Global Market Perspective - JLL Italia · Global Market Perspective , Fourth Quarter 2012 Global...

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GLOBAL MARKET PERSPECTIVE Global Foresight Series 2012 COPYRIGHT © JONES LANG LASALLE IP, INC. 2012. All Rights Reserved Global Market Perspective Fourth Quarter 2012

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Page 1: Global Market Perspective - JLL Italia · Global Market Perspective , Fourth Quarter 2012 Global Market Perspective Fourth Quarter 2012 Investment and Leasing Markets Diverge The

GLOBAL MARKET PERSPECTIVE Global Foresight Series 2012

COPYRIGHT © JONES LANG LASALLE IP, INC. 2012. All Rights Reserved

Global Market Perspective Fourth Quarter 2012

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Global Market Perspective, Fourth Quarter 2012

Global Market Perspective Fourth Quarter 2012

Investment and Leasing Markets Diverge

The global property markets continue on their forward path, but as we move towards the end of the year there are signs of divergence between relatively resilient investment markets and more subdued leasing markets.

The global investment markets are now consistently delivering around US$100 billion in commercial real estate transactions each quarter and have established a firm base of transactional activity in line with the long-run trend; a level that is expected to be maintained, if not exceeded, through 2013. By contrast, leasing volumes have weakened as corporate occupiers adopt a holding pattern in the face of economic uncertainty. Decisions are generally being postponed rather than cancelled altogether, which suggests that sustained improvements in confidence and greater certainty will support an uptick in leasing activity from the second half of 2013.

The key highlights from the Fourth Quarter 2012 Global Market Perspective are:

• Economy: Some cause for optimism but economic headwinds persist, notably the Eurozone debt crisis and U.S. ‘fiscal cliff’. Soft patch is not confined to developing economies - economic growth in emerging markets is slowing.

• Investment Volumes: US$100 billion of capital transactions registered in Q3 - a consistent pattern emerges.

• Capital Markets Outlook: On track to achieve US$400 billion investment volumes for full-year 2012. US$100 billion per quarter to continue into 2013, with upside potential.

• CMBS: CMBS activity in U.S. on track for post-recession high.

• Corporate: Corporate occupiers adopt a holding pattern.

• Leasing: Leasing activity subdued in Q3. Full-year 2012 leasing volumes are expected to be 15% below 2011.

• Vacancy: Vacancy continues to edge downwards – the global office vacancy rate is now 13.2%.

• Construction: New office deliveries at lowest level for more than a decade. Construction gradually increasing in U.S. and Europe, but still well below historic norms.

• Rents: Rental growth slows, but remains positive. Global Office Index increases by 0.2% in Q3 and by 2.0% year-on-year.

• Capital values: Capital appreciation decelerates to an annualised rate of 4.4% (across 24 office markets).

• Star markets: Jakarta, Mexico City, Rio de Janeiro, Beijing and San Francisco record strongest rental growth.

• Retail: International retailers boost demand in key gateway cities and across emerging markets.

• Industrial: Pockets of strength in the U.S.; market polarisation in Europe; retail sales underpin demand in Asia.

• Hotels: Full-year 2012 hotel investment volumes likely to be 10% below initial forecasts. Strong investor focus on gateway cities, notably New York and London.

• Residential: U.S. rental apartment market remains robust, with burgeoning development pipeline; German residential market is attracting institutional investors.

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Global Market Perspective, Fourth Quarter 2012

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Global Market Perspective Fourth Quarter 2012

Contents

Global Economy ................................................................................................................................................................ 4

Global Property ................................................................................................................................................................. 6 Capital Markets Outlook.......................................................................................................................................... 7 Leasing Markets Outlook ........................................................................................................................................ 8

Global Real Estate Health Monitor ................................................................................................................................... 9

Real Estate Capital .......................................................................................................................................................... 10

Corporate Occupiers ...................................................................................................................................................... 14

Office Markets ................................................................................................................................................................. 16 Office Demand Dynamics ..................................................................................................................................... 16 Office Supply Trends............................................................................................................................................. 18 Office Rental Trends.............................................................................................................................................. 21 Office Capital Values and Yield Trends ............................................................................................................... 23

Retail Markets .................................................................................................................................................................. 24

Industrial Warehousing Markets .................................................................................................................................... 26

Hotel Markets ................................................................................................................................................................... 27

Residential Markets ........................................................................................................................................................ 29

Recent Key Transactions ............................................................................................................................................... 30

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Global Market Perspective, Fourth Quarter 2012

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Global Economy

Some cause for optimism, but economic headwinds persist

Recent months have brought some positive developments, but generally the economic news has been disappointing. Once again, the root causes lie in the developed world, though the spread of the slowdown to the more dynamic markets of Asia is increasingly a concern. The Eurozone remains the main threat to recovery; some progress has been made on securing effective support for its fringe economies, but politicians are still far from resolving all the internal contradictions within the system. Elsewhere, the key fear is that the impending U.S. ‘fiscal cliff’ will reinforce the deflationary bias in the global economy next year.

The financial position of the euro has stabilised over recent months underpinned by new European Central Bank (ECB) initiatives, though this has come too late to reverse the economic damage. Spain is at the centre of the latest upheaval, with rumours that the government is preparing to seek a bailout, despite denials that this was needed only recently. The scale of the support required for Spain will dwarf all previous packages and finding agreement will be a stiff test for the Eurozone’s leaders. But the biggest concern will be the spillover impact on Portugal, Greece and (most seriously) Italy.

The latest IHS short-term forecasts show some significant changes in the outlook over the quarter. Downward revisions were most obvious for emerging Asia – China and India – as the global slowdown weighs down on the performance of these fast-growing economies. In Europe, growth expectations have been broadly stable, with the biggest change occurring in the UK. Forecasts for 2013 have been more heavily downgraded of late, especially in the Eurozone.

GDP Projections 2012 in Major Economies – Recent Movements

Australia China France Germany India Japan UK USA

July 2012 3.3 7.8 0.0 1.0 6.5 2.4 0.0 2.0

Oct 2012 (Latest) 3.4 7.4 0.0 0.9 5.1 2.3 -0.2 2.1

Change (bps) +10 -40 0 -10 -140 -10 -20 +10

Source: IHS Global Insight, October 2012 Monetary tap turns back on, but will it help?

Since the summer, unease about stagnating global growth has brought central banks back to the rescue in the developed world. At the September FOMC, the Federal Reserve agreed to provide an additional US$40 billion in liquidity for the U.S. with bond purchases. This move is likely to be mirrored in Japan and the UK over the coming months, while the Fed has backed up its extra cash with a promise of low interest rates until 2015. These signals were greeted enthusiastically and helped support a global stock market rally.

In Europe, intervention is more complex. The ECB followed its rate cut in July with a plan for outright monetary operations - a commitment to unlimited support for beleaguered sovereign states. There was initial optimism that this, along with German approval of an expansion to the European Stability Mechanism, was the bazooka that the Eurozone required to fend off market pressure. But this hope was soon dissipated in arguments over how this support can be used to support local banks. Until these issues are resolved, the risk of a euro breakdown will cast a long shadow over prospects.

Overall, questions remain about the ongoing effectiveness of special monetary operations after the massive injections of the last half-decade. Not only is there a fear that the result will be higher inflation, but there are also concerns that these measures (at best) provide a temporary respite and (at worst) could distort financial markets for years to come. The real reason as to why the authorities continue to loosen monetary conditions seems to be that, as governments’ rein in their huge fiscal debts, there are no other stimulus options to explore.

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Global Market Perspective, Fourth Quarter 2012

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Soft patch not confined to developing economies

There is increasing evidence that the current downturn in the developed world is impacting across the globe. Within a world expansion of 2.3%, GDP growth in the advanced economies is projected to be 1.3% in 2012. Prospects for emerging markets are notably slower than last year and have shown bigger downward revisions over the last three months, though growth is still forecast at an annual 4.8%. Next year, the gap is predicted to widen somewhat, as developed economies slow marginally (1.1%), while the emerging world regains some of its vigour (5.1%).

Concerns about the faltering United States upturn have not been allayed following another quarter of uneven indicators. The announcement of further monetary stimulus by the Fed has boosted short-term sentiment, though this is encountering the prospect of sharp fiscal consolidation in January. The U.S. outlook will remain weak, but stable, with GDP growth at 2.1% in 2012, edging down to 1.8% next year.

Europe’s sovereign debt crisis continues to pose the most serious risks to the global outlook. The ECB bond buyback plan and extra stability funds have provided some respite against market pressures. But the economic damage of the Eurozone crisis is worsening and recession is now forecast to persist into next year (with a GDP declining -0.5% this year and -0.4% next). This conceals a divergence across the single currency area, with fringe economies such as Italy and Spain suffering significantly deeper contractions than the rest. By contrast, Germany is expected to decelerate abruptly but to continue to see growth, though France is forecast to dip into recession in 2013.

The Eurozone picture is certainly weaker than that outside, however its troubles are also impacting the outlook elsewhere in the region. Overall, growth is flat in Europe as a whole this year, though with a slight improvement in prospect for 2013. The UK continues to struggle under its austerity burden and its GDP is now expected to dip this year, though a recovery is predicted for 2013. The Nordic economies have been more resilient, particularly Norway, and all but Denmark will avoid outright recession in the latest forecast.

Prospects for Eastern Europe are even more diverse than in the west, though growth is, on average, significantly higher. CEE economies are also exposed to the crisis and many are close to recession in the current year. Poland and Turkey are holding up best and will underpin expansion in the region during 2013. Emerging CIS markets are stronger still, led by sustained activity in Russia. Prospects for the Middle East and North Africa have been bolstered by buoyant commodity prices and fewer political disruptions, though a slowdown is projected for next year.

Asia Pacific’s markets will continue to drive global growth this year with enviable growth rates of just below 5% annually. However, growth is slowing in many markets, including China, which recorded its lowest GDP growth in 14 quarters in Q3 2012. India’s prospects have also been revised downwards in recent months, though with signs of improvement next year. Japan is expected to post solid growth this year (at 2.3%), although this is largely driven by reconstruction activity, and a much slower expansion is expected for 2013 (1.1%).

Slow squeeze on global price pressures

Headline inflation rates have eased further in the developed world since the spring. This reduction has helped central banks justify the injection of more liquidity to help revive the flagging recovery. Progress on inflation has been less marked in the faster-growing emerging world markets where an upward drift in rates has been evident.

Commodity pressures remain critical. Brent crude oil prices had been on the decline until June, but the trend has since reversed, though, at US$115 pb, prices remain well below their spring peaks. Further price falls are in prospect as the global economy slows, albeit that much will still depend on political developments.

A reduction in global consumer price inflation is forecast for this year and next. In the developed world, a drop to around 1.5-2% year-on-year brings rates into line with central bank targets; in emerging markets domestic demand and price pressures are stronger and progress is limited. Overall, global inflation rates are forecast to edge below 3% year-on-year during 2013, a marked reduction from recent peaks (5.1% in 2011).

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Global Property Momentum slows in Q3

The global property market has continued its forward path, although the pace of activity has slowed during Q3. Office leasing volumes are running at about 15% below 2011 levels, as corporate occupiers focus on consolidation, cost-cutting, productivity and flexibility. In an environment of uncertainty, transactions are taking longer to complete as corporate occupiers check options carefully, with many taking the route of postponing decisions. The investment market is holding up rather better, with a substantial weight of capital targeting real estate. Volumes in the year to date are just 7% below those recorded in 2011, and are likely to end the year about 10% below 2011 levels.

Prime Offices - Capital Value Clock, Q3 2011 v Q3 2012

Prime Offices - Rental Clock, Q3 2011 v Q2 2013

Based on notional capital values and rents for Grade A space in CBD or equivalent. In local currency. Source: Jones Lang LaSalle, October 2012

Capital Value growth slowing

Capital Value growth

accelerating

Capital Values bottoming out

Capital Values falling

AmericasEMEAAsia Pacific

Q3 2011

Hong Kong, Amsterdam

Washington DC,London

Moscow, Paris

Chicago, Stockholm

Berlin

Atlanta, Dallas, Frankfurt, Milan

Brussels, Seoul

Madrid, Tokyo

MexicoCity

Detroit

Los Angeles

Toronto

San Francisco, Beijing

New York, Sao Paulo

ShanghaiSingapore

Sydney

Mumbai

Q3 2012

Capital Value growth slowing

Capital Value growth

accelerating

Capital Values bottoming out

Capital Values falling

Milan

MadridBrussels, Detroit

Seoul

Paris, Hong Kong Amsterdam, Singapore, ShanghaiNew York, Sao Paulo

Los Angeles

AtlantaDallas

Toronto

Mexico City

San Francisco Moscow

Washington DCChicago, Stockholm

FrankfurtSydney

Berlin

London

Tokyo

Mumbai

Beijing

Q3 2011

Rental Value growth slowing

Rental Value growth

accelerating

Rental Values bottoming out

Rental Values falling

Detroit, Dubai, Seoul

San Francisco

New York

Washington DC, Toronto, Milan

Dallas, MumbaiAtlanta, Frankfurt,

Johannesburg, Istanbul

Chicago,Tokyo

Los Angeles, Amsterdam,Brussels

MadridBerlin, Sydney

Stockholm

Sao Paulo,Paris,

Beijing

London

Moscow

Mexico City

Hong Kong

Singapore

Shanghai

AmericasEMEAAsia Pacific

Q3 2012

Rental Value growth slowing

Rental Value growth

accelerating

Rental Values bottoming out

Rental Values falling

Madrid, Detroit

Johannesburg, New York Mexico City, Mumbai

Frankfurt, Dubai, Istanbul Chicago, Atlanta, Seoul

Amsterdam

Milan

Brussels

Moscow, Stockholm

Berlin

London, Paris,Shanghai

San Francisco, Toronto

Dallas

Washington DC

Tokyo

Sao Paulo

SingaporeHong Kong

Sydney

Los Angeles

Beijing

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Global Market Perspective, Fourth Quarter 2012

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Capital Markets Outlook 10% downside on 2011 levels

Although global direct commercial real estate volumes are 7% behind 2011 year-to-date, we remain confident that our year-end forecast of US$400 billion will be achieved. In order to reach this target, approximately US$105 billion of transactions are required in the final quarter of the year, which is less than was transacted in the final quarters of either 2010 or 2011. It is not unusual for the fourth quarter to be the busiest globally, with Europe providing its traditional end-of-year bounce. Indeed we have already seen a couple of major transactions close, including the Meadowhall Shopping Centre in Sheffield, UK (c. US$1.2 billion) and the purchase of two office buildings in Germany for around US$1 billion. The Norwegian Government Pension Fund was the buyer in both transactions, taking out 50% of Meadowhall and combining with AXA for the German office purchases.

These acquisitions are further evidence of the two-tier nature of global property markets, with prime properties continuing to attract significant interest while market sentiment remains challenging for secondary and tertiary stock. Central banks across the world continued their monetary-easing policies during the third quarter leading to a more positive liquidity environment which should benefit secondary markets in the longer term. Given the pricing in prime markets, it is these secondary markets which will provide the real opportunities for experienced asset managers to make enhanced returns. The REIT sector, which has been one of the best-performing segments of global stock markets this year, remains a possible source of capital for secondary opportunities. With relatively strong balance sheets and access to low-cost debt through the corporate bond markets, they look to be ideally placed. However, market sentiment may need to improve further before they become active market participants in this space.

US$100 billion per quarter to continue into 2013, with upside potential

Given the stable, if unspectacular global growth forecasts, we expect the circa US$100 billion per quarter transaction level to be repeated in 2013 with the expectation of increased activity if improved liquidity and confidence in secondary markets continues. The Americas holds the greatest upside promise, with volumes potentially 25% higher on 2012 levels.

Direct Commercial Real Estate Investment, 2006-2012

Source: Jones Lang LaSalle, October 2012

0

100

200

300

400

500

600

700

800

Americas EMEA Asia Pacific Global

US$

billio

ns

2006 2007 2008 2009 2010 2011 2012 (F)

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Leasing Market Outlook Leasing volumes dampened by economic uncertainty

Economic uncertainty continues to weigh down on current and future corporate demand levels. The Eurozone debt crisis and the ‘fiscal cliff’ in the U.S., combined with evidence of weakening economic growth in emerging markets has resulted in corporates postponing real estate decisions and delaying implementation of longer-term strategies. Consequently, we expect overall leasing volumes for the full-year 2012 to be around 15% lower than 2011. Net absorption levels, a measure of expansion demand, are likely to be about 20% lower than a year ago.

Heading into 2013, doubts over future economic conditions are likely to continue to dampen corporate demand, possibly until the middle of 2013, at which point some clarity around Europe may have arrived and, at the very least, the near-term fiscal situation in the U.S. should have reached some degree of resolution.

Supply-side continues to tighten

Office vacancy rates have maintained their steady decline, with the global office vacancy rate (across 94 markets) down to 13.2% in Q3. The decline is helped by record low levels of new completions in the U.S. and Europe. In many core CBDs, large tenants are facing a supply-constrained marketplace with few big blocks of available quality space. The development pipeline in slowly increasing, with office completions expected to be up a modest 10% in 2013 compared to 2012, but it is still well below historic norms. In the U.S., it is likely to be 2015 at the earliest until any substantial amount of supply will become available in select markets.

2013 rental growth matching 2012 rates

In overall terms, prime rental growth in 2013 is expected to broadly match 2012 rates at around 3% (on aggregate), with the majority of major markets projected to register single-digit rental growth over the next year. As in 2012, Beijing and San Francisco are predicted to show the strongest rental performance. London, Tokyo, Moscow, Hong Kong and Sydney are also forecast to register above average rental growth (5-10%). Madrid is expected to see the largest rental decline in 2013, while it is anticipated that the two main LATAM markets – Sao Paulo and Mexico City – will move into negative territory next year.

Prime Offices – Projected Value Changes in 2013

* New York – Midtown, London – West End, Paris - CBD. Nominal rates in local currency. Source: Jones Lang LaSalle, October 2012

+ 10-20%

Capital ValuesRental Values

+ 5-10%

+ 0-5%

- 0-5%

- 5-10%

Hong Kong, Tokyo, SydneyLondon*, Moscow

Mumbai, Shanghai, SingaporeBoston, Chicago, Los Angeles, New York* Toronto, Washington DC, Paris*Frankfurt, Stockholm, Brussels, Dubai

Beijing, Tokyo, Hong Kong, Sydney Moscow, London*

Mumbai, Shanghai, SingaporeBoston, Chicago, Los Angeles, New York*Toronto, Washington DCFrankfurt , Dubai

Madrid

Brussels, Paris*, StockholmSao Paulo, Mexico City

Madrid

Beijing, San Francisco

Sao Paulo, Mexico City

San Francisco

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Global Real Estate Health Monitor

Economy Real Estate Investment Markets Real Estate Occupier Markets

National GDP

OECD Leading Indicator

National Investment Volumes

Capital Value

Change Prime Yield Yield Gap Rental

Change Net

Absorption Vacancy

Rate Supply Pipeline

Dubai 4.2% na -52% 0.0% 8.3% na 0.0% na 31.0% 14.7%

Frankfurt 0.9% -0.25 -17% 1.0% 4.8% 340 0.0% 1.1% 13.1% 5.1%

Hong Kong 1.9% na -14% -2.1% 3.1% 228 -13.5% 1.7% 3.5% 2.8%

London -0.2% 0.13 -10% 0.0% 4.0% 247 0.0% 0.3% 6.2% 7.9%

Moscow 3.6% -0.30 -13% 0.0% 9.0% 124 0.0% 6.6% 13.3% 16.5%

Mumbai 5.1% -0.15 285% 0.7% 10.2% 203 0.5% 8.9% 22.5% 23.9%

New York 2.1% -0.06 9% 0.1% 4.6% 296 4.6% -0.2% 10.6% 1.7%

Paris 0.0% -0.10 8% 2.5% 4.5% 231 -3.0% 1.1% 6.7% 4.1%

Sao Paulo 1.6% 0.19 -72% 18.4% 9.5% na 12.5% 6.5% 14.7% 23.8%

Shanghai 7.4% 0.01 2% 3.0% 6.0% 246 4.6% 19.4% 14.9% 39.0%

Singapore 2.0% na -26% 1.2% 3.6% 208 -12.1% 7.2% 8.7% 7.1%

Sydney 3.4% 0.23 14% 5.7% 6.9% 401 5.1% 0.8% 9.0% 1.1%

Tokyo 2.3% -0.14 7% 2.3% 3.6% 283 2.3% 7.1% 3.1% 15.9% Real Estate Data as at end Q3 2012

Definitions and Sources

National GDP: Change in Real GDP. National Projection, 2012. Source: IHS Global Insight

OECD Leading Indicator: Composite Leading Indicator: Change in Index. Latest Month. Source: OECD

National Investment Volumes: Direct Commercial Real Estate Volumes. National Data. Rolling Annual Change. Source: Jones Lang LaSalle

Capital Value Change: Notional Prime Office Capital Values. Year-on-Year Change. Latest Quarter. Source: Jones Lang LaSalle

Prime Yield: Indicative Yield on Prime/Grade A Offices. Latest Quarter. Source: Jones Lang LaSalle

Yield Gap: Basis Points that Prime Office Yields are above or below 10-year Government Bond Yields. Latest Quarter. Source: Jones Lang LaSalle, Datastream

Rental Change: Prime Office Rents. Year-on-Year Change. Latest Quarter. Source: Jones Lang LaSalle

Net Absorption: Annual Net Absorption as % of Occupied Office Stock. Rolling Annual. Source: Jones Lang LaSalle

Vacancy Rate: Metro Area Office Vacancy Rate. Latest Quarter. Source: Jones Lang LaSalle

Supply Pipeline: Metro Area Office Completions (2013-2014) as % of Existing Stock. Source: Jones Lang LaSalle

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Real Estate Capital

Strong performance in major markets

‘Consistency’ has been the watchword in global commercial transactional markets during the last two years and it has continued to be so in Q3 2012. For the last eight quarters we have seen global volumes of around US$100 billion per quarter, so the Q3 2012 result of exactly US$100 billion confirms that commercial property is well through the recovery phase and has established a base of transactional activity in line with the longer-term trend. The third quarter result is 6% down on the previous quarter and 7% down on the same period last year.

In terms of year-on-year growth, it is the Americas that is consistently showing gains, with an 8% rise on the same quarter of 2011 - volumes for the third quarter came in at US$44 billion. The U.S. and Canada are maintaining pace with last year’s performance, while the large swings we are witnessing in Mexico and Brazil highlight emerging market volatility. While transaction levels in Brazil are down 70% year-to-date, in Mexico volumes are double those of 2011 in the year to date.

As expected, volumes in Europe in US$ terms continue to be around 20% below last year, with the market 9% down in euro terms. The quarterly result of US$33 billion was only 3% below the previous quarter but 22% down on the same period last year, although the market was not as quiet as initially feared given the summer holidays and the London Olympics. Indeed the UK market exceeded its second-quarter performance and has now witnessed volumes above US$12 billion for two consecutive quarters. Germany saw transaction levels rise by 18% compared to Q2 while France recorded lower volumes after some very large deals in Q2.

Asia Pacific is currently matching the good pace it set in 2011 with US$22 billion recorded in the third quarter. While China and Japan had weaker quarters, increased activity in Australia, Hong Kong, South Korea and Taiwan all helped boost transactional volumes. While the region is currently equalling the levels set in 2011, we expect full-year totals to come in slightly below, with the final quarter bounce less evident in this region.

Direct Commercial Real Estate Investment - Quarterly Trends, Q1 2007-Q3 2012

Source: Jones Lang LaSalle, October 2012

US$ b

illion

s 205

107109100

113

7369666666

354340

100118120

159

204190

119

88

107100

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Full-year volumes in Asia Pacific expected to be 10% below 2011

Investment volumes in Q3 reached US$22.4 billion across Asia Pacific, down 5% year-on-year but relatively steady on a year-to-date comparison, down just 2% at US$70.1 billion compared to US$71.6 billion last year. We maintain our expectation for full-year 2012 volumes in Asia Pacific to reach US$88 billion (which would be 10% lower than 2011 levels).

Investors are focusing on Japan (particularly the logistics sector) and China (notably retail), although transaction levels have declined quarter-on-quarter in both countries. Australia remains of interest – improving 17% year-on-year - with a number of large deals at advanced stages of negotiation expected to support transaction volumes in the final quarter of 2012.

Cross-border purchasers accounted for US$3.7 billion of transactions during the quarter, or 16% of the total investment. Of the cross-border investment, US$2.3 billion was from inter-regional purchasers. This included a large investment of A$1 billion (US$1.04 billion) from the Canadian Pension Plan Investment Board (CPPIB) into the Barangaroo project in Sydney. There has been a slowdown in investment activity into Asia Pacific from European investors; their capital outflows have exceeded their capital inflows into the region so far this year. As a result, Asian local buyers are taking up the deals being exited by Europeans while, at the same time, Asian capital continues to flow out of the region looking for bargains in key gateway cities.

The availability of debt appears to be sufficient for the level of deals being completed. However, lenders are continuing to impose heavy restrictions on leverage and other key terms, meaning that there remains a shortfall in equity for the market. Asian banks have replaced availability of debt following the withdrawal of European banks from Asia Pacific and although liquidity has not declined, the availability of cross-border financing within the region may have lowered as Asian banks prefer to lend in their home markets.

Direct Commercial Real Estate Investment - Regional Volumes, 2011-2012

Source: Jones Lang LaSalle, October 2012

Investors focus on London and Paris

Investor activity in Europe over the summer remained in line with expectations. Almost US$33 billion (€26.6 billion) was transacted in Q3 2012, a decline of 22% compared with Q3 2011. Consequently, over the year to date, European investment volumes stand at close to US$100 billion (€77 billion), which is around 18% below the equivalent period last year. In part, this decrease is due to currency movement; in euros the fall is just 9%. Therefore, given the anticipation of another seasonally busy end of the year, our full-year forecast remains at 10% down on volumes recorded in 2011.

There are still significant disparities across markets and sectors, however there continues to be solid performances within established major European markets. This is a reflection of the dominance of equity buyers - who are currently looking for ‘safe havens’ - which has, to some extent, offset a lack of transaction activity elsewhere.

London continues to dominate with robust levels of activity despite the Olympics, which meant that August was very quiet. Paris has had another strong quarter, as it continues to attract large inflows of international capital. Over the year-to-date, the UK and France have achieved volumes in line with the equivalent period last year, and together they

$US Billions Q2 12 Q3 12

% change Q2 12 - Q3

12 Q3 11

% change Q3 11 - Q3

12Americas 47 44 -5% 41 8%EMEA 34 33 -3% 43 -22%Asia Pacific 26 22 -13% 23 -5%TOTAL 107 100 -6% 107 -7%

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accounted for 50% of activity in Europe. In contrast, the lack of good-quality stock on the market in Germany, particularly in the retail sector, has held down transactional levels.

Outside of the core markets, investment activity has been limited. Across Southern Europe, less than US$800 million (€600 million) was transacted, a decline of 66% year-on-year. Furthermore, Central and Eastern Europe has remained quiet and over the year to date is down 40% (in US$ terms) in comparison to 2011.

The fourth quarter is historically the busiest quarter of the year and we do not anticipate that this year will be any different. There are a number of large deals in the pipeline, which should close before year-end, although the lengthening transaction process represents some downside risk. Looking further forward, we expect volumes to be consistent at this level during 2013, but one trend to monitor is the continued activity in alternative sectors, where we are witnessing an increase in investor appetite.

Direct Commercial Real Estate Investment - Largest Markets, 2011-2012

Source: Jones Lang LaSalle, October 2012

Americas capital markets – moving at a steady pace

Americas investment volumes in Q3 reached approximately US$44 billion, representing an increase of around 8% year-on-year. The pace of activity was very much in line with Q2, and also with the average quarterly volume since the beginning of 2011. For the year to date, total transaction levels in the region are essentially identical with the same period in 2011, at roughly US$126 billion. The U.S. experienced very modest gains in overall volumes for both Q3 (+4% year-on-year) and the year-to-date period (+2%). Meanwhile, Canada and Mexico have lodged more significant gains in investment activity during 2012, with Canada’s levels up 18% year-to-date, and Mexico’s more than tripling from its low levels of 12 months ago. Brazil remains the region’s laggard in sales activity, as volumes continue to be down significantly on a year-on-year basis. Investors continue to evaluate the market in the wake of the record transaction levels and surging prices during 2010-2011.

$US Billions Q2 12 Q3 12

% change Q2 12 - Q3

12 Q3 11

% change Q3 11 - Q3

12US 38.4 37.3 -3% 35.8 4%UK 12.5 13.5 9% 12.8 6%Germany 5.2 6.2 18% 8.7 -29%France 5.5 4.3 -22% 5.4 -21%Australia 4.0 4.2 4% 3.4 22%Canada 5.5 3.8 -30% 3.3 17%Japan 5.7 3.5 -38% 5.7 -38%South Korea 1.2 3.3 173% 2.2 53%Hong Kong 3.0 3.1 5% 4.2 -24%China 6.1 2.6 -57% 3.1 -15%Mexico 1.1 2.5 126% 0.6 335%Taiwan 1.3 2.4 92% 2.4 0%Singapore 2.8 2.0 -27% 1.3 51%Sweden 2.5 1.7 -31% 2.8 -40%Russia 2.1 1.4 -35% 2.1 -32%

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Upside potential in 2013

U.S. transaction volume growth, while positive, continues to slow slightly as ‘deal closings’ have become more protracted in light of global uncertainty and a lack of seller motivation and buyer confidence. After some potential year-end volatility around U.S. elections and its near-term ‘fiscal cliff’, it will again be clear that commercial property in the U.S., and more broadly in much of the Americas region, will be seen as attractive and somewhat ‘safer’ relative to other asset classes and geographies around the globe. Accordingly, after a mainly flat 2012 with respect to investment volumes, activity in the Americas is anticipated to re-accelerate by mid-year 2013, and reach up to 25% growth on 2012 levels.

U.S. CMBS on track for post-recession high

After a slow start to the quarter, CMBS activity in the U.S. has increased. During September, following the Fed’s QE3 announcement, highly-rated CMBS spreads had dipped to post-crisis lows and tightened by at least 35-45bps since the start of Q3, reversing the spread widening of the prior few months. Heading into the fourth quarter, the pipeline for new bond issues remains healthy. As of the end of September, U.S. CMBS issuance for the year stood at roughly US$31 billion, ahead of the US$27 billion for the same period in 2011. Barring any major macro-economic or geopolitical disruptions, CMBS appears to be on track for a new post-recession high.

While life insurance companies and other balance-sheet lenders continue to be a preferred financing alternative for most institutional borrowers, they tend to be more conservative on leverage and are still quite selective with respect to sponsorship and asset quality, focusing mainly on primary and leading secondary markets. As a result, CMBS is becoming a viable option for borrowers seeking higher leverage and/or those owning assets in secondary or tertiary markets.

Mexico – this quarter’s star performer

Mexico’s capital markets’ environment continues to gradually strengthen, with the solid performance of the Mexican economy proving attractive, given volatility elsewhere across the globe. Yields have also compressed somewhat in Mexico, following the lead of the U.S. and Canada. Looking ahead, a narrowing gap between the expectations of buyers and sellers, increased availability and the attractive pricing of debt finance, as well as the recent entry of local pension fund investment into commercial property, are all expected to benefit transaction activity in the country into 2013.

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Corporate Occupiers

Corporate occupiers maintain a holding pattern

Q3 saw a reduction in transactional activity from corporate occupiers with leasing volumes typically down 15% year-to-date across global markets. This was a response to economic and political uncertainty, notably the ongoing Eurozone crisis, the U.S. Presidential Elections, the looming U.S. ‘fiscal cliff’ and more limited growth projections in the emerging markets. Against this unsettling backdrop, corporate occupiers have tended to adopt a holding pattern, which is bringing caution and delay to real estate decision making. As decisions are generally being postponed rather than cancelled altogether, this suggests that sustained improvements in confidence and greater certainty will support an uptick in leasing activity from the second half of 2013.

Where occupier activity has been evident, it has typically been driven by a lease event in order to drive consolidation or reduce cost via lease renewal and/or restructure. For example, in the U.S. markets, occupier activity has often been focused on securing lease extensions (from one to three years) as a means of buying time without losing the ability to act more strategically over the medium term. While there is not a freeze per se, any corporate real estate expenditure has to illustrate significant direct cost savings to the wider business in order to be authorised. Indeed, evidence is growing of more aggressive cost saving targets being set by corporations, which will further impact the depth and type of occupier activity across global markets.

Across Asia, we continue to see the emergence of the domestic corporate sector, which is currently underpinning much of the leasing activity in the region; companies from this sector have been far more active than multinational corporations.

Activity also shows variance across industry sectors:

• The technology and energy sectors continue to thrive, helping to boost activity in markets like Northern California, Texas and the Nordics.

• Transactional activity from the banking sector in key financial centres, with the exception of Tokyo, has been down, with many banks focusing on workplace strategies to drive a more intense use of existing space. Banks also have been considering sale and leaseback deals as a means of generating cash to enhance capital ratios.

• The consumer goods sector has been relatively strong, but focused on developing operational platforms in emerging markets.

• Pharmaceutical companies continue to drive consolidation programmes on the back of large-scale mergers and a redistribution of R&D activity.

• Legal and professional services have been resilient, while the insurance sector, particularly in Asia, is still demonstrating growth.

• Asia is also witnessing ongoing growth in the BPO sector, with this playing out especially strongly in the Philippines.

Although transactional activity has been muted, corporate real estate teams within major corporations continue to develop transformative occupational and portfolio strategies, supported by enhanced real estate data and metrics. These strategies will play out in the market over the medium term. At their heart will be workplace strategies that contribute to cost reduction but also bolster worker productivity and support talent and retention. Such strategic requirements are placing great pressure on typically small CRE teams, and this in turn is driving growth in the CRE outsourcing market, notably in markets where outsourcing is relatively immature.

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Global Office Market Conditions Matrix, 2013-2015

* Relates to conditions in the overall office market of a city. Conditions for prime CBD space may differ from the above. Source: Jones Lang LaSalle, October 2012

Market MARKET

Chicago Brussels Beijing

Los Angeles Frankfurt Hong Kong

New York London West End Mumbai

San Francisco Madrid Shanghai

Toronto Moscow Singapore

Washington DC Paris Sydney

Mexico City Stockholm

Sao Paulo Dubai

2013 2014 2015

Neutral MarketLandlord Favourable

Market 2013 2014 2015 Market 2013 2014 2015

Tenant Favourable

Tokyo

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Office Markets

Office Demand Dynamics Global leasing volumes subdued in Q3

Office leasing activity was subdued during the third quarter, reflecting a combination of tepid economic growth, fewer employment increases and an overall decline in corporate confidence. Gross leasing volumes in both Europe and the U.S. were down by around 5-10% on Q2 levels and year-to-date transaction levels are now running about 15-16% below the same period last year. In Asia Pacific, leasing volumes are down as much as 25% quarter-on-quarter, with weakening activity by both MNCs and domestic firms.

Expansion demand has weakened, with net absorption levels in the U.S. and Asia Pacific running 20-30% below 2011 levels, although absorption has held up better in Europe. For the full-year 2012, global net absorption is expected to be down around 20% on 2011 totals, which would be more than half the levels of the peak year in 2007.

There are some bright spots nonetheless, including tech-rich and energy markets (e.g. Northern California, Texas and the Nordics) and some emerging markets (e.g. Jakarta, Manila, Mexico City). By contrast, financial hubs have continued to struggle with weak occupier demand.

Expansion demand slows in Asia Pacific

During Q3, expansion demand remained subdued across the region on the back of corporate caution and slower economic growth. Net absorption fell by about 30% year-on-year, with China and India accounting for approximately 70% of the total. More returning space emerged in Hong Kong and Singapore due to financial sector contraction. Expansion by both MNCs and domestic firms slowed in China, with demand originating mainly from non-financial sectors. In India, expansion by MNCs has eased, although some local occupiers remain keen to take advantage of tenant favourable conditions to consolidate or expand. Tokyo continues to be buoyed by more consolidation and upgrading activity. The main Australian markets have recorded weak or negative net absorption.

U.S. registers tenth consecutive quarter of occupancy gains

Occupancy levels in the U.S. have continued to expand, growing for the tenth consecutive quarter. Yet despite the gains, net absorption levels were 21% lower than levels achieved during the first nine months of 2011. Total leasing velocity also continued its streak of declines in Q3 and, for the year to date, leasing activity is down 16%. Corporates are on a holding pattern, pending stronger signals of sustainable demand growth, and there has been a strong uptick in the preference for shorter lease terms. Sunbelt markets are starting to add to the recovery, although tech and energy are still dominating demand growth. Demand in the main East Coast markets remains weak.

As tenants have increasingly sought to ‘right size’ their footprint and target enhanced space efficiencies and eliminate redundancies, they have flocked not just to ‘quality’, but increasingly to ‘efficiency’. As a result, demand levels spanning the past 21 months have been almost exclusively to the benefit of Trophy and Class A buildings, which are generally more efficient, while second- and third-generational Class B and C buildings, which tend to be less efficient, are having difficulty driving sustained demand.

Leasing activity down 15% in Europe

In Europe, leasing activity in Q3 was subdued at 2.3 million square metres, the lowest quarterly level for three years. Volumes in the year to date are now some 15% below last year. Amsterdam, Brussels and London have seen higher year-to-date levels than 2011. Current forecasts see gross take-up for 2012 as a whole at circa 10% below volumes of 2011 - though roughly in line with the 10-year average. Take-up is expected to increase modestly during 2013 (+5%), but growth will remain slow until the economic recovery filters through and generates more pronounced job growth and expansionary demand.

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Offices – Net Absorption, Q3 2011 – Q3 2012

Source: Jones Lang LaSalle, October 2012. Covers all office submarkets in each city. Tokyo CBD - 3 kus

Offices – Global Net Absorption Trends, 2004-2013

24 markets in Europe; 25 markets in Asia Pacific; 44 markets in the US. Asia related to Grade A space only. Source: Jones Lang LaSalle, October 2012

-5 0 5 10 15 20

Washington DCNew York

TorontoBoston

ChicagoLondon

Los AngelesBrussels

MadridStockholm

SydneyParis

FrankfurtHong Kong

San FranciscoBeijing

Mexico CitySao Paulo

MoscowTokyo CBDSingapore

MumbaiShanghai

% of occupied stock

AmericasEMEA

Asia Pacific

-5

0

5

10

15

20

25

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Millio

ns sq

m

Proj

ectio

n

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Office Supply Trends A steady decline in global vacancy rate

Office vacancy rates have continued their steady decline. The global office vacancy rate (across 94 markets) stands at 13.2%, compared to 14.5% at the peak of the vacancy cycle in Q3 2010. This decline is supported by record low levels of new completions in the U.S. and Europe.

Among the major markets, the largest falls in vacancy have been recorded in Singapore, Moscow, Beijing and Mexico City. By contrast Sao Paulo has seen a sharp increase in vacancy during the past quarter due to a development surge. Likewise, it has also increased notably in London, a result of several new building completions (including The Shard, currently Europe’s tallest building).

Mixed picture in Asia Pacific

The Asia Pacific vacancy rate rose to 10.6% (from 10.1% in Q2) representing the first increase since 2010. Further rises are anticipated by the end of the year, even though 2012 new deliveries are likely to be less than 2011.

Across the region, vacancy rate trends were mixed in Q3. Vacancies in Tokyo CBD fell, assisted by relocation and consolidation activity, and also decreased in Singapore, due a lack of new completions. In Hong Kong, the rate rose slightly at the top end of the market. In China, vacancy trended further downwards in the Beijing CBD, but increased slightly in the Shanghai CBD (mainly in Puxi). Rates climbed marginally in Seoul, the emerging SEA markets and some Indian cities. Australia’s national CBD headline vacancy rate edged up slightly to 8.3%.

Supply shortages for large tenants in the United States

In the U.S., the vacancy rate declined to 17.2%, the lowest for three years. However, as rates of absorption have slowed, so too have vacancy declines - the national vacancy rate remains stubbornly above the 17% threshold, a rate which is now unlikely to be breached until early 2013.

Nonetheless, in many core CBDs large tenants face a supply-constrained marketplace with few big blocks of available quality space in the market. Where landlords will be able to hold rates, and possibly grow them, is in this segment of the Class A core markets - especially in technology and energy-dominated economies - where demand levels, even if slowing slightly, remain much more robust than overall national levels.

When the recovery does finally pick up in earnest, landlords are likely be more aggressive; the supply pipeline, which remains minimal across most geographies at present, will not add viable options until the beginning of 2015 at the earliest in most areas around the U.S.

In Canada the supply pipeline continues to expand, with the vast bulk of new development concentrated in Calgary, Vancouver and Toronto.

Large supply pipeline in Latin America

In Latin America, the supply pipeline kicked into a higher gear in Sao Paulo during the third quarter. Coinciding with a slower leasing market, the development surge is making itself felt in the form of deteriorating fundamentals during H2 2012. The overall vacancy rate increased 280bps during the third quarter alone to 14.7%.

Although Mexico City is also currently facing an historic supply wave, demand has proved somewhat more resilient over the last two quarters. Overall vacancy for the market declined around 100bps to 12% in Q3. However, over 800,000 square metres of new projects are currently under construction, and this incoming supply will remain a challenge as much of the space, particularly that set to be delivered in 2014, remains to be leased.

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Buenos Aires has seen its office market performance remain relatively steady despite the rapid slowing of the economy in 2012. Total vacancy remains quite low at just 5%. Meanwhile, Santiago’s office market continues to be one of the world’s tightest, with a Class A vacancy rate of just 1%, and a combined Class A/B vacancy of near 4%. A substantial amount of the absorption registered in Santiago in 2012 is accounted for by large multinational corporations formerly in owner-occupied buildings that have now consolidated into Class A buildings with the latest technology and efficiencies. In Bogota, the active development pipeline is meeting its match in the form of strong demand for space. Overall vacancy in the market is currently at approximately 6%, the lowest it has been in four years.

Vacancies creep down in Europe

After a pause in Q2, Europe’s overall vacancy continued to decline in the third quarter, down to 9.7%. This was strongly supported by falls in supply in the Moscow market (-140bps over the quarter) and also in the Paris and the German markets. London and Warsaw, however, did see vacancy increasing by 70bps each.

Modern space in good locations is being quickly absorbed, but one element hindering a faster decline in vacancy is the release of second-hand space. In some markets there are various initiatives to convert obsolete stock to residential or hotel uses. For the remainder of the year and through 2013, vacancy rates are expected to remain static on aggregate until we see a sustained rebound on the demand side towards 2014.

The decline in vacancy rates, as well as robust absorption, has also been supported by the sluggish development response. Banks have almost ceased lending activities and access is limited to equity-driven investors and developers as well as relationship lending. In the majority of cases, any development activity relies heavily on pre-lets. Completion volumes are recovering, but with debt remaining a constraint, completions are expected to remain below average until after 2014.

Office Vacancy Rates - Major Markets, Q3 2012

Regional vacancy rates based on 46 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 only. Source: Jones Lang LaSalle, October 2012

0

5

10

15

20

25

Toro

nto

New

York

Mexic

o City

San F

ranc

isco

Bosto

n

Sao P

aulo

Was

hingto

n DC

Los A

ngele

s

Chica

go

Lond

on

Paris

Stoc

kholm

Brus

sels

Madr

id

Fran

kfurt

Mosc

ow

Toky

o CBD

Hong

Kon

g

Beijin

g

Sing

apor

e

Sydn

ey

Shan

ghai

Mumb

ai

Europe 9.7% Asia Pacific 10.6%Americas 16.0%%

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Global Office Construction Trends, 2000-2013

24 markets in Europe; 25 markets in Asia Pacific; 44 markets in the US. Asia relates to Grade A space only. Source: Jones Lang LaSalle, October 2012

Office Supply Pipeline - Major Markets, 2013-2014

Covers all office submarkets in each city. Tokyo CBD - 3 kus. Source: Jones Lang LaSalle, October 2012

0

5

10

15

2020

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

US Europe Asia Pacific

Millio

ns sq

m

Average

0 5 10 15 20 25 30 35 40

ChicagoLos Angeles

MadridSydney

StockholmToronto

New YorkBoston

San FranciscoWashington DC

BrusselsHong Kong

ParisFrankfurt

SingaporeLondonBeijingDubai

Tokyo CBDMexico City

MoscowSao Paulo

MumbaiShanghai

Completions as % of existing stock

2013

2014

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Office Rental Trends Rental growth slows further

The Global Office Rent Index (covering 90 markets) increased by 0.2% quarter-on-quarter and by 2.0% year-on-year, indicating a further deceleration in rental growth; although in most major office markets the direction remains positive. In both the Americas and Asia Pacific quarterly rental growth nearly halved to 0.6% and 0.5% respectively, while European rents were down -0.4% and have now fallen for three consecutive quarters.

• Among the major markets, Mexico City (+7.7%) and Beijing (+5.1%) were the star performers in Q3. Tech-rich markets were among the strongest performers – San Francisco is up 3.9% quarter-on-quarter and Stockholm is up 2.3%. Rental growth is also starting to pick up in Tokyo. Other markets with strong growth include Jakarta, Rio de Janeiro, Buenos Aires and Bangkok.

• By contrast, Hong Kong and Singapore continue to register declines, although quarterly declines have been moderate to date. Madrid (-2.0%) has also registered further falls.

CBD markets lead the recovery in the United States

In the U.S., marketed rents were up 0.9% in Q3 and have now inched up in nine of the past 10 quarters, yet still fall well below peaks in 2007. Recovery is moving at a quicker pace in the CBD markets than in the suburbs, and the rent gap is widening. Concessions continue to erode with net effective rents gaining back 50% of losses from the downturn.

Modest movement in Asia Pacific

Modest rental movements were witnessed across major Asia Pacific markets in Q3, with most experiencing growth of less than 3% quarter-on-quarter, as landlords take a less aggressive stance on asking rents. Jakarta (+8.1% quarter-on-quarter) and Beijing (+5.1%) continued to record the largest increases due to a lack of quality space. The regional office market in general still favours landlords even if occupiers have become more reluctant to pay high rentals. We expect limited rental uplift in most markets over the short term. Overall, moderate rental growth is expected in 2013 with the strongest rises likely to be seen in markets such as Beijing and Jakarta.

European rents fall for third consecutive quarter

Prime office rents continued to soften on aggregate over the quarter. The European Office Index showed a third quarter of negative quarterly movement (-0.4% and -0.5% year-on-year). The strongest growth was registered in the high-value economies of Stockholm (+2.3%) and Munich (+1.7%). In contrast, rents decreased in Madrid (-2.0%) and Milan (-1.9%), where the impact of Eurozone debt crisis and austerity measures are weighing heavily down on economic performance and job markets.

Tenant-favourable markets in MENA

Rents in Dubai’s most popular locations (e.g. DIFC and Emaar Square) have stabilised, although vacancies in these areas remain relatively high (at around 31%). While the overall office market continues to be tenant-favourable, demand is still concentrated on just a few buildings and locations, and the range of prime buildings in single ownership is more restricted than the overall vacancy figures would suggest.

Office markets across the MENA region continue to be tenant-favourable, with occupiers benefiting from an increased choice of new high-quality premises and reduced occupancy costs. Abu Dhabi typifies this trend with completions of new projects pushing up vacancy levels and providing tenants with greater bargaining power. The Cairo and Riyadh markets are also likely to see significant levels of new office supply over the next 12 months, providing a greater selection for tenants.

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Prime Offices - Rental Change, Q3 2011 – Q3 2012

Based on rents for Grade A space in CBD or equivalent. In local currency. Source: Jones Lang LaSalle, October 2012.

Prime Offices – Capital Value Change, Q3 2011 – Q3 2012

Notional capital values based on rents and yields for Grade A space in CBD or equivalent. In local currency. Source: Jones Lang LaSalle, October 2012.

-15 -5 5 15 25 35

Hong KongSingapore

MadridBrussels

ParisToronto

Washington DCChicago

FrankfurtLondon

MoscowDubai

MumbaiTokyo

Los AngelesNew YorkShanghai

StockholmSydneyBoston

Sao PauloSan Francisco

Mexico CityBeijing

% change

AmericasEMEA

Asia Pacific

-20 -10 0 10 20 30

MadridWashington DC

BrusselsChicago

Hong KongLondon

MoscowDubai

New YorkMumbai

FrankfurtSingapore

TokyoParis

ShanghaiSydney

Los AngelesBoston

TorontoStockholmSao Paulo

San FranciscoBeijing

Mexico City

% change

AmericasEMEA

Asia Pacific

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Office Capital Values and Yield Trends Capital appreciation slows

Capital values on prime assets across 24 major office markets showed an increase of 4.4% at an average annualised rate at the end of the third quarter. Rates of growth have gradually decelerated from 24% in 2010 and from 13% in 2011, and for the full-year 2012 we expect the rate to be in the region of 3-4%. Expectations for 2013 are for capital growth to average about 3%, with the majority of major markets projected to register growth in the range of 0-5%.

Prime yields stable

Benchmark market yields have remained largely stable across most major markets during the quarter. Strong investor demand for prime office assets has resulted in further yield compression in Paris and San Francisco. Yields in Singapore and Hong Kong have tightened marginally as capital values have been flat despite small rental corrections - yields in both cities are significantly lower than a year ago.

Yield spread boosts U.S. capital markets

In the U.S., initial yields for top markets and core product have remained relatively stable in recent months, and the spread over 10-year treasuries is approaching the widest on modern record. This has been a major factor in strong investor interest and ongoing solid capital markets activity in the U.S. As values continue to increase, overall volumes are still holding up in a difficult environment, even with the supply of core investment options in primary markets remaining relatively limited. Recent transactions increasingly include core product in secondary markets, volumes of which are beginning to outpace 2011 levels.

Prime Offices – Yield Shift, Q3 2011 – Q3 2012

Source: Jones Lang LaSalle, October 2012.

(100) (50) - 50 100

TokyoSydney

SingaporeShanghai

MumbaiHong Kong

Beijing

Mexico CitySao Paulo

Washington DCToronto

San FranciscoNew York

Los AngelesChicagoBoston

StockholmParis

MoscowMadrid

LondonFrankfurtBrussels

Q2 2012 - Q3 2012Q3 2011 - Q2 2012

Basis point change

Amer

icas

Euro

peAs

ia Pa

cific

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Retail Markets Retailer leasing demand remains strong in Greater China

Retailer demand remained generally healthy in major Asian markets despite weaker retail sales and consumer confidence. China continues to see the strongest demand, although retailers have become more selective about locations; in Hong Kong they have not been as aggressive in chasing space as they were in the previous 12 months. Vacancy rates have generally been stable with most new stock achieving good occupancy rates.

Rental growth has been strongest in Greater China, with Beijing witnessing the healthiest quarterly rental growth of 3.5%, underpinned by the aggressive expansion of many retailers. In Hong Kong growth has eased slightly (about 3% quarter-on-quarter) on the back of a slower uplift in retail sales. Rents have been stable or positive across SEA except Singapore where prime rents have fallen marginally.

Rental decline slows in the United States

The U.S. retail vacancy rate, at 6.9%, continues to hold steady for the fourth straight quarter. Net absorption year-to-date is 2.8 million square metres, more than compensating for the 2.4 million square metres of deliveries during the quarter. Rental rate decline has eased somewhat, inching down 0.2% from Q2 2012, and declining 0.4% year-on-year.

Among U.S. shopping centre types, malls continue to see the tightest overall market conditions, with total vacancy of 5.8% at mid-year 2012. Several standout markets, such as Miami, New York, Houston and San Francisco, are beginning to turn the corner from a falling to a rising market as rents improve and vacancy continues to head down.

International retailers continue to expand in Europe, but remain cautious

Consumer confidence across Europe remains at a low point and retail sales are expected to have fallen by 0.3% over 2012. Sales growth in Russia and the Nordic countries remains positive, while the outlook for Western Europe is mixed. Strong and luxury retail brands continue to perform well; however, many retailers are experiencing increasing pressure to restructure their store portfolios in order to meet financial targets.

Cross-border retailer expansion continues, but retailers are very selective when acquiring new stores. Generally, prime ‘high street’ rents in the key European retail markets remained stable during the third quarter, with the highest uplift recorded in Berlin (+12.5% quarter-on-quarter). A number of prime retail markets are expected to show robust rental growth in 2013 including Moscow, London, Helsinki, Hamburg and Berlin.

Supported by the lack of new shopping centre space, prime shopping centre rents remained stable across Europe over the last quarter. With the exception of Russia and Turkey, the supply of new shopping centre space in Europe is most likely to remain constrained in the medium-term due to the limited availability of finance.

Retailer demand for secondary retail space continues to be significantly weaker. Rents are experiencing downward pressure as various retailers renegotiate rents or dispose of underperforming stores. Asset management remains key to driving returns.

Market turnaround in Australia

The retail sector in Australia can look forward to better times in 2013. In recent years trading conditions have been tough, with households increasing their savings to repair the damage done to their balance sheets by the Global Financial Crisis. Consequently, retail turnover growth has been low and discretionary spending particularly weak. There are now signs of a turnaround. House prices have stabilised; the stock market has risen 8.1% year-to-date and home mortgage rates have fallen. Retail spending remains low, but on a rising trend.

The sector still faces long-term challenges. The strong Australian dollar makes on-line shopping attractive and the arrival of new international retailers is also adding to competitive pressures. Nevertheless, retailers and centre managers are adjusting to the new trading conditions.

Yield spreads between regional and neighbourhood centres, now at 10-year highs, are drawing domestic and offshore investors. The retail sector is once again a contender.

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Prime Retail – Rental Clock, Q3 2012

Source: Jones Lang LaSalle, October 2012

Prime Industrial – Rental Clock, Q3 2012

Source: Jones Lang LaSalle, October 2012

Rental Valuegrowth slowing

Rental Valuesfalling

Rental Value growth

accelerating

Rental Values bottoming out

Milan, Sydney, San Francisco

Dubai, Tokyo, New York City

Madrid, Paris

Berlin

Moscow, London

Shanghai, Beijing

Hong Kong

Singapore

Mumbai

Chicago

Los Angeles, Washington DC

Boston

AmericasEMEAAsia Pacific

Rental Valuegrowth slowing

Rental Valuesfalling

Rental Value growth

accelerating

Rental Values bottoming out

AmericasEMEAAsia Pacific

SingaporeHong Kong

Shanghai

Sydney

TokyoParis, Madrid, Los Angeles

Northern New Jersey/New York

Frankfurt, Beijing

Amsterdam

Dallas, Atlanta, Houston Chicago, Boston

London, Warsaw, Philadelphia

Inland Empire

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Industrial Warehousing Markets Pockets of strength in the United States

Through Q3, industrial market absorption has remained positive across most U.S. markets but has tailed off somewhat overall. The second quarter’s 3.5 million square metre absorption total was somewhat of a surprise to the upside, so some difficulty in maintaining that momentum was not unexpected, especially given some of the macroeconomic variables working against it since the summer months.

The pockets of strength in this environment continue to be the major distribution hubs and energy markets. The Inland Empire, Dallas, Philadelphia, New Jersey, Chicago and Atlanta have all contributed significantly to the year-to-date absorption totals. However, Philadelphia and the Inland Empire actually posted negative absorption this quarter while Dallas was near zero.

The temporary slowdown in these markets points to several factors at work across the broader U.S. industrial market. First, activity has been dominated by large distribution deals with limited organic growth from the general business sector. This allows the timing of a handful of large deals to cause big swings in absorption and vacancy. Furthermore, distributors are tending to adopt a ‘streamlining’ rather than ‘growth’ mindset, which means they are more focused on reducing their inventory and real estate footprint.

We expect activity in the winter months to slow down in contrast to the market conditions experienced earlier in the year due to the factors previously outlined. Organic growth in the general business sector markets will remain tepid at best in most markets, while distributors will keep their eyes firmly focused on the bottom line. However, demand should build up while ‘uncertainty-inducing’ issues are being sorted out, and the second half of 2013 should therefore be more active for the U.S. industrial market than any period for several years.

The Canadian industrial market is still slowly recovering with signs of increasing net asking rates and speculative construction, especially in the Greater Toronto markets. Tepid U.S. demand will continue to limit the pace of demand in central Canada while western Canada’s industrial markets remain clear beneficiaries of emerging market demand and growth in oil and gas production. The national outlook for industrial rent growth is for moderate improvement in 2013.

Asia Pacific - warehousing markets underpinned by retail sales

Retail sales continued to drive leasing demand during Q3, especially in China, where demand for non-bonded space was buoyed by third-party logistics operators and e-commerce firms. However, the export-related segment was generally more subdued, with recent PMI reports from most Asia Pacific countries still indicating contraction in the manufacturing sector. Rents across most monitored markets remained stable. The strongest quarterly growth was seen in Hong Kong (4-5%), supported by low vacancy rates, while rents rose slightly in Singapore. Rents in Beijing and for non-bonded space in Shanghai edged up slightly amid tight supply. Overall rents were broadly stable in most Australian markets.

Polarisation in Europe

The industry’s leading indicator – the Eurozone Purchasing Managers’ Manufacturing Index – recently showed a slowing rate of contraction although output, order books and exports continued to record significant declines in Q3. The resulting occupier caution, together with the seasonal slowdown over the summer months has led to weaker take-up, with full-year 2012 volumes projected to be 25-30% below 2011.

Nevertheless, a number of structural changes among companies is maintaining above-average demand for large modern logistics units across Europe. Meanwhile, development activity remains limited to build-to-suit solutions in the majority of markets; a trend predicted to continue, at least through 2013.

Sustained by low vacancy, prime logistics rents were remarkably stable for another quarter in most markets. Despite this, the European Warehousing Rental Index fell by 0.4% quarter-on-quarter driven by declines in Amsterdam (-2.8%), Barcelona (-3.8%) and Budapest (-4.0%). Low supply levels will continue to sustain prime rents in 2013 with the European rental level expected to remain stable (at an aggregate level).

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Hotel Markets Hotel investment volumes anticipated to be 10% lower than initial forecasts

Hotel real estate continues to attract notable investor interest, but the sector has not been immune to the current global economic challenges. At the start of 2012, we anticipated that hotel investment volumes for the full-year would total US$31 billion, comprising of US$15 billion in the Americas, US$11 billion in EMEA, US$3.5 billion in Asia and US$1.5 billion in Australasia. We stated in the last Global Market Perspective that although these targets seemed quite realistic, notable downside risks were evident. In light of a slower than anticipated third quarter, we now expect volumes to come in at US$28 billion, slightly below our initial forecast. The Americas and Australasia remain projected to hit their initial forecast figures, whereas EMEA and Asia are likely to achieve volumes slightly lower than estimated.

Global Hotel Investment Volumes, 2011-2012

YTD Q3 12 Billions

% YTD Q3 12 - YTD Q3 11

Q3 2012 Billions

% Q3 11 - Q3 12

Americas 10.86 -12% 4.16 14%

EMEA 6.77 -21% 1.67 -47%

Asia 1.39 -53% 0.43 -45%

Australasia 1.24 52% 0.31 39%

Total 20.27 -18% 6.57 -16%

Activity building in the Americas

Even though year-to-date volumes in the Americas are 12% down on last year, activity is building with Q3 volumes up 17% quarter-on-quarter and 14% year-on-year. REITs are starting to come back and debt liquidity (both CMBS and bank lending) continues to improve. We therefore anticipate the Americas to achieve, if not exceed, the initial year forecast of US$15 billion.

Uncertainty dampens investor sentiment in Europe

Hotel investment volumes in EMEA in the year to date are approximately US$6.8 billion - down 21% on the same period last year. Pervasive uncertainty continues to dampen investor sentiment and activity, and economic growth forecasts have been downgraded as a result of fiscal belt-tightening. Even though we still anticipate a notable uptick in volumes in the fourth quarter, year-end volumes are more likely to total around US$9 billion – down US$2 billion on our initial forecast. Going forward, countless summits, trillions of dollars of stimulus, and intervention in the Eurozone could see the foundations established to resolve the current malaise and restore investor sentiment, fuelling hotel investment activity.

Slow activity in Asia

Volumes in Asia year-to-date have totalled US$1.4 billion, down 53% on last year. Hotel investment activity has been relatively slow in the region compared to last year, in part caused by negative news flow around higher-than-anticipated inflation and lower-than-expected economic growth. Deal sentiment is plateauing, and current owners continue to hold onto assets. We anticipate year-end volumes in Asia to total around US$2.5 billion – US$1 billion lower than our initial forecast. Even so, Asian investors have exported substantial capital, notably to Australia as well as the gateway cities of London and New York.

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A robust year in Australasia

Australasia is experiencing a robust year to date with volumes totalling US$1.2 billion - up 52% on last year. Based on the current pace of activity we expect the region to hit the initial year forecast of US$1.5 billion, strongly driven by Asian capital inflows.

REITs are stepping on the gas

During Q3, REITs seem to have taken over the reins again as the largest buyer group globally, accounting for 31.5% of hotel investment volumes compared to 18.3% in Q3 2011. Even though private equity groups continue to be the main buyers in the year to date, their share of total volumes has decreased by 3.5 percentage points to 26.9%. In addition, institutional investors have stepped up their acquisitions in Q3 with volumes up 90% on last year.

In terms of divestments, private equity groups have exceeded hotel operators as the largest sellers globally, accounting for 29.2% of total volumes in the year to date. In Q3 2012, private equity groups accounted for 31.7% of volumes, whereas developers/property companies came in second place totalling 28.6%. Hotel operator divestment volumes in Q3 were notably lower than last year, only accounting for 16.7% of volumes (against 32.3% in Q3 2011).

Global gateways dominate

Ten cities have attracted a third of total capital flowing into hotels so far in 2012, amounting to close to US$6.7 billion, highlighting the significance of gateway cities to the global hotel real estate landscape.

New York has attracted the highest volumes, totalling nearly US$1.8 billion and accounting for around 9% of global volumes and 18% of U.S. volumes. Hotel real estate capital flowing into London amounted to US$1.1 billion, or 6% of global volumes. Nonetheless, London recorded nearly twice the number of transactions of those in New York. Hotel RevPAR (Revenue per Available Room) was up 1.5% and 6.3% in the year-to-date (August 2012) in London and New York respectively compared to the same period last year.

Global Top 10 Destinations for Hotel Investment, year-to-date 2012

City US$ Millions % of global % of country

New York 1,799 9.0% 18% London 1,146 5.7% 56% Washington DC 569 2.8% 6% Chicago 545 2.7% 5% Miami 503 2.5% 5% Paris 474 2.4% 82% San Francisco 428 2.1% 4% Moscow 430 2.1% 85% Hong Kong 409 2.0% 100% Sydney* 372 1.9% 31% 6,674 33.4%

* Excluding the Marriott Portfolio

Source: Jones Lang LaSalle Hotels, October 2012

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Residential Markets United States apartment market remains strong The U.S. apartment market remains strong, but is about to face its first test during the current expansion in the form of a burgeoning development pipeline. MPF Research cites 162,000 multifamily units currently under construction across the U.S., with future inventory growth exceeding 10% in some submarkets. While overbuilding concerns are present, it is also important to note that the amount of construction in the top U.S. markets is still 10 to 30% below the average annual rate of construction of the last two decades. Metros with average-to-strong economic fundamentals are expected to fare well, even with this substantial pipeline of new inventory. While the overall short-to-medium term outlook remains optimistic, it is anticipated that occupancy and rental growth will begin to slow over the next 24 months as lenders loosen residential lending restrictions and home affordability improves to levels that will sway some renters to pursue homeownership. Overall, low interest rates and strong multifamily fundamentals will continue to fuel investor demand over 2013-2014. It is anticipated that secondary and tertiary asset classes and locales will see a spike in transaction volume as the sentiment towards risk aversion fades, investors pursue higher yields and entrepreneurial ‘value-add’ strategies re-emerge. Residential sales stable in most Asian markets The residential sales market remained largely stable across Asia in Q3, with transactions in China and Hong Kong at similar levels to Q2. In SEA, activity in Singapore rose in September while markets such as Jakarta and Manila were supported by strong local investor demand and low interest rates. Capital values were flat in China in Q3, while prices in Hong Kong edged up slightly (+2% quarter-on-quarter), underpinned by low interest rates and more robust buyer sentiment. Prices in Singapore stabilised after correcting for two consecutive quarters, while emerging SEA markets continued to see stable or increasing capital values. Leasing demand remained subdued in Hong Kong and Singapore in line with the office sector, but kept generally healthy in China and emerging SEA markets (except Kuala Lumpur). Rentals continued to rise, by up to 4% in most markets outside of Hong Kong, Singapore (luxury segment) and Manila. Higher sales activity in Dubai The residential market in Dubai continues to experience higher levels of sales activity and the prime market is now considered to have bottomed out. The recovery in prices is most pronounced in the villa sector (where prices have risen 23% year-on-year), compared to the apartment sector, where prices have increased by just 4%. Rentals have also started to recover, with uplifts of 7% for villas and 5% for apartments (year-on-year). The improvement in prices is largely confined to prime established locations however, with less established locations still experiencing declines in both rents and prices. Saudi Arabia sees major increase in mortgage lending The Council of Ministers in Saudi Arabia has endorsed the new mortgage law, and a Royal decree enacting this law could be issued before the end of the year. The market expectation was that it would take some time before the full benefits of the mortgage were realised as many banks were expected to adopt a ‘wait and see’ approach. However, recent data from the Saudi Arabian Monetary Authority suggests that mortgage lending by Saudi banks has increased by 50% in Q2, with banks appearing keen to expand their mortgage books. UK housing market on the rise The UK housing market has been showing signs of mild improvement in recent months. House prices have risen in each of the five months to August, albeit at an average of just 0.3% per month. More encouragingly, transaction levels have been on the increase for almost a year; however, volumes are still very low by historic standards at more than 40% below their 2007 peak. Mortgage lending has also been improving, even if from a very low base. London remains the strongest market in the UK, where price growth is higher than elsewhere and turnover is more robust. Germany attracts institutional investors House prices continue to decline in many European countries. Ireland is suffering most, with price falls in the region of 18% per year, while in Italy, the Netherlands and Spain prices are slipping by 5-10% per year. A few countries are witnessing price rises – most notably France and Germany. Germany’s major conurbations are still benefitting from high demand with average prices for condominiums increasing by more than 14% in the country’s largest eight cities over the last 12 months. The German residential market remains attractive for institutional investors – they have spent over €8 billion (US$10 billion) on residential portfolios in 2012, marking a five-year high.

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Recent Key Transactions Europe

Country City Property Sectors Sales Price

US$ Mill Comments

Finland Helsinki Portfolio: 15 offices and 2 retail units

Mixed 211 Stockholm-based private equity firm NIAM has acquired a portfolio of 17 properties for a reported yield of 7.8%. In total, the assets comprise more than 100,000 sq m of office and retail space. The assets are high-quality assets in prime locations with a steady income. Financing was provided by German bank Helaba.

France Paris Generali Portfolio Mixed 343

Norges Bank Investment Management (NBIM) has acquired a 50% stake in a portfolio of five buildings from Generali. Generali Real Estate holds the remaining 50% and will continue to provide asset management services to the portfolio, which comprises 38,600 sq m of office and retail space. It was reported that the joint venture structure plans further investments, with a focus on office or retail in Paris.

France Paris Liberté II, Avenue de la Liberté

Office 319 AXA Immoselect has sold this office complex for €240 million after reportedly devaluing the asset by 11%. The purchaser was a joint venture between two French institutions. The 46,000 sq m office building was completed in 2005 and is fully let to Natixis for a further 10 years.

France Paris CityZen, Avenue de L'Europe

Office 300 Union investment has purchased 38,000 sq m of office space across two buildings on behalf of its German open-ended fund UniImmo. The assets are currently under construction, with delivery scheduled for 2013. Both assets have been fully pre-let to Coface and GRT Gaz. The vendor was a fund advised by AXA REIM.

Germany Stuttgart Milaneo shopping centre Retail 500

German investor Hamburg Trust has acquired a 78% stake in the property company that owns Milaneo from developers ECE and Strabag Real Estate, who retain the remaining 22%. A 50/50 consortium between Berlin Hyp/LLB and Helaba has provided around €245 million in financing.

Russia Moscow Silver City Office 333 Private equity investor Evans Randall has sold this business centre to Russian investor O1 properties. Completed in 2007, Silver City is located in the centre of Moscow and is almost 100% let, with tenants including SEUK, Toyota Bank, AECOM, Lacoste, Qatar Airways and Canon.

Russia Moscow Hotel Metropol Moscow Hotel 235

This hotel has been auctioned off by the Moscow City Government as part of its privatisation programme. The auction ended after just two bids, the winner being a Russian development company, Gleden Invest.

Spain Majorca, Cadiz Thomas Cook Spanish Portfolio (51% stake)

Hotel 125 Thomas Cook has sold a 51% stake in its five-hotel portfolio totalling 1,355 rooms, as part of the group's disposal programme to reduce its debt. The buyer is a consortium of investors led by Iberostar.

Sweden Malmo Burlöv Center Retail 178

A fund managed by Grosvenor has purchased this shopping centre from Eurocommercial Properties. Located to the north-east of Malmo, it comprises 42,200 sq m and is anchored by COOP Forum Hypermarket with other retailers including H&M, Clas Ohlson and Dressmann. The acquisition is Grosvenor's second in Sweden, following its purchase of three shopping centres and a single retail unit from Unibail-Rodamco last year.

Sweden Stockholm Klarabergshuset, Kungsgatan Office 208

Swedish insurance company AFA Fastigheter has acquired this 22,000 sq m office building from Norwegian investor Fortin Properties. The asset was built in 1953 but was extensively renovated in 2007 and is located in an area of Stockholm that is witnessing a high level of redevelopment. Tenants include the Research Council and Ongame.

Switzerland Zurich Atlantis Zurich Hotel Confidential

The development company Rosebud Héritage SA has sold the Atlantis Zurich Hotel to a high-net-worth individual from the Middle East.

UK Basingstoke Festival Place Retail 474

US pension group TIAA-CREF has purchased this shopping centre in the south east of the UK from a fund managed by Grosvenor. The 100,000 sq m centre is the dominant retail property in the Hampshire area and is anchored by Debenhams, Marks & Spencer and a Vue Cinema. It has a strong multinational mix of tenants, with other retailers including Apple, Zara, H&M, Next, Superdry and Topshop.

UK Cambridge Crowne Plaza Cambridge Hotel 55

Grant Thornton was appointed administrators to this hotel which was owned by the Quinn Group. The Central Bank of Ireland was the initial lender; it has sold the hotel to the developer London & Regional.

UK Leeds Victoria Quarter Retail 215

Hammerson has completed the acquisition of this luxury retail destination from Kennedy Wilson on behalf of Bank of Ireland Private Banking. The scheme is adjacent to the proposed Eastgate Quarter - a Hammerson-led retail development. The purchase will enable Hammerson to develop a co-ordinated approach to its tenant strategy and marketing in Leeds. The 36,000 sq m first phase of Eastgate Quarter will be anchored by John Lewis and will create a direct route from the Victoria Quarter to the new retail stores.

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Country City Property Sectors Sales Price

US$ Mill Comments

UK London - City Broadgate West: Phase I & II Office 458

Gemini Commercial Investments has sold Broadgate West to a joint venture between HSBC Alternative Investments Limited (HAIL) and Hines. The 42,000 sq m prime office-led development is situated on the northern edge of the Broadgate Estate. The asset incorporates two phases: Phase 1 was completed in 2000 and Phase 2 was opened in 2003. Both buildings are fully let to tenants including UBS, GFI and Shearman & Sterling.

UK London - City 10 Gresham Street Office 316

A 30/70 joint venture between Hammerson and Canada Pension Plan Investment Board (CPPIB) has sold this City of London property to Kumpulan Wang Amanah Pencen (KWAP), the Malaysian state pension fund - a new entrant to the London market. The long leasehold building provides 23,600 sq m of office and retail space with Lloyds TSB bank being the principal tenant. The sale is in line with Hammerson's strategy to dispose of its office assets and focus purely on the retail sector.

UK London - West BBC Television Centre Other 316

Stanhope has acquired the iconic BBC Television Centre in West London from the BBC. The sale is part of the BBC’s long-term plans to reduce the size of its property portfolio by 30%. Stanhope’s funding partners in the transaction are Japanese developer Mitsui Fudosan and the Canadian investor Alberta Investment Management Corporation (AIMCo). While the BBC will retain a presence on the site, Stanhope plans a large-scale mixed-use redevelopment.

UK London - West End 23 Savile Row Office 344

A joint venture (Plaza Global Real Estate Partners) between LaSalle Investment Management and Quantum Global Real Estate has purchased this office building from D2 Private. D2 Private purchased the 9,570 sq m property in 2009 and redeveloped it. Tenants include York Capital Management and Resolution. In April 2012, D2 secured one of the area's highest ever rents on the top floor, when it let space to a German hedge fund manager for £110 per sq ft.

UK London - West End

Kinnaird House, Pall Mall Office 90

Israeli property company Delek has sold thid office property to German fund manager GLL Real Estate Partners. The deal is GLL's first acquisition in London for more than three years. The 6,640 sq m building was redeveloped behind a retained façade in 2001 and is fully let to McKinsey & Company until March 2018.

UK Multiple Sentrum Portfolio (Woking, Croydon, Watford)

Data centres 1,131

US datacentre operator Digital Realty Trust has purchased a portfolio of three datacentres from Sentrum. The 761,000 sq m portfolio is around 80% let to 21 tenants, including financial institutions and global network providers.

Asia Pacific

Country City Property Sectors Sales Price

US$ Mill Comments

Australia Brisbane Blue Tower (12 Creek Street) Office 252

Dexus Property Group has purchased this 34-storey A-Grade office tower from APGF for A$241.6 million.

Australia Gold Coast Palazzo Versace Hotel Hotel 72

The Sunland Group has sold its 200-bedroom 5-star hotel to an anonymous Asian private investor.

Australia Melbourne Scots’ Church Office Tower Office 190

GPT Wholesale Office Fund has purchased the project from the APN Funds Management/Grocon JV. The project is largely pre-let to Westpac Banking Corporation.

Australia Melbourne Rendezvous Melbourne Hotel 62

Australian investment fund Challenger Life Nominees No2 has sold the 5-star hotel to The Straits Trading Company, a developer from Singapore.

Australia Melbourne Novotel St Kilda Hotel 52 Tourism Asset Holdings Limited (TAHL), an Australian investment fund, has sold the 211-room hotel to Australian developer, Barana Group.

Australia Perth Old Treasury Building Office 171 Mirvac has sold a 50% share of the office project to K-REIT.

Australia Sydney Barangaroo Office Towers Office 1,562

Lend Lease has secured A$1.5 billion in external investment and also committed A$500 million towards the joint ownership structure for the first two towers at the Barangaroo South site.

Australia Sydney Bateau Bay Square Retail 171

Stockland has sold the sub-regional retail centre to a newly-established Charter Hall unlisted wholesale trust (RP2).

China Beijing China Electronic Plaza Tower B Office 252

Ping An Trust has purchased this office tower from the China Electronic Information Industry Group Company.

China Beijing Novotel/Ibis Beijing Sanyuan Hotel 67

Accor has sold both its Novotel and Ibis hotels in Beijing Sanyuan to Singaporean Ascendas Hospitality Trust under a sale and manage back contract.

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Country City Property Sectors Sales Price

US$ Mill Comments

China Shanghai Waterfront Place Office 136 CITIC Capital has sold the office tower to Asia Dragon Fund II, managed by ARA Asset Management Limited. It is notable as one of the few deals of decentralised offices involving an international investor.

Hong Kong Hong Kong Novotel Nathan Road Hotel 305 LaSalle Investment Management has sold the full interest to Gaw Capital Partners.

Hong Kong Hong Kong Laguna Plaza Retail 193 CLSA has purchased the en-bloc retail mall from Willoy Ltd.

Hong Kong Hong Kong Dorsett Regency Hong Kong Hotel 103 Dorsett Hospitality has sold this 209-room hotel to China Construction Bank.

Japan Osaka Hotel Keihan Universal City Hotel 77 The development company Hulic has sold the 456-room hotel to Japan Hotel REIT

Investment Corporation.

Japan Osaka Hotel Sunroute Shinbashi Hotel 51

The 220-bedroom hotel has been sold as a freehold under a lease with Sunroute. The seller was developer company Hulic

Japan Tokyo Hotel Sunroute Ariake & B Conte Ariake

Hotel 196 This transaction included a 790-room hotel (Hotel Sunroute Ariake) as well as B Conte Ariake serviced apartments. They have been sold by Ariake Property TMK to Singaporean Ascendas Hospitality Trust.

Japan Tokyo NBF Comodio Shiodome Office 372 Shiodomenishi Asset Management has sold the building to Nippon Building Fund.

Japan Tokyo Olinas Mall Retail 294 CapitaMalls Asia has purchased the mall from Invesco Global Real Estate Asia Pacific.

Korea Seoul K-Twin Towers (former Junghak Building)

Office 450 Vestas Investment Management has purchased the twin office towers from Junghak PFV.

Korea Seoul Hyundai Group Building, 1-7 Yeonji-dong Jongro-gu

Office 205 Hyundai Group has carried out a sale and leaseback to KORAMCO REITS and Trust.

Korea Various Home Plus Portfolio Retail 546 Homeplus Co Ltd has sold a three-asset portfolio of Home Plus centres to IGIS Asset

Management.

Singapore Singapore Lippor Centre 78 Shenton Way Office 488 Commerz Real has sold a 50% share in this office tower to Asia Pacific Investment

Partners.

Singapore Singapore Nex shopping centre Retail 672 Pramerica has sold a 50% share to Mercatus Co-operative Limited for S$825 million.

Taiwan Taipei Prince Dunan Building Office 295 Debtor controlled sale - Cathay Financial Holdings has purchased the asset from United

Real Estate Management.

Taiwan Taipei Galaxy Department Store Retail 216 Fubon Financial Holdings Co has sold this shopping centre to Asia Pacific Land Limited.

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Americas

Country City Property Sectors Sales Price

US$ Mill Comments

Brazil Campina Grande, Paraíba

Boulevard Campina Grande Retail 51

Aliansce Shopping Centers has sold the 13,200 sq m retail centre, located in the northeastern state of Paraiba, to Partage, empresa de investimento imobiliário pertencente ao grupo farmacêutico Aché.

Brazil Rio de Janeiro Ed. Buenos Aires Office 51 Kinea has purchased this 7,000 sq m office property from Banco Opportunity S.A.

Canada Barrie, Ontario Georgian Mall Retail 319 In Barrie, to the north of Toronto, Cadillac Fairview has sold this 56,000 sq m shopping centre to RioCan REIT at a reported 5.5% initial yield.

Canada Toronto Bell Trinity Square Office 370 Fund manager Northam Realty Advisors has acquired the 88,000 sq m office tower

from Germany's Union Investment.

Dominican Republic Punta Cana

(Former) Grand Paradise Bavaro Beach Resort

Hotel Confidential Blue Diamond Hotels & Resorts has acquired the 349-room hotel. It will reopen in November 2013 as a 5-star resort.

Mexico Multiple GICSA Portfolio Mixed 899 REIT Fibra Uno has purchased this 16-property retail, office and industrial portfolio from GICSA at a reported 7.7% initial yield.

US Anaheim Hilton Anaheim Hotel 216 Developer company Makar Properties has sold the 1,572 room hotel to HHC HA Investments Inc., a Middle Eastern investment fund.

US Denver Embassy Suites Denver Hotel 135 Hodges Ward Elliott advised Whiteco Residential in the sale of the 402-room hotel to

Cornerstone Real Estate Advisers.

US Houston Shell Plaza Office 550 Hines has sold the 166,300 sq m CBD landmark asset at a reported 6.8% initial yield to a private investment affiliate of the Duncan family.

US Los Angeles W Hotel Los Angeles Westwood

Hotel 125 The 258-room hotel has been sold by Starwood Hotels & Resorts Worldwide to the Pebblebrook Hotel Trust.

US Los Angeles Nordhoff Plaza Retail 90 In the Northridge section of the city, Angelo, Gordon & Co has purchased the 23,800 sq m shopping centre from Red Mountain Retail Group.

US Los Angeles 17018 Edwards Road Industrial 84 TA Associates Realty has sold the 84,300 sq m industrial asset located in Cerritos to

institutional investor TIAA-CREF.

US Multiple Inland Hotel Portfolio Hotel 116 Inland Real Estate Group has sold its12-hotel portfolio which comprises 1,643 rooms.

The buyer is Wheelock Street Capital.

US Multiple Blackstone Ownership Stake in DiamondRock

Hotel 495 DiamondRock Hospitality Company has agreed to purchase a portfolio of four hotels from Blackstone. The contractual purchase price represents an approximately 14.4 times multiple of 2012 forecasted EBITDA and approximately US$339,000 per key.

US Multiple Sunstone Portfolio Hotel 105 This three-hotel portfolio, consisting of 836 rooms, has been sold by Sunstone Hotel

Investors to Wheelock Street Capital; it includes a DoubleTree and a Marriott.

US Orange County The Michelson Office 277 Emmes has sold the 49,400 sq m office asset located in Irvine, California to institutional investor John Hancock.

US Phoenix 800 N 75th Ave Industrial 90 Industrial Income Trust has purchased the 117,700 sq m distribution facility in Tolleson from Buzz Oates Real Estate.

US San Francisco 680 Folsom Street Office 312 REIT Boston Properties has acquired the 48,500 sq m office property from TMG

Partners.

US Tucson Tucson Spectrum Retail 123 At a reported 7.2% initial yield, national REIT DDR Corp. has purchased the 66,000 sq m shopping centre from Barclay Group.

US Washington DC Grand Hyatt Washington Hotel 400

The 888-room hotel has been sold by the Quadrangle Development Corporation. The buyer is Host Hotels & Resorts who has achieved a 6.5% yield on the hotel's 2011 NOI. Jones Lang LaSalle Hotels advised on the sale.

US Washington DC Lakeforest Mall Retail 100 Five Mile Capital Partners has purchased the 96,500 sq m mall in the suburb of Gaithersburg. The vendor was mall REIT Simon Property Group.

COPYRIGHT © JONES LANG LASALLE IP, INC. 2012. 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