Chris Fossick, Managing Director – Southeast Asia of JLL, was the featured speaker at the Asia CEO Forum held at the Tower Club in Makati on September 22, discussing the highly relevant topic of the ASEAN Economic Community (AEC) and its impact on the Philippine real estate market.
The Association of Southeast Asian Nations or ASEAN is composed of ten diverse countries – economically, geographically, and socially. The region is considered to be one of the world’s fastest growing regions and ranks high in the World Economic Forum global competitiveness report on average. The continuous improvement in real estate transparencies the past ten years by major developing markets in the region has made it more attractive to investors.
In front of over 200 senior local and international leaders, Chris Fossick discussed AEC and how this will affect the country’s growth trajectory. The AEC’s main goal is to create a single market with free movement of labor, capital, goods, and services to support the growth of the 624 million people residing in ASEAN countries. The successful incorporation of the AEC has the potential to create 14 million new jobs from 2015 to 2025.
The discussion highlighted the importance of urbanisation and the recent upsurge of middle income families in achieving AEC and the impact that will have on the Real Estate industry. An estimated 40 million people is expected to have moved to urban areas in the different ASEAN countries by 2020. More people moving to ‘live and work’ in the metro will intensify demand from different Real Estate sectors. “It’s very positive for the real estate market and certainly one of the drivers of real estate is population growth,” said Fossick. An increase of the cities’ work force will decrease office vacancy rates and the need for more office spaces to be constructed. According to some financial indicators for the Southeast Asian office sectors, office rents and capital values are primed to rise in tandem in all the major cities. The expected surge in the urban population is also set to propel the retail industry and increase the need for more residential properties to be sold.
The rise of middle income persons and families will have a huge impact on driving retail demand in ASEAN countries. 51 percent of Filipinos is set to move from a lower income bracket toward the middle class by 2020. A growth in the income of many people will increase their ability to consume more products and avail more services. This includes the increase in people that can afford to stay in hotels and buy or lease their own condominium units.
Another point stressed by Chris Fossick is the massive population growth of youths in the ASEAN region. The Philippines being one of the youngest countries in the region, with an average age of about 23 years old. Today’s youth thinks very differently from the generations before them, due to various factors, but also impacted by the mobile technologies available to them. “Young people today are different. They want to get into the property market. They want their independence. They want their own homes,” said Fossick. This makes younger populations work well in emerging markets. They are now better informed regarding environmental issues and are adamant in decreasing their carbon footprints. This awareness has led property developers to not only cater to the demands of multinational corporations to create more sustainable buildings but also to that of their future employees.
A topic raised by one of the members of the audience during the open panel is the current state of Philippine infrastructure and how this has negatively affected foreign entities from investing in the country. Infrastructure in the Philippines, including the major roads leading to the country’s business districts, have not improved as significantly as the economy in recent years. Despite the country’s consistent economic growth, the lack of timely and effective implementation regarding infrastructure has affected the willingness of some foreign investors to locate their businesses inside the Philippines. Fossick reiterates the importance of a government that will also give priority to business entities to foster long-term economic development.
Overall, the opportunities for all real estate stakeholders – developers, tenants, investors, and community – will continue to be positive as the middle-class populations continue to increase, and the number of people move away from the provinces to the cities. Ultimately, the youth or millennials will be an important demographic in ensuring that the real estate industry continues to build sustainably.
Asia CEO Forum is the largest regular business event in the Philippines and considered one of the most important in the Asia Pacific region. Events are organized by an alliance of Filipino and international business people with a mission to promote the Philippines as a premier business destination to global decision makers. The Asia CEO Forum functions as an activist to promote the activities of local and multinational organizations across Southeast Asia. Held in Manila, presenters are leaders in their industries and engaged in pursuits of significance to the entire region. Daiichi Properties is a proud sponsor of the organization.