February 2018

Global Market Perspective

JLL Global Research

2

Global Market Perspective 3

Global real estate markets finish 2017 strongly, with a robust 2018 in prospect

Global Economy 7

Growth edges higher with improvements across most major markets

Global Real Estate Health Monitor 10

Sydney, Stockholm and Singapore lead office rental performance

Real Estate Capital Markets 11

Investment activity ends 2017 on a high note; 2018 volumes set to soften slightly

Capital Values and Yields 17

Income growth supports continued office capital value appreciation; European yields fall to record low

Corporate Occupiers 19

Co-working and shared space on the rise

Office Markets 21

Leasing activity ends 2017 at highest levels in a decade; rental growth exceeds expectations

Retail Markets 32

Retail markets focus on new business models, asset enhancements and tenant mix

Industrial Markets 34

Record demand pushes vacancy rates to historic lows

Hotels Markets 35

Economic growth extends hotels investment cycle with transaction volumes on par with 2016

Residential Markets 38

Peak in new supply outpacing solid demand in U.S. multifamily market

Key Investment Transactions in Q4 2017 40

Noteworthy cross-border deals dominated by European portfolios

Illustrative Office Occupational Transactions in Q4 2017 46

Co-working operators active in all three global regions

3

Real Estate Markets Enter 2018 on a High Note

Synchronised growth provides strong platform for 2018

Global real estate markets ended 2017 in impressive fashion, with 2018 projected to be another

solid year barring major financial, economic or political shocks. Office leasing volumes in the final

quarter of 2017 were at their highest level in a decade, while the global vacancy rate defied

expectations and continued to fall, despite being near the peak of the development cycle. This

helped to propel office rental growth to over 4% for the full year, above earlier forecasts and the

strongest increase since 2011. At the same time, absorption levels in the logistics sector were at

record levels, while vacancy fell to historic lows. Investors remain confident in the real estate

sector, with transaction volumes in the final quarter of 2017 surpassing the previous quarterly

peak in 2014. The synchronised global economic upswing provides a strong platform for 2018,

although it will be difficult to match the robust levels of last year and investment volumes are

likely to soften slightly due to a lack of product and continued investor discipline.

Fourth quarter bounce lifts global investment volumes

Global real estate transaction volumes for the fourth quarter of 2017 came in at US$228 billion,

10% higher relative to the same period last year. This brings full-year volumes for 2017 to US$698

billion, 6% above last year’s total. While political uncertainty still looms, investors remained

Global Commercial Real Estate Market Prospects, 2018

Leasing, vacancy, development, rents and capital values relate to the office sector.

Source: JLL, January 2018

prospects2018Leasing

-0-5% Lower

Capital values

3% Higher

Rents

3% Higher

Development

Peaking

Vacancy rate

Rising

Investment

-5-10% Lower

4

confident in the performance of the real estate sector, reflected in Q4 2017 global investment

volumes surpassing the previous quarterly peak set in 2014.

Despite being in an extended cycle, the weight of capital seeking to enter the sector is still

significant. Although global markets continue to be liquid, the relative lack of product combined

with continued discipline are likely to limit investment growth in 2018 and we expect global

investment volumes to soften by 5%-10% to around US$650 billion. Nevertheless, investors are

still keen to access the sector and are now looking to new strategies such as debt financing, M&A

and alternative sectors as the search for yield continues.

Global office leasing volumes at highest levels for a decade

The global office leasing markets finished the year on a high note, with 11 million square metres

leased in the final quarter of 2017 across 96 markets, the strongest quarterly volume since 2007.

For the full-year 2017, gross leasing volumes were a healthy 4% higher than 2016 and at the top

end of our forecast range. Europe was the outstanding leasing market performer with activity up

an impressive 10%, while volumes in the U.S. were up by 3% on 2016 levels with new supply

providing greater choice for tenants.

2018 is set to be another good year and we have revised our global volume projections upwards to

close to 40 million square metres. Yet due to the exceptional 2017 result, this translates into a

modest 3% decline year-on-year, with volumes unlikely to hit last year’s impressive tally.

Global office vacancy rate falls, defying expectations

Office leasing markets ended the year a lot tighter than predicted, with the global office vacancy

rate defying expectations by falling marginally to 11.9% in Q4 2017, testimony to the capacity of

the market to absorb additional space.

Most of the vacancy rate decline was due to the continued falls in Europe, where vacancy dropped

further to 7.4% in Q4. Vacancy rates remained broadly flat in the Americas (at 14.9%) and Asia

Pacific (at 11.1%). Nonetheless, with the delivery of new offices expected at a relatively elevated

level during 2018, vacancy is projected to edge up in 2018 to around 12.2%.

Office rental growth strongest since 2011

Rents for prime offices across 26 major markets grew by 4.1% for the full-year 2017, double our

forecasts at the beginning of 2017 and the largest increase since 2011. More of the same is

expected for 2018, with growth projected to average 3% and top performances going to Singapore

and Sydney. Only Shanghai, Mexico City and Beijing are slated for rental corrections over the

coming year.

5

Rental Growth for Prime Offices, 2010-2018

Unweighted average of 26 markets

Source: JLL, January 2018

Retail markets focus on asset enhancement and tenant mix

Retailers are adapting and re-evaluating their existing physical space in response to the structural

change impacting the sector, with a notable acceleration in new business models and owners

investing to create mixed-use destinations for the evolving shopper.

The U.S. retail market expansion continues to slow as low vacancy and a focus on renovation of

existing space rather than construction keeps rents inching up, though at a reduced pace. Strong

confidence and job creation continue to drive consumer spending in Europe, although prime high

street rents are broadly stable in most markets. In Asia Pacific, many retail landlords are adjusting

tenant mixes while retailers focus on consumer engagement and experience, with generally flat

rents across the region.

A banner year for global logistics markets

Global logistics markets ended 2017 on a high, with robust demand and vacancy at historic lows

propelling further rental growth. The U.S. industrial market registered its best fourth quarter of

net absorption on record in Q4 2017, driving vacancy to an all-time low and spurring additional

rental growth. In Europe the regional vacancy rate has also fallen to a new low with 2017 take-up

well above the long-term average. Rents continued to edge up in most markets across Asia Pacific,

supported by the uplift in global trade. With buoyant demand and a lack of modern vacant space,

we expect continued rental growth momentum in 2018.

Continuing economic growth extends hotel cycle

The global travel market remains robust, leading to positive hotel operating performance in all

three global regions. Continuing economic growth is supporting a healthy hotel investment

environment, with global hotel transaction volumes totalling US$62.5 billion in 2017, on par with

the levels seen in 2016. Investment funds and private equity firms stayed the most active buyer

8.0% 8.0%

1.8%

0.9%

3.6%4.0%

2.9%

4.1%

3.0%

0

2

4

6

8

10

2010 2011 2012 2013 2014 2015 2016 2017 2018F

Re

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an

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(y-

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%)

6

group in 2017, while institutional investors continued to increase their allocation to real estate,

more than doubling their share of acquisitions since 2014, from 4% to 10% in 2017.

New supply outpaces still solid demand in U.S. multifamily market

The U.S. multifamily rental market continues to adjust to an influx of new supply being delivered

across the country. 2017 marked the expected peak of the development cycle, with annual rental

growth decelerating and a slight rise in the national vacancy rate to 5.2%. With new ground-

breakings in the multifamily sector now slowing, fundamentals are well positioned to stabilise

over the next 18 to 36 months.

Institutional investor demand remains buoyant in continental Europe, with investment volumes

climbing higher in Germany while the Netherlands registered a record year for transactional

activity. The UK institutional market remained on its growth trajectory, with investment volumes

20% higher in 2017 and expectations of continued strong growth this year.

In Asia Pacific, a tight housing policy stance and limited issuance of pre-sales certificates have

impacted sales activity in Shanghai. Elsewhere, market sentiment has led to sustained sales

momentum in Singapore as well as Hong Kong, where buyers have snapped up flats in new

launches.

7

Global Economy

High hopes for 2018

The recent strong tone of economic data has led to a more-than-usually buoyant sentiment at the

start of 2018. There have often been high hopes in the past, but since 2012 these have swiftly been

dashed as challenges emerged to prevent lift-off. The big difference this time seems to be a

greater confidence that the long stagnation in the major economies may be ending a decade after

the Global Financial Crisis (GFC) and that this is synchronised with improvements elsewhere in the

world.

After the Trump administration passed its major tax stimulus package in late 2017, much is

expected of the U.S. economy. Strong consumer-led momentum in H2 2017 pushed growth for last

year up to an estimated 2.4%, below its historic potential but much better than a poor 2016. The

tax package is expected to push this up to 2.7% in the current year – still short of Trump’s 3% goals, though a three-year high nonetheless. Many are still cautious about the longer-term impact

of the tax cuts, however, and the recovery will be accompanied by rising interest rates as the Fed

continues to normalise.

In Europe, the end of an intense election year (if not yet of political uncertainty) has allowed the

economic upturn to move centre stage. Estimates for last year’s Eurozone growth have increased to 2.4%, the highest in a decade. A slight dip is in prospect for the current year to 2.2%, but this

forecast was recently revised upwards with a significant hike to Germany, and upside remains

possible. In the UK, by contrast, another year of Brexit negotiations is expected to constrain

activity to a slightly disappointing 1.5%, a similar rate to 2017.

Fortunes in the dynamic Asia region have continued to be uneven. China’s performance has outstripped expectations over recent quarters and the outlook for this year has edged higher.

Although India underachieved by a significant margin in 2017, forecasts for the next 12 months

remain significantly above trend and it is projected to outstrip China once again. Japan has also

seen its growth predictions edge higher thanks to strong investment and exports.

GDP Projections for 2018 in Major Economies – Recent Movements

Australia China France Germany India Japan UK U.S.

October 2017 2.3 6.2 1.8 2.0 7.5 1.6 1.5 2.4

January 2018 (Latest) 2.5 6.4 1.8 2.5 7.4 1.7 1.5 2.7

Change (bps) +20 +20 0.0 +50 -10 +10 0 +30

Source: Oxford Economics, January 2018

8

Policy-makers plot the path back to ‘normal’

Major central banks continue to move gradually towards interest rate renormalisation. The most

important changes in Q4 2017 were very well signalled, with a 25 bps rise in UK rates in November

and a similar U.S. hike in the following month creating few ripples. U.S. action is expected to

continue this year with three further increases currently pencilled in. Other central banks will be

reigning in asset purchase schemes (Eurozone and Japan) with interest rate rises still a year or

more away, while the Bank of England is odds-on to hold fire during 2018.

The main challenge for policymakers continues to be returning the global economy to its pre-crash

growth norms. Sustained monetary stimulus and numerous fiscal packages have failed to do this

and few are convinced that the recent U.S. package will buck the trend. Many see the underlying

problem as the corrosive impact of the GFC on productivity and (by implication) on income

growth. With real pay effectively unresponsive, growth rates tend to flounder once any immediate

stimulus is removed.

Unfortunately, there are few tools available to address this productivity problem – witness Japan,

which has not found a solution a generation on from its 1980s financial crisis. Restoring real wage

growth remains crucial to a return to past cyclical norms, though as yet evidence is still patchy.

Until it re-emerges, economic growth in the developed world is likely to underachieve.

Global growth edges higher, but not quite lift-off

Given this half-decade of below-par global growth, it is probably not surprising that commentators

are still cautious about prospects beyond the current year. Clearly data and sentiment suggest

risks are shifting to the upside, and the latest view from Oxford Economics shows global growth

sustaining its recent clip of over 3.5% a year. This is above the subdued rates of 2012-2016, but not

especially favourable compared with the past and certainly well below the strong mid-2000s

expansion.

One uncertainty remains the durability of the U.S. upturn. As noted, the U.S. fiscal stimulus is

expected to raise growth in the short-term and is a major contribution to the peaking world cycle

this year. But forecasts suggest that there will be no acceleration and activity will ease again in

2019. This implies that 3% growth targets will be elusive, due to underlying demand fragilities,

subdued productivity and the ongoing impact of interest rate tightening.

Another challenge to a stronger global acceleration will be emerging markets. Here growth rates

continue to be relatively impressive at almost 5% a year. However, factors such as weaker

commodity prices, rising U.S. interest rates and the dollar, and geopolitical volatility have

prevented these dynamic economies regaining the momentum that was typical over the recent

past. These headwinds are not expected to ease and the outlook for the developing world is stable

at a slightly below-par rate.

Asia has the world’s most important emerging markets and is still the fastest-growing region.

Active policy averted the feared slowdown in China over the last 12 months, with GDP growth

projected to drift down towards 6% over the next two years in line with long-term goals to

rebalance economic activity. Indebtedness remains a downside risk, but the central view is of

benign transition.

9

In 2016, India seemed to be turning a corner after taking over as Asia’s growth engine, but the economy has since faltered. Special factors in part explained this slowdown however, and a

reversal is in prospect over the next two years provided reform stays on track. Asia’s most important developed economy, Japan, has now been in a low-growth rut for two decades. Near-

term prospects are brighter, but this expansion is expected to fizzle out by the turn of the decade.

There remain some sources of global upside. The European recovery reached a post-GFC high in

2017 driven by a resurgent Eurozone. Stimulative monetary policy, solid domestic demand and

job creation are supporting activity. German growth is set to stabilise at close to 2.5% this year,

while France also sees further gradual improvement. Elsewhere, Brexit provides a contrast for UK

fortunes, with growth falling well behind its neighbours. Although the UK’s slowdown has been more modest than feared, activity is set to stall at a five-year low until 2020, with downside

potential if a cliff-edge Brexit looms.

Global Outlook, GDP Change, 2017-2019

2017 2018 2019

Global 3.6 3.9 3.6

Asia Pacific 5.5 5.5 5.2

Australia 2.2 2.5 2.4

China 6.8 6.4 6.0

India 6.1 7.4 7.1

Japan 1.8 1.7 0.9

Americas 2.0 2.6 2.2

U.S. 2.3 2.7 1.9

MENA 2.0 3.2 3.8

Europe 2.8 2.5 2.0

France 1.8 1.9 1.7

Germany 2.5 2.4 1.8

UK 1.5 1.5 1.6

Source: Oxford Economics, January 2018

10

Global Real Estate Health Monitor

Economy Real Estate Investment Markets Real Estate Occupier Markets

Metro

Area

GDP

City

Investment

Volumes

City

Investment

Volumes

Change

Capital

Value

Change

Prime

Yield

Yield

Gap

Rental

Change

Net

Absorption

Vacancy

Rate

Supply

Pipeline

Beijing 7.0% 3.6 -50% 0.9% 6.2% 231 -1.1% 4.4% 7.1% 19.9%

Boston 2.9% 10.5 10% -4.1% 4.1% 169 0.8% 0.4% 13.6% 1.4%

Brussels 1.6% 2.1 -17% 15.2% 4.5% 386 9.1% 2.0% 8.2% 2.8%

Chicago 2.5% 8.1 -20% 1.0% 5.3% 289 7.1% 0.1% 16.6% 1.9%

Dubai 3.5% 0.9 8% 0.0% 7.5% na 0.0% na 10.0% 4.7%

Frankfurt 2.7% 5.5 1% 20.1% 3.3% 283 2.7% 1.1% 7.6% 3.8%

Hong Kong 2.8% 16.4 58% 23.6% 2.7% 93 5.6% 1.0% 5.1% 4.6%

London 1.6% 35.2 45% 0.0% 3.5% 227 0.0% -0.4% 5.1% 6.3%

Los Angeles 2.8% 23.4 3% 3.0% 4.3% 189 3.0% 0.5% 15.0% 1.0%

Madrid 3.3% 4.3 10% 7.8% 3.8% 218 7.8% -2.5% 10.9% 2.1%

Mexico City 2.8% 0.0 -96% -0.5% 7.6% -12 2.2% 4.8% 16.0% 14.0%

Milan 1.7% 3.7 15% 19.6% 3.8% 180 6.8% 0.4% 13.3% 2.6%

Moscow 2.0% 3.4 -2% 0.0% 10.0% 242 0.0% 3.1% 14.4% 4.9%

Mumbai 8.0% 0.0 -100% 2.5% 9.6% 210 1.5% 7.0% 16.8% 12.6%

New York 2.7% 27.8 -40% 1.4% 3.6% 119 4.3% 0.6% 10.1% 2.8%

Paris 1.8% 19.6 -13% 1.3% 3.0% 234 1.3% 0.9% 6.4% 4.4%

San Francisco 3.1% 5.2 -30% -5.1% 3.8% 139 0.2% 0.1% 8.1% 7.4%

Sao Paulo 2.8% 1.1 37% 11.7% 9.3% 465 0.8% 2.3% 25.4% 6.8%

Seoul 2.1% 14.0 3% -3.6% 4.4% 195 -3.6% 0.9% 11.7% 6.3%

Shanghai 6.6% 16.7 11% 0.5% 5.6% 173 -0.8% 13.3% 18.4% 25.6%

Singapore 2.9% 11.1 18% 11.2% 3.6% 155 9.2% 3.0% 10.8% 2.5%

Stockholm 3.3% 3.0 -28% 21.0% 3.5% 272 12.9% 0.6% 7.7% 2.4%

Sydney 2.4% 9.3 31% 20.6% 4.8% 212 26.0% -0.1% 6.0% 3.1%

Tokyo 1.6% 23.3 20% 2.9% 2.9% 285 1.2% 2.0% 2.5% 12.7%

Toronto 2.4% 8.3 11% 7.0% 4.3% 224 7.0% 1.4% 8.7% 1.1%

Washington DC 2.4% 12.1 -31% -2.8% 4.5% 209 1.7% 0.0% 17.0% 3.4%

Real estate data as at end Q4 2017.

See page 49 for definitions and sources.

11

Real Estate Capital Markets

Investment Volumes

Fourth quarter bounce lifts global investment volumes

Global real estate transaction volumes for the fourth quarter of 2017 came in at US$228 billion,

10% higher relative to the same period last year. This brings full-year volumes for 2017 to US$698

billion, 6% above last year’s total. While political uncertainty still looms, investors remained

confident in the performance of the real estate sector, reflected in Q4 2017 global investment

volumes surpassing the previous quarterly peak set in 2014.

Despite declines in the U.S., pockets of outperformance across Americas

Continuing the trend seen throughout 2017, fourth quarter volumes in the Americas are 15% lower

than we recorded in 2016, coming in at US$66 billion. Full-year activity is down 12%, with

investment levels dipping to US$249 billion. Once again the U.S. is the epicentre of this decline, as

full-year volumes fell 16% to US$224 billion, the lowest level since 2013. On the other hand,

Canada continues to be a bright spot in the region as 2017 volumes are up 29% to US$18 billion,

29% higher than the long-run average. In Latin America, Brazil outperformed after back-to-back

years of relatively slow activity; full-year volumes in 2017 are up 166% to US$4 billion.

The UK and Germany help Europe finish on a high note

Sustained investor appetite for European real estate led to a fourth quarter surge as volumes

jumped by 31% to US$110 billion. This concluded a strong year for the region with full-year

volumes up 22% to US$300 billion. Markets across much of Europe received a further boost as the

continued weakness of the U.S. dollar pushed up volumes in dollar terms. Driving this

performance was the UK, where annual volumes were up 37% in the year after the Brexit vote.

Robust fourth quarter activity in Germany combined with a vigorous start to the year brought full-

year volumes up 9%. Similarly, a very solid fourth quarter in France helped reverse the early year

slow-down and brought full-year volumes up 12%. In the Netherlands, a record breaking year saw

volumes reach US$21 billion, 44% higher than the previous peak in 2007. Markets in Southern

Europe also continue to perform well as Italy and Spain witnessed activity pick up by 17% and 23%

in 2017, while Greece and Portugal are up even more, posting annual gains of 56% and 66%

respectively.

Record Q4 pushes Asia Pacific forward

For the second year in a row, the fourth quarter of 2017 set a new record for quarterly

transactional volumes in Asia Pacific as investment activity ticked up 16% from the record levels

set in the fourth quarter of 2016 to US$52 billion. This brings annual activity to US$149 billion, 13%

higher than 2016. Leading the way were the region’s two largest markets, China and Japan, where

annual volumes are up 5% and 10% respectively. Robust investor demand for property in Hong

Kong resulted in a strong Q4, which in turn brought full-year volumes to a record high of US$16

12

billion, 58% up on 2016. Growth in South Korea (10%), Australia (14%) and Singapore (18%)

rounded off the very solid year for the region.

Softer investment activity expected in 2018

The global ‘Goldilocks’ economy of 2017 produced a record year in the post-crisis era as markets

hit new highs around the globe. Broad-based growth, low interest rates and the lack of

inflationary pressure have created an ideal environment for investors. Even though central banks

across the developed world are looking to unwind asset purchase programmes, and interest rates

are beginning to slowly rise, forward guidance, strong fundamentals and positive market

sentiment have prevented any major dampening in global markets.

Real estate markets have seen much the same trends. The weight of capital seeking to enter the

sector is still significant despite being in an extended cycle. While yields in many global markets

are at record lows, healthy cash flow fundamentals have underpinned pricing. We expect global

investment volumes in 2018 to soften by 5%-10% to around US$650 billion. Although global

markets remain liquid, the relative lack of product combined with continued discipline are likely to

limit investment growth in 2018. Nevertheless, investors are still keen to access the sector and are

now looking to new strategies as the prominence of traditional single-asset transactions has

started to decline. Greater focus has been placed on debt financing, M&A, and alternative sectors

as the search for yield continues.

Direct Commercial Real Estate Investment, 2006-2018

Source: JLL, January 2018

0

100

200

300

400

500

600

700

800

Americas EMEA Asia Pacific Global

US

$ b

illio

ns

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (F)

-15% -5%

~0%

-5-10%

xx% Projected change 2017-2018

13

Direct Commercial Real Estate Investment – Regional Volumes, 2016-2017

Source: JLL, January 2018

Direct Commercial Real Estate Investment – Largest Markets, 2016-2017

Source: JLL, January 2018

US$ billions Q3 2017 Q4 2017% change

Q3 17-Q4 17 Q4 2016% change

Q4 16-Q4 17 FY 2016 FY 2017% change

FY 16-FY 17

Americas 61 66 7% 78 -15% 285 249 -12%

EMEA 73 110 51% 84 31% 245 300 22%

Asia Pacific 35 52 49% 45 16% 131 149 13%

Total 169 228 35% 207 10% 661 698 6%

US$ billions Q3 2017 Q4 2017% change

Q3 17-Q4 17 Q4 2016% change

Q4 16-Q4 17 FY 2016 FY 2017% change

FY 16-FY 17

U.S. 54.7 59.8 9% 72.8 -18% 266.2 224.3 -16%

UK 20.9 27.3 31% 15.1 80% 57.9 79.1 37%

Germany 14.1 22.6 61% 20.9 8% 55.5 60.2 9%

France 6.7 16.3 143% 10.1 61% 28.9 32.5 12%

China 8.4 15.5 85% 15.8 -2% 34.6 36.3 5%

Japan 6.9 10.5 52% 8.0 31% 33.7 36.9 10%

Hong Kong 3.1 7.5 140% 2.8 171% 10.4 16.4 58%

Australia 6.8 7.2 7% 5.2 40% 18.7 21.4 14%

Netherlands 5.6 7.2 28% 5.5 31% 11.1 21.0 89%

South Korea 1.8 6.3 252% 7.4 -14% 16.0 17.5 10%

Italy 1.7 4.9 186% 3.7 32% 10.1 11.8 17%

Spain 2.2 4.2 90% 3.3 27% 10.5 12.9 23%

Canada 4.7 3.9 -17% 3.2 21% 14.1 18.2 29%

Sweden 1.2 3.9 213% 4.8 -19% 12.5 10.4 -17%

Finland 5.3 3.4 -36% 1.7 101% 4.9 10.6 117%

Norway 1.7 3.0 75% 2.1 42% 7.0 9.3 33%

14

Regions in focus

Lower activity levels in U.S. set tone for the Americas

Sales transaction volumes across the Americas region continued to decelerate moderately in the

fourth quarter, with US$66 billion in closed deals during the period. This is down 15% from the last

quarter of 2016. For 2017 overall, total volumes reached US$249 billion, 12% lower than 2016

levels. These declines continue to be squarely driven by U.S. trends, where total activity for 2017

of US$224 billion represented a 16% fall on the previous year. For 2018, we anticipate a broad

continuation of the underlying factors behind these trends, with lower activity in the U.S. leading

to a regional Americas volume projected to be around 15% lower than in 2017.

Recapitalisations, larger portfolio and platform-level deals continue to be in demand from an array

of investors including, notably, foreign capital sources. Overseas investors remain keen on the U.S.

market, and it is at the top of many target market lists – in fact, foreign buyer market share in the

U.S. office sector for 2017 exceeded 17%, trailing just behind the highest percentage on record

established in 2016. Value-add continues to be the favoured investment strategy for raising and

deploying capital in the U.S., while there is an incremental shift underway towards debt strategies

as an alternate path to yield in the current yield-starved environment.

Outside of the U.S., the trend is generally toward stable or increasing transaction activity within

the Americas Region. In Canada, although total volumes declined moderately in the fourth quarter

from a year earlier to US$4 billion, the country enjoyed sturdy growth in volumes for 2017 overall.

Investment volumes exceeded US$18 billion for the year, an increase of 29% from 2016. In Brazil,

investor appetite for assets continues to grow as confidence about the economic recovery takes

hold. Q4 2017 marked the second consecutive quarter of total volumes reaching US$1.5 billion,

driving full-year 2017 activity to US$4 billion, more than doubling that in 2016. Finally, investment

volumes in Mexico were largely unchanged from the previous year in 2017 at US$2 billion.

Subsiding inflation in 2018, as well as recovery from temporary economic wobbles, bode well for

investment in the market this year; however, potential uncertainty around the mid-year general

election might be a source of caution.

EMEA transaction volumes exceed expectations

EMEA investment volumes came in at US$110 billion in Q4 2017, a 31% increase on the fourth

quarter of 2016. While part of this can be attributed to an appreciating exchange rate over the

course of the year, the growth in local currency terms (24%) was also significant. Over the full year,

volumes reached US$300 billion, an increase of 22% on 2016 and the strongest year since 2007.

Looking to the current year, sentiment across the region is likely to be supported by the favourable

economic backdrop in the Eurozone, although there remain challenges including ongoing political

uncertainties and Brexit negotiations moving into a critical phase. On balance, investors are

expected to be more cautious and volumes are likely to soften marginally on a strong 2017, with a

5% fall predicted.

The UK is in recovery mode following the Brexit-related slump in activity during 2016, with Q4 2017

investment volumes up 80% on the previous year to US$27 billion. Over the full year volumes

increased by 37% to US$79 billion, but were still below 2013-2015 annual totals.

15

Buoyant investment activity in Germany saw volumes at the end of 2017 rise 8% on Q4 2016.

Combined with the strong start to the year, full-year volumes rose to US$60 billion, a 9% increase. Meanwhile, a lively fourth quarter in France helped reverse the slowdown in activity seen in Q2 and

Q3, with Q4 investment volumes up 61% year-on-year. This raised 2017 totals by 12% to US$32

billion.

Robust growth across European regions

Reflecting the region’s strong overall performance, investment activity increased in all European

regions during 2017. Volumes in the Benelux region (+ 57%), Southern Europe (+24%) and the

Nordics (+27%) all rose by double digits compared with 2016, while activity in Central and Eastern

Europe (CEE) rose 3% to US$19 billion, surpassing the previous cyclical peak in 2006 by 29%.

London reclaims top position in 2017

London reclaimed the top position as the world’s most traded city during 2017 as investment activity rebounded by 35% from 2016 lows. A resurgence in foreign investment, which increased

by 67%, meant London also headed the rankings as the largest recipient of cross-border capital for

the year. Los Angeles registered its strongest year on record to displace New York, where

transactional activity fell by 48%, and climb into second place. In Europe, Berlin posted its best

year on record to enter the Global Top 20, as volumes doubled from 2016 levels. All six Asia Pacific

markets represented in the Top 20 witnessed an increase in activity, with Shanghai and Hong Kong

also setting new annual records as volumes climbed by 11% and 58% respectively.

Direct Commercial Real Estate Investment, Top 20 Cities, 2017

Source: JLL, January 2018

Investment volumes reach new record in Asia Pacific

Investment activity across the Asia Pacific region surprised on the upside in the final quarter of

2017, reaching a new record at US$52 billion, up 16% on the same quarter of 2016. As a result, full-

year transaction volumes also set a new high, coming in at US$149 billion, up 13% on the previous

year.

0 5 10 15 20 25 30 35

Houston

Berlin

Seattle

Dallas

Atlanta

Chicago

Toronto

Silicon Valley

Sydney

Boston

Singapore

Washington, DC

Seoul

Tokyo

Hong Kong

Shanghai

Paris

New York

Los Angeles

London

AmericasEMEA

Asia Pacific

US$ billions

16

Cross-border investment activity lifted again in Q4, accounting for 40% of total transaction

volumes. Cross-border investors remained net purchasers during the quarter, with Singaporeans

the largest cross-border buyers in the region, representing US$3 billion worth of deals.

Foreign investors active in Japan

Transaction volumes in Japan totalled US$37 billion in 2017, up by 10% year-on-year. Foreign

investors were very active in the market, with the notable entry of Norges Bank Investment

Management making their first foray in the Asia Pacific region. Investor interest in other regional

cities continues to build, with a particular focus on Osaka and Fukuoka.

Investor interest in Australia moving beyond Sydney and Melbourne

Investment volumes in Australia came in at US$21 billion in 2017, up 14% on 2016. Capital

continues to focus on the upper prime end of the market; however, there is limited opportunity

to deploy in this segment of the market, leaving a lot of unsatisfied capital. Interest has been

shifting towards secondary cities such as Brisbane.

Another record year for Greater China

Transaction volumes during 2017 in China reached US$36 billion, up 5% on the year and marking a

new all-time record. Despite the increase in transaction volumes, most sectors saw year-on-year

declines with total volumes propped up by the Q3 sale of Wanda’s portfolio of 76 hotels for around US$3 billion. Deal flow continues to be concentrated in Shanghai, which accounted for nearly 60%

of transaction volumes in mainland China.

Investment volumes in Hong Kong established a new record in Q4 2017, coming in at US$7.5 billion

and up 171% year-on-year. Full-year volumes totalled US$16.4 billion, up an impressive 58% on

2016. Pricing across the market continues to show upward momentum despite the already heated

environment.

Direct Commercial Real Estate Investment – Quarterly Trends, 2007-2017

Source: JLL, January 2018

0

30

60

90

120

150

180

210

240

Q1

07

Q2

07

Q3

07

Q4

07

Q1

08

Q2

08

Q3

08

Q4

08

Q1

09

Q2

09

Q3

09

Q4

09

Q1

10

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q3

11

Q4

11

Q1

12

Q2

12

Q3

12

Q4

12

Q1

13

Q2

13

Q3

13

Q4

13

Q1

14

Q2

14

Q3

14

Q4

14

Q1

15

Q2

15

Q3

15

Q4

15

Q1

16

Q2

16

Q3

16

Q4

16

Q1

17

Q2

17

Q3

17

Q4

17

Americas EMEA Asia Pacific Rolling Four-Quarter Average

205

107110100

113

7369666666

100

118120

159

204

190

119

91

110100

163

41 4335

108

124

146

211

143

162174

228

155168

171

210

136

153

166

207

143158

169

228

US

$ b

illio

ns

17

Capital Values and Yields

Income growth supports capital appreciation

Income growth on prime assets across 26 major office markets underpinned capital appreciation

of 6.0% in 2017. Capital growth for prime office assets in 2018 is expected to slow to around 3%-

4%.

Eight of the 26 major office markets have recorded double-digit capital value growth over the past

year, as a result of steady income growth and further yield compression. Hong Kong (+24%),

Stockholm (+21%), Sydney (+21%) and Frankfurt (+20%) topped the table of capital appreciation

in 2017. This year should see Moscow and Sao Paulo record strongest capital growth, as they

move into a recovery phase.

Continental Europe drives further yield compression

Prime office yields were virtually unchanged in the majority of major office markets in the final

quarter of 2017, with only Sao Paulo (-25 bps) and Sydney (-12 bps) showing notable compression.

In Europe, however, office yields continue to compress, with the mean prime office yield falling

below 4% for the first time since our records began. The largest inward movement was recorded in

Germany, with Berlin’s prime office yield now standing at 2.9%.

Prime Office Yield Shift, Q4 2016–Q4 2017

Source: JLL, January 2018

-100 -80 -60 -40 -20 0 20 40

TokyoSydney

SingaporeShanghai

SeoulMumbai

Hong KongBeijing

Mexico CitySao Paulo

Washington DCToronto

San FranciscoNew York

Los AngelesChicagoBoston

StockholmParis

MoscowMilan

MadridLondon

FrankfurtBrussels Q3 2017 - Q4 2017

Q4 2016 - Q3 2017

Basis point change

Am

eri

cas

Eu

rop

eA

sia

Pacif

ic

18

Prime Offices - Projected Change in Values, 2018

New York – Midtown, London – West End, Paris – CBD, Dubai – DIFC. Nominal rates in local currency.

Source: JLL, January 2018

Prime Offices – Capital Value Change, Q4 2016–Q4 2017

Notional capital values based on rents and yields for Grade A space in CBD or equivalent. In local currency.

Source: JLL, January 2018

10 - 20%

Capital ValuesRental Values

Sydney, Toronto Sao Paulo, Moscow, Madrid

Hong Kong, Sydney, Toronto, Madrid

Singapore, Brussels, Frankfurt, DubaiBoston, Chicago, Los Angeles, New York San Francisco, Washington DC, Milan, Paris Mumbai, Shanghai, Stockholm, London, Tokyo

Shanghai, Mexico City, Beijing

Hong Kong, Brussels, Stockholm, Frankfurt Dubai, Boston, Chicago, Los Angeles New York, San Francisco, Washington DC Milan, Seoul, Paris, Mumbai, London, Tokyo

5 - 10%

0 - 5%

0 - 5% Beijing, Mexico City, Seoul

Singapore Moscow, Sao Paulo

-5 0 5 10 15 20 25

MoscowDubai

LondonShanghai

BeijingChicago

ParisNew York

MumbaiTokyo

Los AngelesTorontoMadrid

SingaporeSao Paulo

BrusselsMilan

FrankfurtSydney

StockholmHong Kong

% change

AmericasEMEA

Asia Pacific

Mexico CityWashington DCSeoulBostonSan Francisco

19

Corporate Occupiers

Global corporate occupier activity remained at a high level in the final quarter of 2017. Flex space

providers accounted for about one-fifth of activity in London alone, while broad-based demand

from corporates in the financial and technology sectors and the co-working industry underpinned

activity in the U.S and Asia Pacific.

Corporate sentiment is improving as global economic growth creates expansion opportunities in

both developed and emerging markets. Robust levels of occupier activity are expected to continue

in 2018.

Co-working and shared office space on the rise globally

The burgeoning flex space and co-working market is transforming real estate across the world and

is fast becoming an important part of wider corporate real estate (CRE) and portfolio strategies.

SMEs, mobile and contingent workforces remain the backbone of flexible space operations,

although medium and large companies have also begun to realise the potential of leveraging

flexible space arrangements to better manage their liquid workforces, which is evident through

some large-block corporate leasing.

Shared workspaces have grown at an incredible rate of 200% over the past five years. In global

cities like London, New York and Chicago they are expanding at an annual rate of 20%, making co-

working an institutional part of the market. Increasing interest and a lot of aggressive growth from

a number of the key providers is translating into investment, JV and acquisition activity from real

estate investment players.

Demand for flex space is projected to grow as corporates and large enterprises are looking more

and more to enlarge the flexible proportion of their portfolios to benefit from a range of the

advantages that such flexibility can bring. A rising share of enterprise users is likely to continue to

underpin the demand for flexible space over 2018 and beyond.

Talent and technology continue to drive CRE strategies

Competition for top talent has sparked renewed interest in firms’ location decisions, as many of the world’s largest technology and financial companies review their expansion strategies in a

search for affordable but high-quality and educated talent. Companies are also leveraging

workplaces as a key differentiator to attract and retain top talent. Our research shows that

increasingly mobile and tech-enabled employees are demanding greater choice on when and

where they work. In response, corporates are introducing a range of innovative workspaces and

offering more choices to improve employee performance and quality of life.

Smart buildings is another other area of focus within corporate real estate. A variety of companies

and developers are now innovating and exploring the impact of digitisation on buildings,

portfolios and workplaces. This rapidly evolving trend is driving closer alignment between real

estate and technology functions, as they work together to drive performance outcomes for firms

and to enhance the employee experience.

20

Global Office Market Conditions Matrix*, 2018-2020

*Relates to conditions in the overall office market of a city. Conditions for prime CBD space may differ from the above.

Source: JLL, January 2018

Brussels Beijing

Frankfurt Hong Kong

London (West End)

Mumbai

Madrid Shanghai

Moscow Singapore(CBD Overall)

Paris Sydney

Stockholm

Dubai

2018 2019 2020 2018 2019 2020

Tokyo(CBD 5-kus)

Neutral Market

Landlord Favourable

Tenant Favourable

Chicago

Los Angeles

New York

San Francisco

Toronto

Washington DC

Mexico City

Sao Paulo

2018 2019 2020

21

Office Markets

Office Demand Dynamics

Global leasing volumes at highest level for a decade

The global office leasing markets finished the year on a high note, with 11 million square metres

leased in the final quarter of 2017 across 96 markets, the largest quarterly volume since 2007. For

the full-year 2017, gross leasing volumes reached 40.7 million square metres, a healthy 4% higher

than 2016 and at the top end of our forecast range:

Europe was the outstanding leasing market performer in 2017, with levels up an

impressive 10%, far stronger than expected;

Leasing volumes in the U.S. were exactly on forecast, up by 3% on 2016 levels;

Asia Pacific also exactly matched projections, falling as predicted by 5% from the

exceptional levels of 2016.

2018 is set to be another good year, and we have revised our volume forecasts upwards to close to

40 million square metres. Yet due to the exceptional 2017 result, this translates into a modest 3%

fall year-on-year, with volumes unlikely to hit last year’s impressive tally.

European leasing volumes hit record levels in Q4 2017

European office take-up rose to 4.0 million square metres in Q4 2017, the highest quarterly leasing

volume on record. Robust activity in the final quarter pushed 2017 take-up to 13.3 million square

metres, up 10% on 2016 and the highest level since the previous peak of the market in 2007. In

particular, Paris and the ‘Big 5’ German markets outperformed, while London also continued to

see strong take-up levels:

London’s take-up for the full-year 2017 was up 9%, representing a robust year for leasing

activity and outperforming expectations. Flexible-space operators continue to be a major

contributor to activity, with the sector accounting for around 20% of London’s take-up.

The strong sentiment recorded in Paris over the last 18 months translated into a 20% year-

on-year increase and the best year-end on record.

In Germany, the ‘Big 5’ office markets showed no signs of weakening, with Q4 take-up

rising by 38% year-on-year. Frankfurt registered its strongest quarter on record,

highlighting the strengthening sentiment across the wider market.

Central and Eastern Europe also recorded an active Q4, with volumes up one-third on a

year ago. Moscow, Prague and Warsaw all experienced significant growth in leasing

activity in Q4.

Spain also deserves highlighting, where volumes were up 31% in 2017. Madrid witnessed a

particularly strong recent uplift, with Q4 leasing levels 74% higher year-on-year.

22

Demand across Europe continues to strengthen, and we have therefore increased our full-year

2018 take-up forecast to 12.3 million square metres (slightly down on a robust 2017, but 11%

ahead of the 10-year average).

U.S. tenants have increasing choice in 2018

Fundamentals remain positive in the United States and organic growth continues as the economy

powers on, with leasing volumes up 3% for the full-year 2017. There has been a slowdown in net

absorption however, driven by a combination of reduced expansionary activity among large users,

movement into new space and ‘give-backs’ of commodity blocks faster than the market can absorb.

Among the U.S.’s larger office markets, Houston saw the greatest improvement in gross leasing

volumes in 2007, but it is several secondary cities that are registering the fastest growth – notably

Nashville, Minneapolis, Indianapolis and Phoenix.

2018 will see continued growth for the U.S. office market, even though net absorption will stay at

its newer and slower pace. Leasing activity has yet to show a sign of slowing and economic growth

should again be solid. This will keep demand for space buoyant, while more balanced conditions

will ease the cost and space burdens on tenants.

Over the border, Canada saw its best year for occupancy growth since 2012, reflecting the robust

performance of the Canadian economy. Businesses continue to expand in Vancouver, Toronto and

Montreal.

New leasing slows in Asia Pacific

Overall leasing activity in Asia Pacific dropped 26% year-on-year in Q4, contributing to a full-year

decline of 5%, in part due to low vacancy and high pre-commitment rates for quality buildings in

several key markets. Most Asia Pacific cities experienced healthy broad-based occupational

demand driven largely by financial and technology firms:

Gross leasing for the China Tier 1 cities was up 17% in 2017. Leasing volumes in Shanghai

were bolstered by demand from co-working operators, while new supply in Beijing’s core

areas allowed pent-up demand to be released which pushed new leasing higher.

In Japan, gross leasing activity remained robust, rising a healthy 8% in 2017 with improved

market sentiment amid optimism about the economy. Pre-leasing activity maintained its

vigorous pace and bolstered leasing volumes.

Gross leasing for the India Tier 1 cities dropped by 10% in 2007. High occupancy, strong

commitments to high-quality properties and a slight softening of demand from the

technology sector (following job automation and cost-related consolidations) impacted

new leasing activity. Even so, Delhi and Bengaluru registered the highest leasing volumes

in the Asia Pacific region during 2017.

In Australia, gross leasing volumes declined 25% in 2017, but from a high base in 2016.

Demand stayed healthy in Sydney, but leasing activity is constrained by low vacancy and

low deliveries of new space. In Melbourne, most large deals were concentrated in

upcoming developments.

23

With a positive outlook for regional and global economies in 2018, we are optimistic that leasing

activity will hold up relatively well and remain within reach of 2017’s level. The performance among markets will continue to be mixed, and ‘new tech’ firms (e.g. e-commerce, co-working)

should be key sources of demand growth as their business expands.

Global Office Demand – Annual Gross Leasing Volumes, 2007-2018

24 markets in Europe; 50 markets in the U.S.; 22 markets in Asia Pacific

Source: JLL, January 2018

30

33

36

39

42

45

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

mill

ions

sq

m

Pro

jec

tio

n

24

Office Supply Trends

Global office vacancy rate falls, defying expectations

Office leasing markets finished the year a lot tighter than predicted, with the global office vacancy

rate defying expectations by falling marginally to 11.9% in Q4 2017, testimony to the capacity of

the market to absorb additional space.

Most of the vacancy rate decline was due to the continued falls in Europe, where vacancy dropped

further to 7.4% in Q4. Vacancy rates in the fourth quarter kept broadly flat in the Americas (at

14.9%) and Asia Pacific (at 11.1%).

Nonetheless, with the delivery of new offices expected at a relatively elevated level during 2018,

vacancy is projected to edge up in 2018 to around 12.2%.

Peak in global development cycle hides regional differences

Delays in new deliveries have pushed the peak of the global office development cycle into 2018 – at

17.5 million square metres (compared to over 19 million square metres at the peak of the last cycle

in 2008). There remain differences in the timing of development cycles between the three global

regions:

U.S. development peaked last year, with new completions expected to decline

progressively between 2018 and 2020.

In Asia Pacific, peak development is likely to be this year, with high levels of completions

forecast in Shanghai, Beijing, Tokyo, Jakarta, Manila and India’s Tier 1 cities.

In Europe, development is now gearing up, with deliveries peaking in 2019 and 2020.

European office vacancy decreases further

Robust leasing activity continues to erode available space, with the European office vacancy rate

decreasing to 7.4% in the final quarter. This fall was particularly strong in Amsterdam, Warsaw,

Budapest and Berlin.

In 2018 we expect vacancy to stabilise as the pipeline grows further this year and next. The

development pipeline is likely to be more significant this year, with most of the increase

concentrated in London, Paris, Dublin, Berlin and Munich. However, completions of 5 million and

6.5 million square metres in 2018 and 2019 respectively are still well below the levels in excess of 7

million square metres recorded annually in 2008 and 2009.

Both quality and cost-effective space options increase in the United States

As a result of new construction outstripping absorption, vacancy in the U.S. has increased to 15.0%

and is set to grow even more in 2018 and 2019 as deliveries intensify. ‘Flight to quality’ is accelerating the rise in vacancy in Class A space, although it remains tighter than that of Class B

vacancy. Developers are taking note of this upward trend in vacancy and have scaled back on

construction starts. In 2017, starts dropped sharply by 29% to 42.9 million square feet, ultimately

25

leading to construction activity falling below the 100 million square foot mark for the first time

since 2015.

Canadian markets tighten

Canada’s Downtown Class A vacancy dropped an impressive 380 bps during 2017 to 10.9%; if Calgary is removed, the vacancy rate is only 5.8%. Vacancies in Toronto and Vancouver have been

in virtual free-fall for several quarters, although vacancy is likely to see less movement in 2018.

Robust demand counters surging supply in Mexico

The historic wave of new supply landing in the Mexico City office market resulted in a 9% growth in

the office stock in 2017 alone, which explains the currently elevated 16% vacancy rate. That rate

was stable over the course of Q4 however, as tenant demand was also strong. 2018 will see

supply-side challenges continue and the vacancy rate is likely to drift upwards.

Major improvement on offer in Brazil

Brazil’s turning economic fortunes will rather quickly translate into markedly improving conditions in its office market. In Sao Paulo, the vacancy rate has peaked at 25%. As a further boost, new

deliveries will be on the decline during 2018, and by year-end the pipeline should be low

historically.

Large supply volumes offer tenants options in growth markets

China and most Southeast Asian markets saw more new buildings enter the market while the

Australian cities recorded very limited or no new supply. Over 1.5 million square metres of new

supply entered the Shanghai market in 2017. Huge volumes of supply have come online in Jakarta

since early 2015 and 2017 volumes were at a record high.

Vacancy rates continued to decline in the majority of Asia Pacific markets during Q4, with those in

Taipei, Brisbane and Singapore having dropped the most. With a healthy level of new supply

projected in 2018, regional vacancy is anticipated to edge up, led by higher rates in markets such

as Hanoi and Jakarta, which are expecting new waves of supply.

26

Global Office Completions, 2000-2020

24 markets in Europe; 25 markets in Asia Pacific; 50 markets in the U.S. Asia relates to Grade A only.

Source: JLL, January 2018

Office Supply Pipeline – Major Markets, 2018-2019

Covers all office submarkets in each city. Tokyo – CBD - 5 kus

Source: JLL, January 2018

0

5

10

15

20

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018(F)

2019(F)

2020(F)

U.S. Europe Asia Pacific

mill

ion

s s

qm

Average

0 5 10 15 20 25 30

Los AngelesTorontoBoston

ChicagoMadrid

StockholmSingapore

MilanNew YorkBrussels

SydneyWashington DC

FrankfurtParis

Hong KongDubai

MoscowSeoul

LondonSao Paulo

San FranciscoMumbai

TokyoMexico City

BeijingShanghai

Completions as % of existing stock

2018 2019

27

Office Vacancy Rates in Major Markets, Q4 2017

Regional vacancy rates based on 62 markets in the Americas, 24 markets in Europe and 25 markets in Asia Pacific.

Covers all office submarkets in each city. All grades except Asia and Latin America (Grade A only). Tokyo relates to CBD – 5 kus.

Source: JLL, January 2018

Global and Regional Office Vacancy Rates, 2009-2017

62 markets in the Americas; 24 markets in Europe; 25 markets in Asia Pacific. All grades except Asia and Latin America (Grade A only).

Source: JLL, January 2018

0%

5%

10%

15%

20%

25%

30%

San

Fra

ncis

co

To

ron

to

New

Yo

rk

Bo

sto

n

Lo

s A

ng

ele

s

Mexic

o C

ity

Ch

icag

o

Wash

ing

ton

DC

Sao

Pau

lo

Lo

nd

on

Pari

s

Fra

nkfu

rt

Sto

ckh

olm

Bru

ssels

Mad

rid

Milan

Mo

sco

w

To

kyo

Ho

ng

Ko

ng

Syd

ney

Beijin

g

Sin

gap

ore

Seo

ul

Mu

mb

ai

Sh

an

gh

ai

Quarterly movement

Increased

Decreased

Stable

Americas

14.9%

Europe

7.4%

Asia Pacific

11.1%

Global

11.9%

7

9

11

13

15

17

19

Q4 2

00

9

Q1 2

01

0

Q2 2

01

0

Q3 2

01

0

Q4 2

01

0

Q1 2

01

1

Q2 2

01

1

Q3 2

01

1

Q4 2

01

1

Q1 2

01

2

Q2 2

01

2

Q3 2

01

2

Q4 2

01

2

Q1 2

01

3

Q2 2

01

3

Q3 2

01

3

Q4 2

01

3

Q1 2

01

4

Q2 2

01

4

Q3 2

01

4

Q4 2

01

4

Q1 2

01

5

Q2 2

01

5

Q3 2

01

5

Q4 2

01

5

Q1 2

01

6

Q2 2

01

6

Q3 2

01

6

Q4 2

01

6

Q1 2

01

7

Q2 2

01

7

Q3 2

01

7

Q4 2

01

7

Va

ca

ncy

Ra

te (

%)

Americas

Asia Pacific

Europe

GLOBAL

17.9%

14.9%14.4%

11.9%11.9%

11.1%10.3%

7.4%

28

Office Rental Trends

Prime rental growth hits 4%, strongest since 2011

Rents for prime offices across 26 major markets grew by 4.1% for the full-year 2017, double our

expectations at the beginning of the year and the highest rate since 2011:

Strong double-digit uplift was recorded in 2017 in Sydney (+26%), with Stockholm (+13%)

following in second place globally;

Only three major office markets (Shanghai, Beijing and Seoul) registered a decline in prime

rents during 2017, all falling modestly by less than 5%;

2017 was marked by the return of rental growth in Singapore (+9%) and Sao Paulo (+1%)

after several quarters of rental corrections.

More of the same is forecast for 2018, with growth projected to average 3% and top performances

going to Singapore and Sydney. Only Shanghai, Mexico City and Beijing are slated for rental

corrections over the coming year.

Strength of Europe’s occupier markets supports robust rental growth

The European Office Rental Index increased by 4.1% during 2017, the strongest annual rate of

growth since 2010. Excluding the UK, Western European rental growth reached 5.4% year-on-year,

underlining the strength of the occupier market:

Germany continues to lead Europe in terms of rental growth, with Berlin (+3.4%),

Dusseldorf (+1.9%), Hamburg (+1.9%), Munich (+1.4%) and Frankfurt (+1.3%) all seeing

quarterly increases as a result of tightening supply and elevated demand. In the

Netherlands, Amsterdam also witnessed another quarter of rental growth.

In London, prime rents held firm in Q4 2017 as the occupier market continues to stabilise,

while in Paris, prime rents increased by 4.0% in the quarter with the recent positive market

sentiment continuing.

In Southern Europe, prime rents in Milan, Madrid and Barcelona continued to rise on the

back of tight Grade A supply and solid demand.

At 2.3%, projections for prime office rental growth across Europe in 2018 should comfortably

outpace the five-year average (1.4%). However, there is potential for outperformance in Western

Europe’s tightest markets.

New premium-priced spaces are helping to boost U.S. asking rents

The injection of new supply in the U.S. is providing landlords with a short-term bump in asking

rents. New supply averages US$56 per square foot, a 43% premium compared to existing Class A

29

space; this has contributed to a 3.8% increase in asking rents over the year, 60 bps greater than the

market as a whole.

Growth has been highest for quality space in the suburbs, where greater volumes of new, non-pre-

leased supply are coming online. Landlords are taking advantage of the faster ‘flight to quality’ in

suburban geographies to push rents higher.

Rental growth in Asia Pacific maintains pace

For the full-year 2017, Asia Pacific rents increased by 3.6%, the strongest of the three global regions:

Sydney remained the regional leader for annual growth, with incentives continuing to

decline.

Singapore recorded the strongest quarterly rental growth on the back of improved

occupancy levels, as landlords of quality buildings increased rents and some scaled back

incentives.

Mixed rental trends were evident in Beijing with supply putting pressure on CBD rents,

while robust demand in the Finance Street submarket sustained its rental growth.

Shanghai CBD rents edged lower again, while the ‘Decentralised’ market saw rents rise.

Quarterly rental growth was limited in Tokyo as landlords kept focused on securing

tenants ahead of a supply wave.

Sustained demand from mainland Chinese firms against a tight vacancy environment

supported a further uplift in Hong Kong Central rents.

30

Prime Offices – Rental Change, Q4 2016-Q4 2017

Based on rents for Grade A space in CBD or equivalent. In local currency.

Source: JLL, January 2018

Prime Offices – Rental Change, 2010-2018

Prime office rental growth: unweighted average of 26 major markets.

Source: JLL, January 2018

-5 0 5 10 15 20 25 30

MoscowDubai

LondonSan Francisco

Sao PauloBostonTokyoParis

MumbaiWashington DC

Mexico CityFrankfurt

Los AngelesNew York

Hong KongMilan

TorontoChicago

MadridBrussels

SingaporeStockholm

Sydney

% change

AmericasEMEA

Asia PacificShanghaiBeijingSeoul

8.0% 8.0%

1.8%

0.9%

3.6%4.0%

2.9%

4.1%

3.0%

0

2

4

6

8

10

2010 2011 2012 2013 2014 2015 2016 2017 2018F

Re

nta

l ch

an

ge

(y-

o-y

%)

31

Prime Offices – Rental Clock, Q4 2017

Based on rents for Grade A space in CBD or equivalent.

U.S. positions relate to the overall market.

Source: JLL, January 2018

Rental ValuesBottoming Out

Rental GrowthSlowing

Rental ValuesFalling

Rental GrowthAccelerating

Americas EMEA Asia Pacific

Moscow, Johannesburg, Warsaw, Zurich

Milan

Amsterdam, Madrid, Sydney, Toronto

Seoul

Houston

Stockholm, Prague

Brussels

Frankfurt

Dubai

Beijing, Chicago, New York

Boston, Dallas

Singapore

Mumbai

Shanghai

Paris, San Francisco

London

Los Angeles

Tokyo, Hong Kong

Istanbul, Mexico City

Sao Paulo

Delhi

Berlin

Washington DC

32

Retail Markets

U.S. retail market expansion slowing amid rapid structural change

The U.S. retail story in the fourth quarter remains largely consistent with the broader trends of

2017. Retail construction continues to slow, rents are still rising but at a slower rate than in

previous quarters, and vacancy continues to be low at 4.3%. Developers are conservative on new

retail construction, in line with the mall renovation pattern of converting traditional retail spaces

into non-retail uses, with owners investing to create mixed-use destinations for the evolving

shopper including adding residential units, office and hotel space, entertainment, and community

and open spaces.

Retail closures continue to make headlines, but the market could breathe a bit easier as 2017

closed with the holiday season seeing a 4.9% growth in sales. 2018 will most likely experience

more closure announcements as struggling retailers continue to lose footing, but at a slower pace

than in 2017. However, a significant number of openings have been announced for the year and

should help keep vacancy lower than might be expected considering this year’s slew of closures and bankruptcies.

Consumer confidence in Europe at historically high levels

Strong confidence and job creation continue to drive consumer spending across Europe, with

retail sales in the EU28 increasing by 2.8% in 2017. While there is a slight deceleration in prospect,

EU retail sales are forecast to grow by 2.3% this year and by 2.0% in 2019.

E-commerce growth, the rise of technology and changing consumer spending patterns continue to

shape European retail demand. As a result, retailers are adapting and re-evaluating their existing

physical space. There has been a notable acceleration in initiatives addressing this evolving retail

environment; responsive retail, new business models and omni-channel will continue to thrive in

this context.

Prime high street rents were broadly stable during Q4, while shopping centres and retail

warehouses experienced more variation. High street rents rose most in Birmingham (+7.5%

quarter-on-quarter) and Leeds (+4.0%), while shopping centre prime rents saw the largest increase

in Ukraine (+11.1%) and the Czech Republic (4.2%). Germany’s shopping centres witnessed the widest variation in rental growth, ranging from a 16.7% rise in Stuttgart to an 8.0% decline in

Berlin over the quarter.

A focus on asset enhancement initiatives and tenant-mix adjustments in Asia Pacific

Many retail landlords in Asia Pacific continued to adjust tenant mixes in Q4 2017. In Sydney,

retailers are opening new concept stores that offer greater customer engagement and experience.

Mass market fashion brands were among the most active retailers in Beijing and Shanghai, while

leasing activity in Hong Kong was dominated by renewals and cost-saving initiatives.

In general, stagnant rents were evident across Asia Pacific. Sydney and Melbourne recorded rental

growth on renewals, but discounts were offered to replacements with landlords focused on tenant

retention. Hong Kong’s prime shopping centre rents held firm and several malls recorded positive

sales growth, while in Singapore the pace of rental declines in the Marina submarket tapered.

33

Prime Retail – Rental Clock, Q4 2017

Prime Industrial – Rental Clock, Q4 2017

Relates to prime space. U.S. positions relate to the overall market. Source: JLL, January 2018

Americas EMEA Asia Pacific

Rental ValuesBottoming Out

Rental GrowthSlowing

Rental ValuesFalling

Rental GrowthAccelerating Dubai

Boston, Chicago, Houston

Shanghai, Madrid

London, Milan

Beijing

Singapore

Moscow, Sydney

Mumbai

Delhi

Hong Kong

Los Angeles, San Francisco

Tokyo

Berlin

Washington DC

New York

Paris

Americas EMEA Asia Pacific

Rental ValuesBottoming Out

Rental GrowthSlowing

Rental ValuesFalling

Rental GrowthAccelerating

Paris, Hong Kong, Singapore

London, Madrid

Moscow

Frankfurt

Boston, Sydney

Houston

Philadelphia

Chicago, Atlanta, Los Angeles

New York, Dallas

Beijing

San FranciscoAmsterdam

Milan, Stockholm

Shanghai

Tokyo

Istanbul

34

Industrial Markets

2017 another banner year for U.S. industrial sector

The U.S. industrial market had a stellar fourth quarter with total net absorption at 70-75 million

square feet, the best fourth quarter historically. Compared to Q4 2016, absorption levels increased

by nearly 10% and the vacancy rate has consequently dropped by 20 bps points to an all-time low

of 5.0%. On an annual basis, both new completions and net absorption for the full year tallied over

200 million square feet, making 2017 another strong year.

U.S. rents continue to rise to record levels

Spurred by an increase in absorption of warehouse space as the tectonic shifts brought about by e-

commerce continue, U.S. industrial rents increased further in 2017, registering year-on-year

growth of 5.2%. New construction and steady development activity have continued to add

pressure on land prices. With rising labour, material and land costs, there is an increased pressure

to push rents higher to justify increased construction costs. Overall, leasing sentiment remains

stable going into 2018. The industrial market has seen positive growth for over seven years and,

while the Class A market continues to be hot, there is increased competition between Class B and

Class C product.

European warehousing markets set for continued strong performance in 2018

The European occupier market for logistics ended 2017 on a high, with total take-up well above

the long-term average. Driving this activity was robust demand for large warehouse facilities,

along with urban sorting, distribution and fulfilment centres to support the continued growth in

online sales.

There are no signs of an imminent slowdown in activity and, with a strong economic outlook, we

expect occupier demand to maintain its momentum in 2018. The main risk to take-up remains a

lack of modern vacant space, with buoyant demand reducing European vacancy to a new low of

around 5% at end-2017. Given strong demand and low levels of vacancy, rental growth, which has

been quite patchy, should become more widespread in 2018.

3PLs and e-commerce firms continue to drive demand for logistics space in Asia Pacific

E-commerce and 3PLs were the most active occupiers in the China Tier 1 leasing markets and

Tokyo in the fourth quarter. Demand for logistics space in Singapore was supported by the uplift

in trade performance. Given the slowdown in container throughput, 3PL leasing activity in Hong

Kong was largely characterised by relocation and downsizing, while some retailers were active

amid strong domestic consumption.

Rents edged up further in most markets across the region, reaching a record high in Shanghai.

After declining for the last 10 quarters rents for Singapore’s logistics premises held flat on improved sentiment, while overall rents in Hong Kong dropped slightly as landlords facing high

vacancy continued to provide longer rent-free periods.

35

Hotel Markets

Robust economic growth extends hotel cycle

The beginning of 2017 was overshadowed by macroeconomic and geopolitical concerns in

different parts of the world. However, as the year progressed, the economy responded better than

expected with improved economic indicators reported in both the U.S. and major European

countries. Global economic sentiment has gradually improved and investors continue to pursue

purchases in the hotel sector, albeit with disciplined underwriting.

The travel market continues to be buoyant. The latest data from UNWTO reveals that as of October

YTD 2017, the number of international travellers grew 7% to 1.1 billion, despite ongoing political

and economic uncertainties. Growth has also been underpinned by recovery in visitor arrivals in

key cities such as Paris which had previously suffered declines.

Global hotel operating performance remains positive, and all three global regions posted RevPAR

growth in 2017. Europe was in top position, reporting an uplift of 6.9% in YTD November 2017, with

both Madrid and Paris delivering double-digit RevPAR increases. North America is enjoying an

extended cycle with RevPAR climbing over 3% in 2017. Asia Pacific achieved a 2.8% year-on-year

increase in occupancy, resulting in a rise in RevPAR. Cities such as Sydney, Beijing and Hong Kong

all experienced robust RevPAR growth.

Hotel transaction volumes lower despite investor confidence

The aforementioned factors supported a healthy hotel investment environment with global hotel

transaction volumes totalling US$62.5 billion in 2017, on par with the levels seen in 2016.

Asia Pacific posted an impressive uplift in volumes, up 42% compared to 2016. The result was

largely due to R&F Properties’ investment in Dalian Wanda Group, a portfolio of over 60 hotels

located across China. The Americas saw an 11% year-on-year decline in volumes, in part due to a

40% decrease in portfolio transaction volumes in the U.S. EMEA achieved a steady rise in

transactions levels on 2016 at US$22 billion, a sign that political uncertainty surrounding the

multiple elections did not suppress investor appetite.

Global Hotel Investment Volumes, 2016-2017

Source: JLL, January 2018

US$ billions 2016 2017% change 2016-2017

Americas 31.5 28.0 -11%

Asia Pacific 8.7 12.5 42%

EMEA 22.0 22.0 0%

Total 62.2 62.5 0%

36

Portfolio sales globally accounted for 34% of total volumes, which was around the same level as in

2016. In addition to R&F Properties’ acquisition of Dalian Wanda Group, a number of notable portfolio transactions took place in other regions including, in the Americas, RLJ Lodging Trust’s acquisition of FelCor Lodging Trust for a reported US$2.4 billion and, in EMEA, the Jury’s Inn portfolio consisting of 37 hotels located across the UK and Ireland.

The U.S. upheld its position as the most liquid hotel investment market in 2017, accounting for

38% of all deal flow globally despite an 18% drop in total sales. Domestic investors returned to the

market, with 87% of transactions made by local buyers, compared to 58% last year – a firm

indication of their confidence in the U.S. economy.

The UK was the second most liquid market, reporting a 24% uplift in volumes to reach US$5.5

billion. A number of high-profile portfolios traded during 2017 in addition to the Jury’s Inn portfolio, including Q Hotels and the Hilton Metropole Hotels portfolio. International capital into

the UK increased significantly, with investors from North America and Asia (excluding mainland

China) acquiring a significant share of transacted UK hotel properties during 2017.

Spain observed a 71% increase in transaction volumes in 2017 to reach US$4 billion. Growing

travel demand was reflected through positive hotel performance across the country and this

attracted more buyers to the market. Several hotel portfolios transacted during the year,

including the €230m Melia portfolio, IFA portfolio and Intertur portfolio.

Hong Kong also saw notable growth in activity after a quieter 2016, with transaction volumes in

2017 totalling US$1.7 billion. Sales activity was driven by investors acquiring mid-market hotels

for conversion to office use, given that these hotels sell for discounted pricing per square metre

compared to other asset types.

Private equity groups remain most active buyer group

Investment funds and private equity firms were the most active buyers in 2017, representing 30%

of the market. Developers and property companies ranked second with 18% market share, driven

by R&F Properties’ purchase of hotel assets from Dalian Wanda Group and the US$1 billion Jury’s Inn portfolio deal.

REITs were the third most active buyer group, resulting from RLJ Lodging Trust’s purchase of FelCor Lodging Trust. Institutional investors continue to increase their allocation to real estate.

Their share of acquisitions has more than doubled since 2014, from 4% to 10% in 2017.

37

Hotel Transactions: Capital Outflows and Inflows, 2017

Excludes multijurisdictional portfolio transactions

Source: JLL, January 2018

Asian investors overtake mainland China as largest outbound capital source

International capital continues to play a key role in the hotel investment landscape. During 2017,

15% of investment, worth US$10 billion, originated from international investors. Asian investors,

notably from Southeast Asian countries, have increased their offshore investment largely due to

their need to diversify both in terms of location and product, and they overtook mainland Chinese

buyers as the largest group of outbound capital in 2017, accounting for 30% of offshore

investments.

Brand M&A continues, but on a smaller scale

Following the acquisition of Starwood Hotels & Resorts by Marriott International in 2016, there

were more M&A announcements during 2017 with AccorHotels being an active buyer; a particularly

notable announcement was their US$903 million purchase of Australia’s Mantra Group.

We expect to see more hotel M&A activity due to operators’ desire for unit growth, operational efficiency and profitability through scale. Through consolidation, companies are able to expand

their reach to more customers, acquire more advanced platforms and achieve higher revenue.

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

Australasia

South America

Middle East

Europe

Mainland China

North America

Asia

Outflows Inflows

US$ billions

38

Residential Markets

New supply outpaces still solid demand in U.S. multifamily market

U.S. multifamily rental fundamentals flattened through Q4 2017 as the sector continued to adjust

to an influx of new supply being delivered across the country. 2017 marked the expected peak of

the development cycle with roughly 390,000 new units being delivered at year-end. As a result,

annual rental growth decreased 100 bps year-on-year to 2.3%.

While rental growth decelerated, national vacancy rose 20 bps year-on-year to 5.2%. As we look

forward to 2018, we will continue to see elevated deliveries, albeit less than 2017. With this in

mind, it is likely that rental growth and vacancy will be held back from any major improvements as

the market continues to absorb new product. With new ground-breakings in the multifamily

sector also slowing, fundamentals are well positioned to stabilise over the next 18 to 36 months.

UK institutional market continues its upward trajectory

The UK housing market finished the year in modestly positive territory, with the main indices

suggesting price growth of between 4%-5% for 2017. London’s decline was more material, with the 12-month price change turning negative. Sales volumes remain buoyant, aided by the

government’s flagship Help to Buy programme and the more important - but less celebrated -

continuance of record low mortgage rates.

Institutional investment continued its trajectory of growth, with several bigger deals in secondary

and tertiary towns and cities adding to the total amount of large-scale rental assets under

construction. The overweight of capital against available opportunities is driving greater attention

towards joint-venture deals where investors can get access to suitable land and development

opportunities. Investment volumes in 2017 were up 20% to £2.4 billion, with expectations of

continued strong growth this year.

Transaction activity climbs higher in Germany

Residential transaction volumes in Germany totalled €15.7 billion in 2017, almost 15% above the previous year’s level and the third-best result in the last 10 years, following the standout

performances in 2013 and 2015.

Berlin accounted for nearly a quarter of national investment in 2017 with volumes of €3.6 billion, an increase of 25%. Hamburg (with €1 billion of transactional activity), Düsseldorf (€820 million) and the Ruhr region (€650 million) were the next largest markets.

Investor demand remains buoyant in the Netherlands

The investment market in the Netherlands witnessed a record year in 2017, with total

transactional activity exceeding €4.4 billion. Due to increasing competition, prime yields

sharpened in the final quarter to a historical low of 3.2%. Investor demand remains buoyant, with

the first half of 2018 expecting a variety of large-scale portfolio transactions to take place.

Numerous investors that acquired portfolios three to five years ago have now started to dispose of

parts of these portfolios and, as a result, investment volumes in the first half of 2018 are likely to

remain on par with 2017’s levels.

39

Investment volumes dip from record-breaking 2016 in Sweden

Investment volumes for the residential market in Sweden totalled SEK 55 billion in 2017, which

represents a drop from 2016’s record-breaking number, albeit still significantly above the long-

term average. SEK 15 billion was transacted in the fourth quarter due to a number of large deals,

with Akelius and Swedish municipalities particularly active.

Significant capital entering the residential market in Spain

Total residential institutional investment volumes in Spain reached €2.15 billion in 2017, versus €802 million in 2016. There is now significant equity entering the residential market either through

residential SOCIMIS (REITs) seeking buildings to acquire and lease or through private equity or

institutional-backed Spanish property developers acquiring land.

The market is currently undergoing a large transfer of ownership, with the banks selling or

transferring residential loans and assets to private equity or development platforms. While the

residential leasing market is still in its infancy in terms of institutional ownership, there are now

over 20 residential REITs active in Spain with over 20,000 units under lease, the largest being Testa

Residencial, Blackstone through Albirana and Fidere, and Sareb with its Tempore Properties.

Spanish developers are also undergoing a significant phase of expansion with Metrovacesa and Via

Celere expected to join Neinor and Aedes Homes on the Spanish stock market during 2018.

Sustained sales momentum in Hong Kong and Singapore

A tight housing policy stance remained in place across much of Asia in the fourth quarter, and

some local governments in China have taken further steps towards supporting development of the

leasing market. In Shanghai, the tight policy stance such as HPRs and limited issuance of pre-sales

certificates impacted sales activity. With limited new measures announced in the latest policy

address in Hong Kong, market sentiment kept intact and buyers snapped up flats in new launches.

Sales activity in Singapore was dominated by secondary transactions as there were limited new

launches in the prime districts.

Leasing activity was in line with expectations during the final quarter. A seasonal slowdown was

evident in many markets as expats put off decision-making during the holiday season. In

Shanghai, cyclical year-end lease terminations and renewals impacted landlords’ rental stances and rents held generally stable, while modest rental growth was recorded in Beijing amid stable

demand. Growth of luxury rents in Hong Kong slowed due to the holiday season; with leasing

activity largely focused on renewals, most landlords held firm on their asking rents. Hit by slower

leasing activity, rents in Singapore edged lower after recording growth in the previous quarter.

40

Key Investment Transactions in Q4 2017

Europe, Middle East and Africa

Country City Property Sector

Sales

price

US$m Comments

Denmark Multiple Project

Ocean

Retail 1,092 Danish pension fund Danica has sold a 50% stake

in its shopping centre portfolio to ATP Real Estate,

in the highest value real estate transaction in

Denmark to date. The portfolio consists of 16

shopping centres, including some of the largest

and most prestigiously-located in the country.

France Paris 6-8 Boulevard

Haussmann

Office 557 Norges Bank Real Estate Management has acquired

the building in the centre of Paris from Tamweelview

European Holdings SA and Tamweelview Listed

Securities Holdings, wholly-owned subsidiaries of

the Abu Dhabi Investment Authority (ADIA). The

property, comprising 24,500 sq m of office space,

was sold for a yield of 3.1%.

Germany Frankfurt Tower 185 Office 913 JLL has advised CA Immo and its JV partners on the

sale of the property to Deka for €775 million. Located in the Europaviertel district, the 102,000 sq

m building was developed in 2011 by CA Immo and is

around 90% occupied, with PwC occupying more

than 60% of the rentable area.

Germany Multiple RFR Portfolio Mixed 1,766 Signa has bought five trophy assets in Berlin,

Hamburg, Frankfurt and Munich from RFR for €1.5 billion.

Israel Jerusalem Waldorf

Astoria

Jerusalem

Hotel 130 Financière Immobilière Bordelaise has purchased

the 5-star, 226-room luxury hotel from the

Reichmann family.

Italy Multiple Humanitas

Portfolio

Healthcare 330 AXA Investment Managers has acquired the portfolio

of five assets in Milan, Bergamo and Turin from

Techint for €280 million in a sale and leaseback transaction.

Multiple Multiple Gazeley

Portfolio

Industrial 2,800 JLL has advised GLP on its acquisition of European

logistics business Gazeley. The properties,

previously owned by funds affiliated with Brookfield

Asset Management, are spread across the UK,

Germany, Italy and the Netherlands and comprise 3

million sq m of total gross leasable area.

Multiple Multiple Jurys Inn

Portfolio (37

hotels)

Hotel 1,067 Swedish developer and property company Pandox

AB, together with Israel's Fattal Group, have

acquired the portfolio of properties located across

the UK and Ireland.

Poland Wroclaw Magnolia Park Retail 450 JLL has advised Blackstone on the sale of the

shopping centre to Union Investment for its open-

ended real estate fund Unilmmo Europa for nearly

€380 million.

41

Country City Property Sector

Sales

price

US$m Comments

Romania Bucharest Radisson Blu &

Park Inn by

Radisson

Hotel 193 Cerberus Capital Management, a U.S.-based

investment fund, has acquired the two-property

portfolio totalling 697 rooms from Israel's Elbit

Imaging Ltd.

Russia Moscow Moscow malls Retail 900 Immofinanz has sold the portfolio of malls to

Russia’s Fortgroup. The shopping centres, all

located in Moscow, are: Golden Babylon Yasenevo,

Golden Babylon Rostokino, Golden Babylon

Otradny, GoodZone and 5th Avenue.

Spain Multiple HI Partners

Portfolio (14

hotels)

Hotel 742 Blackstone has acquired the portfolio from Banco

Sabadell.

Sweden Stockholm Comfort Hotel

Arlanda

Hotel 153 The 503-key budget hotel has been purchased in

equal parts by Norwegian developers

Wenaasgruppen AS and O.G.Ottersland AS from

Swedish Swedavia Real Estate AB.

UK London 15 Canada

Square

Office 531 JLL has advised KPMG on the sale and leaseback of

its London HQ to Kingboard Investments for c. £400

million. KPMG will continue to occupy the building,

which comprises 40,328 sq m and is located next to

the new Crossrail station in Canary Wharf.

UK London Devonshire

Square

Office 770 WeWork has agreed to buy Blackstone’s estate in the City of London for c. £580 million. Blackstone

acquired the campus from ADIA and Rockpoint in

2012 for £330 million and has since carried out an

asset management programme, including the

transformation of the square into a piazza-style

courtyard framed by warehouse buildings, bars,

restaurants and shops.

42

Asia Pacific

Country City Property Sector

Sales

price

US$m Comments

Australia Brisbane Indooroopilly

Shopping

Centre

Retail 615 AMP Capital Funds has acquired a combined 50%

stake in the shopping mall from Eureka, which is

now controlled by AXA. Each of the two funds

(AMP Capital Shopping Centre Fund and AMP

Capital Diversified Property Fund) will acquire a

25% stake.

Australia Sydney Chatswood

Chase

Retail 859* Vicinity Centres has exchanged its 49% stake in

Chatswood Chase for a 50% stake in GIC's Queen

Victoria Building, The Galeries and The Strand

Arcade. *Price is the combined value of both the

49% stake in Chatswood and the 50% stake in the

three other assets.

China Beijing W Beijing Hotel 298 The full-service 349-room property has been sold

by Joy City Property Ltd. to Tianfu Fund

Management.

China Guangzhou Rock Square Retail 508 CRCT and CapitaLand have acquired a 51% and

49% interest respectively in the mall from PGIM

Real Estate.

China Multiple Dalian Wanda

China

Portfolio

Hotel 2,496 R&F Properties has acquired the portfolio from

Dalian Wanda Group.

China Shanghai Eco City Office 953 Sanpower Group has sold the 67,106 sq m Grade A

building to Ting Hsin International Group.

China Shanghai Shanghai Star

Harbour

International

Centre Project

Mixed 907 China Jinmao has sold the 427,621 sq m

development to Shanghai International Port

Group.

China Shanghai Cross Tower Office 402 Gaw Capital has sold the 24-storey building with a

GFA of 41,662 sq m to World Union Investment

Management.

China Shanghai Mingyue Hotel Hotel 203 Everbright Ashmore Investment Beijing has

acquired the 352-key asset.

China Shanghai Sky SOHO

Project

Office 757 Gaw Capital has acquired a group of Class A

properties with a total GFA of 128,175 sq m from

SOHO China.

China Shenzhen Hongshan

6979

Mixed 355 The project, previously owned by OCT Investment

Real Estate and China Merchants Property

Development in a 50:50 JV, has been sold to

Shanghai ICY Capital Management.

Hong Kong Hong Kong King’s Hotel Wanchai

Hotel 176 The 193-room property has been sold by HNWI

Tang Shing-bor to Chinese investment fund

KaiLong REI Project Investment.

43

Country City Property Sector

Sales

price

US$m Comments

Japan Kanagawa Mitsubishi

Heavy

Industries

Yokohama

Building

Office 436 Hulic has sold the 34-storey building to Kenedix

Real Estate Fund Management.

Japan Kunigami Renaissance

Okinawa

Resort

Hotel 172 The 377-room resort has been acquired by Gaw

Capital Partners from GreenOak Investment

Management.

Japan Tokyo Hilton Tokyo

Odaiba

Hotel 522 The 5-star hotel, with a total of 453 rooms, has

been sold to Hulic and Fuyo General Lease in a

50:50 JV.

Japan Tokyo Sheraton

Grande Tokyo

Bay Hotel

Hotel 867 Fortress Investment Group (Japan) GK has sold

the 1,016-room property to GIC (Japan) K.K. and

Invincible Investment Corporation.

Japan Tokyo Amway Plaza

Tokyo

Office 297 Amway Japan has sold the 13-storey building in

Tokyo's Shibuya ward to Blackstone on a sale and

leaseback agreement.

Malaysia Kuala

Lumpur

Hilton Kuala

Lumpur

Hotel 124 The 503-key property has been purchased by

Japanese developer Daito Trust Construction Co.,

Ltd. from Malaysian hotel operator Daisho Asia

Development.

Singapore Singapore Chevron

House

Office 487 Oxley Holdings has purchased the 32-storey

building located in Raffles Place from Deka

Singapore, a unit of Germany’s DekaBank Group.

Singapore Singapore Florence

Regency

Residential 465 JLL has advised on the sale of the 336-unit former

Housing and Urban Development Company

(HUDC) estate in Hougang to Chinese developer

Logan Property. The collective sale is likely to

yield close to 1,000 apartments once redeveloped.

Americas

Country City Property Sector Sales

price

US$m

Comments

Brazil Guarulhos Internacional

Shopping Guarulhos

Retail 289 Gazit-Globe has acquired a 70% stake in this nearly

54,000 sq m shopping centre from General Shopping.

Brazil Sao Paulo Hipermercado Extra

Itaim

Retail 108 GTIS Partners has purchased this roughly 57,1000 sq m

shopping centre located in the Itaim submarket from

Gazit-Globe.

Canada Toronto 26 Cumberland Street Retail 211 KingSett Capital has sold the asset to Cresford for

redevelopment.

Canada Toronto 284 King Street West Office 134 Great Gulf Homes has purchased this CBD asset from

Mirvish.

44

Country City Property Sector Sales

price

US$m

Comments

Canada Vancouver 2025 Willingdon

Avenue

Office 92 Bentall Kennedy has acquired the CBD property from

Appia Developments.

Canada Vancouver 4403 Eton Street Industrial 72 Chevron Canada Limited has sold this warehouse

asset located in the Burnaby submarket to Parkland

Fuel Corporation.

Mexico Mexico City Montes Urales 620 Office 60 REIT Fibra Uno has purchased the asset from BBVA

Bancomer at a reported 8.1% initial yield.

U.S. Arlington Key Bridge Marriott Hotel 182 The 4-star property has been sold by Host Hotels &

Resorts REIT in equal parts to Oaktree Capital

Management and Woodridge Capital Partners.

U.S. Chicago CH2 Data Center Industrial 315 REIT Digital Realty has purchased the roughly 23,000

sq m data centre located in suburban Melrose Park

from Carter Validus Mission Critical REIT.

U.S. Dallas/Fort

Worth

Trinity Towers Office 70 JP Realty Partners has sold the nearly 59,000 sq m

North Stemmons Freeway property to Stanton Road

Capital.

U.S. Denver 1401 Lawrence Office 225 Great Gulf Homes has sold this over 29,000 sq m

suburban asset to Heitman at a reported 5% initial

yield.

U.S. Detroit Millennium Park Retail 75 Grand Sakwa Properties has acquired the roughly

26,000 sq m Livonia shopping centre from Ramco-

Gershenson Properties Trust.

U.S. Kahuku - Oahu Turtle Bay Resort

Kahuku - Oahu

Hotel 333 The full-service 4-star coastal resort has been

acquired by Blackstone from Highland Capital

Management, an investment fund from the U.S.

U.S. Los Angeles Pacific Corporate

Towers

Office 611 GE Asset Management has sold the three-building,

approximately 147,000 sq m El Segundo property to

Starwood Capital at a reported initial yield of 5.1%.

U.S. Los Angeles Centergate

Distribution Park

Industrial 96 Westcore Properties has purchased the approximately

95,000 sq m San Bernardino warehouse asset from

Bentall Kennedy at a reported 4.25% initial yield.

U.S. Miami Miami Free Zone Industrial 90 Somerset Partners has sold the nearly 79,000 sq m flex

property to Foundry Commercial.

U.S. Multiple Noble Portfolio (four

hotels)

Hotel 164 Summit Hotel Properties, a U.S. REIT, has bought the

portfolio of full-service midscale hotels, located across

the country, from Noble Investment Group LLC.

U.S. Northern New

Jersey

Montville Corporate

Center III

Industrial 53 AEW Global has sold this approximately 50,000 sq m

flex asset to Camber Real Estate Partners.

U.S. Orange

County

The Triangle Retail 55 Unimat Commercial has acquired this 19,000 sq m

Costa Mesa property from a venture involving

Greenlaw Partners, Westbrook Partners and Walton

Street at a reported 6% initial yield.

45

Country City Property Sector Sales

price

US$m

Comments

U.S. Philadelphia Centerton Square Retail 130 Prestige Properties & Development has acquired the

over 40,000 sq m Mount Laurel shopping centre from

Black Creek Diversified Property Fund.

U.S. Phoenix State Farm at Marina

Heights

Office 928 Transwestern Investment Group has purchased the

two-building, nearly 197,000 sq m asset located in

suburban Tempe from Sunbelt Holdings.

U.S. San Francisco Hotel Zelos San

Francisco

Hotel 132 The 202-key asset has been acquired by a HNWI from

JPMorgan Chase & Co.

U.S. Seattle-

Bellevue

Millennium Tower Office 120 Metzler Real Estate has sold the nearly 19,000 sq m

CBD property to TIAA.

46

Illustrative Office Occupational Transactions in Q4 2017

Europe

Country City Property Tenant Industry Sector Floorspace

sq m

France Paris Campus SFR SNCF Transport 43,000

France Paris Kosmo Parfums Christian Dior Manufacturing 24,000

France Paris Grand Central Pernod Ricard Manufacturing 18,000

France Paris Le Belvédère Regus/Spaces Real Estate 17,000

Germany Berlin Atrium Tower WeWork Business Services 12,900

Germany Frankfurt FBC Deutsche Bundesbank Banking & Financial Services 44,400

Germany Frankfurt Boulevard Mitte

& Europa-Allee:

Baufeld 42c Ost

& The Brick

Deutsche Bahn Transport 52,600

Russia Moscow Aquamarine Gazprombank Banking & Financial Services 43,000

Russia Moscow Oasis Gazprombank Banking & Financial Services 12,000

Russia Moscow Bolshevik VEON Telecommunications 17,000

UK London 1 Embassy

Gardens, SW8

Penguin Random House Media 7,863

UK London Nova South,

Victoria Street,

SW1

Vitol Utilities 4,459

UK London The Bard

Shoreditch, The

Stage, EC2

WeWork Business Services 12,590

UK London One Creechurch

Place, EC3

Hyperion Insurance Group Banking & Financial Services 10,768

47

Asia Pacific

Country City Property Tenant Industry Sector Floorspace

sq m

Australia Brisbane 310 Ann Street Allianz Banking &

Financial Services

8,024

Australia Melbourne One Melbourne

Quarter, Collins

Street

AMP Banking &

Financial Services

9,720

Australia Melbourne 130 Lonsdale

Street

CBUS Banking &

Financial Services

9,176

China Beijing Ericsson Building Zhonghuhang IT 16,320

China Shanghai China Overseas

International

Center, Tower B

WeWork Business Services 18,440

China Shanghai Crystal Plaza Covestro Manufacturing 7,100

Hong Kong Hong Kong Manulife Financial

Centre Tower B

China Merchants

Securities

Banking &

Financial Services

2,257

Hong Kong Hong Kong Two Exchange

Square

LGT Banking &

Financial Services

2,583

India Delhi Ambience

Corporate Tower,

NH-8

Amazon IT 7,200

India Mumbai Gigaplex B2, Airoli HERE ITES 10,300

Japan Tokyo* Shibuya Stream Google IT 46,000

Malaysia Kuala Lumpur Mercu 2, KL Eco

City

Gibraltar BSN Banking &

Financial Services

4,328

Singapore Singapore One Raffles Place

Tower 2

INTL Asia Business Services 770

Singapore Singapore Clifford Centre Bellerbys

Educational

Services

Business Services 428

South Korea Seoul Seoul Square WeWork Business Services 11,270

*JLL estimate

48

Americas

Country City Property Tenant Industry Sector Floorspace

sq m

Brazil São Paulo WTorre Morumbi -

Tower B

Unilever Brasil Consumer

Products

12,340

Brazil São Paulo São Paulo

Corporate Towers

- South Tower

XP Investimentos Banking &

Financial Services

12,145

Canada Edmonton CN Tower Alberta Health

Services

Public

Administration

12,657

Canada Montreal 1350 Réne-

Lévesque W

GWL Realty

Advisers

Real Estate 9,129

Canada Toronto 2440 Winston Park Geotab Logistics and

Distribution

8,217

Canada Vancouver The Bay WeWork Business Services 8,268

Mexico Mexico City Periférico Sur 4277 Grupo Salinas Media 19,355

Mexico Mexico City Torre Manacar MetLife Banking &

Financial Services

17,059

Mexico Mexico City ARTZ Towers II

and III

WeWork Business Services 12,660

U.S. Dallas The Campus at

Legacy West

NTT IT 21,623

U.S. Houston Westway II McDermott Engineering 17,369

U.S. New York 1 Manhattan West EY Business Services 56,141

U.S. New York 1100 Avenue of the

Americas

Bank of America Banking &

Financial Services

35,861

U.S. New York 1271 Avenue of the

Americas

Mizuho Banking &

Financial Services

25,084

U.S. New York 390 Madison

Avenue

Shiseido Manufacturing 20,979

U.S. New York One Liberty Plaza NYC Economic

Development

Corporation

Public

Administration

20,391

U.S. New York 150 5th Avenue Mastercard Banking &

Financial Services

19,742

U.S. San Francisco The Exchange Dropbox IT 69,793

U.S. San Francisco 100 1st Street Okta IT 19,237

U.S. Silicon Valley The Village at San

Antonio

WeWork Business Services 42,434

U.S. Washington, DC 2100 Pennsylvania

Ave NW

WilmerHale Legal Services 26,477

49

Global Real Estate Health Monitor

Definitions and Sources

Metro Area GDP: Change in Real GDP. Metropolitan Area Projection, 2018. Source: Oxford Economics

City Investment Volumes: Direct Commercial Real Estate Volumes. Metro Area Data. Rolling Annual Total in USD Billion. Source: JLL

City Investment Volumes Change: Direct Commercial Real Estate Volumes. Metro Area Data. Rolling Annual Change. Source: JLL

Capital Value Change: Notional Prime Office Capital Values. Year-on-Year Change. Latest Quarter. Source: JLL

Prime Yield: Indicative Yield on Prime/Grade-A Offices. Latest Quarter. Source: JLL

Yield Gap: Basis Points that Prime Office Yields are above or below 10-year Government Bond Yields. Latest Quarter. Source: JLL, Datastream

Rental Change: Prime Office Rents. Year-on-Year Change. Latest Quarter. Source: JLL

Net Absorption: Annual Net Absorption as % of Occupied Office Stock. Rolling Annual. Source: JLL

Vacancy Rate: Metro Area Office Vacancy Rate. Latest Quarter. Source: JLL

Supply Pipeline: Metro Area Office Completions (2018-2019) as % of Existing Stock. Source: JLL

COPYRIGHT © JONES LANG LASALLE IP, INC. 2018. All Rights Reserved 50

Jeremy Kelly

Director

Global Research

Jeremy.Kelly@eu.jll.com

Matthew McAuley

Senior Analyst

Global Research

Matthew.Mcauley@eu.jll.com

About JLL

JLL (NYSE: JLL) is a leading professional services firm that

specialises in real estate and investment management. A

Fortune 500 company, JLL helps real estate owners,

occupiers and investors achieve their business ambitions.

In 2016, JLL had revenue of $6.8 billion and fee revenue of

$5.8 billion and, on behalf of clients, managed 4.4 billion

square feet, or 409 million square meters, and completed

sales acquisitions and finance transactions of

approximately $136 billion. At year-end 2016, JLL had

nearly 300 corporate offices, operations in over 80

countries and a global workforce of more than 77,000. As

of December31, 2016, LaSalle Investment Management

has $60.1 billion of real estate under asset management.

JLL is the brand name, and a registered trademark, of

Jones Lang LaSalle Incorporated. For further information,

visit www.jll.com.

About JLL Research

JLL’s research team delivers intelligence, analysis and insight through market-leading reports and services that

illuminate today’s commercial real estate dynamics and identify tomorrow’s challenges and opportunities. Our more than 450 global research professionals track and

analyse economic and property trends and forecast future

conditions in over 60 countries, producing unrivalled local

and global perspectives. Our research and expertise,

fuelled by real-time information and innovative thinking

around the world, creates a competitive advantage for our

clients and drives successful strategies and optimal real

estate decisions.

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