CapitaLand Integrated Commercial Trust - Annual Report 2021

Investment Market North Sydney experienced a sustained period of investment activity with a total of A$5.0 billion transacted over the past five years to 2019. Whilst transactions were more modest in 2021, with about A$442 million transacted across five assets largely due to limited stock available in the market, offshore demand remains significantly strong. Of the five assets transacted, offshore investment contributed about 62% of the total transaction volume, above the 10-year average of 53%. NORTH SYDNEY RENTS NORTH SYDNEY CAPITAL VALUE AND YIELDS While tenant demand continued to strengthen over the last 12 months, prime and secondary office yields have shown little movement and currently average at 4.86% and 5.19%, down 11 bps and 13 bps respectively in 2021. Over the same period, prime and secondary capital values averaged at A$17,192 psm and A$13,613 psm, representing a y-o-y increase of 3.2% and 3.6% respectively. We expect prime yield to remain relatively stable, while modest yield compression is expected in secondary yield over 2022/2023. Further yield compression, albeit slight, may provide greater scope for secondary asset re- positioning as a way to extract value. 700 600 500 400 300 200 100 0 Net Effective Rent (A$/sq m/annum) 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 2Q 2021 3Q 2021 4Q 2021 2022F 2023F 2024F Prime Net Effective Rents Secondary Net Effective Rents Source: CBRE Australia Research, 4Q 2021 20 18 16 14 12 10 8 6 4 2 0 7 6 5 4 3 2 1 0 Capital Value (A$ psm) (‘000) Yield (%) 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 2Q 2021 3Q 2021 4Q 2021 Prime Capital Value Secondary Capital Value Prime Yield Secondary Yield Source: CBRE Australia Research, 4Q 2021 CapitaLand Integrated Commercial Trust 122 Independent Market Review