Real-estate experts say that Thailand is going to be the base for the offices for foreign interests expanding their investment in the Southern Asian region after the Asean Economic Community (AEC) becomes effective in 2015.
CB Richard Ellis (Thailand) | Mr. Alisawasa Pattanathabutr (managing director) told The Nation that after the financial crisis back in 1997, demand for new commercial space grew slowly, at less than 5% a year, but now demand is rising by an average of 10% yearly, and will work out to about 100,000 sq.m this year. This rush is due to the country's economic growth and the need to set up head offices for foreign investors doing business not only in Thailand but other Asean countries as well, particularly Myanmar.
She added that although Thailand faced a flood disaster last year, most foreign investors had maintained or expanded their presence in Thailand, as shown by the new contracts to buy land at industrial estates. Some may be avoiding flood-prone areas, but they are not leaving the country.
Some industries looking to expand in such emerging countries as Myanmar, Cambodia and Laos under the AEC will also need to use Thailand for their office bases because of this country's superior infrastructure. That why Alisawasa believes that the office market here will see strong growth in the next two years, and this is a good time for property developers to expand their investment in this sector.
Jones Lang LaSalle (Thailand) managing director Suphin Mechuchep said the condition of the office market was moving in favour of existing landlords and new development opportunities were starting to emerge, as rents had bottomed out and showed signs of picking up. Demand was curtailed over the past several years because of the volatile political situation and the global financial crisis, but has come back over the past several quarters on renewed confidence.
The relatively low rental levels have allowed occupiers to upgrade, as well as expand, space in the best locations, though opportunities to do so will become increasingly scarce as the supply pipeline becomes quite dry over the next couple of years.
Earlier, Collier International Thailand also said it believed that Thailand would be the office base for foreign firms expanding their investment into the both the Kingdom and emerging countries of the AEC.
Meanwhile, demand for luxury condominiums priced over Bt120,000 per square metre is recovering after the market dropped when the US faced an economic crisis in 2008.
CB Richard Ellis' Alisawasa said the demand was now coming from domestic buyers, who have accounted for 87 per cent of sales of luxury condos so far this year, with the rest mostly from Asia, such as mainland China, Singapore, Japan, Hong Kong and the Middle East. The demand focuses on two-bedroom condos priced between Bt8 million and Bt20 million. This recovery is seen in both Bangkok and resort destinations such as Pattaya, Phuket and Hua Hin.
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Meanwhile, demand for the middle market - condos priced lower than Bt120,000 per square metre - has also recorded growth when compared with the same period last year because some people have decided to buy condominiums rather than low-rise residences.
The demand in this segment is also mostly domestic. As some of the locations catering to this market segment, such as Sukhumvit, have high competition, developers have to be careful to choose the right locations, close to the mass transit system, while offering attractive prices.
"Small developments averaging 100-200 units will be easier to sell quickly and generate returns than larger ones," Alisawasa said.
Suphin said condominiums were an indirect beneficiary of the flooding last year, in that since the disaster, there had been a lot more interest from people seeking to buy homes in the flood-spared city centre. Many condominium launches were held back at the end of last year because of the flooding.
In the areas Jones Lang LaSalle monitors, more than 10,000 new units were launched in the first half of the year. The initial assessment is that demand for those units and previous launches remained strong. In fact, Suphin said, initial estimates show the aggregate total of unsold units declining since the beginning of the year, despite all the new launches.
At the same time, project owners continue to command pricing power, particularly for units near the mass-transit infrastructure. As a result, the average project sale price showed another rise, preliminarily estimated at 2.1 per cent higher.