The Asia Opportunity Nicholas Brooke President, RICS

Asian Bites - Overview  Asia’s economies growing strongly, and SARS now just an unpleasant memory  China and India providing momentum for regional growth  North and East Asia still outperforming south Asia although Singapore recovering  Election year - everywhere!  Property markets mixed  Currency and exchange rate concerns

Economic Transformation

Hong Kong – Cityscape

Hong Kong  A vacuum in leadership but recovering nevertheless  GDP: %Inflation: -0.6%  Rents and prices rising, particularly in luxury residential sector  Increase in tourism with subsequent spending helping to lift deflation  Unemployment figures improving  CEPA

India  The next driver of growth?  GDP: 7.0% Inflation: 5.0%  Still major challenges in attracting FDI  IT and business services sectors continue to drive demand for office space – making the most of highly skilled, English speaking but low cost workforce  Stable rents/prices due to high supply levels

India

Indonesia  Precariously poised and still muddling through  GDP: 4.9%Inflation: 6.5%  Economy improved in late 2003 and interest rates have fallen  Limited progress in resolving bad debt issues  Property markets showing signs of recovery with most interest in the retail and luxury residential sectors  FDI still showing little sign of improving

Indonesia

Japan  An enigma and a puzzle to most, but moving out of deflation despite itself  GDP: 1.4%Inflation: -0.5%  Office sector rents have declined by 30% for new stock and 15% for existing since early 2001  Economic improvement could lead to increased employment opportunities  Demographic challenge of ageing population

Japan

Mainland China  Huge engine of growth domestically and in Asia  GDP: 7-8%Inflation: 3%  FDI continues at high levels but domestic market now as important as exports  Olympics 2008, World Expo 2010  Enormous amount of development – risk of markets overheating  Growing interest in second tier cities  Potential for social unrest, under employment, shift to the cities

Mainland China - Beijing

Mainland China - Shanghai

Malaysia  Potential dark horse  GDP: %Inflation: 1.8%  Improved utilisation rate in manufacturing capacity  Budgetary deficit still a concern  Office sector in KL performing steadily  Retail sector continues active although with high levels of supply  Jury still out on new leadership

Malaysia

Philippines  Circumspect scepticism as rich get richer and poor go nowhere  GDP: 4.2%Inflation: 4.5%  Economy improved in late 2003 but concern over the upcoming Presidential election in May  Call centres still main driver of demand in the office sector, again using low cost, English speaking workforce  Rents expected to stabilise after 50% decline since 1997  Concerns over election/succession issues

Philippines

Singapore  On the mend but not yet out of the woods  GPD: %Inflation: 1.8%  Financial services giving impetus to economy  Office sector remains oversupplied due to weak demand over recent years  Take-up of industrial space improved in later 2003 and investment in this sector is active  Previous over reliance on electronics being replicated with investment in biotech  Role as entrepot under threat from Malaysia

Singapore Singapore

South Korea  The star pupil in the Asia class  GDP: 5.5%Inflation: 2.8%  Fiscal stimuli have added to recent economic growth although politics remain an issue  Office sector stable in all three main Seoul markets with low vacancy rates of 1-3%  Significant investment in hard assets by international institutional community  US suspended disbelief and investing heavily

South Korea South Korea

Taiwan  Smoke and mirrors or the real thing?  GPD: %Inflation: 0.45%  Government investment in infrastructure driving expansion  Presidential elections could be disruptive – reunification still high on the agenda  Residential prices on the rise  Essentially a local play for local players

Taiwan

Thailand  Leaner and more streetwise but bad habits continue  GDP: 8%Inflation: 2.0%  Perception v informed opinion as to whether recovery for real  PM Taksin has major following but are his policies sustainable  Office market still oversupplied but rentals slowly improving

Thailand

INVESTOR PROFILE 1. STILL VERY CAUTIOUS AND RISK AVERSE 2. Essentially IRR driven - 15% + 3. FOCUS ON CBD OFFICE AND QUALITY RESIDENTIAL 4. GROWING INTREST IN SUB-CENTRES around the Region e.g. Osaka. Incheon, Guangzhou, Ho Chi Minh City 5. SPECIALIST PLAYERS, EITHER OPPORTUNISTIC OR VERY SELECTIVE E.G. RETAIL

INVESTOR PROFILE - CONTD 6. CLUB MENTALITY – SAFETY IN NUMBERS 7. REALISATION OF SIZE AND SCALE OF OPPORTUNITY 8. REALITY IS THAT MOST INTERNATIONAL DEVELOPERS WILL BE OUT-MANOUVERED BY LOCAL COMPETITION 9. CHALLENGE OF DEMONSTRATING ADDED VALUE – LIQUIDITY NOT IN SHORT SUPPLY