2014-2016

* Relates to conditions in the overall office market of a city. Conditions for prime CBD space may differ from the above. Source: JLL, July 2014

Market MARKET

Chicago Brussels Beijing

Los Angeles Frankfurt Hong Kong

New York London West End Mumbai

San Francisco Madrid Shanghai(Pudong)

Toronto Moscow Singapore

Washington DC Paris Sydney

Mexico City Stockholm

Sao Paulo Dubai

2014 2015 2016

Neutral MarketLandlord Favourable

Market 2014 2015 2016 Market 2014 2015 2016

Tenant Favourable

Tokyo



Global Real Estate Health Monitor

Economy Real Estate Investment Markets Real Estate Occupier Markets

National GDP

OECD Leading Indicator

City Investment Volumes

Capital Value

Change Prime Yield Yield Gap

Rental Change

Net Absorption

Vacancy Rate

Supply Pipeline

Dubai 4.6% na 567% 23.1% 7.3% na 8.1% na 25.0% 17.3%

Frankfurt 1.8% -0.12 -12% 4.0% 4.7% 345 2.9% 0.7% 11.4% 3.5%

Hong Kong 2.7% na -51% 0.6% 2.9% 84 0.4% -0.4% 4.4% 3.8%

London 3.2% 0.06 54% 14.9% 3.8% 108 7.7% 1.6% 5.5% 4.6%

Moscow 0.2% 0.07 -54% -7.0% 9.0% 67 -4.3% 5.6% 14.8% 13.8%

Mumbai 4.5% 0.11 -76% 0.4% 10.1% 136 0.0% 7.5% 21.9% 18.3%

New York 1.5% 0.08 28% 19.2% 4.0% 149 3.6% 2.0% 10.6% 1.2%

Paris 0.6% 0.01 23% 8.8% 4.0% 230 -3.3% -0.7% 7.5% 3.9%

Sao Paulo 1.0% -0.07 617% -6.1% 8.5% na -11.3% 4.0% 20.5% 27.7%

Shanghai 7.4% 0.14 51% 4.2% 5.9% 183 3.7% 11.2% 11.9% 30.3%

Singapore 3.6% na 24% 2.1% 3.9% 160 15.9% 2.4% 5.8% 4.4%

Sydney 3.1% -0.12 62% 10.9% 6.4% 282 1.9% 1.3% 10.5% 3.0%

Tokyo 1.1% -0.26 35% 14.4% 3.5% 293 5.4% 5.4% 3.7% 8.0%

Real estate data as at end Q2 2014

Definitions and Sources

National GDP: Change in Real GDP. National Projection, 2014. Source: Oxford Economics OECD Leading Indicator: Composite Leading Indicator. Change in Index. Latest Month. Source: OECD City Investment Volumes: Direct Commercial Real Estate Volumes. Metro Area Data. Rolling Annual Change. Source: 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 (2014-2015) as % of Existing Stock. Source: JLL



Office Markets

Office Demand Dynamics

Continued signs of improvement, but leasing activity still uneven The second quarter has seen further signs of improvement in the office leasing markets, although activity has remained patchy. Global office leasing volumes in Q2 were up 5% year-on-year to reach their highest level for two and a half years. The strongest recovery has been recorded in Asia Pacific where volumes are 20% higher than a year ago. Europe is up 11% year-on-year, with its two largest markets – London and Paris - performing robustly. Gross leasing activity in the U.S. continued to be weaker than expected in Q2, but this belies strengthening market fundamentals and higher net absorption.

While leasing volumes are steadily recovering and occupier sentiment is notably improved, we have not yet seen a substantial breakthrough in demand levels, and full-year 2014 volumes are unlikely to be more than 5% higher than in 2013. However, stronger economic growth, improving business performance and elevated M&A activity all point to a healthier leasing market in 2015.

Office Leasing Volumes, 2013 v 2014


Flat gross leasing trend in United States belies robust market fundamentals H1 2014 leasing volumes in the United States were below expectations, down about 3% from H1 2013. However, this in part may reflect harsh early-year weather and related economic stumble, and is inconsistent with other fundamentals’ trends such as net absorption, which is at its highest level of the current recovery. Momentum is building and overall leasing activity in Q2 increased by 6.2% on the first quarter; moreover, large-space leasing deals have returned after a two-quarter lull. We expect further strengthening of leasing activity in the second half of the year to the point where the full-year volume is likely to be slightly higher than 2013.

Europe Asia PacificU.S. Global

FY 2013

FY 2014

+6%

0-5%

-11%

~ 5% ~ 5%

-5%

15-20%

+1%



Asia Pacific gross leasing volumes up 20% year-on-year

Sentiment among Asia Pacific corporates continues to improve compared to 2013. Gross leasing volumes in the region have risen by 20% year-on-year, largely as a result of relocations and pre-commitments to future projects. However, the increase in gross leasing activity has been uneven:

� Tokyo and Seoul have seen strengthening pre-leasing activity.

� Southeast Asia remains very active, especially the Philippines, where companies are moving beyond call-centre activities.

� Demand in China has been dominated by domestic firms and select MNCs (such as international retailers).

� Recent political activity in Thailand, India and Indonesia has given some companies pause for thought.

� Leasing market conditions in Australia have remained segmented, with technology and financial services becoming more active, while the commodity and public sectors are still weak.

� The technology sector is expanding across the Asia Pacific region. The newer players – LinkedIn, Twitter, Google – are all taking space, and in many cases backfilling the space left by the financial sector.

We expect full-year Asia Pacific net absorption and gross leasing activity to grow by 15%-20% this year as corporate confidence strengthens.

European office leasing activity shows encouraging signs

European office leasing volumes in Q2 grew by 18% on Q1 2014 and were 11% up on Q2 last year:

� In Paris, leasing activity has increased by 25%, making it the city’s best second quarter since 2007.

� London has maintained its strong momentum with gross leasing rising 11%.

� Activity in Germany remains healthy and Stockholm had a record quarter, while activity also increased notably in Brussels and Milan.

� Quarterly performance in the CEE was driven by robust activity in Budapest and Warsaw, but volumes in Moscow and Prague continued to be subdued.

Stronger economic activity and employment growth are expected to fuel expansionary demand in Europe. In the short term, however, unemployment will remain high and occupiers are likely to remain cost-conscious. The preference for modern space to drive productivity and efficiency remains, and a lack of such space in some markets has constrained activity. The high volumes of pre-leasing for space completing this year (and into next year) demonstrates the willingness of occupiers to commit to modern space. Gross leasing volumes are forecast to increase by around 5% in 2014 and by another 5% in 2015.



Global Office Demand – Net Absorption Trends, 2004-2014


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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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Office Supply Trends

New construction continues to rise The uptick in new construction has continued into the second quarter of 2014 as developer confidence builds. Globally, office completions for 2015 are likely to be 25% higher than 2014, although levels are still only just above the historic norm.

Construction up 38% in the United States Construction volumes in the U.S. are up by more than one-third on year-end 2013, led by a handful of locations, most notably Houston. High construction-to-inventory ratios are also features of Silicon Valley, Austin and San Francisco. Pre-leasing levels are high at about 50%-70%.

Canada is seeing a burgeoning supply pipeline. In its four primary office markets – Toronto, Montreal, Calgary and Vancouver – 25 projects topping 1.3 million square metres will be added to the CBD inventory over the next four years.

Supply wave posing challenges to Latin American office markets A majority of Latin America’s largest office markets continue to experience large volumes of new office deliveries, especially Mexico City, Sao Paulo and Bogota. Mexico City is notable for its continuing ability to counter this supply cycle with consistently impressive absorption; by contrast, levels of absorption in Sao Paulo and to a lesser extent Bogota are not keeping pace with new construction.

A temporary lull in new deliveries in Asia Pacific During Q2 2014, Grade-A regional stock additions were down 48% year-on-year, with around half of the total in India. Full-year 2014 deliveries across Asia Pacific are likely to be at their lowest since 2006, although 2015 is forecast to see a sharp 38% uplift in completions.

Construction rising in Europe Office completions in Europe continued to increase in Q2, up by 76% on Q2 2013. As a result, H1 2014 levels are now almost double those of H1 2013. Completion volumes were high in Moscow and London, delivering over 500,000 square metres combined. Warsaw has also continued to see high new supply volumes.

Full-year 2014 completions in Europe, at close to 5 million square metres, will be 20% higher than 2013 and in line with the 10-year average. A further 5 million square metres is projected to be delivered in 2015.



Global Office Completions, 2000 - 2015


Office Supply Pipeline – Major Markets, 2014 - 2015

Covers all office submarkets in each city. Tokyo – CBD - 5 kus Source: JLL, July 2014

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U.S. Europe Asia Pacific

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ChicagoLos Angeles

New YorkMadrid

Washington DCBrussels

BostonStockholm

TorontoSydney

SeoulFrankfurt

Hong KongParis

San FranciscoSingapore

LondonBeijingTokyo

MoscowDubai

MumbaiMexico CitySao PauloShanghai

Completions as % of existing stock2014 2015



High structural vacancy rates persist The global office vacancy rate (across 98 markets) has once again remained within the 13%-13.5% range at 13.1% in Q2 2014. Rates are now unlikely to fall below the 13% threshold before the end of the year.

U.S. Vacancy: Vacancy is falling fast in the United States which, at 16.3%, is down by 70 basis points from last year. Tenants are facing tight market conditions in urban Grade- A space environments; suburban markets are recovering more slowly. The lowest vacancy is in New York, San Francisco and Portland at around 10.5%; the highest is in Detroit at 26%.

Asia Pacific Vacancy: At 11.5%, the regional vacancy has fallen to its lowest level in more than a year. Most major markets, including CBD Tokyo, Beijing, Hong Kong and Singapore are registering single-digit vacancy rates. The notable exceptions include the Shanghai decentralised market and most cities in India and Australia.

Europe Vacancy: The European office vacancy rate has remained unchanged at 9.7% for six consecutive quarters, and is unlikely to move more than 10 basis points during the remainder of the year. London maintains Europe’s lowest vacancy rate at 5.5%.

Office Vacancy Rates in Major Markets, Q2 2014

Regional vacancy rates based on 49 markets in the Americas, 24 markets in Europe and 24 markets in Asia Pacific. Covers all office submarkets in each city. All grades except Asia and Latin America (Grade A only). Tokyo relates to CBD – 5 kus. Source: JLL, July 2014

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Europe 9.7% Asia Pacific 11.5%Americas 15.5%%

Quarterly movementIncreasedDecreased

Stable

Global 13.1%



Office Rental Trends

Steady office rental growth Rental growth has continued in all three global regions. Asking rents in the U.S. have grown by 2.5% year-on-year, which is slower than in previous quarters, and has mainly been constrained by limited high-quality space options. Net effective rental growth in Asia Pacific increased by 0.9% over the second quarter (similar to Q1), while annual rental change on prime assets in Europe has edged up to 1%.

San Francisco (+5.3%), Singapore (+4.6%) and Boston (+2.6%) have shown the strongest uplifts during Q2. Meanwhile, Washington DC and Sao Paulo continue to register declines.

Momentum to build in H2 2014 Rents on prime assets across 25 major markets are currently growing at close to 3% per year, and are expected to accelerate above 4% by end-2014.

Singapore is predicted to top the rental growth league table in 2014, followed by Dubai, London and Tokyo. The 5%-10% growth range is also likely to include several U.S. cities – New York, San Francisco and Boston – as well as Mexico City and Beijing.

Prime Offices – Rental Change, 2010-2014

Prime office rental growth: unweighted average of 25 major markets. Source: JLL, April 2014

Forecasts signal higher rents in the United States

Around two-thirds of U.S. markets tracked by JLL reported increases in asking rents in Q2, far higher than in previous quarters. In most markets, increases were marginal, although supply-constrained and tech-heavy markets like San Francisco, Silicon Valley and Portland are registering stronger growth. Double-digit rental growth is being recorded in several niche submarkets – for example, San Francisco’s South Financial District, New York’s creative hub in Chelsea and Houston’s Energy Corridor.

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4.2%



A gap of another 15-18 months until the next cycle of development delivery in late 2015 will yield continued market tightening and consistent rental growth exceeding 5% around the U.S. in 2015.

Steady rental growth in Europe Prime office rents have continued to increase in Europe, though the pace has been slightly slower than at the beginning of the year. The European Office Index rose by 0.4%, compared with 1.1% in Q1 2014. Of the 24 Index markets, three have seen quarterly rental increases, with Dublin (+7.1%) again leading; Munich rents (+3.2%) have climbed to their highest levels since the early 1990s. Positive news also came from Spain, where Madrid (+1%) has witnessed its first increase since Q3 2008.

Europe’s prime rents are forecast to continue to rise, given the low levels of high-quality space. From 2015, expansionary demand should support further rental growth, with the strongest uplifts projected for London and the Nordics. Rents in Southern Europe, notably Madrid, will also maintain their recovery. The preference for quality space in good locations will create a performance gap between Grade A offices and the rest.

Asia Pacific net effective rents edge up Net effective rents increased in over half of Asia Pacific markets in Q2 2014, with average quarterly growth of 0.9% (similar to Q1). Singapore (+4.6%) continued to see the strongest quarterly uplift while growth improved in Beijing (+2.5%), with vacancy edging lower in both markets. Quarterly growth remained steady in Tokyo (+2%), and small rental increases were seen in Hong Kong and Shanghai. Rents in Jakarta fell for the first time since Q3 2009 with business expansion put on hold due to recent elections. Effective rents have held steady in Sydney and Melbourne, but have decreased in other Australian cities due to limited demand.

Prime Offices – Rental Clock, Q2 2013 v Q2 2014

Based on rents for Grade A space in CBD or equivalent. U.S. positions relate to the overall market Source: JLL, July 2014

Rental Value growth slowing

Rental Value growth

accelerating

Rental Values bottoming out

Rental Values falling


Q2 2014

Rental Value growth slowing

Rental Value growth

accelerating


Rental Values falling

Q2 2013

ChicagoHong Kong SingaporeBrussels

Dallas, Frankfurt

HoustonSan Francisco

Toronto

Los Angeles, Seoul, Shanghai

TokyoWashington DC

Mexico City

Sao Paulo Paris

Mumbai, BostonSydney

Beijing

JohannesburgMilan

Madrid

New YorkIstanbul, Dubai

London

Berlin, MoscowStockholm

Amsterdam

Shanghai

New York, StockholmTokyo

SingaporeLos Angeles, Mumbai

Boston

Washington DCMadrid, Milan Paris, Brussels Hong KongSydney

SeoulChicago, Dubai

Istanbul, Beijing

London

FrankfurtBerlin

MoscowAmsterdam

Dallas

Houston San Francisco

JohannesburgToronto

Sao Paulo

Mexico City



Retail Markets Revival, polarisation and consolidation Retail markets in the U.S. and Europe are continuing their steady recoveries despite ongoing structural shifts in the retail industry. Polarisation remains pronounced and many mid-priced retailers are being squeezed. Retailer consolidation will continue to be a trend this year with M&A activity likely to tick upwards as retailers respond to changes in consumer demand. In Asia, international retailers are looking for growth opportunities although some caution was evident in the second quarter.

U.S. market progresses despite structural challenges The U.S. retail market has maintained its gradual revival, with the overall vacancy rate decreasing 10 basis points during the quarter to 6.4%. Net absorption was more than double new deliveries and rents inched up 1.2% in Q2. One significant and positive for the market is that new supply remains at historically very low levels, and the little supply that is under way now consists mainly of big-box single-tenant stores, in large part already leased to anchor discounters.

Growing interest in Europe’s recovery markets Similarly, retail rents in Europe rose by 1.2% in Q2, despite persistently high unemployment and an overhang of household debt. The strongest rental growth was recorded in Athens (+15%), Madrid (+10%), Barcelona (+6.6%) and Milan (+4.3%), emphasising returning retailer interest in Europe’s recovering markets. Likewise, Oslo (+10%) and Istanbul (+6.7%) performed well.

A rise in new shopping centre deliveries in Europe 14.1 million square metres of new shopping centre space will be completed across Europe during 2014 and 2015 – highlighting continued activity in shopping centre development in the region. However, the majority of the new schemes are being built in Russia and Turkey as they play catch up with others across the region. Russia will have the largest shopping centre stock in Europe by 2015. In Western Europe, more favourable market conditions will not necessarily translate into a wave of new retail development as per previous periods of economic recovery. Structural change is still playing out, retail is being redefined and developers will be cautious, as will lenders on new developments.

Mixed retailer demand in Asia Pacific China continues to witness healthy demand supported by fast-fashion retailers and F&B operators, but with slow expansion by luxury brands. In Hong Kong, demand has remained strong in core areas. Elsewhere in Asia Pacific, retailers have been generally more discerning about expansion across Southeast Asia, with the notable exception of Manila, while demand in India has been limited by a lack of quality mall space and ongoing regulatory challenges for foreign retailers. Leasing activity in Australia is stable, although more active for international fashion brands.

World’s largest mall announced in Dubai One of the most eye-catching announcements over the past quarter has been that of the ‘Mall of the World’ in Dubai – a new 750,000 square metre development by Dubai Properties Group. The ‘Mall of the World’ forms the centrepiece of a larger project covering 4.5 square kilometres; a large part of this site will be encased by a massive dome that can be opened during the winter months.



Prime Retail – Rental Clock, Q2 2014

Prime Industrial – Rental Clock, Q2 2014

Relates to prime space. U.S. positions relate to the overall market Source: JLL, July 2014

Rental Valuegrowth slowing

Rental Valuesfalling


Warsaw


Rental Valuegrowth

accelerating

Amsterdam, Paris, Madrid

Atlanta, Houston

Chicago, New York, San Francisco

Frankfurt

Tokyo, Philadelphia

London

Beijing, Hong Kong

Dallas, Shanghai

Singapore

Boston

Los Angeles

Sydney

Rental Valuegrowth slowing

Rental Valuesfalling

Rental Value growth

accelerating



ShanghaiChicago

Dubai, Mumbai, San Francisco, HoustonDelhi

Paris, Hong Kong, Singapore

London

Miami

Madrid, Milan, Los Angeles Sydney

Moscow

Berlin, Beijing

New York, Boston, Washington DC

Tokyo



Industrial Warehousing Markets Supply chain realignment boosts warehousing demand Supply chain realignment and massive structural changes in the retail sector are driving strong demand for functional modern warehousing across all three global regions. Rental growth and supply shortages are stimulating construction in both North America and Europe, an increasing proportion of which is being built on a speculative basis.

U.S. vacancy dips below previous cycle’s low The U.S. industrial market vacancy rate, at 7.4%, has fallen below the low of the last cycle. Tenant requirements are robust and with construction playing catch-up (after 2010-2012 marked a 60-year delivery-low), vacancy will continue to decline through year-end. Landlords are increasingly gaining leverage in all of the 50 U.S. markets tracked by JLL. Construction activity is up 67% from one year ago, with more than half being built on a speculative basis. The Inland Empire (Southern California), Dallas/Fort Worth (Texas) and Philadelphia (Pennsylvania) are the U.S.’s most active development markets.

Shortage of modern space drives occupiers to U.S. secondary markets Major U.S. logistics hubs - such as Los Angeles, Chicago and New Jersey - have few Grade-A and quality B-space units available. As a solution, larger occupiers are now exploring secondary markets which have a reasonable drive time to major population centres, land ready for development, a competitive labour force, a robust supporting infrastructure and economic incentives.

Industrial strength in Canada and Mexico Demand for logistics and warehouse space remains healthy in Canada’s key markets of Montreal, Toronto, Calgary, Edmonton and Vancouver. The markets’ vigour is felt in rising construction and accelerating rental growth, up 1.5% in Q2. Going forward, support for industrial occupancy and rental pricing will be found in an anticipated acceleration in export activity. In Mexico, the Bajio and Central industrial regions are particularly strong at present, with the Central Region experiencing some of its tightest market conditions in memory. The tremendous strength in fundamentals is also creating a vibrant investment market for industrial assets in Mexico.

Occupational demand maintains strong momentum in Europe Changing space requirements continue to drive buoyant demand across Europe, and ongoing supply chain alignment will keep occupational demand at high levels and drive up rents. A shortage of available supply means that take-up will remain volatile across the region, particularly due to the time it can take to agree terms on new build-to-suit facilities. Speculative development has risen in recent months, mainly driven by robust activity in Russia. Elsewhere, it is limited to select initiatives, mostly within the core markets of the UK, Germany and France.

Asia Pacific warehousing demand driven by the retail sector, but demand strengthens from exporters E-commerce and logistics companies continue to underpin leasing activity in Asia, but demand has also picked up from exporters and manufacturers (in Shanghai and Singapore, for example). Moderate rental growth has been seen in Greater China, with the largest increases evident in Hong Kong.



Hotel Markets Hotel investment activity remains buoyant in H1 2014 Global hotel investment volumes totalled US$25.2 billion in the first half of 2014, representing an increase of 6.5% on H1 2013. Activity remains strong, and we now expect the full-year 2014 volumes to reach US$54.5 billion, compared to US$52 billion in 2013.

The Americas region continued to be at the forefront of activity in terms of overall volumes, with an 11.5% uptick. After a brief respite in the first quarter, EMEA is back on track with a 3.8% increase in volumes in H1 2014 year-on-year. Asia Pacific registered a small 3.7% decrease during the same period. The global market is currently dominated by private equity – both as buyers and sellers.

Hotel Investment Transactions, H1 2013 v H1 2014

US$ Billions H1 2013 H1 2014 H1 2013 to H1 2014 %

Americas 11.9 13.2 11.5%

EMEA 8.1 8.4 3.8%

Asia Pacific 3.7 3.6 -3.7%

Total 23.7 25.2 6.5%


Private equity continues to dominate in the Americas The abundance of equity and strong debt markets, as well as rising revenue per available room (RevPAR), continues to drive liquidity and keep investors and lenders bullish in the Americas.

In terms of buyers, private equity still leads the pack, accounting for 40% of transactions so far this year, which is consistent with H1 2013. While private equity funds are pursuing product across the spectrum, their primary targets include large select service portfolios, resorts and ‘big ticket’ full-service hotels.

REITs’ market share is increasing; the sector accounted for 25% of all transactions completed in H1 2014. REITs are targeting high-quality, branded assets in primary markets. Hotel operators also continue to make selective acquisitions but their market share is falling – they represented 13% of total volumes. On the sell-side, private equity (45%) and hotel operators (22%) were most active.

Single-asset transactions now drive the market An emerging trend in the U.S. is that high-quality single-asset transactions are now dominating market activity, making up three-quarters of transaction volumes. The average size of single-asset trades in H1 2014 is up 22% year-on-year, driven by transactions on both coasts. Continued RevPAR increases and compressing yields are resulting in capital value appreciation. This year marks the fifth consecutive year of RevPAR growth since the downturn, and the momentum shows no signs of slowing.



Resorts are back in fashion Resorts were hit hard by the last downturn; the demand fundamentals for two of its largest guest segments – leisure travellers and group business – took longer to recover. However, resorts are proving ‘worth the wait’ and transactions for the asset class exceeded US$3 billion during H1 2014. Resort assets represented nearly 25% of total transactions in the first half of 2014 as consumer confidence continued to make gains. A potential trend to watch will be offshore investors’ increased foray into this segment.

U.S. debt markets continue to strengthen The U.S. debt markets for acquisitions and refinancings continue to be robust. The tightening in spreads in both floating and fixed-rate debt is unabated, with floating-rate CMBS lenders still heading the charge in terms of proceeds and pricing for larger, higher-quality assets. Banks and other balance sheet lenders are becoming increasingly active while maintaining underwriting discipline.

U.S. Hotel CMBS Issuance, 1995-2014

Source: Commercial Mortgage Alert

According to Commercial Mortgage Alert, hospitality lending comprised 20% of all CMBS originations in H1 2014, compared to 15% a year ago, having increased from US$7.1 billion in H1 2013 to US$8.3 billion in H1 2014. This activity proves the re-emergence of the floating-rate CMBS market, which had been largely muted since the global economic downturn.

All eyes on Europe Transaction activity in EMEA is up when compared to last year, with volumes totalling US$8.4 billion for H1 2014 supported by continuously improving trading fundamentals across European cities and strengthening investor confidence in the region.

Interest is now centred on Europe with an abundance of capital chasing deals. The high level of competition for a limited number of opportunities is discouraging some hotel investors from participating in this competitive process. With the availability of cash and debt financing, investors are continuing to seek the right assets and are now actively exploring development opportunities. We anticipate an increase in product availability later this year with a number of ‘big ticket’ products expected onto the market in early autumn.

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The UK remains Europe’s most active market with investment volumes totalling US$2.6 billion for H1 2014 (30% of total EMEA volumes), followed by Germany at US$1.6 billion (19%) and Spain at US$990 million (12%). The Netherlands and France also feature strongly, collectively accounting for another 15% of total market liquidity.

Although activity has remained focused on single-asset sales, the high interest in portfolio platforms has translated into a number of significant transactions. However, a lack of available opportunities coming to the market continues to hamper growth in portfolio sales across the region.

Private equity funds again EMEA’s dominant investor groups in H1 2014 were once again private equity funds, both on the buy-side (39% of transaction volumes) and sell-side (30%).

Hotel operators increased their activity, with the group accounting for about a quarter of all transactions in H1 2014. This trend became particularly sound during the second quarter when Accor started to implement its new strategy. This strategy has translated into acquisitions of large portfolios in Germany, the Netherlands and Switzerland with all three being operated by Accor since 2007-2008 under variable-rent leases. As a result, Accor has become the most active buyer in Europe.

At the same time, those hotel operators continuing to pursue asset-light strategies, remained active on the sell side, accounting for 22% of overall hotel market liquidity. Developers and property companies have also been selling some of their assets in pursuit of additional capital to repay their loans and finance new projects.

Asian capital buying beyond the core markets Europe continues to feature as the top market on the radar of cross-border capital, with strong demand originating from Asia, the Middle East and the U.S. Asian investors, particularly Chinese, are becoming familiar with European hotels, having bought into traditionally strong markets such as London and Paris, and are now increasingly exploring the rest of the region, notably Spain and Ireland.

Spain featured strongly in H1 2014 The main change in the region has been the return of an active transactions market in Spain. Strengthening tourism demand, gradual economic stabilisation and improving trading fundamentals have created a positive outlook for the lodging market, where at the end of 2013 many international players started to close on transactions; and the trend has continued into 2014. With Madrid, Barcelona and Mallorca setting the pace, total liquidity of the Spanish hotel market has already exceeded volumes registered in the full-year 2013, having reached almost US$1 billion in H1 2014.

A combination of factors has seen Barcelona turning into the ‘sweet spot’ of Spain, and it becoming even more robust over the last six months. With few existing hotels available in the market, competition for product has remained strong and although average rates are still below 2007 levels, over 50 months of consecutive RevPAR growth has led to optimism. But, more capital is now going to resort markets, with the Canary and Balearic Islands at the forefront of the activity.

Spain has also featured as a hot spot for cross-border capital which accounted for more than 40% of all transactions completed in H1 2014. U.S. private equity capital is actively looking at opportunities but has yet to assert itself, while Asian (primarily Chinese) and Middle Eastern (Qatari) investors have already completed a number of significant deals.

An ever improving debt environment The European hotel lending market has opened up very quickly, creating a competitive environment where most of the market is now well served in terms of type of lending (refinancing, conversion, and development) and ticket size.



The hotel lending market landscape in Europe is currently experiencing marked changes. Traditional balance sheet lenders have been subjected to increased core capital requirements and regulation under Basel III, keeping spreads from compressing too fast. At the same time, the shadow banking system has found a spot on the field where they previously had no room to play. As a result, the market is dominated by cash-flow lenders seeking stabilised debt yields of at least 9% coupled with bespoke risk mitigating covenant structures.

Momentum continues to build in Asia Pacific Activity in Asia Pacific totalled US$3.6 billion in H1 2014, showing a slight decline of 3.7% compared to the same period last year, with fewer landmark deals taking place and higher volumes being held back by a lack of investment opportunities.

Focus is on portfolio deals in Asia The first six months of 2014 were characterised by increased activity in portfolio deals across the region, with the largest being the sales of Amanresorts portfolio across several countries, the Lone Star and Comfort hotel portfolios in Japan, and a portfolio of Tune Hotels in Indonesia. A successful listing of Frasers Hospitality Trust in Singapore further proved robust investor confidence in Asia.

The main action took place in four markets – China (26%), Japan (26%), Australia (16%) and Malaysia (8%) – which collectively accounted for three-quarters of regional investment volume. An increasing number of transactions involve mixed-use schemes with a hotel component.

Japan is at the heart of hotel investment activity Japan continues to be the most active market, with liquidity reaching US$915 million of disclosed deals in H1 2014, including a number of portfolio sales completed by J-REITs, and we expect this strong sentiment to be maintained through 2014. Unlike the predominantly domestic market in China, Japan increasingly attracts both local and international capital.

China is ‘Going Global’ China remains one of the biggest investment markets in Asia Pacific, although activity is still almost exclusively domestic, with no cross-border capital flowing into the country. At the same time, being encouraged by the government’s ‘Go Global’ policy, Chinese investors have already become one of the largest cross-border commercial property investors in the world and are increasingly seeking offshore hotel opportunities for diversification purposes, notably in gateway cities and strong secondary markets worldwide. In H1 2014, a number of significant single-asset transactions were closed by Chinese capital, with deals happening in all regions.

Single-asset transactions shape the investment scene in Australia Australia continues to attract the bulk of investor interest, with Asian capital being particularly keen on entering this market. Activity remains high and will be further boosted by the anticipated sale of the Sheraton on the Park in Sydney later this year for an estimated A$450 million. However, with yields compressing further, the market is becoming too expensive for many, which will constrain growth in investment volumes.

Unlike the Asian markets, where a number of portfolios changed hands in H1 2014, 100% of all deals closed in Australia were single-asset transactions. At the same time, the average ticket size during the first half of the year has doubled compared to the same prior-year period, driven by compressing yields under a growing weight of capital.



Residential Markets U.S. apartment market continues its growth run Despite concerns about a burgeoning supply pipeline and heated occupancy and investment markets, the U.S. apartment market has maintained its historic run of growth. Aided by a national homeownership rate that has reached its lowest level since 1995, apartment vacancy has fallen to a record low of 4%. Sunbelt markets have continued to show the largest gains while the tightest market conditions are in the gateway cities. Rental growth is still sturdy, with 3.1% across-the-board and standout performers that include Pacific Northwest cities and Denver.

… and the outlook is positive despite large supply pipeline Construction activity will continue to accelerate, with the current number of apartment units currently under construction equating to 3.5% of national inventory. In major metro areas, the percentage is even higher at 4.2%. Even so, the for-sale housing market expansion has been somewhat slower than expected in recent quarters; however, with improved U.S. employment growth the near-term outlook for the U.S. apartment sector remains very positive.

Subdued residential sales in Asia Pacific High-end residential sales have been subdued in most Asia Pacific markets, due to flat economic growth and policy restrictions. Nevertheless, volumes in Hong Kong have improved, partly due to relaxed conditions associated with the double stamp duty. The strongest capital value growth during Q2 was recorded in Manila (+3%). For H2 2014, sales in the high-end residential segment in the region are likely to remain at similar to levels as the last 12 months. Prices are expected to be stable in most markets this year, with small falls in Hong Kong, Singapore and Jakarta.

Unsustainable price increases in Dubai Dubai’s residential market is experiencing a rapid recovery with average residential prices having increased by more than 35% in the year to June 2014. This is an unsustainable rate of growth, however, and the market has cooled significantly in the last quarter (with prices up 6%). Sales activity has also declined significantly in recent months, particularly for existing villas, where many owners are now reducing asking prices.

International demand continues to support price growth in London In London a strong economic backdrop and an international dimension to demand continues to support price growth, which was 18.7% in the year to April 2014. But for prime locations JLL has observed a slowing of growth rates in Q2 2014. These areas have been far more sensitive to government policy announcements around the proposed ‘Mansion Tax’ on £2 million + properties and will experience some receding of demand in the run-up to the national elections next year. However, we do not believe that this will be sufficient to cause material price declines. The Central London new-build market has experienced a shift towards domestic purchasers since the end of 2013 and, as a result, demand is well-supported and broadly-based.

Rest of UK lags London A house price ‘bubble’ is not a reality for most of the UK. Mid-single-digit annualised growth rates for most non-London regions are only modestly above average and are typical of a recovery cycle where demand is moving ahead of supply in both the new-build and second-hand markets. Transactions have begun to tick up across all regions of the UK. Equally, lending volumes have also continued to improve, showing signs of growing confidence despite some headwind from moderately tighter lending rules.



Recent Key Investment Transactions

Europe, Middle East and Africa

Country City Property Sector Sales price

US$ m Comments Austria, Belgium, France, Germany, Netherlands, Spain

Various Project Europe Hotels Confidential

Apollo European Principal Finance Fund II, a fund affiliated with Apollo Global Management has acquired a portfolio of 18 European hotels from Ivanhoé Cambridge. The portfolio includes hotels located in Austria, Belgium, France, Germany, the Netherlands and Spain operated under the IHG brands of Crowne Plaza, Holiday Inn, and Holiday Inn Express.

Belgium Brussels North Galaxy, North District Office 651

In the largest ever single-asset transaction in the Belgian office market, Danish pension fund ATP and AXA Real Estate have acquired North Galaxy from REIT Cofinimmo in a deal valued at €475m. Based on a 2014 passing rent of €26.8m, this represents a gross yield of 5.6%. ATP will take 90% of a new JV owning the asset, with AXA Belgium holding the remainder. North Galaxy includes 105,000 sq m of office space which is fully let to the Belgian Ministry of Finance until November 2031.

France Paris Risanamento portfolio

Office and Retail

1,550 Italian group Risanamento has sold eight assets to The Olayan Group in association with Chelsfield. The 80,000 sq m portfolio consists mainly of offices with some retail.

France Paris Beaugrenelle, 16 rue Linois, 15th arrondissement

Retail 960 Gecina and its partners have sold the Beaugrenelle shopping centre to a consortium of private investors led by Apsys for €700m. Apsys and Groupe Madar each own 40% of Beaugrenelle, while Financière Saint James controls the remainder.

France, Germany Various FEL Portfolio Industrial 649

Blackstone has acquired €473m of logistics assets from Foncière des Régions. The portfolio comprises 17 logistics assets, representing a total surface area of nearly 750,000 sq m, located in France and Germany. The assets will be integrated into Logicor, Blackstone’s European logistics platform.

France, Italy, Spain Various Klépierre

Portfolio Retail 2,757 Klépierre has sold a portfolio of 127 Carrefour supermarkets back to Carrefour, backed by a consortium of institutional investors, for €2.01bn. The 476 000 sq m portfolio comprises 57 assets in France (70% of the value of the portfolio), 63 assets in Spain (19%) and 7 in Italy (11%).

Germany, Netherlands Various Moor Park

Portfolio Hotels 980

Accor has acquired an 86-property portfolio from two funds, Moor Park Fund I and II, which are advised by Moor Park Capital Partners, a pan-European real estate private equity investment advisory business. The portfolio consists of 67 hotels in Germany and 19 hotels in Netherlands with a total room count of 11,286 rooms. The hotels comprising this portfolio have been operated by Accor since 2007 under variable-rent leases.

Germany, Poland, France Various Moorea Portfolio Industrial 647

JLL has advised Segro European Logistics Partnership, a JV between Segro and PSP, on the acquisition of a logistics portfolio. The vendors were Tristan Capital Partners and AEW Europe funds. The portfolio comprises 10 assets in Germany, 3 in Poland and 1 in France, covering approximately 7.3 million sq ft of leasable space. This includes one building under construction and 51 hectares of development land in Germany. The price paid was €472m, representing a net yield of 7% and an annual rental income of €31.6m.

Ireland Dublin George's Quay, George's Court and Westend Shopping Park

Mixed 514

JLL has advised Cosgrave Property Group on the sale of a 650,000 sq ft component of its wider property portfolio, comprised of office buildings at George’s Quay and George’s Court, Dublin 2 and retail and other commercial space in Westend Shopping Park, Blanchardstown, Dublin 15. The portfolio was purchased by Green REIT for €375m.

Netherlands Amsterdam ITO & SOM Complex Office 335

Union Investment has bought a large office complex in Amsterdam Zuidas (the most prominent office location in the Netherlands) for circa €244m from Commerz Real. The ITO + SOM complex offers 51,980 sq m of office and retail space, and consists of the 100m-high ITO office tower and the five-storey SOM building. They will become part of the Union's open-ended fund UniImmo: Europa.

Sweden Various Pandox Portfolio Hotels 335 Pandox, one of Europe's leading hotel property companies, has sold a portfolio of 14 Swedish hotel properties with a total of 2,400 rooms to Fastighets AB Balder, a Swedish operator.

Sweden Various Steen & Strøm Portfolio Retail 492

The real estate unit of the Olav Thon Group, Norway’s largest private property group, has acquired five shopping centres for SEK3.25bn from Steen & Strøm, a company owned by Klépierre (56%) and APG (44%). The malls are situated in Hyllinge, Trollhättan, Norrköping, Karlstad and Stockholm.



Country City Property Sector Sales price

US$ m Comments

UAE Dubai Index Tower, Dubai International Financial Centre

Office 167 Emirates Reit Limited, the UAE’s first regulated Shariah-compliant REIT, has acquired 15 office floors and 706 car parking spaces in Index Tower from Emirates NBD Properties for Dh613.5m. The office floors, which are currently vacant, comprise approximately 372,000 square feet of commercial space.

UAE Dubai Movenpick Jumeirah Beach Residence Dubai

Hotels 131 JLL has advised on the sale of the 5-star Movenpick Jumeirah Beach Residence. The asset, a 294-key hotel, has been operational for four years and was acquired by an investment vehicle set up by a UAE regional investment bank.

UK Heathrow Park Inn Hotel & Conference Centre

Mixed Use/ Hotels

120

JLL’s Alternative Investment Team has completed the acquisition of the Park Inn Hotel & Conference Centre for AXA Real Estate. The property was sold by administrators Zolfo Cooper on behalf of Dania Properties Heathrow Ltd. The acquisition has been achieved at an attractive yield of just sub 6% for the prime Heathrow site. This reflected a price for a lease with over 20 years unexpired.

UK Kent Bluewater shopping centre Retail 1,104

Land Securities has acquired a 30% stake in the Bluewater shopping centre in the county of Kent for £656m from Lend Lease. The deal leaves Lend Lease with a 25% share of the centre; M&G Real Estate and GIC together own 35% while Hermes and Aberdeen Asset Management together control 10%. Land Securities has also acquired the full asset management rights for the centre and 110 acres of surrounding land for £40 million. The overall net initial yield after expiry of rent-free periods is 4.1%.

UK London 10 Upper Bank Street, E14 Office 1,338

Canary Wharf Group has sold a 90% stake in 10 Upper Bank Street, the 32-storey tower it developed in 2003, for £795m. A 70% stake has been acquired by China Life and a further 20% by Qatar Holding. Clifford Chance, the sole office tenant, has a 14-year unexpired lease term, while the retail unit is let to HCA International Limited. The annual rent on the building is £44.35m

UK Manchester Spinningfields Office 539

JLL has advised M&G Real Estate on the acquisition of RBS's circa 500,000 sq ft of offices at Manchester's Spinningfields for circa £320m. The purchase of 1 Spinningfields Square was made on behalf of an internal client fund of M&G Real Estate, while 1 Hardman Boulevard was purchased on behalf of a third-party institutional client of M&G Investments. The two Grade-A offices are leased in their entirety to RBS for a further 23 years and are subject to annual fixed uplifts of 3%.

Asia Pacific

Country City Property Sector

Sales price

US$ m Comments

Australia Brisbane Southpoint - Building B Office 187

Union Investment has acquired the office component of the Southpoint development in the South Bank district on a forward funding basis from local developer Anthony John Group for A$200 million. The asset is fully leased and will house the headquarters of travel company Flight Centre.

Australia Parramatta Parramatta Twin Towers Office 225

Growthpoint Properties has acquired the NSW Police headquarters in Parramatta's CBD from AustralianSuper. The asset was sold with a yield of around 7.6% with a significant weighted average leasing expiry of around 10 years.

Australia Sydney Sofitel Sydney Wentworth Hotels 190

JLL Hotels & Hospitality Group has advised on the sale of the iconic 436-room Sofitel Wentworth Sydney to Frasers Centrepoint Limited (FCL). The property will continue to be run by Accor Asia Pacific under the Sofitel brand. This acquisition is FCL’s fifth hospitality asset in Australia since it started operating in Australia in 2008.

Australia Sydney Westpac Place Office 406

JLL has advised Mirvac on its divestment of a 50% stake in Westpac Place to Blackstone. The deal highlights a continuation of Blackstone's push into the Australian market as well as Mirvac's strategy to enter into new capital partnerships. As part of the deal, Mirvac has also granted Blackstone a call option over a portfolio of seven office and retail assets across various Australian markets.

China Beijing Pacific Century Place Mixed 928

PCPD (Pacific Century Premium Developments) has sold this 1.8 million sq ft mixed-use asset to Gaw Capital. Pacific Century Place is located in Beijing's CBD and comprises office space, street-front retail and serviced apartments.




Sales price

US$ m Comments

China Shanghai Greenland Centre - two office towers

Office 698 Greenland Group has sold the Greenland Centre development to Ping An Trust. The CBD property will be completed in 2015

Hong Kong Hong Kong One Bay East Tower Office 700

Citigroup has acquired the East Tower of the One Bay East project for HKD 5.425bn from Wheelock Properties. The transaction marks the largest en-bloc office deal in Hong Kong and the project is expected to be completed in 2015. Citigroup will use the asset for its own occupation.

India Bangalore Vrindavan TechVillage Office 326

Blackstone and Embassy Group have agreed to buy the Vrindavan Tech Village business park in Bangalore for INR 19.5bn. The project, which spans 106 acres, has about 1.9 million sq ft of office space already developed.

Japan Osaka Osaka Namba Washington Hotel Plaza

Hotels 87 JLL’s Hotels & Hospitality Group has advised on the sale of Namba Washington Hotel Plaza to Singapore-based Ascendas Hospitality Trust (A-HTRUST) for JPY 8.9bn. The purchase is A-HTRUST’s first acquisition in Japan since its initial public offering in July 2012 and will add a second Japanese asset to its portfolio.

Japan Tokyo Ebisu Prime Square Office 245

Tokyu Land has sold a 49% share of Ebisu Prime Square, an office property consisting of three buildings with street-front retail, to the Invesco Office J-REIT. Located in the CBD, the office building is fully occupied and has three major tenants.

Japan Tokyo J6 Front Office 176 Alpha Investment Partners has sold the J6 Front office property to Union Investment. The property is fully leased to six Japanese companies.

Malaysia Kuala Lumpur Platinum Sentral Office 232

Malaysian Resources Corporation Bhd has sold Platinum Sentral, located in the CBD, to Quill Capita Trust. The office asset which consists of five buildings also houses street-front retail. The main tenant, SME, leases nearly half of the 475,000 sq ft property.

Singapore Singapore Equity Plaza Office 439 Keppel Land and its fund management platform Alpha Investment Partners have sold Equity Plaza to a consortium of Singaporean investors including GSH Corporation, Vibrant DB2 and TYJ Group. The purchasers intend to undergo an asset refurbishment including an upgrade to the facade.

Singapore Singapore Prudential Tower Office 409

Keppel REIT has struck an agreement to sell its 92.8% stake in Prudential Tower for S$512m to Lian Beng Group, KSH Holdings, KOP Limited and Centurion Global, reflecting a yield of around 3.5%. The asset is already under strata-title and the investors plan to retain some of the units for recurring income and to undertake some strata sales further down the track.

South Korea Seoul K Twin Towers Office 486 Kohlberg Kravis Roberts (KKR) and LIM Advisors have completed the joint acquisition of K Twin Towers, a prime commercial property in Seoul's CBD, for KRW 500bn. The building consists of 900,000 square feet of office and retail space.

South Korea Seoul

Uljiro Mirae Asset Tower (101 Pine Avenue Tower A)

Office 447 JLL has advised asset manager Mirae Asset on the sale of the Uljiro Mirae Asset Tower to The State Oil Fund of Azerbaijan (SOFAZ).

Thailand Hua Hin Hilton Hua Hin Resort & Spa Hotels 99

JLL Hotels & Hospitality has advised Destination Resorts on the sale of the 298-room Hilton Hua Hin, one of Thailand’s most iconic beachfront hotels. The property was bought by Saha-Union Plc, a Thai company listed on the Thai Stock Exchange. .

Americas


Sales price

US$ m Comments

Brazil Various Distribution Portfolio Industrial 1,360 Global Logistic Properties has purchased the 34-property warehouse

distribution portfolio from BR Properties at a reported 9.4% initial yield.

Canada Toronto Renaissance Plaza Office 234 Spain's Ponte Gadea has purchased this CBD office asset at a reported 4.6%

initial yield from a JV of Kevric, Caisse de dépôt and PSP Investments.




Sales price

US$ m Comments

Canada Toronto GTA and Calgary Warehouse

Industrial 46 An equity fund of CanFirst Capital Management has purchased the six-building industrial property.

Mexico Various Garza Ponce Industrial Industrial 275 Mexican REIT Fibra Uno has purchased this 29-property industrial portfolio from

Grupo GP.

Mexico Mexico City Campos Eliseos Office 57 Fibra Uno has acquired the two-building office property in the city's Polanco submarket.

United States Various Innkeepers USA Trust Hotel Portfolio

Hotels 959 NorthStar Realty Finance Corp., a property investor and lender, has acquired an 89.7% interest in a JV comprised of 47 U.S. hotels from Cerberus Capital Management, LP. The remaining 10.3% will be retained by the Chatham Lodging Trust.

United States Boston Vertex Pharmaceuticals HQ at Fan Pier

Office 1,125 Senior Housing Properties Trust has purchased this 153,000 sq m two-building office property from The Fallon Company at a reported 7% initial yield.

United States Charlotte 2321 Concord Pkwy S Industrial 69 Philip Morris USA has sold its former 325,000 sq m warehouse in suburban

Concord to Victory Industrial Park, LLC.

United States Chicago CH2 Data Center Industrial 212 CVMC REIT has purchased this 23,000 sq m data centre in suburban Melrose

Park from Ascent Corporation.

United States Los Angeles Malibu Village Retail 120 Dune Capital Management has sold the 4,700 sq m shopping centre in the Malibu submarket to Jamestown.

United States Maui, Hawaii Marriott Wailea Beach Resort & Spa

Hotels 326

Sunstone Hotel Investors, a Southern California-based lodging REIT, has acquired the 544-room Wailea Beach Marriott Resort & Spa. The deal was funded with US$60m of common stock issued directly to the seller, an affiliate of Blackstone, and a combination of proceeds from the company's June 2014 common stock offering and cash on hand.

United States New York Novotel New York Times Square

Hotels 274

JLL has advised on the sale of the 34-storey 480-room Novotel Times Square at 226 West 52nd Street. The property was purchased by Millennium & Copthorne Hotels from Apollo Global Real Estate Management and The Chartres Lodging Group who previously acquired it in 2012. The property will continue to be managed by the Accor Group under the Novotel brand.

United States New York 5 Times Square Office 1,500 Investor David Werner has purchased the 103,000 sq m office asset at a reported 4.5% initial yield from AVR Realty.

United States Washington, DC Techworld Office 320 The JBG Companies has sold the 70,000 sq m office property to the Meridian Group at a reported initial yield of 6.8%.

COPYRIGHT © JONES LANG LASALLE IP, INC. 2014. This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report

COPYRIGHT © JONES LANG LASALLE IP, INC. 2014. This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report

Investor Relations

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