emerging hotspots: the rise of the vip - cushman & wakefield/media/reports/singapore... ·...

8
SEPTEMBER 2014 ASIA PACIFIC EMERGING HOTSPOTS: THE RISE OF THE VIP A Cushman & Wakefield Research Publication

Upload: vankhue

Post on 03-May-2018

216 views

Category:

Documents


3 download

TRANSCRIPT

Page 1: EMERging hoTSPoTS: ThE RiSE of ThE ViP - Cushman & Wakefield/media/reports/singapore... · toward greater resource nationalism led the ... Remittances from Overseas Filipino Workers,

SEPTEMBER 2014aSia Pacific

EMERging hoTSPoTS: ThE RiSE of ThE ViP

A Cushman & Wakefield Research Publication

Page 2: EMERging hoTSPoTS: ThE RiSE of ThE ViP - Cushman & Wakefield/media/reports/singapore... · toward greater resource nationalism led the ... Remittances from Overseas Filipino Workers,

EMERging hoTSPoTS: ThE RiSE of ThE ViP

Cushman & Wakefield is the world’s largest privately held commercial real estate services firm. Founded in 1917, it has 235 offices in 60 countries and more than 13,000 employees. The firm represents a diverse customer base ranging from small businesses to large multi-national firms. It offers a comprehensive range of services within five primary disciplines:

• Leasing, including tenant and landlord representation in office, industrial and retail real estate;

• Capital Markets, including property sales and acquisitions, investment banking, and corporate and investor finance;

• Corporate Occupier & Investor Services, including integrated real estate strategies for large corporations and property owners;

• Consulting Services, including business and real estate consulting; and

• Valuation & Advisory, including appraisals, highest and best use analysis, dispute resolution and litigation support, along with specialized expertise in various industry sectors.

A recognized leader in global real estate research, the firm publishes a broad array of proprietary reports available on its online Knowledge Center at: www.cushmanwakefield.com/knowledge

ExEcuTiVE SuMMaRyIn a recent Cushman & Wakefield global publication, “Emerging and Frontier Markets: Assessing Risk and Opportunity,” seven markets in Asia Pacific were ranked high on the list of up-and-coming emerging and frontier markets around the world, including Vietnam, Indonesia and the Philippines (VIP) based on strengthening economic and demographic prospects. The VIPs are all performing very well right now, and consensus outlook shows that they are well-positioned to expand further and breed an increasingly wealthy consumer class. This paper focuses specifically on the VIPs characteristics, performance, and their place in a global portfolio.

Growing Share of Global Output 5

Increasing Competitiveness 6

Diverse Economic Pillars 6

Open for Business 9

Greater Regional Integration in 2015 10

A Further Rise in the “Expanding Middle” 10

Office Real Estate has Room to Run 10

Jakarta 11

Manila 12

Ho Chi Minh and Hanoi 13

Conclusion: Why VIP? 13

MAnIlA, PHIlIPPInES

EMERging hoTSPoTS: ThE RiSE

of ThE ViP

CUSHMAn & WAKEFIElD 3

Page 3: EMERging hoTSPoTS: ThE RiSE of ThE ViP - Cushman & Wakefield/media/reports/singapore... · toward greater resource nationalism led the ... Remittances from Overseas Filipino Workers,

EMERging hoTSPoTS: ThE RiSE of ThE ViP

The famous BRIC economies, Brazil, Russia, India and China, seemed poised to dominate especially as the advanced economies sank into a recession in the wake of the 2008 financial crisis. However, their prospects just are not what they used to be. China, even with its continued enviable growth of 7-7.5%, is slowing down. Similarly, India has been slow moving, albeit recent economic indicators suggest that its economy is on the way to recovery. Nonetheless, other emerging economies are stepping up to show economic strength. In our recent global publication, “Emerging and Frontier Markets: Assessing Risk and Opportunity,” we have identified seven up-and-coming locations in Asia Pacific, including Vietnam, Indonesia and the Philippines (VIP); which were once considered among the region’s economic laggards. The rise of the VIPs is very important for the future of the global economy, signifying that the advance of emerging economies is widening and deepening, extending to regions that had been previously left out. So for now, forget the BRICs; take a look at the VIPs.

GROWING SHARE OF GLOBAL OUTPUT

Even though the scale and advance of the VIPs may not have the same global impact as the BRICs, especially those of China and India, they are in a class by themselves still representing a major opportunity for any international company to invest, expand and find new customers. The numbers tell the story. Economic growth is expected to remain resilient. Its economies, with a combined population of nearly 430 million, have posted real gross domestic product (GDP) growth of 6-7% a year, on average, between 2008 and 2013. While real GDP growth is expected at 5-6% this year, well below the recent trend rate, firming global demand and stronger domestic spending will lift growth in 2015 toward trend rate. This is a striking statistic, at a time when many developed economies are moribund. If it were a single country, VIP would rank as the world’s 12th largest economy, with a combined estimated GDP of US$1.8 trillion in 2014. With downside risks relatively contained, the stage is set for economic

growth continuing to accelerate and cause their GDP to rise to over US$5.0 trillion in 2025, which is the size of Japan’s economy today. The region has weathered the fallout from the 2008 global financial crisis better than many. Government debt in Indonesia and Philippines is less than 50% of GDP, compared with over 90% in the UK and the Euro area or over 100% in the U.S. Sound fiscal and monetary policies have been key drivers of growth. This steady flow of positive economic news helped to win ratings upgrades. Standard & Poor’s lifted the Philippines’s debt ratings by a notch above investment grade in May this year. Likewise, Moody’s Investors Service upgraded the ratings of Vietnam in July, citing the country’s emerging track record of macroeconomic stability.

Where are the risks? China’s ascendancy poses both opportunities and threats to the VIP region. An escalation in tensions or conflict arising from disputed territories in the South China Sea could hit all countries economically. Even a growth slowdown in the region’s largest economy has begun to impact. After all,

ECOnOMIC OUTlOOK – VIP VS. BRIC

Even though the scale and advance of the VIPs may not have the same global impact as the BRICs, especially those of China and India, they are in a class by themselves still representing a major opportunity for any international company to invest.

VIETNAM

PHILIPPINES

INDONESIA

0%1%2%3%4%5%6%7%8%9%

10%

VIP BRIC

Real GDP Growth

2010 2025

GDP GROWTH

Source: Cushman & Wakefield Research

HO CHI MInH CITy, VIETnAM

EMERging hoTSPoTS: ThE RiSE

of ThE ViP

CUSHMAn & WAKEFIElD 54

Page 4: EMERging hoTSPoTS: ThE RiSE of ThE ViP - Cushman & Wakefield/media/reports/singapore... · toward greater resource nationalism led the ... Remittances from Overseas Filipino Workers,

EMERging hoTSPoTS: ThE RiSE of ThE ViP

China remains a huge trading partner, visitor and investor. Nonetheless, the Chinese government continues to fine-tune the economy, which we believe should keep growth close to its 7.5% target this year and hardly poses a threat. We also believe that given their solid economic outlook, the VIP region is well-positioned to deal with capital outflows as global investors reposition their portfolios away from riskier markets in response to tighter U.S. monetary policy.

INCREASING COMPETITIVENESS

In the 2014-2015 World Economic Forum report, the region’s rankings continued to notch gains, with Indonesia, Philippines, and Vietnam ranking 34th, 52nd and 68th out of 148 economies – a significant progress from their rankings in 2009-2010, which were 54th, 87th and 75th respectively. The combination of an improving institutional framework and impressive economic performance have paved the way for a much improved business environment. For the Philippines, its remarkable gain of 35 places since 2010 is the largest over that period among all 148 countries studied. The results underscore the effectiveness of the reforms of the past four years under President Benigno Aquino III. Additionally, this could be credited to increased technological

adoption as well as a sound and well-functioning financial sector that has helped to channel resources to those viable entrepreneurial or investment projects. While this improvement in competitiveness will likely help to sustain VIP’s positive momentum, a number of shortcomings still remain in all three countries, especially the infrastructure deficit and inefficient bureaucracy, among others. For Vietnam, its financial sector remains vulnerable, not to mention businesses have yet to speed up technology adoption. All of these have to be addressed in order to fully tap their important competitive advantages and further reduce poverty and income inequality.

The region’s development model and competitiveness strategy have also hinged on a continuous emphasis on education. Notably, all three countries boast a well-educated workforce with 98% literacy rate. Competitive cost structures in the region have also been a key strength of the region; all three countries boast among the lowest direct cost structures among top exporting countries in the world1, even lower compared to China, where labor costs have surged over 50% since 2008. Additionally, the region’s young demographics stand out. With a number of countries in Asia that will see their working-age populations decline in the

coming years and cause their labor costs to rise, the region will remain competitive due to the sheer abundance of workers joining the labor force.

DIVERSE ECONOMIC PILLARS

Growth in Indonesia has been relatively subdued this year due to a tight interest rate environment, after the government took steps to rein in the large trade deficit. Concurrently, mining output has also been weak as soft global commodity prices and export tariffs are weighing on production. Notably, Indonesia is a major source of commodities such as nickel ore, bauxite, tin, copper and thermal coal, and the drive toward greater resource nationalism led the country to impose export restrictions on raw mineral ores early this year. However, its commodities sector should get a boost as giant miners like Freeport McMoRan Copper & Gold and Newport Mining resume activity. In addition, the election of Joko Widodo is a positive for the outlook, with his pro-growth agenda expected to get the Indonesia economy back on a higher trajectory over the medium term. Plans to gradually adjust fuel subsidies should help free funds for infrastructure projects needed to reduce bottlenecks and attract manufacturing investment that can wean the economy off commodities.

The region’s development model and competitiveness strategy have also hinged on a continuous emphasis on education. notably, all three countries boast a well-educated workforce with 98% literacy rate.

VIP CHINA INDIA JAPAN US

398% 381% 583% 22% 95%

2010

2015

20250

15,000

30,000

NOMINAL GDP (US$ BIILLION)

Source: Cushman & Wakefield Research

ECOnOMIC OUTlOOK – VIP VS. MAJOR ECOnOMIES

1 Eiu

JAKARTA, InDOnESIA

6

EMERging hoTSPoTS: ThE RiSE

of ThE ViP

CUSHMAn & WAKEFIElD 7

Page 5: EMERging hoTSPoTS: ThE RiSE of ThE ViP - Cushman & Wakefield/media/reports/singapore... · toward greater resource nationalism led the ... Remittances from Overseas Filipino Workers,

EMERging hoTSPoTS: ThE RiSE of ThE ViP

The Philippines remains among the fastest-growing economies in the region, with exports and household demand continuing to tick over at a solid pace. Remittances from Overseas Filipino Workers, estimated at 8-9% of GDP, have been a key driver of household spending, but in our view, the more important economic growth driver is the rise of its Business Process Outsourcing (BPO) industry. Many of the young English-speaking workforce are now feeding the country’s thriving BPO industry. According to IT and the Business Process Association of the Philippines (IBPAP), the country is the number one globally in voice and number two in non-voice BPO, Offshoring & Outsourcing (O&O), and captive services, providing services for a wide range of prominent Fortune1000 firms in North America, Asia, and Europe. The government is seeking to expand the industry as it only provides 1% of jobs in the country.2 Additionally, it has embarked on a comprehensive and ambitious program to improve national infrastructure, though it needs to be more rapidly implemented. Recent impact from Typhoon Haiyan (Yolanda) illustrates a shortage of modern infrastructure that makes the Philippines highly vulnerable to disasters. The government needs to boost

infrastructure spending from the current 3% to 5-7% of GDP in order to keep pace with its regional neighbors and sustain its growth momentum. Such improvements are critical to sustaining other sectors such as manufacturing and tourism to reach their potential.

Vietnam has been steadily improving this year, as recovery in global demand and successful trade negotiations helped export-oriented firms attain robust growth. Lower cost of production has been the backbone for its successful manufacturing sector. The government has actively pursued expansionary fiscal policies through higher spending on infrastructure in order to stimulate growth. The country’s monetary policies have been equally supportive, especially with inflation under control, playing an important role in boosting exports by keeping the domestic currency low and in easing credit growth by reducing lending rates. However, banks remain weighed down by a high ratio of bad debt that is crimping lending activity. Nonetheless, favorable policies have led to tangible benefits to the country’s export sector. Exports of electronics have grown 50% from 2013, and now accounts for 24% of Vietnam’s total exports. Samsung Electronics Co., which already has two major manufacturing bases in Vietnam, recently announced plans to build a US$1 billion factory for displays used in smartphones and tablets. This will be Samsung’s first display

module factory in Vietnam; it currently has similar factories in South Korea and China. South Korea’s LG Electronics Inc. and Taiwan-based Foxconn Technology Co. are among other companies that have either invested or announced major plans to invest in the country.3

Indeed, the VIP region has made positive strides to improve the overall economy and business environment. However, we urge their governments to build on the positive momentum thus far and ensure long-term growth. First, they need to put infrastructure projects on a fast-track mode to boost productivity and attract more investments. Second, regulations have to be eased to allow for continued growth of sectors. Third, to benefit from a young and growing population, all three countries will have to enhance productivity through investments in education, research, and skills. Implementing all of these will not be easy, but they are essential to unleash full dynamism in all three countries and make growth more inclusive.

OPEN FOR BUSINESS

The VIP bloc is now a more accessible place for foreign investment, especially as Asia remains a key plank of international growth strategy. Moreover, allowing greater foreign investment is transformative as it facilitates infrastructure spending needed to address capacity constraints. The scale of Japanese investment speaks volumes and has been among the growth catalysts. Notably, the country commits nearly a third of its investments in Asia to Southeast Asia, with an increasing proportion accruing to the VIP bloc. Its investments in the VIP have risen an average of 15-20% per year since 2009.4 This year, the Japanese government unveiled a new program to help accelerate infrastructure investment in Indonesia, which will be run by the Japan Bank for International Cooperation. Some of current Japanese-led projects include the construction of Indonesia’s first subway system in Jakarta as well as a new seaport in Cilamaya on the outskirts of the capital city. In the Philippines, Japan is assisting the expansion of a commuter rail network to ease traffic jams, according to Japan International

2CUSHMAN & WAKEFIELD

MANUFACTURING LABOR COST2013

$1.33

$0.44

$2.16

$2.58

$1.53

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

Vietnam Indonesia Philippines China India

US$ per hour

Source: Cushman & Wakefield Research

2013 ManufacTuRing LaBoR coST

The VIP bloc is now a more accessible place for foreign investment, especially as Asia remains a key plank of international growth strategy.

Source: Cushman & Wakefield Research

2 Asian Development Bank

3 “Samsung Considers US$1 Billion Investment in Vietnam,” June9, 2014, Wall Street Journal.

HO CHI MInH CITy, VIETnAM

EMERging hoTSPoTS: ThE RiSE

of ThE ViP

CUSHMAn & WAKEFIElD 98

Page 6: EMERging hoTSPoTS: ThE RiSE of ThE ViP - Cushman & Wakefield/media/reports/singapore... · toward greater resource nationalism led the ... Remittances from Overseas Filipino Workers,

EMERging hoTSPoTS: ThE RiSE of ThE ViP

are major benefits to adding emerging economies to a global investment portfolio. Their strong relative performance is attractive, both in terms of income and total returns; at the same time, the diversification benefits are appealing. On the whole, the VIP markets offer higher, albeit more volatile, returns than those in the U.S. and Europe, largely as a result of higher yields. Many of the mature global markets remain quite popular among investors especially with signs of revival, and the relative weight of capital flowing to these markets has pushed down yields say, for office assets, generating moderate returns in the 6–7% range in New York, Washington, D.C., or London, 3-4% range in Singapore or Hong Kong. By comparison, returns in the VIP office sector are at least double those levels. Additionally, prices have ample room to grow especially as property fundamentals are expected to remain firm. Notably, prices of office assets have appreciated at least 50% over a five-year period for Indonesia and the Philippines and slightly less for Vietnam.

JAKARTA Jakarta has continued to see a resurgent office market. Continuing positive economic growth has fostered the expansion of businesses during the past three years so that occupancy rates have remained at record levels to date.

This, together with relatively low new supply resulted in double-digit growth in rents for Grade A office space through this year, with rates now double the level posted in 2011. Despite the city’s rapid rate of rental growth, Jakarta’s Grade A rent is still quite low compared to other emerging cities within Asia Pacific. As of the second quarter of 2014, Grade A rents averaged US$43 per square

foot per year (psf/year), more than 50% lower than rates in New Delhi’s CBD in India, which has consistently been the most expensive emerging market in the region over the past five years. On the supply side, large scale office project construction is expected to increase significantly in the next 3 years especially in the CBD area, so that Jakarta’s Grade A stock is set to rise by up to 40% by

4CUSHMAN & WAKEFIELD

0100200300400500600700800900

1000

VIP China India

snoillim nI

2014 2018 2025* The bubbles represent growth rate during the 2013 – 2025 period** Definition of Prime Spending Group: Population with annual income above:- US$ 2,500 for Indonesia- US$ 7,500 for Vietnam, China and India- US$ 10,000 for Philippines

Source: Cushman & Wakefield Research

80.95% 70.58% 94.91%

PRiME SPEnDing gRouP

Cooperation Agency.5 While such initiatives are being driven by a need to find new growth markets outside Japan, they have a geopolitical impetus. Japanese companies are looking to the bloc for their relative stability especially as ongoing territorial disputes continue to stoke political tension between Japan and China. In addition, the move comes as Japanese auto makers in particular seek to diversify production currently concentrated in Thailand; which to date, continues to struggle to deal with the effects of severe 2011 floods and political unrest. U.S. interest has also noticeably increased in the Philippines and Vietnam over the past year, though the volume of investments remain relatively small compared to the entire Southeast Asian region.

GREATER REGIONAL INTEGRATION IN 2015

In 2015, 10 member states of the Association of Southeast Asian Nations (ASEAN), which include Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, are committed to adopting the principles of the ASEAN Economic Community. The integration by the end of 2015 envisages creating a single market and production base that would ease all trade barriers and thus

allow for less inhibited flow of goods, services, investment, capital and skilled labor. Essentially, this should facilitate greater supply-chain integration and spur regional demand for goods and services; which in turn, would create more jobs and output. However, the gains will not be evenly shared over the near term, as seen in the case of the European Union. More competitive economies, as measured by the real exchange rate, wages, and productivity growth, stand to benefit more from the regional integration.

A FURTHER RISE IN THE “EXPANDING MIDDLE”

International retail brands have been expanding their footprint swiftly and decisively in Asia Pacific over the past five years. According to a 2013 study by Bain & Company, Southeast Asian nations led by Indonesia are the new engines of luxury growth in Asia. The VIP region remains impossible for retailers to ignore. The bloc’s population is young, with a median age of 29.2 years for Vietnam and Indonesia and 23.4 years for the Philippines.6 Nearly 60% of the population is of working age, between 15 and 64. That figure is expected to continue increasing in all three countries, with the working age population potentially rising to nearly 500 million by 2025 from 430 million7

this year, which contrasts many of its Asian neighbors whose populations are ageing.

Additionally, the creation of higher paying jobs has paved the way for a burgeoning middle class with more disposable incomes. With continued urbanization powering growth in incomes, we expect the VIP countries to be home to over 200 million consumers with considerable spending power by 2025. Nearly 40% of the total population will have the ability to spend more than the basic necessities. Currently, there are nearly 110 million households in this class in all three countries; which Cushman & Wakefield defines as those with annual incomes of over US$7,500 in purchasing power parity terms. Notably, that over 80% growth in the prime spending group is a testament to the growing market opportunity offered by the VIP economies, providing critical mass that should underpin demand for a range of products and services, from electronics and travel and to big-ticket items such as housing. Indeed, rising rates of consumption augur well for the VIP region, bolstering growth in the long term. Domestic consumption is already a large economic growth driver that has helped both Indonesia and Philippines to weather the recent global financial crisis. Catering to increasing demand by developing the consumer services sector will ensure that their economies will even be more insulated from future shocks.

OFFICE REAL ESTATE HAS ROOM TO RUN

Economic growth prospects for the VIP bloc remain among the best in the region, which certainly supports demand for all classes of real estate. With the combination of growth and a lack of transparency, the potential for outsized returns is high, but the risks are also significantly higher than in the more established, transparent markets in the U.S., Europe, or within the region such as Singapore, Hong Kong and Australia. Still, while the risks must be monitored, we continue to expect favorable economic and demographic prospects to be sufficient to attract real estate investors. After all, there

3CUSHMAN & WAKEFIELD

Source: Real Capital Analytics, Cushman & Wakefield Research

0

5

10

15

20

25

Vietnam Philippines Indonesia

2009 2010 2011 2012 2013

US$ Billion

inVESTMEnTS fRoM JaPan

Source: Cushman & Wakefield Research

Source: Japan External Trade Organization, Cushman & Wakefield Research

4 Japan External Trade Organization5 “Japan Moves to Encourage Indonesia Investment,” May 4, 2014, Wall Street Journal.6 CIA Factbook7 EuroMonitor

JAKARTA, InDOnESIA

EMERging hoTSPoTS: ThE RiSE

of ThE ViP

CUSHMAn & WAKEFIElD 1110

Page 7: EMERging hoTSPoTS: ThE RiSE of ThE ViP - Cushman & Wakefield/media/reports/singapore... · toward greater resource nationalism led the ... Remittances from Overseas Filipino Workers,

EMERging hoTSPoTS: ThE RiSE of ThE ViP

0CUSHMAN & WAKEFIELD

OFFICEStock and Under Construction – Q2 2014

Source: Cushman & Wakefield Research

0.361.341.812.392.472.52

4.225.37

7.717.99

14.2527.05

0.482.212.322.72

3.824.83

8.199.34

11.6112.82

14.8217.9518.4319.09

22.6227.63

57.79

0 10 20 30 40 50 60 70

AdelaideBrisbane

PerthMelbourne

SydneyShanghai

TaipeiSingapore

SeoulHong Kong

TokyoBeijing

BangkokHanoiManila

Ho Chi Minh CityAhmedabad

ChennaiPune

KolkataHyderabad

Kuala LumpurJakarta

MumbaiBengaluruChengdu

New DelhiGuangzhou

Shenzhen

Under Construction (Millions of sf)

5.686.519.35

18.7919.5222.0623.29

43.0953.57

62.1277.76

395.90

1.693.556.7212.6018.1621.0722.7427.2228.9432.7733.6038.4539.96

49.4265.36

77.5392.19

0 50 100 150 200 250 300 350 400 450

AdelaidePerth

BrisbaneTaipei

SydneyMelbourneSingaporeShanghai

Hong KongSeoul

BeijingTokyo

Ho Chi Minh CityHanoi

AhmedabadBangkokKolkata

ChengduShenzhen

JakartaHyderabadGuangzhou

PuneChennai

Kuala LumpurManila

MumbaiNew DelhiBengaluru

Total Stock (Millions of sf)

EMER

GIN

GC

ORE

ASIA PACIFIC GRADE A OFFICE STOCK AnD nEW SUPPly - Q2 2014

2018, and reach over 70 million square feet (msf). Despite this surge in new supply, sustained economic growth and positive market sentiment post the 2014 elections will continue to fuel occupier demand, and maintain generally healthy occupancies, though annual rent increases will revert to around, or slightly above, inflationary levels.

ManiLaThe Manila office sector has had a remarkable growth, on the back of a flourishing BPO sector. With Grade A stock of around 49 msf, Manila’s office market is the fourth largest emerging city in the region, following other BPO-attractive locations, Bengaluru and New Delhi in India, which have nearly 100 msf and 82 msf, respectively, as of the second quarter of 2014. In terms of rents, Manila commands the lowest in the VIP region; however, at US$20 psf/year, Grade A rents are still higher relative to comparable information technology and BPO destinations in India, except for New Delhi and Mumbai. IBPAP expects growth of the BPO sector to be sustained, with revenues rising to US$25 billion in 2016 from US$13 billion in 2012, which is approximately 9% of GDP. The Philippines is well-positioned among BPO service providers in terms of multiple

human resource indicators, not to mention that the government proactively promotes the country as a BPO destination through investment incentives. With direct and indirect employment expected to rise to 4.5 million in 2016, we estimate that BPO absorption alone could total 3-4 msf per year. Consequently, we expect high

occupancies to prevail even with a high volume of new office projects coming on stream over the next two years, and support rent increases. Additionally, the BPO influence is extensive and we expect other segments to benefit from its expansion.

ho chi Minh ciTy anD hanoiThe manufacturing sector has been a vital catalyst of growth in Vietnam’s property markets. Global tech companies such as Samsung, Intel Corp. and Canon Inc. are some of the prominent foreign firms that have set up their manufacturing bases in the country. The country’s importance as a competitive manufacturing hub will continue to impact the outlook. Manufacturers looking to base operations in Vietnam in both technology and fast moving consumer goods sectors along with the insurance and pharmaceutical sectors, are expected to drive demand over the medium term. The proliferation of new projects in Hanoi and Ho Chi Minh City over the next two years will ensure ample options and concessions to tenants. Currently, both Ho Chi Minh and Hanoi are witnessing a development boom that is set to double their Grade A stock to a combined total of 10 msf by 2016. As of the second quarter of 2014, Grade A rents averaged US$53 psf/year and US$33 psf/year for Ho Chi Minh City and Hanoi, respectively, and are among the highest in the region for emerging cities.

For more information about C&W Research, contact:

Sigrid Zialcita Managing Director, Research, Asia Pacific +(65) 6535 3232 [email protected]

Cushman & Wakefield is the world’s largest privately-held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world’s major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and management assignments. Founded in 1917, it has approximately 250 offices in 60 countries, employing more than 16,000 professionals. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has nearly $4 billion in assets under management globally. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge.

This report has been prepared solely for information purposes. It does not purport to be a complete description of the markets or developments contained in this material. The information on which this report is based has been obtained from sources we believe to be reliable, but we have not independently verified such information and we do not guarantee that the information is accurate or complete. Published by Corporate Communications.

©2014 Cushman & Wakefield, Inc. All rights reserved.Cushman & Wakefield3 Church Street #09-03 Samsung Hub Singapore 049483www.cushmanwakefield.com

COnClUSIOn: WHy VIP?Given this backdrop, the VIPs provide a compelling investment story based on demographics and economics. All three countries have evolved into a major pillar of growth in Asia Pacific over the past five years, and we believe that their continued rapid expansion will breed a burgeoning wealthy consumer base and make them potential economic heavyweights. Of course, there are risks that these countries will falter if much-needed reforms are slow to come. As the VIP economies continue to mature and investors learn to navigate market risks, we believe capital should continue to flow, to capitalize on strong underlying trends, specifically the potential for high returns and low correlations with the rest of the world.

For more information about other C&W offices, please contact:

Arshpreet Chaudhry Executive Managing Director South East Asia +(65) 6232 0848 [email protected]

Source: Cushman & Wakefield Research

Timothy Horton General Manager, C&W Vietnam timothy.horton @ap.cushwake.com

David Cheadle Managing Director, C&W Indonesia david.cheadle @ap.cushwake.com

Joe Curran General Manager, C&W Philippines joe.curran @ap.cushwake.com

MAnIlA, PHIlIPPInES

HO CHI MInH CITy, VIETnAM

EMERging hoTSPoTS: ThE RiSE

of ThE ViP

CUSHMAn & WAKEFIElD 1312

Page 8: EMERging hoTSPoTS: ThE RiSE of ThE ViP - Cushman & Wakefield/media/reports/singapore... · toward greater resource nationalism led the ... Remittances from Overseas Filipino Workers,

www.cushmanwakefield.com

HO CHI MInH CITy, VIETnAM