MARKETVIEW Capital values hold firm in a challenging year Australia Office, Q4 2020 Q4 2020 CBRE Research 2020 CBRE, Inc. | 1 -5.2% p.a. *Arrows indicate change from previous period Figure 1: CBD Office Prime and Secondary Capital Value (CV), Net Effective Rent (NER) Annual Growth 12 9 Key Points Improved business sentiment will continue to support the expected rebound in Q4, but the outlook remains challenging Prime face rents held steady across the board, except for Brisbane the only CBD market to record a decline Incentives have risen in most markets with Brisbane and Melbourne recorded largest q/q increase in both prime and secondary Vacancy is rising across all markets with vacancy spread between prime and secondary expected to increase in the near term Leasing volumes remained subdued with the majority in the sub500sqm office space Sales volumes up to Q4 were $9.8 billion across 117 transactions with the majority in Sydney Prime yields remained relatively stable whilst secondary yields soften marginally -40% 5.0% IN RECOVERY BUT CHALLENGES REMAIN Source: CBRE Research AUSTRALIA OFFICE -20% -10% 0% 10% 20% CV NER CV NER CV NER CV NER CV NER CV NER CV NER CV NER CV NER CV NER CV NER CV NER SYD MEL BNE PER ADE CAN SYD MEL BNE PER ADE CAN Ann ual G row th Last 5 years 2020 MARKETVIEW VACANCY SPREAD BETWEEN ASSET GRADE INCREASING 2020 CBRE, Inc. | 2 AUSTRALIA OFFICE Figure 2: Secondary vacancy spread from prime vacancy Source: CBRE Research Figure 3: Australia Office Transaction Volume, Q4 2020 Q4 2020 CBRE Research PRICING HOLDING UP AT THE TOP END AS OFFSHORE INVESTORS SWOOP 0 50 100 150 200 250 300 0 5,000 10,000 15,000 20,000 25,000 30,000 20 15 20 16 20 17 20 18 20 19 20 20 Sa le (# ) Pri ce ($m ) Domestic - Sales Volume Foreign - Sales Volume Domestic - Number of Transactions Foreign - Number of Transactions 0% 2% 4% 6% 8% 10% 12% 14% 16% Sy dn ey Melb ou rne Bri sb an e Pe rth Ad ela ide Ca nb err a Va ca nc y sp rea d (p pts) Last 10 years Current Next 5 years MARKETVIEW 2020 CBRE, Inc. | 3 State State Final Demand, Q3 Y-o-Y growth (%) CBD White Collar Employment, Q3Y-o-Y growth (%) Unemployment RateNov-20 New South Wales -3.3% -5.3% 6.5% Victoria -9.8% -9.1% 7.1% Queensland 0.7% -3.8% 7.7% Western Australia -0.7% -1.4% 6.4% South Australia -0.8% -2.4% 6.2% Australian Capital Territory 3.6% 5.2% 4.0% Table 1: Economic Indicators Legend V Total Market Vacancy (Q4-20)* PR Prime Net Face Rent (Q4-20) PY Prime Yield (Q4-20) *Total market vacancy are CBRE estimated only. Arrows indicate 2021 calendar year forecast Australia CBD Office Key Market Indicators & Forecast Direction Q4 2020 V 19.3% PR $607 PY 6.3% Perth CBD V 14.0% PR $432 PY 6.75% Adelaide CBD V 8.2% PR $648 PY 4.8% Melbourne CBD V 11.4% PR $441 PY 5.6% Canberra V 8.7% PR $1,264 PY 4.6% Sydney CBD V 13.9% PR $660 PY 5.3% Brisbane CBD Source: ABS, Deloitte Access Economics, CBRE Research *Arrows indicate change from previous quarter and month for unemployment rate AUSTRALIA OFFICE V 5.6 PR $438 .7% Q4 2020 CBRE Research MARKETVIEW 2020 CBRE, Inc. | 4 AUSTRALIA OFFICE Q4 2020 CBRE Research MARKETVIEW AUSTRALIA OFFICE 2020 CBRE, Inc. Figure 4: Australia CBD Net Supply Forecast Figure 5: Australia CBD Net Absorption Forecast Figure 6: Australia CBD Vacancy Forecast Figure 7: Australia CBD Prime Net Face Rents Forecast Q4 2020 CBRE Research -200,000 -100,000 0 100,000 200,000 300,000 400,000 500,000 600,000 20 17 20 18 20 19 20 20 20 21 20 22 20 23 Net Su pp ly (sq m) Sydney Melbourne Brisbane Adelaide Perth Canberra (200,000) (100,000) 0 100,000 200,000 300,000 400,000 500,000 20 17 20 18 20 19 20 20 20 21 20 22 20 23 Net A bso rpt ion (sq m) Sydney Melbourne Brisbane Adelaide Perth Canberra 0% 5% 10% 15% 20% 25% 20 17 20 18 20 19 20 20 20 21 20 22 20 23 Va ca nc y (% ) Sydney Melbourne Brisbane Adelaide Perth Canberra 0 200 400 600 800 1,000 1,200 1,400 20 17 20 18 20 19 20 20 20 21 20 22 20 23 Net Fa ce Rent ($ /sq m) Sydney Melbourne Brisbane Adelaide Perth Canberra Figure 8: Australia CBD Prime Net Effective Rent Annual Growth -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% Sy dn ey Melb ou rne Bri sb an e Ad ela ide Perth Ca nb err a An nu al Gr ow th (% ) 2017 2018 2019 2020 2021 2022 2023 Figure 9: Australia CBD Prime Yield Forecast 3% 4% 5% 6% 7% 8% 20 17 20 18 20 19 20 20 20 21 20 22 20 23 Yield (% ) Sydney Melbourne Brisbane Adelaide Perth Canberra Source: CBRE Research, Q4 2020 MARKETVIEW AUSTRALIA OFFICE 2020 CBRE, Inc. Figure 10: Sydney Net Supply Forecast Figure 11: Melbourne Net Supply Forecast Figure 12: Sydney Vacancy Forecast Figure 13: Melbourne Vacancy Forecast Q4 2020 CBRE Research -100,000 -50,000 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 20 17 20 18 20 19 20 20 20 21 20 22 20 23 Net Su pp ly (sq m) Sydney CBD North Sydney Chatswood St Leonards Macquarie Park Parramatta 0 200 400 600 800 1,000 1,200 1,400 20 17 20 18 20 19 20 20 20 21 20 22 20 23 Net Fa ce Rent ($ /sq m) Sydney CBD North Sydney Chatswood St Leonards Macquarie Park Parramatta Figure 14: Sydney Prime Net Face Rent Forecast Figure 15: Melbourne Prime Net Face Rents Forecast 0% 2% 4% 6% 8% 10% 12% 14% Sy dn ey C BD No rth Sy dn ey Ch atsw oo d St Le on ard s Ma cq ua rie Pa rk Pa rra ma tta Va ca nc y (% ) Dec-20 Dec-23 Long-term Average -100,000 -50,000 0 50,000 100,000 150,000 200,000 250,000 300,000 20 17 20 18 20 19 20 20 20 21 20 22 20 23 Net Su pp ly (sq m) Melbourne CBD Southbank St Kilda Road 0% 2% 4% 6% 8% 10% 12% Melb ou rne CB D So uth ba nk St Kil da Ro ad Va ca nc y (% ) Dec-20 Dec-23 Long-term Average 0 100 200 300 400 500 600 700 800 20 17 20 18 20 19 20 20 20 21 20 22 20 23 Net Fa ce Rent ($ /sq m) Melbourne CBD Southbank St Kilda Road Source: CBRE Research, Q4 2020 MARKETVIEW AUSTRALIA OFFICE 2020 CBRE, Inc. Figure 16: Brisbane Net Supply Forecast Figure 17: Perth Net Supply Forecast Figure 18: Brisbane Vacancy Forecast Figure 19: Perth Vacancy Forecast Q4 2020 CBRE Research -60,000 -40,000 -20,000 0 20,000 40,000 60,000 80,000 100,000 20 17 20 18 20 19 20 20 20 21 20 22 20 23 Net Su pp ly (sq m) Brisbane CBD Brisbane Near City 0 100 200 300 400 500 600 700 800 20 17 20 18 20 19 20 20 20 21 20 22 20 23 Net Fa ce Rent ($ /sq m) Brisbane CBD Brisbane Near City Figure 20: Brisbane Prime Net Face Rent Forecast Figure 21: Perth Prime Net Face Rents Forecast 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Brisbane CBD Brisbane Near City Va ca nc y (% ) Dec-20 Dec-23 Long-term Average -20,000 -10,000 0 10,000 20,000 30,000 40,000 50,000 20 17 20 18 20 19 20 20 20 21 20 22 20 23 Net Su pp ly (sq m) Perth CBD West Perth 0% 5% 10% 15% 20% 25% Perth CBD West Perth Va ca nc y (% ) Dec-20 Dec-23 Long-term Average 0 100 200 300 400 500 600 700 20 17 20 18 20 19 20 20 20 21 20 22 20 23 Net Fa ce Rent ($ /sq m) Perth CBD West Perth Source: CBRE Research, Q4 2020 MARKETVIEW 8 Source: PCA, CBRE Research. Note *Q4 2020 vacancy refers to CBRE estimates only NER: net effective rent, NFR: net face rent Table 2: Major Prime CBD Market Key Stats, Q4 2020 Sydney CBD 2018 2019 Q4 2020 Q-o-Q change Y-o-Y change Vacancy* 3.7% 3.0% 7.7% 1.65ppts 4.72ppts NFR $1,193 $1,258 $1,264 - 0.5% Incentives 19.2% 19.4% 29.7% 70bps 1,030bps NER $922 $972 $821 -1.3% -15.5% Yield 4.8% 4.6% 4.6% - 4bps Melbourne CBD 2018 2019 Q4 2020 Q-o-Q change Y-o-Ychange Vacancy* 2.8% 2.0% 7.9% 1.06ppts 5.88ppts NFR $614 $656 $648 - - Incentives 27.5% 26.8% 34.7% 221bps 785bps NER $445 $480 $423 -3.3% -10.7% Yield 4.9% 4.8% 4.8% - 3bps Brisbane CBD 2018 2019 Q4 2020 Q-o-Q change Y-o-Ychange Vacancy* 10.0% 10.9% 11.6% 0.52ppt 1.18ppts NFR $645 $674 $660 -1.1% -2.1% Incentives 35% 35% 39.0% 125bps 400bps NER $370 $382 $338 -4.2% -11.5% Yield 5.6% 5.5% 5.3% 0bps -13bps Perth CBD 2018 2019 Q4 2020 Q-o-Q change Y-o-Ychange Vacancy* 13.0% 12.5% 12.6% 0.34ppt 0.41ppt NFR $593 $607 $607 - - Incentives 50.7% 46.2% 50.0% - 383bps NER $293 $327 $304 - -7.1% Yield 7.0% 6.3% 6.3% - - Adelaide CBD 2018 2019 Q4 2020 Q-o-Q change Y-o-Ychange Vacancy* 13.5% 11.3% 11.2% 0.38ppt 0.29ppt NFR $423 $432 $438 - 1.3% Incentives 33.3% 31.7% 32.2% 17bps 53bps NER $283 $295 $296 -0.3% 0.5% Yield 6.8% 6.7% 6.7% -9bps -7bps ACT 2018 2019 Q4 2020 Q-o-Q change Y-o-Ychange Vacancy* 5.4% 6.9% 8.2% 1.25ppts 2.48ppts NFR $408 $428 $441 - 3.2% Incentives 20% 20% 21.0% 0bps 100bps NER $312 $326 $332 - 1.8% Yield 6.1% 5.7% 5.6% 0bps -6bps 2020 CBRE, Inc. |Q4 2020 CBRE Research AUSTRALIA OFFICE Address Market Sale Date Sale Price ($m) Purchaser Vendor Proportion Sold* Grosvenor Place, 225 George Street Sydney Nov-20 $925.0 CIC Dexus, CPP Investment Board 50% Sahmri 2, North Terrace Adelaide Oct-20 $446.2 Dexus Commercial & General 100% 60 Miller Street Sydney Nov-20 $273.0 Huge Linkage Limited Dexus 100% 340 Adelaide Street Brisbane Nov-20 $86.8 Mirvac Forza Capital 100% 2 Burke Street & 163 Ipswich Road Brisbane Dec-20 $80.2 Private Investor Elanor 100% 190 St Georges Terrace Perth Dec-20 $52.5 Credit Suisse Fiveight 100% Table 3: Major Office Sales, Australia, Q4 2020 Source: RCA, CBRE Research *Sale price represents price paid for share MARKETVIEW 9 Source: PCA, CBRE Research. Note: *Q4 2020 vacancy refers to CBRE estimate only NER: net effective rent, NFR: net face rent Table 4: Major Prime Market Key Stats, Q4 2020 North Sydney 2018 2019 Q4 2020 Q-o-Q change Y-o-Y change Vacancy* 3.5% 8.8% 9.6% 1.71ppts 0.82ppt NFR $790 $817 $823 - 0.7% Incentives 21.9% 21.9% 32.3% 229bps 1043bps NER $589 $610 $512 -4.1% -16.0% Yield 5.0% 4.8% 5.0% 3bps 14bps Chatswood 2018 2019 Q4 2020 Q-o-Q change Y-o-Ychange Vacancy* 3.9% 2.1% 10.1% 0.57ppt 8.01ppts NFR $501 $535 $543 - 0.6% Incentives 22.0% 22.3% 30.0% - 768bps NER $367 $392 $348 - -12.0% Yield 5.8% 5.8% 5.8% -2bps -2bps St Leonards 2018 2019 Q4 2020 Q-o-Q change Y-o-Ychange Vacancy* 1.9% 1.1% 3.8% 1.14ppts 2.66ppts NFR $574 $620 $620 - - Incentives 24.8% 24.6% 32.0% 200bps 740bps NER $403 $440 $384 -3.7% -12.6% Yield 5.7% 5.2% 5.2% - 2.5bps Macquarie Park 2018 2019 Q4 2020 Q-o-Q change Y-o-Ychange Vacancy* 3.6% 3.3% 6.4% 0.07ppt 3.15ppts NFR $378 $396 $427 0.6% 7.9% Incentives 25.1% 23.1% 27.9% - 478bps NER $284 $304 $308 0.6% 1.2% Yield 5.3% 5.2% 5.2% -6bps -2bps Parramatta 2018 2019 Q4 2020 Q-o-Q change Y-o-Ychange Vacancy* 0.8% 0.4% 7.2% 2.90ppts 6.78ppts NFR $529 $560 $585 -0.4% 4.4% Incentives 17.8% 19.9% 25.0% 308bps 630bps NER $434 $449 $439 -4.3% -3.7% Yield 5.7% 5.4% 5.0% - -41bps Southbank 2018 2019 Q4 2020 Q-o-Q change Y-o-Ychange Vacancy* 12.8% 9.9% 10.2% 0.10ppt 0.24ppts NFR $533 $579 $579 - - Incentives 23.5% 24.3% 29.0% 200bps 475bps NER $408 $439 $411 -2.7% -6.3% Yield 5.3% 5.0% 5.0% - - 2020 CBRE, Inc. |Q4 2020 CBRE Research AUSTRALIA OFFICE St Kilda Road 2018 2019 Q4 2020 Q-o-Q change Y-o-Ychange Vacancy* 4.8% 4.1% 5.1% 0.20ppt 1.05ppts NFR $418 $447 $447 - - Incentives 19.0% 18.6% 23.4% 200bps 480bps NER $339 $363 $342 -2.5% -5.9% Yield 5.5% 5.0% 5.0% - - Brisbane Near City 2018 2019 Q4 2020 Q-o-Q change Y-o-Ychange Vacancy* 16.7% 10.4% 14.0% 1.29ppts 3.64ppts NFR $470 $496 $504 0.5% 1.6% Incentives 37.5% 37.5% 43.0% 200bps 550bps NER $256 $269 $240 -4.3% -10.7% Yield 6.4% 6.3% 5.9% - - West Perth 2018 2019 Q4 2020 Q-o-Q change Y-o-Ychange Vacancy* 11.5% 13.7% 27.2% 1.50ppts 13.51ppts NFR $363 $363 $363 - - Incentives 35.0% 35.8% 36.3% - 50bps NER $236 $233 $231 - -0.8% Yield 7.1% 6.6% 7.1% - - MARKETVIEW Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. 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