Southeast Asia Outlook 2023

BOUNC I NG BAC K S T RONG E R

A REOPENING BOOST I M PAC T O F C H I NA’ S R EO P E N I N G

Southeast Asia (SEA) is expected to be one of the leading sources of growth for the global economy as the United States and Europe tiptoe around a potential recession. SEA is expected to grow by 4.7% yoy in 2023, close to pre-pandemic average growth rates of about 5% annually.

GROSS DOMESTIC PRODUCT (GDP)

The pace of economic growth differs across SEA, depending on their economic structure and stage of reopening. The Philippines and Vietnam’s economies are expected to lead growth in 2023, with growth at 7.1% and 5.8% respectively. The Philippines economy would be aided by tourism recovery and a sustained growth in its Business Process Outsourcing industry which tends to do well during the economic downturn. Vietnam continues to benefit from trade diversification trends though export growth is showing signs of tempering off due to a global slowdown. Thailand is the only ASEAN economy that would see stronger GDP growth in 2023, compared to 2022, amidst an expected strong tourism uplift as China reopens. Pre-pandemic, Chinese visitors to Thailand contributed to over a third of the total Chinese visitors to SEA. The Singapore and Malaysia economies would cool off after a strong economic rebound in 2021 and 2022. Similarly, the Purchasing Managers’ Index (PMI) paints a mixed picture across SEA economies, with dimmer manufacturers confidence in trade-oriented economies. Singapore (26%), Vietnam (24%) and Malaysia (17%) collectively drove about 67% of

outside-of-SEA exports, based on 2021 trade data. The rising adoption of electronic vehicles bodes well for manufacturers in Indonesia and Thailand is an automotive hub and well-positioned to tap on EV production trends. While Indonesia has seen higher planned investments into both mining and downstream industries due to its large reserves of Nickel, a key metal for EV batteries. The reopening of China would be a catalyst for SEA economies given China is a key export destination for SEA. Higher consumption demand out of China would bode well for commercial, industrial and residential investments in the region. Hotel and retail assets could see the strongest uplift in the near term.

Source: Moody’s Analytics, Cushman & Wakefield Research

1

Southeast Asia Outlook 2023: Bouncing Back Stronger | 2

PURCHASING MANAGERS’ INDEX

PROPORTION OF EXTRA-SOUTHEAST ASIA EXPORTS

Source: Moody’s Analytics, Cushman & Wakefield Research

Source: ASEAN Statistic Yearbook 2022, Cushman & Wakefield Research

3

Southeast Asia Outlook 2023: Bouncing Back Stronger | 4

SIGNS OF SLOWING INFLATION

SIGNS OF OPTIMISM COO L I N G I N F L AT I ON T H O U G H I N T E R E S T R AT E S MAY S TAY H I G H

Source: Moody’s Analytics, Cushman & Wakefield Research

While inflation has shot up across SEA in 2022, there are signs that inflation has peaked. Based on Consumer Price Index data, consumer prices across SEA have climbed at a much slower rate in the last quarter of 2022.

MONETARY POLICY RATES

EXPECTED INFLATION FOR 2023 (B)

EXCHANGE RATE VS USD YOY % CHG (DEC 22)

POLICY RATE (DEC 21)

POLICY RATE (DEC 22) (A)

REAL POLICY RATE (A-B)

COUNTRY

TYPE

Overnight Lending Rate

Inflationary pressures in SEA are expected to moderate in 2023 with a milder pace of US rate hikes in 2023, coupled with an unwinding of supply chain disruptions due to softening global consumer demand growth. However, higher consumption demand from China could lend strength to current inflation levels. Nonetheless, inflation could remain at heightened levels and there is scope for more interest hikes in SEA, albeit the pace of increase is expected to be slower. Thailand and Singapore forward-looking real policy rates remain in negative territory. A negative real policy rate could incentivise higher spending in the economy that further pushes up inflation. Also, the rapid rise of US interest rates in 2022, has fuelled a strong dollar leading to currency depreciation for SEA. Excluding Singapore, the

currency depreciation in SEA was about 7% to 13% in 2022. Continued currency depreciation would increase risks to economic stability, although most of SEA external debt levels relative to GDP remain far lower than historical levels. Negative real policy rates and continued currency depreciation would fuel further interest rate hikes. Nonetheless, we remain sanguine that the worst of interest rate hikes are over, and the upward interest rate trend is likely to be gradual. Also, a weaker currency could bolster exports and encourage higher foreign property investment. As the outlook on interest rates clears, we should see investment demand picking up towards 2024.

2.0%

5.2%

5.0%

0.2%

-13.0%

Philippines

Singapore

SORA - Overnight

0.2%

3.2%

5.0%

-1.8%

-1.5%

Central Bank Policy Rate

Indonesia

3.5%

5.5%

4.2%

1.3%

-9.1%

Central Bank Policy Rate

Thailand

0.5%

1.2%

3.0%

-1.8%

-7.5%

Refinancing Rate

Vietnam

4.0%

6.3%

3.3%

3.0%

-6.6%

Central Bank Rate

Malaysia

1.8%

2.8%

2.2%

0.6%

-8.4%

Source: Moody’s Analytics, Cushman & Wakefield Research

5

Southeast Asia Outlook 2023: Bouncing Back Stronger | 6

PROMISING LONG TERM PROSPECTS A S T RON G D EC AD E A H E AD

Notwithstanding short-term challenges, SEA long-term

POPULATION AND GDP GROWTH

Both internal and external trade in SEA are poised to grow. Trade volumes in SEA has increased over the years, particularly in Vietnam whose trade goods have grown by 12.7% annually since 2012. Singapore could also see stronger future trade volumes, especially for high-value trade goods, in view of a record high fixed asset investments in 2022, particularly from the electronics sector. The ongoing diversification of supply chains from China is expected to continue albeit at a gradual pace. The institutionalisation of real estate in emerging SEA could accelerate as development policies, ease of doing business and government effectiveness improve, especially in Vietnam and Indonesia. Vietnam is a favoured market amongst investors and has seen rising investments from institutional investors. Indonesia and Philippines are markets with potential, though these markets remain relatively illiquid. Finally, sustainability is a rising opportunity in SEA as the major SEA economies set “green building” targets. The green building market could be worth US$20-25 billion by 2030, according to the Southeast Asia’s Green Economy 2022 Report.

Increasing urbanisation fuelled by digital transformation would create a huge market opportunity that would drive property demand in SEA. The digital economy in SEA is expected to grow by 20% annually from 2023 to 2025, according to a study by Google, Temasek and Bain & Company in 2022. SEA has also benefited from current global trade trends and geopolitical environment which has driven a diversification of supply chains and an expected increase in trade regionalisation. Recent trade agreements and frameworks would support further trade growth in SEA. For example, the Regional Comprehensive Economic Partnership (RCEP) would eliminate tariffs on more than 90% of goods over the next 10-15 years. The US-led Indo Pacific Economic Framework was announced in 2022 and could potentially drive higher trade for SEA. Trade-oriented economies such as Vietnam and Malaysia should benefit strongly. prospects looks promising. The SEA economy is huge and has the third largest population after China and India.

Source: Moody’s Analytics, Cushman & Wakefield Research Note: Size of bubble denotes Size of economy

7

Southeast Asia Outlook 2023: Bouncing Back Stronger | 8

RISING URBANISATION

RISING TRADE

Source: ASEAN Statistic Yearbook 2022, Cushman & Wakefield Research

Source: ASEAN Statistic Yearbook 2022, Cushman & Wakefield Research

9

Southeast Asia Outlook 2023: Bouncing Back Stronger | 10

INVESTMENT SALES REACH A DECADE HIGH BO U N C I N G BAC K F ROM T H E PAN D EM I C

Despite a challenging investment environment amidst rising inflation and interest rates, 2022 was a bumper year for SEA property investment sales. Total investment sales in 2022 reached US$18.8 billion, a decade high.

RISING INVESTMENT SALES

Investment volumes continues to be dominated by Singapore (83% of total investment sales in SEA), as capital embarked on a flight to safety. Notable deals included Link REIT’s entry into the Singapore market via the acquisition of two top-tier suburban retail malls, Kenedix’s acquisition of a 50% stake in a CBD Grade A office development. Niche industrial assets remain sought after as evidenced by acquisitions of cold chain and self storage assets in 2022. While Singapore continues to lead investment sales, investment interest in Vietnam and Indonesia, have grown with 2022 investment sales surpassing their 10-year average. Philippines and Thailand investment sales have remained steady. While investment sales in Malaysia have fallen, potentially due to higher political risks, it remains the second largest investment sales market after Singapore. Excluding Singapore, investment sales in SEA have continued to improve, reaching $US 3.3b in 2022, about 19.4% higher y-o-y. Not surprisingly, investors are betting on supply chain diversification from

China and a rise in alternative manufacturing hubs in SEA, and this is seen by a general uptrend in industrial investment sales. SEA industrial investment sales, excluding Singapore, has doubled to US$1.22b in 2022, as compared to only $US 0.6b in 2013. Office transactions as well has picked up, with a stronger return to the office in Asian economies as compared to western economies. Hotel transactions have taken a backseat but could recover strongly in 2023 amidst the anticipated return of Chinese outbound tourists. Given the subdued economic climate, investment sales in 2023 are expected to temper off from 2022 record levels, as investors continue to take a cautious stance. Nonetheless, the long-term fundamentals remain unchanged, and SEA offers a wide spectrum of investment opportunities in a fast-growing region.

Source: RCA, Cushman & Wakefield Research Note: Excluding development sites

11

Southeast Asia Outlook 2023: Bouncing Back Stronger | 12

INVESTMENT SALES BY PROPERTY TYPE 2022 (EXCLUDING SINGAPORE)

MARKET DEPTH

Singapore 10 YR Avg: $9.9b 2022: $15.5b

Source: RCA, Cushman & Wakefield Research Note: Excluding development sites

Source: RCA, Cushman & Wakefield Research Note: Excluding development sites

13

Southeast Asia Outlook 2023: Bouncing Back Stronger | 14

2023 OUTLOOK P O S I T I V E R E N TA L G ROW T H AC RO S S MO S T MA R K E T S

OPPORTUNITIES I N D U S T R I A L , O F F I C E S AN D R E S I D E N T I A L A R E K E Y P I C K S

VIETNAM: HO CHI MINH

VIETNAM: HO CHI MINH

VIETNAM: HANOI

2023 OUTLOOK SINGAPORE MALAYSIA INDONESIA THAILAND PHILIPPINES

VIETNAM: HANOI

SINGAPORE

MALAYSIA

INDONESIA THAILAND PHILIPPINES

      

1

RENT

CBD GRADE A OFFICES

      

CAPITAL VALUES

Industrial

Industrial

Residential: Landed Homes

Hotel

Industrial

Office

Office

      

2

RENT

RETAIL

Office

Office

Industrial

Industrial

Office

Industrial: Ready Built Factories

Industrial: Ready Built Warehouses

      

CAPITAL VALUES

3

      

RENT

INDUSTRIAL

Residential: Luxury Non-landed

Retail

Retail

Data Centres

Residential: Luxury Non-landed

Residential

Residential

      

CAPITAL VALUES

       LANDED HOMES

RESIDENTIAL (NON LANDED)

CAPITAL VALUES

Note: Opportunities are not ranked in any order

Note: Segments reference key submarkets in each country. For example, Singapore retail refers to Orchard prime retail. More details indicated on the market snapshots.

15

Southeast Asia Outlook 2023: Bouncing Back Stronger | 16

MARKET STATISTICS

OFFICE (CBD GRADE A)

RETAIL (ORCHARD)

LOGISTICS (ISLANDWIDE)

RESIDENTIAL (LUXURY NON-LANDED)

$10.44

$33.76*

$1.63

$5.50

Rents Q4 2022 (SGD psf pm) 2023 Forecast

   

4.5%

9.8%

8.3%

7.9%

Vacancy Q4 2022 2023 Forecast

SINGAPORE MA R K E T S NA P S H OT

   

Current Inventory

31.2 Million SF

7.4 Million SF

122 Million SF

71,681 units

Pipeline Supply (2023-2027)

2.8 Million SF

0.06 Million SF

7.8 Million SF

10,712 units

% of Current Inventory (Pipeline Supply over Current Inventory)

ECONOMY

9.0%

0.8%

6.4%

14.9%

   

Singapore’s open economy will be exposed to the global economic slowdown, and GDP growth is expected to decelerate to 0.5% to 2.5% in 2023. While the manufacturing sector is expected to slow as exports fall due to a weaker external demand and a cooling of the semiconductor boom, this would be mitigated by resilient and recovering growth in service producing industries due to a sustained relocation of businesses towards Singapore, and the reopening of China to bring about positive spillover effects.

Capital Value Outlook

* Prime units: Retail units that enjoy strong footfalls with good frontage and accessibility

RECENT SIGNIFICANT DEALS

INVESTMENT OPPORTUNITIES

PROPERTY NAME

PROPERTY TYPE

PRICE (MIL USD)**

1. INDUSTRIAL: Market demand supply dynamics remain promising with resilient demand and tight market supply as most new warehouse stocks are seeing strong pre-commitments. Aside from logistics, cold chain and life science are niche markets with an imbalance in supply and demand dynamics, with growing demand and limited supply. Sale & leaseback and value add opportunities remain highly sought after. 2. OFFICE: The gap in buyer-seller expectations persists with limited repricing in the market. However, private investors stay active and the strata office market and shophouse markets remain active and are sought after by private wealth and North-Asia Investors. The reopening of China could propel demand further. While overall office demand is expected to slow in 2023, the supply pipeline

remains tight and Grade A office vacancy rates are expected to remain low. Investors looking for better returns can consider taking on vacancy risk and look at value-add or opportunistic strategies. 3. LUXURY HOMES: While private residential prices have soared, luxury home prices have lagged her city-fringe and suburban counterparts. The price gap between luxury vis-a-vis city-fringe and suburban homes have tightened below their 10-year averages. With islandwide home prices at historical highs and still expected to trend higher in 2023, luxury home prices particularly could surprise on the upside.

BUYER

SELLER

YIELD (%)

DATE

Meyer Park Condo

United Venture Development

Collective Sale

Residential

298

-

Q1 2023

Joint Venture between Frasers Centrepoint Trust and Frasers Property

Mercatus Co-operative Limited Mercatus Co-operative Limited

NEX (50% Stake)

Retail

790

4.8%

Q1 2023

Jurong Point & Swing By @ Thomson Plaza

Link REIT

Retail

1,591

4.9%

Q4 2022

Lazada One (50% Stake)

ARA Asset Management

Kenedix

Office

258

N/A

Q4 2022

1 Buroh Lane

Ascendas REIT

PGIM Real Estate

Industrial

146

7%

Q3 2022

Source: RCA, Cushman & Wakefield Research ** Some deals reflect a pro-rated proportion of their latest valuation

17

Southeast Asia Outlook 2023: Bouncing Back Stronger | 18

MARKET STATISTICS

RETAIL (SHOPPING CENTER)

READY-BUILT FACTORIES, (GREATER HCMC)

READY-BUILT WAREHOUSE (GREATER HCMC)

RESIDENTIAL (APT MID-END TO HIGH-END)

OFFICE (GRADE A&B)

$3.70 *

$4.40 *

$0.43

$0.45

Rents Q4 2022 (USD psf pm) 2023 Forecast

Selling Price: $253 psf **

   

Vacancy/Sales Rate Q4 2022 2023 Forecast

7.7%

12.4%

20%

25%

Sales Rate: 50.9%

VIETNAM: HO CHI MINH MA R K E T S NA P S H OT

    

Current Inventory

15.3 Million SF

10.1 Million SF

51.8 Million SF

54 Million SF

201,408 Units

Pipeline Supply (2023-2027)

2.8 Million SF

3.0 Million SF

2.1 Million SF

8.1 Million SF

70,071 Units

% of Current Inventory (Pipeline Supply over Current Inventory)

ECONOMY

18.4%

29.9%

4%

15%

35%

    

2022 witnessed a recovery of Vietnam’s economy, with GDP growth recorded at 8%, exceeding previous forecast by most economic institutions (6.5 to 7.5%). In 2023, despite gloomy global economic outlook, Vietnam’s economy is still expected to maintain stable growth as GDP growth is forecast between 5.9% to 7.3%. However, caution and uncertainty remains the general sentiment coming from various anticipated challenges such as Vietnam’s reliance on trade activity with global partners, increasing inflationary pressure, and tightening monetary and fiscal policies in many countries.

Capital Value Outlook

* Office and retail rentals are inclusive of service charge ** Primary selling price

RECENT SIGNIFICANT DEALS

INVESTMENT OPPORTUNITIES

PROPERTY NAME

PROPERTY TYPE

PRICE (MIL USD)

BUYER

SELLER

DATE

1. OFFICE: Office demand is expected to trend higher in 2023, albeit at a slower pace especially for high-quality buildings in prime areas. Recent legal revision and market incidents have caused delayed completion of some future supply at prime locations. New business hubs are in development outside the CBD, moving toward the South (District 7) and the East (Thu Duc City) where new Grade A projects are distributed or expected to complete within the upcoming years. Investors should keep an eye on the developing legal framework of real estate and enter the market via joint ventures with well-established domestic developers. 2. READY-BUILT-FACTORIES: The notable investment flow in 2022 has been mainly focused on Ready-Built Warehouses (RBW) project development. With greater HCMC

area as a key manufacturing hub coupled with continued investment flows and higher manufacturing output, as well as increasing land use fees, there is room for potential future Ready-Built Factory (RBF) development targeting small and medium manufacturers. Opportunistic investors could leverage on development opportunities as there is an expected adjustment period for RBF demand 3. RESIDENTIAL: Ultra-luxury and Luxury sector in HCMC recently observed an oversupply, with a slow down in both demand and market sentiment. Meanwhile, there is still high demand towards Mid-end and High-end apartments, coming from both occupiers and investment buyers. Therefore, there is still potential for development in these sectors. to catch up to that of RBW’s; therefore stabilizing assets in a short time frame.

Land at Binh Duong Province

Sembcorp Industries, Becamex

Commercial - Industrial

Giant Manufacturing

13

Q3 2022

Future Data Center

Gaw Capital

N/A

Data Center

N/A

Q2 2022

Land at Binh Duong Province

Mixed Development

Gamuda Land

Becamex

59

Q2 2022

Source: RCA, Cushman & Wakefield Research

19

Southeast Asia Outlook 2023: Bouncing Back Stronger | 20

MARKET STATISTICS

RETAIL (SHOPPING CENTER)

READY-BUILT FACTORIES, (HANOI)

READY-BUILT WAREHOUSE (HANOI)

RESIDENTIAL APARTMENTS (MID END TO HIGH-END)

OFFICE (GRADE A&B)

$2.30 *

$3.80 *

$0.43

$0.42

Rents Q4 2022 (USD psf pm) 2023 Forecast

Selling Price: $173.3 psf **

   

VIETNAM: HANOI MA R K E T S NA P S H OT

Vacancy/Sales Rate Q4 2022 2023 Forecast

12.9%

12.9%

17%

27%

Sales Rate: 51.4%

    

Current Inventory

17.6 Million SF

12.1 Million SF

29.6 Million SF

21 Million SF

194,045 Units

Pipeline Supply (2023-2027)

5.0 Million SF

3.6 Million SF

2.9 Million SF

6 Million SF

70,959 Units

ECONOMY

% of Current Inventory (Pipeline Supply over Current Inventory)

28.5%

29.4%

10%

29%

36.5%

2022 witnessed a recovery of Vietnam’s economy, with GDP growth recorded at 8%, exceeding previous forecast by most economic institutions (6.5-7.5%). In 2023, despite gloomy global economic outlook, Vietnam’s economy is still expected to maintain stable growth as GDP growth is forecast between 5.9% – 7.3%. However, caution and uncertainty remains the general sentiment coming from various anticipated challenges such as Vietnam’s reliance on trade activity with global partners, increasing inflationary pressure, and tightening monetary and fiscal policies in many countries.

    

Capital Value Outlook

* Office and retail rentals are inclusive of service charge ** Primary Selling Price

INVESTMENT OPPORTUNITIES

RECENT SIGNIFICANT DEALS

1. OFFICE: With limited space left in the CBD, new business hubs that are still in development has increased in popularity among developers and tenants alike. Expectant new projects in upcoming years are also distributed on non-CBD area, especially in the western urban districts. High-quality supply that can satisfy large-scale lease demand becomes more favourable options for companies that consider and can afford expansion. Interested investors should look out for the upcoming revision of Land law, as well as focus on developing high-quality projects that can attract tenants and deliver higher potential for returns on investment. 2. READY-BUILT-WAREHOUSES: Northern Vietnam is positioning as “China +1” destination with expanding key manufacturers, improving connecting routes, and enlarging logistics ports are the main factors driving industrial demands into the region; where international

diplomatic conflict helps to catalyst further demands, as Vietnam is the preferred substitute re-location. While the majority of 2023 is expected to decelerate Vietnam’s industrial growth due to inflation and market uncertainties, the pressure is expected to lighten by year-end. Investors looking for opportunistic strategies should consider this period as there are many divesting assets to acquire and to prepare for the incoming market expansion. 3. RESIDENTIAL: Due to the Government’s credit control on Vietnam’s real estate industry, rising interest rate, project legal issues, and bond issuance tightening, Hanoi’s residential market is expected to experience a down trend in 2023. However, segments close to real housing demand such as mid-end and high-end still received high attention in the market.

PROPERTY NAME

PROPERTY TYPE

PRICE (MIL USD)

BUYER

SELLER

DATE

CN03 Plot at Hanoi Supporting Industry Industrial Park

N&G Investment and Development Corporation

Inventec Corporation

Industrial Land

23

Q4 2022

Parcel of Land at Hoai Duc

Keppel Land

Phu Long RE Co

Residential Land

116

Q3 2022

Viva Land Investment & Development Joint Stock Company

Mitsubishi Estate, CapitaLand Development

Capital Place

Office

557

Q1 2022

Source: RCA, Cushman & Wakefield Research

21

Southeast Asia Outlook 2023: Bouncing Back Stronger | 22

THAILAND: BANGKOK MA R K E T S NA P S H OT

MARKET STATISTICS

RESIDENTIAL (LUXURY NON LANDED)

OFFICE (CBD GRADE A)

RETAIL (CBD GRADE A)

LOGISTICS (WAREHOUSE)

HOTELS (BANGKOK)

$3.06

$0.41

Avg. Daily Rate: $103

Rents Q4 2022 (USD psf pm) 2023 Forecast

         

ECONOMY

2023 Vacancy Forecast

The Thai economy is expected to expand up to 3.7% in 2023, following a 2.6% growth in 2022. This growth will be fuelled by the full return of international tourism, increased private consumption, further export resilience and strong manufacturing industries benefiting from Thailand’s pro-investment incentives. The country is seeing itself move up the value chain in Asia Pacific’s supply chain and is experiencing inbound investment as companies seek to diversify their supply chains and production networks. The Bank of Thailand is forecasting headline inflation to average at 3.0% in 2023, compared to the 2022 average of 6.5%. The policy rate increased to 1.25% at the end of 2022 then up to 1.50% in January 2023, up from 0.5% at the beginning of 2022. Base interest rates are expected to rise to 2% by the end of 2023.

    

Capital Value Outlook

INVESTMENT OPPORTUNITIES

1. HOTEL: The hotel business will enjoy a steadily improving outlook over the next year. The number of foreign arrivals will build at an accelerating rate with 25.5 million arrivals expected in 2023. Local investors are seeking opportunities to acquire independent hotels suitable for conversion, repositioning and offering to large operators, while foreign capital continues to enter the market primarily through joint ventures with local groups. This trend is expected to continue across Thailand, especially in prime tourist provinces where trends such as wellness and medical tourism are becoming more prominent, as groups seek to offer differentiated products to get ahead in the market. 2. INDUSTRIAL: The industrial and logistics sector is one of the primary engines driving the country’s economy. Thailand and specifically the EEC area is becoming a preferred location for multinational companies as supply chain

conditions. High technology sectors including electric vehicle production, automobile parts, electronics, healthcare, pharmaceuticals, and IT are growing as Thailand varies its manufacturing footprint and climbs the value chain. 3. INDUSTRIAL-DATA CENTRES: This up and-coming asset class has seen growth over the last 24 months with the country seeing increased public and private cloud migration, internet dependency, and demands for increased bandwidth. Thailand has 108 MW of potential IT load currently planned or under construction as local players further establish themselves in market, and international operators capitalise on I-EAT and Thai Board of Investment incentives, such as CIT exemptions, and the ability to own land. Demand for eligible land is strong. Operators and investors are proactively seeking partnerships with local groups with access to land in Bangkok, Samut Prakan and the EEC area.

RECENT SIGNIFICANT DEALS

PROPERTY NAME

PROPERTY TYPE

PRICE (MIL USD)

CITY

BUYER

SELLER

DATE

Land on Wireless Road

Swire Properties (Minority)

HKR International

Development Land

Bangkok

70.9

Q1 2023

Choengmon Real Estate Company Limited

Kimpton Koh Samui

Surat Thani

Liu Chong Hing Inv

Hotel

73.5

Q4 2021

Source: RCA, Cushman & Wakefield Research

diversification continues, owing to strong infrastructure and favourable investment

23

Southeast Asia Outlook 2023: Bouncing Back Stronger | 24

MARKET STATISTICS

OFFICE (CBD GRADE A)

WAREHOUSE (GREATER JAKARTA)

LANDED-RESIDENTIAL (GREATER JAKARTA)

RETAIL (CBD)

13.14

63.40

4.76

Base Rents/Price Q4 2022 (USD psm pm) 2023 Forecast

Selling Price: 815 psm

  

INDONESIA: GREATER JAKARTA MA R K E T S NA P S H OT

28.8%

22.6%

10.9%

Sales Rate: 94.5%

Vacancy/Sales Rate Q4 2022 2023 Forecast

   

Current Inventory

5.1 Million sqm

1 Million sqm

2.1 Million sqm

416,500 Units

Pipeline Supply (2023-2027)

0.3 Million sqm

0.05 Million sqm

0.8 Million sqm

62,000 Units

% of Current Inventory (Pipeline Supply over Current Inventory)

ECONOMY

6.0%

4.6%

38.4%

14.8%

   

In the face of a global slowdown and inflationary pressures, the central bank forecasts Indonesian growth of 4.5% to 5.3% in 2023. This expansion is primarily driven by increased consumer expenditures, increased business activity, and improved mobility as a result of fewer COVID-19 restrictions in the country. However, following the high inflation that drove price increases in 2022, as well as the planned election in 2024, the Rupiah is still expected to depreciate to some extent between 2023 and 2024.

Capital Value Outlook

*Prime units: Retail units that enjoy strong footfalls with good frontage and accessibility

RECENT SIGNIFICANT DEALS

INVESTMENT OPPORTUNITIES

1. LANDED HOMES: Following the pandemic, market confidence in landed residential products has steadily improved, with the Middle and Upper segments accounting for the majority of demand. Driven by the primary needs of Indonesia’s large population, an increase in general purchasing power post pandemic, and the fact that most demand comes from end-users purchasing their first homes, landed residential demand is projected to continue to be relatively steady in 2023, despite the global economic concern. 2. INDUSTRIAL AND WAREHOUSE: The availability of industrial land in favourable area becomes more limited, and the demand from high-tech industries such as data centers, and electric vehicles remain. Aside from the low vacancy rate of the warehouse market and growing logistics sector, and there is increasing demand from other sectors

such as manufacturing, raw materials, and automotive. Rent is expected to be stable due to high market competition, and incoming new supplies, which indicates the warehouse market is still considered attractive for investors. 3. RETAIL: Although economic growth accelerated during the last quarter of 2022, the on-going elevated consumer price, inflation, and rising interest rates are expected to balance off household spending in the subsequent year. Positive net absorption of retail space is expected to continue in 2023 along with the return of visitor traffic to pre pandemic level. Rental rate and service charge are expected to remain stable in 2023 as landlords will continue their efforts to maintain and attract new retailers.

PROPERTY NAME

PROPERTY TYPE

PRICE (MIL USD)

BUYER

SELLER

DATE

Central Park Mall Jakarta (71% stake)

Agung Podomoro Land TBK

JOIN, Hankyu Hanshin

Retail

201.5

Q3 2022

Portfolio of 4 Data Centers

Indosat Ooredoo and Lintasarta JV

BDx

Data Center

293

Q2 2022

Source: RCA, Cushman & Wakefield Research

25

Southeast Asia Outlook 2023: Bouncing Back Stronger | 26

MARKET STATISTICS

INDUSTRIAL (INDUSTRIAL LAND MEGA MANILA)

OFFICE (CBD GRADE A)

RETAIL (SHOPPING CENTERS)

RESIDENTIAL (LUXURY NON-LANDED)

$2.10

$3.00

$0.40*

$2.00

Rents Q4 2022 (PHP psf pm) 2023 Forecast

   

16.32%

20.0%

5.0%

16.0%

Vacancy Q4 2022 2023 Forecast

PHILIPPINES: MANILA MA R K E T S NA P S H OT

   

Current Inventory

98.9 Million SF

101.8 Million SF

5,607 Hectares

388,000 Units

Pipeline Supply (2023-2027)

13.6 Million SF

9.1 Million SF

410 Hectares

15,000 Units

% of Current Inventory (Pipeline Supply over Current Inventory)

ECONOMY

13.7%

9.0%

7.3%

3.8%

   

The Philippine's GDP continued its growth trajectory, recording a full-year growth of 7.6% in 2022 from 5.8% a year ago. The latest growth is the fastest since 1976 and surpasses the government’s growth target range for the year of 6.5%-7.5%, owing to the buoyant household spending and services sector which offset the slower growth of the industry sectors, particularly in the manufacturing and construction industries. For 2023, the growth target has been set within the range of 6.0%-7.0%, taking into consideration the effects of external headwinds and the increasing price levels.

Capital Value Outlook

*Selling price of land in industrial estates

RECENT SIGNIFICANT DEALS

INVESTMENT OPPORTUNITIES

PROPERTY NAME

PROPERTY TYPE

PRICE (MIL USD)

BUYER

SELLER

DATE

1. INDUSTRIAL: Despite the downward trend in the manufacturing and external trade segments, the growth of logistics facilities and industrial estates is being driven by the continuous expansion of the online economy. This is spurring growth of industrial assets in nearby provinces of Metro Manila, particularly in the areas of Calabarzon and Central Luzon. Growth prospects remain buoyant with great opportunities seen in cold storage facilities, data centers, and fulfillment centers, among others. 2. OFFICE: The recovery of the office market remains on track, with only a few buildings posting slight downward rental adjustments. However, rental flexibility depends on the amount of space to be taken by prospective tenants. Positive rental growth is likely to happen in 2023, as delayed prospects are

expected to get a green light this year, giving confidence to developers and landlords to test resistance levels on the pre-pandemic published rates, while the overall market vacancy tapers down. 3. LUXURY HOMES: Demand for luxury residential condominiums in key business districts remain strong as business activities have begun to normalise. The higher interest rates are likely to have minimal effect on the high-end residential segment, as the target market continues to place premium on high quality project and often without the need for any leverage.

Cyberscape Gamma

RL Commercial REIT

Robinsons Land

Office

112.2

Q2 2022

A.T. Yuchengco Centre

House of Investments Inc

RCBC

Office

115.6

Q2 2022

Source: RCA, Cushman & Wakefield Research

27

Southeast Asia Outlook 2023: Bouncing Back Stronger | 28

MARKET STATISTICS

OFFICE GRADE A (KL CBD)

RETAIL (KL CBD PRIME)

INDUSTRIAL (GREATER KL)

 6.72

 134  19%

 0.80 - 4.20

Rents Q4 2022 (MYR psf pm) 2023 Forecast

 28.6%

Vacancy Q4 2022 2023 Forecast

N/A

MALAYSIA: KUALA LUMPUR MA R K E T S NA P S H OT

Current Inventory

58.8 Million SF

17.4 Million SF

46,762 Units

Pipeline Supply (2023-2027)

15.2 Million SF

3.7 Million SF

3,225 Units

% of Current Inventory (Pipeline Supply over Current Inventory)

25.91%

21.08%

6.9%







Capital Value Outlook

ECONOMY

*Prime units: Retail units that enjoy strong footfalls with good frontage and accessibility

Malaysia’s economic performance boosted to 8.7% in 2022 as compared to 3.1% in the previous year. This is the highest annual growth recorded within the period of 22 years (2000: 8.9%) mainly attributed by strong commodity exports. Looking into 2023, the fading of base effects and pent-up demand, tighter credit conditions, and a weakening global growth outlook are all expected to pose significant growth headwinds that are projected to slow Malaysia’s GDP growth to 4%.

RECENT SIGNIFICANT DEALS

PROPERTY NAME

PROPERTY TYPE

PRICE (MIL USD)

BUYER

SELLER

DATE

INVESTMENT OPPORTUNITIES

Parcel 1 & 2, Puchong Perdana

Mah Sing Group Berhad

Millennium Acres Sdn Bhd

Industrial

19.5

Q1 2023

1. INDUSTRIAL: The market's demand-supply dynamics continue to be promising, with the logistics sub-sector remaining in focus as fresh supply enters the market to meet the current and future logistic operators' needs. Although there was a notable slowdown in the first half of 2023, the mining and manufacturing sectors are expected to remain a major contributor to Malaysia's industrial production. 2. OFFICE: Due to high supply versus stagnant rental demand, the office market remains saturated. While flight-to-quality relocation is still the most popular strategy, occupiers are set to remain cost-conscious as economic worries mount alongside the pandemic

driven digital and e-commerce trend. Slower economic growth, rising inflation, and concerns about a possible recession in 2023 could all weigh on leasing demand. 3. RETAIL: Despite inflationary pressures that may reduce consumers’ disposable income and spending, the retail sector may continue its recovery path, which is supported by an improved labour market, fiscal incentives, and tourism activities. The reopening of China may result an upsurge in tourist arrivals which can catalyst footfalls and sales further especially in the malls that are favoured by Chinese tourists.

Eco Business Park V (9.81 Acre of land)

Paragon Pinnacle Sdn Bhd

SKB Shutters Corp Sdn Bhd

Industrial

8.2

Q3 2022

Wisma TM Taman Desa

Q3 2022

JAG Land Sdn Bhd

Menara ABS Bhd

Office

8

Warehouse facility in Pelabuhan Tanjung Pelepas (PTP) in Johor

Equalbase PTP Sdn Bhd

Axis REIT

Industrial

92.6

Q2 2022

Empire City Mall (20% stake)

Mammoth Empire, Exsim Development

Rubberex Corp

Retail

47.6

Q4 2021

Source: Bursa Malaysia Announcement, IVPS-C&W Research

29

Southeast Asia Outlook 2023: Bouncing Back Stronger | 30

REGIONAL BUSINESS CONTACT:

ANSHUL JAIN Head of APAC Tenant Representation

GORDON MARSDEN Head of Capital Markets Asia Pacific gordon.marsden@cushwake.com

and Managing Director, India & Southeast Asia anshul.jain@ap.cushwake.com DENNIS YEO Head of Investor Services and Logistics & Industrial Asia Pacific dennis.yeo@cushwake.com

BUSINESS:

RESEARCH & CONSULTANCY:

SHAUN POH Head of Capital Markets Singapore shaun.poh@ap.cushwake.com

XIAN YANG WONG Head of Research Singapore & Southeast Asia Xianyang.wong@cushwake.com

TRANG BUI Country Head Vietnam bui.trang@cushwake.com

CUC LE MRICS Head of Advisory Vietnam thucuc.le@cushwake.com

LINI DJAFAR Managing Director Indonesia lini.djafar@ap.cushwake.com

ARIEF RAHARDJO Head of Strategic Consulting Indonesia arief.rahardjo@ap.cushwake.com

GARETH POWELL Country Head Thailand gareth.powell@cushwake.com

SARAWUT TIKHACHON Senior Market Analyst Thailand sarawut.tik@cushwake.com

TETET CASTRO Head of Tenant Advisory Group Philippines Tetet.Castro@ap.cushwake.com

CLARO DG. CORDERO JR., MSC Head of Research Philippines claro.cordero@cushwake.com

TIFFANY GOH Country Manager Malaysia tiffanygoh@ivpsmalaysia.com

Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 52,000 employees in over 400 offices and approximately 60 countries. In 2022, the firm had revenue of $10.1 billion across core services of property, facilities and project management, leasing, capital markets, and valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter. ABOUT CUSHMAN & WAKEFIELD