MARKETBEAT

OFFICE SNAPSHOT
SINGAPORE
A Cushman & Wakefield Research Publication

Q4 2011

ECONOMY
As we draw a close to 2011, we begin the year with anticipation of slower growth and shrinking economy. Singapores economy falls 4.9% from quarter three though overall GDP growth in 2011 was in line with expectations, recording at 4.8%. The Ministry of Trade & Industry has cautioned of a technical recession ahead and the GDP forecast for 2012 would be between the 1-3%. Although there is still resilient growth in emerging Asia supporting overall global demand, the risks to worsening debt situation and financial crisis remains.

commercial properties instead. This quarter saw some notable transactions which included One & Three Philip Street to the Royal Group and K-REIT purchase of Ocean Financial Centre.

OUTLOOK
Looking ahead, the weak economic outlook could affect employment, especially in the financial sector where jobs cut have been reported and hiring has been cautious. With the economy highly dependable on capital flows and international trade and the outlook clouded with uncertainty and volatility, Cushman & Wakefield anticipates demand to go slow and rents are likely to moderate and decrease by 5%-10%.

MARKET CORRECTION AHEAD

2011 office market can be described as starting on a high note with rising rents and vacancies declining to less than 5%. Demand for newly completed prime buildings such as Marina Bay Financial Centre and Asia Square was mainly driven by the financial sector. However, in tandem with increasing uncertainties in the global macroeconomic outlook in the second half of the year, the bearish mood has definitely set in and created a negative impact on the office leasing market. According to prospective occupiers, there is said to have more room for negotiation with landlords and larger offers of incentives as compared to a year ago. Such benefits are expected to continue at least in the 1H 2012. In the last quarter of 2011, overall Grade A rents declined 3.2% eradicating the gains achieved in the first two quarters of 2011. On a year-on-year basis, this translates to about 10.4%. Vacancy continued its upward trend and ended the quarter at 5.9%. Many shadowed space appeared as tenants moved and upgraded to the newly completed buildings. There are also tenants who have taken up more space in anticipation of further expansion plans which have since been shelved looking to sublease the extra space. On the supply side, 2011 was a bumper year where a substantial amount of office space entered the market and they include many top-quality buildings such as Asia Square, Marina Bay Financial Tower, Ocean Financial Tower and OUE Bayfront. STATS ON THE GO
4Q11 Overall Vacancy Grade A Overall Rents* 5.9% 9.05 Q-O-Q CHANGE 7.3% 3.2% Y-O-Y CHANGE 2.8pp 10.4% 12 MONTH OUTLOOK

ECONOMIC INDICATORS
CHINA GDP Growth CPI Growth Unemployment
Source: Roubini Economics

2010 14.5% 2.5% 2.2%

2011 4.8% 5.1% 2.0%

2012F 1.4% 3.2% 2.4%

GRADE A OVERALL RENTAL* VS. VACANCY RATES

8.00
S$/sqft/mth

10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
Grade A overall rent Vacancy

6.00 4.00 2.00 0.00

INVESTMENT SALES HOLDING ON

According to Real Capital Analytics, the investments sales from Jan-Nov 2010 have already exceeded total sales achieved last year. Investments sales for commercial properties excluding development sites to-date is about $7 billion, higher than the total sales of $4 billion in 2010. Despite the fact that sentiments have dropped slightly in view of the macro-economic conditions, it is without a doubt that the favourable environment Singapore possess makes it a popular destination for investments. In addition, with the latest round of cooling measures introduced by the Government on the residential market which involve hefty stamp duties, investors would now have to look at other options and may likely re-direct their interest and capital flows into

SINGAPORE MARKET STATISTICS

SUBMARKET INVENTORY SQ.FT OVERALL VACANCY RATE UNDER CONSTRUCTION SQ.FT YTD CONSTRUCTION COMPLETIONS SQ.FT 2,697,000 2,697,000 GRADE A AVERAGE* S$/SQ.FT/MTH 3Q11 12.50 10.70 7.80 9.20 9.20 9.35 4Q11 12.50 10.20 7.40 9.20 9.00 9.05 US$ SFMTH 4Q11 $9.68 $7.90 $5.73 $7.13 $6.97 $7.01 EURO SF/MTH 4Q11 7.40 6.04 4.38 5.45 5.33 5.36

Marina Bay* Raffles Place Shenton Way City Hall/Marina Centre Orchard Road OVERALL (INCLUDING ORCHARD)

2,920,000 8,362,650 6,582,358 6,102,582 2,590,823 28,128,413

12.6% 4.2% 7.8% 4.0% 3.5% 5.9%

1,258,000 1,574,200 1,666,800 157,900 4,656,900

*New submarket carved out from Raffles Place 1 USD = 1.291 SGD, 1 EURO = 1.688 SGD as at 23rd Dec 2011

MARKET HIGHLIGHTS
SIGNIFICANT 4Q11 LEASE TRANSACTIONS*** BUILDING Centennial Tower Ocean Financial Centre 71 Robinson Road Asia Square SIGNIFICANT 4Q11 SALE TRANSACTIONS BUILDING 1 & 3 Phillip Street Midlink Plaza MARKET Raffles Place Bugis/Beach Road BUYER Royal Group Lian Beng Group PURCHASE PRICE (US$ MILL) 219 98 SQUARE FEET 120,000 128,076 MARKET City Hall/Marina Centre Raffles Place Shenton Way Marina Bay TENANT FrieslandCampina Headquarters Trafigura Zebra Sinochem/GMG BUILDING CLASS A A A A SQUARE FEET 10,000 46,000 10,000 23,000

SIGNIFICANT 4Q11 CONSTRUCTION COMPLETIONS BUILDING N/A MARKET N/A TENANT N/A SQUARE FEET N/A COMPLETION DATE N/A

SIGNIFICANT 4Q11 PROJECTS UNDER CONSTRUCTION BUILDING Marina Bay Financial Centre Tower 3 Asia Square Tower 2
***Renewal Not Included in Leasing Activity Statistics

MARKET Marina Bay Marina Bay

TENANT DBS (700,000sf) -

SQUARE FEET 1,258,500 808,200

COMPLETION DATE 2012 2013

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This report contains information available to the public and has been relied upon by Cushman & Wakefield on the basis that it is accurate and complete. Cushman & Wakefield accepts no responsibility if this should prove not to be the case. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2012 Cushman & Wakefield, Inc. All rights reserved.