Five opportunities in AEC 2015

If you’re not already aware, the AEC (Asean Economic Community) 2015 is a proposed common market of 10 ASEAN countries. It will create a powerful trading bloc with a population more than 600 million people and will be the fifth largest economy in the world (after the EU, U.S., China and Japan). An ambitious attempt at market integration, it will be charactersed by the free flow of goods, services and investment, unhindered flow of financial capital and enhanced connectivity.

The AEC 2015 will come into being at the end of 2015. Real estate form JLL, on its Real Views website, looks at what it means for the Thailand, the Philippines, Indonesia, Myanmar and Singapore

Thailand: Senior shoppers and tourists are helping to bolster demand for retail space in Bangkok. Property and real estate Investors have typically participated in the growth of the retail market through joint ventures with local partners or direct investment in the equity market.

In terms of GDP per capita, Thailand ranks third after Singapore and Brunei. Following the military coup in May 2014, a more stable political environment has given landlords and occupiers greater motivation to renew their contracts. Consumer confidence has also largely recovered.

The Philippines: With competitive rents for commercial space relative to other outsourcing centers, and historic low vacancy rates, Manila’s office space offers a compelling property investment opportunity.

Demand for office space is rising amid a growing appetite from offshoring and outsourcing companies. Manila’s Fort Bonifacio district has seen unprecedented construction in the last decade while the government is promoting a new city in the Clark Special Economic Zone.

Indonesia: In Greater Jakarta, booming trade and urbanisation are fueling demand for logistics and residential properties. Most investors look for land on established industrial estates, but foreign firms often seek local partners to help mitigate the risks from low market transparency.

Demand for consumer goods is rising rapidly, and a larger volume of goods is being transported across the country. More new international brands with production facilities in the Greater Jakarta area have also led to surging demand for distribution and logistics services.

Myanmar: With 2,000 km of coastline and an immense collection of archeological sites, the tourism opportunity is promising. This sector has seen interest from institutional property and real estate investors with a high risk appetite.

As the country emerges from military rule, business potential is helped by the government’s commitment to political and economic reforms. By 2014, foreign firms had invested US$2.5 billion into development projects – mainly hotels and commercial.

Singapore: Its business environment, economic structure, and real estate market are relatively transparent and mature for Southeast Asia. Commercial office and private residential markets offer opportunities as Singapore cements its role as the financial hub for the AEC.

The city-state is seen as a core market where rental yields and capital appreciation are moderate but stable. As neighbouring economies grow it is expected to benefit from rising regional trade. A recent correction in the high-end private residential market has created opportunities.

This article was first published by JLL on their RealViews website and is published with kind permission.