INTERNATIONAL REPORT

CONSTRUCTION MARKET INTELLIGENCE

THIRD Quarter 2012

INDEPENDENT CONSULTANTS LOCAL KNOWLEDGE AND EXPERTISE GLOBAL NETWORK

RIDER LEVETT BUCKNALL
Rider Levett Bucknall are independent property market and construction cost consultants with offices located globally.

THE INTERNATIONAL REPORT

The Rider Levett Bucknall International Report is published twice-yearly and provides detailed local construction market intelligence and data.

THE INTERNATIONAL REPORT UPDATE SURVEY

The Rider Levett Bucknall International Report is supplemented by the twiceyearly International Report Update Survey.

Rider Levett Bucknall, through professional excellence and proven performance, continues to grow as one of the world's most active property and construction consultancy groups. We strive to advance through innovation and research, publishing Cost Reports with particular reference to the regions in which we do business. Partnering is central to our customer proposition. The successful completion of any project is a team effort and over the years Rider Levett Bucknall has developed efficient relationships with its clients and leaders in the property and construction industry. As weve developed new ways to achieve optimum technical and economic outcomes for projects, weve challenged not so much what we need to do today, but what we need to do tomorrow to ensure we lead the way. This philosophy is about reading trends in the market, our clients and their businesses to achieve profitable and successful outcomes. The International Report third quarter 2012 is part of this strategy. A productive and progressive approach can also be seen in industry support on a global basis such as sponsorship of the World Architecture Festival (WAF), the worlds largest festival and awards dedicated to celebrating and sharing architectural excellence from across the globe. Through initiatives like WAF Rider Levett Bucknall ensures best practices are actively encouraged. 2012 heralds the festival's move to Marina Bay Sands in Singapore (3-5 October). Rider Levett Bucknall is proud to have provided cost consultancy services to this landmark development. Visit rlb.com/app

Cover: Chengdu City, Sichuan, China

Disclaimer: While the information in this publication is believed to be correct at the time of publishing, no responsibility is accepted for its accuracy. Persons desiring to utilise any information appearing in the publication should verify its applicability to their specific circumstances. Cost information in this publication is indicative and for general guidance only and is based on rates as at July 2012.

INTERNATIONAL REPORT

The International Report, covers the globe, providing a half-yearly snapshot of construction market conditions and price movements around the world, via commentaries and analysis from Rider Levett Bucknall Directors in key locations A broad overview of regional economic issues is provided on Page 1, followed on pages 3-27 by commentaries from Rider Levett Bucknall Directors in multiple locations in each region. Commentary on each region is supplemented by a Construction Cost Relativity table for that region. This edition of the International Report is pleased to welcome commentaries and market analysis from Chengdu, Jakarta, Manila and Mumbai. Our Asia Focus section on these cities, pages 9-12, showcases the rapid economic and commercial development in each location, as Asian development continues apace. Pages 28 and 29 feature Construction Rates for building types in cities within each region, providing easy comparison between locations. Pages 30 and 31 consider the wider issue of general market activity levels for seven building types, in each location, using the Rider Levett Bucknall Construction Activity Cycle Model to provide an insight into market movements. Regional analysis of this data is shown on page 31, with a total of responses within each cycle-sector, giving an overview of activity levels in each Region. On pages 32 and 33 we feature Key Statistics the data that describes countries general economic performance, as a backdrop against which the construction industry functions on the ground. Overall International Construction Cost Relativity is shown on page 34, with each location placed in its ranking spot in respect of al the other locations in the study. The International Report is a member of a suite of Reports produced by Rider Levett Bucknall. Currently, in addition to the International Report, the suite comprises the Caribbean, European, Gulf States, Hong Kong and China, Oceania, Singapore, USA and Vietnam Reports Each document has its own unique flavour, driven as they are, by the conditions and circumstances of the particular economy in question. All are available at www.rlb.com. Textual commentary is also featured in the Rider Levett Bucknall Intelligence Smartphone App and via Desktop WebApp, at www.rlbintelligence.com

Instant cost data on the spot

Rider Levett Bucknall Desktop app The fastest way to get the latest construction cost information right at your ngertips

Also available: RLB Intelligence Smartphone app Available on iPhone, Android, Windows Phone7 and Blackberry Operating Systems

rlbintelligence.com

Global Construction and Property Advisors

INTERNATIONAL REPORT
Asia With the Eurozones debt crisis showing no signs of abating and the sluggish rate of recovery of the US economy, Asian export markets have been negatively affected by the slowdown in the global economy. Chinas real year on year GDP growth slipped to 7.6% in the second quarter of 2012, slowing for the sixth consecutive quarter to the lowest since the global financial crisis in the first quarter of 2009. The central government has been easing its fiscal and monetary policies as inflation has moderated. Chinas inflation rate was as low as 2.2% in June, suggesting that more policy relaxation is likely in the near future in order to stimulate domestic construction demand. Looking ahead, construction activity levels in Asia are likely to remain sufficient to maintain steady growth momentum as domestic consumption is pursued, offsetting weaker exports. Tender prices in most locations in Asia are expected to be flat or to rise moderately in the next couple of quarters. Americas The economic news for the United States for the first half of 2012 has been mixed, and somewhat disappointing, after another strong start to the year. The important Consumer Confidence Index declined in May and then fell further in June, showing the difficulty that the general economy has in building steam. Home foreclosures continued to fall generally, but faster in those states in which Deeds of Trust are used rather than mortgages. Some states, such as Arizona, are already reporting rising home prices. New home construction continued to show signs of a rebound, with modest gains in starts, which followed the big quarterly gains of 32%, 49% and 23% from the 3rd quarter of 2011 to the 1st quarter of 2012.

Commercial construction activity remained tame although there was life in a few sectors such as hospitality (responding to a pick-up in business travel) and New York City continued to do well. EMEA The European crisis is having a significantly de-stabilising effect on members of the global economy, and all the more so on the members of the troubled region themselves. The UK is seeing a slowdown in all areas of the economy, as lack of available funding from risk-averse banks and Government austerity measures take hold. Developers are struggling to secure pre-lets and adequate margins to meet funding requirements and the housing market rests at 10 year lows. In the Middle East, Qatars economy remains one of the strongest performers in the world, with recent increases in oil production. A number of mega-projects are underway and tendering has begun for infrastructure projects for FIFA World Cup 2022. The non-hydrocarbon economy continues to recover in the UAE, while limited potential oil production increases will keep growth moderate. Residential over-supply remains a factor in Dubai, although a resurgence in non-residential construction activity is apparent. As in Qatar, a number of on-going mega-projects continue to drive activity in Abu Dhabi, with most sectors performing strongly. Oceania Construction in Australias resourcedominated states of Western Australia, Queensland and Northern Territory remains buoyant as ongoing investment from the mining sector stimulates activity.

Elsewhere, in the South Eastern states, activity struggles to show signs of improvement. Extreme concern over declining future workloads is haunting the Sydney market as a number of contractors have gone into administration. Reduced opportunities and increased uncertainty in Adelaide is weighing heavily, and Melbourne, although only showing early signs of decline and with a surge in apartment approvals, continues to be hampered by problems of access to finance. The recent advent of the Carbon Pricing Mechanism (CPM), commonly referred to as the Carbon Tax, raised significant concerns as to how building pricing would be affected. These concerns have not yet abated completely. At the time of publication, any measurable effect is still unclear, due to the high levels of competition in many regional markets. Separating truly CPM-related cost impacts from non-CPM-related cost imposts may be challenging for those wishing to pass on a price increase, especially considering the watchful attention of the Australian Competition and Consumer Commission (ACCC). As New Zealand households, and the Government itself, continue to de-leverage, the economy remains subdued. In Auckland, weak activity pervades both the residential and non-residential sectors, however there are signs that the market has at least stabilised. With the release, in late July, of the Christchurch central city development blueprint the construction market may be able to develop some confidence to begin the reconstruction process. Some residential reconstruction is already underway and tender price increases are evident, which suggests that pressure will only grow once CBD construction begins. Wellington remains at historic lows, with little to suggest an upswing in market conditions in the short term.

Hong Kong harbour, Hong Kong

INTERNATIONAL REPORT
MARKET INTELLIGENCE ASIA
Beijing
Supply of Grade A offices in Beijing has remained tight and new space has been quickly absorbed by the robust demand from multinational companies and domestic enterprises, to fulfil headcount expansion plans in the capital. The rents of CBD office space in Beijing have reached historic highs. The governments continued tightening policies have damped the overall residential property market, with a plummet in loans, sales transaction volumes and capital values. However, the government announced in the Beijing 2011-2015 land supply plan that there will be no land supply for residential use within the 3rd Ring Road in Beijing, with future residential developments mainly focused in suburban areas. Although the overall stock of commercial properties in Beijing is huge, its geographical distribution is unreasonable. With this rapid development in the southern and western regions of Beijing, developers are looking for potential commercial property development opportunities within those regions. The Beijing construction industry continues to maintain a steady growth momentum. As more office, commercial and suburban high-end residential projects are expected to commence in the next couple of quarters, tender prices are forecast to rise moderately.

Hong Kong
According to Rider Levett Bucknalls Tender Price Index, which measures tender price movements of builders works in the private sector in Hong Kong, there was an increase of 2.1% in tender prices in the first quarter of 2012. On a year-on-year basis, the increase was 8.4%. Hong Kongs economy grew by 0.4% year-on-year in real terms in the first quarter of 2012, compared with the 3% increase in the fourth quarter of 2011. According to the Composite Consumer Price Index, overall consumer prices rose by 4.9% in March 2012 over the same month a year earlier. The seasonally adjusted unemployment rate was 3.4% in January to March 2012, which is the same as that recorded in December 2011 to February 2012. In the past few months, the Eurozone sovereign debt crisis has appeared increasingly unstable. While the economy in the United States has exhibited some early yet uncertain signs of recovery, Chinas economy has been growing at a much slower pace than that in the past decade. Materials prices are therefore more stable than a year ago. Locally, the construction industry has been dominated by large infrastructure works, with the peak of construction output expected in the coming two years. The shortage of skilled labour and construction professional staff will remain a major concern in the next two to three years. With abundant job prospects, contractors are unwilling to bid for building projects that are complicated or have many site or programme restrictions. Tender prices are therefore expected to continue to rise in the remaining months of 2012.

Asia Construction Cost Relativities Hong Kong Macau Singapore Beijing Shanghai Guangzhou Shenzhen

Jul 12 128 105 99 89 86 77 75

INTERNATIONAL REPORT
MARKET INTELLIGENCE ASIA
Guangzhou
Guangzhous recent GDP slowdown has followed the national trend, amid weakening exports and the slashing of infrastructure investment. Government measures to curb soaring house prices last year have resulted in house prices having fallen by about 10% this year, as developers cut prices to boost sales and cash flow. Although the residential property sector is slower now, new house sales recently showed signs of life, as buyers see prices becoming attractive. House price decline will ease as inventory is taken up, but government remains adamant in retaining ongoing restrictive measures. Local governments efforts, in boosting domestic consumption and foreign business set-up, have protected the commercial property sector. Shortly, the commercial sector will have the greater share of the property market in Guangzhou, which has been accustomed to being dominated by the residential sector. Recent statistics have revealed flagging economic growth and abating inflation, as gauged by CPI figures, which receded to 3.4% in April 2012, from 5.4% in 2011. There are signs that the government is gearing up for renewed monetary easing. Banks Reserve Requirement Ratios have been lowered from the peak several times, alongside interest rate cuts. There are also government proposals to moderately beef-up fixed asset investment, including infrastructure and subsidised housing. Looking ahead, economic growth is likely to remain promising, though not as strong as before. Construction activities should cushion the downturn of residential property. Tender prices are expected to be flat or to rise moderately in the next couple of quarters.

Macau
According to the Statistics and Census Service of the Macau government, Gross Domestic Product for the first quarter of 2012 rose by 18.4% year-on-year in real terms, compared with the 17.5% growth in the fourth quarter of 2011. The unemployment rate for February to April 2012 was 2%, down by 0.7 per cent over the previous period. The average daily wage of construction workers was MOP563 in the first quarter of 2012, a decrease of 3.4% on a quarter-to-quarter basis. The average daily wages of skilled and semi-skilled workers decreased by 4.2% to MOP568 and that of unskilled workers increased by 1.9% to MOP373. Construction activities have been picking up since 2010. There was a total of 351,501m2 of gross floor area granted construction approvals in 2011, which was a significant increase compared with the 95,265m2 of gross floor area approved in 2010. Looking ahead, several casino operators have announced plans to commence construction of the next phases of casino and resort projects this year. The aggregate floor area of these projects will far exceed 2 million square metres. As there is a shortage of skilled construction workers in Macau and there are restrictions on importing labour, the rise in construction costs is expected to continue in the near future.

INTERNATIONAL REPORT
MARKET INTELLIGENCE ASIA
Shanghai
A total of RMB 61.3 billion was invested in Shanghais property developments between January and April 2012, which is a 0.1% drop compared to the same period last year. It represents 50.1% of the overall fixed asset investment. Of the total investment in property developments, some RMB 38.64 billion or 63% was invested in the residential sector, a 0.8% increase compared to the same period last year. Of this, RMB 7.25 billion, or 11.8%, was invested in the commercial sector, a 19.1% increase compared to the same period last year, while RMB5.05 billion or 8.2% was invested in the office sector, a decrease of 14.2%. Between January and April 2012, a total floor area of 9,481,500m2 commenced construction, which was a drop of 24.4% compared to the same period last year. Within this, about 5,777,800m2 was for residential properties, a drop of 33.9%. As the policy of controlling property prices is still in place, the Shanghai property market has been following the guideline of "Three Priorities" priority for local residents, priority for ordinary quality properties, and priority for dwelling only. The result has been a drop in the total area of newly commenced projects, and a rise in the total completed floor area. Investment in commercial properties is still on the rise, but the sale of all types of properties has continued trending downwards. Consequently, construction costs in Shanghai are not expected to show any significant increase in the coming months.

Shenzhen
Shenzhen is transforming into the business hub of southern China. In recent years most of the new developments in Shenzhen have been office and retail, or mega-scale mixed use developments comprising hotels, serviced apartments, convention centres and a small amount of residential units. As the central government's cooling down measures have pin pointed residential development, Shenzhen's construction activities have not been overly affected. While local demand for labour and plant has not been affected by the governments monetary policy, the prices of major building materials such as steel, aluminium, copper etc. have been impacted by the decrease in demand in the global market. The combined effect has been a moderate range of movement in tender prices, with this trend expected to continue into the near future.

Construction in Shanghai, China

INTERNATIONAL REPORT
MARKET INTELLIGENCE ASIA
Singapore
With the Eurozones debt crisis showing no signs of abating and the sluggish rate of recovery of the US economy, Asian export markets will be similarly affected by the slowdown in the global economy. It remains to be seen whether current levels of growth can be maintained in the long-term. Singapore rebounded from a 2.5% contraction in the previous quarter to 10% quarter on quarter (QoQ) GDP growth in the first quarter of 2012. However, generally Singapores economy grew by 1.6% year on year (YoY), a drop from the 3.6% annual growth of the previous quarter. The manufacturing sector grew by 19.8% QoQ, attributed mainly to higher production levels across all key manufacturing clusters, particularly in electronics and precision engineering. Despite the present global downside risks, Singapores Ministry of Trade and Industry maintained its economic growth forecast of 1% to 3% for 2012. Property prices fell by 0.1% QoQ, compared to an overall 0.2% quarterly rise in the previous quarter. This is the first fall in prices since 2Q2009. A total of 6,903 private residential units were launched in the first quarter of 2012, compared to just 4,105 units in 4Q 2011. A surge in sale of shoe-box units (smaller than 50m2) was observed with 1,764 units sold, accounting for 27% of new sales in 1Q 2012. Office property prices remained flat, while shop prices posted 0.2% quarterly increase. Industrial properties prices soared 7.3%, indicating continued investment interest for commercial and industrial properties. The Construction sector grew 7.7% YoY, with impressive 32.1% quarterly growth, an improvement from the 2.2% contraction in 4Q2011. This was due largely to an increase in construction activities in residential and institutional sectors. However, there was a decline of 29% in construction demand in 1Q2012, QoQ, with public demand falling by 23% and private demand by 34%. Notably, public and private residential demand fell by 40% and 35% respectively and private commercial demand fell 77%. An encouraging sign on the other hand is a 51% increase in public industrial demand in 1Q2012, compared to the previous quarter. Construction demand appears set to increase in the next few quarters. Overall, Singapores building tendering market has remained competitive in the last quarter. The impact of the rise in labour cost due to increased levies, reduced ManYear Entitlement (MYE) and shortage of skilled workers is being felt, with greater pressure on tender prices. Global uncertainty has impacted on global commodity prices, causing marginal falls in April following an upward trend in the first three months of 2012. Rider Levett Bucknalls Tender Price Index posted a 1.1% quarterly rise for 1Q2012. In view of more public sector projects coming on-line from the second half of 2012, coupled with potentially higher commodity prices, building tender prices could trend higher towards the end of 2012.

Cityscape of Jakarta

INTERNATIONAL REPORT
MARKET INTELLIGENCE Asia FOCUS
Chengdu
Chengdu is one of the most important business hubs and transportation centres in China. Geographically, it is the most convenient urban centre for transit to Tibet and Xinjiang. Generally speaking, the tier one cities in China are usually considered to be Beijing, Shanghai, Guangzhou and Shenzhen. Chengdu is classified as the first of the 'tier 1.5' cities, and therefore is usually ranked as the 5th most important city in China in terms of overall economic development and financial strength. In the first quarter of 2012, Chengdu's GDP was 13.6% higher than that in 2011. The rise of Chengdu's property market and construction industry was relatively late compared to major coastal cities in China, but the property market has become more active in recent years, thanks to the central governments "Go West" policy. Fixed investment in infrastructure grew by 30% year-onyear (YoY) in the first quarter of 2012. The four tier 1 cities aside, Chengdu has the largest stock of Grade A office space in China. In the next two years, the growth of Grade A office stock in Chengdu is forecast to be about 2 million square metres, which is the biggest among cities in Central and Western China. In 2007, Chengdu was stated by the World Bank to be a Benchmark city for investment environment in inland China. While some of the more developed cities in China have been affected by the impact of macroeconomic control policies of the central government, the construction industry of Chengdu has not been adversely affected. On the contrary, the property market has become increasingly important since 2010 as it has attracted not just international developers, but also 'local' developers from all over China. Currently the performance of both public and private construction projects has been very strong and there is great potential for the construction industrys continued expansion in Chengdu.

INTERNATIONAL REPORT
MARKET INTELLIGENCE Asia FOCUS
Jakarta
The Governor of Bank Indonesia (the central bank), Darmin Nasution, has forecast Indonesias 2012 economic growth to be below the governments target of 6.7%, set in the 2011 draft state budget. This is primarily due to the slowdown in global economic performance as a result of the financial crises in the United States and Europe. The Bureau of Statistics noted that economic growth of 6.3% in 1Q2012 was driven by improvement in the transportation, communication, trade and services, and construction sectors. National construction growth in 1Q2012 stood at 7.3%, with spending of IDR40.5trillion, a rise of 0.5% compared to the same period last year. Infrastructure has been a persistent hurdle in improving economic efficiency in the country as well as in holding back foreign direct investment. The government has passed the land acquisition law, for which Fitch Ratings has raised the countrys sovereign debt rating, and as a consequence of which Indonesia should have wider access to investors funds. This is in line with the national efforts to speed up infrastructure development for seaports, airports and toll roads, which Finance Minister Agus Martowardojo predicts will support Indonesias projected 7 to 7.7% growth in 2014. In line with national planning, Indonesia is expecting to deliver over US$150 billion in infrastructure projects over the next five years. For this, the government had intended to cut the fuel price subsidy to free-up some funding for infrastructure developments. This planned subsidy cut was scheduled to kick in from April 2012, but was postponed for further review. Nonetheless, prices in the construction industry started to increase in anticipation of this subsidy cut. Some infrastructure works are already underway, notably the Sunda Strait Bridge, the countrys first super express train, the construction of a new railway in southern Sumatra, new toll roads, airports and many other projects. Confirmation of increasing foreign interest in Indonesia is evidenced by the high passenger growth rates recorded by Soekarno-Hatta Airport in recent months, establishing it as one of the 12 busiest airports in the world. Despite the high levels of foreign interest, housing pricing has not increased much in inflation adjusted terms. Such damping of prices is due in part to the market over-supply of the past few years and to the high mortgage interest rates, high tax rates, red tape, and the like. Although the global slowdown has affected the Indonesian economy to some extent, the government has taken positive steps to make available funds allocation to ensure an attractive investment climate that would draw in foreign investors. The slow growth and low interest rates in developed countries since 2008 have pushed funds to emerging markets in recent years, not least Indonesia. With increasing investment by both local and foreign investors, long-term growth in Indonesia now appears to be even more assured.

10

INTERNATIONAL REPORT
MARKET INTELLIGENCE Asia FOCUS
Manila
The Philippine construction industry anticipates an influx of opportunities both in public and private construction, with Php170 billion worth of projects to be tendered this year, combined with a 240 kilometre road network planned by the Philippine government. These projects are designed to boost the country's performance on specific indicators in the construction industry. The government has already identified several Public-Private Partnership (PPP) Projects up for bidding this year, while the PPP projects for school buildings have already been published for tender. With this high level of construction activity, the capacity of all facets of the industry may be stretched. The construction of high rise residential condominiums by major developers and owners is also in full flow across the entire region, from Manila to Cebu. The labour and material prices for ready-mix concrete, steel and aluminum products increased minimally over Q1 2012. However, with the rolling back of oil prices during the second quarter, we anticipate some downward pressure on the cost of construction materials. The Philippine foreign currency exchange has experienced minimal changes outside the normal ranges of fluctuation of around Php 42.00 to Php 43.50 per US$. While the average GDP growth across the ASEAN countries slowed last year to 4,8% from 6.9%, the Philippine economy grew at a manageable 3.7%. Though posting a lower rate of growth, the country was able to withstand the weak global demand derived from external economic tribulations. Despite the fact that government spending on infrastructure was belatedly pushed last year, and while fishing production and exports have consistently declined, resilient performance in the services sector and strong consumer spending compensated for the years otherwise sluggish performance. Specifically, services under the Real Estate sub-sector grew annually by 17.0%, while Renting and Other Business Activities increased by 9.6%. Last year, the services sector contributed more than 40% of the countrys gross national income, which reached over Php7.7 trillion (+2.6%). Meanwhile, consumer spending increased by 6.1% in 4Q 2011. Inflation further contracted to 2.7%, pushing lending rates to their lowest levels of between 5%-8%. The economic outlook from most multinational institutions is for the Philippine economy to grow between 3.5% and 4.0% in 2012.

11

INTERNATIONAL REPORT
MARKET INTELLIGENCE Asia FOCUS
Mumbai
The global turmoil, along with internal policy stagnation, has forced India to revise its growth forecast to 5 to 6% of GDP, against targeted growth of 7-7.5%. With higher inflation in food and commodities, Banks have so far resisted reducing higher interest rates, leading to a quasi slow-down in the real estate sector in India. With International investments being stagnant at present, owners and developers have reduced their expansion programmes due to large inventory of available space in metropolitan cities across India. Higher taxation in the recent budget, along with hikes in petroleum products and changed development rules in Mumbai, have once again spiked the input costs for developers, leading to pressure on gross margins. In the short to medium term, the market appears to be adopting a cautionary approach in general. Recently, properties located in select metropolitan areas have commanded an investment premium. With the right price and product mix and credible developers, investors are ready to take more risk. Bulk discount schemes have been floated privately, and have lead to price correction in select micro-market segments. Investors, taking advantage of the poor capital position of developers, have been successful in negotiating favourable deals with additional amenities and financing options. However the Rehabilitation / Real Estate Regularity Bill, which is pending before Parliament, may change the rulebook of the developers and it remains to be seen how the market moves with the proposed new laws. The residential sector is doing well in certain market sub-sectors such as Bangalore, Chennai and Pune, However, some metropolitan cities such as Mumbai Metropolitan Region and Delhi National Capital Region have seen reduced activity, possibly due to higher overall pricing levels of properties and elevated interest rates. A new phenomenon for the commercial real estate sector is that of high vacancy rates and large pipelines, accompanied by rentals increases. This seems to suggest a move toward preferred locational outcomes. For non-CBD locations, rentals are expected to be stagnant in the near to short term. Built-toSuit facilities for IT companies have staged a comeback, while Special Economic Zones have encountered headwinds due to difficult market conditions. It is expected that, after new policy decisions on foreign direct investments in retail and industrial sectors, there could be some upswing in the offing. However, the retail sector in general will continue to expand in Tier I to Tier III cities and remains a sector which could perform strongly in the next few years. The retail sector is also helped by flexible lease terms and revenue share models by developers, which make certain destination more appealing to consumers as well as to retailers. In the next 6 to 8 months, the construction sector could see increased input costs, as well as strong market-resistance to the gross profit margins of the developers and contractors. There could be the possibility of underbidding by contractors to pick up projects at loss/no profits levels as well. Overall, the real estate sector may witness slower growth, depending on the financial stability and the condition of the overall Indian economy. As ever, developers with the right project/ product mix, the right location and attractive pricing will receive attention from investors. With strong economic fundamentals and an expanding, youthful population, the long term market view seems to be positive.

12

INTERNATIONAL REPORT
MARKET INTELLIGENCE USA
Phoenix
Arizona's economic recovery continues to move at a slow pace in 2012. Following three straight years of increases, the State's overall unemployment rate has reduced from 9% in late 2011 to 8.2% in mid 2012. However, unemployment within the construction industry remains high, at over 10%. The real estate and housing markets in Arizona, weakened severely since 2008, have started to show some signs of modest improvement, with permits and construction of new single family and multi-family housing on the increase. The average vacancy rate for the 1st Quarter 2012 for Metropolitan Phoenix was 8.48%, the lowest first quarter rate since 2007. Sustained improvements throughout the remainder of 2012 may finally end five consecutive years of decline within the residential sector. In the office market, the absorption rate has also improved recently. However, the balance between absorption and vacancy is still askew, resulting in few multi-tenant office buildings under construction and no significant speculative multitenant building expected for some time. The industrial market has seen consecutive quarters of positive absorption which, combined with decreased vacancy, has resulted in significantly increased demand for construction of industrial facilities across the Phoenix Metro area.
USA Construction Cost Relativities New York Honolulu San Francisco Boston Los Angeles Washington Seattle Portland Las Vegas Phoenix Denver

Honolulu
Hawaiis economy is on a path to recovery, as its major economic indicators improved during the first quarter of 2012. Within the tourism sector, visitor arrivals have gone up by 8.6% as an influx of domestic and international traffic moves through the islands. Visitor expenditures have also increased significantly, going up by 13.5%. Tourism has benefited the economy in Hawaii as more individuals are finding employment within the hospitality industry. Increased tourism will bring the need for more visitor-related construction improvements over the next year and the General Excise Tax Base for this year is forecast to be 9.6% more than last year at approx. 6.4 billion. The construction industry outlook is looking brighter as the year goes by, with a forecast 2.1% increase in the number of construction jobs this year in comparison to last year, and an 8.8% increase predicted between this year and next year. These changes can be attributed to the flourishing high-rise condos, retail, and resort development projects in the Hawaii construction industry. Hotels owners are beginning to reinvest in upgrades to their properties. With tourism numbers up, many hotels are continuing with renovations after having deferred plans over the last few years due to the economic downturn. Additionally, the State has been pushing hard to kick off the Rail Transit Project in Honolulu. The start of the rail project would provide increased opportunities for the construction sector and create additional employment opportunities for many contractors.

Jul 12 155 141 137 133 125 124 106 97 93 93 93

Arizonas leading economic indicators are residential and commercial construction. As the latter closely follows the performance of the former, recent improvements within the residential sector offer some reasons for optimism that the much anticipated economic recovery may gather some momentum over the remainder of 2012 and beyond.

13

Waikiki, Honolulu

INTERNATIONAL REPORT
MARKET INTELLIGENCE USA
Las Vegas
Construction activity in Las Vegas remains slow in 2012, although there has been an interesting area of improvement with land sales up 38% from a year ago and an increase in the price paid per acre. Residential building permits have also increased significantly from a year ago, although there is still a potential damping effect from bank-owned homes that have yet to be released onto the residential market. Demand for new commercial construction is soft. However, there does seem to be an increase in renovation work as the hospitality industry starts to catch up on work that was deferred during the worst part of the recession. Vacancy rates within the commercial sector have changed little and remain high (25.2% offices, 10.5% retail and 19% industrial), although there have been some notable new commercial construction projects including Skyvue, Project Linq and Zappos Head Office. With construction price escalation remaining at low levels, it is a good time for Owners to build, with Contractors continuing to bid for work at competitive prices. Overall levels of competition for construction work are also keeping fees low. Local unemployment remains at a high 12.3%, after hitting a peak of 12.7% in January. Many constructionrelated firms continue to operate on skeleton staff while diversifying in order to remain competitive and also focusing on other States or overseas for opportunities. The remainder of 2012 will continue as it did in 2011 with very slow growth in the commercial construction sector and modest growth within the residential sector.

15

INTERNATIONAL REPORT
MARKET INTELLIGENCE EMEA
Birmingham
Ongoing fears surrounding the Eurozone crisis continue to impact construction with 5.4bn less work than 2011, nationally. This will adversely affect Birmingham, as investors continue to view London as a safer haven. Tender prices edged up in the first quarter, but are unlikely to continue as declining workload may see prices slip back as the year progresses. Analysis of tender returns shows that prices dipped by 1% in the last quarter 2011, leaving prices 1% lower than a year earlier. Preliminaries costs have bottomed out, typically at 9-13% on large projects, as contractors are unable to trim further and still maintain an acceptable service level. Building costs, in terms of tender pricing, rose 3.2% in the year to the first quarter of 2012. Employment costs are expected to rise this year, resulting in a 3.5% increase in the tender price index over the next 12 months. Retail price inflation fell back to 3.7% in February. Further reductions are anticipated as consumer price inflation falls back towards the government target. The Birmingham market has seen slightly more pre-construction activity, due in part to schemes becoming more viable as costs become lower, with activity on the Gateway development taking shape around New Street railway station. Further activity around the area is evident, particularly in the refurbishment and remodelling of office stock, with a number of hotel conversion schemes currently in preconstruction. Nevertheless, 2012 is still expected to be a tough year for all in the industry, with total output expected to fall by 4.4%, and new work down by 6.9%. At last years prices, that means 5.4bn less work to fight over. Private housing will be the only sector to show any increase over 2012. On a more positive note, manufacturing is looking up: output progressed steadily through 2011 and was nearly 6% higher than in 2010. However, the latest figure for February 2012 showed a fall of 1%, which it is hoped was a minor correction. With the West Midlands building upon the Automotive sector, activity is expected around the new Jaguar Land Rover engine plant planned on the i54 development outside Wolverhampton, and further investment by Tata at the JLR plant in Solihull. Further developments to support the 1st and 2nd tier suppliers are expected to follow. Retail sales figures have weakened again, further administrations are expected and rents are expected to fall further in 2012. Shopping Centre space completed this year will be the lowest since the 1960s. Smaller suburban shopping areas are becoming a more attractive proposition. The public sector cuts will bite harder now and business investment is expected to weaken this year, with the Office for Budget Responsibility slashing its forecast from 7.7% in the autumn to 0.7%. Credit conditions are expected to tighten further over the next few months.

EMEA Construction Cost Relativities London Bristol Manchester Birmingham Doha Abu Dhabi Dubai Riyadh Muscat

Jul 12 143 118 114 110 101 100 96 94 86

16

INTERNATIONAL REPORT
MARKET INTELLIGENCE EMEA
Bristol
The Bristol construction market remains relatively flat and we anticipate a continuation of current market conditions for the next 12 months. Growth continues to be hampered by a lack of available development funding and a serious lack of confidence in the economy, as the effects of the Governments austerity measures take hold. Significant delay in letting of Government funded projects and initiatives has further slowed the regional market. Opportunities are identified, but developers struggle to secure prelets and purchasers, or to achieve adequate margins to secure funding. In common with other regions, due to the deteriorating economy, developers are again putting projects on hold. Government funding has continued on projects which are deemed to be essential/vital in their nature, however this has resulted in a series of other schemes being postponed in the medium term. General house-building is at a ten year low due to the lack of mortgage availability and confidence in the market. The buy-to-let market is showing no signs of recovery in the short to medium term, and accordingly, private residential developers in the South West are concentrating on saleable housing. Government HCA funding has now been secured and we anticipate an increase in activity in the social housing market over the coming months. In order to underpin the construction industry, additional public sector funding has been released by the Government, for infrastructure, housing and school projects, but this will not have an impact on the industry until the latter half of 2012.

London
Construction output in the first quarter of the year dropped by 4.8%, reflecting a deteriorating financial outlook for the economy. As the Eurozone financial crisis rumbles on, confidence remains fragile and the continuing lack of available development funding has seen the more active London market starting to show signs of weakening demand. There continues to be strong activity in the West End prime residential sector, fuelled by a wave of foreign investment, with a number of conversions of existing commercial offices into high quality residential and hotel buildings also occurring. The new-build commercial office sector remains subdued, as developers seek to secure pre-lets on major commercial schemes before they proceed. The demand for new or refurbished commercial office space previously expected as a result of a host of lease breaks has not occurred, due to a high degree of economic uncertainty with the office development cycle remaining predominantly in the management of existing portfolios. General house-building is currently at a 10 year low, due to the lack of mortgage availability and confidence in the market. However, signs of recovery in the buy-to-let market, fuelled by increased rental demand, are becoming evident. Contractors have been steadily reducing tender prices, with levels of declared overhead and profit reaching almost unsupportable levels. A noticeable trend has been a far more aggressive approach to project durations. Tender prices will remain depressed for the rest of the year, with a possible return to tender price inflation from the beginning of next year.

17

INTERNATIONAL REPORT
MARKET INTELLIGENCE EMEA
UNITED ARAB EMIRATES
Economic Overview There is evidence of a gradual recovery of the United Arab Emirates (UAE) economy since the GFC. Government intervention, by means of significant capital injections, has seen the banking sector strengthened and there has been continual progress made in restructuring the debt of government-related companies. The recovery of the non-hydrocarbon economy looks set to continue, backed by strong trade, tourism, logistics and manufacturing - assisted also by high oil prices. With limited near-term potential for further increases in real oil production, overall UAE GDP growth is expected to moderate to 2.3%. Downside risks relate to a possible increase in regional geopolitical tensions, a potential decline in oil prices, a renewed worsening of global financial conditions, and/or a marked slowdown in Asia. Residential Construction Dubai has a significant number of units in this sector being completed this year and continuing into the next few years adding to the ongoing oversupply. This comprises mainly apartments and villas in the lower to medium classes. Demand for apartments and villas in up-market asset classes remains strong due to the increasing numbers of expatriates coming into the UAE in the nonhydrocarbon sectors of the economy. Abu Dhabi has less of an oversupply situation, but there is still a large amount of stock coming onto the market over the next few years. Non-residential Construction There has been a marked increase in activity levels in the Dubai markets recently, with consultants and contractors reporting a number of new projects, but less so in Abu Dhabi. Dubai has had little development over the past few years, but this appears to be changing, with developers looking into various projects in all sectors. Abu Dhabi has announced that a number of stalled government-related projects have been given the go ahead, but the market is still yet to see the results of these announcements. The education sector is expanding, with numerous initiatives in place around the UAE. The tourism industry also continues to expand, with new hotels being launched on a regular basis. The Dubai Airport Terminal 4 has recently been awarded at a value of US$871 million, as has the Abu Dhabi Airport Midfield Terminal which is one of the largest airport projects ever conceived. This project has a value of US$3,2 billion. Dubai is bidding for the World Expo 2020 and if this is successful, it will provide a major boost to the UAE economy. Further Comments Tender pricing has remained extremely competitive, as a result of the limited amount of new construction work in the UAE. This will continue until more work comes on-stream in the next few years.

18

INTERNATIONAL REPORT
MARKET INTELLIGENCE OCEANIA
Adelaide
The South Australian construction market has become more competitive across all sectors. Previously, the Tier One contractors have had a number of potential projects available. However, the following factors have seriously impacted on these opportunities: A tough SA Budget; A loss of SA Government tax revenue and a credit downgrade; Uncertainty regarding the commencement date of BHP Billitons multi-billion dollar Olympic Dam project; Continued global financial uncertainty proposed projects delayed due to lack of investor confidence and; The Hastie Groups failure, impacting negatively on both major contractors and suppliers. The SA Government has offered further stamp duty concessions on off the plan purchases on CBD residential properties, which may or may not be enough to entice nervous investors or first home buyers. The small to mid sized general contractors continue to struggle with reduced opportunities and margins, while for residential builders, the picture is equally grim. The March quarter volume of residential building Work Done fell 3.4% (seasonally adjusted) and is likely to remain subdued, with the volume of approvals dipping 11.3% during the March quarter. Some major projects, such as the New Royal Adelaide Hospital ($1.7Bn), Adelaide Oval Redevelopment ($535M) and the Adelaide Convention Centre ($350M) will help support the Tier One market. However, these projects already have head-contractors and subcontractors committed and the lack of new major projects is not filling the remaining void. Further opportunities still exist in the Riverbank Precinct and BHP Billitons Olympic Dam. Until then, the industry (and the State) is holding its collective breath.

Brisbane
Engineering work increased by approximately 50% in 2011, to nearly $30bn. However building work was $15bn, some 25% down from the 2008 peak. Despite overall construction volume increase of $5bn since 2008, there is significant excess capacity in the market, resulting in the most competitive conditions since late 2005. Queenslands March quarter volume of residential building Work Done rose a seasonally adjusted 6.0% overall with new houses up 14.4% and apartments down 8.5%. A 33.6% drop in the volume of apartment approvals suggests that the effects of two consecutive interest rate cuts have yet to materialise, and, other than on the Gold Coast, there is no obvious over-supply of apartments. However, the retail sector may benefit from the interest rate cuts with the value of approvals figures having surged 139.6% in the March quarter. The Indooroopilly Shopping Centre redevelopment could be the first of a number of significant projects. Queenslands new government has shelved several major projects, including Cairns Performing Arts Precinct and the Bowen Hills office building for Queensland Health. Also, Suncorps Southbank consolidation is not now proceeding. However, the ATO building is under construction and Bank of Queensland is relocating to a new building at Newstead. The announcement of the successful bidder for the $2bn Sunshine Coast University Hospital is expected soon, with hopes that construction commencement in early 2013 will act as a catalyst for development in Kawana and Sunshine Coast Regions. Looking forward, as total volume of approvals for the March quarter posted a fall of 8.4%, a full resurgence in workload figures is yet to eventuate and tender pricing should remain competitive.

Oceania Construction Cost Relativities Perth Darwin Sydney Canberra Melbourne Adelaide Wellington Townsville Otago Christchurch Auckland Brisbane

Jul 12 119 118 114 108 108 106 100 99 99 97 94 90

19

Melbourne, Australia

INTERNATIONAL REPORT
MARKET INTELLIGENCE OCEANIA
Canberra
The Canberra construction market continues to exhibit weakening conditions and there is little evidence that this trajectory will turn around this year. Construction activity is significantly lower in the past 12 months than that seen each year from 2008 onwards. As a consequence, there has been a further easing of tender prices over the last quarter and a further tightening of margins and overheads. Capital works expenditure remains subdued at both Local and Federal government levels, as both tiers of government attempt to reign in spending and reduce existing budget deficits. Residential work done volumes edged up a seasonally adjusted 3.1% QoQ in the March quarter however apartment work done volumes fell 3.8%. A significant seasonally adjusted 44.8% drop in the value of residential building approvals for the March quarter indicated that a continuation of soft conditions could be prevalent in the short-term. Despite strong non-residential building approval figures in the March quarter that suggest workload increases in the near term, looking forward, the outlook is less bright with developers being extremely cautious. With limited new opportunities on the horizon in the near term and insufficient new projects to satisfy existing resources, price discounting is widespread and in many instances, unsustainably so. There have been a number of reputable contractors and subcontractors that have found themselves in financial difficulty in the last six months as a result of such commercial decisions. Escalation will dip into negative territory for 2012, and not until mid-next year will we see some significant capital works investment into the Canberra economy.

Darwin
The Darwin construction market remains buoyant at the moment, with major civil works having started on the Inpex gas project, the Marine Supply Base, the NT Secure Facilities and other infrastructure and housing subdivision projects. This is having the effect of rapid absorption of resources in the civil engineering and infrastructure sectors of the market. Construction activity in other sectors is set for expansion, with optimism present but demand still soft, resulting in tight lending policies being applied by finance institutions. Demand for residential accommodation is trending upwards, leading to very low vacancy rates and rising rents until such time as supply starts to pick up again. The volume of residential building Work Done in the March quarter improved for the second consecutive quarter, posting a 0.1% year on year growth. A number of residential projects are being approved and commencing in order to mitigate the current shortage of accommodation. This has been particularly exacerbated by the major civil projects mentioned, which will see significant influxes of labour requiring accommodation and will have a knock-on effect on other industry sectors. The volume of non-residential building Work Done posted a 52.4% year on year increase in the March quarter. Approval volume was down 49.3% year on year, showing some signs of stabilisation in the nonresidential market. The industrial sector is quite active, with a number of projects starting and under way to accommodate the emerging and lucrative oil and gas industries. Commercial office accommodation is still soft, with a few projects in the planning stage and set for delivery during the course of the next year.

21

INTERNATIONAL REPORT
MARKET INTELLIGENCE OCEANIA
Melbourne
The Melbourne construction market continues to track sideways, unable to serve up the quantity of large projects tier one contractors have become accustomed to dining upon in recent years. While some continue to devour a healthy workload of on-going major projects, others are having to settle for smaller morsels to suppress their appetites. This is in turn rendering the small-to-medium sized markets extremely competitive. Residential construction remains flat as the total volume of Work Done slipped a seasonally adjusted 1.8% quarter on quarter (QoQ) in the March quarter with both housing and apartment sectors posting slight falls. While housing looks likely to continue this trend, there was a 53.3% QoQ spike in the value of apartment approvals in the March quarter, providing some signs of optimism. Non-residential construction continues to decline posting an 18.7% QoQ (seasonally adjusted) fall in the volume of Work Done in the March quarter. However, there are still a few office projects expected to commence in the 2nd half 2012 and also a number of large retail projects in the pipeline which may generate some momentum. As has been the case for the previous two years, access to finance continues to stymie any sustained recovery in the Melbourne market. While smaller sub-$20M projects are in abundance, major projects are scarce as financiers await a resolution to the global economic turmoil. With such a contrast between the haves and have nots among tier one builders, wide tender ranges are evident. Highly competitive tendering by those eager for workload continues with price escalation for 2012 expected to remain flat.

Perth
The construction market in Perth remains extremely "tight", with fiercely competitive tendering for smaller and mid level projects. There are significant numbers of larger projects either under construction or in documentation stage and so the sub-contractors and contractors who ordinarily undertake larger projects are slightly better off. The State's economy and general confidence levels remain fairly buoyant, although still influenced by the general world economy and China in particular. The impact of the Carbon Tax on construction prices will be closely scrutinised. Although it appears that the previous limitations on funding availability and lending criteria are beginning to relax slightly, there is limited evidence of increasing speculative commercial activity. The volume of nonresidential construction Work Done posted a 9.4% seasonally adjusted quarter on quarter increase in the March quarter. Meanwhile, volume of approvals for the same period was down 37.4%. Where developers are building facilities for their own use, it remains a very advantageous market. The State Government 's investment programme in health, justice and civil infrastructure continues, with a number of projects moving into the post-award construction stage. The construction of new dwellings remains below historic activity levels, with its volume of residential construction work done dipping 7.7% seasonally adjusted in the March Quarter. However, strong approvals volume figures in the apartment sector in the March quarter suggests that it is expected to revive due to continuing positive population growth and declining availability of rental accommodation. Construction costs have remained relatively static now for over four years. There is likely to be some cost increase during 2012 through general price pressures and the impact of the Carbon Tax.

22

INTERNATIONAL REPORT
MARKET INTELLIGENCE OCEANIA
Sydney
The prevailing sentiment in the Sydney Construction market is one of extreme concern due to the decreasing future workload and the financial capacity of both contractors and sub-contractors to fulfil their obligations. The past quarter has seen four long-standing contractors receive extensive media coverage of financial difficulties and the subsequent closure of three of these companies, accompanied by the appointment of an administrator. Building contractors also report an increase in the number of sub-contractors seeking financial assistance. The financial stability of industry participants has become a major issue amongst clients and contractors. The risk of a contractor entering liquidation part-way through a contract is self-evident and clients are anxious to avoid the financial, delay, quality and warranty problems that arise in such instances. We expect that companies with a relatively strong balance sheet will, in the short term, receive increased opportunities to secure new work. The total volume of Building Approvals for the first quarter 2012, as collated by the ABS, fell approximately three per cent from the last quarter of 2011. These falls confirm predictions of declining new work opportunities. Recent forecasts expect the non-residential sector to show little improvement for the remainder of 2012. Owing to the prolonged period of reduced residential activity and the resulting shortfall of new residential accommodation, buyer demand for residential property under $600k continues to be a sector that offers opportunities. New developments of this type report reasonable pre-sales activity and offer future prospects for developers and contractors. Contractors who previously worked in this sector are now likely to return, due to the increased possibility of work opportunities compared to other sectors. The market remains extremely competitive. Discounting has not diminished. Rumours abound of further increased discounts of up to 5% being offered to secure new work. We can see no reasons for these discounts to disappear in the short term, other than on complex projects where risk pricing is evident. Price rises in the past quarter have been minimal, excepting concrete and reinforcing steel, recording price increases of between four and seven per cent respectively. The combined conditions of a competitive market place and the threat of action from The Australian Competition and Consumer Commission for unlawful price increases due to the Carbon Pricing Mechanism have mitigated any significant price increases from suppliers at the present time. Consultants and contractors continue to shed staff due to decreasing workload and a lack of confidence for the future. All sectors continue to seek an event that will break the cycle of pessimism. It is hoped that the decrease in cash rates by The Reserve Bank, together with the prospect of increased capital expenditure on muchneeded infrastructure and facilities will provide the spark to kindle confidence. Within its budget announced on June 12, the NSW Government revealed that it is attempting to boost the construction sector. If successful, it could re-ignite the industryand not a moment too soon.

23

Auckland, New Zealand

INTERNATIONAL REPORT
MARKET INTELLIGENCE OCEANIA
Auckland
The New Zealand economy remains flat, with emphasis on a gradual but sustainable recovery. De-leveraging by both households and Government continues and economic growth for 2012 is forecast to be modest, with interest rates not expected to be raised for some months or possibly years. Residential construction activity remains weak, however there are signs of recovery driven by a tight Auckland housing supply and remediation work associated with leaky buildings. Non-residential building activity has been similarly weak, with a very modest 1.4% increase in the value of building consents nationally, to April 2012, and Auckland remaining essentially flat. Activity in the key sectors of retail, commercial and industrial appears to have stabilised and the risk of further falls in these sectors has waned. With reducing public spend and the remaining difficulties in private sector investment, there is an insufficient number of significant projects on the horizon in Auckland to suggest any real improvement in the short to medium-term. Aucklands tender market is fiercely competitive, as it has been for some time. There is little pressure toward cost increases and with the limited workload, margins remain extremely tight. To date, there have been no Canterbury-Earthquakerelated increases in tender pricing or builders costs. Moving forward, we expect current conditions to remain for the balance of 2012, with the optimism that conditions will improve mid-to-late next year.

25

Wellington, New Zealand

INTERNATIONAL REPORT
MARKET INTELLIGENCE OCEANIA
Christchurch
Christchurch continues to await the full impact of the reconstruction on the construction industry. The residential repair programme is well underway and associated tender price increases in certain finishing trades are flowing through to the commercial sector. In addition a number of structural trades are exhibiting signs of increases as the relatively small local market responds to demand. There are now a number of commercial projects underway of various types and sizes, providing early indications of the likely forward workload. In addition, there are numerous schemes at concept stage in the market, competing for displaced tenants to relocate back to the CBD and its environs. Tenants commitment to these landlords will likely dictate the timing of such projects. Of current particular interest to the Christchurch construction and property industries is the Christchurch Central Development Unit (CCDU) and the eagerly awaited delivery of the Blueprint for Christchurchs central city development. The blueprint for the central city, presented publicly on 27 July 2012, is intended to provide a clear direction for implementing the Recovery Plan for Christchurch. It will provide certainty for the location and development of anchor projects and precincts within the centre of Christchurch city. It is considered that this will give confidence to property owners to move forward.

Wellington
The local market conditions remain largely unchanged from the previous quarter. Both the residential and non-residential sectors are at or very close to historic lows, given current consent values and general forward outlook for the remainder of 2012. Questions around insurance, seismic strengthening and leaky home issues are still at the forefront of discussion in the Wellington market. Public sector buildings are proceeding into construction to remedy issues with existing buildings, whilst the private sector has been a little slower to react, given financial funding pressures. The local residential market remains subdued, with the likelihood of improvement over the coming months as historically low interest rates and a competitive market make it a very good time to invest and develop. House prices remain static, with some areas increasing slightly. Sales of existing properties are still moving well, but at much lower volumes than in previous years. Non-residential construction is also at a very low point, with government spending being pared back considerably from previous years. The tender market has firmedup considerably over the past few months and keen pricing is likely to remain for the rest of this year and into 2013. The outlook for the Wellington region is one of slow decline, without much sign of improvement and it is evident that we may not yet have seen the bottom of the trough. Further downward pressure is being applied to government workforce numbers, both central and local, and this will feed through to the commercial, residential and retail markets in the near future.

27

INTERNATIONAL REPORT
MARKET data
CONSTRUCTION RATES
The following data represents estimates of current building costs in the respective market. Costs may vary as a consequence of factors such as site conditions, climatic conditions, standards of specification, market conditions etc.

Range of cost per m2 of gross floor area Offices Premium Location Asia Beijing Chengdu Guangzhou Ho Chi Minh City Hong Kong Jakarta Macau Manila Mumbai Seoul Shanghai Shenzhen Singapore Tokyo EMEA Birmingham Bristol Abu Dhabi Dubai London Manchester Oceania Adelaide Auckland Brisbane Canberra Christchurch Darwin Melbourne Perth Sydney Wellington USA Boston Denver Honolulu Las Vegas Los Angeles New York Phoenix Portland San Francisco Seattle Washington D.C. NA: Not Available USD USD USD USD USD USD USD USD USD USD USD 2,155 1,505 2,260 1,505 1,940 2,205 1,345 1,775 2,100 1,775 1,885 3,015 2,420 4,200 3,070 3,015 3,765 2,475 2,260 3,230 2,205 2,585 1,885 1,075 1,885 1,130 1,290 1,940 1,075 1,240 1,505 1,240 1,400 2,635 1,615 3,120 2,045 2,100 2,905 1,670 1,720 2,370 1,720 1,990 1,290 860 1,615 1,240 1,185 1,505 1,130 1,185 1,290 1,240 1,025 2,260 1,400 3,875 5,165 2,100 2,690 1,775 2,100 2,370 2,155 2,045 970 700 1,290 700 860 1,240 755 970 1,185 1,025 805 1,560 1,345 3,390 1,560 1,505 1,720 1,345 1,400 1,775 1,455 1,455 AUD NZD AUD AUD NZD AUD AUD AUD AUD NZD 2,500 2,750 2,500 2,930 3,500 2,645 2,980 3,180 2,900 2,800 3,750 3,500 3,850 3,810 4,500 3,870 3,740 4,780 4,030 3,200 2,200 2,100 2,000 2,380 3,000 2,160 2,325 2,605 2,200 2,200 3,100 3,200 3,000 3,000 4,000 3,520 2,880 3,745 3,020 2,500 1,550 1,100 2,150 1,960 1,500 1,420 2,020 2,010 1,600 1,300 2,950 1,800 2,950 2,780 2,000 2,255 2,980 2,885 3,280 1,800 1,300 1,200 1,050 1,030 NA 960 1,060 1,030 1,250 NA 1,750 1,400 1,550 1,730 NA 1,815 1,565 1,780 1,560 NA GBP GBP AED AED GBP GBP 1,770 1,900 5,800 5,600 2,150 1,770 2,330 2,500 7,000 6,900 2,800 2,330 1,500 1,550 4,700 4,600 1,800 1,500 2,330 2,450 6,600 6,400 2,800 2,330 2,530 2,530 4,800 4,600 2,910 2,530 3,550 3,550 6,500 6,300 4,090 3,550 810 810 NA NA 930 810 1,520 1,520 NA NA 1,750 1,520 Rmb Rmb Rmb VND ('000) $HKD Rp ('000) MOP Php INR KRW ('000) Rmb Rmb $Sgd Yen ('000) 7,250 6,900 7,000 21,810 17,500 8,189 13,900 32,100 25,625 2,150 7,350 6,750 2,550 249 12,000 11,200 11,100 31,370 25,900 11,330 19,800 43,800 51,250 2,750 11,850 11,050 3,650 329 6,750 6,350 6,450 18,600 15,400 5,665 12,200 25,900 20,500 1,610 6,750 6,350 1,950 219 10,300 9,300 9,700 23,280 20,900 8,858 17,000 35,300 35,875 1,980 10,250 9,600 2,800 249 8,050 7,150 7,950 NA 18,200 5,665 15,000 27,200 25,625 1,440 8,050 7,350 2,050 93 12,300 11,050 11,400 NA 23,100 7,519 18,600 31,300 35,875 2,090 12,450 11,050 3,250 204 7,000 6,600 6,900 NA 15,500 NA 12,700 20,600 NA 1,210 7,050 6,450 NA 93 11,000 10,500 10,300 NA 20,300 NA 16,300 23,100 NA 1,840 11,200 9,850 NA 204 Low High Grade A Low High Low Mall High Retail Strip Shopping Low High

28

INTERNATIONAL REPORT

Rates are in national currency per square metre of Gross Floor Area except as follows: Chinese cities, Hong Kong and Macau: Rates are per square metre of Construction Floor Area, measured to outer face of external walls. Singapore: Rates are per square metre of Construction Floor Area, measured to outer face of external walls and inclusive of covered basement and above ground parking areas. Chinese cities, Hong Kong, Macau and Singapore: All hotel rates are inclusive of Furniture Fittings and Equipment (FF&E).
Range of cost per m2 Of gross floor area Hotels 5 Star Low Asia Rmb Rmb Rmb VND ('000) $HKD Rp ('000) MOP Php INR KRW ('000) Rmb Rmb $Sgd Yen ('000) EMEA GBP GBP AED AED GBP GBP Oceania AUD NZD AUD AUD NZD AUD AUD AUD AUD NZD USA USD USD USD USD USD USD USD USD USD USD USD 2,690 1,990 4,090 3,500 2,690 3,445 2,260 1,885 2,850 1,990 2,475 4,305 3,015 5,920 5,005 4,200 5,115 3,765 2,850 4,415 2,960 4,035 1,720 1,130 2,530 1,290 1,830 1,990 1,185 1,400 2,045 1,505 1,615 2,690 1,775 4,305 2,420 2,635 2,850 1,720 1,830 2,800 1,940 2,475 645 430 700 540 645 700 430 700 755 700 590 970 755 1,075 915 1,025 1,130 700 915 1,075 915 860 860 645 1,075 645 915 915 645 915 970 915 805 1,185 1,025 2,045 1,615 1,400 1,345 1,075 1,345 1,505 1,345 1,075 755 700 1,130 540 755 970 590 805 860 805 755 1,075 1,185 1,775 1,075 1,290 1,400 1,075 1,185 1,400 1,185 1,075 1,455 755 1,505 755 1,455 1,505 860 1,185 1,560 1,290 1,075 2,370 1,990 3,500 4,305 2,315 2,690 1,990 2,100 2,475 2,530 1,990 3,400 3,450 3,200 3,610 3,500 2,990 3,740 3,730 3,700 3,400 4,300 3,800 4,300 4,220 4,000 4,020 4,245 4,580 4,680 4,100 2,450 2,800 2,500 2,630 2,800 1,785 2,880 2,740 2,600 2,200 3,300 3,200 3,600 3,670 3,200 2,795 3,385 3,785 3,170 2,600 625 550 600 670 800 540 655 685 600 500 1,050 750 900 920 1,200 1,080 1,060 1,125 910 900 1,100 1,000 1,100 890 1,600 695 1,110 990 900 1,800 1,400 1,500 2,000 1,240 2,000 1,420 1,365 1,455 1,410 2,600 600 450 600 620 700 675 555 635 600 900 1,100 700 1,000 960 1,000 1,225 1,110 1,030 910 1,400 2,100 2,100 2,100 2,430 NA 1,645 2,175 2,235 2,150 2,500 3,400 2,900 3,050 3,450 NA 2,750 3,490 3,935 3,520 3,200 1,925 2,100 8,900 8,800 2,300 1,925 2,635 2,800 10,400 10,250 3,100 2,635 1,215 1,250 7,500 7,300 1,500 1,215 1,620 1,750 9,000 8,900 2,000 1,620 305 450 1,500 1,500 375 305 610 750 3,500 3,500 750 610 810 850 2,750 2,750 975 810 1,315 1,400 4,500 4,500 1,600 1,315 330 330 1,500 1,300 400 330 610 610 2,700 2,600 725 610 1,520 1,520 4,500 4,300 1,800 1,520 2,130 2,130 6,100 5,900 2,500 2,130 12,400 11,550 12,400 28,360 27,700 11,639 22,300 52,900 61,500 2,890 12,450 11,900 4,050 378 16,400 14,100 15,900 34,730 33,800 14,935 27,100 60,900 87,125 4,280 16,350 15,500 5,350 501 9,100 8,550 9,250 21,320 22,600 8,910 17,900 42,700 41,000 1,860 9,200 8,900 3,100 281 11,800 10,900 11,400 27,580 26,000 10,300 21,300 48,300 51,250 2,370 11,750 11,200 3,500 455 2,100 2,050 2,050 7,950 6,950 2,730 NA 14,500 10,250 600 2,200 2,000 650 94 2,900 2,800 2,850 11,880 8,100 3,605 NA 16,700 14,350 740 3,000 2,800 1,250 125 3,450 3,300 3,550 16,350 11,800 3,605 6,850 15,900 15,375 780 4,000 3,450 1,850 249 6,150 5,400 6,200 22,340 16,800 5,047 9,050 18,300 22,550 990 6,550 6,050 2,050 314 4,100 3,450 4,000 5,450 12,000 3,811 NA 17,200 16,400 1,080 4,100 3,850 1,050 94 5,200 4,250 5,000 8,250 15,000 4,635 NA 20,300 25,625 1,350 5,250 4,850 1,450 180 3,800 3,450 3,650 13,970 15,300 5,768 9,750 26,900 16,400 1,390 3,700 3,550 1,900 NA 5,850 5,350 5,500 21,180 22,300 9,270 16,500 47,900 34,850 2,020 5,700 5,400 3,000 NA High 3 Star Low High Car Parking Multi Storey Low High Basement Low High Industrial Warehouse Low High Residential Multi-Storey Low High

29

INTERNATIONAL REPORT
MARKET data
Location AMERICAS Boston Denver Honolulu Las Vegas Los Angeles New York Phoenix Portland San Francisco Seattle Washington D.C. ASIA Beijing Chengdu Guangzhou Ho Chi Minh City Hong Kong Jakarta Macau Manila Seoul Shanghai Shenzhen Singapore Tokyo EMEA Abu Dhabi Bristol Doha Dubai London Manchester Saudi Arabia Sheffield OCEANIA Adelaide Auckland Brisbane Canberra Christchurch Darwin Melbourne Perth Sydney Townsville Wellington NA: Not Available NA Houses Apartments Offices Industrial Retail Hotel Civil

30

INTERNATIONAL REPORT
MARKET data
CONSTRUCTION MARKET ACTIVITY CYCLE MODEL

PEAK GROWTH ZONE

PEAK ZONE

PEAK DECLINE ZONE

MID GROWTH ZONE

MID ZONE

MID DECLINE ZONE

TROUGH GROWTH ZONE

TROUGH ZONE

TROUGH DECLINE ZONE

ASIA Construction Sector Barometer

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% HOUSES

EMEA Construction Sector Barometer

100% 90% 80%

2 5

1 5

1 2 2 2 2

1 3 2

70%

8 8 5 6 4 2
INDUSTRIAL RETAIL

60%

8 6

50% 40% 30% 20%

6 5 5 4 5

3 1
APARTMENTS

2
HOTEL

10% 0%

1
HOUSES APARTMENTS OFFICES INDUSTRIAL RETAIL HOTEL CIVIL

OFFICES

CIVIL

TROUGH ZONE

MID ZONE

PEAK ZONE

TROUGH ZONE

MID ZONE

PEAK ZONE

Oceania Construction Sector Barometer

100% 100%

Americas Construction Sector Barometer

1
90%

1
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% HOUSES

1 1

1 2

1 4

80% 70% 60% 50%

11 10 10 9 7 10 9

9 8

9 8

4
40% 30% 20%

10% 0%

APARTMENTS

OFFICES

INDUSTRIAL

RETAIL

HOTEL

CIVIL

HOUSES

APARTMENTS

OFFICES

INDUSTRIAL

RETAIL

HOTEL

CIVIL

TROUGH ZONE

MID ZONE

PEAK ZONE

TROUGH ZONE

MID ZONE

PEAK ZONE

31

INTERNATIONAL REPORT Key Statistics

AUSTRALIA 2008 GDP GDP per capita Exchange Rate (As at 1 June AUD per USD) PPP Rate Inflation Unemployment CHINA 2008 GDP GDP per capita Exchange Rate (As at 1 June CNY per USD) PPP Rate Inflation Unemployment UNITED ARAB EMIRATES 2008 GDP GDP per capita Exchange Rate (As at 1 June AED per USD) PPP Rate Inflation Unemployment EURO ZONE 2008 GDP GDP Per Capita (Int $) Exchange Rate (As at 1 June EUR per USD) PPP Rate Inflation Unemployment 0.4 % $33,035 0.644 N/A 3.3 % 7.7 % 2009 -4.3 % $31,857 0.703 N/A 0.3 % 9.6 % 2010 1.9 % $32,727 0.823 N/A 1.6 % 10.1 % 5.3 % AED 137,662 3.673 4.774 12.3 % N/A 2009 -3.3 % AED 125,241 3.673 4.193 1.6 % N/A 2010 0.9 % AED 122,663 3.673 4.525 0.9 % N/A YEAR 2011 (P) 1.4 % $33,786 0.694 N/A 2.7 % 10.1 % 2012 (F) -0.3 % $34,023 0.812 N/A 2.0 % 10.9 % 2013 (F) 0.9 % $34,766 N/A 1.6 % 10.8 % 9.6 % 8,828 Yuan 6.937 3.823 5.9 % 4.2 % 2009 9.2 % 9,593 Yuan 6.832 3.760 -0.7 % 4.3 % 2010 10.4 % 10,542 Yuan 6.828 3.964 3.3 % 4.1 % YEAR 2011 (P) 4.9 % AED 124,922 3.673 5.110 0.9 % N/A 2012 (F) 2.3 % AED 124,051 3.673 5.292 1.5 % N/A 2013 (F) 2.8 % AED 123,847 5.176 1.7 % N/A 2.5 % $57,920 1.050 1.493 4.4 % 4.3 % 2009 1.4 % $57,652 1.242 1.482 1.8 % 5.6 % 2010 2.5 % $58,284 1.193 1.543 2.8 % 5.2 % YEAR 2011 (P) 9.2 % 11,459 Yuan 6.484 4.173 5.4 % 4.0 % 2012 (F) 8.2 % 12,340 Yuan 6.331 4.238 3.3 % 4.0 % 2013 (F) 8.8 % 13,358 Yuan 4.276 3.0 % 4.0 % YEAR 2011 (P) 2.0 % $58,736 0.930 1.577 3.4 % 5.1 % 2012 (F) 3.0 % $59,771 1.031 1.572 2.7 % 5.2 % 2013 (F) 3.5 % $61,100 1.588 3.0 % 5.2 %

NOTES Estimates after 2011. Exchange rates are quoted as currency units per U.S. dollar Sources: IMF and RLB Definitions GDP: Gross domestic product, constant prices (Annual percent change). Annual percentages of constant price GDP are year-on-year changes; the base year is country-specific. GDP per Capita: Gross domestic product per capita, constant prices (National currency). GDP in constant national currency per person. Data derived by dividing constant price GDP by total population. PPP rate: Purchasing Power Parity rate of exchange. Rate against the International dollar (USD), which renders purchasing power identical to the international dollar. Inflation: Consumer Price Inflation Unemployment: Percentage of total workforce

32

INTERNATIONAL REPORT

NEW ZEALAND 2008 GDP GDP per capita Exchange Rate (As at 1 June NZD per USD) PPP Rate Inflation Unemployment SINGAPORE 2008 GDP GDP per capita Exchange Rate (As at 1 June SGD per USD) PPP Rate Inflation Unemployment UNITED KINGDOM 2008 GDP GDP per capita Exchange Rate (As at 1 June GBP per USD) PPP Rate Inflation Unemployment USA 2008 GDP GDP per capita Exchange Rate (As at 1 June per USD) PPP Rate Inflation Unemployment -0.3 % $43,194 1.000 1.000 3.8 % 5.8 % 2009 -3.5 % $41,328 1.000 1.000 -0.3 % 9.3 % 2010 -1.1 % 23,363 0.510 0.651 3.6 % 5.6 % 2009 -4.4 % 22,188 0.610 0.655 2.1 % 7.5 % 2010 1.7 % $50,400 1.363 1.062 6.6 % 2.2 % 2009 -1.0 % $49,030 1.441 1.066 0.6 % 3.0 % 2010 -0.1 % $31,770 1.274 1.582 4.0 % 4.2 % 2009 -2.1 % $30,786 1.542 1.612 2.1 % 6.1 % 2010

YEAR 2011 (P) 1.4 % $30,928 1.212 1.674 4.0 % 6.5 % 2012 (F) 2.3 % $31,314 1.328 1.725 2.1 % 6.0 % 2013 (F) 3.2 % $31,994 1.736 2.4 % 5.4 %

1.2 % $30,821 1.468 1.654 2.3 % 6.5 % YEAR

2011 (P) 4.9 % $56,813 1.230 1.038 5.2 % 2.0 %

2012 (F) 2.7 % $57,349 1.288 1.045 3.5 % 2.1 %

2013 (F) 3.9 % $58,567 1.050 2.3 % 2.1 %

14.8 % $55,107 1.403 1.055 2.8 % 2.2 % YEAR

2011 (P) 0.7 % 22,492 0.609 0.667 4.5 % 8.0 %

2012 (F) 0.8 % 22,525 0.653 0.674 2.4 % 8.3 %

2013 (F) 2.0 % 22,831 0.683 2.0 % 8.2 %

2.1 % 22,498 0.689 0.666 3.3 % 7.9 % YEAR

2011 (P) 1.7 % $42,684 1.000 1.000 3.1 % 9.0 %

2012 (F) 2.1 % $43,202 1.000 1.000 2.1 % 8.2 %

2013 (F) 2.4 % $43,808 1.000 1.000 1.9 % 7.9 %

3.0 % $42,256 1.000 1.000 1.6 % 9.6 %

33

INTERNATIONAL REPORT
MARKET data
International Construction Cost Relativities City New York London Honolulu San Francisco Boston Hong Kong Los Angeles Washington Perth Bristol Darwin Manchester Sydney Birmingham Canberra Melbourne Seattle Adelaide Macau Doha Wellington Abu Dhabi Townsville Singapore Otago Portland Christchurch Dubai Auckland Riyadh Las Vegas Phoenix Denver Brisbane Beijing Shanghai Muscat Guangzhou Shenzhen Americas EMEA Americas Americas Americas Asia Americas Americas Oceania EMEA Oceania EMEA Oceania EMEA Oceania Oceania Americas Oceania Asia EMEA Oceania EMEA Oceania Asia Oceania Americas Oceania EMEA Oceania EMEA Americas Americas Americas Oceania Asia Asia EMEA Asia Asia Jul 12 155 143 141 137 133 128 125 124 119 118 118 114 114 110 108 108 106 106 105 101 100 100 99 99 99 97 97 96 94 94 93 93 93 90 89 86 86 77 75

34

OFFICES AROUND THE WORLD

OCEANIA
AUSTRALIA Adelaide Brisbane Cairns Canberra Darwin Gold Coast Melbourne Newcastle Northern NSW Perth Sunshine Coast Sydney Townsville Western Sydney NEW ZEALAND Auckland Christchurch Otago Palmerston North Tauranga Wellington

EMEA
MIDDLE EAST Abu Dhabi Doha Dubai Muscat Riyadh UK Birchwood/Warrington Birmingham Bristol London Manchester Newcastle Sheffield Welwyn Garden City Wokingham EUROPE RLB|EuroAlliance Austria Belgium Bulgaria Czech Republic Estonia France Germany Greece Hungary Ireland Italy Kazakhstan Latvia Luxembourg Malta Netherlands Norway Poland Portugal Romania Russia Spain Sweden Slovakia Slovenia Switzerland Turkey Ukraine

ASIA
CHINA Beijing Chengdu Chongqing Dalian Guangzhou Guiyang Haikou Hangzhou Hong Kong Macau Nanjing Qingdao Shanghai Shenyang Shenzhen Tianjin Wuhan Wuxi Xian Zhuhai India Mumbai INDONESIA Jakarta MALAYSIA Kuala Lumpur PHILIPPINES Cebu Davao Manila SINGAPORE Singapore SOUTH KOREA Seoul THAILAND Bangkok VIETNAM Ho Chi Minh City

AMERICAS
CANADA Calgary CARIBBEAN Barbados Grand Cayman USA Boston, MA Chicago, IL Denver, CO Hagta, GU Hilo, HI Honolulu, HI Kennewick, WA Las Vegas, NV Los Angeles, CA New York, NY Orlando, FL Phoenix, AZ Portland, OR San Francisco, CA Seattle, WA Tucson, AZ Waikoloa, HI Washington, DC

www.rlb.com