Asia Pacific Legal Sector Trends

ASIA PACIFIC LEGAL SECTOR TRENDS

2017

Asia PacificLegal SectorTrends

Demand from international firms remains subdued

Challenge growing from domestic firms

Strong focus on cost containment

Relocation driven by right-sizing and cost saving

Office design shifts to hybrid of open plan and enclosed spaces

CBRE Research |

INTERNATIONAL LAW FIRMS

JUNE 2017ASIA PACIFIC LEGAL SECTOR TRENDS

Macro trends impacting international law firms

Aligning real estate strategy with market conditions

2©2017 CBRE, Ltd.

Demand is being led by domestic firms

*Data related to the increase in the number of lawyers including partners is based on the top 50 international law firms and top 50 Asian law firms mentioned in Asia Legal Business, November 2016

Source: CBRE Research, June 2017.

Rents Increasing

Cautious expansion

-2% +23%

Rents Peaking Rents Declining

DOMESTIC LAW FIRMS

Cost optimisation

Flight to quality

Relocation

Improving space utilisation

CBRE Research |

01 Beijing 11

02 Shanghai 12

03 Hong Kong 13

04 Tokyo 14

05 Seoul 15

07 Singapore 16

08 Sydney 17

09 Melbourne 18

10 Auckland 19

©2017 CBRE, Ltd.


Table of Contents

PART 2. Major Legal Market Trends

Overview 4

PART 1. Legal Sector Overview

Occupier Trends 7

Workplace Strategy 10

3

JUNE 2017

CBRE Research | 4

JUNE 2017

©2017 CBRE, Ltd.


Overview

-5 0 5 10 15 20 25 30

International law firms

Asian law firms

+ 6735 lawyers

- 149 lawyers

+23%

-2%

CBRE Research | 5

JUNE 2017

©2017 CBRE, Ltd.


-20

0

20

40

60

80

100

-2000

0

2000

4000

6000

8000

10000

China Singapore India Japan South Korea

Change in the number of lawyers (LHS) % change (RHS)

CBRE Research | 6

JUNE 2017

©2017 CBRE, Ltd.


0%

10%

20%

30%

40%

50%

60%

2010 2011 2012 2013 2014 2015 2016

Increased Remained Decreased

CBRE Research | 7

JUNE 2017

©2017 CBRE, Ltd.


Occupier Trends

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Relocation Renewal Downsize Expansion New Set Up Others

% o

f lea

sing

trans

actio

n by

num

ber o

f dea

ls

CBRE Research | 8

JUNE 2017

©2017 CBRE, Ltd.


Market Company From: Building To: BuildingSize

(sq. ft.)

Sydney, Australia Baker McKenzie 50 Bridge Street Tower Barangaroo T1 100,000

Hong Kong,

ChinaFreshfields Two Exchange Square One Island East 40,000

Auckland,

New ZealandDLA Piper* 205 Queen Street

PwC Tower at

Commercial Bay 22,000

Shanghai, China Clifford Chance Bund Centre HKRI TaiKoo Hui 20,000

Beijing, China Linklaters China World Office 1 China World Tower B 14,000

Market Company BuildingSize

(sq. ft.)Purpose

Sydney, Australia Henry Davis York 60 Martin Place 75,000 Relocation

Melbourne, Australia Gadens 447 Collins Street 54,000 Relocation

Auckland,

New Zealand Minter Ellison Rudd Watts PwC Tower at Commercial Bay 42,000

Relocation

& pre-

commitment

Seoul, South Korea APEX Law Frim Wooduk Building 40,000 Relocation

Shanghai, China Han Kun LLP HKRI TaiKoo Hui 12,000 New lease

CBRE Research | 9

JUNE 2017

©2017 CBRE, Ltd.


CBRE Research | 10

JUNE 2017

©2017 CBRE, Ltd.


Workplace Strategy

17% 22%

75%

0%

20%

40%

60%

80%

100%

Large(>25,000 sq. ft)

Medium(10,000 -25,000 sq. ft)

Small(<10,000 sq. ft.)

Celluar Open Plan Hybrid

CBRE Research |

OVERVIEW


Beijing

Geographical trends / domicile of

organisation

11©2017 CBRE, Ltd.

OUTLOOK

Leasing demand will continue to be driven bydomestic law firms as they expand their officefootprint. International firms will remaincautious due to the economic slowdown andgeopolitical uncertainty.

Q1 2017 YoY

Vacancy Trends – Grade A

Overall Beijing 9.3%

CBD 5.2%

Rental Trends – Grade A

Overall Beijing RMB 502/ sq. m. /month

CBD RMB 524/ sq. m. /month

VACANCY AND RENTS

OFFICE RENTAL CYCLE

Rental Decline Accelerating

Rental Decline Slowing

Rental Growth Accelerating

Rental Growth Slowing

Prediction in next 12 monthsCurrent status

MAJOR TRANSACTIONS

Mayer Brown JSM

1,200 sq. m.

Renewal

China Central Place

Linklaters

1,300 sq. m.

Relocation

China World Tower B

Akin Gump

400 sq. m.

Relocation

Kerry Center

Morrison Foerster

300 sq. m.

Relocation

World Financial Center

©2017 CBRE, Ltd. 11

CBRE Research |

OVERVIEW


Shanghai


organisation

12©2017 CBRE, Ltd.

OUTLOOK

Domestic law firms will drive demand whileforeign companies are set to remain subdued.New Grade A buildings providing efficientand flexible space will attract solid upgradingdemand. Vacancy and rents will remainunchanged in the short term.

Q1 2017 YoY


Overall Shanghai 14.2%

CBD 9.9%


Overall Shanghai RMB 340/ sq. m. /month

CBD RMB 390/ sq. m. /month

VACANCY AND RENTS

OFFICE RENTAL CYCLE





MAJOR TRANSACTIONS

Baker & McKenzie

3,700 sq. m.

Renewal

Jin Mao Tower

Han Kun LPP

1,100 sq. m.

New lease

HKRI TaiKoo Hui

Morrison & Foerster

790 sq. m.

Renewal

Bund Centre

Yuan Ben Law Office

780 sq. m.

New lease

The Center


CBRE Research |

OVERVIEW


Hong Kong


organisation

Operational trends

13©2017 CBRE, Ltd.

OUTLOOK

Hong Kong remains the Asian headquartersfor most major U.S and UK law firms. Whileattitudes towards location and space arebeginning to change, the widespreadadoption of alternative workplace strategy bylegal firms in the city remains some way off.

Q1 2017 YoY


Overall HK 4.7%

CBD 1.5%


Overall HK HK$69/sq. ft. /month

CBD HK$127/sq. ft. /month

VACANCY AND RENTS

OFFICE RENTAL CYCLE





MAJOR TRANSACTIONS

JSM Mayer Brown

100,000 sq. ft.

Renewal vs Relocation

Various Locations

King & Wood Mallesons

48,000 sq. ft.

Renewal vs Relocation

Gloucester Tower

Hogan Lovells

42,000 sq. ft.

Rent Review

One Pacific Place

Freshfields

40,000 sq. ft.

Relocation

One Island East


CBRE Research |

OVERVIEW



organisation

Workplace strategy trends

14©2017 CBRE, Ltd.

OUTLOOK

A large volume of new Grade A supply will becompleted in Tokyo between 2018 and 2019.This is likely to encourage foreign law firms toseek opportunities for flight to quality/locationmoves, which will include a strong focus onimplementing workplace strategy.

Q1 2017 YoY


Tokyo Core Submarket

4.2%

Marunouchi 3.1%


Tokyo Core Submarket

JPY 35,950 / tsubo/month

MarunouchiJPY 46,000/ tsubo/month

VACANCY AND RENTS

OFFICE RENTAL CYCLE





MAJOR TRANSACTIONS

N. A.

Tokyo


CBRE Research |

OVERVIEW


Seoul


organisation

15©2017 CBRE, Ltd.

Domestic law firms will continue to driveleasing demand, although increased activityfrom foreign law firms could be witnessed inthe medium term. The CBD will remain as thepreferred submarket. Rents are set to remainunchanged.

Q1 2017 YoY


Overall Seoul 10.3%

CBD 10.9%


Overall Seoul KRW 26,898 /sq. m.

/month

CBD KRW 31,079 /sq. m.

/month

VACANCY AND RENTS

OFFICE RENTAL CYCLE





MAJOR TRANSACTIONS

APEX Law Firm

3,700 sq. m.

Relocation

Wooduk Building

Clifford Chance

624 sq. m.

Relocation

D Tower


CBRE Research |

SECTOR OVERVIEW


Singapore


organisation


16©2017 CBRE, Ltd.

OUTLOOK

Cost containment is expected to remain a keytrend. The window for opportunistic deals isclosing as availability in new supply hasshrunk considerably. Renewals are likely todominate in the coming months. Demandfrom foreign law firms may pick up slightly asthe past few quarters have seen some firmsfrom U.S. and Europe form alliances withlocal entities.

Q1 2017 YoY

Vacancy Trends

Overall Singapore 6.1%

Core CBD 4.4%

Rental Trends

Core CBD S$8.95 /sq. ft./month

VACANCY AND RENTS

OFFICE RENTAL CYCLE





MAJOR TRANSACTIONS

Linklaters

25,000 sq. ft.

Renewal/ Expansion

One George Street

Clifford Chance

35,000 sq. ft.

Renewal/Expansion

Marina Bay Financial Centre – Tower 3

CMS Cameron McKenna

8,000 sq. ft.

Pre-commitment/ Relocation

Marina One

Mayer Brown

8,000 sq. ft.

Renewal/Expansion

Six Battery Road


CBRE Research |

OVERVIEW


Sydney

Domicile of organisation


17©2017 CBRE, Ltd.

OUTLOOK

The end of the mining investment boom, amature local market and an unfavourableexchange rate will continue to slow the rate ofnew legal sector entrants from abroad.

Q1 2017 YoY


CBD 6.2%


CBD AUD 1,100/ sq. m. /year

VACANCY AND RENTS

OFFICE RENTAL CYCLE





MAJOR TRANSACTIONS

Baker McKenzie

9,900 sq. m.

Relocation

Barangaroo T1

Henry Davis York

7,000 sq. m.

Relocation

60 Martin Pl

Hicksons Lawyers

2,300 sq. m.

Relocation

Barangaroo T1

Blackstone Waterhouse

700 sq. m.

Relocation

Barangaroo T3


CBRE Research |

OVERVIEW


Melbourne

Domicile of organisation


18©2017 CBRE, Ltd.

OUTLOOK

The legal sector is set to face increasingcompetition from Multi-DisciplinaryPartnerships which are rapidly growing theirlegal services teams.

Q1 2017 YoY


Melbourne CBD 6.4%


Melbourne CBD AUD 534/ sq. m. /year

VACANCY AND RENTS

OFFICE RENTAL CYCLE





MAJOR TRANSACTIONS


Gadens

5,000 sq. m.

Pre-commitment & Relocation

447 Collins Street

White & Case

1,500 sq. m.

Relocation

525 Collins Street

CBRE Research |

OVERVIEW


Auckland

Geographical trends


19©2017 CBRE, Ltd.

With plenty of high quality new supply andbackfill space entering the market, activity isset to pick up over the next couple of years.However, the adoption of new and moreflexible ways of working may result in adecrease in law firms’ overall office footprint.

Q1 2017 YoY


CBD 3.3%

Suburban 4.6%


CBD NZD 456/ sq. m./annum

Suburban NZD 344/ sq. m./annum

VACANCY AND RENTS

OFFICE RENTAL CYCLE





MAJOR TRANSACTIONS

Russell McVeagh

6,000 sq. m.

Renewal

Vero Centre

DLA Piper

2,600 sq. m.

Pre-commitment

New PwC Tower

Duncan Cotterill

1,000 sq. m.

Relocation

Australis Nathan Building

Minter Ellison Rudd Watts

3,900 sq. m.

Pre-commitment

New PwC Tower


CBRE Research |


Rent Definitions

©2017 CBRE, Ltd.

BEIJING

SHANGHAI

HONG KONG

TOKYO

SEOUL

SINGAPORE

SYDNEY

MELBOURNE

AUCKLAND

20

CBRE Research

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

Henry Chin, Ph.D


Contacts

Manish Kashyap

Ada Choi, CFA Paul Hubbard-Brown

Jonathan Hills Rohini Saluja

Richard Stevenson

Mukesh Hemrajani

JUNE 2017

Cynthia Chan

CBRE Research

© CBRE Ltd. 2017

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Asia Pacific Legal Sector Trends

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