Reworking Lease Expires

REWORKING EXPIRIES H1 2024 UPDATE

Grade A Office net absorption (msf) ONGOING ROBUST OFFICE DEMAND

Tier 1 Chinese mainland India Rest of APAC

• The demand for office space in Asia Pacific remains undiminished. In total there has been more than 128 million square feet (msf) of net absorption over the two years to Q2 2024. • The majority of demand is being experienced in Indian cities, which together account for 63% of total regional demand, equivalent to 81 msf. • After facing some headwinds in 2022 and 2023, office demand in tier 1 cities in the Chinese mainland appears to be recovering, with net absorption of almost 8 msf in H1 2024, which is over 70% of the full year total in 2023. • Office demand in the rest of the region is also positive, with Singapore, Brisbane and Ho Chi Minh City all showing relative strength.

35

30

25

20

4.8

15

3.0

10

3.2

11.6 9.4

6.3

5

3.7 4.2

2.2

-

-5

Source: Cushman & Wakefield

2

Most markets currently favour occupiers OFFICE OCCUPIER CONDITIONS

NORTH ASIA

Beijing

Seoul

Tokyo

Delhi NCR

Shanghai

Shenzhen

TENANT FAVOURABLE

Kolkata

GREATER CHINA

Ahmedabad

Guangzhou

Pune

Hong Kong

Hanoi

Mumbai

Hyderabad

NEUTRAL

Manila

Bangkok

Bengaluru

Chennai

Ho Chi Minh City

LANDLORD FAVOURABLE

Kuala Lumpur

SOUTHEAST ASIA

Singapore

Jakarta

AUSTRALIA/NEW ZEALAND

Brisbane

Perth

Adelaide

Sydney

Auckland

Melbourne

Christchurch

Source: Cushman & Wakefield

3

Proportion of markets experiencing rental growth, stability and decline (y-o-y) RENTAL GROWTH TO STRENGTHEN

100%

• Despite strong office demand across the region, rental growth has been comparatively muted. At the regional level, rents declined by 0.4% year-on year (y-o-y) in Q2 2025. Notwithstanding, 68% of the 25 markets covered showed positive, albeit mostly weak, rent growth in Q2 2024. • Rent growth has been consistently strongest in Brisbane, Hyderabad, Mumbai and Hanoi, which has ranged between 5% to 16% y-o-y over the past year. • In contrast, rents have been under downwards pressure in mainland China and Hong Kong in reflection of new supply coming to market at a time of weaker than average demand. • Similarly, there has also been negative rent growth in Manila and Bangkok over much of the past 18 months.

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Decline

Stable

Growth

Source: Cushman & Wakefield

4

INTRODUCING THE TERMINOLOGY

UNDER-RENTED

Where a tenant is paying below average market rents

• Whilst looking at movements in market rents is critical for occupiers, perhaps the most important aspect to track is the difference between the rent being paid, as per the lease terms, against the current market rental level. This will give occupiers a view on whether they have positive or negative rental exposure in the prevailing market conditions, which then prompts subsequent actions.

OVER-RENTED

Where a tenant is paying above average market rents

5

Over-rented versus Under-rented markets A WORKED EXAMPLE

SYDNEY

HO CHI MINH CITY

1,450,000

1,000 1,050 1,100 1,150 1,200 1,250 1,300

1,400,000

1,350,000

1,300,000

800 850 900 950

1,250,000

1,200,000

Lease Rent

Market Rent

Lease Rent

Market Rent

Outcome = Over-rented Lease rent 21% above market rent on expiry

Outcome = Under-rented Lease rent 8% below market rent on expiry

Source: Cushman & Wakefield

6

OVER-RENTING ACROSS MOST OF THE REGION

Level of over- or under-renting for leases expiring in Q2 2024

15%

Under-rented

10%

5%

0%

-5%

-10%

-15%

-20%

-25%

-30%

Over-rented

-35%

Source: Cushman & Wakefield

7

CONDITIONS CHANGE OVER TIME

Forecast levels of over- or under-renting for leases expiring in 2023-27

• It is important to continually monitor market conditions, especially the direction and amount of rental change. Current analysis (slide 7) shows that 76% of markets are currently over-rented, where lease rents are higher than market rents. • However, this shifts over time such that by 2026, only 60% of markets are over-rented. This should be a signal to tenants to examine their lease rents now while conditions are favourable. • Occupiers should also consider the year-to-year changes. The highest level of over-renting (biggest discount between market rents and leases) in Shanghai is occurring now. Similarly in Melbourne, the highest over-renting is now, though the market remains over-rented through to 2027. • In contrast, the level of under-renting in Singapore is forecast to increase over H2 2024, suggesting tenants with forthcoming leases expires should act sooner rather than later.

20%

Under-rented

10%

0%

-10%

-20%

-30%

Over-rented

-40%

Lease expiry period

Melbourne

Shanghai

Singapore

Source: Cushman & Wakefield

8

IDENTIFYING THE WINDOW OF OPPORTUNITY

Dec-23 Mar-24 Jun-24

Dec-24

Dec-25

Dec-26

Dec-27

Hanoi Ho Chi Minh City Singapore Brisbane Kuala Lumpur Seoul Tokyo

Jakarta Sydney

Bangkok Shanghai Hong Kong Manila Pune Hyderabad Manila Mumbai Bengaluru Guangzhou Beijing Shenzhen Kolkata NCR Melbourne Chennai Ahmedabad

Source: Cushman & Wakefield

Over-renting

Markets broadly in equilibrium

Under-renting

9

KEY MESSAGES

88% of markets (22 out of 25) are forecast to experience rental growth by the end of 2026.

Similarly, the level of under renting in Brisbane is forecast to rise dramatically reflecting strong market rental growth. Brisbane is forecast to become the most under-rented market by early 2026.

For South East Asian cities, especially Hanoi, Ho Chi Min City, Singapore and to a lesser extent Kuala Lumpur, arguably the best time to act has past, though gaps between market rents and lease rents will continue to grow suggesting there is some benefit in bringing forward negotiations. 76% of markets in Asia Pacific are currently over-rented, but this will decline through to 2027 as ongoing rental growth takes effect. This suggests there is a window of opportunity for occupiers to act on their lease expiries before markets start to shift.

In contrast, In India, significant annual rental escalations of 5% against forecast market rent rises of 2% to 3% mean that these markets are expected to remain over-rented.

For the remaining markets, varying levels of over renting are expected to endure. However, Sydney, Shanghai, Manila and Bangkok are forecast to become under-rented toward the end of the forecast horizon. Notwithstanding, all markets should be regularly assessed to identify opportunities to rethink lease strategy and perhaps reset rents where local conditions allow.

10

AUTHOR:

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

CONTACTS:

ANSHUL JAIN Head of Tenant Representation, Asia Pacific and CE India & SEA anshul.jain@cushwake.com

ARPITA SRIVASTAVA Head - Global Capability Centre Advisory & APAC Tenant Rep Advisory & Transactions arpita.srivastava@cushwake.com CHRIS CUFF Regional executive Director, Commercial Leasing chris.cuff@cushwake.com

MARK LAMPARD Managing Director, APAC Tenant Representation mark.lampard@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.