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Booming Southeast Asian real estate markets to support AEC by 2015

Posted in ASEAN, Myanmar, Real estate and property, Yangon by Sherpa Hossainy on July 10, 2013

Jones Lang LaSalle ties increased real estate transparency and investment interest to economic growth

Published in Myanmar Business Today (Vol 1, Issue 20) on June 20, 2013


Real estate trends and opportunities in emerging markets across Southeast Asia will support the establishment of the ASEAN Economic Community (AEC) by 2015, according a leading global real estate advisory firm Jones Lang LaSalle.

The economies of the ASEAN markets continue to outpace the rest of the world by a significant margin. While Singapore remains the commercial and financial hub, emerging markets like Myanmar are making headway across Southeast Asia. Despite a slight slowdown during the first quarter of 2013 in some Southeast Asian markets, such as Indonesia and Thailand, economies across the region anticipate growth for the remainder of the year. “As the continued global economic recovery and growth in the region increase liquidity and reduce debt, growth prospects in real estate assets across the region will attract global investors,” Jones Lang LaSalle said.

While Myanmar is touted by Asian Development Bank and International Monetary Fund to grow more than 6 percent, other Southeast Asian countries are also expected to see similar growth. Supported by strong investor demand and consumer spending, Indonesia’s economy is forecast to grow 6.1 percent in 2013, while the Philippines is expected to grow 5.7 percent this year, driven by investor interest in the country’s upgrades to sovereign credit ratings and low interest. Thailand, Malaysia and Vietnam are also expected to grow between 4.5 and 5.5 percent driven by strong domestic demand.

Chris Fossick, managing director, Singapore and Southeast Asia at Jones Lang LaSalle, who attended the World Economic Forum on East Asia in Nay Pyi Taw, said, “This growth translates to robust domestic investment into commercial property, driving demand for office and logistics space.”

Fossick added that increased consumer spending will boost demand for expanded retail formats, which in turn will support the developments of retail malls and the subsequent accompanying infrastructure in emerging markets. “We are now starting to see increased transparency in the real estate markets of these economies which will ultimately spur regional growth encouraging investment.”

“The real estate industry is in a unique position to influence and be involved in many key aspects of development in the Southeast Asia region, both economic and social. There is a role for the industry in areas such as infrastructure, housing, education, healthcare, tourism and industry and trade which are all inextricably linked. This is both an opportunity and a challenge for our industry and we need to work closely with both private and public enterprise to ensure real estate adds full value,” Fossick said.

2012 ASEAN Real Estate Market Transparency Rankings

ASEAN Ranking Global Ranking Market Composite Score Change on 2010
1 13 Singapore 1.85 1.73
2 23 Malaysia 2.32 2.30
3 35 The Philippines 2.86 3.15
4 38 Indonesia 2.92 3.46
5 39 Thailand 2.94 3.02
6 68 Vietnam 3.76 4.25

Source: Jones Lang LaSalle 2012 Global Real Estate Transparency Index

While economic growth drives corporate activity across Southeast Asia, businesses are making changes to accommodate growing workforces and modernised office spaces in new, emerging markets. As existing companies seek space to accommodate expansion and new businesses and industries demand a share in the markets, demand for offices will spike and vacancy levels are forecasted to reach historic lows by 2014.

Demonstrating this growth is Jakarta, where office demand has increased by nearly 150 percent in four years, growing 7.4 percent the last quarter alone. The Philippines, often overlooked by investors, witnessed record levels in demand for office space, sparking new developments in previously unexplored submarkets and a 3 percent rise in rents from the same period 2012. Backed by increased domestic demand, office market rents and capital values, Thailand’s real estate market has demonstrated recovery since the end of 2012, rising 15.2 percent year over year in the first quarter of 2013. Meanwhile increases of 1 to 4 percent in office rents were seen in some other emerging Southeast Asian markets, such as Kuala Lumpur and Bangkok.

Owing to improvements in SEA economies and international trade, ASEAN industrial and logistics markets have reached historic highs and show no signs of slowing, as trade volumes are predicted to increase by 130 percent over the next 10 years.

“Real estate will have a critical role in driving trade and industrial growth across SEA markets. Many have already experienced rates increase as a result of improved foreign investment and a tighter supply base. As foreign investment continues and more borders once blocking global trade open, the most developers will seek new markets in the SEA region that will boost competitiveness and emerging markets’ growth,” Fossick said.

In retail markets sector, Jakarta leads the regional field in the retail market, supported by a large domestic population. As rising disposable income and a changing demographic drives consumer confidence, retail rents have accelerated by 4.9 percent year over year in Q1 2013. In Thailand, the local retail market also enjoyed renewed interest from international retail brands looking to capitalize on resilient domestic demand and overall rising affluence in Asia. Leasing activity was strong, largely driven by newcomers and expansions by international brands with retail rents in Bangkok growing 4.1 percent year over year and capital values rising by 3.4 percent year over year in 1Q13.

By incorporating sustainability in real estate development, markets in SEA can capitalise on and maintain growth, enhance corporate productivity and efficiency, and improve transparency for prospective investors. Jones Lang LaSalle’s 2012 Global Real Estate Transparency Index revealed that transparency in real estate markets is also improving as investors and corporate occupiers extend deeper into these geographies.

“A higher transparency ranking in these markets will support ASEAN economic integration by leading developers to explore opportunities for real estate growth which, in turn, encourages other investors who will recognise the growing development cycle,” Fossick said.



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