FEATURES Chart 3-2


Disposable Income in Select Southeast Asian Countries, 2011-2016 (as of November 2012)


Source: Economist Intelligence Unit Chart 3-3 Retail Supply Overview (as of Q4 2012)


Total New Supply 2013- 2016 / Current Stock Q4 2012 Vacancy Rate


Singapore Kuala Lumpur


Other Malaysian Cities Bangkok


Jakarta


Ho Chi Minh City Hanoi


Prime


Suburban Prime


Suburban —


Prime


Suburban Prime Prime Prime


5.5% ██


34.2% █████████████████ 29.9% ██████████████ 22.5% ███████████ —


13.4% ██████ —


18.9% █████████


2.2% █ 0.6%


8.3% ████ 5.4% ██ —


9.5% ████ —


3.9% █


Supply Risk Outlook Low Low


Medium Medium


Medium / High Medium


Low / Medium Low


538.6% █████████████████████████████████████████████████████████████████████████████████████████ High


427.6% █████████████████████████████████████████████████████████████████████████████████████████


39.8% ███████████████████ Medium / High 30.0% ███████████████


Sources: CBRE; Jones Lang LaSalle; Prudential Real Estate Investors


country. (See Table 3-3.) In the more mature markets of Southeast Asia, income will be the primary driver of total returns in the near term, as cap rates are unlikely to compress significantly. The outlook for capital appreciation in Bangkok is a bit


better. Solid economic growth and tourism expansion are encouraging greater institutionalization of the market, and this is likely to stimulate new demand from retailers. Retail yields in Bangkok are relatively high, so the current dynamics of the market leave room for further compression. But liquidity issues complicate retail returns in the emerging markets. The lack of investment-grade assets and transactions tends to amplify capital appreciation. When a transaction occurs, the yield is


typically low, making it difficult for foreign investors to justify the acquisition on a risk-adjusted basis.


Risk Considerations The following are among the other specific risks retail property investors face:


 Liquidity risk. Liquidity varies across the Southeast Asian markets, with Singapore and Malaysia posing fewer challenges. Liquidity risks are higher in markets such as Vietnam and Indonesia.


 Development/counterparty risk. Again, there is a higher level of risk in markets such as Indonesia and Vietnam. Given the lack of transparency and relatively high corruption,6 domestic developers and


6 Indonesia ranked 118 and Vietnam ranked 123 out of 174 nations listed on an international corruption index. See Transparency International, “Corruption Perceptions Index 2012,” retrieved March 20, 2013.


INTERNATIONAL COUNCIL OF SHOPPING CENTERS 15 4 RETAIL PROPERTY INSIGHTS VOL. 20, NO. 1, 2013


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