Southeast Asia remains a bright spot amid a subdued global economic outlook, as ASEAN economies continue to grow at 5 percent per year compared to a global growth rate of 3.5 percent per year.
According to data released by real estate consultant JLL, Vietnam is a rising star in terms of real estate investment with strong opportunities in the office, residential and retail sectors. Occupancy of Grade A office space in Ho Chi Minh City exceeded 95 percent in Q4 2016, while retail occupancy in the city's CBD was over 92 percent for the same period. In the residential sector, the number of new apartments launched increased 46 percent from 2015 to 2016.
"The real estate sector in Vietnam has been hitting its stride since 2015, spurred in part by recent government reforms, such as stronger financial requirements for property developers and the relaxation of rules on foreign investment," says Chris Fossick, Managing Director, Singapore and Southeast Asia, JLL.
"With the rapid expansion of Vietnam's consumer market and the economy transitioning towards higher value activities, there have been significant levels of foreign direct investment and the construction of office, retail and hotel stock to meet growing demand. As a result, we're seeing strong demand for office space, particularly in the financial services, law, manufacturing, consumer goods and technology sectors."
Disbursed foreign direct investment (FDI) into Vietnam hit a record US$15.8 billion in 2016, while FDI into the real estate sector reached nearly US$1.7 billion at the end of 2016.
Improving outlook in other Southeast Asian markets
Elsewhere in the region, Indonesia's economy is expected to lift off, with the logistics sector garnering investor interest, according to a new report on Jakarta published by JLL. The sector has historically been held back by infrastructure and regulatory challenges. However, the Jokowi administration is making headway in improving infrastructure, easing bureaucracy and encouraging investment.
"The potential has been there for some time as Indonesia offers the scale in terms of demographics and population that is required for logistics to grow," says Mr Fossick. "With increased political and economic stability alongside a growth in demand for consumer products, e-commerce is on a growth trajectory meaning that demand for logistics space will follow."
Meanwhile, Singapore's attractiveness as a core market has become more compelling following a correction in capital values. Gross domestic product (GDP) is expected to grow 2.3 percent in 2017, recovering slightly from 1.8 percent in 2016.
"While demand for office, retail and food & beverage real estate slowed between 2012 and 2015, we believe this bottomed out in 2016 and we expect a modest recovery in the next couple of years. In particular, the prices of prime residential properties remain attractive to investors as compared to other global cities."
Download the report 'Jakarta until 2024: offices and industrial may outperform' here.
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