ITB 2024 Special Reporting
Strong growth in Southeast Asian markets to support ASEAN integration by 2015.
Monday, 30th September 2013
Source : Jones Lang LaSalle
As political and business leaders from across Asia gather at the 2013 World Economic Forum East Asia in Nay Pyi Taw, Myanmar, real estate advisory firm Jones Lang LaSalle has identified real estate trends and opportunities in emerging markets across Southeast Asia that will support the establishment of an ASEAN Economic Community (AEC) by 2015.

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 are making headway across Southeast Asia. Despite a slight slowdown during the first quarter of 2013 in some Southeast Asia (SEA) 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.
  • Supported by strong investor demand and consumer spending, Indonesia's economy is forecasted to grow 6.1 percent in 2013.
  • 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 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 is attending the World Economic Forum on East Asia said, "This growth translates to robust domestic investment into commercial property, driving demand for office and logistics space. 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.

"As a result, 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."

Real Estate Markets

Office Markets: While economic growth drives corporate activity across SEA, businesses are making changes to accommodate growing workforces and modernized office spaces in new, emerging markets. While 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 SEA markets, such as Kuala Lumpur and Bangkok.

Industrial & Logistics Markets: Thanks 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.

Retail Markets: Jakarta, again, leads the regional field in the retail market, supported by a large domstic 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.

Real Estate Market Transparency and Sustainability

By incorporating sustainability in real estate development, markets in SEA can capitalize 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.

2012 ASEAN Real Estate Market Transparency Rankings: Jones Lang LaSalle
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Source: Jones Lang LaSalle 2012 Global Real Estate Transparency Index

Across the SEA emerging markets, increased corporate real estate activity is enhancing the pace of transparency improvements in Indonesia, the Philippines, Vietnam and Thailand.

These countries have experienced the most progress in transparency among Asia Pacific countries, and rank among the top 10 improvers globally in overall transparency scores due to greater availability of market data and incremental changes in the regulatory and transaction processes.

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet. Its investment management business, LaSalle Investment Management, has $47.0 billion of real estate assets under management.

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