Jones Lang LaSalle Survey: 83 per cent of Multi-Nationals in Asia Pacific Increasing or Maintaining Growth Plans in 2008 India, China and Vietnam Remain the Top Three Destinations
India, 24 June 2008 – According to a Jones Lang LaSalle survey released today, 83 per cent of multi-national companies polled said that they will increase or maintain current growth plans in Asia Pacific. In fact, 28 per cent are responding to the gloomy global economic situation by looking to accelerate the growth of their operations in the region.
Jones Lang LaSalle’s survey also shows that India, China and Vietnam remained the top destinations for company growth plans in the region in 2008.
The report highlights that there are some key evolutionary changes occurring in the region’s economies, as individual nations continue to mature and attract higher value operations. These changes have a long-term impact on demand in the local property markets. For instance, in India, China and Vietnam, rising middle class incomes are driving growth for more banking retail outlets. Furthermore, China and India, once known for their low cost workforces, are, in some cases, losing factory jobs to other countries, but still enjoying significant net growth, as their increasing per capita incomes and advancing skills are attracting increasingly sophisticated activities.
Jones Lang LaSalle’s CEO of Regional Business Lines and Corporate Solutions, John Forrest, says that the survey shows how business in Asia remains less affected by the sub-prime crisis. “As the leading supplier of real estate services to corporations in Asia Pacific, we are still seeing strong demand for space. However, an uncertain economic environment is forcing corporations to find smarter ways to manage their growth. For example, many are outsourcing the management of their real estate or re-designing current office space to be more efficient.”
Jones Lang LaSalle, a professional services firm specializing in real estate, conducted a survey of 30 senior corporate real estate executives from leading multinational companies active in Asia Pacific in the second quarter of 2008. Findings from the survey are presented in the firm’s research paper, Gauging Demand, which focuses on how occupier demand for office and industrial space in Asia Pacific is being affected by global economic turmoil.
Strategies Differ by Industry Sector
Three sectors were surveyed, Financial Services, Technology and Manufacturing/Consumer Goods. Of the three, Financial Services predicts the most aggressive growth in 2008, with 44 per cent having added more growth to their original plans in the first quarter of the year, and 33 per cent predicting further growth by the end of the year. Even though this sector is showing the most aggressive growth of the three sectors some companies remain cautious with 44 per cent expecting to scale back in 2008. This is, in part, a reflection of the differing degree of exposure to sub-prime suffered by the banks – some emerged unscathed while others faced huge write-downs.
Where 44 per cent of Financial Services companies are expecting to scale back during the year, it is Manufacturing/Consumer Goods companies that are showing the most mixed response. The companies polled were split evenly, with a third looking to further expand their growth plans, a third to scale back and a third expects no change to current plans. Companies in this sector are also more likely to shift operations into or within the region, as they look for fresh markets and lower-cost destinations.
The most consistent of the three sectors is Technology. On average the majority, 83 per cent, are ramping up or maintaining current growth plans in the region in 2008 in response to the current economic climate. The reason cited by those surveyed lies in the search for greater revenues driven by the migration of their client base to Asia Pacific. Even though there are growth plans, cost containment remains a key driver for their real estate strategy.
Jones Lang LaSalle Meghraj India CEO, Vincent Lottefier, says "Different industry sectors are responding to the economic environment in markedly different ways, with traits that have significant implications for the markets in which they are major players. India still remains overwhelmingly the focal points of most new growth, easily outpacing the rest of the field."
Forrest comments that, “Even the financial sector, which has been the hardest hit in other regions, is not contracting on an overall basis. Emerging markets in Asia really are the world’s bright spot for growth at the moment.”