Asia retail to drive interest in the region

Retail assets in general and offices specifically in Singapore and Bangkok have been pinpointed as sectors that will drive interest in Asian real estate despite ‘deteriorating’ conditions.

Singaporean real estate investment firm, Pacific Star Group, argued in its Asian Property Outlook Strategy report that the global economy was in a “state of inflection” and that the recovery for many markets depended on a macro recovery in 2013 and beyond. In Asia, growth prospects have also dimmed as its bellwether economy, China, sees a definite economic slowdown.

Nevertheless, several factors augured well for the region: stronger inter-regional trade, greater financing by local banks as European banks retreat, consumer spending sustained by wage increases, more affluent households and increased tourism arrivals, it said. In addition, policy makers also had considerable leeway to employ counter-cyclical stimulus measures, it argued. 

Pacific Star noted that though there were “global uncertainties”, healthy domestic conditions and buoyant tourism growth underpinned a “favourable outlook” for the Southeast Asian retail markets of Singapore, Kuala Lumpur and Bangkok.

Lam Chern Woon, Pacific Star’s vice president of research and strategic planning, said: “While we’re optimistic about continued interest in Asian real estate, we’re also at a juncture where any further deterioration in the macro outlook can drastically impact returns. Given this, it’s all about entering the market at the right time. Asia will continue to stand out because of its resilience supported by domestic demand and wider policy options, even in the face of muted prospects in the US and Europe.”

He added: “The retail sector is the bright spot in the region and demand here is driven by the large number of international retailers coming in to set up shop in markets like Singapore, Kuala Lumpur and Bangkok. These retailers are eager to establish a greater brand presence and to tap growing tourist arrivals as well.”

In the office sector, Pacific Star said it favoured Singapore because it has held its ground as a business hub because non-financial companies had cushioned softer demand for space. Meanwhile, In Bangkok, where rents have stayed firm, enquiries are rising amid the improving post-flood economic environment and a tight supply pipeline, it added. It also said of Thailand it was encouraged by capital values that had risen in the first half of the year and by the approval of Reits on the Thai stock market from June.

The report also highlighted potentially “rich” investment opportunities in the fringe economies of Myanmar, Vietnam and the Philippines given their large populations and youthful demographics, as well as notable natural resources and physical proximity to China and India.