FEATURES
The Case for Southeast Asia Retail Investments
Structural Opportunity vs. Trading Strategy HENRY CHIN* and ALAN CHOW**
Abstract: Retail investment opportunities in Southeast Asia vary significantly from country to country. For emerging markets such as Vietnam and Indonesia, the focus usually should be limited to the major cities. In maturing markets such as Malaysia and Thailand, urbanization and improving infrastructure bode well for the retail scene in the central and fringe areas of capital cities, and increasingly in second-tier cities and resort areas outside the capitals. In mature markets such as Singapore, both central-city and suburban retail are considered core investments which can attract institutional investors.
The Asia Pacific retail market is the world’s largest. The
region’s retail sales rose from US$3.2 trillion in 2006 (31% of the worldwide total) to US$3.8 trillion in 2011 (41% of the total).1 The rate of growth during this period was at least four times faster than in Europe or North America. Within the Asia Pacific landscape, Southeast Asia tends to be overshadowed by the bigger, more high- profile players, such as China and India, that surround it. In particular, Southeast Asia retail markets in the five countries analyzed in this report—Vietnam, Indonesia, Malaysia, Thailand and Singapore—feature strong demographic growth, economic resilience, strong tourism potential and increasing retail market maturity.
Understanding Market Maturity and Evolution All property markets fall along a continuum of
structural progression. The least mature markets are those with a limited stock of investment-grade property. In Southeast Asia, this is where Myanmar is today. At the far end of this spectrum are a handful of
markets (e.g., Australia, the United Kingdom and the United States) with high levels of liquidity, transparency and organized participation by institutional investors. Modern, advanced retail centers form deep pools of investible assets in these markets. The closest Southeast Asia gets to this level of retail market maturity is Singapore. Other markets in Southeast Asia fall midway along the
spectrum. Emerging retail markets in Vietnam, the Philippines and Indonesia, for example, are ahead of
Myanmar, but they lag behind the maturing markets of Malaysia and Thailand. Table 3-1 provides a framework for understanding how Southeast Asian markets fit into the maturity spectrum in 2013.
The Macro Environment As presented in Table 3-2, the Southeast Asian
economies are projected to grow from 4% to 7% per annum over the 2013-2017 period. This is a significantly faster pace of growth than is expected in advanced economies. Clearly, a fertile environment exists for prime retail demand to grow in Southeast Asia in the years ahead. A massive population base adds to the region’s attractiveness. Southeast Asia’s 436 million residents in 2011 not only exceeded both the United States and Western Europe in size, but also tended to be younger than either of these regions.
Demographics Increasing rates of urbanization bring profound structural changes across a number of fronts:
Economic. Urban labor pools are larger, denser and more diverse, something that works to the advantage of employers as well as those seeking jobs. In this environment, productivity and incomes rise and so does spending.
Social. Urban areas integrate diverse groups of residents and visitors, creating a social and cultural
* Head of Research and Strategy in Asia Pacific, Prudential Real Estate Investors
** Director of Research in Asia, Prudential Real Estate Investors 1 Canadean and
MarketResearch.com, The Future of Global Retailing to 2016, June 2012.
INTERNATIONAL COUNCIL OF SHOPPING CENTERS 12 1 RETAIL PROPERTY INSIGHTS VOL. 20, NO. 1, 2013
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