APAC Capital Markets Midyear Outlook 2024

MIDYEAR OUTLOOK 2024

01 THEN & NOW – THE CURRENT CYCLE

02 WHAT’S NEXT?

03 SIX POTENTIAL GAME CHANGERS

04 REGIONAL INVESTMENT THEMES

KEY MESSAGES

POTENTIAL GAME CHANGERS

INVESTMENT STRATEGIES

THE CURRENT CYCLE

WHAT’S NEXT?

• Rapid interest rate rises have applied the brakes to economic expansion, though growth remains positive across the region. • Demand for space in Asia Pacific remains strong – almost 400 msf of office space absorbed in the past 5 years. • Interest rate “shock” and structural change in some sectors has reduced CRE investment by 40%. However, recent trends show this has stabilised.

• Interest rate cuts are coming but the pace and magnitude will vary – expect fewer and slower cuts, at least in the near-term. • Significant dry-powder capital is waiting to be deployed. The key issue will be matching capital to available assets. • Longer-term growth drivers of the region remain intact – it is still “the decade of Asia Pacific”.

• Increasing geo-political fractionalization.

Core/Defensive: • Low supply / low vacancy CBD offices and key L&I submarkets. • Daily necessity assets including the living sector and essential retail. • Co-alignment on recapitalisations. Value Add / Opportunistic • “Urban assets” in high quality locations that need repositioning strategies. • “No cycle” sectors including health and self-storage. • Create vertically integrated platforms to attract institutional investment.

• Be mindful of government and household debt levels – keep an eye on any significant unwinding of labour markets. • Secular megatrends will drive growth in Alternative and “through the cycle” asset classes.

3

01 THEN & NOW – THE CURRENT CYCLE

INTEREST RATE HIKES HAVE SLOWED ECONOMIC GROWTH

INTEREST RATE MOVEMENTS SINCE DEC-19 (bps)

REAL AVERAGE ANNUAL GDP GROWTH

15%

-200 -150 -100 -50 0 50 200 250 300 350 400 450 500 100 150

US Euro UK

10%

India

Australia

Chinese mainland

5%

US

Australia

Japan Euro UK

0%

India

-5%

Japan

-10%

Chinese mainland

-15%

5

Source: Moody’s Analytics

OCCUPIER DEMAND HAS BEEN SUSTAINED

APAC Grade A office net absorption (msf) and total occupied Grade A office stock (bsf)*

140

2.0

1.9

120

1.8

10 13

100

1.7

1.6

80

6 6

36

1.5

60

1.4

13

41

1.3

40

20

57

1.2

52

20

1.1

25

23

1.0

0

2015

2016

2017

2018

2019

2020

2021

2022

2023 H1 2024

Greater China

India

SEA

Rest of APAC

Occupied stock (bsf) (RHS)

6

Source: Cushman & Wakefield (42 markets across Asia Pacific)

INVESTMENT HAS SLOWED BY 40% PEAK TO TROUGH

Rolling annual CRE investment volume (USD bn)

250

200

APAC 2015-19 average = $150bn

150

100

50

0

Chinese mainland

Japan

South Korea

Australia

Rest of APAC

7

Q2 2024 preliminary data subject to upward revision

Source: MSCI-RCA; Cushman & Wakefield

VOLUMES HAVE NOW STABLISED, OFFICES LIKELY IN Q2 2024

Rolling annual CRE investment volume by sector (USD bn)

300

250

200

103

150

51

28

100

47

31 25

27 23

50

66

36 38

-

Industrial

Retail

Alternatives

Office

8

Q2 2024 preliminary data subject to upward revision

Source: MSCI-RCA; Cushman & Wakefield

red denotes lowest annual volume

02 WHAT’S NEXT?

“LAST MILE” INFLATION SLOWLY COMING UNDER CONTROL

CPI growth (% y-o-y)

Peak

May-23 Dec-23

Jun-23 Jan-24

Jul-23

Aug-23 Mar-24

Sep-23 Apr-24

Oct-23 May-24

Estimated inflation target

Nov-23

Feb-24

14

12

10

8

6

4

2

0

-2

10

Source: Various Central Banks; Cushman & Wakefield

Central bank policy rates 2009-26 RATE CUTS ARE UNDERWAY – TIMINGS WILL VARY

6%

5%

Australia

4%

3%

United States

2%

Chinese mainland

South Korea

Euro Zone

1%

United Kingdom

Japan

0%

-1%

Australia

Chinese mainland

Japan

South Korea

US

Euro

UK

11

Source: Moody’s Analytics; Cushman & Wakefield

Average annual real GDP growth (May vintage forecast) RATE CUTS WILL DRIVE STRONGER GROWTH

ASIA PACIFIC

EURO AREA*

UNITED STATES*

-2.2%

2020

-1.2%

-5.5%

5.8%

2021

5.9%

5.3%

1.9%

2022

3.2%

3.5%

2.5%

2023

4.3%

0.7%

1.9%

2024

3.9%

0.9%

Normalisation of growth in APAC emerging markets; recovery in advanced economies.

1.1%

2025

3.9%

1.6%

12

Source: Moody’s Analytics; Cushman & Wakefield (* = Cushman & Wakefield in-house forecasts)

Fundraising and dry powder - APAC SIGNIFICANT CAPITAL WAITING TO BE DEPLOYED

FUNDRAISING DOWN, BUT NOT OUT

DRY POWDER MOUNTING

CAPITAL IS SEEKING YIELD

$80 bn

$10 bn $15 bn $20 bn $25 bn $30 bn $35 bn $40 bn $45 bn $50 bn

100 120 140 160 180 200

100%

$70 bn

80%

$60 bn

60%

$50 bn

0 20 40 60 80

$40 bn

40%

$30 bn

20%

$0 bn $5 bn

$20 bn

0%

$10 bn

2012

2018

2016

2014

2010

2022

2002

2020

2008

2006

2004

2000

64% Opportunistic + Debt + Value Add

$0 bn

2024 YTD

Opportunistic

Value Added Debt

Aggregate Capital Raised (USD BN) Average Fundraising (2017 - 2019) Number of Funds (RHS)

2011

2017

2012

2021

2015

2013

2018

2016

2019

2014

2001

2010

2022

2023

2007

2002

2020

2005

2003

2008

2006

2009

2004

2000

Core-Plus Distressed

Core

Fund of Funds

Co-Investment

Secondaries

2024 YTD

13

Source: Preqin (data through Q1 2024); Cushman & Wakefield

The Asia Pacific growth story LONGER TERM DRIVERS REMAIN INTACT

4 3 2 1

5 Seven of the top 10 most populated metropolitan cities globally

1 Largest and fastest growing region by GDP

1 Largest and fastest growing region of middle-class consumers 75% of all new office jobs globally 8 7 6 World’s largest e-commerce market

Largest growing region by population

Rapid urbanisation across China, India and parts of Southeast Asia

Three of the world’s four largest economies by 2030

14

Source: United Nations; Moody’s Analytics; Brookings Institute; E-marketer; Cushman & Wakefield

03 SIX POTENTIAL GAME CHANGERS

SIX THINGS THAT COULD CHANGE EVERYTHING

#1 THE NEXT 20 YEARS WILL BE DIFFERENT TO THE LAST 20

#2 THE GEOPOLITICAL ENVIRONMENT IS FRACTURED

#3 THERE IS POTENTIAL FOR A DEBT CRISIS

16

GOVERNMENTS AND HOUSEHOLDS ARE HEAVILY INDEBTED

% of Debt to GDP

CENTRAL GOVERNMENT

HOUSEHOLDS

250

140

120

200

100

150

80

60

100

40

50

20

0

0

Australia Japan South Korea U.K.

U.S.

Australia Japan South Korea U.K.

U.S.

17

Source: IMF; Cushman & Wakefield

SIX THINGS THAT COULD CHANGE EVERYTHING

#1 THE NEXT 20 YEARS WILL BE DIFFERENT TO THE LAST 20 #4 OPPORTUNITIES ABOUND IN SECULAR GROWTH ASSETS

#2 THE GEOPOLITICAL ENVIRONMENT IS FRACTURED

#3 THERE IS POTENTIAL FOR A DEBT CRISIS

#5 THE FUTURE OF AI IS LIMITLESS

#6 THE TIME TO ACT IS NOW

18

HISTORY TELLS US THE TIME TO ACT IS NOW

7

120

Fed cuts

+130%

6

100

FED CUTS

Fed cuts

5

80

+200%

4

+26%

60

3

40

2

+86%

20

1

0

0

2011Q1

2017Q1

2012Q1

2021Q1

2015Q1

2013Q1

1999Q1

2018Q1

2016Q1

2019Q1

2014Q1

2001Q1

2010Q1

2027Q1

2022Q1

2025Q1

2023Q1

2028Q1

2026Q1

2024Q1

2007Q1

2002Q1

2020Q1

2005Q1

2003Q1

2008Q1

2006Q1

2009Q1

2004Q1

2000Q1

Fed Funds Rate (%)

C&W All-Property Value Index (21Q4 = 100, RHS)

APAC All-Property CPPI (21Q4 = 100, RHS)

19

Source: Federal Reserve, MSCI-RCA; Cushman & Wakefield

04 REGIONAL INVESTMENT THEMES

Defensive / Core STRATEGIC RECOMMENDATIONS

MAJOR SECTORS

ALTERNATIVE SECTORS

INVESTMENT STYLE

Low supply / low vacancy CBD office and key L&I sub-markets

Recapitalisations of co-aligned investment platforms

Data centres in mature markets

Non-discretionary retail such as neighbourhood centres

Living sector – BTR, PBSA, Aged Care

ESG-linked loans / green financing

21

Value Add / Opportunistic STRATEGIC RECOMMENDATIONS

MAJOR SECTORS

ALTERNATIVE SECTORS

INVESTMENT STYLE

Reposition low ESG office assets in high amenity locations

Develop vertically integrated platforms to attract institutional capital

“Through the cycle” sectors

Position portfolios for rising tide of capital

Infill L&I (re)development

Self-storage

Positive rental reversion assets

Hospitality / leisure assets

22

AUTHOR:

DR. DOMINIC BROWN Head of International Research dominic.brown@cushwake.com

CONTACTS:

CATHERINE CHEN Director, Business Development Services, Capital Markets, Asia Pacific catherine.chen@cushwake.com

GORDON MARSDEN Head of Capital Markets, Asia Pacific gordon.marsden@cushwake.com

About Cushman & Wakefield Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in nearly 400 offices and 60 countries. In 2023, the firm reported revenue of $9.5 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), sustainability and more. For additional information, visit www.cushmanwakefield.com.