Archive for the ‘Demography’ Category

Why Strong Demographics Is Good For The Philippine Property Market

Wednesday, September 26th, 2012

Several studies conducted by economic think tanks and investment banks have recognised the growing population of the Philippines as an economic asset now and in the near future. A growing population means a growing workforce and a larger consumer base that could propel future economic growth for the country.

As of May 2010, the Philippine population stood at 92.1 million, with a median age of 23.4 years old – considered to be within the most economically active age cohorts of 21 to 35 years. The majority of the workforce in the offshoring & outshoring (O&O) industry – one of the strongest contributors to the economic growth in the Philippines – belong to this age group.

Locally, the attractive compensation packages offered by O&O firms have attracted a considerable proportion of this working population, effectively raising the disposable incomes of many O&O workers. This has consequentially supported their demand for a wider range of goods and services, including real estate.

This heightened consumer appetite has also translated to a greater demand for retail goods, encouraging retailers to take up more spaces, improving the occupancy level in retail establishments. While the growth in the O&O industry is not the only factor behind the surge in consumer demand, it is a sizeable market that has some retail establishments adjusting their operating hours to cater to the working hours of this industry. There has also been a recent emergence of retail offerings on the ground floors of office and residential developments, particularly in the established commercial business districts of Makati and Ortigas as well as in the emerging urban district of Bonifacio Global City where there is a large agglomeration of the O&O companies.

The effect is more visible in the residential property sector, especially in the mid-end residential condominium market. Higher disposable income in the O&O workforce has made it now one of the key target markets for property developers. These workers are mostly single who prefer studio-type units. Equally they have the potential to become upgraders in the near future as their disposable incomes rise or when they form new households through marriages. Although renters make up most of this demographic, some are buying condominium units – either as end-users or investors – supporting the demand in the residential market.

Admittedly, the country’s young and growing population is not enough to ensure the growth of the local property sector. Equally, strong government support is needed to further improve the human capital as well as sustain and enhance the country’s economic conditions. Nevertheless, we cannot deny the economic benefits of the country’s young and growing demographics on the Philippine economy and the property market.

About the author
Jan-lo de los Reyes is the Senior Research Analyst for Jones Lang LaSalle in Philippines.

Posted in Demography, Philippines, Real Estate Research | No Comments »

It’s All About Brand…And Price!

Thursday, August 2nd, 2012

Finally, the long-awaited news has arrived. Ikea will be coming to Jakarta!

In March, the Swedish retailer reportedly signed an agreement with Hero Group to establish Ikea stores across Indonesia. The first outlet is scheduled to open in 2014.

For the past six years, the market has been talking about Ikea’s foray into Indonesia. The world’s largest furniture retailer has many fans in Indonesia and any indication of a possible opening in the country has always sparked hot discussions amongst aficionados. Meanwhile, developers, landlords and local retailers are competing to secure the potential opportunities created from Ikea’s arrival.

The arrival of more foreign retailers to Indonesia is a reflection of the maturing retail industry in the country, a result of the rising middle class, rapid urbanisation and a shift from a traditional to a modern lifestyle.

Ikea and other European brands such as Mango, Zara, Topshop, Debenhams, FitnessFirst, Pizza Marzano and Tony & Guy are considered latest lifestyle icons in the city. Their Asian peers such as G2000, Muji, Sogo, Metro, Lotte, Bossini, Charles & Keith and Baleno are also perceived in the same way. They have joined the growing Indonesian middle and middle-up class retail segment, which was previously dominated by American brands such as GAP, Old Navy, Guess, NEXT, Nine West, DKNY, Ace Hardware, Starbucks, Nike, Coach, etc.

With higher purchasing power and better exposure to the outside world, Indonesia’s middle class demands a larger variety of better-quality products and services to support its lifestyle. While more and more people are becoming passionate about specific brands, they also like to try new things. These people want the latest styles for their homes, to taste international cuisine from the new restaurants, to shop at latest stores or to hangout at the new gym near the office, etc. This attitude has helped new brands grow their business in this market.

However, not every brand has a remarkable story. There are cases where new brands have failed in a relatively short period after opening, such as Harvey Nichols in Grand Indonesia Shopping Town. In other cases, several brands have suffered low sales and stagnant activity, and are just waiting for their leases to expire.

Despite having a high passion for famous brands and a new lifestyle, many Indonesian consumers remain price sensitive. Popular brands like Starbucks, Mango, Zara, FitnessFirst, Guess, GAP, NEXT, Charles & Keith seem to be well positioned among the locals due to the quality and good value for money, while Harvey Nichols was perceived by the locals as being somewhat ‘too expensive’ for its high-end segment, as compared to other boutique stores in the same league selling similar products. Beside, for luxury or high-end products, a lot of Indonesians often shop overseas such as Singapore, Hong Kong and Europe rather than in the country.

As for Ikea, with loads of loyal customers already in place coupled with the concept of affordable modern furniture, the brand has much potential to grow and expand in this country.

About the author
Anton Sitorus is the Head of Research for Jones Lang LaSalle in Indonesia.

Posted in Consumer Spending, Demography, Indonesia, Retail Research | No Comments »

Maximum City, Maximum Use Of Space

Thursday, April 19th, 2012

The city of Mumbai has an uncanny knack of pushing everything to the limits, and it certainly does so for optimally utilising its every square foot of space surrounded by the sea from three sides. Mumbai teaches its citizens to be focused on one’s own work by remaining oblivious to what happens just an arm’s length away and like a true Mumbaikar, Mumbai’s spaces radiate dynamism in making numerous activities happen on a time share basis!

Mumbai’s suburban train stations are surely the world’s most vivid spaces. Every single day their spill-over nooks and corners are time share offices, relaxing areas, communication hubs, retail joints, food spots, business centres, logistics points and what not! The foyers and enclosures are greeted by the vendors of perishable goods at 3 am and for the next hour or two one can see a flawless, well lubricated distribution of their goods to retailers who will take the goods door to door, neighbourhood to neighbourhood.

With sunrise, also emerging on the horizon are hundreds of high school and college students on their way to schools, colleges and private coaching institutes. Where else in the world would schools decide on their timing based on the need to beat the morning rush hour! People not belonging to Mumbai often find it crazy to see college rush hour dawning as the sun emerges but soon they sink into their own memory lanes once among the sea of young hearts.

What follows next is a march past by office goers; men and women, rich and poor, bankers and carpenters, engineers and clerks, sales girls and fashion designers all forming an order like a never ending parade of ants coming in and out with precision personified. About 10,000 people walk past 1,000 sq m access controls in less than 6 minutes, if they fail, the next batch of people drifts them away in no time.

Office goers gone, the place assumes a relaxed mood. This is when it is at its productive best. Diamond dealers do trade worth millions of bucks, medical representatives master the art of symbiosis, interviews happen and candidates are selected, real estate agents broker deals, courier services sort out their mail, insurance agents solicit their clients and by now it is time to make way for the food stalls. Mumbai’s famous Dabbawallas (tiffin carriers) are ready for their final leg to the offices, people emerge from all sorts of bee hives for lunch and hundreds of food stalls dishing out most cousins of India rule the station area for the next couple of hours.

Come afternoon and the place turns gentle and caring for those who seek solitude, who seek their beloved’s company for some magic moments of love, affection and romance. This does not last long, for it is time for the petty retailers to set up their shops selling novelty items and daily needs to thousands of commuters who have no time for shopping and truly, this is “convenience shopping” for them on their way home in the evenings. Trading density during evening hours in suburban station areas of Mumbai is easily ten times that during crowded weekends at any malls and the kind of high rent retailers pay for this time slot is often two times higher than that for a popular high street.

The buzz finally starts receding around 10 pm when the hard working work force is making its journey back after doing “overtime”, friends catching up and hanging out, plans being made for the late night movie, the suburban station starts wearing its humane cap in providing the less privileged their shelter for the night. Mind you, it will be merely three hours of peace as the railway house keepers and gangmen do their daily repairs and maintenance, and there will be yet another busy day for all of Mumbai’s suburban railway stations! An ordinary Mumbaikar’s rightful public space for the tax he pays.

About the author
Ashutosh Limaye is the head of Research and Real Estate Intelligence Service, for Jones Lang LaSalle in India, based in Mumbai.

Posted in Demography, India | No Comments »

Bangkok’s Booming Retail Real Estate

Tuesday, February 28th, 2012

In years past, a trip to the mall, even for some basic shopping, often meant a serious commitment of time – because one would often be stuck in traffic and have to search for a parking space – and then face a lack of choice in terms of both products and brands. Over the past five years, however, Bangkok has welcomed 1.25 million sqm of new retail space in new centres across the city, an increase of nearly 25%, bringing the Thai capital much closer towards its goal of being a shoppers’ paradise.

While the Ratchaprasong area still hold the title of Bangkok’s core shopping district, with high-profile centres like Siam Paragon, Central World, Gaysorn Plaza, Siam Discovery, and MBK, all within walking distance of each other, other areas and retail formats have mushroomed across the metropolitan area. Hypermarkets Tesco Lotus and Big C continue to prosper in both the city and the suburbs. The increasingly ubiquitous neighbourhood malls attract residents from increasingly affluent local areas, while specialty retail outlets in locations easily accessible by foot traffic and mass transit stations are benefitting from the ongoing urbanisation of Bangkok. Meanwhile, traditional street-front retail shophouses are undertaking facelifts to remain relevant in the wake of losing customers to modern retail malls.

Driving this trend is continued economic growth, rising incomes, and higher disposable income. Despite numerous negative factors, for example, political turmoil, the global financial crisis and recent natural disasters, Thai consumption has expanded more than 40% this past decade. Better mass transit infrastructure, particularly the Bangkok Transit System (BTS) skytrain, and the underground Mass Rapid Transit (MRT), has made it much easier to get around the city. Higher density and more upmarket residential developments across the city have created new catchments supporting the viability of neighbourhood malls. Finally, competition among retailers, from both established local and new international brands, is resulting in more space being demanded to support their expansion.

So far, most retail projects have enjoyed good returns but the impact of rising rental income on this modern retail boom and the potential pitfalls ahead have yet to become evident. Success does breed competition, and Bangkok will see an all-time record amount of supply in 2012 with over one million sqm in new and renovated malls scheduled to come on stream. Recent success has attracted independent and less experienced retail developers. However, sustaining a successful retail development in Bangkok requires a high level of expertise, proactive management, and innovation. In the near term, the robust consumer demand will mask the lack of experience of these new developers. Over the longer term, however, it will be important for these smaller players to step up to the game through targeted product offerings and active tenant management to compete effectively with the leading Thai retail managers and sustain the city’s long term retail growth.

About the author
Dan Tantisunthorn is the Head of Research for Jones Lang LaSalle in Thailand.

Posted in Consumer Spending, Demography, Retail Research, Thailand, Urban Development | No Comments »

Livability & Economic Activity – An Unusual Combination

Sunday, October 23rd, 2011

According to the Economist Intelligence Unit (EIU), I now live in the world’s most livable city. It may not have the culture of Europe, the bright lights of Hong Kong, the weather of Queensland or the beaches of New South Wales – but Melbourne ranks as number one on the EIU’s livability index.

Questions will always be asked of livability surveys in terms of methodology, weightings and criteria. I myself query the pertinence and value of such research. That being said, there is no doubt that Melbourne does in fact have a very high standard of living. It is the purpose of this blog to outline the unique position of the city.

An indication of the quality of life enjoyed in Melbourne can be gauged by the population growth over the past decade. Over the 10 years to 2010, the population of Victoria (of which Melbourne is the capital) grew by over 800,000 people. Over the same period, the state of Victoria has accounted for 25.4% of the national population growth despite only accounting for 23% of national output. Furthermore, Victoria now has a positive net balance of interstate migration which is a large turnaround from the mid 1990’s where Victoria was losing residents to the other states.

So the question remains…why is Melbourne doing so well? Firstly, the city has been beneficiary to a steady release of residential land on the urban fringe, giving the city affordable housing options within the metropolitan area. Secondly, Australia has two commercial hearts – Sydney and Melbourne – and has afforded Melbourne with significant employment opportunities for skilled migrants. In fact, twenty of the companies that make up the S&P ASX 50 are headquartered in Melbourne.

Melbourne’s combination of livability and economic activity is unique. Over the next 10 years, Deloitte Access Economics project a further 820,000 people will live in Victoria, taking the total to around 6.4 million. Population growth will continue to drive residential housing investment in Victoria. Strong population growth will also flow through to the demand for retail floorspace, industrial warehouses and office accommodation.

The future for Melbourne is positive – the issue is there is only one way to go from number one. The EIUs livability report stated that one major area for improvement was the city’s prevalence of petty crime. Another area that will come under pressure will be the public transport infrastructure. The state will have to address these issues and remain proactive in terms of maintaining and increasing the scope of the public transport infrastructure. There will also need to be provision for new infrastructure within the urban growth areas which is where a high proportion of the population growth is expected to be accommodated.

About the author
Nicholas Wilson is a Research Analyst for Jones Lang LaSalle, based in Melbourne, Australia.

Posted in Australia, Demography, Economic Research, Standard of Living | No Comments »

Will a Rise in the Minimum Salary for College Grads Help Fill Up Condos?

Monday, August 29th, 2011

An interesting, but yet to be implemented, policy from our new government is the introduction of a minimum THB 15,000 baht (USD 500) monthly salary for employees with undergraduate degrees. Whether this is feasible or even plausible (and ignoring other macroeconomic impacts), the prospect does offer hope for developers of or investors in the many residential condos mushrooming across Bangkok.

The trends of widespread mass transit use, evolving lifestyles and demographics, rising incomes and increased access to finance have propelled high-density residential development across central Bangkok. The number of condominium units rising from 49,800 in July 2006 to a total stock of over 172,000 units (including units under construction now). For this type of development to be sustainable, affordability is key. Due to the rising land and construction costs, the abundance of studio and one bedroom units have also gotten considerably smaller over the past five years.

With so much of this type of development, the question has been, who is living in, or will be living in, these small units? One obvious pool is young professionals wishing to save time using mass transit to get to and from work. However, the existing pay scale – where jobs for new grads in the private sector can start at about THB 9,000 baht and for government jobs at about THB 8,000 – limits the affordability. With all degreed employees earning at least THB 15,000 a month, purchasing or renting power could increase considerably. Ignoring the other economic implications, the prospect should give some developers and investors with units becoming ready something to forward to.

About the author
Dan Tantisunthorn is the Head of Research for Jones Lang LaSalle in Thailand.

Posted in Demography, Economic Research, Investment Research, Residential Research | No Comments »

Spending Life Commuting and the Changing Face of Mumbai

Monday, August 22nd, 2011

If the daily commute for work is considered traveling, half of Mumbai’s population would have covered the distance taking them every year easily to London and back or to Sydney and back. Traveling 25,000 km a year [Travelling 50 km one way for 250 working days in a year], year after year, often standing sharing one sq metre of space with fourteen fellow travelers in a train that is aired only naturally and still contributing to Mumbai’s economy constructively calls for a free holiday for six million Mumbaikars to London or Sydney.

Traffic in Mumbai is so bad that one has to compromise comfort or punctuality. One has a choice of spending hours in an air conditioned car or be subjected to “crushing load density” [According to Indian Railways a crushing load density is when the train is subjected to 2.5 times the designed load conditions (number of passengers) during its journey] of local trains. You cannot have both! And this is precisely why everyone aspires to buy a home close to their work place, or to choose a job near your home!

You are one of the lucky ones to own your house in Mumbai! Exceedingly high realty prices in Mumbai are putting newer and higher entry barriers [An average 2-bedroom compact house in a far suburb of Mumbai costs at least INR 11 million whereas a house twice as big can be bought for half the price in cities like Bangalore, Chennai, and Hyderabad] for home buyers and the city could be on the verge of losing its edge of talent, and business competitiveness to other cities. Transportation infrastructure can collapse any time, and the city is responding in its own way by moving its business districts away from downtown, and creating newer business districts closer to people’s homes.

Areas that were entirely residential are fast becoming multi-use with office neighbourhoods, erstwhile industrial areas are becoming office-residential districts and business districts are assuming a distinct occupier base and their own unique character. Bandra Kurla Complex – Mumbai’s swankiest CBD is already home to BFSI, SBD-Central is made up of creativity based businesses, SBD- North is an all inclusive office world in itself, while the suburbs are bustling with IT-ITeS offices. I would not be surprised if Nariman Point – Mumbai’s parallel to Manhattan – becomes the priciest residential district in the country [A house in Nariman Point costs INR 80,000- 100,000 psft or about INR 180 million for a 4- bedroom apartment while average cost for a similar house in Manhattan is USD 2 million (INR 90 million)] not too many years from now!

I wonder if this will continue forever or there is any hope of breaking free from this need to stay closer to one’s workplace. On the cards is the bullet train linking Mumbai with the cities of Pune and Ahmedabad. This project will by year 2021 reduce the traveling time to forty minutes from the present four hours for Pune and to less than two hours from the present seven hours for Ahmedabad. The real estate market of Mumbai should be a lot more affordable then and once the pressure on the city is released, those who choose to stay back should have a lot better living environment. So, I have hopes that my children’s generation will have a healthy environment to live in and I am willing to bear the pain to make them happy!

About the author
Ashutosh Limaye is the Head of Research and Real Estate Intelligence Service, for Jones Lang LaSalle in India, based in Mumbai.

Posted in Demography, India | 1 Comment »

Where is Bangkok’s CBD?

Wednesday, June 29th, 2011

Depending on whom you ask, Bangkok’s central business district can actually be one of numerous locations across the city. From the days when the Chao Phraya River and the city’s intricate canal network provided much of the infrastructure for commerce, to an era when residents and visitors had few alternatives to spending much of their day stuck in the notorious road traffic, the biggest influence on how the city works these days is the mass transit infrastructure, BTS skytrain and MRT underground. As a result, rather than having a single commercial heart, the city is evolving around key nodes with a blend of high density office, retail, hospitality and residential developments clustering in these areas.

Coinciding with the launch of a high profile residential project, five business groups will collaborate to establish “Ploenchit City”, a new central business district between the Chidlom and Ploenchit BTS stations. The area already offers its fair share of office, retail, hotel and residential space, but new development includes the Park Ventures office/hotel complex, Central Embassy and Park Hyatt hotel, and the Noble Ploenchit condominium development. The group expects traffic to rise from the current level of 50,000 people per day to over 200,000 by 2016.

The initiative could shift some of the momentum built up by development around the Asoke-Sukhumvit intersection over the past couple of years. The relocation of Citibank to the recently completed Interchange 21 at the Asoke-Sukhumvit intersection highlights a shift towards density being realized at these infrastructure nodes. Also at the Asoke-Sukhumvit intersection, Exchange Tower completed in 2006 was one of the first office buildings to link directly with a BTS station. Meanwhile, the completion of Terminal 21 at the end of this year will be the first major retail center linking to the Asoke-Sukhumvit BTS sky-train and underground MRT stations.

And despite these recent developments, the Chong Nonsi intersection, at Sathorn and Narathiwat Roads, still offers the largest amount of grade A office space. The Bangkok Metropolitan Authority recently completed construction of the platform over the intersection which allows easy pedestrian access between the BTS and Bangkok Rapid Transit stations as well as the many high quality buildings in the area. The recently completed Sathorn Square office building, built in conjunction with Bangkok’s soon to be first W Hotel has further raised the profile of this already prominent intersection.

In all these areas, individual commercial developments are less able to stand alone on their own and are increasingly reliant on integration with the infrastructure and other buildings in the area. Other key mass transit locations also comprise high density commercial and residential offerings, and new development plans are already entering the pipeline. As these nodes evolve and attracting traffic becomes increasingly competitive, we can expect to see more collaboration among landlords and developers promoting their area as the best commercial zone in Bangkok.

About the author
Dan Tantisunthorn is the Head of Research for Jones Lang LaSalle in Thailand.

Posted in Demography, Investment Research, Land Supply, Office Research, Thailand, Workplaces | No Comments »

So you work in an office?

Thursday, June 16th, 2011

Every week-day morning around two million Australians tumble out of bed and, with varying degrees of enthusiasm, go to work in an office.

Nothing surprising about that – but if you are an office worker, here are a few questions.

Firstly: did either your father or mother work in an office? If the answer is “yes”, then here is a second question: did any of your grandparents work in an office? If the answer to all these questions is “yes” then you are a third generation office worker, and this makes you are a very rare person indeed.

I estimate no more than 5% of today’s office workers in Australia are descended from two generations of office workers.

It can be argued that a generation is a long time. But commercial property assets have long life expectancies. Almost half the Sydney CBD office stock is 30 or more years old.

Does this matter? Perhaps not, but here is a fourth and final question – do you think that your grandchildren will work in an office? If the answer is “yes” then you believe that the waves of demography and technology that propelled so many of us from farms, factories and corner stores and into offices in just three generations have suddenly skidded to a halt.

The facts suggest otherwise. The pace of change seems to be speeding up, not slowing down.

A popular metric of efficiency in the use of office space is the workspace ratio – the number of square metres of space occupied by each office worker. A typical office workspace ratio is 15 square metres per person. Reliance on simple metrics can be handy but risky. Technology is freeing up office workers to leave the office. Occupancy in offices has been falling and is now often between 40% and 50%. A 40% occupancy rate means that the average workplace is only occupied for two days out of a five-day working week. That’s expensive space.

No-one knows for certain how these trends will play out in the future. Rules of thumb like workspace ratios and turnover per square metre in shopping malls are convenient short term indicators. But prepare for a life of surprises: Technology is challenging many of these benchmarks. Property investors make big commitments to assets with a long life expectancy. More than any other sector of the economy, property investors and developers need to think outside the box.

About the author
David Rees is the Head of Research for Jones Lang LaSalle in Australasia, based in Australia.

Posted in Demography, Technology, Workplaces | 1 Comment »