Increased transparency boosting real estate markets in south east Asia, says report

Strong growth in Southeast Asian real estate markets is linked to increasing transparency in the region’s property markets and consequently rising investment interest, it is claimed.

Global real estate advisory firm Jones Lang LaSalle says there are a number of real estate trends and opportunities in emerging markets across Southeast Asia.

In a new report it points out that the economies in the region 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.

The report says that despite a slight slowdown during the first quarter of 2013 in some Southeast Asia 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, it believes.

Supported by strong investor demand and consumer spending, Indonesia’s economy is forecasted to grow 6.1% in 2013, the Philippines is expected to grow 5.7% this year and economies in Thailand, Malaysia and Vietnam are expected to grow between 4.5 and 5.5% driven by strong domestic demand.

‘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,’ said Chris Fossick, managing director, Singapore and Southeast Asia at Jones Lang LaSalle.

‘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,’ he explained.

‘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,’ he added.

The office markets in the region are set to benefit from changes being made to accommodate growing workforces and modernised 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, the report says.

An example is Jakarta where office demand has increased by nearly 150% in four years, growing 7.4% in 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% rise in rents from the same period 2012.

The report also says that due to increased domestic demand, office market rents and capital values in Thailand’s real estate market have demonstrated recovery since the end of 2012, rising 15.2% year over year in the first quarter of 2013. Meanwhile increases of 1 to 4% in office rents were seen in some other emerging markets, such as Kuala Lumpur and Bangkok.

It says that currently Jakarta leads the regional field in the retail market, supported by a large domestic population. As rising disposable income and changing demographics are driving consumer confidence and as a result retail rents have accelerated by 4.9% year on year in the first quarter of 2013.
In Thailand, the local retail market also enjoyed renewed interest from international retail brands looking to capitalise 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% year on year and capital values rising by 3.4% year on year in the first three months of 2013.

By incorporating sustainability in real estate development, markets in the region can capitalize on and maintain growth, enhance corporate productivity and efficiency, and improve transparency for prospective investors, according to the firm.
The 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 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,’ the report explains.

‘Across the Southeast Asia 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,’ it adds.