This document discusses top trends to watch in 2015 in the Asia Pacific real estate market according to a Cushman & Wakefield report. The key points are: 1) Regional economic growth is expected to moderate around 5.0-5.3% as China's growth slows, but domestic demand and policy support will help other economies. 2) Office leasing activity is projected to rebound across many markets in the region due to improving fundamentals, with emerging markets seeing the strongest gains. Vacancy rates may rise in some emerging cities. 3) Non-central business district office locations will continue attracting tenants by offering lower rents and desirable locations compared to prime CBD areas.

1. december 2014
top trends to
watch in 2015
A Cushman & Wakefield Research Publication

2. 2
A Cushman & Wakefield Business Briefing
december 2014 top trends to
watch in 2015
3
foreword
In many ways, the property market in Asia Pacific is ending 2014 on a more solid note
than when we began the year. We saw the conclusion of peaceful elections in the region’s
emerging countries,and concurrently witnessed the luster fade from some of our economic
behemoths. Encouragingly, the region moved forward as policymakers across the region
vigorously sought to strengthen their countries’ economic pillars,with positive effects that
are slowly making their way to the property markets – trends that we hope will pave the
way for a better 2015.
We are pleased to share our latest report –TopTrends toWatch for 2015 – summarizing
our views on relevant issues in the regional economy and occupational and investment
environment, and helping guide you in making strategic decisions for the coming year.
TOKYO

3. 4
TOP TRENDS TO WATCH IN 2015
december 2014
Executive Summary
Looking back over the past 12 months since we released our report,“14 Trends for 2014,” our central
theme of “moderate growth” held true to a large extent. Economic growth continued to decelerate
across the region.As a result, leasing activity came off the boil in the region’s large markets but showed
some resurgence as political stability and some policy changes helped to stimulate regional economies in
the second half. Japan’s contraction following the consumption tax hike in April took us by surprise, as it
did most observers; but we remain confident in Japan’s unswerving commitment to growth. Just as we
had anticipated, property fundamentals in Tokyo turned around this year, with rents and prices finally
showing some gains. From an investment perspective, we thought the office sales volume in the region
would surpass the record level in 2013; at the same time, we forecasted that Asian investors would be a
key player in the global arena.And we were right; as of October 31, the annualized office sales volume
set a new high in 2014, and the surge in Asian international investments turned out to be even better
than expected.
Looking forward, this slower macro environment is likely to persist but remain generally supportive of
property fundamentals. Regional economic performance, aided by resilient domestic demand, strong
policy support, and an improving export sector, will continue to support sentiment and thus, underpin
the strengthening recovery in leasing activity across all 30 cities that we track in Asia Pacific.Additionally,
speculative construction will remain on an uptrend especially in fast-rising markets across the region,
and bring about the emergence of new competitive urban centers.With occupancy costs still on a
modest uptrend in most markets in the region, though they are already among the highest globally,
further adoption of workplace strategies will become a business imperative. Companies will be
well-placed to explore various strategies that would allow them to manage their costs alongside their
efficiency and productivity in the workplace.While returns are expected to continue their descent
against this slower macro backdrop, lower returns is a new reality that is evolving across the global
marketplace. Nevertheless, there are compelling reasons for continued interest in the region as an
investment destination.A number of Asia Pacific markets will still have ample room for significant
improvement in fundamentals over the long term, especially in light of new regulations and better
governance that are poised to foster the continued development of the real estate sector. Furthermore,
the extensive availability of financing through domestic and international channels will likely sustain the
high volume of transaction activity and pricing in the region. Overall, as we move into 2015, we continue
to see a healthy leasing market and active transactions market fueling growth of the office sector in the
region.
FORECAST SUMMARY
While China settles to a new normal of slower growth, the rest of Asia should gain traction on the back of
strong policy support, domestic demand, better governance and an energized export sector.
Gdp Growth
2015 absorption
Growth
Lowestvacancies
in the reGion
inventorY expansion
rent increase
throuGh 2018
throuGh 2016
5.0-5.3%
20%
10%/YEAR
1-2%
absorption to reach a
SEVEN-yEAR HIgH IN 2015
Rents will rise in a vast majority of the markets; however, rent increases will be modest at 1.0-2.0% per annum. Rents are
expected to be flat to declining in majority of the emerging markets as vacancies trend higher in 2015.
With nearly 400 million square feet under construction across 30 cities in the region,
the office inventory is expected to expand by 10.0% per year through 2018. Leading
the list of high office construction volume relative to existing inventory are cities in
India, China andVietnam.
grade A vacancy rates are expected to average 7.0-8.0% for core markets, and
16.0-17.0% for emerging markets.
TOKYO
AUCKLAND
BANGKOK
MANILA
SINGAPORE
OVER
top trends to
watch in 2015
5

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TOP TRENDS TO WATCH IN 2015
december 2014 top trends to
watch in 2015
7
Regional Economy Settles into “New Normal” of
Moderate Growth
GDP growth in Asia Pacific is anticipated to continue to hover around
5.0%-5.3% through 2016 as momentum fades in the region’s largest
economies. China’s growth is set to decelerate to somewhere between 6.0%
and 7.0% in the next couple of years as the government prioritizes economic rebalancing
over growth. Similarly,Australian policymakers will continue to facilitate an economic shift
in favor of non-mining industries in 2015 amid weak commodity prices. Nonetheless, the
rest of the region should gather momentum in 2015.We maintain our cautiously
optimistic view on the Japanese economy.The surprise slowdown in 2014 underscores
that there are structural issues that need to be addressed to achieve a full-fledged
recovery. However, the government’s swift action to recalibrate its recovery program via
an extension of the quantitative easing program, another set of tax and spending
measures, and postponement of the second consumption tax increase until 2017 should
allow the Japanese economy to regain its strength over the next couple of years.The
appetite for reform has also been rekindled in most parts of the region. In India, Prime
Minister Narendra Modi has made his reform agenda the cornerstone of economic policy
targeting a return to a higher GDP growth trajectory of 6% and above.The Philippine
government will continue its infrastructure push as President Aquino’s term winds down
with elections scheduled in May 2016. By the same token, the newly-installed Widodo
government in Indonesia is trying to boost infrastructure spending while reducing existing
fuel subsidies.The outlook for Malaysia calls for continued government reforms that
should put the country on the path to move up the high-income ranks. In Thailand,
growth should accelerate further, as fiscal stimulus kicks in and conditions return to
normal on the back of a calmer political climate.
1
There are a number of bright spots in the Asia Pacific outlook that should benefit export
sectors and pave the way for a continued recovery, especially in South Korea, Singapore,
Hong Kong,Taiwan andVietnam. Specifically, the acceleration of U.S. economic growth,
along with the proliferation of free trade agreements (FTAs) and moves towards enhanced
free trade within the region, should set the stage for greater trade activity and help
compensate for lower growth in China and a fragile recovery in Europe.As in Japan, most
Asian central banks have sought to put downward pressure on their currencies, and this
trend is expected to continue through 2015 and help to improve the competitiveness of
exporters.The broader picture also points to a benign inflation outlook in most parts of
the region over the next year. Falling food and energy prices should allow central banks to
relax monetary policy, if necessary. Risks to the economic outlook remain largely the same
as in the previous year. Geopolitical tension in the region, as well as macroeconomic
concerns regarding Europe’s fragile recovery, the U.S. Federal Reserve’s interest rate
normalization, policy changes in Japan and China’s slower growth trajectory, have the
potential to derail sentiment and erode economic gains.
2015 GROWTH AND INFLATION RATE
HO CHI MINH CITY
Australia
China
Hong Kong
India
Indonesia
Japan
Malaysia
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
0%
1%
2%
3%
4%
5%
6%
7%
8%
0% 1% 2% 3% 4% 5% 6% 7%
2015InflationRate
2015 GDP Growth
Source: Roubini Global Economics

5. 8
TOP TRENDS TO WATCH IN 2015
december 2014 top trends to
watch in 2015
9
Rising Competitiveness in
Emerging Asia
While rising costs in China have led some
global companies to repatriate
manufacturing jobs in the last few years, a
development called onshoring, they have concurrently
created opportunities for emerging markets in the
region, which today still boast some of the most
competitive cost structures in the world. Notably, even
if real wages per worker have risen steadily, mirroring
improvements in living conditions and growth over the
last decade, they are still one-fifth as high as wages in
developed countries. Emerging Asia also has a large
working-age population expected to grow at robust
rates over the next three decades, which should
sustain competitive labor costs, and even provide the
scope to adopt a domestic-led model of growth.
Equally important is the increasing openness to foreign
direct investment, which has nurtured some of these
countries’ thriving homegrown industries.We
anticipate most of the emerging economies will
continue to open up in order to sustain progress. In
India, Prime Minister Modi has launched the “Make in
India” initiative to lure investment and boost
manufacturing’s share to 25.0% from 15.0% of GDP.
Office Leasing: Full Speed Ahead
The relatively solid economic backdrop could aid a broad-based rebound in
office demand in the majority of the top 30 cities tracked in Asia Pacific in
2015. Gains are expected to be most pronounced in emerging markets, with
traditional growth drivers such as information technology, business process
outsourcing, and professional and business services making bigger market plays at a local
level and in turn, fueling the expansion of other supporting office-using sectors.The
competitive cost structures in emerging Asia will remain a linchpin of a thriving
outsourcing industry and fast-rising manufacturing hubs outside of China. In addition, the
commitment to structural reforms will progressively squeeze inefficient industries and
pave the way for the growth of stronger institutions across many sectors needed to
drive leasing activity. On the supply side, emerging markets have been a magnet for new
construction. More than 200 msf of office space has been built since 2010 in emerging
cities in China, India, and Southeast Asia, and another 280 msf is under construction
through 2018. Nonetheless, supply additions will be keeping pace with the rising trend in
demand through 2015 except in Chengdu, Kolkata,Ahmedabad, New Delhi, Pune and
Hanoi, where vacancies will remain in excess of 20.0%. Come 2016, tenants in
Guangzhou and Shenzhen stand to have a multitude of options, with office completions
soaring to new highs of 13 msf and 17 msf, respectively.
Tokyo will remain in the spotlight in 2015. Recent policy moves indicate that growth
remains Japan’s top priority, key to instilling confidence among corporates, which in turn,
will be critical to sustaining the current positive momentum in the property markets.
Japanese companies are performing very well; their earnings are much better than
expected even accounting for the impact of the weak yen.Additionally, we believe
ongoing government initiatives will help to foster a resurgence in the city. Infrastructure
development for the Tokyo 2020 Olympics is already under way. Plans are in the works
to convert 11 projects in Tokyo andYokohama into international business hubs with help
from major real estate companies. The initiative is aimed at reclaiming Tokyo’s status as
a major international metropolis by creating an environment conducive to attracting
foreign corporations. Consequently, we believe the office market recovery is still in an
early stage but expect it to be patchy at times. In nearby Seoul, the abundance of
brand-new options with generous concession packages will continue to induce a flight to
quality in all districts and lead to occupancy gains, especially with office completions set
to ease in 2015.
For core cities in China, the teeming supply pipeline will bring relief to occupiers in
Beijing and Shanghai, after a prolonged period of single-digit vacancies, which even
reached as low 2.7% in 2011 and 3.8% in 2012, respectively.Tenants often had to choose
from a very short list of vacancies that might not have been the best fit for their
operations, and can look forward to the completion of nearly 14 msf and 15 msf in
Beijing and Shanghai, respectively, through 2016. Similarly,Taipei will witness over 900,000
square feet (sf) of office completions in 2015.The majority of the projects are located in
fringe markets, and provide ample opportunities for cost savings with rent at a
substantial discount to the CBD and generous concessions being offered to lure tenants.
However, we expect the Xinyi submarket, home to a number of multinational
corporations (MNCs), to remain tight. In Hong Kong, caution is still in the air.With high
occupancy costs and limited availability in Greater Central, tenants are generally opting
to better utilize their office space to keep costs down. On the upside, the Shanghai-
Hong Kong Stock Connect scheme has the potential to lead to a huge increase in capital
2 3
0
5
10
15
20
25 Developed Asia Emerging Asia
20162015201420132012201120102009
AVERAGE MANUFACTURING LABOR COST
US$PERHOUR
HONG KONG
Source: Economist Intelligence Unit

6. 10
TOP TRENDS TO WATCH IN 2015
december 2014 top trends to
watch in 2015
11
flows both into and out of China, with foreign investors being able to access a market
valued at about US$2 trillion.This development bodes well for office demand in Hong
Kong, but the impact is likely to be most meaningful over the long term. In our view, the
mainland banks are likely to be stronger growth catalysts for Hong Kong in the near
term given their current small footprint compared to international banks.
The recent political tension in Hong Kong is likely to have a positive effect on its rival
financial center, Singapore, highlighting the political stability characterizing the city-state.
Of course, Singapore and Hong Kong serve two distinct regions: North Asia and China
in the case of Hong Kong and Southeast Asia for Singapore.We think Singapore’s rapid
rise as the region’s largest center for both commodity and foreign exchange trading, as
well as its growth as a wealth management and regional headquarters hub, will continue
to make it a choice destination for MNCs. Dwindling options in the CBD will push
activity towards fringe and suburban locations in 2015, where occupancy costs are lower
compared to the CBD.This trend is likely to reverse in 2016 when the largest premium-
grade project currently under way, the 1.9-msf Marina One, will come online in the
Marina Bay submarket. Signs are also pointing up in some cities in Australia, with
improvements in the financial markets and other non-mining sectors already spurring
office demand somewhat.This comes at an opportune time, given that significant new
supply that is attractively priced will come on stream in Sydney and Melbourne in 2015.
However, a still weak resource sector is expected to keep vacancies in Perth at
record-high levels.
2
Core markets:Australia, Hong Kong, Japan, New
Zealand, Singapore, South Korea,Taiwan and the
Chinese cities of Beijing and Shanghai. Emerging
markets: India, Indonesia, Malaysia, the Philippines,
Thailand,Vietnam and the rest of the Chinese cities,
including Macau.
3
Source: Nikkei
2015 SUPPLY AND ABSORPTION
2015 Absorption
2015 Supply
INMILLIONSF
0 3 6 9 12 15
Hong Kong
Adelaide
Auckland
Brisbane
Taipei
Singapore
Perth
Melbourne
Sydney
Seoul
Shanghai
Tokyo
Beijing
Hanoi
Kolkata
Bangkok
Ho Chi Minh City
Mumbai
Ahmedabad
Kuala Lumpur
Chennai
Shenzhen
Guangzhou
Pune
Hyderabad
Jakarta
Chengdu
New Delhi
Manila
Bengaluru
TAIPEI

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december 2014 top trends to
watch in 2015
13
Non-Core Locations:The New Downtown
Non-CBD locations will also successfully compete by offering desirable
locations with significantly lower rents.With buoyant economic growth over
the past decade, the cost of office space in most core locations, for example
in first-tier cities in China or even in Jakarta, has doubled compared to five
years ago, and rapid leasing has left those markets in a supply crunch. Consequently,
absorption is beginning to reflect a growing interest in the suburbs, and companies are
less eager than before to move to city centers. In particular, the surge in new projects in
emerging suburban markets provides opportunities for companies to secure high-quality
office space relatively cheaply, which on average, could be at least 40% lower than rates
in core cities. In some cases, such as Beijing’s CBD, rents in prime buildings could be
close to double the level of up-and-coming submarkets such as Wangjing.
Those “urbanizing” suburbs that offer easy access to workplaces and a sufficient amount
of mixed-use urban amenities offer some of the greatest real estate opportunities.A
case in point is Kowloon in Hong Kong.The area’s improving accessibility to public
transportation and its live-work-and-play environment, along with the affordability and
availability of its options relative to Greater Central, have been a major impetus for the
decentralization trend. Rents in this market are set to fall 8.0-10.0% over the next two
years as more supply comes online while demand remains modest, at the same time that
rents in Greater Central are set to rise once again as a pick-up in demand chips away at
prime vacancies.These factors are expected to make this submarket more cost-
competitive, which will in turn further incentivize occupiers to decentralize. However,
high relocation costs could further limit significant tenant movements.
Technology Knows No Boundaries
The technology industry is clearly prospering, having been a strong pillar of
leasing activity in the region in 2014. There are good reasons to believe in
the immense upside potential of the new technology sector in Asia Pacific,
especially with rising domestic consumption, urbanization and the rise of the
mobile commerce platform.The numbers tell the story.Asia Pacific remains the growth
leader globally, which will allow the region to breed a wealthy consumer base, especially
in emerging countries, and the critical mass needed to sustain the sector’s long-term
viability over the next decade. For example, approximately 65.0% of Southeast Asia’s
estimated population of 735 million by 2030 is expected to belong to the middle-class
category. We estimate that e-commerce revenues will reach about US$1.5-2.0 trillion
each in China and India over the next 10 years. In our view, therefore, the technology
sector has positioned itself just right during its nascent stage in these growth markets,
and has compelling prospects.
There are, of course, differences between the current high-tech boom and the previous
one. Most technology companies that are fast expanding their footprint around the
world have gone public in recent years, are profitable and are more mature than
companies that created a frenzy some 15 years ago before fizzling out. Needless to say,
not all technology companies will succeed in this highly competitive marketplace.
Furthermore, the surge in growth in e-commerce, cloud computing, and big data stand
to have positive ramifications for data centers and warehousing/logistics space to house
the required back-end infrastructure.
Balancing Costs and Efficiency in the Workplace
Workplace strategy continues to play a pivotal role among companies for
recruiting high-quality talent, and in recent years, many companies have
embraced open, collaborative work environments to promote innovation and
enhance productivity.Technology and the professional and business services
sectors have a significant head start, and are now refining some of their earlier
workplace concepts. Some companies have already reversed policies relating to
telecommuting, even pulling back from the extreme openness concept that was earlier
driven by an efficient use of the floor plate and has now been replaced with a growing
concern for effectiveness.
Ever-tightening regulatory requirements are changing the business models for financial
institutions.Additionally, a variety of factors continue to crimp returns: low interest
rates, sluggish global economic growth and still-anemic loan demand, as well as legal
problems that continue to afflict some banks.As such, we expect financial institutions to
continually adjust their approach to property, with portfolios being rationalized and new
initiatives undertaken to reduce the cost of workplaces especially in high-cost markets.
In regional financial centers such as Hong Kong and Singapore, which currently are the
most expensive locations in Asia Pacific, recent demand from large financial institutions
has largely been for decentralized space, with back offices and more cost-conscious
operations moving out of high-rent submarkets into lower-cost decentralized markets.
Meanwhile, law firms across the region have largely been a driver of high-end office
space in the heart of the business districts, and have yet to embrace decentralized
locations. Some new space concepts such as activity-based work settings, collaborative
spaces or lawyer lounges, seen in the UK and other parts of Europe, are also appearing
4 5
62015 RENTS
0
3
6
9
12
15
Non-CBD
CBD
JakartaSingaporeHong KongShanghaiBeijing
US$/SF/MONTH
2015VACANCY RATES
0
5%
10%
15%
20%
JakartaSingaporeHong KongShanghaiBeijing

8. 14
TOP TRENDS TO WATCH IN 2015
december 2014 top trends to
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15
in some firms in Australia.Though law firms tend to be more conservative than, say,
financial sector companies, acceptance has been good and results show increased
collaboration between legal partners and their associates, while retaining some
distinction in terms of role and hierarchy. Going forward, while several law firms in the
region have already “rightsized” over the past 12 months, we still anticipate law firms to
expand in high-growth markets in the region with continuing preference for prestigious
space. However, such firms are more likely to take less space, and be more efficient,
especially as costs in the region remain on an upward trajectory.
7


NEW DELHI
AHMEDABAD
MUMBAI
PUNE
HYDERABAD
CHENNAI
BANGKOK
HO CHI MINH CITY
KUALA LUMPUR
SINGAPORE
JAKARTA
BRISBANE
AUCKLAND
SYDNEY
MELBOURNE
ADELAIDE
PERTH
MANILA
TAIPEIHONG KONG
HANOI
GUANGZHOU SHENZHEN
SHANGHAI
BEIJING
CHENGDU
SEOUL
TOKYO
BENGALURU
TENANT FAVORABLE
NEUTRAL
LANDLORD FAVORABLE
Emerging
Emerging
EmergingCore
Core
Core
New efficiency
New efficiency
New efficiency
60
80
100
120
140
160
180
200
IT Banks Legal
SFperemployee
OFFICE SPACE PER EMPLOYEE
AnotherYear of Diminished Rent Growth
Expectations
Single-digit rent growth is expected across the top 30 cities tracked in the
region for 2015 and 2016. For core markets, Grade A rents are forecasted to
rise another 1.0-2.0% per annum through 2016, with Tokyo posting the
highest rent growth on the back of ultra-low vacancies. Rents in Singapore are expected
to move up once again in a favorable supply/demand environment in the prime office
market, but the pace will be slower relative to the 10% surge in 2014 as office
completions will pick up in 2016. Hong Kong’s Greater Central is also set for a modest
uptick in Grade A rents on account of better economic sentiment, after drifting sideways
in 2014. In Seoul, leverage will slowly shift away from tenants as landlords begin to limit
the concessions they are willing to offer to secure deals.
Meanwhile, tenants will see some measure of leverage return to them as new supply
ramps up in Beijing and Shanghai so that rates will continue to inch down from their
current high levels. Similarly, Grade A rents in major markets in Australia will continue to
slide as vacancies trend higher. For emerging markets, average rents are forecasted to
increase moderately, at 0.5-1.0% per year through 2016, as rampant supply will restrain
landlord leverage. Jakarta, Shenzhen, Manila, Chennai and Bangkok will buck the trend
with above-average annual rent growth of 4.0-5.0%, though this pace represents the
third consecutive year of slowdown for those markets.
Note: New efficiency are an average of newer developments of < 4 years
MUMBAI

9. 16
TOP TRENDS TO WATCH IN 2015
december 2014 top trends to
watch in 2015
17
With annual rent increases moderating since 2011, tenants with three-year leases will, by
and large, face slightly higher renewal rates in 2015. On average, rents will be up 6.0-7.0%
for core and 7.0-8.0% for emerging markets from 2012. However, tenants in Jakarta,
Singapore and Manila will face a significant rent bump upon lease renewal, with average
rates in 2015 higher by nearly 50.0%, 28.3% and 27.0%, respectively, than in 2012.
Meanwhile, those in Ho Chi Minh, Ahmedabad and Chengdu stand to achieve some cost
savings, with rents expected to be down 8.0-10.0% from 2012.
2016 RENT GROWTH
-6% -3% 0.0 3% 6% 9% 12% 15%
Hanoi
Ho Chi Minh City
Kuala Lumpur
Guangzhou
Chengdu
Shenzhen
New Delhi
Hyderabad
Kolkata
Bengaluru
Mumbai
Pune
Bangkok
Manila
Chennai
Jakarta
Ahmedabad
Beijing
Brisbane
Shanghai
Sydney
Perth
Melbourne
Auckland
Adelaide
Taipei
Hong Kong
Singapore
Seoul
Tokyo
2015 RENT GROWTH
-6% -4% -2% 0.0 2% 4% 6% 8%
Hanoi
Ho Chi Minh City
Chengdu
New Delhi
Kolkata
Kuala Lumpur
Pune
Mumbai
Hyderabad
Ahmedabad
Guangzhou
Bengaluru
Bangkok
Chennai
Manila
Shenzhen
Jakarta
Perth
Brisbane
Melbourne
Shanghai
Sydney
Adelaide
Beijing
Auckland
Taipei
Hong Kong
Seoul
Singapore
Tokyo
-20% -10% 0.0 10% 20% 30% 40% 50%
Perth
Shanghai
Beijing
Brisbane
Melbourne
Hong Kong
Auckland
Seoul
Sydney
Taipei
Adelaide
Tokyo
Singapore
Ho Chi Minh City
Ahmedabad
Chengdu
Kolkata
Guangzhou
Hanoi
Kuala Lumpur
Mumbai
Hyderabad
Bengaluru
New Delhi
Chennai
Bangkok
Shenzhen
Pune
Manila
Jakarta
-5% -0% -5% 0.0 5% 10% 15% 20% 25% 30% 35%
Perth
Brisbane
Shanghai
Beijing
Melbourne
Sydney
Taipei
Auckland
Hong Kong
Adelaide
Seoul
Singapore
Tokyo
Hanoi
Ho Chi Minh City
Chengdu
Kolkata
Kuala Lumpur
New Delhi
Guangzhou
Mumbai
Hyderabad
Ahmedabad
Bengaluru
Pune
Shenzhen
Chennai
Bangkok
Jakarta
Manila
Y-O-Y RENT GROWTH 3-YEAR RENT REVERSION
2015 20152016 2016
*5-year rent reversion for Australian cities

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december 2014 top trends to
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19
100 150 200 250 300 350 400
Singapore
New York City Metro
London Metro
San Francisco Metro
Los Angeles Metro
Sydney
Tokyo
Melbourne
Yield spreads (bps)
Lowering Returns Expectations, Lengthening Time
Horizon
The continuation of subdued rent growth in the region over the next year
suggests another period of lower returns; but this is a new reality that is
evolving elsewhere in the world. Securing access to core products in the
region, while inevitably difficult, can yield an unlevered IRR of 7-8% on a five-year period
if successful.The perpetuation of low interest rates in Japan and Australia also provides
some attractive opportunities with yield spreads in both countries the highest in the
region. On the opportunistic side, cap rates are in the 10.0-12.0% range, while
development returns can range between 15.0-20.0% for core markets and 30.0-35.0%
for fast-rising emerging markets.We also believe there is room for cap rate compression
for certain markets over a 5-10 year period. In Japan, the incipient recovery will not just
benefit the top-grade assets, but also Grade B properties in Tokyo and secondary
markets.This trend also holds for India, where real estate fundamentals and capital
markets are on the cusp of a turnaround, supported by a reform-oriented government
that can steer the country back to stronger growth; and Manila, where a resilient
economy is continuing to support a thriving commercial real estate sector. (See
Investment Opportunities in Select Markets).
We also believe that the region can handle an orderly increase in interest rates without
serious disruption to the economy and property markets. Its solid economic landscape
should continue to strengthen property fundamentals, and thus offset the impact of
gradually rising interest rates. Hong Kong and Singapore will likely be most vulnerable in
the region, as higher interest rates could weigh on consumer spending and investment,
and have repercussions for their residential property markets. Nonetheless, their
economies should be prepared for any shocks, with prudent macroeconomic policies,
strong financial sectors, and large foreign reserves.
8 Investment Opportunities in Select Markets
Japan
Total transaction volume across the
commercial and logistics sector of
US$28.8 billion this year through
November 20 has already exceeded last
year’s volume of US$27.4 billion. End
users, and in particular cross-border
investors, have been active, in part, due to
the weaker yen but also on strong
investor sentiment. Properties in Japan
across all sectors are characterized by
stable income returns. Offices have
averaged just below 4.0% in Tokyo’s CBD
and over 2.0% in Osaka and Nagoya in the
last eight years, while yields in Fukuoka
register a higher 4.5%.The residential
sector, which has attracted international
investors of late, averages 3.5% across the
major cities.Against the historically low
bond yields, spreads for offices in Tokyo,
Osaka, Nagoya and Fukuoka are
registering 350-500 basis points (bps)
while those in the residential sector are
even higher at 400-500 bps.
India
As the economy starts picking up, office
assets will be amongst the first to benefit
as pent-up demand kicks in. Besides
traditional growth areas, several factors
like the spread of banking and the surge in
e-commerce are expected to create their
own momentum.The recently announced
REIT legislation and relaxation of FDI
rules will facilitate ease of entry and exit
for investors in this segment.These assets
attract investors who prefer stable and
predictable returns with some scope for
appreciation. In the current environment,
buyers appear to outnumber sellers, with
keen interest from global investors.While
there is a positive outlook for this asset
class, investors should ensure they choose
their portfolio carefully to ensure that the
yields they paid for remain undiluted.
The Philippines
The strong economic performance of the
Philippines in recent years has contributed
to heightened investor interest in the
local office market, reinforced by the
country’s credit rating upgrade.The
positive investor sentiment in the office
sector is reflected by recent significant
transactions such as SM Group’s
acquisition of five Grade A office buildings
and recent record-level bid prices on two
sites auctioned in Bonifacio Global City
(BGC). Investor confidence is also
observed in the growing number and
positive reception of upcoming strata-title
office buildings.The positive take-up of
these office building has been driven by
both local and foreign investors, as the
latter seek to gain exposure to property
they can acquire at full ownership. In
particular, average pre-sales take-up of
upcoming strata-title offices is estimated
at around 70.0-80.0%.Assuming sustained
rental and capital value growth, we
estimate office yields to range from
5.0-7.0%.
OFFICEYIELD SPREADS IN SELECT GLOBAL CITIES
Yoshiyuki Tanaka
President, Cushman & Wakefield
Asset Management
Japan
Joe Curran
Country Manager
Philippines
Shouvik Purkayastha
Executive Director, Capital Markets Group
India
SINGAPORE

11. 20
TOP TRENDS TO WATCH IN 2015
december 2014 top trends to
watch in 2015
21
Investment Activity Still Heating Up
As explained in our latest report,“Global Forecasts 2015-2016,” the pattern
of modest economic expansion will continue into 2015.While the U.S.
Federal Reserve has announced plans to gradually unwind nearly six years of
easy-money policies, we believe that it is likely to show patience on rate-hike
decisions.Additionally, the bias remains for easing in Europe and Japan as they step up
efforts to revive economic recovery. In our view, the recent decision by Moody’s
Investors Service to cut Japan’s sovereign debt rating is not cause for significant concern;
even the bond markets have not shown any adverse reaction not to mention that most
of Japan’s debt is owned by domestic investors. Consequently, we expect Japanese
Government Bond yields to remain low over the near term. China also stepped up its
stimulus efforts by recently cutting lending and deposit rates, which should help alleviate
financing strains.We maintain our view that against this backdrop, global financial
conditions will remain relatively accommodative for the foreseeable future, with the
9
major central banks maintaining their commitment to bolster economic activity and
income growth.Therefore, financial conditions will continue to support an appetite for
risk and a search for yield on the part of global investors. Considering further that
growth markets such as India and Indonesia have worked to reduce financial risk, even
embarking on reforms that will make investing there more attractive over the long term,
including progressive moves to allow some foreign participation inVietnam, we can
reasonably expect that more, not less, funds will be flowing into Asia next year.
A case in point is India.The Indian government passed REIT legislation in the Union
Budget in July 2014.While it will take some time for REITs to take off in India, this
development is welcome news for the capital-starved commercial real estate sector.
Availability of long-term capital could be a growth catalyst, and could spur the
development of the property management sector, which involves management of those
REIT assets.An equally critical impact is that REITs could facilitate greater transparency
by relaxing the information constraints that have typically characterized emerging
markets.The availability of information should make investors more comfortable with
investing in emerging markets; at the same time, it should help lower the cost of capital,
which today remains quite high in India. Singapore is another example.The Monetary
Authority of Singapore has recently put forward several proposals to strengthen
corporate governance, align incentives, enhance operational flexibility, and improve
transparency for the SREITs.We view these proposed changes to REIT rules as positive
as they could improve investors’ trust in managers and support the further development
of this sector in the city-state.
Recent FTAs also augur well for investment activity. Under the recently signed China-
Australia Free Trade Agreement, private Chinese investors will be able to buy
commercial property up to a value of AUD1.0 billion without requiring approval from
Australia’s Foreign Investment Review Board.We believe this change is likely to result in
increased transactional activity in the market, especially considering the significant
interest among Chinese investors in investing in Australian property.
Overall, we expect office investment volume in 2015 across the region to be on a par
with or even surpass the estimate of US$60 billion of significant office sales closed in
2014 by 5-10%. Smaller players will fuel intra-regional investments while markets like
Tokyo and Australia will be attractive to investors making their first foray into the region.
For China, office investment activity will likely to be focused on Shanghai and Beijing,
while restrictive cooling measures continuing into next year, rather than student
protests, will continue to dampen transaction volume in Hong Kong. We also expect
investment activity in Singapore to benefit from continued increases in core office rents.
ASIA PACIFIC INVESTMENTVOLUME
$0
$20
$40
$60
$80
$100
$120
$140
2006 2007 2008 2009 2010 2011 2012 2013 2014* 2015F
US$Billion
Office Others
* annualized
Note: Only include transactions that are above US$25 million; excluding land sales
KUALA LUMPUR
Source: Real Capital Analytics

12. 22
TOP TRENDS TO WATCH IN 2015
december 2014 top trends to
watch in 2015
23
9
Asia’s Rising Clout on the Global Stage
Asian international investments have been grabbing headlines,
especially with activity ramping up over the past two years. Notably,
total investments are estimated at nearly US$78 billion in 2014,
which is just shy of the record of US$80 billion posted in 2013.
China has been the most visible because of investors’ predilection for trophy assets in
gateway cities and landmark deals, and the trend is likely to continue given continuing
ample liquidity and the increased sophistication of investors. Singapore and Hong Kong
investors have also been major sources of capital as cooling measures in their countries
have driven them to go overseas in search for yields and diversification. Furthermore,
the lower cost of funds in these markets has allowed investors to bid more
competitively for overseas acquisitions, particularly in higher-yielding markets like
Australia and the UK.With the globalization of real estate, combined with an abundance
of capital and relatively conducive financial conditions, expect Asian capital to gain an
increasing share of global transaction volume, with a wider reach into core-plus and
peripheral markets. Considering that Asian investors tend to buy and hold, and thus have
the option of a more flexible sale date,Asian capital may prove to be a tonic for some of
the dormant Western markets.
10
CONCLUSION
In summary, the region’s office sector is expected to remain on solid
footing even as slower economic growth will become the norm over the
near term. In addition, the region will remain a growth destination for
companies that seek to capitalize on the relatively favorable economic and
demographic prospects of emerging markets as well as positive
developments occurring in mature countries. Strong capital availability,
combined with healthy leasing conditions across the region, will provide a
diverse array of opportunities for all types of investors. Of course, there
are concerns – geopolitics, weak global growth, policy missteps – that
cloud the outlook; but risks are here to stay.
CROSS BORDER INVESTMENTS BY ASIA PACIFIC INVESTORS
SYDNEY
Source: Real Capital Analytics
0
10
20
30
40
50
60
70
80
90
2010 2011 2012 2013 2014* 2015
US$Billion
* annualized
Only include transactions that are above US$25 million
APAC AMERICAS EMEA

13. 24
TOP TRENDS TO WATCH IN 2015
december 2014 top trends to
watch in 2015
25
Sigrid Zialcita
Managing Director, Research,Asia Pacific
+(65) 6232 0875
sigrid.zialcita@ap.cushwake.com
John stinson
Executive Managing Director, Capital Markets,Asia Pacific
+(65) 6232 0878
john.stinson@ap.cushwake.com
richard middleton
Executive Managing Director, CIS, EMEA/Asia Pacific
+(852) 2956 7075
richard.middleton@ap.cushwake.com
simon lynch
Executive Managing Director,Valuation & Advisory,Asia Pacific
+(852) 2956 7038
simon.lynch@ap.cushwake.com
Cushman & Wakefield is the world’s largest privately held commercial real estate services firm.The company advises and represents clients on all aspects of
property occupancy and investment, and has established a preeminent position in the world’s major markets, as evidenced by its frequent involvement in many
of the most significant property leases, sales and management assignments. Founded in 1917, it has approximately 250 offices in 60 countries, employing more
than 16,000 professionals.It offers a complete range of services for all property types,including leasing,sales and acquisitions,equity,debt and structured finance,
corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and appraisal.
The firm has nearly $4 billion in assets under management globally.A recognized leader in local and global real estate research, the firm publishes its market
information and studies online at www.cushmanwakefield.com/knowledge. ©2014 Cushman & Wakefield, Inc.All rights reserved.
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