The Asia Opportunity The Asia Opportunity Nicholas BrookeNicholas Brooke

President, RICSPresident, RICS

Asian Bites - OverviewAsian Bites - Overview

Asia’s economies growing strongly, and Asia’s economies growing strongly, and SARS now just an unpleasant memorySARS now just an unpleasant memory

China and India providing momentum for China and India providing momentum for regional growthregional growth

North and East Asia still outperforming North and East Asia still outperforming south Asia although Singapore recoveringsouth Asia although Singapore recovering

Election year - everywhere!Election year - everywhere! Property markets mixedProperty markets mixed Currency and exchange rate concernsCurrency and exchange rate concerns

Economic TransformationEconomic Transformation

Hong Kong – CityscapeHong Kong – Cityscape

Hong KongHong Kong

A vacuum in leadership but recovering A vacuum in leadership but recovering neverthelessnevertheless

GDP: 5.4-6.2%GDP: 5.4-6.2% Inflation: -0.6%Inflation: -0.6% Rents and prices rising, particularly in luxury Rents and prices rising, particularly in luxury

residential sectorresidential sector Increase in tourism with subsequent Increase in tourism with subsequent

spending helping to lift deflationspending helping to lift deflation Unemployment figures improvingUnemployment figures improving CEPACEPA

IndiaIndia

The next driver of growth?The next driver of growth? GDP: 7.0%GDP: 7.0% Inflation: 5.0%Inflation: 5.0% Still major challenges in attracting FDIStill major challenges in attracting FDI IT and business services sectors continue to IT and business services sectors continue to

drive demand for office space – making the drive demand for office space – making the most of highly skilled, English speaking but most of highly skilled, English speaking but low cost workforcelow cost workforce

Stable rents/prices due to high supply levelsStable rents/prices due to high supply levels

IndiaIndia

IndonesiaIndonesia

Precariously poised and still muddling throughPrecariously poised and still muddling through GDP: 4.9%GDP: 4.9% Inflation: 6.5%Inflation: 6.5% Economy improved in late 2003 and interest Economy improved in late 2003 and interest

rates have fallenrates have fallen Limited progress in resolving bad debt issuesLimited progress in resolving bad debt issues Property markets showing signs of recovery Property markets showing signs of recovery

with most interest in the retail and luxury with most interest in the retail and luxury residential sectorsresidential sectors

FDI still showing little sign of improvingFDI still showing little sign of improving

IndonesiaIndonesia

JapanJapan

An enigma and a puzzle to most, but moving An enigma and a puzzle to most, but moving out of deflation despite itselfout of deflation despite itself

GDP: 1.4%GDP: 1.4% Inflation: -0.5%Inflation: -0.5% Office sector rents have declined by 30% for Office sector rents have declined by 30% for

new stock and 15% for existing since early new stock and 15% for existing since early 20012001

Economic improvement could lead to Economic improvement could lead to increased employment opportunitiesincreased employment opportunities

Demographic challenge of ageing populationDemographic challenge of ageing population

JapanJapan

Mainland ChinaMainland China

Huge engine of growth domestically and in Huge engine of growth domestically and in AsiaAsia

GDP: 7-8%GDP: 7-8% Inflation: 3%Inflation: 3% FDI continues at high levels but domestic FDI continues at high levels but domestic

market now as important as exportsmarket now as important as exports Olympics 2008, World Expo 2010Olympics 2008, World Expo 2010 Enormous amount of development – risk of Enormous amount of development – risk of

markets overheatingmarkets overheating Growing interest in second tier citiesGrowing interest in second tier cities Potential for social unrest, under employment, Potential for social unrest, under employment,

shift to the citiesshift to the cities

Mainland China - BeijingMainland China - Beijing

Mainland China - BeijingMainland China - Beijing

Mainland China - Mainland China - ShanghaiShanghai

MalaysiaMalaysia

Potential dark horsePotential dark horse GDP: 4.4-5.0%GDP: 4.4-5.0% Inflation: 1.8%Inflation: 1.8% Improved utilisation rate in manufacturing Improved utilisation rate in manufacturing

capacitycapacity Budgetary deficit still a concernBudgetary deficit still a concern Office sector in KL performing steadilyOffice sector in KL performing steadily Retail sector continues active although with Retail sector continues active although with

high levels of supplyhigh levels of supply Jury still out on new leadershipJury still out on new leadership

MalaysiaMalaysia

PhilippinesPhilippines

Circumspect scepticism as rich get richer and poor Circumspect scepticism as rich get richer and poor go nowherego nowhere

GDP: 4.2%GDP: 4.2% Inflation: 4.5%Inflation: 4.5% Economy improved in late 2003 but concern over Economy improved in late 2003 but concern over

the upcoming Presidential election in Maythe upcoming Presidential election in May Call centres still main driver of demand in the office Call centres still main driver of demand in the office

sector, again using low cost, English speaking sector, again using low cost, English speaking workforceworkforce

Rents expected to stabilise after 50% decline since Rents expected to stabilise after 50% decline since 19971997

Concerns over election/succession issuesConcerns over election/succession issues

PhilippinesPhilippines

SingaporeSingapore

On the mend but not yet out of the woodsOn the mend but not yet out of the woods GPD: 4.9-5.5%GPD: 4.9-5.5% Inflation: 1.8%Inflation: 1.8% Financial services giving impetus to economyFinancial services giving impetus to economy Office sector remains oversupplied due to Office sector remains oversupplied due to

weak demand over recent yearsweak demand over recent years Take-up of industrial space improved in later Take-up of industrial space improved in later

2003 and investment in this sector is active2003 and investment in this sector is active Previous over reliance on electronics being Previous over reliance on electronics being

replicated with investment in biotechreplicated with investment in biotech Role as entrepot under threat from Malaysia Role as entrepot under threat from Malaysia

SingaporeSingapore

SouthSouth KoreaKorea

The star pupil in the Asia classThe star pupil in the Asia class GDP: 5.5%GDP: 5.5% Inflation: 2.8%Inflation: 2.8% Fiscal stimuli have added to recent economic Fiscal stimuli have added to recent economic

growth although politics remain an issuegrowth although politics remain an issue Office sector stable in all three main Seoul Office sector stable in all three main Seoul

markets with low vacancy rates of 1-3%markets with low vacancy rates of 1-3% Significant investment in hard assets by Significant investment in hard assets by

international institutional communityinternational institutional community US suspended disbelief and investing heavilyUS suspended disbelief and investing heavily

South KoreaSouth Korea

TaiwanTaiwan

Smoke and mirrors or the real thing?Smoke and mirrors or the real thing? GPD: 4.1-5.4%GPD: 4.1-5.4% Inflation: 0.45%Inflation: 0.45% Government investment in infrastructure Government investment in infrastructure

driving expansiondriving expansion Presidential elections could be disruptive – Presidential elections could be disruptive –

reunification still high on the agendareunification still high on the agenda Residential prices on the riseResidential prices on the rise Essentially a local play for local playersEssentially a local play for local players

TaiwanTaiwan

ThailandThailand

Leaner and more streetwise but bad habits Leaner and more streetwise but bad habits continuecontinue

GDP: 8%GDP: 8% Inflation: 2.0%Inflation: 2.0% Perception v informed opinion as to whether Perception v informed opinion as to whether

recovery for realrecovery for real PM Taksin has major following but are his PM Taksin has major following but are his

policies sustainablepolicies sustainable Office market still oversupplied but rentals Office market still oversupplied but rentals

slowly improvingslowly improving

ThailandThailand

INVESTOR PROFILEINVESTOR PROFILE

1.1. STILL VERY CAUTIOUS AND RISK AVERSESTILL VERY CAUTIOUS AND RISK AVERSE2.2. EssentiEssentially ally IRR driven - 15% +IRR driven - 15% +3.3. FOCUS ON CBD OFFICE AND QUALITY FOCUS ON CBD OFFICE AND QUALITY

RESIDENTIALRESIDENTIAL4.4. GROWING INTREST IN SUB-CENTRES around GROWING INTREST IN SUB-CENTRES around

the Region e.g. Osaka. Incheon, Guangzhou, the Region e.g. Osaka. Incheon, Guangzhou, Ho Chi Minh CityHo Chi Minh City

5.5. SPECIALIST PLAYERS, EITHER SPECIALIST PLAYERS, EITHER OPPORTUNISTIC OR VERY SELECTIVE E.G. OPPORTUNISTIC OR VERY SELECTIVE E.G. RETAILRETAIL

INVESTOR PROFILE - INVESTOR PROFILE - CONTDCONTD

6.6. CLUB MENTALITY – SAFETY IN NUMBERSCLUB MENTALITY – SAFETY IN NUMBERS7.7. REALISATION OF SIZE AND SCALE OF REALISATION OF SIZE AND SCALE OF

OPPORTUNITYOPPORTUNITY8.8. REALITY IS THAT MOST INTERNATIONAL REALITY IS THAT MOST INTERNATIONAL

DEVELOPERS WILL BE OUT-MANOUVERED BY DEVELOPERS WILL BE OUT-MANOUVERED BY LOCAL COMPETITIONLOCAL COMPETITION

9.9. CHALLENGE OF DEMONSTRATING ADDED CHALLENGE OF DEMONSTRATING ADDED VALUE – LIQUIDITY NOT IN SHORT SUPPLYVALUE – LIQUIDITY NOT IN SHORT SUPPLY