In Asia Pacific, 75% of total commercial real estate currently concentrates in five markets – China, Japan, Australia, Hong Kong and Singapore, according to LaSalle (LIM Global Real Estate Universe February 2016).
Coincidentally, these five markets account for around 60% of AP regional GDP. A sixth market, India, comprises 16% of regional GDP but is currently under-represented with only around 6% of the region’s commercial real estate (South Korea’s share is 7%).
However, India is forecast to join this group of global real estate investment markets over the next decade, as a result of rapidly expanding commercial real estate stock.
Globally, demand for commercial real estate is driven by economic and demographic forces such as a country’s GDP and employment. Demographics alone will be a strong demand driver for commercial real estate in India.
Just over one-quarter of the country’s workers currently works in the service sector according to the World Bank (the regional average is 55%), as agriculture is still a key part of the economy.
However, a young population, more educated women and the highest GDP growth rate in the region mean more service sector jobs will be created.
Oxford Economics forecasts that India will create a total of 80 million new jobs over the next decade, account for almost 60% of the region’s total employment growth.
Up to one-half of these new jobs may be in the service sector, if the sector’s employment matches more closely its share of the country’s GDP. Southeast Asia will see similar developments.
Indonesia, the Philippines, Vietnam and Malaysia together may be able to deliver twice the number of service sector jobs as China in the next decade.
