Spotlight on South-East Asia

    Singapore dominates, but Indonesia and Malaysia deserve a closer look as well.

    Singapore is a leading fund management hub in Asia-Pacific and, particularly, a center for private wealth management. It’s also home to the region’s largest local managers.
    According to the 2020 ANREV Fund Manager Survey, four of the top 10 Asia-Pacific real estate investment managers by assets under management are headquartered in Singapore: CapitaLand, ARA Asset Management, GLP and Mapletree. Many of Singapore’s larger private fund managers also manage real estate investment trusts.

    The city state hopes to encourage more managers to call it home and in early 2020 announced a new corporate structure, the Variable Capital Company, which it hopes will encourage managers to domicile funds in Singapore. PERE data show Singapore-based managers are in the market to raise $3.1 billion for real estate.

    Singapore is the only developed real estate market in South-East Asia. It was the fifth-most active national market in the first half of 2020, with $2.1 billion of transactions, according to Real Capital Analytics.

    The city’s office sector is controlled by a broad range of domestic and foreign investors. Although it has suffered from the covid-19 pandemic, “a supply crunch from construction delays and buildings being redeveloped could upset overly bearish views,” says Savills’ head of Singapore research, Alan Cheong, who is predicting that office rents will fall by 7.6 percent in 2020.

    The retail real estate market is far more vulnerable. Vacancy rates have crept up in all districts in the past five years, while retail sales have been flat over the same period. The combination of e-commerce and the pandemic means challenging times for the sector.
    The industrial market is popular with a range of investors. Singapore’s government is trying to stay ahead of market trends by encouraging modern logistics space, data centers and even vertical farming.

    Indonesia and Malaysia

    Indonesia is regarded as a real estate market with huge potential because of its population of 180 million, strong GDP growth and youthful demographics. However, the lack of transparency and infrastructure makes life difficult.
    Jakarta’s office market has given investors a rollercoaster ride, as waves of new supply have impacted rents. However, supply over the next five years is expected to be lower than demand.

    Booming retail sales pre-covid and a rapidly growing e-commerce market have attracted overseas investors to the Indonesia’s logistics sector. The supply of modern warehousing is very low and the market has proven resilient in 2020.

    Malaysia, meanwhile, is one of the region’s most developed economies, but has found relatively little favor with overseas real estate investors. This is despite it having a population of 37 million and the region’s third-highest GDP per capita, behind Singapore and Brunei.

    The Kuala Lumpur office market has performed resiliently this year, with rents and capital values only sliding 0.5 percent, JLL notes. The city has seen a wave of co-working operators launch in recent years. Logistics is the sector most favored by overseas investors, with Singapore managers Mapletree and CapitaLand long-term players.