1. Investment Market Update
Asia Pacific Q2 2011
Slowdown continues
13 July 2011 Total commercial real estate investment volumes fell for the
second consecutive quarter in 2011. The value of transactions
fell by 37% to reach US$25 billion compared to Q1.
Authors
Investors became more cautious as the debt crisis in Europe
Kasia Sielewicz and the USA intensified with many adopting a wait and see
Forecasting & Strategy Research approach. Lack of investable product also prevailed,
+44 (0)20 3296 2322 hampering trading volumes.
Kasia.sielewicz@dtz.com
David Green-Morgan Activity slowed down significantly in all countries with double
Head of Asia Pacific Research digit declines from Q1. Compared to the same period last year
+61 (0)2 8243 9913 most countries posted a recovery. But in China and Japan the
david.green-morgan@dtz.com first half of 2011 is much weaker than in 2010.
Investors were favouring mixed-use property which accounted
Contacts for more than half of all transactions in Q2. Outside China,
offices still retained the largest share but investments in
Tony McGough
mixed-use schemes increased over the quarter.
Global Head of Forecasting &
Strategy Research
+44 (0)20 3296 2314 The drop off in activity at the top end has reduced the average
tony.mcgough@dtz.com deal size with domestic investors continuing to secure over
90% of all assets traded.
Hans Vrensen
Global Head of Research
With anti-inflationary policies now well entrenched in most
+44 (0)20 3296 2159
hans.vrensen@dtz.com countries across the region, it is expected that investor
sentiment will remain muted for the remainder of 2011.
Figure 1
Asia Pacific investment volumes Q1 2009 - Q2 2011
US$ bn
60
50
40
30
20
10
0
2009.1 2009.2 2009.3 2009.4 2010.1 2010.2 2010.3 2010.4 2011.1 2011.2
China Japan South East Asia Australia Hong Kong Other
Source: DTZ Research
www.dtz.com 1

2. Investment Market Update
Investor activity slows as global economic Investment volumes in Hong Kong fell by 14% in
Q2 and reached US$1.5 billion over the quarter.
worries weigh on sentiment Limited supply and strong demand continue to drive
prices up in the office sector, to potentially
Total commercial real estate investment volumes unsustainable levels. Investors are now turning to
fell for the second consecutive quarter in 2011. The other property types seeking value in higher
value of transactions fell by 37% to reach US$25 yielding sectors such as industrial and retail.
billion compared to US$40 billion in Q1. Investors
became more cautious as the debt crisis in Europe In Singapore investments reached US$3.3 billion, a
and the United States intensified. Lack of investable fall of 24% on the previous quarter. While there is
product also prevailed, hampering trading volumes ample liquidity there are very few core assets for
in the region. sale. As in Hong Kong, investors in Singapore are
increasingly looking at higher yielding sectors.
Activity slowed significantly in all countries with
double digit declines from Q1 (Figure 2). When Mixed use schemes gain more importance
excluding China the activity across Asia Pacific fell
by half to US$10.8 billion. Compared to the same
period last year most countries posted a recovery. Investors were favouring mixed-use property which
But in China and Japan the first half of this year is accounted for more than half (US$13 billion) of all
much weaker than 2010. transactions completed in Q2. This is on the back
of several large deals including the sale of the Boon
Lay Way development in Singapore for US$782m
A reduction in land supply by some local authorities
(Table1).
and restrictive lending to developers impacted
property trading in China with volumes falling by
23% to US$14 billion. Notably, office sales dropped by 46% (US$6.2
billion) while retail sales fell by 35% (US$3.5 billion)
in Q2. Investors are reportedly increasingly looking
As expected, there was much less activity in Japan. for higher yielding properties potentially in the
Investment volumes were down by 86% to US$1.1
industrial sector. This is however yet to be
billion over the quarter, with no major deals closed
translated into volumes. In Q2 industrial property
during Q2. In general, the market still lacks good
sales fell by 68% to US$2.1 billion. Outside China,
investment opportunities with investors continuing
only mixed-use property saw activity growth in Q2
to hold assets. Purchasers may have been looking
increasing by 7% (US$ 2.4 billion). Its overall share
for a price drop after the earthquake, but this is yet
increased from 10% to 22% over the quarter
to be reflected in actual transacted prices.
(Figure 3).
Figure 2 Figure 3
% change in investment volumes, Q1 2011–Q2 2011 Investment activity by sector, Q1 2011–Q2 2011
100%
90%
-14% 80%
-23% -24% -24%
-27% 70%
-37% 60%
-47% -49% 50%
-54%
40%
30%
20%
-86%
10%
0%
2011.1 2011.2 2011.1 2011.2
Asia Pacific Asia Pacific excl China
Mixed Use Office Retail Industrial Other/Unknown
Note: Thailand is excluded from the chart.
Source: DTZ Research Source: DTZ Research
www.dtz.com 2

3. Investment Market Update
the lack of deal flow at the larger lot size. The
Chinese government continues to divest
average deal size is now at its lowest since the global
financial crisis when it hovered in the low US$20m
Once again this quarter the public sector was a range (Figure 4).
major net seller of commercial property, divesting
over US$14 billion. The majority of this divestment Domestic buyers dominate
comes from within China where the government
continues to offload long leasehold development
opportunities to the open market. In a continuation of the trend that we have seen over
the last two years, domestic investors continue to be
the most active buyers in commercial property
In a reversal of the market dynamics we witnessed at
markets around the region (Figure 5).
the height of the financial crisis private investors
have become net sellers of property. For over two
years private investors were net buyers of Although the ratio improved slightly in Q2, domestic
commercial assets but with the recovery in the buyers have been responsible for over 90% of all
market they have looked to offload and take profits. deals since the market cycle started to turn at the
end of 2008.
Replacing them as net acquirers in the quarter were
private property companies and corporates, who Outlook
together built up almost US$10 billion of new assets. This quarter’s transactional volumes are a further
Quoted vehicles are starting to become more active indication that the global economic problems are
in the market adding over US$4 billion worth to their affecting the region’s economies and property
portfolios in Q2. markets. Although the markets are still well above
the lows we saw in late 2008, the bounce back
Lack of US$1 billion+ deals brings average down recovery of 2009 and 2010 seems to be at an end.
For the first time in two years there were no The strong economic growth we witnessed in 2009
individual deals over US$1 billion in the quarter, and 2010 has now translated into higher inflation in
primarily due to the sharp fall in volumes in Japan. almost every country in Asia Pacific. While policy
The number of deals over US$500m also reduced measures were introduced quickly and have been in
from the preceding quarters, with only the mixed use place for some time, it is taking longer than expected
scheme on Boon Lay Way in Singapore (Table 1) to bring inflation back under control. This coupled
breaching this milestone. with the on-going debt issues in Europe and the
USA means that investor sentiment looks set to be
muted for the rest of 2011.
The average deal size was reduced to US$40m due to
Figure 4 Figure 5
Investment activity by deal size, Q1 2007–Q2 2011 Investment activity by investor origin, Q1 2007–Q2
2011
US$ bn
70 100%
90%
60
80%
70%
50
60%
40 50%
40%
30
30%
20 20%
10%
10
0%
0
Domestic Foreign
Source: DTZ Research Source: DTZ Research
www.dtz.com 3

4. Table 1
Significant deals
Address Town/City Property type Purchaser Vendor Price (US$m)
Capita Land.
CapitaMall
Boon Lay Way Singapore Mixed-use URA US$782m
Trust . Capital
Malls Asia
The New World Changning
Shanghai Mixed-use SOHO China New World China US$492m
Commercial Centre
Canadian
Northland Shopping Pension Plan
Preston Retail Gandel Group US$483m
Centre Investment
Board
Charter Hall
Woolworths Centres Multi-city Retail REIT and Woolworths US$283m
Telstra Super
United Urban
Arena Tower Yokohama Office Arena Tower YK US$116m
Investments
Retail Podium of Nan Fung
Hong Kong Retail The Link Nan Fung US$150 m
Plaza
Source: DTZ Research
Table 2
Investment market
Q2 Q3 Q4 Q1 Q2 Yr to Q4 Yr to Q1 Yr to Q2
2010 2010 2010 2011 2011 2010 2011 2011
Total investment
27.47 38.22 49.87 39.73 24.98 158.37 155.30 152.80
volume (US$ bn)
Total purchasing
activity (US$ bn)
Offices 6.81 9.57 8.99 11.52 6.18 35.05 36.90 36.26
Retail 6.36 10.55 10.07 5.34 3.48 33.75 32.32 29.44
Industrial 2.28 2.94 3.64 6.44 2.07 11.93 15.30 15.09
Mixed Use 11.49 13.89 25.47 15.63 12.98 72.32 66.48 67.97
Other 0.53 1.27 1.70 0.80 0.27 5.32 4.30 4.03
Domestic 24.98 33.97 45.41 37.55 22.68 143.61 141.92 139.62
Cross Border 2.49 4.24 4.46 2.18 2.29 14.76 13.38 13.182
*Due to lag of received data. investment volumes in China have been revised from US$12 bn to US$18 bn in Q1 2011.
Source: DTZ Research
This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional advice. Whilst facts have been rigorously checked, DTZ can take no
responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part, be published, reproduced or referred to
without prior approval. Any such reproduction should be credited to DTZ.
© DTZ July 2011
www.dtz.com 4