Four Asean cities have made the top 20 list in real estate consultancy JLL's City Momentum Index 2019, which tracks socio-economic and commercial real estate growth in 131 cities over a three-year period. Vietnam was the strongest performer with two cities ranking the highest in Asean: Hanoi at third place and Ho Chi Minh City at eighth. The Philippines was represented by Manila in 12th place and Thailand by Bangkok in 18th place.
Topping the list was Bangalore, one of six Indian cities in the top 20. China had the greatest presence with nine cities. The only non-Asian city in the top 20 was Kenya's capital, Nairobi, which ranked 6th -- a position "heavily influenced by significant amounts of infrastructure-focused investment from China", said JLL.
Said JLL director of global research Jeremy Kelly: “Asia continues to show strong momentum, with cities that are successfully expanding their innovation economy punching above their weight in terms of attracting capital, companies and people. It’s clear that the tech sector is a key driver of both real estate and economic momentum – driven by large technology firms as well as dynamic start-ups in cities like Bengaluru, Hyderabad, Ho Chi Minh City and Shenzhen.”
Now in its sixth year, the City Momentum Index looks at 20 indicators. For socio-economic momentum, these include recent percentage changes in city GDP, population, air passengers and corporate headquarters presence; projected percentage changes in GDP, population and retail sales; and recent levels of and changes in foreign direct investment, as a proportion of a city’s economy. For commercial real estate momentum, these include variables relating to recent and projected percentage changes in office net absorption, office rents, retail rents and hotel rooms; international retailer presence; and recent changes in direct commercial real estate investment volumes and real estate transparency.
Hanoi and Ho Chi Minh CIty
In its report, JLL noted that the two cities from Vietnam performed very well for socio-economic momentum, with fast-growing populations and economies, saying: "Ho Chi Minh City is generally viewed as the more business-friendly destination attracting more overseas investment along with a higher corporate presence, whereas Hanoi has lagged commercially but is a city that is swiftly evolving."
On the real estate front, Vietnam has "a small real estate investment market struggling with issues such as low transparency and a limited volume of investment grade stock", noted JLL. However, steps are being taken to improve transparency, such as enhanced access to the land registry, better valuation practices and the increasing application of green building certification system.
On Manila, JLL noted the government's extensive Build Build Build infrastructure programme, with over 2,000 projects that are expected to improve congestion, increase power reliability, reduce the impact of climate change and redevelop areas of the urban fabric. The city is well known for its business process outsourcing and foreign companies continue to be attracted by the skilled workforce, English language skills and tax incentives, said JLL, adding: "Once seen as lagging other South East Asian cities, Manila appears to be thriving and boosting growth for the longer term."
In Bangkok, economic momentum has been rising gradually in the past couple of years, yet is tempered by political uncertainty. JLL noted the launch of government initiative Thailand 4.0 in 2016, aiming to elevate the country to the status of a high-income nation; reduce inequality; and promote environmentally sustainable growth and development. Foreign direct investment rebounded sharply in 2017 with many successful foreign-local partnerships, while infrastructure improvements are underway with new mass rapid transit lines and extensions. "However, political uncertainty has the potential to derail this momentum with an election due in February 2019 which could impact business investment decisions and tourism inflows," said JLL.