T: Era of change - Part 2

WHILE last week's article highlighted the rise of global cities along with the shift in lifestyle habits and mindsets due to the way modern day companies function and the masses engage, this week we look at three mega trends expected to drive the real estate market and how Malaysia is faring in its goal as a developed nation.

To further understand these changes that are slowly and subtly changing the global urban landscape, let us first look at trends and market opportunities that are causing this evolution.

Shaping the shift

According to a study conducted by Oxford Economics on Global Cities 2030, the urban economic power will shift into the court on the east side. By the year 2030, it is forecast that:

>> 410 million more people will be living in the top 750 global cities;

>>240 million more jobs will be created (with 60 million extra jobs in industries);

>> the number of elderly aged 65 and above will rise by an additional 150 million people; consumer spending will increase by $18 trillion; and

>> 260 million more new homes will be needed.

China will be the powerhouse to watch, with cities like Chengdu, Hangzhou and Wuhan economically at the top. Cities expected to witness the biggest increases in population and GDP growth in Asia and Oceania include Dhaka, Karachi, Jakarta, Delhi, Mumbai, Tokyo, Istanbul, Singapore and Bangkok.
While emerging markets of India, Brazil and China will make it as the stories of the century, the world's major 750 cities (by 2030) as surveyed in the report, are set to contribute to the world's economy with staggering amounts.

Urban economic powers

According to the report, by 2030, Chinese cities will be at the heart of the radical shift in the urban centre of economic gravity. These cities, driven by burgeoning urban populations and rapid labour productivity growth, are expected to overtake Europe's 139 largest cities and America's 58 cities by 2020. Chinese urban incomes will also grow six times faster than that in the Europe sector.

By 2030, US and Asian cities are expected to dominate the top 10 spots with the biggest increases in urban income and consumer spending. While cities across Asia will continue to urbanise rapidly until 2030, their urban populations will also age. Across the globe, aging populations will bring both challenges and opportunities.

Real estate catalysts

The three mega trends to drive the real estate market according to investment and business website Visual Capitalist founder Jeff Desjardins are globalisation, demographics and technology. Here are examples of each and valuable tips for the real estate investor.

1) Globalisation – Global cities are receiving more foreign capital across all real estate types eg. 60% of commercial real estate in London, which have been bought up by international investors in the past 10 years. He urges investors to look for opportunities to diversify real estate portfolios across a broader mix of geographics and asset types.
His advice – think globally and develop strong knowledge about the local market before investing.

2) Demographics – The middle class in Asia is expected to "explode" in growth while in Western countries, the aged will reach their ranks. Global and mega cities have already started mushrooming and will attract and account for the vast majority of economic activity. Desjardins recommends investors look at emerging markets with rapidly expanding middle class (emerging markets), as well as capitalise on areas with large retiree populations.

3) Technology – With its omnipresence, technology will also impact real estate markets. The growing demographic of "highly-prized commodity of skilled and talented techies" drawn to urban centres will re-shape and re-map communities. Suggests Desjardins, explore emerging technology hubs for real estate opportunities and look for favourable circumstances
in urban-adjacent industrial properties as businesses establish distribution centres near cities to reduce costs.

Malaysia into the future

With all the development, evolution and progress that Asia is forecast for, it sounds as though the real estate industry in this part of the world is in for an exciting time. As it is back here on home ground, one cannot help but notice the amount of construction that has been on-going. Driving this growth and development is the Economic Transformation Programme, otherwise known as the ETP, which was launched in 2010 and has set sights for our country to achieve "developed-nation" status by 2020.

Parallel to our topic on global cities, we examine Greater Kuala Lumpur (Greater KL), which encompasses the capital city of KL and its surrounding metropolitan areas. Sprawling some 2,793 sq km to accommodate approximately 7.9 million people – Greater KL is said to be well positioned as a regional hub for diverse economic activities and business dealings. In its development as a megalopolis and with our currency where it is, public and private stakeholders are reported to be attracting multinational global firms to set up regional hubs right here. Agencies established to help the country achieve the ETP and its developed-nation come world-class status include InvestKL and InvestSelangor.

As it is, investors and stakeholders from China and Indonesia, as well as other countries are already behind a couple of major mega property development projects. The real estate landscape is already on its course of change as lifestyles and habits transform. Follow our column next week for more on this exciting era of change.

** Note: Data and charts taken from Global Cities 2030 study conducted by Oxford Economics.