Economic Landscape and Growth Trends
Southeast Asia is on track for significant economic growth in 2024, with an average GDP growth rate of 4.6%. Most countries in the region are experiencing a positive uptrend, except for Indonesia, which is already nearing pre-pandemic levels. Thailand, in particular, is set to benefit from a revival in its tourism sector, propelling its GDP growth forward.
According to Wong Xian Yang, Head of Research Singapore and SEA:
SEA presents a huge market opportunity that cannot be ignored. The region is underpinned by a youthful population of over 600 million, strategic position in global supply chains and increasing investments into the region which would spur economic growth and knowledge transfers.
SEA Economies poised to outperform
Trade Dynamics and Influential Partners
A noteworthy point discussed was the close ties between Southeast Asia and its top trading partners - the US, China, the EU and Japan. These partnerships play a pivotal role in shaping the region's economic trajectory and fostering international trade relationships that drive growth and development.
Real Estate Market Opportunities
The real estate sector in Southeast Asia is brimming with opportunities, especially in the office and industrial segments. The rental outlook for offices remains largely positive, fueled by demand from tech and finance industries. On the industrial front, the market is thriving due to factors like manufacturing, e-commerce activities, and the growing need for modern warehouses to support evolving supply chains.
A confidential CRE representative from a global e-commerce platform shared that there is a lot of growth and investment happening in SEA, particularly in Vietnam, Bangkok, and Malaysia. 80% of retail sales are still done in brick-and-mortar stores, representing a huge growth potential for e-commerce in SEA.
2024 Property Outlook
Source: Cushman & Wakefield Research
Chinese Investments and Market Expansion
A significant highlight is the increasing presence of Chinese companies in SEA across various sectors such as technology, new energy vehicles, retail, finance, and agriculture. From tech giants investing in local startups to solar photovoltaic companies establishing manufacturing bases, the influx of Chinese investments is reshaping the business backdrop in the region.
Shaun Brodie, Head of Research Content, Greater China added: “There are several factors fuelling Chinese investments into SEA. This includes navigating the continuously evolving geopolitical landscape, SEA’s increasing prominence as China’s key export market and rising cost pressures in China. Additionally, SEA has received the lion share of Chinese FDI to Belt and Road countries.”
Chinese brands are dominating the charts in the Neighbourhood Electric Vehicle (NEV) segment in the region
Source: Canalys, Cushman & Wakefield Research
The Belt and Road Initiative (BRI) further strengthens economic ties between China and ASEAN countries, providing opportunities for infrastructure development and market access. To date, South and SEA have received the lion’s share of Chinese outbound FDI to BRI countries.
The Belt and Road Initiative: ASEAN Infrastructure Projects
Note: Examined infrastructure projects include those under construction, those waiting for approval or those proposed.
Source: Silk Road Associates, Cushman & Wakefield Research
Sustainability and Market Resilience
The summit emphasized the growing importance of sustainability initiatives in Southeast Asia, driven by both occupier demand and government policies. Factors like green building certifications, flight to quality, and sustainability considerations are becoming key determinants for corporates looking to expand their presence in the region.
One of the CRE heads for a prominent tech company shared that sustainability is a business imperative, and many companies have made commitments in this regard. But beyond that, occupiers are looking at an entire ecosystem and how well the workplace can enable and enhance employee experience
Wong Huey Feng, Head of Integrated Portfolio Management, SEA, added: “Flight-to-quality relocations have been a growing trend, along with right-sizing exercises by multinational corporations (MNCs) seeking to modernise their traditional office setups. A notable trend across Southeast Asia is the increasing willingness of occupiers to explore Grade A offices with ESG features. Instead of solely focusing on location, location, and location, modern site selection emphasises features such as column-free office layouts for flexibility and productivity, sustainable design to reduce energy consumption, integrated building systems for monitoring environmental conditions, fibre optic infrastructure, comprehensive mobile coverage, smart water systems for recycling & harvesting rainwater, and etc.”
Challenges and Opportunities Ahead
While the economic outlook appears promising, the summit also highlighted potential challenges such as geopolitical tensions, supply chain disruptions, and energy price spikes that could impact the region's growth. Navigating these uncertainties while capitalizing on the emerging opportunities will be crucial for businesses operating in Southeast Asia.
Ashish Khanna, Director, Global Occupier Services added: “Southeast Asia is strategically positioned from a supply chain perspective. Continued investments in R&D, manufacturing, and innovation should propel SEA into a strong growth trajectory.”
A confidential client from a renowned information technology and networking services sector indicated that growth is witnessed in manufacturing, shared services, data centers, research & development, and engineering in Southeast Asia. Most MNCs see strong growth in SEA, though they are closely watching potential geopolitical issues that may emerge.
Wong Huey Feng, Head of Integrated Portfolio Management, added Southeast Asia is a vibrant region, and numerous significant activities are underway or have happened across the region.
- Dyson has selected the historic St James Power Station in Singapore as its new global headquarters location.
- Electrolux is closing its Singapore regional office and relocating its leadership team to Bangkok.
- Chinese companies, as part of the China + 1 strategy, are starting to manufacture EVs locally in Thailand. BYD, SAIC Motor, and Great Wall Motor are among those planning or already commencing production.
- Hyundai has inaugurated a high-tech electric vehicle factory in Singapore, aiming to play a pivotal role in its electrification strategy. Half of the tasks at the Hyundai Motor Group Innovation Center Singapore will be done by 200 robots, and it will use new production methods that move away from traditional conveyor belts.
- German company DB Schenker has opened a warehouse, RedLion2, in Singapore, representing an investment of over 100 million euros, significantly expanding its logistics footprint.
- Samsung Electronics has launched a $220 million research and development center in Hanoi, aiming to establish Vietnam as its key global strategic base due to its substantial smartphone production capacity, and Vietnam is an attractive alternative to China.
As Southeast Asia's economic landscape evolves and the dynamics of its real estate market shift, the influence of Chinese investments is increasingly felt. In navigating this landscape, businesses must prioritise staying informed and adaptable to ensure success in this vibrant and dynamic market. As the region progresses towards growth and sustainability, this adaptability will be crucial for businesses seeking to thrive.