APAC guide: Southeast Asia’s challenges and opportunities

The diversity of the nations of Southeast Asia is matched only by the richness of their investment potential.

Southeast Asia offers a range of investment opportunities to real estate managers. However, its heterogeneity means they cherry-pick from a few preferred locations rather than investing in the region as a coherent whole.

The ASEAN group of nations comprises 10 Southeast Asian states with a combined population of more than 650 million and combined GDP of approximately $3.3 trillion. The bloc has begun the work to develop a single market but is still a long way off achieving this.

Simon Treacy, chief executive of private equity real estate, real assets, at Singaporean manager CapitaLand Investment, says: “We look at Southeast Asia country by country; we don’t think there are any drivers that are unique to the region; there isn’t a great deal of homogeneity among the countries. It is an eclectic mix of nations and that does make them complementary.”

Real estate investors tend to target the larger economies: Singapore, Vietnam, Malaysia and Thailand. Of these, Singapore is the only developed economy and is also a base for some of the region’s largest real estate managers, such as CapitaLand and Mapletree Investments.


Total amount targeted by funds in market

Singapore’s commercial real estate investment market recovered fast and strongly from the pandemic, with transaction volumes up 47 percent year on year in the 12 months to March 2023. Cross-border capital continues to target the city-state, particularly the office and logistics sectors. Hong Kong-based PAG Group has invested in Singapore offices and the city is understood to be one of its targets for a new $1.8 billion core-plus/value-add office fund.

George Agethen, co-head of Asia-Pacific at Ivanhoé Cambridge, the real estate investment management business of Canadian institutional investor Caisse de dépôt et placement du Québec, says the logistics market in Singapore has proven resilient despite external headwinds, supported by constrained supply.

“The sector has seen strong rental growth in recent quarters and future growth is expected to be above trend for this cycle. Capital into the sector is expected to remain keen on account of the positive spread over borrowing costs,” says Agethen.

Increased attention

The preferred Southeast Asian developing market for real estate investors has been Vietnam, which has a 100 million population and a growing manufacturing sector.

“We look at Southeast Asia country by country… It is an eclectic mix of nations and that does make them complementary”

Simon Treacy
CapitaLand Investments

Treacy says: “Due to its strategic proximity to China, Vietnam is positioned to leverage the advantages of the China Plus One strategy. As a result, it is rapidly emerging as a global alternative manufacturing hub, attracting numerous multinational corporations like Samsung and Foxconn to establish their manufacturing capabilities in the country.”

Hong Kong’s ESR Group began work on 7.5 million square feet of logistics space last November and was the lead investor in a $450 million fundraising by a local developer. GLP Group and Warburg Pincus have previously invested in the sector.

Agethen notes that Ivanhoé Cambridge is looking to increase its exposure to Vietnam industrial. “Vietnam’s manufacturing sector attracted the largest volume of foreign direct investments in 2022, underlining the sector’s growth prospects,” he says. “We have also observed more foreign investments, mostly for developments, into Vietnam over the last few years – this should help to increase the supply of investable stock in the market as well as improve real estate liquidity and transparency in time.”

Manufacturing growth and China Plus One strategies are also benefiting Thailand, which has seen investment from Apple partner Foxconn and Chinese electric vehicle maker BYD Auto. Real estate investment has followed, with ESR making its first investments in Thailand in May.

Meanwhile, significant investments in infrastructure are pushing Bangkok toward regional gateway city status and helping attract a growing number of expatriate workers as well as tourists. The Thai capital also boasts some of the region’s best modern retail. Bangkok governor Chadchart Sittipunt is trying to make the city more livable and to boost transparency, something which Thailand as a whole needs to improve to attract more investment.

Indonesia is the largest economy in the region and “might be the dark horse that surprises people over the medium term,” says Treacy. “It is the world’s fourth most populous nation, with steady GDP growth. We are seeing the same type of players who were interested in India becoming interested in Indonesia.”

Industrial and logistics players such as ESR and a number of Singaporean managers are already active in Indonesia. Meanwhile, Warburg Pincus has backed NWP Property, a retail and logistics real estate company.

Elsewhere in the region, Malaysia has attracted interest from overseas real estate investors, mainly from Singapore, but has not seen a significant volume of activity due to a sluggish economy and political upheaval. Other markets in the region remain largely off the radar for now.

October 2022

Hines opened its first Vietnam office, in Ho Chi Minh City, and employed Anh Hao Le, previously with Vietnamese property group Sunny World Investment & Development, to source new opportunities in the country

October 2022

UK-based M&G Real Estate agreed to acquire four car showrooms in Singapore from auto distributor Jardine Cycle & Carriage for $248 million

June 2023

Hong Kong-listed ESR opened its first office in Thailand with plans to invest at least $1 billion in the country over the next five years via a partnership with Asia Industrial Estate, a Thai developer