SINGAPORE (EDGEPROP) - Despite the severe economic and social impact of the Covid-19 pandemic felt across the globe, recent data illustrates profound resilience in Asia Pacific. In fact, growth expectations over the next decade are not only still intact, but the region’s enviable pre-pandemic economic outlook, supported by massive demographic tailwinds and strong forecasts for regional corporate expansion plans, remains very much in play and will continue to propel the region forward to 2030.
Asia Pacific will drive global economic growth over the next decade. At the end of 2019, the region’s economy stood at US$31.3 trillion, accounting for 36% of the global total, making Asia Pacific the largest region in the world by total GDP. By the end of the decade, Asia Pacific’s economy is expected to reach US$45.8 trillion ($60.9 trillion) and represent more than 40% of the global total. Not only is Asia Pacific the largest region, it is also forecast to outgrow the rest of the world at 3.5% per annum, with Europe, Middle East and Africa (EMEA) forecast to grow at 1.6% per annum and the Americas at 2.1% per annum.
Underpinning this is the growth of several powerhouse economies. The Chinese economy continues to grow at an impressive rate and is forecast to expand by US$9.2 trillion — equivalent to three French economies — by 2030. And India will ascend the rankings from the seventh-largest economy in 2019 to fourth in 2030. Asia Pacific is expected to house three of the four largest economies in 2030 (plus Japan), with Australia, South Korea and Indonesia also included in the top 15.
Favourable demographics are a major driver of this economic growth. The Asia Pacific region, comprising 4.4 billion people, currently accounts for 56% of the world’s population. Two of its countries, Greater China and India, totalling 2.8 billion, account for more than one-third of the world’s entire population.
It is not size alone, but the composition of the population, that is important. By 2030, the working-age population of Asia Pacific will have grown by 165 million people, while in contrast, North America will only add three million and Europe will retreat to the tune of 24 million.
As millions of people enter the workforce, the region’s middle class will experience prodigious growth. Currently, 54% of the world’s middle class — or 2.1 billion people — live in Asia Pacific. This will increase by 1.5 billion people — to 65% (the increase is 73% to account for 65% of the global total) — by 2030. In comparison, the growth of the middle class for the rest of the world combined will only total 176 million (see Chart 2).
Employment growth in Asia Pacific will vastly exceed that of other regions, considering the surge in younger age groups. However, this is only part of the story. An important element is that office-demanding occupations are forecast to grow at an even more rapid rate. Out of a global total of almost 55 million office-using jobs forecast to be created from 2020 to 2030 across the world’s major office markets, more than 47 million will be in Asia Pacific.
Strong job growth will drive office demand over the next decade. Asia Pacific already has an impressive record in global office demand. In the 2010-2019 period, Asia Pacific absorbed more than 800 million sq ft of office space, 42% of the global total. However, over the next decade, global office demand is forecast at 2.1 billion sq ft, of which 1.35 billion sq ft (65%) is forecast to be required in Asia Pacific (see Chart 4) — enough to fill the whole of Manhattan three times over.
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The region will see an ongoing construction boom as cities continue to expand to accommodate future demand for space. Over the next five years, an average of 120 million sq ft of space will be brought to markets across Asia Pacific each year — approximately 55% of global supply. To put this in context, it is the equivalent of creating a new Shenzhen and Guangzhou combined, or four Singapore CBDs, every single year for the next five years.
All factors that lead to strong office demand will drive greater investment into commercial real estate, creating a considerable opportunity for growth. In addition, Asia Pacific has further tailwinds to those already described. The region is forecast to return to pre-Covid GDP levels by the end of 2020, which is up to 18 months ahead of other regions. In a world searching for growth, this alone will accelerate investment into the region. Furthermore, as the region continues to grow and mature, even greater investment volume is likely to follow.
The robust growth forecast is not dependent upon any single factor but is reflective of the wide range of positive economic, demographic, employment and investment drivers, all acting together to propel the region forward. It is this weight of momentum that underpins Asia Pacific’s ongoing rise as the world’s major growth story for the next decade.