Accelerating success.

2015/16

O F F I C ECAPITAL MARKETS INVESTMENT REV IEW

VALUATION OUTLOOK

34 INVESTMENT OUTLO OK

35

CONTENTS

03

DETAILED TRANSACTION LIS T

42

INTRODUCTION

04

OFFICE EXPERTS

KEY FINDINGS

06 YEAR IN REVIEW

5 MARTIN PLACE, SYDNEY: Colliers

International exclusive leasing appointment

on behalf of Cbus Property and DEXUS

Property Group.

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OFFICE EDITION

10 TRANSACTION TRENDS

14 OFFICE FORECAST INDICATORS

16 MAJOR TRANSACTION OVERVIEW

23 CASE STUDIES

23 77 KING STREET, SYDNEY, NSW

24 SOUTHERN CROSS, MELBOURNE, VIC

25 179 ELIZABETH STREET, SYDNEY, NSW

26 41 GEORGE STREET, BRISBANE, QLD

27 COMO CENTRE, SOUTH YARRA, VIC

28 AVIATION HOUSE, CANBERRA, ACT

29 NZ OFFICE OVERVIEW

32

ANNEKE THOMPSON

NATIONAL DIRECTOR

RESEARCH

DWIGHT HILLIER

MANAGING DIRECTOR

VALUATION & ADVISORY SERVICES

INTRODUCTIONThere is little doubt that the Australian o�ce investment market is still very

much in the grips of a yield compression cycle. Over the year to June 2016,

Sydney CBD Core Prime Grade yields have compressed by 44 basis points to

5.50 per cent, and Melbourne CBD Prime Grade yields by 69 basis points to

5.60 per cent. The Australian capital city CBD average compression rate was

41 basis points. This is the sixth year of the cycle, with yields starting to

compress in most capital city markets in mid 2010, albeit slowly for the �rst

three (3) years. It is really since capital returned strongly to the market in the

2014 �nancial year, and in particular global capital, that yields have

accelerated downwards.

Our O�ce Investment Review discusses what our outlook is for this cycle over the next year.

In our opinion, the key drivers of continued capital �owing into our markets (and therefore cap rate

compression) is population growth, and speci�cally where this growth is happening, supply side

growth, including infrastructure, as well as positive return metrics when benchmarked against the

rest of the world. Some global geo-political considerations are making some previously transparent

markets, speci�cally; the UK, the Euro zone and the USA – more di�cult to read in the near term,

and this can only be a positive for Australian markets, where despite our own Federal Election, we

are seen by the investment community as an extremely safe market to invest in.

What is remarkable about this investment cycle is that much of the contraction in yields occurred

when most leasing markets were still in recovery mode. Sydney and Melbourne are now �rmly in

growth mode, with Prime Grade net e�ective rents in the Sydney CBD Core precinct growing by

20 per cent in the year to June 2016, and by 8.6 per cent in the Melbourne CBD. Over the next �ve

years, we expect net e�ective rents to grow by 7.7 per cent per annum in the Sydney CBD and

5.6 per cent per annum in Melbourne. It is the growth environment of these two (2) cities that leads

us to conclude that they will remain the focus for investment capital in the near future. However,

Perth is also seeing increased capital �ows, from those buyers seeking value in a counter cyclical

environment, proving that opportunities still exist for those requiring a higher return.

We trust you �nd the Capital Markets O�ce Investment Review an insightful read.

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JOHN MARASCO

MANAGING DIRECTOR

CAPITAL MARKETS AND

INVESTMENT SERVICES

Over the past two (2) years Sydney and Melbourne have firmly cemented their positions as global cities in the context of office investment capital. Colliers International’s most recent Global Investor Outlook (2016) found that only London ranked ahead of the two major Australian cities as the preferred destination of global property capital.

Total office investment sales volumes for the Financial Year Ending (FYE) 2016 came very close to equalling volumes in FYE2015, despite a low supply environment. Sale volumes in FYE2016 were $15.91 billion versus $16.16 billion in FYE2015. Once again, sales volumes in NSW dominated the country despite being $584 million down on the previous year at $8.15 billion. States that saw an increase in sales volumes were Victoria, Western Australia and ACT.

KEY FINDINGS

MIGRATION AND EMPLOYMENT GROWTH ACCELERATING IN NSW & VIC

On purely financial metrics Sydney and Melbourne still provide a significant yield premium when benchmarked against other major cities. Sydney CBD Core precinct Prime Grade office yields currently average 5.50 per cent and Melbourne’s closely follow at 5.60 per cent. Comparative asset yields in the major US cities of New York and Los Angeles average a full 100bps lower at 4.60 per cent and in the Asian cities of Hong Kong, Singapore and Shanghai they are even tighter, at an average of 4.08 per cent.

The enduring challenge for Australian markets has been to provide these investors with globally competitive office assets of the scale, design and resilience that they are used to in major markets such as London, New York and Singapore. The next development cycle is underway in Sydney and Melbourne and will go some way to alleviating this pressure and are expected to further realign the market’s expectations of returns and set a new benchmark for cap rates.

FYE 2016 SALES VOLUME

OFFSHORE OFFICE PURCHASES

SOVEREIGN WEALTH & SUPER FUNDS

BY STATE

(DOWN $250 MILLION ON FYE2015)

HIGHEST PROPORTION IN HISTORY

UP FROM 4% IN FYE2008

BIL$ 1.92

QLD

$15.91 BIL

LIO

N

BIL$ 8.15

BIL$1.88

BIL$0.68

BIL$0.55

BIL$0.35

BIL$4.30

NSWVIC

QLD

WA SA

ACT

59%

32%

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55 CLARENCE STREET, SYDNEY:

Currently being marketed by Colliers

International on behalf of Eureka.

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Source: Colliers International / RCA

OFFICE INVESTMENT VOLUMES BY COUNTRY OF CAPITAL

$0 $4,000$2,000 $6,000$1,000

AUSTRALIA

CHINA

USA

SINGAPORE

HONG KONG

KOREA

GERMANY

SWITZERLAND

UNDISCLOSED(OFFSHORE)

UK

MALAYSIA$5,000$3,000 $7,000

O�shore buyers dominated transaction activity in

FYE2016, buying just under $9.4 billion of o�ce

assets across the country. Included in this is the

$2.45 billion sale of the Investa Portfolio to China

Investment Corporation (CIC) – making up over a

quarter of the o�shore sales volume. Even excluding

this sale – the biggest in Australian history – sales

to o�shore buyers were 81 per cent higher than the

next buying group – local institutions.

YEAR IN REVIEW

There were a number of reasons for this in�ux

of capital from foreign buyers. Chief amongst

these is the ongoing search for yield. Global

bonds yields remain stubbornly low and a

number of geopolitical threats have been, or are

occurring around the world, including the Brexit

vote and the US presidential elections, both of

which have the potential to impact con�dence in

the two strongest o�ce markets in the world.

Interestingly, investment volumes of Australian

investors on Australian property changed

very little from levels seen in 2008. The

major change seen from capital sources is

by Asian investors, and in particular Chinese

investors. This is partly due to loosening

capital restrictions in those countries and huge

reserves held by Sovereign Wealth Funds in

those countries that need to be invested in 'safe

haven' markets.

OFFICE INVESTMENT SALES BY PURCHASER TYPE

FYE 2008

FYE 2012

FYE 2010

FYE 2014

FYE 2009

FYE 2013

FYE 2011

FYE 2015

FYE 2016

MIL

LIO

NS

$AU

D

Source: Colliers International / RCA

Source: Colliers International / RCA

MILLIONS $AUD

$18,000

$12,000

$4,000

$16,000

$10,000

$2,000

$14,000

$6,000

$8,000

$0

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Corporate

Developer

Government

Local Institution

Private

Syndicate

Undisclosed

O�shore

■

FYE2016 FYE2008

OFFICE INVESTMENT SALES BY STATE

FYE 2008

FYE 2012

FYE 2010

FYE 2014

FYE 2009

FYE 2013

FYE 2011

FYE 2015

FYE 2016

MIL

LIO

NS

$AU

D

$18,000

$12,000

$4,000

$16,000

$10,000

$2,000

$14,000

$6,000

$8,000

$0

■

NSW

VIC

QLD

ACT

WA

SA

■

■

■

■

18 SMITH STREET, PARRAMATTA:

Currently being marketed by Colliers

International on behalf of Altis

Property Group

333 KENT STREET, SYDNEY: Currently

being marketed by Colliers International

on behalf of a private client

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28 FRESHWATER PLACE, MELBOURNE: Currently

being marketed by Colliers International on behalf

of Frasers Property Australia and The GPT Group

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OFFICE EDITION

The impact of Super and Sovereign Wealth Funds on our office investment markets can’t be underestimated. In FYE2008, only four per cent of institutional investment was sourced from these sectors. By FYE2016, this proportion had risen to 32 per cent.

The rate of compression in Prime Grade yields across the various CBD markets differs significantly between the major eastern seaboard markets and all others. Not surprisingly, Sydney and Melbourne have seen sharp decreases, particularly late into 2015 as deal activity produced a flood of yield compression evidence.

FYE 2008

FYE 2016

TRANSACTION VOLUMES BY TYPE OF INSTITUTION

25%INVESTMENT MANAGER

54%UNLISTED FUND

4%SUPER FUND

35%UNLISTED FUND

7%SUPER FUND

19%INVESTMENTMANAGER

22%REIT

7%REIT

25%SOVEREIGNWEALTH FUND

AUSTRALIAN CBD PRIME GRADE YIELDS

Source: Colliers International / RCA

Source: Colliers International

SYDNEY (CORE) MELBOURNE BRISBANE PERTH ADELAIDE CANBERRA

9.0 %

8.5 %

8.0 %

7.5 %

7.0 %

6.5 %

6.0 %

5.5 %

5.0 %

JUN

-06

DEC

-06

JUN

-07

DEC

-07

JUN

-08

DEC

-08

JUN

-09

DEC

-09

JUN

-10

DEC

-10

JUN

-11

DEC

-11

JUN

-12

DEC

-12

JUN

-13

DEC

-13

JUN

-14

DEC

-14

JUN

-15

DEC

-15

JUN

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Barangaroo International Towers, and yields achieved on these sales reflect the lower end of our average yield range for Premium Grade transactions (a 37.5 per cent share in ITS1 Barangaroo sold to the Qatari Investment Authority (QIA) on a cap rate of 5.75 per cent in mid 2015, with a further 25 per cent share selling to the Hong Kong Monetary Authority (HKMA) in late 2015 on a cap rate of 5.25 per cent).

AMP Capital’s Quay Quarter Sydney development is located in arguably the most prestigious location in all of Sydney, taking up close to two full city blocks bordered by Bridge, Alfred, Loftus and Phillip Streets. Quay Quarter Sydney will be the only full precinct development in the CBD core, and will be a 24/7 lifestyle destination, comprising not just office but boutique retail, low-rise apartment living and cafes, restaurants and bars. 3XN Architects from Copenhagen won the design competition for the new Quay Quarter Tower, which will comprise of almost 90,000m2 of next generation office accommodation that will provide innovative workspaces and ‘elastic’ space options for added tenant flexibility. The site is perfectly connected via all modes of transport including ferry, train, bus and car and will also enjoy convenient access to the new $2.2 billion Sydney Light Rail infrastructure project. The building’s design and features will ensure it becomes a globally recognised asset, comparable with the likes of the World Trade Center in Manhattan and The Shard in London.

Brookfield’s Wynyard Place will also change the shape of the major transit precinct around Wynyard Station, and will also be integrated with the $2.2 billion Sydney light rail project which is due for completion around the same time. The major tower as part of the development will be a 59,000m2, 29 level office tower at 10 Carrington Street.

NEXT GENERATION ASSETS TO REALIGN CAP RATE EXPECTATIONS

Over the past two (2) years Sydney and Melbourne have firmly cemented their positions as global cities in the context of office investment capital. Colliers International’s most recent Global Investor Outlook (2016) found that only London ranked ahead of the two major Australian cities as the preferred destination of global property capital. Of course this survey was completed prior to the UK’s surprising referendum result to exit the EU, and so it could be argued that Sydney and Melbourne are now viewed as the highest ranked cities. The challenge, however, for Australian markets has always been to provide these investors with globally competitive office assets of the scale, design and resilience that they are used to in major markets such as London, New York and Singapore. The next development cycle is underway in Sydney and Melbourne and will go some way to alleviating this pressure, and is expected to further realign the market’s expectations of returns and set a new benchmark for cap rates.

Much has been made of the withdrawal pipeline impacting the Sydney CBD and changing the skyline in turn. Colliers International are forecasting almost 400,000m2 of office space will be withdrawn from the market over the next four years to make way for new office developments, residential conversions or the Sydney Metro project. What makes this cycle so opportunistic for developers is the diminishing total NLA of the CBD market is coming at the same time as employment growth is expected to be strong, with almost 26,000 1 new white collar workers to move into the CBD – this equates to demand of approximately 385,000m2.

These strong demand conditions, as well as increased investment in CBD infrastructure by both the local and state governments, has opened up opportunities for some of Australia’s premier developers to build the next generation of office assets in the Sydney CBD. Already underway is

TRANSACTION TRENDS

1 Deloitte Access Economics, Employment Data Forecasts, Q1 2016

Colliers International are forecasting almost 400,000m2 of office space will be withdrawn from the Sydney CBD market over the next four years to make way for new office developments, residential conversions or the Sydney Metro project.

NET SUPPLY VERSUS FORECAST TAKE UP - SYDNEY CBD

Source: Colliers International. Deloittes Access Economics Net Supply (m2) Forecast Take Up (m2)

250,000

200,000

150,000

100,000

50,000

0

-50,0002016 2017 2018 2019

m2

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QUAY QUARTER SYDNEY

MIRVAC 35 PITT STREET

151 CLARENCE STREET 60 MARTIN PLACE

WYNYARD PLACE

LENDLEASE CIRCULAR QUAY

BARANGAROO INTERNATIONAL TOWERS

CIRCULAR QUAY

GROSVENOR

STREET

WYNYARD

MARTIN PLACE

WYNYARD

CIRCULAR QUAY

ST JAMES

MUSEUM

TOWN HALL

QUEEN VICTORIA

BUILDING

TOWN HALL

GE

OR

GE S

T

SYDNEY'S NEXT

DEVELOPMENT CYCLE

YO

RK

ST

CLA

RE

NC

E S

T

KE

NT S

T

SU

SS

EX

ST

T

MARKET ST

TRAIN STATION

LIGHT RAIL STATION

DEVELOPMENTS

PARK STT

BATHURST ST

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EG

E S

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KING ST

HUNTER ST

BLIG

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T

PIT

T S

T

PIT

T S

T

CA

RR

ING

TO

N S

T

MA

CQ

UA

RIE

ST

PH

ILL

IP S

T

BRIDGE ST

CA

ST

LE

RE

AG

H S

T

EL

IZA

BE

TH

S

T

T

T

T

T

T

% %

%

%

(YEAR END 2019)

LO

ND

ON

NEW

YO

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PA

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FORECAST

OFFICE FUNDAMENTALS OUTPERFORMING

ON A GLOBAL BASIS

CBD

VACANCY RATE

17.9 8.2

7.5

4.3

On purely �nancial metrics, Sydney and Melbourne still

provide a signi�cant yield premium when benchmarked

against other major cities. Sydney CBD Core precinct Prime

Grade o�ce yields currently average 5.50 per cent and

Melbourne’s closely follow at 5.60 per cent. Comparative

asset yields in the major US cities of New York and Los

Angeles average a full 100bps lower at 4.60 per cent and in

the Asian cities of Hong Kong, Singapore and Shanghai they

are even tighter, at an average of 4.08 per cent. The yield

spread to 10 year bond rates is also seen as more attractive

than some other markets. However, these yield premiums

are getting smaller, and coupled with our incentive regime

that confounds some global investors, the upscaling of asset

quality is imperative if Australia is to continue to attract global

capital and keep yields compressing to levels near 5 per cent.

Over the immediate forecast period, o�ce market

fundamentals in Sydney and Melbourne compare very well

to our global city comparisons. Hong Kong is always a tight

market, re�ected in its perennially low cap rate. On a vacancy

and forecast outlook however, Sydney and Melbourne

compare very favourably to major global cities, and these

improving tenant market fundamentals are expected to also

drive cap rate compression over the next three (3) years.

A new development cycle in Melbourne is also underway,

incorporating both Docklands and CBD grid sites, after

years of Dockland’s developments dominating new supply.

Lendlease continues to revitalise Docklands with the

development of Melbourne Quarter. Already a new 25,000m2

2 Deloitte, The purpose of place Reconsidered,

Building the Country #5, 2015

tower is underway that has been pre-committed by Lendlease

and ARUP. Lendlease has scope for a further two o�ce

towers at the site and will also be developing an apartment

precinct with a 2,000m

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‘skypark’ to form the centrepiece.

Cbus Property’s unique mixed-use development at 447

Collins Street will set a new benchmark for o�ce quality

in the Melbourne CBD. Coupled with the prime location in

what is now the centre of Collins Street, 447 Collins Street

will include a highly activated 2,000m

OFFICE EDITION

2 public realm o�ering

diversity of spaces. The public realm can be accessed directly

from Collins Street plus there is opportunity to integrate

part of Market Street adjoining the site providing a further

1,500m2 of public park. The o�ce development itself will be

a 50,000m2 Premium Grade o�ering (increasing Melbourne’s

Premium Grade space by 6.5 per cent) with 1,800m2 to

2,300m2 �oorplates providing diversity of workplace. It will

also be Melbourne’s �rst WELL rated building and include

extensive state of the art lifestyle facilities.

As well as new developments, existing buildings in the

Melbourne CBD are being refurbished and will also add to

the supply of next generation assets. To maintain its market

position as Melbourne’s landmark o�ce tower, Rialto is

undergoing a $200 million aesthetic and services upgrade.

Upon completion, guests will be welcomed by a high end

retail o�ering and a brand new ground �oor foyer enclosed

in a curtain wall of full height glass. Tenants will bene�t from

new destination lift controls, cutting edge end of trip facilities

and behind the scenes new chillers, boilers and air handling

units to ensure optimum comfort. On �oor, the entry lobbies,

bathrooms, ceilings and light �ttings are being upgraded in

keeping with Rialto’s Premium nature.

All of these developments in Sydney and Melbourne will

cement these cities’ reputations as globally competitive, for

both tenants and capital, and meet not only the current, but

the future needs of tenants that many existing prime grade

buildings will need signi�cant capital expenditure to achieve.

The importance of 'place’ of the CBDs of our major global

gateway cities is only going to be enhanced as Australia

moves from the industrial era, into a more service producing

economy. Global accounting and consultancy �rm Deloitte

recently noted the importance of place in their fascinating

Building the Lucky Country series: “The purpose of place

in a knowledge economy is to facilitate the productive

interaction of knowledge workers. Even in a world of instant

global connectivity, this typically involves them working in

close proximity.” 2 What this means is that technology, rather

than replacing the need for human interaction, merely is one

method of facilitating interaction between workers. The need

to provide appropriate and resilient workspaces that allow

workers to �ourish and work pro-actively in the knowledge

economy, will be critical to the success of our CBDs. These

are the future buildings that are anticipated to set cap rate

benchmarks over the next �ve to ten years.

Forecast CBD Vacancy Rate

(end 2019)

Prime Grade Face Rent Growth (annual average to

year end 2019)

SYDNEY*

MELBOURNE*

LONDON

PARIS

NEW YORK

LOS ANGELES

HONG KONG

SINGAPORE

SHANGHAI

6.30 % 5.60 % 5.50 %

7.70 % 6.30 % 4.40 %

2.90 % 7.50 % 4.70 %

4.30 % 4.00 % 2.00 %

9.90 % 8.20 % 3.20 % (Manhattan)

17.50 % 17.90 % 3.00 %

2.60 % 3.50% 4.00 %

7.10 % 16.10 % 4.50 %

4.00 % 6.70 % 4.80 %

PRIME CBD OFFICE CAP RATES AND GOVERNMENT BONDS BY SELECTED CITIES

NET OVERSEAS MIGRATION, NSW & VIC

Source: Colliers International, ABS 3101

RISKS TO CONSIDER IN THE CURRENT CYCLE

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CAP RATE (June 2016) 10 YR GOVERNMENT BOND (Per Annum)

NSW VIC

The risk outlook for Australia’s o�ce markets has changed

considerably during this cycle compared to previous cycles,

as foreign capital re-weights the risk outlook to global

considerations, rather than local �scal or monetary policy

changes or local debt markets. The major global risks are

really the rise of bond markets or other alternative asset

classes. Capital Economics forecasts 10 year US Treasury

Bonds to rise from their current (at time of writing) 1.81 per

cent to 3.00 per cent by the end of 2017, while Japanese

Bonds will likely still be in negative territory, and German

Bonds rise only moderately, by about 58 basis points to the

end of 2017. However, the recent Brexit vote in the UK is

presenting some interesting scenarios. It is our opinion that it

will probably lead to further downward pressure on an already

very low global bond yields in the short to medium term,

increasing the relative attraction of 5 per cent to 6 per cent

yields on Core Australian (Sydney and Melbourne) property

over the 2016 to 2017 outlook period.

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OV

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NM

EN

T B

ON

D (

%)

PE

OP

LE

These �gures are exceptionally important in determining

the long term demand is potential for commercial property

markets across the country. This provides further evidence

that demand in consolidating in our two global cities – Sydney

and Melbourne. We are already seeing the impacts of this, with

net e�ective rents in the Sydney CBD Core precinct growing

by 20 per cent in the year to June 2016, and by 8.6 per cent

in the Melbourne CBD. Over the next �ve years we expect net

e�ective rents to grow by 7.7 per cent per annum in the Sydney

CBD and 5.6 per cent per annum in the Melbourne CBD.

ME

LB

OU

RN

E

SY

DN

EY

SH

AN

GH

AI

LOS

AN

GE

LES

SIN

GA

PO

RE

NEW

YO

RK

(MA

NH

AT

TA

N)

LON

DO

N

PAR

IS

HO

NG

KO

NG

% %

%

% % 7.0 %

6.0 %

5.0 %

4.0 %

3.0 %

2.0 %

1.0 %

0.0 %

200,000

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

SY

DN

EY

SH

AN

GH

AI

HO

NG

KO

NG

ME

LB

OU

RN

E

Source: Colliers International. Trading Economics

Source: Colliers International, PCA OMR Jan 2016

* Note that Current CBD Vacancy Rates for Australian markets are rates as at Jan 2016.

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The latest ABS Australian Demographics Statistics

release has con�rmed what demand indicators

in those property markets would indicate – that

migration in�ows continue to increase. 68,368

o�shore migrants moved to NSW in 2016, and

60,532 to Victoria, a small increase for both states

on the previous year. These two states are bucking

the trends seen in the other states, where o�shore

migration �ows are decreasing. 13

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Current CBD Vacancy Rate (Total Market)

FYE2016 FYE2017

YIELDS 7.3% 7.3%VACANCY 14.1% 15.7%RENTAL GROWTH 0.0% -0.5%EMPLOYMENT 0.9% 0.7%SUPPLY 54,684 9,846

FYE2016 FYE2017

YIELDS 6.9% 6.9%VACANCY 19.2% 21.9%RENTAL GROWTH -20.0% 0.0%EMPLOYMENT -1.9% -0.9%SUPPLY 142,545 2,100

PERTH

ADELAIDE

OFFICE FORECAST INDICATORS

WESTERN AUSTRALIA

NORTHERNTERRITORY

SOUTHAUSTRALIA

NOTE YIELDS – Prime Grade EMPLOYMENT – y-o-y White Collar

Employment Growth

Source: Colliers International, PCA OMR Jan 2016, Deloittes Access Economics * FYE2016 vacancy rates are PCA OMR Jan 2016 vacancy rates

RENTS – y-o-y Prime Grade Net Effective Rental GrowthSUPPLY – New (m2), 12 months to20

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FYE2016 FYE2017

YIELDS 7.0% 7.0%VACANCY 12.5% 10%RENTAL GROWTH 2.0% 3%EMPLOYMENT -2.1% 0.4%SUPPLY 6,252 0

CANBERRA

QUEENSLAND

NEW SOUTH WALES

NORTHERNTERRITORY

SOUTHAUSTRALIA

VICTORIA

FYE2016 FYE2017

YIELDS 5.5% 5.2%VACANCY 6.3% 4.9%RENTAL GROWTH 20.3% 12.1%EMPLOYMENT 4.9% 1.5%SUPPLY 294,432 171,701

SYDNEY

FYE2016 FYE2017

YIELDS 6.3% 6.2%VACANCY 14.9% 16.4%RENTAL GROWTH -7.7% 8.9%EMPLOYMENT 0.9% 1.0%SUPPLY 121,394 82,153

BRISBANE

FYE2016 FYE2017

YIELDS 5.6% 5.3%VACANCY 7.7% 7.1%RENTAL GROWTH 8.6% 10.8%EMPLOYMENT 1.7% 1.7%SUPPLY 100,069 52,000

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SYDNEY CBD

FYE2016 has seen a continuation of strong capital �ows in the

Sydney O�ce market, rea�rming its position as Australia’s core

investment destination of choice. Transaction volumes tracked

down slightly in FYE2016, recording $8.15 billion, compared

to $8.736 billion in FYE2015 (for transactions greater than

$20 million). While capital markets continue to display

unprecedented appetite for Sydney o�ce assets, Sydney’s

strong leasing market and truly global status are giving its assets

a feeling of irreplaceability.

Large-scale transactions in the Sydney market in 2016 began

with CIC’s purchase of the $2.45 billion Investa Portfolio,

marking a much anticipated shift in yields for core assets. Of the

$2.45 billion in assets, $1.8 billion were in the Sydney market,

including �agship assets such as 126 Phillip Street, 400 George

Street and 225 George Street. The transaction represented

the largest o�ering of prime Sydney stock for some time and

con�rmed yields for prime assets sat in the low 5 per cent

range.

The demand for high quality investment product and particularly

product underpinned by long-term leases, was highlighted by

two (2) of the larger transactions of 2016. Mirvac’s successful

bid for the Australian Technology Park in Redfern in November

2015 saw the AMP Wholesale O�ce Fund (AWOF) and

Sunsuper, partner with Mirvac in the 93,000m² development.

Mirvac’s scheme was supported by a 15 year lease to CBA,

MAJOR TRANSACTION OVERVIEW

creating an annuity-style product with an end value in excess

of $1 billion.

In a similar fashion, Lendlease’s sell-down of 25 per cent of their

holding in Tower (ITS1) at Barangaroo to HKMA in December

2015 was another demonstration of investors’ appetite for quality

stock. The transaction was structured around a di�erential cap

rate, with HKMA investing on a cap rate of c5.25 per cent across

the occupied space, with a softer cap rate applied to the vacant

space. At the time of the transaction, ITS1 was 48 per cent let

to tenants PWC, Marsh, HSBC & Servcorp, leaving in excess of

50,000m2 of vacancy.

The latter half of FYE2016 saw the close of (2) of the major

on market campaigns for 2016, with 420 George Street and

1 Shelley Street changing hands. Fortius’ 75 per cent stake in

420 George Street was purchased by the Investa Commercial

Property Fund (ICPF) on a yield of c 5.25 per cent. The 25 per

cent balance has since sold. Brook�eld’s sell-down of a range of

assets across Australia culminated in their 1 Shelley Street asset

being sold to a partnership between Charter Hall and Morgan

Stanley Real Estate Investing for $525 million in May 2016.

In another signi�cant year for the Sydney o�ce market, 2015/16

showed a continuation of strong investor appetite for high-quality

product. With sentiment growing in the market that the low cost

of capital environment will become a long term theme, 2017 is

set to see Sydney retain its core investment status.

19 HARRIS STREET, PYRMONT:

Sold by Colliers International to UBS

Grocon on behalf of LaSalle Investment

Management for $91,919,000

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OFFICE EDITION

17

MELBOURNE CBD

A �ood of on-market activity followed the announcement of

China Investment Corporation as the successful bidders for what

became the biggest sale globally when it purchased the Investa

Property Trust (IPT) portfolio of 9 properties for $2.45 billion.

A 50 per cent interest of 120 Collins Street, the only Melbourne

asset apart of the portfolio, sold for a reported $401 million.

222 Exhibition Street and 460 Lonsdale Street were both hotly

contested marketing campaigns by Colliers International, both

representing sub 6 per cent market yields and selling for 10 per

cent plus premiums above their most recent book valuations.

The �agship o�ering in the Melbourne CBD during FYE2016

was Brook�eld Property Partners' sell down of a

50 per cent interest in Southern Cross Towers (also transacted

by Colliers International), located at 121 Exhibition Street and 111

Bourke Street. In what was the largest transaction to occur in

Melbourne, Blackstone paid $675 million, representing an initial

yield of 4.96 per cent. This transaction represented the strongest

pricing metrics ever to be seen in Melbourne and consequently

re-rated the market.

Following on from last �nancial year, FYE2016 saw o�shore

investors continue to be very active on the buy-side in

Melbourne as 11 buildings were acquired by a combination

of developers, retail funds, pension funds and wholesale

funds. The dominant origin of o�shore capital emanated

from the USA (54 per cent) consisting of Blackstone’s

50 per cent interest in Southern Cross Towers, Pembroke’s

acquisition of 161 Collins Street and LaSalle Investment

Management purchasing 222 Exhibition Street on behalf of

a US pension fund.

Core investors from Asia were prevalent in FYE2016 with

4 transactions totalling $622 million. These sales included

the purchases of 120 Collins Street (CIC; 50 per cent for

$401 million) and 383 La Trobe Street (Sterling Global;

$70.7 million).

75 DORCAS STREET,

SOUTH MELBOURNE:

Sold by Colliers International

on behalf of SachsenFonds to

Growthpoint for $166,000,000

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Currently being marketed by Colliers

International on behalf of the

Lendlease-managed APPF Commercial

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OFFICE EDITION

O�shore institutions have been most active divesting 19 o�ce

investments in FYE2016, representing 45 per cent of total

volume. Domestically, prominent groups to divest o�ce assets

included Investa Property Group, AMP Capital and REST.

The second half of FYE2016 has seen subdued activity in the

Melbourne CBD with only 2 transactions above 50 million +

occurring through the sales of 1 Collins Street and 120 Spencer

Street. Activity in the second half has largely been driven in the

City Fringe and Metro markets with the on-market campaigns

of Mirvac’s Como Centre in South Yarra, 75 Dorcas Street,

South Melbourne through SachsenFonds and Frasers Property

Group’s divestment of two metro assets located in Richmond

and Springvale.

BRISBANE

Brisbane has continued the momentum generated in the

second half of 2015, garnering signi�cant interest from both

domestic and o�shore capital. The substantial yield arbitrage

between Brisbane and the Australian gateway cities of Sydney

and Melbourne remains a key driver of o�shore enquiry

in Brisbane, exempli�ed through investments in 2016 by

Singapore based AEP Investment Management and LaSalle

Investment Management, purchasing 41 George Street (CBD)

and 28 Macgregor Street (Metro) respectively. Both deals were

brokered by Colliers International and underpinned with leases

to the Queensland State Government (5.35 year WALE) and the

Commonwealth Government (5 year WALE) respectively.

The sales further highlight Brisbane as an attractive destination,

with quality CBD and Metropolitan o�ce investments with long

WALEs and strong tenant covenants in high demand, given their

ability to ride out the challenging leasing market. O�shore groups

are becoming increasingly prevalent in the market and domestic

funds are beginning to lower their investment return hurdles in

order to compete. Adding to this has been the 'lower for longer'

theme globally, with reserve banks across the world lowering

cash rates to record levels resulting in low cost of debt and low

or negative risk-free rates (bond yields).

Keeping with this theme, ISPT Super Property’s Green Square

Brisbane, South Tower, (505 St Pauls Terrace, Fortitude Valley)

is likely to re-rate the metropolitan market. Underpinned by

an 11 year WALE (as at 22 August 2016) to local government

(Brisbane City Council) this ‘annuity-style’ o�ce investment will

be hotly contested by both o�shore and domestic groups. The

international expression of interest campaign is being conducted

exclusively by Colliers International. There is a scarcity of quality

o�ce product within the Brisbane market creating competitive

tension from both o�shore and domestic funds.

CANBERRA

Throughout the second half of FYE2016, the Canberra o�ce

market has seen a continuation of the very high investment

activity. After a record surge of activity in the last quarter

of 2015, peaking with the sale of Louisa Lawson for

$224.5 million, demand has increased substantially over the

past 12 months. Foreign investors and major REITs continue

to be attracted to the high level of cash �ow security o�ered

by Canberra’s prime assets that have long term government

leases. There has also been a rise in demand for secondary

assets that have less secure cash �ow and expiry pro�les.

GREEN SQUARE, SOUTH TOWER, 505 ST PAULS TERRACE,

FORTITUDE VALLEY, QLD: Currently being marketed by

Colliers International on behalf of ISPT

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Total sales values 2016 YTD have increased 31 per cent on

the same period in 2015. The largest transaction recorded

in 2016 has been the sale of Aviation House for $68.1 million

in the Woden Town Centre. The building was sold to an

interstate private investor and was keenly sought after due to

the staggered expiry pro�le of government tenants.

AREIT investors have traditionally dominated the buyer pro�le

in the ACT, however there has been a noticeable shift toward

new entrants that include international institutions, syndicated

investors and small to medium privates. In FYE2016 we

have witnessed new entrants into the market, all chasing a

variety of assets types. Other buyers such as Centuria and

Growthpoint have expanded their Canberra portfolios over the

12 months.

Local private investors have taken the opportunity to

purchase secondary assets that have scope for value uplift

through re-positioning. The Molonglo Group has plans to

upgrade 33 Allara Street and the Morris Property Group will

add a residential apartment tower to their purchase of 20

Allara Street. The Zapari Group plan to convert Eclipse House

into a boutique city hotel which shows the trend continuing

into FYE2017.

The occupier market is improving, and we are expecting A

Grade vacancy to contract signi�cantly. This has helped to ease

investor concerns about cash �ow risk in the medium to long

term. A more positive general outlook has been adopted for

tenant retention, falling incentives and a strengthening landlord

bargaining position. The outlook is not consistent across all

locations and asset types however, and in particular, C and D

grade assets will have consistently high vacancy rates.

ADELAIDE

The Adelaide o�ce market has seen volumes fall over the

FYE2016 to $354 million, compared to record sales the

previous year of $525 million. Sales volumes, however, are

still above the post GFC average of $278 million.

Institutional investors have remained active, accounting for

over 60 per cent of the sales in FYE2016. They have been a

consistently active purchaser type since FYE2011, with

private investors accounting for the remainder of the sales.

The interesting trend however has been the move from

domestic to o�shore capital. The purchase of Rundle Place and

80 Grenfell Street by Blackstone (USA) and 100 Waymouth

Street, purchased by a Singaporean investor are the two most

signi�cant sales in the period. O�shore investors have been

active in the east coast o�ce market for some time, but have

now seen that there is good value in the Adelaide o�ce market.

Yields have not tightened as rapidly in the Adelaide market and

there is still a signi�cant spread between the Adelaide o�ce

market and most other east coast o�ce markets.

Yields in the o�ce market have started to tighten with the

evidence of 100 Waymouth Street, 30 Flinders Street and 80

Grenfell Street seeing yields below 7 per cent. The overall

market trend has seen yields for both Premium and A Grade

tighten by between 50-60 basis points over the last 12

months. Prime yields, which includes Premium and A Grade

currently range from 6.0 per cent to 8.0 per cent. This is a

large range, but is re�ective of the weakness in the leasing

market. Prime quality assets with long WALEs are seeing

stronger demand which is resulting in much tighter yields.

Buildings with any vacancy or short WALEs are much harder

to sell due to the higher risks around the leasing market.

108 NORTH TERRACE, ADELAIDE: Currently being marketed by Colliers International on behalf of DEXUS Property Group

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OFFICE EDITION

28 O'CONNELL STREET, SYDNEY: Currently

being marketed by Colliers International on

behalf of CHUBB Insurance

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as institutional and foreign capital chase investments that

provide reliable rental returns and comparatively attractive

yields in comparison to other locations and asset classes.

As a result of this robust interest, capital values have

been, and are likely to remain, supported for quality assets.

For secondary assets, or those with signi�cant vacancy,

capital value deterioration may result. This is due to

a reduced risk appetite and tighter funding conditions

as �nancial institutions seek to reduce exposure to

potential non-performing or bad debts on their loan books.

However, since the start of the downturn in FYE2014,

distress assets sales have been limited.

The lower Australian dollar in combination with

comparatively high yields and lower foreign funding

costs has made Australian and Perth commercial assets

signi�cantly more attractive to foreign investors. As such,

expected yields for Perth CBD assets with good lease

pro�les are likely to remain relatively tight throughout

FYE2017, despite economic and market vacancy concerns.

Colliers International has also noted both domestic and

international investors, fully aware of the current lull in the

Perth market, are increasingly interested in Perth assets as

a counter-cyclical strategy. Although above average vacancy

and contracting rental income are still apparent, the longer

term prospects of Perth remain attractive for these investors.

PERTH

Perth’s CBD o�ce market continues to exhibit a high level

of vacancy as a result of low net tenant demand.

Vacancy increased from 19.2 per cent in January 2016 to

22.5 per cent in July 2016.

Assets worth $681.2 million changed hands in the Perth

CBD and CBD fringe locations during FYE2016. The

largest of these were;

• A 50 per cent interest in Exchange Tower acquired by

Primewest for approximately $110 million.

• The Forrest Centre at 219-221 St Georges Terrace

purchased by a foreign investor from the Insurance

Commission of WA (ICWA) for $193.6 million.

• 81 St Georges Terrace, which had recently been fully

leased to the WA State Government on a ten year lease,

also purchased by a foreign investor for $81.3 million.

• 190 St Georges Terrace, which had a WALE of circa

3.5 years, acquired by Credit Suisse REIM for $63.9 million

which equated to a market yield of approximately

7.7 per cent.

Notwithstanding the di�cult leasing market, assets with

relatively strong lease pro�les, and/or redevelopment

prospects, continue to be in demand, and when available,

attract strong interest from both domestic and foreign

investors. This has led to continued market yield compression

LOUISA LAWSON, 25 COWLISHAW STREET, GREENWAY

ACT: Sold by Colliers International on behalf of Amalgamated

Property Group to FG Asset Management for $224,500,000

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OFFICE EDITION

OFF-MARKET TRANSACTION OF PRIME SYDNEY ASSET

77 King Street, Sydney is an A Grade office asset in a high profile location on the intersection of King & George Streets. The 18 level office stratum was transacted off-market between the owner Keppel REIT and Invesco.

The transaction marked an example of the market’s appetite for A Grade office product in prime Sydney locations. 77 King Street’s position on the corner of King & George Street is set to benefit from significant infrastructure investment in the coming years, with Sydney’s Light Rail and Metroline stations in close proximity. This infrastructure spend, in conjunction with Sydney’s strong leasing market, was enough for Invesco to make a compelling bid in the one of the largest off-market Sydney office transactions in the second half of FYE2016.

NEW SOUTH WALES

77 KING STREET, SYDNEY

Vendor Keppel REIT

Purchaser Invesco

Sale price $160.0 million

Passing initial yield 5.75%

NLA 13,625 m2

Site area N/A (Stratum)

Net passing income $9,505,303

WALE 3.66 Years (By income)

CASE STUDIESColliers International's Capital Markets transacted 77 King Street, Sydney in January 2016

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LANDMARK EAST END MELBOURNE OFFICE TOWERS

Southern Cross Towers features two ‘A Grade’ landmark office towers providing a total NLA of 126,056m². Southern Cross East at 121 Exhibition Street comprises a 37 level tower of 77,378m² with centre typical floor plates of approximately 1,770m² to 2,200m². Southern Cross West at 111 Bourke Street comprises a 20 level tower of 44,431m² with typical side core plates ranging from approximately 2,200m² to 2,850m². The development includes ground level retail accommodation and basement car parking for 950 vehicles. Major tenants include the Victorian Government and Australian Postal Corporation.

The sale of Southern Cross Towers represented the largest office transaction in the Melbourne CBD, eclipsing the sale of ‘CBW’, a 100 per cent interest which sold for $608.1 million.

VICTORIA

SOUTHERN CROSS TOWERS: 121 EXHIBITION STREET & 111 BOURKE STREET, MELBOURNE

Vendor Brookfield Property Partners

Purchaser Blackstone

Sale price $675 million (50%)

Passing initial yield 4.97%

Site area 9,573m²

Net passing income $67,192,341 (fully leased)

WALE 5.20 years

Colliers International's Capital Markets transacted Southern Cross Towers, Melbourne in December 2015

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179 Elizabeth Street, Sydney, is an A Grade o�ce asset

completed in 1992, located within the Mid-Town precinct

of Sydney, with dual street frontages to Castlereagh and

Elizabeth Streets.

The asset comprised of a Stratum interest in the building,

inclusive of 107 car spaces, and 15,030m² of retail and

o�ce NLA. The targeted sales campaign focussed around

speci�c buyers with an appetite for stratum title assets.

The buyer, Markham Corporation, acquired the asset

shortly after divesting their share of the IMAX Theatre site

in Darling Harbour to Grocon.

NEW SOUTH WALES

179 ELIZABETH STREET, SYDNEY

Vendor LaSalle Investment Management

Purchaser Markham Corporation

Sale Price $148.8 million

Passing initial yield 6.63%

NLA 15,030m²

Site area 1,814m²

Net passing income $10,802,523

WALE 4.21 Years (By income)

PRIME OFFICE STRATUM

OVERLOOKING HYDE PARK

Colliers International's Capital Markets

transacted 179 Elizabeth Street, Sydney in

January 2016

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GOVERNMENT LEASED ASSET TRANSACTS

IN BRISBANE CBD’S GROWTH PRECINCT

Set on a 2,811m² elevated corner site, 41 George Street is

predominately leased to the Queensland Government (99.71

per cent of NLA) with a 5.35 year WALE. The property is

situated within a highly strategic, growth corridor of the

Brisbane CBD as it is positioned at the gateway to the

proposed $3 billion “Queens Wharf” integrated casino,

entertainment, hotel and residential precinct which is

scheduled to open in 2022.

The highly competitive marketing campaign resulted in

multiple bids from both domestic and o�shore institutional

capital. In addition to cash �ow security, the building also

lends itself to a range of redevelopment and value-add

options. These include o�ce refurbishment and adaptive

re-use to hotel, student accommodation or residential

apartments. The acquisition of 41 George Street was AEP

Investment Management’s �rst acquisition for the Basil

Property Trust in Australia.

QUEENSLAND

41 GEORGE STREET, BRISBANE

Vendor QIC

Purchaser AEP Investment Management

Pty Ltd

Sale price $159.8 million

Passing initial yield 8.72%

NLA 29,960m²

Site area 2,811m²

Capital Value $5,334 per m²

WALE 5.35 years

Colliers International's Capital

Markets transacted 41 George Street,

Brisbane in January 2016

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ICONIC MIXED-USE ASSET

The Como Centre is a mixed-use complex located on the

prestigious corner of Chapel Street and Toorak Road, South

Yarra. The Centre comprises 4 o�ce components - two levels

of retail accommodation, a luxurious 107 room 5 star hotel

and a 629 bay commercial carpark. The o�ce component

spread across four towers (644 Chapel Street, 650 Chapel

Street, 620 Chapel Street and 299 Toorak Road), collectively

represents over 60 per cent of the asset’s net income.

VICTORIA

COMO CENTRE, SOUTH YARRA

Vendor Mirvac

Purchaser Newmark Capital

Sale price $236.5 million

Net passing income $14,134,715

Colliers International's Capital

Markets transacted Como Centre,

South Yarra in June 2016

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GOVERNMENT LEASED ASSET IN

GEOGRAPHIC CENTRE OF CANBERRA

Aviation House is a striking A Grade building in the heart of

Canberra’s Woden Town Centre. Set over 9 levels the building

provides 14,812m² of high quality o�ce accommodation

occupied by 3 Government tenants plus a ground �oor café.

Rare in Canberra, Aviation House is leased by three

Government tenants with staggered expiry which minimises

the binary expiry risk surrounding many similar assets in

Canberra. The transaction highlighted Canberra’s emergence

as a proxy for investment in Metropolitan Sydney and

Melbourne as it drew a large number of parties to the

campaign due to the relatively high yield and AAA-rated

Australian Government tenants with staggered expiry.

The Woden Town Centre is the approximate geographic centre

of Canberra, some 6 kilometres south of Parliament House and

is undergoing signi�cant revitalisation with the ACT Government

moving a 1,000 sta� to the precinct at the same time investing

in improving civic infrastructure. Coupled with the variation to

the Department of Finance’s Property Procurement Framework

AUSTRALIAN CAPITAL TERRITORY

AVIATION HOUSE, CANBERRA

in 2015 to encourage Government agencies to consider local

impacts prior to vacating locations, the Patella Group had

con�dence to make a strong bid and secure the most expensive

building to transact in Canberra in calendar year 2016 so far.

Vendor Mirvac

Purchaser Patella Holdings

Sale price $68.1 million

Passing initial yield 8.99%

NLA 14,812m²

Site area 4,464m²

Net passing income $6,118,213

WALE 4.57 years

Colliers International's Capital

Markets transacted Aviation House,

Canberra in May 2016

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OFFICE EDITION

AUCKLAND A HOTSPOT

Auckland captured the majority of the major o�ce property

transaction value in FYE2016, which is a re�ection of its

overall dominance in transaction activity. Approximately one

third of national sales transactions across all price levels are

in Auckland.

Demand from tenants for o�ce space in Auckland is at

all-time highs re�ecting the extended period of buoyant

economic activity fuelling employment in the services sector

and ‘white-collar’ jobs. The overall Auckland CBD o�ce

vacancy rate is at 5.8 per cent, the lowest recorded by

Colliers International in two decades. Metropolitan Auckland

is also experiencing heightened levels of demand for o�ce

space with a vacancy of 6.2 per cent in March 2016, the

lowest in eight years.

Colliers International’s investor con�dence survey shows that

sentiment for the Auckland o�ce sector is at record highs. A net

positive (optimists minus pessimists) 70.8 per cent of investors

surveyed are con�dent in the sector’s performance across

occupancy rates and rental and capital appreciation for the next

12 months. This is the highest level of con�dence across the

entire commercial property sector in Auckland, and the highest

rate recorded since the survey began in early 2006.

FLAGSHIP OFFICE PREMISES

IN HIGH DEMAND

The o�ce sector punches above its weight in the NZD

$5 million and over category. Analysis of provisional data

for the �nancial year to June 2016 (FYE2016) showed 40

properties transacted aggregating to NZD $2.3 billion. This

represents more than half of total sales value and volume for

all commercial and industrial properties worth NZD $5 million

or more in New Zealand.

Flagship o�ce premises are highly attractive to local

and o�shore parties. Portfolios of buildings with strong

fundamentals such as occupancy, lease terms and low capital

expenditure requirements are seldom available.

We have seen a number of local listed sector vehicles recycle

assets in the past two (2) years to pursue new development

opportunities. This has created new purchasing opportunities in

a market that is tightly held by a small number of parties. There

have also been an increasing number of new developments

brought to market which have generated signi�cant interest

amongst o�shore and local purchasers as well as syndicators.

Five (5) recent major o�ce purchases, aggregating to more than

NZD $500 million, have been purchased by syndicators who

remain active in this low interest rate environment.

NZ OFFICE OVERVIEW New Zealand’s o�ce sector continues to provide investors with solid return pro�les

supported by positive underlying fundamentals. This is attracting new and old to the

sector which saw a buoyant period of purchasing activity over the FYE2016.

BUILDINGS A & B, 2 GRAHAM ST, AUCKLAND: Sold by

Colliers International NZ to August Funds Management

Ltd on behalf of Mansons TCLM for $204,189,354

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NOT ALL OF THE ACTION IS IN AUCKLAND

Investors in Wellington commercial office properties are also in a positive mood. Although lower than Auckland with a net positive 29.9 per cent, this is the highest of all commercial sectors in Wellington and the highest recorded since the Wellington survey began in mid-2008.

The increasing level of positive sentiment has been building in Wellington over the past couple of years and has translated into real purchasing activity. In the last two years to June 2016, there were 21 office properties sold in Wellington worth NZD $5 million or more, aggregating to NZD $695 million.

INVESTMENT DRIVERS FOR OFFSHORE AND ONSHORE PURCHASERS

After property fundamentals and economic growth, asset appreciation was signalled as the third most important feature of a real estate market in the latest Colliers International Global Investor Sentiment survey.

In New Zealand, asset values recovered in 2010 after the decline in 2008, but were relatively static until 2012. The key to the most recent uplift in values over the past few years and especially in FYE2016 has been the rise in cash flows from rent increases combined with firming cap rates.

In a review of major cities in the US, Europe, Asia, Australia and New Zealand, prime average commercial office yields in Auckland, Wellington and Christchurch were typically higher than many global counterparts.

However, the decrease in yields to record lows across most sectors has been a key component of asset value appreciation. Enabling purchasers to bid higher has been the relative spread between borrowing costs and prime property yields. There is currently a 200 to 250 basis point spread, which is higher than many major offshore markets.

The ‘lower for longer’ inflation and interest rate environment, the weight of money chasing limited prime stock in New Zealand and the positive economic and property fundamentals, signals further yield firming, rising rents and asset appreciation.

WHERE CAN WE GO FROM HERE?We are now in the eighth year of a property cycle, which in the past, has typically lasted between seven and 10 years, with varying degrees of severity when it changes.

However, there are 10 key features that suggest we are far from the risks of an overheated market and these also point to an extended pattern of buoyant investment activity being likely to continue. In no particular order those features are:

• Global economic risks are well defined

• The Reserve Bank of New Zealand and credit agencies continue monitoring and mitigating risks for financial instability

• Investors are not overconfident or overcommitted

• Sales activity is justified on current economic and property fundamentals

• Asset values are appreciating modestly from positive cash flow and capital returns

• New Zealand yield levels are still higher than many major overseas markets

• The spread between debt costs and property returns will remain lucrative for longer

• There is limited political risk and high levels of transparency

• A positive demographic environment for commercial sales activity now and the future, and

• New Zealand is increasingly becoming a globally attractive, more liquid property market, increasing the depth in our transaction market.

PRIME OFFICE INVESTMENT SALES METRICS

AVERAGE YIELDS (%)

Q2 2015 Q2 2016 Change

Auckland 7.18% 6.84% -0.34%

Wellington 7.97% 7.19% -0.78%

Average 7.57% 7.01% -0.56%

AVERAGE CAPITAL VALUES ($/M²)

Q2 2015 Q2 2016 Change

Auckland $5,900 $6,535 + $635

Wellington $4,455 $5,035 + $580

Average $5,178 $5,785 $607Source: Colliers International Research

Source: Colliers International Research, CoreLogicNote: Property sales of NZD $5m or more only. Provisional data for FYE2016

FYE2015 FYE2016

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OFFICE EDITION

447 COLLINS STREET, MELBOURNE: Cbus Property's $1.25 billion twin-tower mixed

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The outlook of a low interest rate environment, and the

overall competition for return is likely to continue to verify the

anticipation of an investment environment that is ‘lower for

longer’. Nonetheless, the silver lining for return outlook is that

we may see some modest improvements in internal rates of

return (IRR) in our major markets of Sydney and Melbourne

VALUATION OUTLOOK Despite the uncertainty surrounding “Brexit” and the implications associated with this geo-

political event, demand for quality Australian o�ce assets remains strong, continuing to be sought

by a broad cross section of domestic and o�-shore capital. This demand however remains

predominately unsatis�ed, with limited opportunity to acquire – be it in an on or o� market capacity.

As we move into H2, we are at that interesting point of the cycle where there is a relatively short

period of paired bene�t – with further compression of yields in combination with a strengthening

forecast for rental growth, a dynamic that sees a relatively short but strong push on capital value

appreciation. As we move into Q3 and Q4 of this year, we anticipate to see yields stabilise, with

capital value appreciation being driven to a greater degree by forecast rental growth.

By Dwight Hillier: Managing Director, Valuation & Advisory Services, Colliers International

over the next 12-24 months, dependant of course on the

strength and longevity of the outlook for rental growth in the

respective markets.

From a global comparison perspective on a face yield basis,

Australia provides anywhere between 100-150 basis points

BARRANGAROO, SYDNEY: Valued by Colliers International's

Valuation & Advisory Services on behalf of Lendlease

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cohort at this point in time for asset acquisition in Perth.

As for metropolitan o�ce markets, the quality assets

within the more prominent suburban location of Sydney

and Melbourne have seen material capital growth, as these

markets have been the bene�ciary of the yield di�erential

between core CBD’s. Like the CBD’s these markets have

also seen a steady increase in e�ective rentals since early

2016. Further yield compression is anticipated for these

quality metropolitan assets as the opportunity for CBD based

investment will continue to tighten.

For the second half of 2016, we anticipate the stand out

performer to be Sydney CBD Core precinct B Grade assets.

Owing to the removal of over 60,000m² of B Grade stock

associated with the compulsory acquisition of buildings for

the construction of the Sydney Metro railway, combined

with up to 300,000m² of additional B Grade o�ce space

earmarked for conversion to residential, this dwindling supply

is already and will continue to see strong e�ective rental

growth over the next 24 plus months.

of yield or return advantage over other major global o�ce

markets, however with the reality of the signi�cance of

our tenant incentive levels, our real advantage is reduced

to approximately 25-50 basis points on a pure e�ective

yield comparison basis. On the global stage our key o�ce

markets of Sydney and Melbourne remain very strong

contenders for the battle for the allocation of capital,

with our other point of di�erence to many global markets

being the relatively long term revenue streams with �xed

review structures, particularly attractive to pension based

investment funds.

For secondary Australian CBD o�ce markets, including

Brisbane and Perth, the outlook is not as alluring as that

of Sydney and Melbourne. With the prevailing high level

of o�ce vacancy anticipated to remain for at least the

medium term for Brisbane and Perth, we do not anticipate

strong capital value growth in these markets over the

corresponding period. The exception to this however is

those assets which are modern and well leased with long-

term annuity style revenue streams, which will continue to

be sought by both domestic and o�-shore capital.

The general consensus is that Perth still has some further

correction to go in terms of its rental market before it can

be con�rmed that it has ‘bottomed out’. Opportunistic

private and syndicated capital remain the dominate market

Sydney CBD Core precinct B Grade assets

anticipated to be the stand out performer

for the �rst half of FYE2017.

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The macroeconomic factors supporting investment in our office markets are certainly there, but what about financial indicators, the other key determinant of capital inflows to markets? Access to our office markets remains both open and transparent for both onshore and offshore buyers. Foreign buyers often comment on the transparency our market provides as being a key factor in their decision to invest here. Capital costs domestically at least have risen slightly as bank margins have increased due to some tightening by regulatory authorities. We could also argue that this is a positive for commercial property, as risky bank lending has been the key precipitator to previous property downturns. This factor certainly isn’t apparent in this cycle. Finally, return on capital is still healthy although it is expected that domestic institutions in particular will be refining their return benchmarks over the next 12 months to compete with global capital.

Our office markets are dominated by knowledge and service intensive industries – the FIRE industries, business services, government and to a growing extent education, health and technology sector occupiers. In their excellent report ‘Building the Lucky Country, The purpose of place Reconsidered’4, Deloitte describes the purpose of place in knowledge economies, and that even in a world of instant global connectivity, knowledge workers need to work in close proximity to achieve productivity gains. What this means is that our major office markets will play an even greater role in the economic growth of our country going forward.

On the supply side, after years of slow growth in this area, investment in infrastructure in our major capital cities is finally underway – the Sydney Light Rail project and Melbourne Metro Rail Project key amongst these. These projects, and others around the country, will help our cities operate more efficiently. Private sector investment wishing to capitalise on the value uplift that these projects provide is already following.

INVESTMENT OUTLOOK

POPULATION GROWTH FORECASTS

3 United Nations, Department of Economic and Social Affairs, World Population Prospects, the 2015 Revision

4 Deloitte, The purpose of place Reconsidered, Building the Country #5, 2015

The Australian macroeconomic environment is in a unique expansionary position, with both demand and supply side factors in major growth phases. The best long term demand indicator for all classes of property is population growth. Over both the 10 years to 2025 and to 2035, Australia outperforms all our major competitor markets on this indicator alone. Australia’s population is forecast to grow by 1.2 per cent per annum to 2025 and a further 1.0 per cent per annum to 20353. In the longer term, the major global markets have forecast population growth rates well below this averaging 0.5 per cent to 2025 and 0.2 per cent to 2035. History tells us that the vast majority of population growth particularly that growth which emanates from overseas migration occurs in Sydney and Melbourne and we expect this to continue. By 2056, both Sydney and Melbourne are forecast to have surpassed a population of 8 million, up from 4.9 million and 4.6 million respectively in 2016.

FYE2025 FYE2035

-0.5%

-0.3%

0.0%

0.3%0.3%0.4%0.4%

0.6%0.6%0.5%

0.7%0.7%

1.0%

1.1%1.2%

0.4%

1.5%

1.0%

0.5%

0.0%

-0.5%

Source: Colliers International / United Nations Department of Economics and Social Affairs

AVER

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AUSTRALIA FRANCE JAPANCHINAUSASINGAPORE HONG KONG UK

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DETAILED TRANSACTION LIST

FYE2016 SALES

QLD SALES TOTAL

$1.88 BILLION

ACT SALES TOTAL

$548 MILLION

WA SALES TOTAL

$681 MILLION

SA SALES TOTAL

$354 MILLION

NSW SALES TOTAL

$8.15 BILLION

VIC SALES TOTAL

$4.3 BILLION

%

%%%

%

%

28.5

11.942 3

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ADDRESS SUBURB STATE SALE TYPE PRICE STAKE SALE DATE

INITIAL YIELD $/M² VENDOR PURCHASER

NEW SOUTH WALES

Hickson Rd Sydney NSW Investment Sale c$560,000,000 25% Dec-15 c$20,650 HKMA

1 Shelley St Sydney NSW Investment Sale $525,000,000 100% May-16 4.9% $15,158 Brookfield Property Partners

Charter Hall JV Morgan Stanley

420 George St Sydney NSW Investment Sale $442,500,000 75% Apr-16 5.3% c$15,655 Fortius Funds Management

Investa Property Group

400 George St Sydney NSW Investment Sale c$417,000,000 50% Jul-15 4.7% c$16,294 Investa Office Trust (MSREI)

China Investment Corp

225 George St Sydney NSW Investment Sale c$355,000,000 25% Jul-15 4.4% c$16,700 Investa Office Trust (MSREI)

China Investment Corp

1 Woolworths Way Bella Vista NSW Investment Sale $336,450,000 100% Mar-16 6.1% $7,505 Mirvac Funds Mgmt Taejin Ji

255 Elizabeth St Sydney NSW Investment Sale c$320,000,000 100% Jul-15 7.0% c$11,250 Investa Office Trust (MSREI)

China Investment Corp

100 Arthur St North Sydney NSW Investment Sale $315,000,000 100% Mar-16 6.2% $11,583 Salteri family Ascendas-Singbridge

273 George St Sydney NSW Investment Sale $279,500,000 50% Dec-15 5.2% $12,067 MTAA PAG

55 Market St Sydney NSW Investment Sale c$270,000,000 100% Jul-15 5.2% c$11,780 Investa Office Trust (MSREI)

China Investment Corp

Locomotive St Eveleigh NSW Investment Sale $263,000,000 100% Dec-15 5.8% $4,614 NSW Government Mirvac Group JV SunSuper JV AMP

Capital Wholesale Fund

126 Phillip St Sydney NSW Investment Sale c$240,000,000 25% Jul-15 4.9% c$22,673 Investa Office Trust (MSREI)

China Investment Corp

31 Market St Sydney NSW Investment Sale c$238,000,000 100% Jul-15 6.4% c$9,570 Investa Office Trust (MSREI)

China Investment Corp

207 Pacific Hwy St Leonards NSW Investment Sale $160,755,000 100% Jul-15 7.2% $8,056 Primewest JV Valad Property Group

Altis Property

77 King St Sydney NSW Investment Sale $160,000,000 100% Jan-16 5.8% $11,747 Keppel REIT Invesco Real Estate

233 Castlereagh St Sydney NSW Investment Sale $156,000,000 100% Oct-15 6.4% $1,134 GDI Property Trust Visionary Investment Grp

Pier St Sydney NSW Investment Sale $150,000,000 50% Oct-15 6.0% $11,538 Lend Lease First State Super

Pier St Sydney NSW Investment Sale $150,000,000 50% Oct-15 6.0% $11,538 Lend Lease Australian Prime Property Fund Commercial (APPFC)

179 Elizabeth St Sydney NSW Investment Sale $148,800,000 100% Jan-16 7.0% $9,967 LaSalle Investment Management

Markham Corporation

110 Goulburn St Sydney NSW Investment Sale $148,500,000 100% Oct-15 6.0% $10,572 Kinder Investments Commerzbank

153-159 Clarence St Sydney NSW Investment Sale $140,000,000 100% Sep-15 6.0% $5,833 St Hilliers Eureka Funds Mgmt OBO Union Investment

821-843 Pacific Hwy Chatswood NSW Investment Sale $139,525,000 50% May-16 6.9% $6,378 DEXUS JV GPT Wholesale Office Fund

Centuria Capital Ltd JV BlackRock

80 Pacific Hwy North Sydney NSW Investment Sale c$127,000,000 100% Jul-15 7.6% c$9,300 Investa Office Trust (MSREI)

China Investment Corp

201 Pacific Hwy St Leonards NSW Investment Sale $115,000,000 100% Aug-15 8.5% $6,937 Challenger Life Abacus Property Group JV Goldman Sachs

78 Waterloo Rd North Ryde NSW Investment Sale $106,000,000 100% Nov-15 6.3% $7,225 CorVal Partners Mapletree

Garden St Eveleigh NSW Investment Sale $104,000,000 100% Dec-15 8.1% $5,267 NSW Government Centuria Capital Ltd

80 Waterloo Rd North Ryde NSW Investment Sale $101,000,000 100% Dec-15 N/A $14,710 Centuria Capital Ltd Undisclosed

NSW SALES

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ADDRESS SUBURB STATE SALE TYPE PRICE STAKE SALE DATE

INITIAL YIELD $/M² VENDOR PURCHASER

NEW SOUTH WALES

80 Waterloo Rd North Ryde NSW Investment Sale $101,000,000 100% Dec-15 N/A $14,710 Centuria Capital Ltd Undisclosed

181 Miller St North Sydney NSW Investment Sale $101,000,000 100% Apr-16 $8,417 LIF Pty Ltd NSW Government

175-181 Castlereagh St Sydney NSW Investment Sale $98,000,000 100% Dec-15 9.5% $8,264 Centuria Capital Ltd NSW Government

19 Harris St Sydney NSW Investment Sale $91,919,000 100% Jul-15 7.0% $6,566 LaSalle Investment UBS JV Grocon

33 Berry St North Sydney NSW Investment Sale $90,000,000 100% Oct-15 7.2% $7,826 Horaco Property Australian Catholic University

203 Pacific Hwy St Leonards NSW Investment Sale $86,050,000 50% Oct-15 8.0% $7,347 Challenger Life Centuria Metropolitan JV Centuria Capital Ltd

117 Clarence St Sydney NSW Investment Sale $81,000,000 100% Dec-15 6.2% $6,443 Altis Property Roxy-Pacific

10 Dawn Fraser Ave Sydney Olympic Park

NSW Investment Sale $80,000,000 100% Mar-16 11.8% $3,427 Real I.S. AG Sandran Pty Ltd

520 Smollett St Albury NSW Investment Sale $64,800,000 100% Oct-15 7.0% $6,020 CorVal Partners OBO Andrew Roberts

FG Asset Management

20 Berry St North Sydney NSW Investment Sale $60,000,000 Jul-15 7.3% $6,171 Robert Magid Yuhu Group

160 Sussex St Sydney NSW Investment Sale $57,350,000 100% Oct-15 7.6% $6,369 JP Morgan Asset Management

Burcher Property Group

1-3 Smail St Sydney NSW Investment Sale $56,000,000 100% Dec-15 6.3% $6,875 Anton Capital Mirvac Group

36 George St Burwood NSW Investment Sale $47,500,000 50% Sep-15 $6,700 DEXUS Office Trust JV CPP Investment Board

Holdmark Developers

2-6 Cavill Ave Ashfield NSW Investment Sale $47,000,000 100% Aug-15 $4,435 Graf Family Barana Group

1 Lucknow Rd North Ryde NSW Investment Sale $47,000,000 100% Feb-16 7.8% $4,595 Blackstone Grosvenor Group JV Propertylink

1 City View Rd Pennant Hills NSW Investment Sale $40,000,000 100% Sep-15 8.0% $4,940 CorVal Partners Pitt Street Securities

1-3 Munn St Sydney NSW Investment Sale $40,000,000 100% Dec-15 2.3% $10,409 Primary Health Care Undisclosed

93 George St Parramatta NSW Investment Sale $37,243,000 100% Oct-15 8.0% $5,226 Marprop F Hannan Properties

223-237 Liverpool Rd Ashfield NSW Investment Sale $35,000,000 100% Sep-15 7.5% $3,610 PAG GDI Property Group

61 York St Sydney NSW Investment Sale $33,000,000 100% Feb-16 4.8% $12,373 Nick Manettas Undisclosed

64-76 Kippax St Surry Hills NSW Investment Sale $31,500,000 100% Sep-15 4.3% $5,763 Susan Carleton & Michael Lunzer

Undisclosed

9 George St Parramatta NSW Investment Sale $30,000,000 100% Sep-15 8.0% $5,478 Hyperion Property Syndicates

Hadley Green

332 Pitt St Sydney NSW Investment Sale $30,000,000 100% Feb-16 $13,806 Visionary Investment Grp

39-41 Chandos St St Leonards NSW Investment Sale $30,000,000 100% Oct-15 4.7% $6,497 Markham Corporation Holdmark Developers

166 Epping Rd Lane Cove West

NSW Investment Sale $28,000,000 100% Oct-15 9.0% $3,928 Quintessential Equity Epic Doncaster

245 Castlereagh St Sydney NSW Investment Sale $25,000,000 100% Feb-16 $8,333 RSL Visionary Investment Grp

7 City View Rd Pennant Hills NSW Investment Sale $25,000,000 100% Nov-15 $3,509 Pitt Street Securities

2 Chandos St St Leonards NSW Investment Sale $23,500,000 100% Aug-15 4.5% $5,103 College of Law Landan Development Pty Ltd

15 Orion Rd Lane Cove NSW Investment Sale $21,000,000 100% Jan-16 6.7% $2,099 Undisclosed Intrasia Oxley

81-85 Flushcombe Rd Blacktown NSW Investment Sale $20,600,000 100% Feb-16 9.4% $2,424 Denison Group Blacktown Council

17-21 Macquarie St Parramatta NSW Investment Sale $20,000,000 100% Sep-15 5.3% $4,236 Caleven Pty Ltd Paul Lederer

28 Rodborough Rd Frenchs Forest

NSW Investment Sale $20,000,000 100% Feb-16 $4,020 Thyra Investment Management

Ossen Pty Ltd

NEW SOUTH WALES TOTAL $8,152,517,000 A Co

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VIC SALES

ADDRESS SUBURB STATE SALE TYPE PRICE STAKE SALE DATE

INITIAL YIELD $/M² VENDOR PURCHASER

VICTORIA

121 Exhibition St Melbourne VIC Investment Sale $675,000,000 50% Dec-15 5.0% $10,709 Brookfield Property Partners

Blackstone

120 Collins St Melbourne VIC Investment Sale $401,000,000 50% Jul-15 4.8% $12,369 Investa Office Trust (MSREI)

China Investment Corp

161 Collins St Melbourne VIC Investment Sale $277,000,000 100% Dec-15 7.5% $6,425 Sachsenfonds Pembroke Real Estate

600 Bourke St Melbourne VIC Investment Sale $245,000,000 43% Dec-15 5.8% $8,700 Brookfield Property Partners

AMP Capital Investors

Como Centre South Yarra VIC Investment Sale $236,500,000 100% Jun-16 7.0% $7,508 Mirvac Newmark Capital

222 Exhibition St Melbourne VIC Investment Sale $231,000,000 100% Aug-15 5.9% $7,626 AMP Capital Investors LaSalle Investment

120 Spencer St Melbourne VIC Investment Sale $165,000,000 100% Apr-16 7.0% $4,961 Stamoulis Property Group Anton Capital OBO Goldman Sachs

75 Dorcas St South Melbourne VIC Investment Sale $166,000,000 100% Jun-16 6.6% $6,972 Sachsenfonds Growthpoint (AUS)

913 Whitehorse Rd Box Hill VIC Investment Sale $156,000,000 100% Aug-15 6.1% $6,860 Cromwell FG Asset Management

30 Convention Centre Pl Melbourne VIC Investment Sale $155,000,000 100% Dec-15 6.5% $7,454 Deka-Immobilien Global CBRE Global Investors OBO BVK

114 William St Melbourne VIC Investment Sale $125,000,000 100% Aug-15 5.2% $5,941 Kyko Group Straits Trading

1 Collins St Melbourne VIC Investment Sale $125,000,000 100% Feb-16 5.2% $9,038 Overland Properties Stamoulis Real Estate

460 Lonsdale St Melbourne VIC Investment Sale $98,000,000 100% Aug-15 5.7% $8,438 REST Industry Super Undisclosed

636 St Kilda Rd Melbourne VIC Investment Sale $87,500,000 100% Dec-15 6.7% $5,132 Blackstone AMP Capital Investors

452-484 Johnston St Abbotsford VIC Investment Sale $88,888,888 100% Jun-16 6.0% $5,362 Computershare LYZ Property Group

690 Springvale Rd Mulgrave VIC Investment Sale $87,600,000 100% Mar-16 7.1% $4,146 Frasers Property Stockland

530 Springvale Rd Glen Waverley VIC Investment Sale $83,000,000 100% Aug-15 7.2% $4,929 MarksHenderson

380 Docklands Dr Docklands VIC Investment Sale $80,400,000 100% Nov-15 6.9% $6,596 Private LaSalle

55 King St Melbourne VIC Investment Sale $78,500,000 100% Dec-15 6.0% $6,453 LaSalle Investment Charter Hall Core Plus Office Fund

211 Wellington Rd Mulgrave VIC Investment Sale $50,900,000 100% Nov-15 7.3% $4,944 Frasers Property JV CIP Growthpoint (AUS)

658 Church St Richmond VIC Investment Sale $45,500,000 100% Mar-16 7.4% $5,710 Frasers Property BlackRock

658 Church St Richmond VIC Investment Sale $45,500,000 100% Mar-16 7.2% $5,761 Frasers Property BlackRock

277 William St Melbourne VIC Investment Sale $45,000,000 100% Aug-15 $2,738 Stamoulis Property Group EG Funds Management

973 Nepean Hwy Bentleigh VIC Investment Sale $41,500,000 100% Aug-15 8.7% $3,471 JAK Investment Group Henkell Brothers Investment Managers

606 St Kilda Rd Melbourne VIC Investment Sale $40,000,000 100% Feb-16 7.0% $4,625 Malcolm Dumenil Bayley Stuart

425 Collins St Melbourne VIC Investment Sale $39,000,000 100% Sep-15 5.1% $7,248 Halim Group AMP Capital Investors

2 Luton Ln Hawthorn VIC Investment Sale $37,360,000 100% Mar-16 6.9% $6,600 Bricktop

533 Little Lonsdale St Melbourne VIC Investment Sale $35,250,000 100% Mar-16 6.0% $5,342 Vantage Asset Mgmt Fidinam Group

261 Salmon St Port Melbourne VIC Investment Sale $35,000,000 100% Jun-16 7.4% $3,596 Altis Property Bob Jane Corporation

395 Little Collins St Melbourne VIC Investment Sale $35,000,000 100% Feb-16 $6,054 Lee Tai Enterprises Shakespeare Property Group (Yong Quek)

180-188 Burnley Street Richmond VIC Investment Sale $31,200,000 100% Oct-15 7.3% $5,615 Sarrin Pty Ltd Rufolo Pty Ltd

520 Bourke St Melbourne VIC Investment Sale $25,000,000 100% Dec-15 4.0% $4,373 Subramaniam Sivarajah Fife Capital

51 Queen St Melbourne VIC Investment Sale $25,000,000 100% Jun-16 5.0% $4,956 Majlis Amanah Rakyat Undisclosed

244-248 Flinders St Melbourne VIC Investment Sale $25,000,000 100% Oct-15 $1,147 Yooralla Undisclosed2015

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ADDRESS SUBURB STATE SALE TYPE PRICE STAKE SALE DATE

INITIAL YIELD $/M² VENDOR PURCHASER

VICTORIA

31 Vision Dr Burwood East VIC Investment Sale $24,250,000 100% Aug-15 7.4% $3,770 Dennis Milin Ortello Investments

31-47 Joseph St Blackburn North VIC Investment Sale $23,980,000 100% Sep-15 7.3% $2,713 Peter Anastasiou Jingyi Ye

11 Dorcas St South Melbourne VIC Investment Sale $23,280,000 100% Mar-16 6.0% $5,992 Undisclosed

406 Collins St Melbourne VIC Investment Sale $23,100,000 100% Jan-16 4.4% $6,150 Dorian Ribush Jomelan Nominees

11 Dorcas St South Melbourne VIC Investment Sale $23,280,000 100% Mar-16 6.0% $5,992 Undisclosed

406 Collins St Melbourne VIC Investment Sale $23,100,000 100% Jan-16 4.4% $6,150 Dorian Ribush Jomelan Nominees

27-35 Little Bourke St Melbourne VIC Investment Sale $23,000,000 100% Apr-16 $21,043 Daryl Jackson Undisclosed

Stud Rd Rowville VIC Investment Sale $21,700,000 100% Mar-16 $947 Frasers Property IOOF

172-186 Moreland Rd Brunswick VIC Investment Sale $20,950,000 100% Jul-15 6.5% $4,967 Paul Marks Castlerock

45 Assembly Dr (Lot M) Dandenong South VIC Investment Sale $20,750,000 100% Dec-15 7.0% $4,621 Cbus Property IOOF

VICTORIA $4,298,608,888

QUEENSLAND

300 Queen St Brisbane QLD Investment Sale $188,000,000 100% Apr-16 6.9% $9,709 Seymour Group ARA Asset Management

900 Ann St Fortitude Valley QLD Investment Sale $170,000,000 100% Aug-15 6.5% $8,858 Consolidated Properties Charter Hall

41 George St Brisbane QLD Investment Sale $159,800,000 100% Jan-16 8.7% $5,334 QIC AEP IM

313 Adelaide St Brisbane QLD Investment Sale $125,400,000 100% Sep-15 7.1% $8,594 FA Pidgeon & Son Deutsche AWM - Germany

410 Ann St Brisbane QLD Investment Sale $108,088,234 100% Jul-15 7.4% $4,972 Investa Office Trust (MSREI) China Investment Corp

100 Skyring Ter Newstead QLD Investment Sale $93,100,000 50% Mar-16 6.5% $7,546 PSP Investments Charter Hall Direct Office Fund

545 Queen St Brisbane QLD Investment Sale $82,000,000 100% Aug-15 11.0% $6,038 GPT Group Private (offshore)

201 Charlotte St Brisbane QLD Investment Sale $81,571,082 100% Oct-15 8.8% $6,070 Private (domestic) Fortius Funds Management

15 Butterfield St Herston QLD Investment Sale $81,470,000 100% Apr-16 7.0% $7,239 Clive Berghofer Australian Unity

315 Brunswick St Fortitude Valley QLD Investment Sale $79,000,000 100% Oct-15 8.8% $4,060 Forwin International Ashe Morgan

108 Wickham St Fortitude Valley QLD Investment Sale $79,000,000 100% Aug-15 8.4% $6,660 Primewest Centennial Property

Group

203 Robina Town Centre Dr Robina QLD Investment Sale $70,050,000 100% Jul-15 8.4% $5,467 Robina Land Corp Sentinel Property Group

10 Browning St South Brisbane QLD Investment Sale $65,500,000 100% Jun-16 8.0% $841 Armada Funds

Management Forza Capital

62-80 Ann Street Brisbane QLD Investment Sale $63,000,000 100% Jun-16 16.2% $2,960 Queensland Investment Corporation Wee Hur Holdings Limited

151-171 Roma St Brisbane QLD Investment Sale $62,600,000 50% Mar-16 8.8% $3,836 GPT Group Australian Prime Property Fund (Commercial)

28 Macgregor St Upper Mt Gravatt QLD Investment Sale $57,100,000 100% Dec-15 8.2% $3,997 Private LaSalle Investment

Management

QLD SALES

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ADDRESS SUBURB STATE SALE TYPE STAKE PRICE SALE DATE

INITIAL YIELD $/M² VENDOR PURCHASER

QUEENSLAND

100 Wickham St Fortitude Valley QLD Investment Sale $50,000,000 100% Sep-15 10.4% $3,816 Fortius Funds

Management Keystone

50 Cavill Ave Surfers Paradise QLD Investment Sale $48,750,000 100% Dec-15 6.6% $2,943 Chung Gold Coast GDI Property Group

99 Melbourne St Brisbane QLD Investment Sale $38,750,000 100% Oct-15 7.6% $6,267 Primewest Credit Suisse

308 Queen Brisbane QLD Investment Sale $37,400,000 100% Jun-16 8.0% $8,101 Unity Pacific Primewest

1 & 3 Breakfast Creek Rd Newstead QLD Investment Sale $36,270,000 100% Aug-15 8.1% $5,197 Primewest Private (Domestic)

179 North Quay Brisbane QLD Investment Sale $34,279,736 100% Nov-15 7.5% $3,966 PAG Perri Projects

38 Limestone St Ipswich QLD Investment Sale $32,000,000 100% Nov-15 9.2% $4,454 Trident Corporation Elanor Investors

527 Gregory Ter Fortitude Valley QLD Development $31,000,000 100% Sep-15 7.3% $4,187 Cromwell Kingsford Development

Pte Ltd

11 Stanley St South Brisbane QLD Investment Sale $26,300,000 100% Sep-15 6.2% $7,987 La Salle Investment

ManagementAMP Capital Wholesale

Australian Property Fund

7 Brandl Street Eight Mile Plains

QLD Investment Sale $25,500,000 100% Apr-16 7.6% $4,844 Industria Undisclosed

461-473 Lutwyche Rd Lutwyche QLD Investment Sale $22,500,000 100% Aug-15 7.2% $4,569 Harvest Property FF Lutwyche Pty. Ltd.

114 Brisbane St Ipswich QLD Investment Sale $22,350,000 100% Jul-15 8.4% $4,897 Cryton JV Macknade Investments Pty Ltd JV

Rohrig Investments Pty Ltd

Trilogy Funds

QUEENSLAND TOTAL $1,881,479,052

AUSTRALIAN CAPITAL TERRITORY

25 Cowlishaw St Greenway ACT Investment Sale $235,547,717 100% Dec-15 5.9% $9,728 Amalgamated Property Group

Challenger OBO FG Asset Management JV Korea Investment Holdings

134 Reed St Tuggeranong ACT Investment Sale $75,000,000 100% Dec-15 8.0% $4,913 Record Realty AKA Allco Finance Group

Juilliard Group

255 London Circuit Canberra ACT Investment Sale $70,025,000 100% Dec-15 6.5% $7,639 Emboss Capital OBO Brompton Asset Mgmt

Growthpoint (AUS)

16 Furzer St Woden ACT Investment Sale $68,071,576 100% May-16 9.0% $4,596 Mirvac Patella Holdings

14 Mort St Canberra ACT Investment Sale $41,500,000 100% Mar-16 7.5% $4,422 GIC (Govt of Singapore) JV PSP Investments

JV Charter Hall

Ascot Capital

73 Northbourne Ave Canberra ACT Investment Sale $29,200,000 100% Apr-16 9.0% $4,777 Hume Property Partners South Haven Group

33 Allara St Canberra ACT Investment Sale $29,000,000 100% Dec-15 $1,124 360 Capital Office Fund Molonglo Group

AUSTRALIAN CAPITAL TERRITORY TOTAL $548,344,293

ACT SALES

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SA SALES

WA SALES

WESTERN AUSTRALIA

221 St Georges Ter Perth WA Investment Sale $215,000,000 100% Jan-16 $7,249 Insurance Commission of WA

Perth Upper China

2 The Esplanade Perth WA Investment Sale $110,000,000 50% Dec-15 $6,707 Colonial First State Primewest

45 Francis St Northbridge WA Investment Sale $101,000,000 100% Aug-15 12.1% $4,588 Deka Immobilien Warrington Property Group (AUS) JV Goldman

Sachs

81 St Georges Ter Perth WA Investment Sale $81,333,333 100% Dec-15 7.3% $6,858 Nick Tana ARA Asset Management Group

190 St Georges Ter Perth WA Investment Sale $63,904,767 100% Dec-15 9.2% $6,842 Terrace Properties & Investments Pty Ltd

Credit Suisse REIM

53 Ord St West Perth WA Investment Sale $59,000,000 100% Aug-15 8.0% $8,596 Primewest Mapletree Commercial Trust

12-14 The Esplanade Perth WA Investment Sale $51,000,000 100% Dec-15 9.5% $6,410 Asia Pacific Investment T2 Pty Ltd

Cape Bouvard Investments Pty Ltd

WESTERN AUSTRALIA TOTAL $681,238,100

ADDRESS SUBURB STATE SALE TYPE STAKE PRICE SALE DATE

INITIAL YIELD $/M² VENDOR PURCHASER

SOUTH AUSTRALIA

77-91 Rundle Mall Adelaide SA Investment Sale $150,000,000 100% Jan-16 6.15% $7,400 Pacific Group of Cos JV epc.Pacific

Blackstone

100 Waymouth St Adelaide SA Investment Sale $73,000,000 100% Dec-15 6.8% $5,799 Cromwell

30 Flinders Street Adelaide SA Investment Sale $63,500,000 100% Jan-16 7.9% $4,659 Prime Value Asset Management

19 Grenfell St Adelaide SA Investment Sale $39,200,000 100% Dec-15 8.5% $3,634 Shakespeare Property Group

30 Currie St Adelaide SA Investment Sale $27,875,000 100% Feb-16 8.0% $3,117 Raptis Family Prime Value Asset Management

SOUTH AUSTRALIA TOTAL $353,575,000

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JAMES GIRVAN

VALUATIONS

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Associate Director Ofce

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National Director

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Director Capital Markets

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QUYEN QUACH

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ALISTAIR MACKIE

National Director Capital Markets

Disclaimer: Colliers International does not give any warranty in relation to the accuracy of the information contained

in this report. If you intend to rely upon the information contained herein, you must take note that the information, �gures

and projections have been provided by various sources and have not been veri�ed by us. We have no belief one way or

the other in relation to the accuracy of such information, �gures and projections. Colliers International will not be liable

for any loss or damage resulting from any statement, �gure, calculation or any other information that you rely upon that is

contained in the material. COPYRIGHT 2016.

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