CapitaLand Integrated Commercial Trust - Annual Report 2021

Sydney Office Market Australia Economic Overview While the Australian economy had experienced a contraction in early 2020, the economy bounced back quickly as strong growth recorded in 2H2020 consolidated into 2021. In addition, Australia’s strong banking system andlowpublicdebt levelshaveallowedforaccommodative monetary policy and expansionary fiscal policy to shore up demand and stabilise the economy. Although the Winter 2021 lockdown in New South Wales and Victoria saw GDP contracted by 1.9% q-o-q in September 2021, ongoing vaccination rollout alongside solid rebound in the labour market, and household consumptions suggest that economic recovery is well underway. The Reserve Bank of Australia (RBA) forecasted Australia’s GDP outlook of around 3.0% in 2021, followed by a rapid growth of 4.5% in 2022 and 2.0% in 2023. In short, the economy of Australia is in prime position for recovery as the country looks to reopen in early 2022. Gross Debt to GDP stands at just 72%, well below other comparable countries such as the USA (132%), UK (107%) and Japan (256%). This relatively low debt level has resulted in all major credit rating agencies issuing an AAA rating, which affirms the stability and attractiveness of the Australian economy as a global investment hub. Whilst the emergence of the Omicron variant brings a new source of uncertainty, putting downward pressure on the growth outlook, the impact is expected to be less severe as a strict lockdown is not anticipated to be imposed nationwide. Rejuvenation of Sydney Sydney is in the state of New South Wales (NSW) and has often been recognised as the major gateway city of Australia for which the corporate sector is located. NSW is also the only state in Australia with AAA credit ratings by Fitch and Moody’s, highlighting the resilience of the NSW economy and the government’s history of strong financial management. Whilst the Winter 2021 lockdown had weighed heavily on the state economy, with state final demand falling sharply by 6.5% over the quarter, the state’s high vaccination rate has supported its faster-than- expected recovery. CBRE’s recent survey noted that it took approximately four to six weeks to recover visitation compared to around eight to twelve weeks after the initial lockdown in March 2020. The NSW Government has also targeted to deploy around A$6 billion worth of investment across a range of projects, including A$3.6 billion in infrastructure and capital maintenance and A$1.7 billion to support business and economy. Following the three-month lockdown, an additional A$2.8 billion was invested under the COVID-19 Economic Recovery Strategy in October 2021, aiming to restore consumer and business confidence, support jobs and skills, boost vital sectors, boost recovery in the regions as well as support communities across the state. Before the onset of the pandemic, the NSW Government also invested heavily in upgrading Sydney’s transportation network, aiming to improve connectivity between CBD and greater urban population bases. Over the next four years to 2026, NSWwill seeAustralia’s largest transport infrastructure program, with A$41.4 billion of investment on light rail, metro, fleet and roads. More importantly for the office market, several major transport upgrades have already taken place and will continue to benefit the Greater Sydney workforce. Amidst the recent surge in the Omicron variant, the city may face headwinds to recovery. However, NSW’s resilient economy, compared to other Australian states which rely heavily on the commodities sector, alongside high vaccination rates of over 93% will continue to underpin the swift recovery as anticipated. Source: Infrastructure NSW, CBRE Research NSW MAJOR INFRASTRUCTURE PROJECTS AND TIMELINE Project Estimated Completion WestConnex (M4-M5) 2023 Parramatta Light Rail (Westmead-Carlingford) 2023 Sydney Metro City & South West 2024 Western Sydney Airport 2026 Sydney Metro West (CBD-Parramatta) Planning Western Sydney Light Rail • Macquarie Park Line • Castle Hill Line Planning Western Sydney N-S Rail Link (Airport) Planning Western Sydney Light Rail • M12 Motor Way • Local roads package Planning Sydney, Australia CapitaLand Integrated Commercial Trust 116 Independent Market Review