• The Hertsmere is a 74-storey residential development opportunity designed by Squire and Partners and featuring luxury apartments and penthouses.
• The development includes 511,000 sq ft (47,491 sqm) of residential and 47,600 sq ft (4,423.8 sqm) of ancillary retail and reisure uses.
• Scheduled to open at the same time as the new Canary Wharf Cross Rail station in 2018, the Hertsmere will provide a new benchmark of accommodation for Canary Wharf.
• A funding partner is sought to participate in the development of this hugely exciting new landmark.

Should you wish to receive more information on this investment opportunity, please contact us at acm@ap.jll.com

Operating a building to its highest potential performance means knowing which elements are being efficiently managed, understanding where improvements need to be made, and aligning operational and capital expenditure programs to achieve optimum cost efficiency. But to optimise your building’s operations, you first need total control over the vast quantities of energy and emissions data from your property or space.

A new proprietary service platform called the Energy and Sustainability Platform (ESP), developed and implemented by Jones Lang LaSalle’s Energy and Sustainability Services (ESS) team, has been helping investors unlock their real estate potential by discovering a better understanding of the details underpinning their building performance. Currently in use at over 20,000 commercial sites across Asia Pacific, the ESP has been proven to save up to 30% on energy and emissions costs.

The ESP combines a robust metering platform with a web-based solution to validate and centralise your building’s energy and emissions data. It then sorts and arranges the data into interactive displays and reports that clarify trends and reveal areas for improvement.

For more advanced analysis, the ESS team provides ongoing reviews and directions to help in refining the commissioning process, and extract maximum operational performance.

Learn more on www.ap.joneslanglasalle.com/asiapacific/en-gb/pages/energy-and-sustainability-platform.aspx

THE ECONOMY IN 2013
India’s economic environment will certainly improve in 2013, with a corresponding (although lagging) gain in momentum for real estate. As per the Reserve Bank of India (RBI), the policies will focus towards growth in 2013, although risks of inflation will continue to remain. Interest rates are expected to witness a downward correction of 100-150 bps in 2013. The softening of interest rates is expected to reduce the home loan rates, in turn increasing the buying of real estate assets. Increasing urbanisation and consumption despite the slowdown in GDP growth will be the key drivers of the economy in 2013.

RESIDENTIAL REAL ESTATE IN 2013
Residential property prices have breached affordability limits in cities such as Mumbai. Nevertheless, developers will have to factor in the ground realities of the business and at the same time debate the lowering of prices to catalyse sales in 2013. We are likely to see drastic trimming of frills in projects to make them more marketable from a pricing point of view and innovative payment schemes. Developers will also offer buyers attractive pre-launch benefits in a bid to accelerate sales momentum in the initial months following a launch.

Although most of the cities of India will see an increase in residential launches in 2013, the southern cities of Bangalore and Chennai will witness a decline in launches as compared to 2012 YTD (year to date). It is important to note that these two cities recorded a historical high in terms of the number of launches during 2012.

COMMERCIAL REAL ESTATE IN 2013
The fact that the major cities of Mumbai, NCR-Delhi, Bangalore and Chennai saw 72.5% of the total commercial real estate absorption in 2012 is a telling one, and indicates the forward path. These cities will grab the lion’s share of contribution in total commercial property absorption in 2013, certainly within the range of 74-76%. In terms of commercial real estate investment potential, we expect investor-driven demand to also remain upbeat in Chennai, Hyderabad and Pune.

We expect 2013 to bring a larger-than-usual number of non-resident Indian (NRI) investors into the commercial property arena. This is because NRIs are currently enthused by the prevailing exchange rate benefits and the fact that commercial real estate capital values are still 15-25% under their 2007-2008 peak levels.

RETAIL REAL ESTATE IN 2013
Altogether, India’s major cities such as Mumbai, NCR-Delhi, Bangalore, Chennai, Pune, Hyderabad and Kolkata will see the addition of close to 9.5 million sq ft (882,899.63 sqm) of organised retail real estate in 2013. Mumbai, NCR-Delhi, Bangalore and Chennai will together contribute 70% of the total retail space absorption. Other cities such as Pune, Hyderabad and Kolkata will account for the remaining 30%.

The government’s nod to FDI in multi-brand retail will be a major driving factor for increased activity in 2013. Because the policy opens the portals to major MNC retail brands in India, the absorption of retail space is forecast to touch 6.8 million sq ft (631,970 sqm) and 7.1 million sq ft (659,851 sqm) in 2013 and 2014, respectively.

POLICY
In addition to the easing of FDI into multi-brand retail, the power exchange and civil aviation (as well as broadcasting) sectors have been permitted FDI in a bid to improve efficiency and productivity. In a time when liquidity is down, and the performance of various sectors deteriorating, a shot in the arm for power and aviation will have positive (albeit only over the long term) ramifications on the real estate sector, as well.

The Direct Tax Code (DTC), a major evolutionary step in the country’s taxation system, will change the entire financial landscape of India. Whilst implementation of the DTC has been deferred from 2014 to 2015, occupiers will have more time to capitalise on their expansion decisions whilst carefully negotiating with developers. The delay has also resulted in a good portion of office space demand for IT special economic zones (SEZs) to spill over from 2013 to 2014.

Grant Thornton, the receiver of the owner, Peninsula Road Ltd, has put the stages two and three of the Kawarau development land on the market, with Jones Lang LaSalle appointed to market the sale.

Nick Hargreaves, Managing Director at Jones Lang LaSalle New Zealand, said “Queenstown is a world-class destination and is now one of the most positive property markets in New Zealand with strong market dynamics. Owing to good tourist numbers, increasing population and a tightly held CBD where property values have recovered strongly, Kawarau Falls Station is a rare opportunity.”

Surrounded by the rocky Southern Alps, this site is situated five minutes’ drive from Queenstown International Airport, Remarkables Park Shopping Centre and Kelvin Heights, while Jacks Point Golf Course and Remarkables Ski Field are also a short distance away.

Kawarau Falls Station is the only large, fully zoned and consented, north facing, waterfront site in Queenstown. Consisting of approximately 4 ha of serviced land, it sits right on the water’s edge with superb views of the lake and Coronet Peak. The site also boasts a north-facing aspect on the lake that allows it to receive sun all day and protects it from all prevailing winds.

The site has the added attraction of being immediately adjacent to the outstanding stage one development of the Kawarau Falls, which comprises six residential apartments and hotel buildings, including the five-star Hilton Hotel.

There are three sections to the subject site, comprising 430,000 sq ft (39,966 sqm) and offering a wide range of development opportunities. The subject site is a fully zoned area with ‘Consent for the Master Plan’ that remains valid until June 2016, but it can be extended because almost 40% of the consent has now been fully implemented. Alternatively, a new consent could take advantage of the existing high-density residential zoning.

“The fact that the site is zoned recognises that there is a need to provide for high-density accommodation to ensure suitable housing for residents and for visitors close to Queenstown and Frankton. Visitor accommodation has been acknowledged in the zone to protect the important contribution it makes to the economic and social well-being of the community,” Nick adds.

Should you wish to receive more information on this investment opportunity, please contact us at acm@ap.jll.com

To date, the Australia team has sold over USD 210.3 million (AUD 203.3 million) worth of 7-Eleven stores as part of a sale program by 7-Eleven Australia. The ten new properties were put up for auction as part of a sale program by 7-Eleven, which also allows the convenience retailer to continue to occupy the properties under 15-year leases with 3×5 year options.

These properties represented the sixth tranche of this sale program and represented an overall average yield of 6.9%. The sale offered the opportunity to acquire high-profile assets with strong underlying land value and providing excellent compounding rental growth.

Interest from investors in convenience stores has been high in the last two years, especially from self-managed super fund users and self-funded retirees looking for a secure rental stream and a reliable, long-term tenant. This is further established by the fact that there were four sell-out auctions in a row.

Overall, the Asia Pacific economy weathered last year’s global challenges pretty well, with regional growth of almost 5% across markets albeit with mixed results. Generally, robust domestic sectors helped to offset weakness on the export side.

China expected to lead regional growth again
China’s 4Q12 GDP result of 7.9% y-o-y alleviated concerns of a hard landing, with export growth, industrial production and retail sales starting to improve. Following interest rate cuts earlier in 2012, residential prices across China were generally stable. China is expected to lead the region again with 8% growth in 2013, driven largely by strong consumer spending and stabilising external demand.

…whilst India’s growth likely to remain below trend
India’s GDP growth came in at around 5.0% for 2012, the weakest result since 2009. The government’s recent reforms including allowing FDI in multibrand retail have bolstered confidence in recent months and should help to underpin stronger investment spending. Growth is expected to strengthen to 6.0% in 2013, a moderate improvement, although it is still below trend.

Japan’s growth to weaken
The Japanese economy continues to lose momentum, with real GDP expanding by a tepid 0.3% y-o-y in 4Q12. Exports and retail sales have been lacklustre, although the latter partly due to the phasing out of car purchase subsidies. Economic growth is expected to remain low at 0.4% this year, despite a stimulus package of more than JPY 20 trillion (USD 21 trillion) in January.

…and Australia also likely to moderate
Australia’s GDP growth slowed to 3.1% y-o-y in 3Q12 because of weaker consumer spending, although mining-related investment remained strong and employment conditions have been relatively steady in recent months. Growth is expected to slow to 2.3% in 2013 due to more subdued mining investment and consumer spending.

Brighter prospects for Hong Kong
In 3Q12, real GDP growth expanded by a modest 1.3% y-o-y mainly because of slower consumer spending. GI estimates growth of just 1.6% for 2012, the lowest since 2009, but strengthening to 3.7% in 2013 on the back of slightly more buoyant consumer spending and stabilising external demand.

…as well as Singapore
Real GDP grew by 1.5% y-o-y in 4Q12, with weakness in the manufacturing sector continuing to weigh down on the economy. GDP growth is expected to improve to about 2.3% in 2013, as exports strengthen over the course of the year whilst consumer spending remains relatively stable.

…but no major pick-up for South Korea
Real GDP grew by 1.5% y-o-y in 4Q12 as slightly higher export growth helped to offset subdued domestic demand. Despite stronger export growth projected, economic growth is set to remain at around 2% this year due to weaker domestic spending.

Indonesia remains resilient
Indonesia continues to be a regional bright spot, buoyed by its strong domestic economy. Steady growth of around 6% is projected for 2013, supported by buoyant consumer and investment spending.

More monetary policy loosening likely
Inflation has been trending lower in most economies in recent months, which could provide scope for further interest rate cuts. Just over half of all Asia Pacific countries cut interest rates in 2012, with India easing again in January. More government support measures are likely across the region this year (albeit at a measured pace), although tightening measures in residential markets should remain in place at least until 2014.

Regional growth to strengthen by mid-2013
2013 has got off to a more optimistic start globally and barring any major shocks, the Asia Pacific economy is set to grow by another 4%–5% this year, 2.5 times faster than the rest of the world. Export demand from the United States and Europe is projected to gradually strengthen after mid-2013. The domestic sector remains relatively strong in most countries, supported by low unemployment rates, strong investment spending and government support measures.

Slow office leasing activity
In 4Q12, Grade A office supply additions in Tier I markets were largely unchanged y-o-y at 1.3 million sqm (14 million sq ft), with around half of the supply added in China and India. For 2012 as a whole, a total of 5 million sqm (54 million sq ft) was completed, a decline of 15% y-o-y.

For the quarter, aggregate net absorption fell by 25% y-o-y to 1 million sqm (11 million sq ft), with China and India accounting for 50% of the total. Expansion demand remained subdued on the back of corporate caution. Returning space arose on a small scale in Hong Kong and Singapore because of ongoing financial sector contraction. Expansion by MNCs remained slow in both China and India. Generally steady take-up was seen in North Asia and emerging South-East Asia (SEA), with strong expansion demand in Jakarta. Most Australian markets recorded limited or negative net absorption on the back of corporate cost savings.

Occupiers more resistant to higher rents
Net effective rents grew more slowly in some markets and fell in more markets across the region in 4Q12, as corporate occupiers have become increasingly reluctant to pay high rents. For 2012 as a whole, the strongest performers were Jakarta (growth of 36.5% y-o-y) and Beijing (20.2% y-o-y), with vacancy at low levels in both markets. However, in 4Q12, rents in Beijing edged lower (-0.1% q-o-q) for the first time since 4Q09. Likewise, some landlords in the Shanghai (Puxi) CBD also slightly lowered rents in order to attract quality tenants. Rents in Tokyo held flat after rising for two straight quarters, because of tenant resistance to higher rents. Average rents in India remained mostly flat.

Rents declined further in Singapore (-2.5% q-o-q) and Hong Kong (-1.8% q-o-q) as landlords at the top end of the market have remained under pressure. These markets registered the biggest rental declines of about 10% for the year (and around 15% cumulatively since the last peak). In Australia, rents were generally flat or fell by 1%–2% q-o-q in most cities, and on an annual basis, the largest fall was 2% in Melbourne.

Moderate rental growth this year
At this stage, we expect that overall net take-up of office space in 2013 will remain at similar levels to last year with the potential for upside as and when the global economy strengthens. Over the short term, rental growth is likely to be limited in most markets, whilst Hong Kong and Singapore should see further moderate declines. Rents are expected to edge lower in a few Australian cities, including Melbourne and Brisbane. Single-digit growth is generally expected for the year, with rents in Hong Kong and Singapore starting to recover in 2H13 and the biggest uplift likely to be seen in Jakarta.

Retailer demand remains resilient
In 2012, the retail sector remained relatively resilient across the region, with Greater China in particular buoyed by the ongoing expansion of international retailers. Rental growth continued at a moderate pace in 4Q12 (0.5%–4% q-o-q), with the exceptions of Australia, Singapore and India, which witnessed mostly flat rents in relatively challenging conditions. Rental growth was generally the strongest in Greater China, with rents in Beijing rising 3.8% q-o-q (8.7% y-o-y), although rental growth in prime malls in Hong Kong eased to 2.1% q-o-q (12.5% y-o-y). For 2013, retailer demand for space is likely to remain relatively strong in most locations, and most markets are expected to see a further upswing in rents, albeit moderate.

Residential leasing demand in line with office sector
In 4Q12, high-end leasing demand remained subdued in Hong Kong and Singapore but stayed generally healthy in China and emerging SEA markets. Rentals continued to rise, by up to 4% q-o-q in most markets outside of Hong Kong. In 2013, residential take-up is likely to be generally in line with trends in the office sector, with mostly flat rents or small increases in most markets.

Industrial demand underpinned by retail sales
Retail sales continued to drive leasing demand in 4Q12, although the export-related segment was slightly more buoyant than 3Q12, with recent Purchasing Managers Index (PMI) reports for many Asia Pacific countries indicating that the manufacturing sector is starting to stabilise. Rental growth in the monitored markets eased slightly to 1%–3% q-o-q, with the largest q-o-q growth seen in Hong Kong (2.7% q-o-q and 9.9% y-o-y). Moderate rental growth is projected for most centres this year.

Stable investment volumes in 2012
Direct commercial real estate investment activity totalled USD 23 billion in 4Q12. For the full year, investment volumes totalled USD 95 billion, marginally down on the 2011 figure of USD 98 billion. Japan retained top investment spot, whilst Australia moved into second place ahead of China. Local investors accounted for 80% of the acquisitions. Australia led the way in attracting foreign capital (USD 6.5 billion/AUD 6.3 billion). We predict that investment volumes will grow by a healthy 10%–15% in 2013, partly driven by increased cross-border activity including acquisitions by pension and sovereign wealth funds.

In 2012, office capital values increased across the board, including Hong Kong and Singapore where they edged up by 1%–2% despite ongoing rental correction. Jakarta office witnessed the largest q-o-q and y-o-y increases (9.4% and 44.6%, respectively).

Further yield compression in 2013
Corporates in the region are feeling more optimistic, although this may not translate into expansion demand early on this year. In most markets and sectors, rents and capital values should continue to increase in 2013, but with growth rates typically less than 10%. The increased weight of money into commercial property should see further mild yield compression with capital values increasing faster than rents. The office and retail sectors should generally deliver higher returns than the residential sector, which is likely to see continued policy restrictions in various markets.

Stuart Crow, Head of Asia Pacific Capital Markets, Jones Lang LaSalle, said: “Investment levels in Asia Pacific in 2012 remained strong, although it slowed a little during the middle of the year because of the Euro debt crisis and the fiscal cliff concerns.  Activity returned strongly towards the end of the year, and we see this flowing into 2013.”

Jones Lang LaSalle is forecasting that volumes in the Asia Pacific region could increase to USD 110 billion in 2013, a y-o-y growth rate of 16% over 2012.

Crow added: “We are expecting to see higher transaction volumes this year, driven largely by the strength of the listed real estate markets, the continued low interest rate environment and the very noticeable return of large global investors to the region. We see numerous new investors targeting the region and a fresh wave of groups who are looking to move higher up the risk curve.”

Volumes globally in the final quarter of 2012 stood at USD 147 billion, which was the highest quarterly volume since 4Q07, when almost USD 160 billion was traded. It was also 24% higher than 4Q11. Much of this boost came from the United States, which saw transaction volumes up 44% q-o-q and up 60% y-o-y. US investors also increased their overseas activity in 2012, with a 26% increase over 2011.

Alistair Meadows, Director, International Capital Group Asia Pacific, said: “Inflows into Europe continued to dominate the capital moving around the globe in 2012. We saw net investment into Europe up 36%, which was due in part to an 80% increase from investors in Asia Pacific taking advantage of opportunities. These opportunities have been created by attractive assets coming onto the market as investors who bought in 2008 and 2009 are choosing to capitalise on value gains, as well as some distressed properties becoming available.”

“We expect Chinese offshore investment to become one of the major sources of new capital this year and beyond, as insurance companies are now allowed to invest in overseas real estate, having not been able to previously,” Meadows said.

Meadows added: “We are forecasting global volumes will reach between USD 450-500 billion in 2013 because of the increased levels of equity, coupled with a strategic reallocation to real estate by institutional investors.”

However, it is not just sun-seekers that the Maldives is attracting. At a time when the global financial crisis continues to be felt across the world, the country has also caught the attention of the investment community, in particular Asian buyers. Approximately USD 200 million in transactions has taken place in the last 12 months through three open-market purchases by Asian investors. The most recent, CDL Hospitality Trust’s acquisition of Angsana Velavaru under a sale-and-leaseback structure was the first of its kind in the Maldives and the first foray by an Asian Real Estate Investment Trust into the country. The Maldives’ allure to a sophisticated, institutional buyer is testament to its evolution into a gateway investment destination similar in stature to the resort markets of Phuket and Bali.

What is it then that is luring investors to the Maldives?

Firstly, the country enjoys positive demand and supply fundamentals. Current bed capacity is forecasted to increase by about 12% between 2012 and 2015 but over the same period arrivals are expected to grow by some 27% to 1.24 million. This demand and supply imbalance will thrust rate and occupancy growth in a market that is already one of the highest RevPAR markets in the world.

Secondly, the Maldives is foreign investor friendly and enjoys a transparent policy-making environment. There are generous incentives in place for foreigners including full ownership rights, legally-backed investment guarantees, long-term leases of land and ability to fully repatriate profits.  A good example of the government’s proactive policy-making can be seen in the evolution of island leases. These have been successively extended from 21 years to 25, 35 and, most recently, to 50 years. At the same time island rent assessments have been standardised and made transparent across the board based on land areas. Such developments, and an expectation that leases will be further prolonged, are helping boost demand from an ever-growing investor base.

Thirdly, Maldives’ ‘One Island, One Resort’ proposition is truly unique and presents significant income opportunities. With an average length of stay of around 6.7 nights and virtually a 100% capture rate, resorts have an unrivalled opportunity to maximise revenue per occupied room from guests across all operating departments. Such potential, coupled with a high RevPAR, offsets a comparatively higher cost base, particularly in undistributed expenses. As a result, resorts in the Maldives typically achieve healthy gross operating profit margins of up to 50%.

Ultimately the Maldives draws interest because it offers attractive returns, underpinned by its mix of healthy trading fundamentals and positive outlook. Coupled with availability of debt through a number of funding sources, leveraged returns on well-executed deals can comfortably reach mid-to-high-teens – an attractive proposition under the present investment market context.

Notwithstanding its positive attributes, the Maldives has also had its fair share of challenges – September 2011 attacks, 2004 Indian Ocean tsunami and political disorder in 2012 have all had an impact on its tourism industry. In each instance, however, the country has bounced back stronger and become more resilient.

On the back of investor-friendly policies, sound tourism fundamentals and enticing returns, the Maldives will continue to lure investors and attract new capital sources seeking the sunny side of investment.

Six other cities in Asia Pacific also saw the cost of office space increase by over 5%: Bangkok (+9.2%), Bangalore (+6.9%); Auckland and Chennai (+6.8%); and Perth and Brisbane (+5.6%). In contrast, 11 of the monitored cities saw a decline in rents in 2012, with the steepest falls in the financial centres of Hong Kong and Singapore, down 11.1% and 9.8%, respectively, as well as in Vietnam, where rents in Ho Chi Minh City and Hanoi declined 11.1% and 7.5%, respectively.

Dr. Jane Murray, Head of Asia Pacific Research, Jones Lang LaSalle, said: “The office market, in general, continues to favour landlords, although corporate occupiers have become increasingly reluctant to pay high rents. Over the short term, rental growth will probably be limited in most markets, whilst Hong Kong and Singapore should see further moderate declines, and rents are expected to edge lower in a few Australian cities, including Melbourne and Brisbane.”

Looking ahead, she added: “Single-digit growth is generally expected for the year, with rents in Hong Kong and Singapore starting to recover in 2H13, and the biggest uplift still likely to be seen in Jakarta. Once again, we expect further mild yield compression this year, with capital values increasing faster than rents in many markets, supported by solid investor interest in the Asia Pacific region.”

Todd Lauchlan, Country Head of Jones Lang LaSalle Indonesia, said: “Rental growth in Jakarta continues to be driven by a lack of quality space and the strong demand from corporates. The majority of the demand is from international companies that are expanding aggressively to cater to the demands of Indonesia’s rapidly expanding consumer base. We are also seeing significant take-up of space from Indonesian companies within owner occupied and strata titled buildings as they start to become a force in Jakarta’s office market.”