“With greater ease of capital flow and investments, the level of real estate investment activity is expected to rise in the untapped South East Asian markets as investor appetite grows.”
– Yang Liang Chua, Head of Research for Singapore and South East Asia, Jones Lang LaSalle
In a previous article, I wrote about the ASEAN Economic Community (AEC) and gave 4 Reasons Why ASEAN Integration May Not Succeed. But, several articles have already been written about the positive effect of the 2015 ASEAN Integration on the real estate sector of different ASEAN member-states.
In an article, Jones Lang LaSalle (JLL) Managing Director for Singapore and South East Asia Christopher Fossick said that “if successfully implemented, the AEC will offer businesses unrestricted access to a unified market of 600 million people, 8% of the world’s population, spread across nearly 4.5 million sq. km.”
Mr. Fossick further disclosed that the ASEAN real estate markets play a critical role in supporting this integration through development of and adjustments to regional infrastructure such as air and sea ports, rail networks and roads, as well as through advising on the growth of urban development and facilitating investment.
According to the research of JLL, as businesses and investors across South East Asia look for opportunities to maximize profit while reducing outlays, areas with lower production costs will draw lower-end production away from costlier regions.
Yang Liang Chua of JLL gives the examples of the recent outflow of industrial production from China into the emerging markets of Myanmar, Vietnam and Cambodia and the outsourcing of backroom functions from Singapore to the Philippines.
In addition, JLL stated that this will drive higher-cost regions, such as Malaysia, Thailand and Singapore, to adapt their industrial assets to focus on providing higher value-added products and services while the new industrial estates – such as Myanmar, Vietnam and Cambodia – will support lower-end production.
As more manufacturers relocate to South-East Asia, demand and competition for industrial and logistic properties will increase. This can only mean increased investments in infrastructures to provide stable platform for business.
The most important point to remember about the AEC is this: The AEC is geared for the establishment of a single market and a production base through the free flow of goods, services, capital and skilled labor in all of the ten (10) ASEAN member countries.
Hence, what does this mean for the real estate sector in the Philippines? Here are 10 things real estate service practitioners (RESPs) should know about the ASEAN Integration in 2015.
1. AEC will result in stronger capital inflow and investments. According to Marketing and Communications Director Amor Maclang, this is particularly true for the Philippines which has gained attention from the international business community due to the series of investment-grade ratings upgrade that the country has received from different credit rating firms in the past several years.
2. AEC will result in a significantly higher rate of consumer spending given the huge inflow of goods and services. Ms. Maclang opines that this will drive the development of more lifestyle-centric developments, such as malls, retail complexes and properties anchored on tourism, across the archipelago.
3. An increase in foreign direct investments (FDI) in the manufacturing sector would bring a substantial increase in demand for commercial and industrial development. This will now lead to accelerate modernization, increase urban development standards, and drive unprecedented regional growth in Southeast Asia – factors that sustain direct investments in the region, according to Ms. Maclang.
4. The real estate sector of the Philippines is expected to grow with the dawn of the AEC in 2015. The Business Process Outsourcing (BPO) industry will continue its robust growth as the country is still a preferred location by reason of its skilled pool of human resources.
5. Tourism developments would receive major infusion of capital due to the increase access of people to and from each member-state. Expect the improvement of airports and seaports in major urban and regional centers throughout the archipelago. Furthermore, expect the increase in the construction of infrastructures related to and in support of the hospitality industry.
6. Ms. Maclang sees that the influx of industry players will lead to increased rate of construction activities where we will be seeing mixed-used residential districts, retail, commercial and office hubs and key infrastructures racing to be built.
7. Another opportunity pointed out by Ms. Maclang is the increase in employment opportunities due to the greater demand for skilled laborers to help the local property sector sustain the increased level of property development.
8. The immediate impact of the economic integration of ASEAN will be the increase in demand for both commercial and industrial space in various economic hotspots all over the region. Particularly, in the Philippines, Ms. Maclang sees the emergence of more economic hotspots in various parts of the country specifically in Mindanao.
9. Just like AEC will open up Thailand to all investors in the Asian Region, higher standards of property management will be applied. The same can be said here in the Philippines. The increase in real estate projects and its eventual completions will engender the adoption of higher standards of property management in all these various development and projects.
10. Finally, the advent of AEC will put pressure on the Philippine political establishment to lift the prohibition on foreigners from owning land through the amendment of the 1987 Constitution. The successful lifting of the prohibition will be most welcome to all foreign investors and the local capital market which will lead to a stupendous increase of FDI.
You can learn more about the impact of AEC in the “ASEAN Integration Forum” to be held in the afternoon of September 5, 2014 at the Real Estate Hub (REHub) Expo 2014 at the World Trade Center.
This year’s theme is “ASEAN Integration in Real Estate and Tourism to Go Glocal – Global and Local Opportunities.”