Kuala Lumpur gains more attention from commercial property investors

KUALA LUMPUR (March 15): Kuala Lumpur and Bangkok are generating higher investor interest in direct commercial real estate investment, according to JLL’s newly released Investment Intensity Index.

The index compares the volume of direct commercial real estate investment in a city over a three-year period relative to its economic size. According to JLL, KL and Bangkok are set to draw increased investment activity in the coming years.

The real estate consultancy said the two cities are seeing improvements in the quality of their commercial real estate stock and investment transparency although they have yet to rank among the top 30 in the index.

There are only four cities in Asia Pacific that ranked among the top 30 cities in the index. They are Sydney, Melbourne, Hong Kong and Tokyo.

JLL said this means that while places such as Bangalore, Ho Chi Minh City and Shanghai are racing ahead in their speed of development as real estate markets, they still have room to grow when it comes to attracting investment proportionate to their gross domestic product (GDP). 

JLLs Asia Pacific head of research, Dr Megan Walters said although the emerging cities of Asia Pacific are attracting an ever greater share of global real estate investment, the latest index shows there is some way to go before they punch their weight in terms of investment intensity.

“However, the balance is starting to shift. What we’re seeing is that real estate investors are looking more and more to developing cities to satisfy their diversification requirements, with an estimated 60% of the global office development pipeline until 2020 projected to come from emerging markets,” she said in a statement today.

While offering huge investment potential, the report reveals that emerging world cities will need to boost transparency, improve regulatory oversight and build robust financial platforms to attract real estate investors in the long term.

“Shanghai and Beijing have been identified as some of the world’s fastest growing city economies and are making their mark globally as real estate investment destinations,” says JLL China’s head of research Joe Zhou.

He commented that these cities sit consistently in the top 30 in terms of absolute real estate investment volumes, though they have not yet broken into the top tier of the Investment Intensity Index. This highlights an immense opportunity for growth.

Zhou also pointed out that several other emerging cities, such as Manila, Jakarta, Mumbai, Delhi and Bangalore, have yet to realise their full potential as real estate investor destinations due to issues ranging from regulatory transparency, infrastructure challenges, market restrictions and ownership styles to economic and political volatility.

Meanwhile Australia’s largest cities continue to register robust investor interest, with Sydney and Melbourne both among the Top 30 in the Investment Intensity Index. High levels of transparency, sustainability and buoyant economies support investor interest in these cities, which are poised to register some of the world’s highest office rental and capital value growth this year.