Transcript The Asia Opportunity

The Asia Opportunity
Nicholas Brooke, FRICS, SIOR
President, RICS
Presented at MIPIM 2004
Asian Bites - Overview
• Asia’s economies growing strongly, and SARS now just an
unpleasant memory
• China and India providing momentum for regional growth
• North and East Asia still outperforming south Asia although
Singapore recovering
• Election year - everywhere!
• Property markets mixed
• Currency and exchange rate concerns
Hong Kong – Cityscape
Economic Transformation
Wholesale, Retail,
Import, Export,
Restaurants and
Hotels
Financing, Insurance,
Real Estate and
Business
350
300
200
Community, Social
and Personal Services
150
Transport, Storage
and Communication
100
50
Manufacturing
0
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
GDP (HK$ bn)
250
Year
Hong Kong
• A vacuum in leadership but recovering nevertheless
• GDP: 5.4-6.2% Inflation: -0.6%
• Rents and prices rising, particularly in luxury residential
sector
• Increase in tourism with subsequent spending helping to lift
deflation
• Unemployment figures improving
• CEPA
India
India
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The next driver of growth?
GDP: 7.0% Inflation: 5.0%
Still major challenges in attracting FDI
IT and business services sectors continue to drive demand
for office space – making the most of highly skilled, English
speaking but low cost workforce
• Stable rents/prices due to high supply levels
Indonesia
Indonesia
• Precariously poised and still muddling through
• GDP: 4.9% Inflation: 6.5%
• Economy improved in late 2003 and interest rates have
fallen
• Limited progress in resolving bad debt issues
• Property markets showing signs of recovery with most
interest in the retail and luxury residential sectors
• FDI still showing little sign of improving
Japan
Japan
• An enigma and a puzzle to most, but moving out of
deflation despite itself
• GDP: 1.4% Inflation: -0.5%
• Office sector rents have declined by 30% for new stock and
15% for existing since early 2001
• Economic improvement could lead to increased
employment opportunities
• Demographic challenge of ageing population
Mainland China - Beijing
Mainland China - Beijing
Mainland China - Shanghai
Mainland China
• Huge engine of growth domestically and in Asia
• GDP: 7-8% Inflation: 3%
• FDI continues at high levels but domestic market now as
important as exports
• Olympics 2008, World Expo 2010
• Enormous amount of development – risk of markets
overheating
• Growing interest in second tier cities
• Potential for social unrest, under employment, shift to the
cities
Malaysia
Malaysia
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Potential dark horse
GDP: 4.4-5.0% Inflation: 1.8%
Improved utilisation rate in manufacturing capacity
Budgetary deficit still a concern
Office sector in KL performing steadily
Retail sector continues active although with high levels of
supply
• Jury still out on new leadership
Philippines
Philippines
• Circumspect scepticism as rich get richer and poor go
nowhere
• GDP: 4.2% Inflation: 4.5%
• Economy improved in late 2003 but concern over the
upcoming Presidential election in May
• Call centres still main driver of demand in the office sector,
again using low cost, English speaking workforce
• Rents expected to stabilise after 50% decline since 1997
• Concerns over election/succession issues
Singapore
Singapore
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On the mend but not yet out of the woods
GPD: 4.9-5.5% Inflation: 1.8%
Financial services giving impetus to economy
Office sector remains oversupplied due to weak demand
over recent years
• Take-up of industrial space improved in later 2003 and
investment in this sector is active
• Previous over reliance on electronics being replicated with
investment in biotech
• Role as entrepot under threat from Malaysia
South Korea
South Korea
• The star pupil in the Asia class
• GDP: 5.5% Inflation: 2.8%
• Fiscal stimuli have added to recent economic growth
although politics remain an issue
• Office sector stable in all three main Seoul markets with low
vacancy rates of 1-3%
• Significant investment in hard assets by international
institutional community
• US suspended disbelief and investing heavily
Taiwan
Taiwan
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Smoke and mirrors or the real thing?
GPD: 4.1-5.4% Inflation: 0.45%
Government investment in infrastructure driving expansion
Presidential elections could be disruptive – reunification
still high on the agenda
• Residential prices on the rise
• Essentially a local play for local players
Thailand
Thailand
• Leaner and more streetwise but bad habits continue
• GDP: 8% Inflation: 2.0%
• Perception v informed opinion as to whether recovery for
real
• PM Taksin has major following but are his policies
sustainable
• Office market still oversupplied but rentals slowly improving
Investor profile
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Still very cautious and risk averse
Essentially irr driven - 15% +
Focus on cbd office and quality residential
Growing interest in sub-centres around the region e.g.
Osaka. Incheon, Guangzhou, Ho Chi Minh City
Specialist players, either opportunistic or very selective e.g.
retail
Investor profile - contd
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Club mentality – safety in numbers
Realisation of size and scale of opportunity
Reality is that most international developers will be outmanoeuvred by local competition
Challenge of demonstrating added value – liquidity not in
short supply