According to a new report by CBRE, the Trans-Pacific Partnership (TPP) agreement is expected to result in increased trade flows, the lower cost of goods, and improved employment prospects for participating Asia Pacific countries such as Australia, Japan, Malaysia, New Zealand, Singapore, and Vietnam. Member countries will also benefit from lower tariffs and uniform regulations.
The industrial and logistics property sector will be the major and immediate beneficiary of the TPP. CBRE believes the following markets will be the most affected in this sector: Vietnam, Australia, New Zealand, Japan, Thailand and Indonesia.
On October 4th, 2015, ministers of the 12 member countries of the Trans-Pacific Partnership (TPP) announced negotiations had been concluded, heralding a major milestone in the TPP agreement.
The TPP is a comprehensive trade-agreement among Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam that seeks to lower trade tariffs, streamline cross-border regulations and increase market access between member countries for a range of products/issues including manufacturing, intellectual property, garments & textiles, services, procurement and agriculture. Member countries will also benefit from lower tariffs and uniform regulations.
What is the impact on real estate?
The industrial and logistics sector will be the major and immediate beneficiary of the TPP. CBRE believes the following markets will be affected.
Vietnam: Higher demand for industrial land and factories as low-cost manufacturing shifts to Southeast Asia.
Australia and New Zealand: Stronger demand for agricultural land and logistics facilities, with the projected increased output of agricultural products from Australia and New Zealand.
Japan: Manufacturing and logistics will benefit from the Japanese exports that meet the TPP requirements for intermediate parts sourcing according to the Rules of Origin, although the overall benefit may be limited as Japanese companies have been manufacturing goods overseas for some time.
Thailand and Indonesia: Weaker demand for manufacturing facilities as production becomes less competitive in these countries. Countries within the TPP such as Vietnam and Malaysia will offer manufacturers lower tariffs and streamlined regulation.
Singapore: The expansion of logistics, chemicals and electrical service companies will support office demand as the city remains a regional hub for multinationals.
Vietnam: International companies, particularly professional and technical services firms, will expand their subsidiaries within the country, boosting demand for Grade A office space.
The TPP still has to be ratified by member countries' legislative bodies, meaning that implementation still has some way to go. However, manufacturing investment, trade flows, and professional services growth will adjust sooner in order to capture the benefits of increased market access and lower tariffs of the TPP.