Asia Pacific

Capital Tracker
Q4 2023

First Mover Advantage

January 2024
THEMATIC

China leads • Asia Pacific investment volumes registered USD 31.6bn in Q4, marking a
3% increase YoY, the first in seven quarters. FY 2023 volumes were USD
• Australia registered USD 4.3bn, improving 14% YoY, mainly dominated
by the improvement of the retail sector. Investors were re-assessing
APAC volume 106.8bn, down 17% YoY, with China being the only major market
recording volume growth, whereas Singapore experiencing the steepest
market pricing and how far asset values may still adjust as the cash rate
has peaked.

rebound decline.
• China was the most active market with volumes of USD 11.1bn, growing
50% YoY. Some indebted developers actively offloaded assets to alleviate
their liquidity issues, while insurance companies seized the opportunities
to make acquisitions.
• Japan volumes were USD 4.4bn, dropping 53% YoY. Investors were
concerned about the Bank of Japan ending its negative interest rate
policy. Interest in office assets remained subdued with international
investors staying on the sidelines, while J-REITs continued to acquire
living assets.
Investment volume by sector Investment volume by geography
• South Korea garnered USD 4.2bn, falling 7% YoY. Large office
transactions were completed thanks to strategic investors’ backing and
continued interest from blind funds and REITs. Global investors were on
the lookout for further pricing adjustment in logistics.
• Hong Kong volumes reached USD 2.1bn, rising 6% YoY and bolstered by
two sizeable owner-occupation office transactions.
• Singapore investments declined 29% to USD 1.8bn. Investors were
interested in acquiring office-retail mixed-use assets.
• India recorded USD 55mn in Q4 (USD 1.6bn FY), sinking 38% YoY.
Investments were all from the industrial sector.

100 200
90 180 173.1 173.8 176.4 177.0
170.0
161.3
80 160 154.7 153.4
140.4
70 140 129.2
USD bn

USD bn
60 120 106.8
50 100
40 80
30 60
20 40 30.7 31.6
10 20
0 0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Q4'22 Q4'23

Office Industrial & Logistics Retail Living / Multi-housing Hotels & Hospitality Others Australia China Hong Kong Japan Singapore South Korea AP other

Source: JLL Research, as at Q4 2023 Source: JLL Research, as at Q4 2023

2 | © 2023 JLL IP, Inc. All rights reserved.

THEMATIC

Singapore • In Q4 2023, cross-border investment volumes to APAC registered USD 3bn,

plummeting 64% YoY. Investor caution and pricing uncertainties continued
• Overseas investors remained interested in logistics assets, especially
dry warehouses in South Korea where several large acquisitions were

capital active to keep cross-border activities modest. Singapore capital was the most
active cross-border investor, making large hotel and logistics acquisitions
made during the quarter. Foreign investors faced less competition
against domestic institutional investors overcoming liquidity issues.

overseas across the region and accounting for 36% of the quarterly volume, in a drive
to diversify geographically.
• Hong Kong attracted the most cross-border capital amongst APAC
geographies during the quarter, most of which were from Chinese occupiers.
Many Chinese corporates saw Hong Kong as the natural destination for their
expansion and opted to acquire assets for occupation to reduce long-term
rental expenses and operational risks.
• Australia remained attractive to global capital due to its well-
capitalised commercial real estate market. Overseas investors bought
mainly hotel and retail assets in Q4 2023 amid recovery in the tourism
and retail sectors. With better clarity on future funding costs, more
offshore investors would re-enter the market.

Sources of cross-border capital to Asia Pacific Cross-border volumes to Asia Pacific by purchaser region

Q4 2023 FY 2023 4,500 FY 2023

4,235
Singapore Singapore 4,000

3,500 3,429
China Global
2,989
3,000
Global United States

USDmn
2,500 2,287
United States China 2,072
2,000
United
Hong Kong 1,500
Kingdom
Switzerland France 1,000 872 790
500
Malaysia Hong Kong
0
0 200 400 600 800 1,000 1,200 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Japan Australia South China AP other Hong Kong Singapore
USD mn USD mn Korea
Intraregional Interregional
APAC EMEA & Americas Global

Source: JLL Research, as at Q4 2023 Source: JLL Research, as at Q4 2023

*Global refers to capital with >30% coming from multiple geographies

3 | © 2023 JLL IP, Inc. All rights reserved.

THEMATIC

Office resilience • The US 10-year Treasury yield has seen a rapid decline to the range of 3.8%-
3.9% over the two months after experiencing a significant rise of
• Throughout 2023, the value of APAC offices has remained relatively
resilient, outperforming their North American and European
sees limited approximately 150 bps from July to October. This marked drop in the US 10-
year Treasury yield has led to a reversion of key global and APAC yields to
counterparts where recent office trades, such as One Liberty Plaza in
NYC and Sancroft at St Paul's in London, have seen sales prices below
pricing their earlier 2023 levels. their original purchase prices.

dislocation • This normalisation in yields has a ripple effect across commercial real estate
assets, effectively resetting their valuations to the levels seen in 2Q 2023. This
• In Q4 2023, Arc Place, a trophy office asset in the Gangnam submarket of
Seoul, received a bid from a preferred bidder that was in line with the
fluctuation in valuation has been well captured in APAC REIT markets. prices of prior transactions executed between 4Q21 and 1Q22. Likewise,
Between July and October 2023, the cap rates of Asia Pacific large-cap REITs despite facing a prolonged due diligence process and capital raising
had widened by 40 basis points. Since then, the valuations of REITs have challenges, the sale of 60 Margaret Street in Sydney was ultimately
swiftly normalized, with their cap rates contracting by 25 basis points. finalized at a modest discount of 10% compared to earlier transactions.

Average implied cap rates of APAC large cap Repricing in office value relative to Q4 2021 Estimated repricing range in office values as at Q4 Estimated repricing range in office values between Q4
REITs (based on transactional evidence) 2022 and Q4 2023 (based on broker’s opinion) 2021 and Q4 2023 (based on valuation)
0% 15%
5.1% 0%
-5% 10%
5.0%
-5%
5%
4.9% -10%
-10% 0%
4.8% -15%
-5%
4.7% -20% -15%
-10%
4.6%
-25% -20% -15%
Concordian
60 Margaret St
44 Market St

1 Margaret St

Arc Place*
Alphadom Tower
4.5%
-20%
4.4% -25%
-25%
4.3% -30% -30%
2023-Jul 2023-Oct 2024-Jan 4Q22 4Q23 4Q22 4Q23 4Q22 4Q23 4Q22 4Q23 Hong Kong Sydney Singapore Seoul
Australia South Korea Sydney Hong Kong Singapore Seoul

Source: JLL; Bloomberg as at January 2024; the average Source: JLL; estimates for 44 Market St and 1 Margaret against Source: JLL estimates; the repricing ranges are estimated by Source: JLL estimates based on CBD markets assuming required
cap rate calculated by referencing EBITDA/EV yields of the book value as at June 21 and 60 Margaret St against the book comparing the current broker opinion-based price with the past cost of capital demanded by equity investors stay the same over
major APAC REITs value as at June 22; the estimates for Arc Place based on local price seen in Q4 2021 this period
media coverage as the sales are not finalized

4 | © 2023 JLL IP, Inc. All rights reserved.

THEMATIC

Office spreads • The Asia Pacific office yield spread over the 10-year government bond yield
has reached its lowest levels in a decade. The rate increases during this
• Anticipated rate cuts over the next few years are expected to normalise
Asia Pacific's 10-year government bond yields, leading to an increase in

at decade lows tightening cycle have been unprecedented in terms of magnitude and pace,
pushing the 10-year bond yields to their highest levels in a decade.
office spreads. However, given the projected future interest rate
trajectory and cap rate forecasts, the office spreads are predicted to stay
below the 10-year average levels until 2026.
• These developments have caused a recalibration in commercial real estate
asset values, resulting in softer office cap rates. However, the adjustment has
not kept pace with the rise in the 10-year government bond yield, leading to
a decrease in the size of the risk premium (office spread).

Sydney Office Spread over 10 Yr Gov’t Bond HK Office Spread over 10 Yr Gov’t Bond Tokyo Office Spread over 10 Yr Gov’t Bond SG Office Spread over 10 Yr Gov’t Bond Seoul Office Spread over 10 Yr Gov’t Bond

Office Spread Office Spread Office Spread Office Spread Office Spread
10 Yr Gov't Bond Yield 10 Yr Gov't Bond Yield 10 Yr Gov't Bond Yield 10 Yr Gov't Bond Yield 10 Yr Gov't Bond Yield
Office Yield Office Yield Office Yield Office Yield Office Yield
10 Year Avg Spread 10 Year Avg Spread 10 Year Avg Spread 10 Year Avg Spread 10 Year Avg Spread
5.0%
7.0% 5.0% 5.0% 6.0%

6.0% 4.0% 4.0% 4.0% 5.0%

5.0% 3.0%
3.0% 4.0%
3.0%
4.0% 2.0%
2.0% 3.0%
3.0% 1.0% 2.0%
1.0% 2.0%
2.0% 0.0%
1.0%
1.0% -1.0% 0.0% 1.0%

0.0% -2.0% -1.0% 0.0% 0.0%

2013Q4
2014Q4
2015Q4
2016Q4
2017Q4
2018Q4
2019Q4
2020Q4
2021Q4
2022Q4
2023Q4
2013Q4
2014Q4
2015Q4
2016Q4
2017Q4
2018Q4
2019Q4
2020Q4
2021Q4
2022Q4
2023Q4

2013Q4
2014Q4
2015Q4
2016Q4
2017Q4
2018Q4
2019Q4
2020Q4
2021Q4
2022Q4
2023Q4

2013Q4
2014Q4
2015Q4
2016Q4
2017Q4
2018Q4
2019Q4
2020Q4
2021Q4
2022Q4
2023Q4
2021Q4
2013Q4
2014Q4
2015Q4
2016Q4
2017Q4
2018Q4
2019Q4
2020Q4

2022Q4
2023Q4

Source: JLL, Oxford Economics as at Q4 Source: JLL, Oxford Economics as at Q4 Source: JLL, Oxford Economics as at Q4 Source: JLL, Oxford Economics as at Q4 Source: JLL, Oxford Economics as at Q4
2023; shaded areas are forecasts 2023; shaded areas are forecasts 2023; shaded areas are forecasts 2023; shaded areas are forecasts 2023; shaded areas are forecasts

5 | © 2023 JLL IP, Inc. All rights reserved.

5
THEMATIC

3-year fixed • Global yields have tumbled dramatically since November 2023, reversing
the previous upward trend observed between July and October. These
• In light of the revised market outlook, the latest forward rate curves suggest
that major Asian economies are likely to experience a more accelerated

borrowing yields have now returned to levels similar to those experienced earlier in
2023.
monetary easing cycle. It is expected that their central banks will cut
interest rates two to four times in 2024.

rates fell 30- • Amid a deteriorating macroeconomic picture, a re-accelerating • Given this backdrop, all 3-year fixed rates have experienced a significant

130bps disinflation trend, and normalising labor market conditions, the markets
have swiftly ditched the notion of rates staying higher and longer,
prompting aggressive rate cut expectations among investors. The Fed
has also joined the chorus with the market by releasing its updated
Summary of Economic Projections (SEP), which reflects a more dovish
view on the trajectory of interest rates.
shift, softening by 30 to 130 bps compared to the previous quarter. As a
result, these rates now stand below corresponding floating rate levels.
• Looking ahead, negative carry is expected to persist until mid-2025.
Uncertainties surrounding oil prices, normalization of the US job market,
and excessive government bond issuance by the US Treasury Department
may exert upward pressure, potentially delaying the anticipated rate cuts.

Global 10-year government bond yield trend 3M forward rates between 2024 and 2025 Jan 2024 APAC 3-month floating vs 3-yr fixed for senior loan

5.00% 6.00% 9.00%

5.50% 8.00%
4.50%
5.00% 7.00%

4.50% 6.00%
4.00%
5.00%
4.00%
3.50% 4.00%
3.50%
3.00%
3.00%
3.00% 2.00%
2.50%
1.00%
2.50% 2.00% 0.00%
3M 3M 3M 3M 3M 3M 3M 3M
01/2023

02/2023

03/2023

04/2023

05/2023

06/2023

07/2023

08/2023

09/2023

10/2023

11/2023

12/2023

01/2024

Tokyo Singapore Hong Kong Sydney Seoul Shanghai Auckland

forward forward forward forward forward forward forward forward
Jan, 2024 Apr, 2024 Jul, 2024 Oct, 2024 Jan, 2025 Apr, 2025 Jul, 2025 Oct, 2025

US JP AUS KR HK SG NZ Floating rate Fixed Rate

UK SG US AU CA SK

Source: JLL, Bloomberg as at Jan 2024 Source: JLL, Bloomberg as at Jan 2024 Source: JLL estimates, as at Jan 2024

6 | © 2023 JLL IP, Inc. All rights reserved.

THEMATIC

Credit strategies • Over the past two years, the capitalization rate spread over CRE lending rate has
significantly narrowed, with the current monetary tightening cycle raising the
• Regionally, prominent players such as KKR, Gaw Capital, and Blackstone are
spearheading the launch of new private credit funds, driving new capital

deliver superior
lending rate to new heights in a decade. Despite the rise in cap rates, it hasn't kept formation in the debt space. Although Asian banks remain engaged in the CRE
pace with lending rates, positioning debt strategies to deliver superior risk- lending market, funding from traditional lenders does not fully meet market
adjusted returns compared to equity strategies. This has fueled a surge in global demand, particularly in mezzanine/preferred equity and development loans.
return over equity debt fund formations, raising over USD 110.7 bn since 2020. While Asia Pacific's
debt fundraising may not match the global level, the region has experienced
Private credit can also help bridge some of the funding gap, especially in Hong
Kong, China, Australia, and Korea logistics, the markets where banks have
significant momentum. tightened lending over time.

• Investment managers and LPs are increasingly turning to credit strategies for AUM • The expected refinancing shortfall concentrated between 2024 and 2025 presents
growth and capital deployment, leveraging existing value add/core plus funds. a significant opportunity for debt capital in the Asia Pacific region. JLL projects
Among our top 40 regional clients as fund managers, a significant percentage are that by the end of 2025, there will be roughly USD 7 bn refinancing gap in Asia
actively seeking debt opportunities, with some new entrants exploring debt Pacific commercial real estate market alone. The combination of a 10-20%
strategies within the past two years. Additionally, a slew of Australian super funds softening in capital values and a lower leverage ratio reset from 50-60% to 40-50%
and Korean pension funds have shifted their capital from equity to debt strategies. over the past few years will result in a notable refinancing risk. These conditions
will open up a range of opportunities for APAC debt strategies going forward.

APAC Equity (cap rate) vs Debt return comparison Debt Fund Raising – Global vs APAC APAC refinancing gap in 2024 and 2025 assuming loan matures in 4
years of time
6%
45 3.5 4.0
5%
40
3.0 3.5
4% 35
2.5 3.0
3% 30

USD bn
2.0
USD bn

25 2.5

USD bn
2%
20 1.5 2.0
1%
15
1.0 1.5
0% 10
0.5 1.0
-1% 5
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 - 0.0 0.5
2010
2011
2012
2013
2014
2015
2015
2016
2017
2018
2019
2020
2020
2021
2022
2023
Cap Rate Spread over Debt APAC Equity (Cap Rate) APAC Debt -
2024 2025
Global Asia Pacific (RHS)

Source: JLL, as at Q4 2023 Source: JLL, Preqin as at Q4 2023 Source: JLL, RCA as at Q4 2023; refinancing gap defined to be difference between available
loan amount at refinancing and original loan amount for the same asset after accounting for
capital appreciation and a change in leverage ratios over the loan life of the original loan

7 | © 2023 JLL IP, Inc. All rights reserved.

THEMATIC

Dry powder • Total APAC fundraising recorded USD 18.77bn in 2023, down 34% yoy. The average fund size sits at USD 447mn (23% increase versus 2022) with an average of 23
months on the road until final close. Industrial, mulitifamily, and data centre sectors continued to attract capital in 2023.
levels decline • Dry powder was at USD 68.1bn as at Dec 2023, a 2% drop from 2022. This is due to dry powder levels for opportunistic strategies declining 14% yoy.

for the first time • In 2024,

in over a decade • Interest rates will dictate the pace of dry powder deployment: Countries where rates ease later, will see a lag in capital deployment. In APAC, Korea and
Singapore are poised to lead rate cuts, and therefore capital deployment.
• Higher yielding strategies will deploy first: In the new normal of risk-free rates set higher than pre-2022 levels, capital deployment will focus on higher-
return strategies such as value add and opportunistic strategies, over core strategies, in the near term.
• First mover advantage: In markets where capital values are bottoming out, higher return requirements will drive capital deployment sooner rather than
later. First mover advantage will be evident especially in geographies and sectors where rental growth forecasts can be underwritten in confidence. Capital
value growth in the medium term is likely to be underestimated.
• Looking across the capital stack: Investors will not only look at higher-yielding equity strategies, but also deploy capital into debt or hybrid structures such
as mezzanine or preferred equity. Since the end of 2021, APAC debt dry powder has decreased 20% from USD 5bn to USD 4bn in 2023.
• Concentration of activity around investors with more capital: Investors with larger pools of capital have the flexibility to deploy across countries and
sectors based on return opportunities, unlike investors with limited liquidity who may be forced to accept lower yields in an increasingly competitive
environment as the market recovers.
For more info, Global Capital Outlook 2024
CORE-PLUS OTHERS
APAC fundraising: Capital raised and average fund size APAC Dry powder 11% 2%
40 600 80 DEBT
$70 $68
500 70 $63 6% OPPORTUNISTIC
30 60 $54 40%
400
50 $41 $44
USD Mn
USD Bn

20 300 USD Bn $38 $38 $39 $37 VALUE

40
$29 $29 $29 $31 $31 $31 ADDED
200 30 $22
10 $19 16%
100 20

0 0 10
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

CORE
2007

2011

2015
2006

2008
2009
2010

2012
2013
2014

2016
2017
2018
2019
2020
2021
2022
2023
25%
Aggregate capital raised (USD Bn) Average fund size (USD Mn)
Source: Preqin, JLL, as at Dec 2023 Note: “Others” include distressed, fund of funds
Source: Preqin, JLL, as at Dec 2023 and co-investment

8 | © 2023 JLL IP, Inc. All rights reserved.

THEMATIC

Flexibility helps • Flex space operator news in Q4 had raised questions about its impact on
APAC’s office sector. We expect changes to flex space operators to have
• The highly fragmented nature of APAC’s flex space market is evidenced by
the whopping 702 operators running centres in the region, with the five

mitigate risks minimal bearing owing to the market structure and value proposition for
businesses to incorporate flex space in their real estate portfolio to
mitigate risk.
• APAC’s flex space market can be characterised as low penetration and
highly fragmented. Currently, there are about 6 million sqm of flex space
in APAC, which represents a 2.5% penetration rate of Grade A office space
regionally. This is low when compared with gateway cities outside APAC,
such as London and Amsterdam, which both have a penetration rate of
6% of total office stock. The low penetration implies that the APAC
market still has room for growth to reach maturity.
leading operators managing 35% of flex space in APAC. Despite growth of
new operators having slowed since the pandemic, operators still face
competition for desirable sites for expansion.
• The flex space market is going through a phase of consolidation amid the
market downturn. Nevertheless, demand for flex space remains robust as
the hybrid work model is embraced. The wide spectrum of options
provided by flex space operators, ranging from turnkey workspace to
enterprise solution, enables tenants to make real estate decisions flexibly
in changing circumstances. Office landlords have continued to
incorporate flex space in their portfolios to enhance their product
offering to meet the various business needs.

Flex stock and penetration rate in global gateway cities Market share of flex space by operator in APAC
2.1 7%

1.8 6%
Flex stock (mn sqm)

16%

Penetration Rate
1.5 5%

1.2 4%
WeWork IWG
0.9 3% 9%
IndiQube The Executive Centre
0.6 2%
4% Smartworks Rest of the operators
0.3 1%
3%
0.0 0% 65%
3%
Shanghai
Los Angeles
New York City

London

Tokyo

Singapore
Bengaluru

Hong Kong
Paris

Amsterdam

Flex stock (LHS) Penetration Rate (RHS)

Source: JLL Research Source: JLL Research

9 | © 2023 JLL IP, Inc. All rights reserved.

THEMATIC

Low carbon • Under the new IFRS/ISSB sustainability reporting standards in effect from 1 st
Jan 2024, listed and unlisted companies will be required to increase their
• Through analysis of Sydney and Melbourne CBD markets, on average
CBD assets with NABERS 5.5-star+ ratings have 2.7% lower vacancy than
office space sustainability and climate risk reporting, driving adoption of sustainability
strategies – including leasing decisions.
the wider market, 10% higher net face rents and 39bps sharper yields.

undersupplied • Landlords that do not address net zero carbon demand as part of building
across APAC upgrades risk alienating a growing pool of potential tenants. Currently, there
is low availability of highly energy efficient stock and absence of fully electric
stock across APAC.
• Given this, assets that achieve net zero operational carbon ready status will
gain early mover advantage – in driving premiums and securing cashflows.
• Asset owners of ageing building systems of 1980s, 1990s and 2000s offer
the greatest opportunity to upgrade and should adopt a fully electric
strategy. The yield premium is most pronounced for buildings
constructed in the 1980s and 1990s - assets of these decades are capable
of upgrade to higher NABERS ratings as HVAC systems etc have reached
obsolescence.
For more info, Embracing net zero carbon in our CBD office markets and
The impending green divide: Supply deficit of sustainable workplaces in
Asia Pacific

Demand-Supply deficit of ESG office space (till 2028) Australian cities rents and yields by NABERS rating
Sydney CBD Hong Kong Mumbai
4,000 8,000 900 7.4
Thousands sqft

Thousands sqft
Thousands sqft

15,000
84% 68% 62% 800 7.2
6,000
under under under 7.0
10,000 700
2,000 supply 4,000
supply supply
6.8
5,000 600
2,000 6.6

Yields (%)
500 6.4

AUD
- - 0
400 6.2
6.0
Singapore Melbourne CBD Delhi 300
5.8
Thousands sqft

200
Thousands sqft

2,000 43% 44%

Thousands sqft

5.6
56% under 10,000 under
4,000 100 5.4
under supply supply
supply 0 5.2
1,000
2,000 5,000 NR 1* to 3.5* 4 4.5 5 5.5* & 6*
Net face rent average Yield Average
- - 0

Source: JLL, as at Dec 2023 Source: JLL, as at Dec 2023

Note: NABERS is a national rating system that measures the environmental performance of Australian
10 | © 2023 JLL IP, Inc. All rights reserved. buildings and tenancies. The higher the rating, the better the performance.
 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Sectors
1 Office 5 Alternatives

2 Logistics 6 Hotels

3 Retail 7 REITs

4 Living

11 | © 2023 JLL IP, Inc. All rights reserved.

 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Office: End-user • APAC office volumes experienced a moderated contraction of 13% YoY to
USD 13.7bn in Q4 2023. Investors remained indifferent towards office assets
• Australia: cash rate has peaked at 4.35% but will remain high, capital
remains cautious towards office assets of scale.

demand drives as uncertainties on interest rate movements, the extent of re-pricing and
occupancy shrouded the sector outlook.
• China: policy measures trickle through to the property sector slowly;
yields will edge up further while investors explore exit strategies.

trades • Some non-real estate corporates and end-users opted to acquire office
assets for occupation in the wake of a softening market to reduce rental
expenses and future relocation costs. During the quarter, such
corporates/occupiers were involved in 38% of office investment volumes,
the highest amongst purchaser types. Occupier purchasers would have
considerations in amenities and sustainability features in order to future-
proof their offices for long-term usage. A vast majority of end-user
acquisitions took place in Greater China and South Korea.
• Hong Kong: end-user demand fills the void left by investors; rents are
predicted to fall further, while yields expand moderately.
• Japan: leasing market is seeing green shoots with a revival of occupier
demand in central locations, supported by the flight to quality trend; this
will likely boost rental growth outlook, attracting investors back soon.
• South Korea: over 10 quality office assets in marketing or due diligence
phase, raising funds simultaneously, the size larger than available liquidity
in the market; this imbalance shifted the bid-ask spread down modestly.
• Singapore: re-pricing pressure seems to have abated to some extent, with
long-term interest rates dropping significantly and investors expressing
more optimism for 2024.

Office purchaser types Office yield trends 2022-2023 Office annual rental changes 2021-2023
Public 6.0%
Institutional 6% 5.7% 25%
Investor 20%
13% 5.0% 5.0%
Corporate / 15%
Occupier 4.5%
10%
38% 4.0%
5%
3.5%
Private 0%
3.0% 2.9%
16% -5%
2.2% -10%
2.0%
Investment Manager / 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 -15%
Private Equity Seoul Sydney Singapore Tokyo Hong Kong Shanghai
27% Shanghai Hong Kong Tokyo
Singapore Seoul Sydney 2021 2022 2023

Source: JLL Research, as at Q4 2023 Source: JLL Research, as at Q4 2023 Source: JLL Research, as at Q4 2023

12 | © 2023 JLL IP, Inc. All rights reserved.

 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Australia’s largest CRE transaction in 2023

60 Margaret Street & MetCentre 60 Margaret Street, Sydney | Australia

Overview Profile Key Metrics

Location Australia Price (AUD) 796 mn
• International Expressions of Interest campaign closed in Oct 2022. • Located within Sydney’s core office precinct and directly linked to
Experienced prolonged due diligence and capital raising period as the Wynyard Station, 60 Margaret is a 36-storey office tower, with Property Type Office/Retail Passing yield 5.7%
Australian cash rate increased 7x (175bps) since start of sales campaign. income underpinned by ING and a diverse range of tenants
NLA 47,096 sqm Market yield 5.9%
• Substantial interest from both onshore (60%) and offshore (40%) managers • MetCentre is a multi-level retail centre anchored by Woolworths
and capital supermarket and includes 72 specialty tenancies. Huge untapped Mirvac &
potential to add value to the retail podium through a major WALE (Income) 3.2 years Vendor
• Australia’s largest single CRE transaction of 2023 and largest in Sydney Blackstone
since December 2021 refurbishment and re-leasing strategy
AsheMorgan &
Occupancy 88% Purchaser
• 4.5 star NABERS Energy rated MECGP

“Despite the steep rise in rates, offshore capital continue to show interest in partnerships with other
capital sources to purchase well located high-quality assets that display access to future income
growth”
Kate Low
Head of International Capital, Australia & New Zealand

• Sydney CBD office completions in 2023 (0 sqm) will be the lowest level since 2012 (0 sqm of completions). There will be substantial
development in Sydney CBD in 2024, the second highest annual completion figure over the past 20 years. Despite 270,800 sqm of office
supply pipeline under construction in Sydney, 58% is precommited.
• Beyond 2024, the supply pipeline is limited due to construction costs and difficulty in securing pre-leases, placing downward pressure on
vacancy rates.
• Large tenants (>1000 sqm) from the financial services and technology sectors continue to consolidate and offer sublease space to the
market while smaller tenants were active in the market, slightly offsetting negative demand by large occupiers.
 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Owner-occupier transaction
One Island East (12 floors) 18 Westlands Road, Quarry Bay | Hong Kong

Overview Profile Key Metrics

$5.4 billion
• The Securities and Futures Commission (SFC) is the current tenant of 9 • A 68-storey Grade-A office building located in Taikoo Place, a Location Hong Kong Price (HKD)
($18,233 psf)
floors (45/F-54/F) at One Island East. popular decentralised office cluster for occupiers looking for
quality and cost-effective options in Hong Kong Island East. Property Type Office Passing yield 3.3%
• The SFC acquired its occupied floors and 3 more floors (42/F-44/F) for
expansion in the largest end-user office transaction in Hong Kong since • Integrated design with sustainability features, amenities and a Gross Floor Swire
2019. large floor plate (typical lettable floor area ~21,000 sf). 296,173 sqft Vendor
Area Properties
• The SFC opted to own the office floors to save cost in the long run by • Anchor tenants include DBS Bank, Aedas, SFC and Zurich
eliminating rental expenses. Securities
Insurance Group.
No. of Floors 59 Purchaser and Futures
Commission

“The interest rate hikes have impacted the investment demand for Hong Kong’s commercial properties
in recent years. However, given that the demand dynamics, defensive nature and limited office supply in
core business districts on Hong Kong Island, high-quality offices will continue to attract the interest from
both end-users and investors.”
Oscar Chan
Head of Capital Markets, Hong Kong

• End-user demand has risen as they choose their real estate for long-term expense management in view of rising costs of capital. Another owner-
occupier transaction in Q4 2023 was Li Ning acquiring Harbour East in North Point for HKD 2.3 bn.

• Capital values in Hong Kong’s overall market dropped 2.1% q-o-q in Q4 2023, and investment yield expanded marginally by 1 bps q-o-q. Overall
market rents declined 1.7% in Q4 2023 and in Hong Kong Central, the rents declined by 1.9% due to limited expansion demand.
 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Logistics: High • AP industrial volumes reached USD 6.5bn in Q4 2023, upheld by improved
deal activity in China.
• China: Sector-focused developers such as ESR and GLP successfully divested
their stabilised assets to long-term capital, leading to significant portfolio

conviction • Throughout the quarter, the steep decline in long-term interest rates and
the Fed's indication of a potentially accelerated schedule of rate cuts
across most of through 2024 have emboldened investors, boosting their confidence and
conviction in the sector.
APAC • As a result, investors are expected to take a somewhat more aggressive
stance, deploying their capital more quickly across the region in the first half
of the year rather than waiting for the second half, driven by their desire to
gain a first-mover advantage in anticipation of heightened competition in
the latter part of 2024.
sales during the quarter.
• Japan: The bid-ask spread continues to be positive, ranging from 5% to
10%, as investment demand outpaces available stock. The ongoing record-
high supply will provide relief to the investment market, offering investors a
wider range of opportunities going forward.
• South Korea: Starting from mid-2024, a wave of project financing defaults is
expected, creating bargain opportunities and swiftly normalising the long-
term supply cycle, especially beyond 2024.
• Australia: Volumes continue to remain limited, with smaller trades
dominating. The bid-ask spread remains wider relative to office and retail,
hindering the sales of recapitalization and portfolio opportunities.

APAC volume composition by sector between 2020 and 2023 The degree of logistics yield softening trend between 2022-2024F Asia Pacific logistics annual rental growth 2023-2025F
100% 2.50% 2.2% 12.0% 20.0%
2.00% 10.0%
80%
15.0%
1.50% 8.0%
1.2%
60% 6.0%
1.00% 10.0%
4.0%
40% 0.50% 0.3%
0.1% 2.0%
5.0%
20% 0.00%
0.0%
0.0%
-0.50% -2.0% 0.0%
0%
-0.5% Shanghai Hong Kong Tokyo Singapore Seoul Sydney
2020 2021 2022 2023 -1.00%
Office Industrial Retail Living Hotels Others Sydney Seoul Hong Kong Shanghai Singapore Tokyo 2023 2024 2025 Average Vacancy (2023-25), RHS

Source: JLL estimates, as at Q4 2023 Source: JLL estimates, as at Q4 2023 Source: JLL estimates, as at Q4 2023; bars stand for annual rental
growth; Sydney vacancy is not available
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 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Retail: Bifurcation among geographies

In Q4 2023, the APAC retail market registered USD 5.3 bn, achieving the highest volume since Q1 2023, on the back of increased liquidity in large transactions. The sentiment for shopping malls has
slightly improved, yet there remains a clear divergence in major retail markets across the region. Factors such as price adjustments, new capital sources, and the availability of quality product are
catalysing investment activities in Japan, Australia, and Singapore. In contrast, the mood for shopping malls in Hong Kong and South Korea remain subdued. Retail assets in these locations are at the
bottom of investors’ lists with shopping mall performance continuing to remain under pressure. A turnaround in these markets may take time as investors are hesitant to re-engage.
High-street volumes remain steady at USD 2.1 bn in Q4 underscored by sizable high street deals in Japan, Korea, and Hong Kong.

• Singapore: Heightened interest in non-discretionary shopping malls, coupled with operators’ on-going portfolio reshuffling efforts, to set the stage for large-scale suburban mall trades.
• China: Cash strapped developers liquidated their shopping mall portfolios to raise funds; this trend will likely continue with the government encouraging SOEs to buy these assets.
• Hong Kong: Scheduled large supply between 2024 and 2027 alongside consumption leakage to mainland China and surrounding countries likely to soften shopping mall sentiment
• South Korea: Retail funds, backed by anchor tenants such as hypermarkets and movie theaters, have faced challenges in liquidating assets, leading to the extension of fund life by 2-5 years
• Australia: With sellers lowering asking prices, the bid-ask spread has narrowed, likely to facilitate more shopping mall transactions through 2024, as mall yields surpass the cost of debt.
• Japan: During the quarter, cash-abundant occupiers purchased prime high street assets at Tokyo and Osaka from international investors.

Asia Pacific market fundamental snapshot – office vs retail

18.0% 20.0%
16.0%
15.0%
14.0%
12.0% 10.0%
10.0%
5.0%
8.0%
6.0% 0.0%
4.0%
-5.0%
Edion Namba Main Store, Osaka, Japan Cairns Central, Brisbane, Australia 2.0%
0.0% -10.0%
Edison, the electronic retailer and Lendlease Australian Prime Property Sydney Shanghai Hong Kong Tokyo Singapore Seoul
current occupier, has purchased the Fund sold the shopping mall to
Office Vacancy Rate Retail Vacancy Rate Office Rental Growth (RHS) Retail Rental Growth (RHS)
high street asset for USD 365 million Fawkner Property for USD 254 million
from Mapletree Source: JLL, as at Q4 2023; the above vacancy rate and rental growth are as at Q4 2023 and for full year 2023 respectively;
data refer to CBD market for office and prime shopping mall for retail; for Tokyo retail vacancy, ARES data referred

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 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Quality sub-regional asset

Rosebud Plaza McCombe St, Rosebud VIC | Australia

Overview Profile Key Metrics

• Sold following a direct approach from a Sydney-based investor • Located in the Mornington Peninsula, 61.5km from Melbourne CBD Location Australia Price (AUD) 134.5mn
• The purchaser, a private investor, was attracted to the large landholding • Recently redeveloped to include 2 tenants both on 10-year leases
and potential for future upside. (Dan Murphy’s and BCF) Property Type Retail Core yield 6%
• In mid-2022, Charter Hall Retail valued Rosebud Plaza at AUD 122mn. • Anchored by Coles, Kmart, Woolworths and supported by 52
Gross Floor
specialties. 22,997 sqm Vendor Charter Hall
Area
• The property has a WALE (income) of 4.27 years.
Private
Occupancy 98% Purchaser
Investor

“The fourth quarter of 2023 saw a significant increase in investment activity in the retail sector,
with the predominant focus being in the sub-regional sector sub $300 million. The sub-regional
sector is attracting a resurgence in capital given its relative return spread compared to other retail
sub-sectors.”
Nick Willis
Senior Director, Retail Investments, Australia & New Zealand
• Supply nationally across all retail sub-sectors is down 50% from 2022, and trending to be down 55% on the prior 10-year average.
• Sub-regional assets have endured a resurgence in 2023 due to improving fundamentals and ability for management efficiencies.
• Despite transaction volumes being significantly below the average, deal volume in the sub-sector as a proportion of the total retail
market is sitting at 41%, significantly above the 10-year average of 25%.

17 | © 2023 JLL IP, Inc. All rights reserved.

 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Multifamily: China gains momentum

Market Fundamentals: The multifamily market in China has experienced exponential growth driven by favorable demographic shifts, barriers to home ownership, and changing attitudes towards
renting, particularly among the younger generation. To meet the growing demand, the top 30 multifamily operators in China have added approximately 106,000 units to their portfolios between the
first half of 2022 and 2023, bringing the total stock to 1.3 million units. Despite the uptick in supply, many of the leading brands have successfully maintained high occupancy levels, averaging between
93% and 96% for projects that have been operating for more than 6 months, demonstrating the strong market fundamentals and robust demand for multifamily housing. While white-collar workers
continue to be the primary tenant base, accounting for 58% of renters, the market is rapidly diversifying. More college students and freelancers are embracing multifamily housing. There is also an
emerging trend of attracting corporate customers and family tenants through the introduction of high-quality rental products and a wider range of unit sizes and amenities.

Investment market: Both domestic and international investors are expanding their asset allocation into Chinese multifamily. Investors continue to pursue a repurposing strategy as a go to the market
strategy by converting underperforming retail, hotel, and office into modern multifamily products. But due to limited conversion opportunities, more investors are now warming up to development
opportunities. When it comes to investment destinations, top tier 1 cities such as Shanghai, Beijing, Shenzhen, Guangzhou, and Hangzhou are favored among institutional investors. Nevertheless, there
is a growing appetite among investors to explore opportunities in 1.5-tier cities like Chengdu, Nanjing, and Wuhan. Given the tenant base predominantly consists of younger individuals aged between
20 and 40, and their preference for smaller units, investors continue to prioritize the upscale and mass-market segments over the blue-collar and high-end markets.

For more info: 2023 China Rental Housing Market

Total Multifamily Stock Managed by Leading Average Occupancy Rates of Mature Projects Share of respondents choosing preferred Share of respondents choosing preferred rental
Multifamily Providers in China, Top 30 Managed by Top Rental Housing Providers, 1H23 investment model (multiple choice), % housing market (multiple choice), %
Providers
1.35 95% Shanghai
96% 100% Beijing
Multifamily Stock under
Management (Million

1.30 Shenzhen
80% 67%
94% Guangzhou
1.25 60% Hangzhou
Units)

92% 38% Nanjing

1.20 40% 29% Suzhou
90% Chengdu
1.15 20% Wuhan
Chongqing
1.10 88% 0%
4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Port Big+ Youtha Goyoo Acquiring Development Investing in Leasing 0% 20% 40% 60% 80% 100%
Apartment existing of new rental operation
propertieis for housing platform 2021 2023
conversion
Source: CRIC, company annual reports, public information, Note: Occupancy rates displayed above represent the occupancy Source: JLL China Rental Housing Investment Sentiments Source: JLL China Rental Housing Investment Sentiments
JLL analysis rate of mature projects (those operated for more than 6 Survey 2023 Survey 2023
months) managed by those rental housing providers
18 | © 2023 JLL IP, Inc. All rights reserved. Source: Company annual reports, public information, JLL analysis
 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Data centres: Growing JVs boost liquidity

• DC operators have been aggressively acquiring and developing new assets to meet demand. The significant capital commitment required, sees more operators and financial sponsors form joint
ventures to fund future development.
• Sovereign wealth fund Indonesia Investment Authority, and China’s GDS formed a JV – with their first project to develop a hyperscale data centre in Nongsa Digital Park, Batam.
• STT GDC and Basis Bay, a leading provider of sustainable cloud and green data centres, formed a JV to develop data centers in Kuala Lumpur and Cyberjaya.
• CyrusOne and Kansai Electric Power Company (Japan) entered into a JV to invest at least USD 7bn over the next decade to reach a scale of 900MW across Japan.
• NVIDIA and YTL’s power unit (Malaysia) will jointly develop a USD 4.3bn AI-oriented data centre infrastructure in Johor.
• Infrastructure funds have been active in their DC fundraising and in acquiring stakes in stabilised asset portfolios.
• Singapore-based Seraya Partners closed an USD 800mn digital infrastructure and energy transition fund, surpassing its target of USD 750mn.
• As part of its Asia infrastructure strategy, KKR acquired a 20% stake in Singtel’s (Singapore) regional data center business for USD 800mn.
• Bain Capital bought back the remaining 57% stake in Chindata for USD 3.2bn.
• Macquarie raised AUD 130mn to expand their data centre business and in talks to raise USD 4bn for a new fund dedicated to APAC infrastructure.
• Notable Q4 2023 DC activity:
• Digital Core REIT acquired a 10% interest in Digital Osaka 2 TMK, an Osaka data center, from Mitsubishi, for USD 52mn
• ESR Kendall Square sold a fully-leased data center and logistics facility, Ilsan Distribution Centre, in Goyang, South Korea, for USD 96mn
• Singtel secured a USD 400mn green loan which will be used to refinance borrowing and support the operations of 2 Singtel data centers: DC West and DC Kim Chuan
• GDS raised USD 270mn in green financing for Nusajaya Tech Park data center in Johor, Malaysia

AP data centre investment volume 2008- 2023

5.5
5.0
4.5 Nvidia and
4.0 Malaysia’s YTL are
3.5
3.0 jointly developing
USD Bn

2.5 USD 4.3bn in AI Vantage DC is ResetData launched a

2.0
1.5 cloud and planning to open its liquid-cooled data
1.0 supercomputer first facility in Taipei, center lab with full-
0.5
0.0 infrastructure offering 16MW, stack AI and ML testing
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 hosted in YTL’s across 20,000 sqm facilities in Sydney
Australia China Hong Kong India Others Japan Singapore South Korea Johor DC park
Source: JLL, as at Dec 23 Note: Includes entity deals

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 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Life Sciences: • There are various ways to enter the life sciences real estate market. In more
developed clusters with existing stock occupied by life sciences companies,
• Development activities are also essential for clusters to expand their
capabilities. Investors with specialised expertise can partner with life

Market entry investors can engage in sale and leaseback arrangements with life sciences
companies to secure long-term rental income streams. Investors in China
sciences companies to develop customised build-to-suit facilities which
meet their specific R&D needs. Moreover, some local governments would

strategies differ are increasingly targeting such opportunities by companies looking to

recycle capital and focus on R&D.
collaborate with investors through public-private partnerships (PPP) in
developing new planned business parks and R&D hubs.

among clusters • In clusters facing acute shortage of life sciences spaces, asset conversion can
be the quickest way to meet the growing demand. Value-add investors can
• Investors should consider a market’s maturity and the amount of venture
funding that could benefit the life sciences sector. Since the start of the
identify opportunities to convert or upgrade existing properties, such as pandemic, Singapore received the most funding in its life sciences industry
repurposing aged and underutilised industrial buildings into specialised R&D amongst major clusters in APAC. Its life sciences industry is well-supported
facilities. by various government initiatives and agencies.
For more information: Life Sciences Industry & Real Estate Perspective 2024

Opportunities across life sciences clusters Venture funding in the life sciences industry since 2020 Profile of life sciences real estate investors
Sale & Asset 90 REIT Private Wealth
City Build to Suit PPP 1%
Leaseback Conversion 80 9%
Shanghai • • • 70
60
Beijing • • •
USD bn
50 Occupier
Hong Kong • •
40 17%
Sydney • • • Insurer
30 2023 48%
Melbourne • • • 20
Tokyo • • 10
Seoul • 0

Seoul
Shanghai

Sydney

Melbourne
Beijing

Tokyo
Singapore

Hyderabad
Hong Kong

Bangalore
Investment
Singapore •
Manager /
Bangalore • • Private Equity
Hyderabad • • 25%

Source: JLL Source: PitchBook Source: JLL

20 | © 2023 JLL IP, Inc. All rights reserved.

 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Hotels: Increased transaction activity led by China, Australia and Japan

Hotel transactions in the Asia Pacific region experienced a surge in activity during the last quarter of the year. The total volume of hotel transactions reached more than USD3.3 billion in Q4 2023,
marking a significant increase of 65% compared to the previous quarter. Many investors were motivated to close deals before the end of the year. Despite this positive trend, the full-year hotel
transaction volume for 2023 amounted to USD9.8 billion, reflecting a 16% decrease from the previous year due to inflationary pressures and high interest rates. China, Australia, and Japan emerged as
the strongest markets for hotel capital market activity in the last quarter, with these three countries accounting for 80% of the region's total hotel transaction volume.
• Australia: Strong transaction activity to close out the year thanks to several trophy and sizable deals settlings in Q4
• China: Continued downturn in domestic real estate market unlocks investment opportunities of landmark hotels. Pricing adjusts downwards amid macroeconomic headwinds
• Japan: 73% of hotel investment volume in Q4 2023 driven by domestic REITs on the back of attractive financing terms
With continued global macroeconomic uncertainties and ongoing political tensions, hotel investment volume in Asia Pacific is expected to reach USD10.4 billion in 2024, with Japan toping the podium.

Asia Pacific Hotel Investment Volume, 2016 to 2023 Monthly RevPAR (USD) recovery
16 200%

% recovery in monthly RevPAR (USD)

14
150%
12

10
USD bn

100%
8

6 50%

4
0%
2

Sep-20

Sep-21

Sep-22

Sep-23
Mar-20

Oct-20

Oct-22
May-20

Jul-20

Mar-21

May-21

Jul-21

Oct-21

Mar-22

May-22

Jul-22

Mar-23

Oct-23
May-23

Jul-23
Jan-20

Aug-23
Aug-20

Jan-21

Aug-21

Jan-22

Aug-22

Jan-23
Apr-22
Apr-20

Nov-20

Apr-21

Nov-21

Nov-22

Apr-23

Nov-23
Dec-20

Dec-21

Dec-22
Jun-20

Jun-21

Jun-22

Jun-23
Feb-20

Feb-21

Feb-22

Feb-23
0
2016 2017 2018 2019 2020 2021 2022 2023 Asia Pacific Australia China Japan

Japan Australia Singapore China (incl. Hong Kong) Thailand Maldives Others Singapore Thailand Hong Kong 2019 level

Source: JLL estimates, as at Q4 2023 – data pertains to to transactions USD5M and above, and excludes Casino Source: STR, JLL
Property, Pub/Licensed Leisure, Development Site

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 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Japan hotels in the spotlight

SH BY THE SQUARE HOTEL KYOTO KIYAMACHI

Key Metrics
Overview
Location Kyoto (Japan)
• Anglo Fortune Capital Group, a Singapore-based entity, represented the buyer in the acquisition of SH by the Square Property Type Hotels
Hotel Kyoto Kiyamachi from Kasumigaseki Capital Inc., a Tokyo-based real estate investor. Confidential – Advised by Anglo Fortune Capital
Buyer
Group
• This transaction highlights a continued interest for hospitality assets in Japan’s cultural capital.
Seller Kasumigaseki Capital Inc.
• Opened in 2018, the 75-key SH by the Square Hotel Kyoto Kiyamachi is located at a prime location, within walking Total Price (USD) Confidential
distance of Kyoto Kawaramachi and Kiyomizu Gojo stations.
Closing date 30 November 2023

“Japan's hotel performance has been outstanding in 2023, with steady activity in capital markets
underscored by substantial demand for hotel assets. The country's appealing investment
environment, combined with its status as a sought-after tourist destination, has contributed to a
thriving hotel market throughout the year. Consequently, investors remain highly interested in Japan's
hotel sector, motivated by the promise of profitable returns and long-term growth prospects.”

Nihat Ercan
CEO Asia Pacific, JLL Hotels & Hospitality Group

• With continued attractive cash-on-cash returns compared to other markets in the region, Japan has maintained its position as a
sought-after tourist destination within Asia Pacific, generating both domestic and foreign interest in hotel assets.
• In 2023, Japan witnessed hotel transactions totalling JPY395 billion (USD2.8 billion), establishing itself as the second most liquid
country in the region following China. Hotel capital market remained active throughout the year, reflecting a sustained and positive
trend. Given the number of agreed transactions and assets currently on the market, buyers' interest is anticipated to persist in 2024.
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 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Behind the keys: • Investing in hotels in Asia Pacific is more nuanced compared to other sectors • On the other hand, experienced hotel investors actively seek out the
in commercial real estate. Limited liquidity, fluctuating income streams, and operational risk associated with hotels, as their expertise in asset

Strategic the operational complexities are associated with hotel properties. As a

result, investors typically demand a higher return spread, ranging between
management allows them to effectively mitigate this risk. Additionally, the
operational intensity of hotels often leads to the identification of
operations 50 and 150 basis points over office assets, to offset the uncertainties. In
markets where real estate prices are higher, this spread is usually smaller.
undervalued assets and creates a higher entry barrier for less experienced
investors. Consequently, savvy investors can seize value-add opportunities
unlock However, the attractiveness of investing in hotels goes beyond the potential
for additional returns.
with minimal competition.

profitability
• In recent years, Japan has emerged as a prime location for experienced
• The operational nature of hotel assets can be viewed as two-sided. On the
one hand, it magnifies risks and raises the probability of facing execution
challenges. Amongst other metrics, investors should consider the pace of
recovery in trading performance. For example, in 2022, RevPAR in Japan and
Thailand reached between 60 and 63% of pre-COVID levels, and was at 79%
in Singapore. Within almost a year, those three countries exceeded pre-
pandemic levels. On the contrary, RevPAR recovery in China, the Philippines
and Vietnam is still ongoing as of YTD November 2023.
investors seeking value-add opportunities. Regional players like SC Capital,
GIC, and Blackstone have focused on hotel portfolios managed by domestic
operators, which often face operational challenges. With factors such as yen
depreciation, strong tourism growth, and an inflationary environment, these
assets are projected to achieve significant RevPAR growth of approximately
20% after implementing value-add enhancements.

Asia Pacific Yields – Hotel vs. Office Asia Pacific Investment Strategy Breakdowns – Hotel vs. Office Asia Pacific Investor Profiles – Hotel vs. Office
7.0% 100%
100%
6.0%
80% 80%
5.0%
4.0% 60% 60%
3.0%
40% 40%
2.0%
1.0% 20%
20%
0.0%
Office Hotel Office Hotel Office Hotel Office Hotel 0% 0%
Hotel Office Hotel Office
Tokyo Singapore Shanghai Seoul
REIT Private Wealth Investment Manager
Core Core Plus ValueAdd Opportunistic
Financial SWF REOC
Source: JLL estimates as at Q4 2023 Corporate Others
Note: Hotel yields based on market intel and past closed transactions; Shanghai Source: JLL Horizon, as at Q4 2023 based on transactions since 2020
Source: JLL, RCA, as at Q4 2023 based on transactions since 2020
refers to entry yields

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 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

REITs in • REITs depend on borrowed funds to acquire properties. With higher

borrowing costs, this lowers net income, dragging distributed income down
• REIT total return (TR) performance in 2023 varied among the countries:
• Gains: Australia (+7.2%), Singapore (+4.8%), Japan (+4.0%)

Review as well. In 2023, REITs have been recapitalising to reduce gearing, resulting in
more divestments.
• Losses: China (-34.8%), Hong Kong (-19.8%)

• Manulife US REIT plans to dispose assets to gain >USD 328.7mn in net sale
proceeds (on top of its USD 98mn sale of Park Place).
• Centuria Office REIT is considering asset disposals through 2024 to lower its
gearing. It completed AUD 225mn debt refinancing and divested 2 assets in
2023, including 54 Marcus Clarke Street – one of the fund’s oldest buildings.
• ESR Logos REIT has proposed divestment of 7 non-core assets in Singapore
and Australia for ~USD 253 mn, as part of their strategy of “portfolio
rejuvenation, capital recycling, recapitalising balance sheet and reinforcing
sponsor support”
• Q4 2023 saw Australian (A-REITs) and Singapore REITs (S-REITs) rally due to
expectations of rate cuts in 2024. This benefits REITs with higher leverage -
such as Scentre Group (debt/assets of 0.43) and GPT (debt/assets of 0.31) -
both which recorded >10% total return in FY 2023.
• China REITs continued their decline in 2023 due to the persisting property
crisis amid a broader equity market slump. Geopolitical tensions have also
weighed on foreign investors’ mind and they have largely moved away from
China assets. However, expected government stimulus might add cheer to
the sector in 2024. Hong Kong REITs declined as the much-anticipated China
rebound did not materialise in 2023 as well as foreign investors move away
from China-linked assets.

2023 APAC REITs total return performance by country 2023 APAC REITs total return performance by sector
120
Industrial APAC REITs Residential Diversified Office Hospitality Healthcare Retail
115
20.0%
110
Australia 15.4%
105 Singapore 15.0%
100
Japan
95
10.0%
90
85
5.0% 2.5% 2.2%
80 Hong Kong 0.4%
75
0.0%
70
65 China -5.0% -2.7% -2.8%
60
31-Dec 31-Jan 28-Feb 31-Mar 30-Apr 31-May 30-Jun 31-Jul 31-Aug 30-Sep 31-Oct 30-Nov -6.2%
-10.0% -7.7%

Australia Singapore Japan Hong Kong China

Source: S&P Capital IQ, S&P Asia Pacific REIT Index USD total return (12/31/2022=100), as at Dec 2023 Source: S&P Capital IQ, S&P Asia Pacific REIT Index USD total return, as at Dec 2023

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 SECTORS Office Logistics Retail Living Alternatives Hotels REITs

Geographies
1 China 5 Singapore

2 Hong Kong 6 Australia

3 South Korea 7 India

4 Japan

25 | © 2023 JLL IP, Inc. All rights reserved.

 GEOGRAPHIES China Hong Kong South Korea Japan Singapore Australia India

Insurers on acquisition mode

Key trends:
• Uneven recovery: Policy support lifted consumer sentiment slightly; however, private investment remained weak as the property sector challenges
remained. On paper, China reached its growth target for the year without massive stimulus. GDP grew 5.2% in 2023.
• Investor caution: Office investors, in general, remained conservative and some were exploring exit strategies. Retail investors awaited more evidence
of recovery in the retail market.
• Capital sources: Domestic insurance companies and corporate occupiers emerged as major capital sources making real estate acquisitions.
Institutional buyers are waiting for the market to bottom.

Outlook:
• Growth moderation: The ongoing developer and local government debt clean-up process will continue to be a macro drag. Domestic demand recovery
is forecast to be slow and bumpy.
• Advanced manufacturing: The strong policy support for various high-end manufacturing industries is expected to instigate more investment into R&D-
related assets.
• Distressed sales: Measures to rein in real estate corporate leverage could impose more pronounced financial stress and induce distressed selling to pay
off debt.

Landmark Tower Key deals Asset Price (USD mn) Unit price / NOI yield Vendor Purchaser

Beijing Q4 2023
Beijing Capital Guangfulin
642 N/A Beijing Capital Group GIC
Project (2 assets)
China Life, Grandjoy
Q4 2023 Landmark Tower 587 USD 7,207 psm China Post Life
Holdings Group & GIC

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 GEOGRAPHIES China Hong Kong South Korea Japan Singapore Australia India

End-users dominate investment market

Key trends:
• High interest rates: The cost of debt remained elevated, as evidenced by the benchmark 1-month HIBOR rate staying at around 5%. Investor sentiment
remained cautious amid a prolonged period of high interest rates.
• End-user demand for office assets: Two sizeable office acquisitions made for occupation were recorded in Q4 2023. Occupiers opted to buy assets
during a market downturn, while investors remained inactive.
• Local investors target retail assets: More cash-rich local investors were interested in retail assets with existing tenancy and excellent transportation
network for long-term investment, as retail sales and tourist spending were recovering from 2022 lows.

Outlook:
• Rate cut prospect: The recent pause in interest rate hikes and prospect of rate cuts in 2024 shall boost investor sentiment in the near term.
Nevertheless, Hong Kong’s major banks may not cut prime rates immediately after the Fed.
• Price discovery: Market yields are expected to expand on the back of softer rents for office and industrial assets, which could potentially lead to
vendors lowering price expectations
• External risks: The commercial real estate market will be highly affected by external factors, including geopolitical tensions, China’s economic
performance and global demand.

Harbour East Key deals Asset Price (USD mn) Unit price / NOI yield Vendor Purchaser

Hong Kong Q4 2023

One Island East
691 USD 25,115 psm Swire Properties
Securities and Futures
(12 floors) Commission

Q4 2023 Harbour East 283 USD 21,121 psm Henderson Land Li Ning

27 | © 2023 JLL IP, Inc. All rights reserved.

 GEOGRAPHIES China Hong Kong South Korea Japan Singapore Australia India

Waiting for distress opportunities

Key trends:
• Limited liquidity: Liquidity remained tight as domestic asset management companies were facing ongoing issues from their overseas investments
regarding leasing, refinancing and dispositions, which reduced overall capital allocation to real estate.
• Slow investment market: While the leasing market stayed unabated with low vacancy and positive rental growth, investment activities slowed down
due to large bid-ask gaps and investor caution.
• Strategic investors: Domestic investors strived to form partnerships with strategic investors seeking offices for self-use to be more competitive with
pricing, while core investors actively gauged investment opportunities on logistics assets.

Outlook:
• Financing conditions: The dovish comments from the Fed have led investors to expect multiple rate cuts in 2024, though it is likely to take some time.
The cap rates will largely hinge on improvements in the funding market to reverse the softening trend.
• Distressed sales: Global investors will await distressed sales opportunities with a strong preference towards stabilised dry logistics assets.
• Hedging operational risks: Domestic strategic investors with affluent dry powder will continue to seek office assets for self-use in order to mitigate the
occupancy and operational risks associated with low vacancy and persistent rental growth.

Samsung SDS Tower Key deals Asset Price (USD mn) Unit price / NOI yield Vendor Purchaser

Seoul Q4 2023 Samsung SDS Tower 643 USD 6,465 psm / 4.1%
Ryukyung PSG AM &
KB AMC (KB Bank)
NH I&S

Q4 2023 MajeStar City Tower 1 394 USD 8,451 psm / 4.2% IGIS AMC (Invesco) Koramco AMC (NH I&S)

28 | © 2023 JLL IP, Inc. All rights reserved.

 GEOGRAPHIES China Hong Kong South Korea Japan Singapore Australia India

Limited investment opportunities

Key trends:
• BOJ policy: Consumer prices continued to rise, but wage increases were slow. Investors concerned about potential changes in BOJ’s monetary policy
and interest rate hikes when price and wage growth become balanced.
• Limited office opportunities: With employees returning to offices after the pandemic, demand was recovering in the office leasing market. However,
there were only limited investment opportunities in office properties in Tokyo CBD and transactions were mainly seen in fringe areas.
• Occupier acquisitions: Domestic investors seemed to be more bullish than overseas investors. Corporates and self-use occupiers emerged as new
Asset A picture capital sources, as evidenced by some transactions involving cash-rich occupiers acquiring leased properties.

Outlook:
• Office market recovery: Driven by the strong leasing market performance, investors will become interested in office assets again. Office investment
volumes are expected to recover while office transactions in the Tokyo CBD will increase.
• Interest rates: Interest rate hikes are expected to be gradual and cautious and property yield gaps are predicted to remain, thus the impact on the real
estate market will not be profound.
• Market risks: Japan’s shrinking population and acute labour shortage problem could dampen demand for real estate and cause decline in occupancy
rates across sectors.

Edion Namba Main Store Key deals Asset Price (USD mn) Unit price / NOI yield Vendor Purchaser

Osaka Q4 2023 Edion Namba Main Store 365 USD 15,901 psm Mapletree Investments Edion Corporation

Shin-Yokohama Square
Q4 2023 137 USD 8,582 psm / 3.9% TPG Angelo Gordon Orix JREIT
Building

29 | © 2023 JLL IP, Inc. All rights reserved.

 GEOGRAPHIES China Hong Kong South Korea Japan Singapore Australia India

Growing interest in retail

Key trends:
• Yield movements: Amid high interest rates, office capital values continued to fall, keeping market yields expansionary. Meanwhile, the uptrend in
prime retail and logistics/warehouse rents supported capital value growth and kept market yields stable for both sectors.
• Investor preferences: Freehold assets priced below SGD 500 million remained favoured. While investors were still keen on industrial assets due to their
positive yield spreads over interest rates, interest in retail assets was gaining traction.
• Mixed-use interest: Some large transactions involving institutional investors acquiring commercial buildings with office and retail portions were
recorded during the quarter.

Outlook:
• More investment activities: Investment volumes are expected to rise in 2024 as investors with capital to deploy will be on the lookout for acquisition
opportunities. Retail is anticipated as the investment hotspot.
• Sector performances: Pent-up demand could drive recovery in the office market by H2 2024. Logistics/warehouse yields shall hold steady on the back
of rental growth prospects and sustained buying demand, while yields for prime retail assets could compress due to growing investor interest.
• Macro concerns: Unforeseen interest rate hikes and worsening geopolitical situations could conceivably derail the envisaged macroeconomic recovery
and deter property market revival.

VisionCrest Commercial Key deals Asset Price (USD mn) Unit price / NOI yield Vendor Purchaser

Singapore Q4 2023 VisionCrest Commercial 327 USD 23,627 psm

Union Investment Metro Holdings, TE Capital
Real Estate Partners & LaSalle
Lian Beng Group &
Q4 2023 Wilkie Edge 259 USD 18,062 psm Keppel Capital
Apricot Capital

30 | © 2023 JLL IP, Inc. All rights reserved.

 GEOGRAPHIES China Hong Kong South Korea Japan Singapore Australia India

Stable investor sentiment

Key trends:
• Asset re-pricing: Investor sentiment in the market has remained stable throughout H2 2023. Investors were in the mindset of reviewing opportunities,
but still assessing the current asset re-pricing trend carefully.
• Bid-ask spreads: The wide bid-ask spreads remained across most property sectors and have been hindering the execution of real estate transactions
throughout the year.
• Balance sheet management: Some major owners have begun to selectively divest assets to shore up balance sheets, but there have not been
any major signs of distressed selling to date.

Outlook:
• Capital recycling: While the institutional real estate market in Australia is well capitalised relative to other markets, some capital recycling for sector re-
allocation purposes is still expected to drive asset sales.
• Interest rates: The futures market has forecast the cash rate has now peaked at 4.35% and is likely to remain elevated. However, while bond yields
declined over Q4, the volatile risk-free rate is creating some uncertainty around where long-term expected return hurdles should sit for real estate.
• Softening yields: Yields across all core property sectors are forecast to continue to soften in 2024 before beginning to stabilise in the medium term.

60 Margaret Street Key deals Asset Price (USD mn) Unit price / NOI yield Vendor Purchaser

Sydney Q4 2023 60 Margaret Street 518 USD 10,983 psm Mirvac & Blackstone AsheMorgan

JLL deal Q4 2023 Cairns Central 254 USD 4,818 psm

Lendlease Australian Prime
Property Fund
Fawkner Property

31 | © 2023 JLL IP, Inc. All rights reserved.

 GEOGRAPHIES China Hong Kong South Korea Japan Singapore Australia India

Attractive emerging market

Key trends:
• Economic environment: Healthy economic momentum was bolstered by government spending; private consumption indicators were mixed and trade
faced pressure from slow global growth.
• Demand for office: Robust leasing demand for office driven in part by employees returning to the workspace. Growing number of real estate funds
pointed towards good quality office assets offering high rental yield.
• Risk appetite: More non-core asset transactions were recorded, indicating a higher risk appetite and focus on potentially higher returns by institutional
investors. Investors were seeking to capitalise on the emerging trends in India and deploying more opportunistic strategies.

Outlook:
• Sector diversification: The office sector will continue to be favoured in 2024. Moreover, alternative sectors, such as data centres and student housing,
will also attract a larger share of institutional investments.
• Risk aversion: Prolonged global economic uncertainties and monetary tightening in developed markets can lead to increased risk aversion among
investors, who would become more cautious about allocating capital into real estate.
• Political risks: The upcoming elections can possibly have an impact on all investments, including the real estate sector. Despite optimism from the
market perspective, there can be delays in decision making.

Farukhnagar Warehouse Key deals Asset Price (USD mn) Unit price / NOI yield Vendor Purchaser

Delhi NCR Q4 2023

CapitaLand India Trust
22 N/A TBC CapitaLand India Trust
Portfolio (2 assets)

Q4 2023 Farukhnagar Warehouse 11 USD 376 psm Welspun Mapletree Logistics Trust

32 | © 2023 JLL IP, Inc. All rights reserved.

APPENDIX

Direct deals
Transaction Date Sector Price (USDmn) Vendor Purchaser Remarks
China
ZT International Center (Blocks C & D) Nov-23 Office 498 GLP GCP China Office Income Fund I
GLP Logistics Portfolio Oct-23 Industrial 484 GLP GCP 4 properties
West Bund Finance Center Block B3 Dec-23 Office 415 Hongkong Land & Ping An Easy Money
Westin Beijing Chaoyang Nov-23 Hotel 398 China Jinmao Bohai Runze
ESR Logistics Portfolio Nov-23 Industrial 282 ESR Cayman Taikang Insurance Group 6 properties; 95% stake
Hong Kong
Kerry Warehouse (Fanling I) Nov-23 Industrial 128 Kerry Properties China Resources Logistics
Kiu Fai Mansion (G/F-6/F) Nov-23 Retail 102 Private investor Religious institution
Hale Weal Industrial Building Dec-23 Industrial 72 HSBC Blackstone & StoreFriendly Self-storage conversion
South Korea
Logishub Incheon Nov-23 Industrial 233 Pebblestone AMC Pebblestone AMC (AEW)
Monvert Country Club Dec-23 Country Club 186 Winia Electronics Hankook Ilbo
Megabox Seongsu Square Dec-23 Retail 184 JoongAng Multiplex Development Krafton
HSBC Building (B1 & 8/F-18/F) Nov-23 Office 137 Kclavis Asset Management & Prain Global Shinhan REITs Management
Sujeong-ri Logistics Center Dec-23 Industrial 114 Metheus AMC Mastern Investment Management
Japan
Gotenyama SH Building Oct-23 Data Centre 474 Sekisui House REIT TIS
Japan Metropolitan Fund Living Portfolio Dec-23 Living 120 TBC Japan Metropolitan Fund Investment Corporation 12 properties
Logiport Nagareyama Building B Nov-23 Industrial 89 LaSalle Logiport REIT TBC 37.5% stake
NBF Ueno Building Nov-23 Office 67 Nippon Building Fund Global One Real Estate Investment Renamed Global One Ueno
Singapore
Shenton House Nov-23 Office 399 TBC Shenton 101 Collective sale
Mercatus Retail Portfolio Dec-23 Retail 130 Mercatus Evia Real Estate 9 properties
Serene Centre Oct-23 Retail 76 Private investor Apricot Capital
Australia
Chatswood Chase Oct-23 Retail 200 GIC Vicinity Centres 49% stake
175 Eagle Street Nov-23 Office 158 Charter Hall Group Hancock Prospecting
Sheraton Grand Mirage Resort Gold Coast Nov-23 Hotel 125 Star Entertainment Group & Chow Tai Fook Enterprises Laundy Hotels & Karedis Family
Sofitel Brisbane Dec-23 Hotel 116 Brookfield Properties City Developments Limited
55 Elizabeth Street Dec-23 Office 112 Credit Suisse Real Estate Fund International Elanor Managed Fund

33 | © 2023 JLL IP, Inc. All rights reserved.

APPENDIX

JLL thought leadership compendium

Investor Intel Cold storage opportunity in APAC Life Sciences Industry & APAC Hotel investment Data Center parks: The future of
Real Estate Perspective highlights – 2H 2023 sustainable and orderly DC
2024 (APAC) development

Global Real Estate Perspective Global Capital Outlook 2024 Global Real Estate Outlook APAC cross-sector report Capital Tracker Q3 2023
2024 Q3 2023

34 | © 2023 JLL IP, Inc. All rights reserved.

Authors:
Pamela Ambler Sungmin Park, CFA, CAIA Jeffrey Sun Durga Gopalan
Head of Investor Intelligence Director, Cap Mkts Research Manager, Cap Mkts Research Analyst, Cap Mkts Research
Asia Pacific Asia Pacific Asia Pacific Asia Pacific
+65 9351 1669 +65 9062 5867 +852 2846 5152 durga.gopalan@jll.com
pamela.ambler@jll.com sungmin.park@jll.com jeffrey.sun@jll.com

For more information, please contact:

Stuart Crow Rohit Hemnani Tim Graham Martijn Van Eldik Paul Brindley
CEO, APAC Capital Markets COO & Head of Alternatives, Head of International Capital Head of Equity Advisory, APAC Head of Debt Advisory, APAC
+65 6494 3888 APAC Capital Markets +65 9638 6227 martijn.vaneldik@jll.com +65 8028 7794
stuart.crow@jll.com rohit.hemnani@jll.com tim.graham@jll.com paul.brindley@jll.com

jll.com.sg
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