With China's economic growth stalling and regulators
there and in Hong Kong and Singapore trying to restrain their property
markets, investors are turning their attention to Southeast Asia, and
John van Oost, managing partner of Singapore-based
Yishan Capital Partners, visited Hong Kong recently on a fund-raising
mission. His company has launched a fund to invest in Southeast Asia,
targeting US$250 million in assets, and has already committed US$25
Indonesia is where he sees the best opportunity and
Yishan has made four investments there. Singapore, Thailand and
Malaysia, as well as the frontier markets of Cambodia and Myanmar, also
are on the radar.
"We have been very vocal that there is not going to
be a lot of excitement about real estate in Europe - it's going to be
pretty static," he said. "In terms of yield, you can get that in Europe.
But the growth has to be in Asia."
There are good reasons for that kind of optimism,
particularly in Indonesia. It has stabilised politically and its
fundamentals look strong, with real estate brokerage Jones Lang LaSalle
calling it "one of the bright spots in the regional economy".
Chinese investors are often attracted by the way
Chinese Indonesians control large parts of the economy, while Dutch
investors like their historic connections to the former colony.
The country posted 6.2 per cent GDP growth in the
third quarter, only marginally lower than in the previous three months.
Exports are slowing but domestic demand provides a strong underpinning.
IHS Global Insight is forecasting growth of about 6
per cent both this year and next, thanks to buoyant consumer demand and
investment spending. That's the second-fastest economic growth in Asia,
behind only China.
It is partly because China's growth is slowing that
Indonesia has started to attract institutional investors. Both the rents
and capital values of office property are rising in Jakarta, with rents
up 26.6 per cent this year alone.
The Indonesian capital has an investment-grade supply
of 1.5 million square metres, with the WTC II project having just been
completed and the DBS Tower due to finish construction shortly. Jones
Lang LaSalle says there are only three investment-grade projects
scheduled for completion next year and 2014, although there are more due
the year after that.
Van Oost also likes investments in warehouses, which
benefit from Indonesia's strong domestic demand and growth in consumer
spending. His fund has invested in logistics centres in Jakarta and
Surabaya, as well as a residential project in the capital and a shopping
centre in Bali, just south of the airport at Denpasar.
Not everybody agrees that Indonesia holds great
potential. The Asia Pacific office of Grosvenor, the property investment
arm of the Duke of Westminster, has expanded rapidly in Asia, including
Hong Kong residential projects in Repulse Bay, on Castle Peak Road, and
at Jardine's Lookout. It had HK$7.6 billion in assets under management
at the end of last year, and aims to increase its allocation to Asia to
20 per cent of Grosvenor's portfolio.
When it comes to investing in Indonesia "Good luck"
is the comment from Nicholas Loup, chief executive of Grosvenor's Asia
Pacific office. From his Hong Kong base, he prefers more established
Van Oost agrees that Indonesia isn't for everybody,
given the lack of understanding of its property market and economy.
"People have a lot of preconceived ideas," he said. "People either love
it or don't. Even if they like it, it's often for no real reason."
Slowing growth in China is creating the interest in
Indonesia, according to John Saunders, the Hong Kong-based chief
executive for Asia of MGPA, a private-equity property specialist in
"There is certainly an interesting property story
going on in Indonesia at the moment," he said. "My slight concern is
that in some of these markets there is a lot of land available. The
rents will go up and then everybody starts building because there is not
too much of a constraint on supply. But it doesn't have the constraints
of Hong Kong or Singapore."
MGPA has a US$3.9 billion Asia-focused opportunity
fund, as well as a core-plus fund that raised €85 million (HK$837
million) in its first close, and expects to have a second close at the
end of this year at €100 million.
But Indonesia is a market that Saunders is watching
for potential future investment, while he seeks more reliable office and
shopping-centre investments in Japan, Australia and China.