International property investors, whose attention has long been focused on Japan’s economic turnaround and China’s frothy building boom, are now turning to Southeast Asia. Head of Research for south Asia of Jones Lang LaSalle in Singapore said “The region hasn’t attracted much interest in the last few years but I think investors are now looking back here.”
Rental yields for retail space stretch from around 6% in Singapore to 10%-13% in Bangkok, Manila and Jakarta. Office yields are mostly 7%¬8% but as much as 10% in the Indonesian capital – where a series of bombs attributed to Muslim militants have rattled investors’ nerves. Yields in Tokyo are around 5.5% and in China’s main cities they seldom reach double figures, meaning lower compensation for foreign investors, despite their perception of high risk and thick red tape in China. Developers say as a rule of thumb, property cycles tend to lag the macro economy by 18 months.
Southeast Asian economies are expected to grow at a rate of over 4% over the next 2 years, with Thailand predicting 6%-7% growth this year. ING Real Estate, which manages a US$200 million fund for Southeast Asia, says it is interested in shopping centers in Thailand and Malaysia that can be refurbished to quickly raise their values. The problem is getting the right property, especially in Thailand, where many top grade offices and shopping complexes are in the hands of family firms reluctant to sell. Developers believe Malaysia is two years out of a trough in a 12-year property cycle. Asia Pacific Land’s managing director said “If you’re talking about cycles, Malaysia must surely be considered an opportunity play.”