Global Capital Flows. Petra Blazkova, Senior Director, APAC Analytics PFA ANNUAL CONFERENCE, 1 ST MAY 2018

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1 Global Capital Flows Petra Blazkova, Senior Director, APAC Analytics PFA ANNUAL CONFERENCE, 1 ST MAY 2018

2 TOPICS Global Capital Flows Property Pricing Alternative Sectors Australia in a Wider Context 2

3 Q1'08 Q1'09 Q1'10 Q1'11 Q1'12 Q1'13 Q1'14 Q1'15 Q1'16 Q1'17 Q1'18 $b AS A REGION, ASIA PACIFIC STANDS OUT Global Investments: 12-mth Rolling Totals 1,200 1, % 30% 25% 20% 15% 10% 5% APAC Share of Global (12-mth rolling average) Asia-Pacific $164.4b 11% EMEA $ % Americas $424.8b -6% 0 0% Global $918.6b 4% AsiaPac EMEA Americas APAC Share of Global Note: Office, Retail, Industrial, Apartment, Hotel valued at $10m or greater are included. Development sites excluded. Updated on 28 Apr

4 HONG KONG LEAPS, LONDON FALLS Q1'18 Market Sales Volume ($m) YOY NYC Metro Hong Kong LA Metro Tokyo London Metro DC Metro SF Metro Chicago Seoul Atlanta Dallas Seattle Denver Houston Phoenix Paris Munich Toronto Rhine-Ruhr Boston Metro Miami/So Fla Philly Metro Brussels Amsterdam/Randstad Austin Raleigh/Durham Berlin-Brandenburg Frankfurt/Rhine-Main Madrid Singapore 2,648 2,551 2,545 2,518 2,452 2,393 1,987 1,926 1,839 1,838 1,693 1,662 1,606 1,432 1,308 1,291 1,229 1,127 1,122 3,455 3,355 3,332 3,304 4,809 6,659 6,654 6,273 6,238 7,677 13,569-61% -57% -7% -14% -30% -31% -34% -47% -50% -10% -14% -19% -29% -4% 31% 90% 38% 30% 18% 84% 19% 31% 46% 18% 62% 8% 99% 24% 42% 140% Note: Office, Retail, Industrial, Apartment, Hotel, Seniors Housing, valued at $10m or greater are included. Development sites excluded. Updated on

5 IN THE REGION, AUSTRALIA RANKS THIRD NOW Country Investment Volume; Q1 18* Q2'17 Q3'17 Q4'17 Q1'18 YOY chng (12-mth Rolling Total) China Japan 2% 0% Australia Hong Kong 83% 15% South Korea 5% Singapore 16% India 17% APAC - Other US$ bn Note: Office, Retail, Industrial, Apartment, Hotel valued at $10m or greater are included. Development sites excluded. * Based on 12-months rolling totals Updated on 26 April

6 INDUSTRIAL CONSISTENTLY UP Global Transactional Volumes by Sector 6

7 VOLUME INCREASES IN GLOBAL TRADES What is moving around the world? People Data Goods Services Finance X Increase 7X Increase 10X Increase 3X Increase 1.5X Increase Real Estate US$8bn US$277bn 34X Increase Source: Real Capital Analytics/McKinsey Global Institute 7

8 CROSS-BORDER FLOWS Global Cross-Border Investments: Percentage Shares 50% Global Australia 40% 30% 20% 10% 0%

9 DESTINATIONS OF CROSS-BORDER CAPITAL; Cross-Border Globally US$ bn Cross-Border in Asia Pacific 30 US$ bn Flows from HK 80 Flows from CHN Americas EMEA APAC 0 Japan China Australia Hong Kong Singapore S Korea Note: Office, Retail, Industrial, Apartment, Hotel valued at $10m or greater are included. Development sites excluded. Updated on 27 Apr

10 US REMAINS THE TOP EXPORTER 10

11 CAPITAL FLOWS IN AND OUT OF ASIA PACIFIC Capital Exported From Asia Pacific Capital Imported Into Asia Pacific US$b Note: Office, Retail, Industrial, Apartment, Hotel valued at $10m or greater are included. Development sites included. Domesitc and Regional deals excluded Updated on 28 Feb

12 CHINA, HK AND SINGAPORE DOMINATED RECENTLY KEY SOURCES OF CROSS-BORDER ASIAN CAPITAL, China Singapore Hong Kong South Korea Japan APAC - Other 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Note: Income producing property deals valued at $10m or greater are included. Domestic and continental (cross-border Asian) deals excluded. Dev site deals excluded 12

13 CHINA CAPITAL CONTROL CHINESE CROSS-BORDER CAPITAL FLOWS CHINESE SELLERS SINCE JAN 17 TO NOW US$b 45 HNA Group 40 State-Owned Enterprises CIC 35 Dalian Wanda Group 30 Bright Ruby Resources 25 CITIC Group 20 Wanxiang Grp 15 LeEco '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Fosun Int'l Ltd Ridong Group Bank of China Americas EMEA AsiaPac $b Note: Office, Retail, Industrial, Apartment, Hotel valued at $10m or greater are included. Development sites included. Domesitc deals excluded Updated on 28 Apr

14 IS CHASING CROSS-BORDER CAPITAL A GOOD THING? RCA COMMERCIAL PROPERTY PRICE INDICES ONE YEAR CHANGE Price YOY Change Volume YOY Change 14

15 GLOBAL GROWTH IN PROPERTY PRICES RCA COMMERCIAL PROPERTY PRICE INDICES (CPPI) Index, Dec 2006 = 100 Hong Kong Singapore Sydney Seoul London Global Composite New York Los Angeles Tokyo Chicago Washington DC Amsterdam 50 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 15

16 AUSTRALIA - STRONG OFFICE & RETAIL PRICE GROWTH RCA Commercial Property Price Indices (CPPI) Australia Office Australia Retail Australia Industrial Sydney Australia Logistics Logistics Industrial '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 16

17 TRANSACTION YIELDS REFLECT INVESTOR DEMAND Office Yields APAC & London Tokyo HK London Sydney Office Yields 11.0% 8.0% 7.0% Seoul Singapore Sydney 10.0% 9.0% 8.0% 6.0% 7.0% 5.0% 6.0% 5.0% 4.0% 4.0% Uber-Prime Prime Secondary 3.0% '11 '12 '13 '14 '15 '16 '17 3.0% '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 17

18 TRANSACTION YIELDS REFLECT INVESTORS DEMAND Australia: Average Transaction Office & Retail Yield 9.0% Asian Buyer Domestic (AUS) Buyer 8.0% 7.0% 6.0% 5.0% '11 '12 '13 '14 '15 '16 '17 '18 18

19 DESPITE COMPRESSION SPREADS STILL HIGH In most markets remain ahead of long-term averages * Cap Rate = 12-mth average transactional Office, Retail, Industrial 19

20 INVESTORS STILL UNDER-ALLOCATED, ESP. ASIAN Allocation Target Europe Americas APAC Global 0% 2% 4% 6% 8% 10% 12% Source: INREV Investor Intentions Survey

21 INVESTORS PUSH FOR ALTERNATIVES Investment Volumes Globally 250 Multi-Fam Student housing Seniors Housing & Care Medical office Data center Q1 18 (12-mth Rolling Total) YOY% Multi-Fam 6% Student Hsng 14% SHC -6% Medical Office 26% Data Centers 52% 50 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '

22 ALTERNATIVE VOLUMES IN AUS US$b Data center Medical office Seniors Housing & Care Student housing Multi-Family '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 22

23 INVESTORS EXPLORING ALTERNATIVES Transaction Yields, Last 12 Months 23

24 ACTIVITY AND PRICING OF THE MULTI-FAMILY MARKET RCA CPPI YOY Change: U.S. 30% Office Retail Industrial Apartment Hotel 20% 10% 0% -10% -20% -30% -40% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '13 '14 '15 '16 '17 '18 24

25 INVESTORS TURN TO FORWARD SALES Investment Volume of Forward Sales US$b % Share of Total Volume 15% 10% 5% APAC - Other India Malaysia South Korea Singapore Australia Hong Kong 0 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 0% China Note: Office, Retail, Industrial, Apartment, Hotel valued at $10m or greater are included. Development sites excluded. Updated on 28 Feb

26 ALTERNATIVES: NOT ONLY ASSETS BUT ALSO ROUTES Global Investments; 12-moths Rolling Totals US$b Entity Deals Joint Ventures 0 Q1'09 Q1'10 Q1'11 Q1'12 Q1'13 Q1'14 Q1'15 Q1'16 Q1'17 Q1'18 26

27 WHAT DOES IT ALL MEAN? MORE OF: More JVs and M&As More niche property investment More cross-border New sources of capital LESS OF: Economic growth Political certainty Appetite for risk Is the money going to move elsewhere or will yields fall further? 27

28 Thank You Petra Blazkova Senior Director, Analytics, Asia Pacific