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The integration of the Association of South East Nations (ASEAN) into a single market is expected to benefit the industrial sector of member countries, with positive spill over effect on office and retail markets, said CBRE in a report.
Specifically, the logistics market is expected to grow in ASEAN given the AEC blueprint’s strong emphasis for infrastructure development and gradual elimination of non-tariff barriers across member countries.
According to the property consultancy, the boost lift in the industrial market will also bolster the growth in office demand with the entry of more MNCs and expansion of more regional SMEs (Small and Medium Enterprises).
More foreign retailers are also expected to venture into ASEAN, said CBRE, noting that tourism is a bright spot for member countries as the AEC blueprint focuses on enhancing air and land transport infrastructure as well as regional cooperation to attract more visitors into the region.
Desmond Sim, CBRE Research head for Singapore and South East Asia, noted that while there are “hurdles and limitations that ASEAN needs to overcome, the region is still anticipated to remain an attractive proposition for businesses and commercial real estate with the implementation of the AEC serving to strengthen ASEAN’s development”.
Impediments to growth include volatility in retail rents resulting from ill-managed institutional supply pipeline, delaying or deterring retailers from expanding.
The report also noted that the lack of complementary real estate investment policies to promote the free flow of capital – like restrictions on foreign land ownership and short duration of leases – may also deter foreign investors from participating in real estate development.
Notably, China emerged as the top investor in the ASEAN market in the last five years, accounting for 29 percent of total investment volume or US$4.423 billion (S$6.2 billion) of Chinese capital. Singapore came in second, with a value of US$4.268 billion (S$5.98 billion) or 28 percent of total investment during the said period.
“The ASEAN Economic Community has played a key role to liberalise the investment markets in ASEAN to pave the way for foreign investments within individual member states. The diversity in the development of the real estate markets in ASEAN provides investors a broader investible universe for their investment strategies,” said Sim.
“More developed markets such as Singapore and Malaysia could offer investors a “core” or “value-added” investment profile while “opportunistic” investments could be sourced from emerging markets such as Vietnam and Philippines. Investments into ASEAN real estate market is thus expected to grow as investors seek alternative markets for their real estate portfolios,” he added.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg