Southeast Asia 2019 Outlook

Southeast Asia to benefit from domestic

consumption and shifts in global supply chains
Key investment themes in Southeast Asia for 2019
1. Mild downgrade in growth expectations
The IMF downgraded global growth expectations for 2019
to 3.5% from 3.7% previously, as advanced economies are
expected to expand slower and trade challenges escalate.
Southeast Asia is expected to grow by 4.8% in 2019-2023,
down from 5.0% previously, as the outlook for Indonesia
and Philippines are scaled back. Higher oil prices will weigh
on fuel importers but benefit Malaysia, a net exporter.
2. Rising trade barriers dampen exports in near term
but benefit mid-tech countries in medium term
Higher trade tariffs on China exports could impact imports
of components by China from Southeast Asia in the short
term. However, in the medium term, manufacturers are
likely to expedite the relocation of operations to Southeast
Asia. This process has already started in the last five years
as wages in China rose. For Vietnam, its exports to the
United States accelerated in 2H 2018, and the number of FDI
projects from China, Korea, Singapore and Japan grew 17-
37% yoy in 3Q2018. We also expect countries with mid-tech
skills such as Thailand and Malaysia to benefit. We expect
higher demand for industrial property in Southeast Asia.
2 Southeast Asia 2019 Outlook
3. Technology companies continue to expand rapidly
in Southeast Asia
We estimate that technology companies leased about 15-
20% of total gross office space in 2018 in Southeast Asia,
compared to 5-10% just three years ago. We continue to
expect these firms to potentially take up 15-25% of annual
office leasing volume for the next decade. In 2H2018, office
take-up surprised on the upside in Singapore and Bangkok,
growing by 6% yoy, while demand moderated in Manila
and Jakarta after rapid growth in the prior few quarters.
Downsizing in Kuala Lumpur led to a shrinkage in occupied
office space in the city.
4. Global retailers expand in Southeast Asia,
integrate online and physical points of sale
Domestic consumption continues to grow in Southeast
Asia due to urbanisation and higher incomes. Global
retailers such as Uniqlo, IKEA and Apple continue to
expand their footprints. E-commerce companies such as
JD.com and Alibaba are collaborating with local groups to
integrate online and physical points of sale to tap on young
consumers who are both tech-savvy and continue to prefer
shopping as a leisure activity. The World Bank has raised
the rankings for the logistics sectors in Vietnam, Indonesia,
Philippines and Thailand significantly in the last two years.
5. Tourist arrivals and hotel room rates continue to grow
In 2018, tourist arrivals across Southeast Asian cities grew
9% yoy, with international tourists visiting Vietnam and
Indonesia rising 20% yoy and 16% yoy respectively. Upscale
hotel revenue per available room also grew by 5% yoy in
3Q2018, after rising 6% in 2017. More hotel investment sales
were observed in Singapore, with capital values significantly
above expectations.
6. Changes to our view
We upgraded our prime office rents forecasts for Singapore
after accounting for the higher-than-expected take-up in
2H2018. We now expect rents to rise 15% over 2019-2020.
Office rents are expected to decline in Kuala Lumpur in
2019-2021E. Our Jakarta office rents forecasts for 2019-
2021E are now 6% lower than our previous estimates as
the city’s vacancy rate remained above 30% by 4Q2018. We
expect rents in Jakarta to compress further but stabilise
beyond that. We have also mildly downgraded our Jakarta
retail rents for 2019-2021E as rents grew just 1.8% yo in
2018, down from 4% yoy in 2016-2017.
Southeast Asia 2019 Outlook 3
Expectations for Thailand and Malaysia continue to improve

Fig 1: 2019 GDP growth forecasts Fig 2: GDP forecasts for 2019-2020 Fig 3: Indonesian Rupiah vs US dollar Fig 4: Current account surplus as % of GDP
8.00% 8.00% 14,800 54

7.00% 7.00% 14,600 53

14,400
6.00% 6.00% 52

14,200
5.00% 5.00% 51
14,000
4.00% 4.00% 50
13,800
3.00% 3.00% 49
13,600

2.00% 2.00% 48
13,400

1.00% 1.00% 13,200 47

0.00% 0.00% 13,000 46

Indonesia Thailand Malaysia Philippines Vietnam Singapore Indonesia Thailand Malaysia Philippines Vietnam Singapore

Q4
20 Q1
20 Q2
20 Q3
20 Q4
20 Q1
20 Q2
20 Q3
20 Q4
20 Q1
20 Q2
20 Q3
20 Q4
20 Q1
20 Q2
20 Q3
20 Q4
20 Q1
20 Q2
20 Q3

20 Q2
20 Q1
20 Q2

20 Q3
Q4
20 Q3
20 Q4
20 Q1
20 Q2
20 Q3
20 Q4
20 Q1
20 Q2
20 Q3
20 Q4
20 Q1
20 Q2
20 Q3
20 Q4
20 Q1
16
16
16
16
17
17
17
17
18
18
18
18
19
19
19
19
20
20
20
20

16
16
16
16
17
17
17
17
18
18
18
18
19
19
19
19
20
20
20
20
20

20
2Q18 4Q18 2018 2019E 2020E

Source: Oxford Economics Source: Oxford Economics

Southeast Asia expected to grow 4.8% annually in 2019-2023
The IMF downgraded global growth expectations for 2019
to 3.5% from 3.7% previously as advanced economies are
expected to expand slower and trade challenges escalate.
Southeast Asia is expected to grow by 4.8% in 2019-2023,
Limited downside to currencies after sharp corrections in 2018 Fig 5: Current account surplus as % of GDP
In 2018, Indonesia raised its policy rates six times and by 200bps 25
as it sought to stabilise the rupiah, which depreciated c.10%
against the US dollar in the first three quarters of 2018. Similarly,
20
Philippines tightened monetary policies to protect the Peso as

Current account surplus/deficit % of GDP

down from 5.0% previously, as the outlook for Indonesia and markets were concerned about its current account deficits.
Philippines continued to be scaled back. 15
In 4Q18, both the Indonesian Rupiah and Philippines Peso
Both Indonesia and Philippines are expected to continue to stabilised as expectations on the pace and magnitude of rising
face dampened exports as red tape, bureaucracy and poor global interest rates moderated. Most economists now expect 10
infrastructure continue to hamper progress. However, strong the US Federal Reserve to raise interest rates just twice in
domestic consumption is expected to keep growth above 5%. 2019, compared to thrice previously. While the ECB intends to
5
In particular, Indonesia’s strong domestic demand makes it end quantitative easing in 2019, it is unlikely to raise interest
highly resilient and the only economy in the region which is not rates immediately. We expect these trends to be supportive of
expected to grow any slower in 2019-2020 compared to 2018. investor sentiment in Southeast Asia in 2019. 0
2012 2013 2014 2015 2016 2017 2018E 2019E 2020E
On the other hand, expectations for Malaysia and Thailand
continue to improve as these governments take steps towards -5

attracting more foreign direct investments. As a net exporter

Indonesia Thailand Malaysia Philippines Vietnam Singapore
of oil/gas, Malaysia is also likely to benefit from higher global
oil prices. Source: IMA Asia

4 Southeast Asia 2019 Outlook Southeast Asia 2019 Outlook 5

Southeast Asian economies with higher skills to benefit from
US-China trade tensions
In the last decade, China has become a key partner of In the medium term, we think manufacturers are likely to Fig 7: Exports from Vietnam to the US
Southeast Asia, with the establishment of the ASEAN-China expedite the relocation of operations to Southeast Asia, which 16 70%
Free Trade Area (ACFTA) in 2010. The framework lowered the has already started as wages in China rose. The American 14 60%

Exports to US US$bn
average tariff rates on both imports and exports of ASEAN Chamber of Commerce in Shanghai undertook a survey in 12 50%
goods to China to 0.1-0.6%. The ACFTA is the third largest by September 2018 to gauge the impact of new US tariffs on 10
40%
trade volume after the European Economic Area and the North American companies in China. Of the 430 companies who 8
30%
6
American Free Trade Area. responded, 61% are in manufacturing-related industries. 20%
4
Around 70% of the companies expect a negative impact 10%
2
Today, China is Southeast Asia’s largest trading partner, making on their profits, production costs and reduced demand for 0 0%
up 14% of ASEAN’s exports in 2017. 48% of Southeast Asia’s products. Most respondents are adjusting their supply chains

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fuels. Trade tensions between the US and China may impact assembly outside of China and delaying investment decisions.

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Southeast Asia’s exports in the short term. As intermediate While 64.6% of respondents are not considering relocating their

st
2017 2018 yoy change
goods make up over 50% of China’s imports from Southeast manufacturing facilities out of China, 18.5% of respondents are
Asia, a decline in China’s exports is likely to reduce China’s considering relocating these to Southeast Asia. Source: Vietnam Customs
demand for such exports from Southeast Asia in the short term.

Fig 8: Global Manufacturing Competitiveness Index

Fig 6: Preferred destinations for relocation of China-based manufacturing facilities 120 7
6
100 5
80 4
Southeast Asia
3
60 2
1
40 0
Elsewhere
20 -1
-2
0 -3
Indian subcontinent

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United States 2016 2020 Change in rank (RHS)

Source: Global CEO Survey by Deloitte, 2016

Europe
Amongst the countries in Southeast Asia, Vietnam has already Outside of Vietnam, we also see Malaysia and Thailand as
seen an acceleration of exports to the US as well as the number potential net beneficiaries in the medium term. According to
East Asia of FDI projects in 2H2018, potentially due to the trade tensions Deloitte’s Global Manufacturing Competitiveness Index, CEO
between the US and China. Vietnam’s exports to the US grew respondents were asked to rank nations in terms of current and
17% yoy in 2018, including substantial growth in machineries/ future manufacturing competitiveness. The 2016 study found that
Latin America equipment, steel and steel products and wood and wood Vietnam, Malaysia, Indonesia and India are expected to become
products, where new tariffs by the US have been imposed. The more competitive over the next few years while countries such
number of FDI projects registered in Vietnam also started to as China and South Korea could become less competitive.
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% pick up in 3Q2018, with China FDI projects growing 37% yoy,
Korean FDI projects growing 21% yoy and Singapore and Japan
Source: American Chamber of Commerce, Shanghai, Sep 2018
growing 17% yoy.

6 Southeast Asia 2019 Outlook Southeast Asia 2019 Outlook 7


For manufacturing companies seeking to relocate their
operations from China to Southeast Asia, more developed
countries with the requisite mid-tech skills such as Thailand
and Malaysia could be more likely to benefit, in our view. Wages
in these countries are now about 60% lower than in China,
compared to 33% in 2010.
IMA Asia expects China’s exports to grow 3-4% p.a. over the
next few years, decelerating from 15% p.a. in 2010-2014. In
comparison, Thailand and Malaysia’s exports are expected to
grow faster at 5% p.a. in 2019-2023.
Office take-up tapered off in 2H2018, mainly due to slowdown in
Kuala Lumpur, Manila and Jakarta
In 2H2018, office take-up in the region grew by 3% yoy, sharply
slower than the 5% yoy growth in the prior four quarters. This
was mainly due to negative net absorption in Kuala Lumpur as
well as slower growth in Manila and Jakarta. In Kuala Lumpur,
downsizing by some financial institutions and government
linked companies reduced occupied office space in the city
centre by over 500,000 sqft in 2H2018.
In Jakarta and Manila, office take-up has been strong, matching
the high supply of new completions and expanding by 16%
yoy in 1H2018, but this moderated to 13% yoy in 2H2018. We
continue to expect office take-up in Jakarta to grow at 11%
CAGR in 2019-2023E and take-up in Manila and Bangkok to
grow at 4-5% CAGR in the same period.

Fig 9: Manufacturing wages in Southeast Asia compared to China Chart 11: Office net absorption in Southeast Asia (yoy)
0.90 10.0%

0.80 9.0%
Manufacturing wage as % of China wage

0.70 8.0%

0.60 5.0%

0.50 6.0%

0.40 5.0%
0.30 4.0%
0.20 3.0%
0.10
2.0%
0.0
1.0%
Malaysia Thailand Vietnam Indonesia
0.0%
2010 2018 2023 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018

Source: IMA Asia Source: JLL Research

Fig 10: Exports growth in Malaysia, Thailand to grow faster than China Chart 12: Office net take-up in Southeast Asia (yoy)
40 18%

16%
30
14%

12%
20
10%
10 8%

6%
0
4%
2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E
-10 2%

0%
-20 1H2016 2H2016 1H2017 2H2017 1H2018 2H2018
-2%

Malaysia Thailand China Jakarta Manila Bangkok Singapore Kuala Lumpur

Source: IMA Asia Source: JLL Research

8 Southeast Asia 2019 Outlook Southeast Asia 2019 Outlook 9

Technology companies now a key office occupier group in
Southeast Asia
Fig 13: Estimated gross office space leased by technology companies
4%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Five years ago
Kuala Lumpur Manila
Source: JLL estimates
Technology companies have been expanding swiftly in
Southeast Asia and have become a key office occupier group
in the region in the last five years. We estimate that these
companies leased around 15-20% of total gross office leasing
volumes in Southeast Asia, compared to 5-10% just three years
ago. We expect technology companies to continue to expand in
Southeast Asia, potentially taking up 15-25% of annual gross
office leasing volume for the next decade.
Technology hardware manufacturers such as Dell, Intel,
Apple, Ericsson and Siemens have been operating in the region
for decades and new players are investing in the region. In
Bangkok, Huawei opened its Southeast Asia Research and
Development centre in 2017 and is now the largest technology
occupier in Bangkok, taking up more than 15,000 sqm of space,
up from just 1,000 sqm in 2013.
In the last ten years, internet companies such as Google,
Amazon and Facebook started to operate in Southeast Asia.
For instance, Google started its Singapore office with just 24
people in 2007 but this Asia Pacific headquarters had grown to
over 1,000 employees by 2017. As of 2018, Google is the largest
corporate occupier in Singapore, taking more space than any
financial institution.
10 Southeast Asia 2019 Outlook
9% 16%
Three years ago Last 12 months
Singapore Jakarta Bangkok HCMC
In the last two years, investments into e-commerce companies
in Southeast Asia accelerated. For instance, Singapore-based
Sea, which operates Garena gaming and e-sports platform
and Shopee e-commerce site, just raised over USD 1 billion
in 2017 through an initial public offering and a further USD
575m in June 2018. Tencent, China’s largest video games and
social media operator has been investing in Garena for several
years. In early 2018, Alibaba increased its investment in Lazada
by USD 2billion, bringing its total investment to date to USD
4billion. This was in addition to its USD 1billion investment
in Tokopedia, which operates in Indonesia. As gaming and
e-sports markets grow in Southeast Asia, we think gaming
companies such as Garena, Ubisoft, Quest Drop and Blizzard
will start to expand quickly. The number of PC and mobile
gamers in Southeast Asia is projected to reach 400 million by
2021, according to Niko Partners.
Both international and local coworking companies are also
rapidly increasing their presence in Southeast Asia, at pace
with the global trend. WeWork acquired Spacemob as part
of its entry into Southeast Asia in August 2017 and has been
expanding at breakneck pace since then. Justco started in
Singapore in 2015 and expanded into Bangkok and Jakarta.
Southeast Asia 2019 Outlook 11
Where are the largest technology companies in Southeast Asia?

Fig 14: Where are the largest technology companies in Southeast Asia? Chart 15: Flex space penetration in Southeast Asia
100% 4.5%

90%
4.0%

80%
3.5%

70%

3.0%
60%

2.5%
50%

40% 2.0%

30%
1.5%

20%
1.0%

10%

0.5%
0%
Facebook Google Alibaba Sea Wework
0.0%
Singapore Kuala Lumpur Bangkok Jakarta HCMC Manila Singapore Bangkok HCMC Manila Jakarta Kuala Lumpur

Source: JLL estimates Source: JLL Research

We find that the largest global technology companies in
Southeast Asia currently take up between 20,000 sqm and
50,000 sqm in total, spread amongst three to five cities:
 All of them have some presence in Singapore, Bangkok and
Jakarta.
 In many cases, the companies have grown their headcount
by 30-50% CAGR over the last 5-10 years.
 Internet companies Google and Facebook have most of
their office footprint in Singapore, which acts as a regional
headquarters and a base for marketing, sales, and research
and development operations.
E-commerce companies such as Sea (which operates
 
Garena, Shopee and Airplay) and the Alibaba group (which
operates Lazada, Alipay and UC Web) are operating out of
more locations in Southeast Asia and take up substantially
more office space in Jakarta than Singapore, followed by
Bangkok. We believe these companies are set up to serve
the large and growing domestic markets of Indonesia,
Thailand and Vietnam where personal consumption
expenditure is growing by over 6% annually.
Flexible office space operator WeWork has expanded rapidly
in the last two years and now take up over 50,000 sqm across
the region.
In Southeast Asia, flexible work spaces have grown by c.40%
CAGR in the last three years and now take up 2% of the office
stock, from 0.5-1.0% in 2015. Singapore enjoys the highest
penetration rate, with flexible work spaces taking up 4.2%
of JLL island-wide office stock. The growth of flexible work
spaces in Southeast Asia is in line with the rapid growth in
Asia Pacific, where flexible space stock recorded a compound
annual growth rate of 35.7% in 2014-2017, much higher than
in the United States (25.7%) and Europe (21.6%) over the
same period. JLL predicts that as much as 30% of corporate
portfolios could be flexible space by 2030. What initially began
as a platform for freelancers and startups, flexible space
providers are now tailoring their offering to accommodate
corporate users.

12 Southeast Asia 2019 Outlook Southeast Asia 2019 Outlook 13

Global retailers to continue to expand in Southeast Asia
Domestic consumption continues to grow in Southeast Asia
due to urbanisation, rising employment in the manufacturing
and services sectors and growth in the middle-income
household population. While online retail makes up 30% of
retail sales in China, it is currently just 5% in Southeast Asia
where shopping is still seen as a leisure activity, as customers
have a strong preference to touch and feel the product. Due
to the young and tech-savvy population in Southeast Asia,
global retailers see the region as an ideal place to expand and
integrate online and physical retail points of sale.
For example, some outfit retailers in malls have created ‘virtual
shelves’ that allow customers to order the items they want for
delivery, if the store does not have the items in stock. Other
retailers use ‘magic mirrors’ that allow users to try new makeup
looks with the help of Augmented Reality, and then buy items
14 Southeast Asia 2019 Outlook
from a vending machine. Modern grocers can provide in-
store chefs that cook a shopper’s groceries on demand, with
deliveries made in under two hours from initial order.
One example of a retailer that is expanding in Southeast Asia is
Uniqlo, which said it would double its Southeast Asia network
over the next four years to 400 stores by 2022 and treble sales
to USD2.7 bn from USD 0.9 bn in 2017. Uniqlo has opened
its first store in Thailand and is targeting suburban stores in
Thailand, Malaysia and Philippines. It will also start to open
stores in Vietnam, Laos and Myanmar. IKEA, the Swedish
furniture maker, is currently operating in Singapore, Malaysia,
Indonesia and Thailand. It targets to double its business and
enter new markets in Southeast Asia in the next few years. The
new IKEA store in Manila (in partnership with SM Group) will
be the largest IKEA in the world. Apple has opened its second
retail store in Southeast Asia in Bangkok, and is considering
Jakarta and Vietnam next. It is also planning additional stores
in Bangkok and Singapore.
E-commerce companies from China, such as Alibaba and
JD.com, continue to expand in Southeast Asia. Potentially,
there are several similarities between China and Southeast Asia
in terms of consumption growth rates and technology adoption
by youths. JD Central, a joint venture between JD.com and
Thailand’s largest retail firm Central Group, aims to provide
e-commerce and fintech services and accelerate omni-channel
retail growth in Thailand. The two firms will also collaborate to
provide IT solution services for supply chain development for
small businesses and developing e-commerce skills among
tertiary students in Thailand. Alibaba currently has a presence
in all six countries in Southeast Asia and targets to open high-
tech stores in the near term. The company is collaborating
with Malaysia and Thai governments on logistics hubs and
e-commerce parks.
We expect the transformation of the retail business to spill
over into higher demand for industrial and logistics space in
Southeast Asia. In Philippines, Lazada doubled its plant in
Cabuyao, Laguna to 60,000 sqm in 2018. Zalora plans to move
to a four-storey warehouse facility in Cavite in 2019 that can
accommodate 5 million product inventory, or five times more
than the 1 million product inventory capacity of its existing
warehouse. JD Central targets to increase the number of
warehouses in Thailand to five in early 2019.
Southeast Asia 2019 Outlook 15
Logistics performance in Southeast Asia continues to improve Strong tourist arrivals to boost hotel investments in the coming
24 months
Fig 16: Logistics Performance Index (global ranking) In 2018, tourist arrivals surged across Southeast Asia, growing Upscale hotel revenue per available room (RevPar) also grew
71 9% yoy. The number of international tourists visiting Vietnam by 5% yoy in 3Q18, after rising 6% yoy in 2017. Over the last
Philippines 60
and Indonesia rose 20% yoy and 16% yoy respectively, while four quarters, hotel RevPar rose 5-6% yoy in Kuala Lumpur and
Indonesia 46 63
Thailand attracted 12% yoy more tourists. Investor interest in Bangkok. Singapore’s hotel RevPar finally recovered in the last
Malaysia 32 41 hotels is rising and we expect more hotel assets to be sold in the four quarters after declining for five years.
Vietnam 39 64 coming months in the more developed Southeast Asia markets.
Thailand 32 45
Taiwan 25 27
Fig 18: Tourist arrivals grew 9% yoy in Southeast Asia 2018
China 2627
35.00%
Korea 2425
Hong Kong 9 12 30.00%

Singapore 5 7
25.00%
Japan 5 12
20.00%
0 10 20 30 40 50 60 70 80

2016 2018 15.00%

Source: World Bank 10.00%

5.00%
Fig 17: Logistics Performance Index – Competence and quality of logistics services (global ranking)
0.00%
Philippines 69 77 2016 2017 2018E
-5.00%
Indonesia 44 55
Malaysia 3536 Vietnam Indonesia Philippines Thailand Singapore Malaysia

Vietnam 33 62 Source: JLL estimates and various country tourism boards

Thailand 32 49
Taiwan 13 30 Fig 19: Change in hotel revenue per available room yoy
China 27 27
30%
Korea 25 28
Hong Kong 11 12
20%
Singapore 3 5
Japan 4 12
10%
0 10 20 30 40 50 60 70 80 90

2016 2018 0%
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
Source: World Bank
-10%

Southeast Asian countries continue to improve the The index measures six components including (1) efficiency of
-20%
performance of their logistics sectors. According to World customs and border clearance; (2) quality of trade and transport
Bank’s Logistics Performance Index (LPI), Vietnam’s logistics infrastructure; (3) ease of arranging competitively priced
-30%
performance is now ranked 32nd globally compared to 64th in shipments; (4) competence and quality of logistics services;
Jakarta Bangkok Kuala Lumpur Singapore Manila
2016 and now is just slightly behind Thailand. Indonesia also (5) ability to track consignments and (6) frequency where
moved up to 46th from 63rd rank. Singapore, Japan and Hong shipments are delivered on schedule. Vietnam and Indonesia Source: JLL estimates
Kong are still the most efficient logistics hubs. improved the most on their logistics quality and competency.

16 Southeast Asia 2019 Outlook Southeast Asia 2019 Outlook 17

Key changes to our views for 2019 Authors

Chart 20: Office rental compound annual growth rate (%) Regina Lim Veena Loh
6%
Head of Capital Markets Research Head of Research
4% Southeast Asia Malaysia
Regina.lim@ap.jll.com Veena.loh@ap.jll.com
2%

0%

-2% Singapore Jakarta Manila HCMC Bangkok Kuala Lumpur

-4% Andrew Gulbrandson Tay Huey Ying

-6% Head of Research Head of Research
Thailand Singapore
-8%
Andrew.gulbrandson@ap.jll.com Hueyying.tay@ap.jll.com
-10%

2016-2018 2019-2021E

Source: JLL Research

Janlo de los Reyes James Taylor

Chart 21: Prime retail rental growth yoy Head of Research Head of Research
Philippines Indonesia
12.0%
Janlo.Delosreyes@ap.jll.com James.taylor@ap.jll.com
10.0%
8.0%
6.0%

4.0%
Trang Le
2.0%
Head of Research
0.0% Vietnam
-2.0% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 trang.le@ap.jll.com
-4.0%

-6.0%
-8.0%
-10.0%
Bangkok Jakarta Kuala Lumpur Singapore

Source: JLL Research

Singapore prime office rents rose 22% over 2017-2018 and we
now expect rents to continue to rise 15% over 2019-2020, slightly
higher than our previous forecast. The upgrade to our Singapore
office rents forecasts was made on the back of stronger than
expected office take-up in 2018 and the withdrawal of some
aging stock expected in 2019. Our Jakarta office rents forecasts
for 2019-2021E are now 6% lower than our previous estimates as
vacancy rate in the city remained above 30% despite strong net
absorption in 2018. Despite improving office demand over the
past couple of years, we expect Jakarta office rents to compress
further in 2019, extending the downward trend since mid-2015.
However, after 2019 supply volumes are expected to be more
manageable and as vacancy rates come down from their current
level we are likely to see some stability in rents.
In 2018, retail rents across Southeast Asia continued to increase
slightly by 2.8% yoy on average. Bangkok rents rose the fastest,
rising 3.4% yoy. Singapore retail rents finally grew yoy after three
years of decline. We have mildly downgraded our Jakarta retail
rents for 2019-2021E as rents only grew just 1.8% yoy in 2018,
down from 4.0% yoy in 2016-2017. We expect Jakarta retail rents
to grow 3% yoy in 2019.

18 Southeast Asia 2019 Outlook Southeast Asia 2019 Outlook 19

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