Given the change of pace in China's economy and India's headline-grabbing growth story, many political and economic commentators will have their eyes on the Asean development as the world continues to pivot towards Asia.
For business players in Southeast Asia, we are used to hearing the impressive numbers that illustrate the region's progress. Its economies are forecast to grow at 5 percent annually until 2020, exceeding global growth of 3.52 percent per year. Its urban population is growing by around 2.2 percent annually, while the middle-class population is set to increase by 70 million to 194 million by 2020.
With more than 600 million people, Asean has the third-largest labor force in the world after China and India.
But behind those big numbers, what will make Asean an economic force to be reckoned with? Much of its success will hinge on how countries in the region capitalize on the huge opportunity presented by emerging technologies. At the heart of this are the possibilities created by what professor Klaus Schwab has termed "The Fourth Industrial Revolution."
In the real estate sector, we expect the changes to be positive and transformational. Our research leads us to believe that technology will enable many Asean member states to leapfrog current infrastructure and developmental constraints to transform the way their citizens work, live and play.
New Ways to Work
In terms of work, office demand will change due to greater outsourcing from developed markets, more flexible work practices and an increase in co-working spaces.
While global office demand growth slowed after the financial crisis, Southeast Asia has bucked the trend. We expect office demand to grow by 6 percent per year until 2020 due to economic growth, further acceleration of outsourcing from developed markets and the rise of the middle class.
Co-working and serviced office space currently accounts for 1 percent to 5 percent of the total office stock in developed cities, as it is growing rapidly due to the sharing economy, flexible working and freelancing. In Southeast Asia, co-working spaces could make up 10 percent to 15 percent of total office stock by 2030.
In developed markets, online retail sales already make up 5 percent to 15 percent of the total, as retail space per capita has peaked. In Southeast Asia, online shopping penetration is higher than rates in developed markets such as the United States and Britain. According to research by management consultant Bain & Company, 50 percent to 90 percent of consumers in Southeast Asia living outside cities are bypassing their computers to use mobile phones to shop online.
But rather than diminish the demand for physical stores, this is likely to result in increased adoption of the online-to-offline model. Malls will be used as meeting places and for consumers to touch and feel products, while many will choose to shop online but collect items instore.
Traffic Management and Infrastructure
New technologies and new uses for existing technologies have the potential to transform the way we move within cities.
Intelligent traffic management, car sharing and autonomous driving are expected to ease congestion and enhance mobility. Traffic congestion in cities such as Jakarta and Manila are legendary, mainly due to inadequate investment in mass rail transit and the absence of restrictions on car ownership. However, online platforms such as Waze, Grab and Uber are allowing the use of mobile-phone data to enhance government efforts in traffic management.
Meanwhile, mass rapid transit projects are under construction in Singapore, Kuala Lumpur, Bangkok, Manila and Jakarta, which will increase rail length by 50 percent by 2020. In terms of real estate, this will create new hubs, new investment opportunities and the potential to create innovative mixed-used developments that facilitate people's ability to live, work and play more easily.
In many ways, technology could allow cities in Southeast Asia to bypass current constraints and leapfrog into greater efficiency. However, it is clear that alongside the many positive indications, there are challenges ahead. Smart use of technology does not substitute much-needed investment in infrastructure.
According to the Asian Development Bank, Asean needs to pour $60 billion annually into critical infrastructure projects such as roads, railway lines, power and water.
Another of the key challenges faced by the AEC is how to ensure the economic benefits of regional integration reaches the less-developed member states, as well as the less-advantaged citizens within those states. In addition, many countries will need to improve their data transparency if the bloc is to truly reap the benefits of a single market. To succeed, Asean must also work hard to leverage its cultural and linguistic diversity rather than be overwhelmed by it.
As the profile of Asean increases globally, more and more multinational companies are recognizing the significant opportunities in the region and developing strategies accordingly. If member countries can harness the power of emerging technologies, they have the opportunity to build an economic powerhouse to rival both China and India.
Chris Fossick is the managing director for Singapore & Southeast Asia at the Jones Lang LaSalle Asia Pacific. He oversees operations in Singapore, Thailand, the Philippines, Indonesia, Malaysia and Vietnam, while also sitting on the Asia-Pacific executive committee. Jones Lang LaSalle Asia Pacific employs 20,800 employees in 77 offices in 13 countries across the region.