Luxury Condo Rent in Thonglor

The recent restrictive measures from the Bank of Thailand (BOT) have continued to cast a shadow over Bangkok’s condominium market since the beginning of this year.

Condominium sales have dropped, putting pressure on developer’s financial targets. Some developers have sought to diversify their risk in pure residential development projects for sale by seeking to develop alternative sources of revenue from recurring income properties. 

Growing concerns about excessive residential mortgage lending by commercial banks prompted the BOT to reduce loan-to-value ratios (LTV ratios) for second and subsequent home mortgages starting from 1st April 2019. CBRE believes the new measures have significantly reduced the number of speculative buyers and buy-to-rent investors of residential condominium units.

A slowdown in the condominium market has encouraged major residential developers to consider diversifying their portfolios into other property sectors such as office, hotel, and serviced apartments.

Most of these companies are listed on the Stock Exchange of Thailand and their financial performance is regularly accessed. With stable recurring income, they are better able to offset the volatility in revenues from the residential-for-sale market as well as sustain revenue and profit growth.

“We have seen an increase in both the number of landowners willing to lease land for the long term and the number of developers who are looking to develop leasehold land projects,”

Ms. Kulwadee Sawangsri, Executive Director and Head of Capital Markets – Investment & Land, CBRE Thailand. 

“Over the last 4 years, CBRE has completed nine long lease land transactions worth more than THB 10 billion. With the forthcoming changes in the new Land and Building Tax whereby landowners will have to pay significant tax on vacant land, we expect that more high-quality land will become available for long term rent,” Ms. Kulwadee added.

Ananda Development and Origin Property have both shown strong interest in the hospitality sector after Thailand welcomed a record-breaking 38.27 million tourist arrivals in 2018, an increase of 7.5% Y-o-Y. Both companies have announced plans to develop several hotels and serviced apartments in Bangkok and the Eastern Economic Corridor. 

Ananda Development has partnered with Ascott Limited to develop five serviced apartments valued at THB 12 billion, four of which will be located in Bangkok and one in Pattaya. The company has also purchased 42.5 million shares equivalent to 5% in Dusit Thani, a leading Thai hospitality company. 

On the other hand, Origin Property set up a new subsidiary, One Origin, to invest up to THB 20 billion into recurring income properties in the next five years. Previously, the company has signed a management contract agreement with InterContinental Hotels Group to manage three hotels in Bangkok and Sriracha, expected to be operational within 2021.

Even the mass market developer, L.P.N. Development, has formed a joint venture with Nye Estate, to develop an office tower on a leasehold site on Rama IV Road, worth THB 3.79 billion. The company has been struggling to get a foothold over the past few years since purchasing power in the mass market has become weaker and buyers are much more vulnerable to mortgage rejection by banks.

Nye Estate is also developing Silom Square, another office building on a 50-year leasehold plot located on the corner of Silom and Convent Roads. The company previously developed purely residential projects before entering the office market in 2016.

Raimon Land is another company to have jumped into the recurring income business after signing a 30-year lease for a prime 6-rai plot located on Ploenchit Road opposite Central Embassy.

The company has recently started piling on the site to be developed…

Thailand’s nascent e-commerce industry is thriving and making serious money. According to the Ministry of Digital Economy and Society, Thai e-Commerce grew the most in ASEAN, the value of Thai ecommerce grew 14% in 2018, estimating that the value would increase to USD 103 billion, and its growth is expected to hit 20% this year.

The region is flourishing

According to the report Asia-Pacific B2C E-Commerce Market, over one half of total global online retail sales happens in the Asia-Pacific region. Over 50% of all the online shopping for retail goods and services takes place in the Asia Pacific region, and South-East Asia accounts for about 40% of the e-commerce market of the region.

Southeast Asia is definitely a new big e-commerce hit, and the region is currently a very attractive market for big players involved globally in the e-commerce sector and smaller local companies.

At a reflection point of Internet penetration and mobile devices rapid spread, the population of Southeast Asia is quickly adapting its behaviors to take advantage of new purchasing products and services online opportunities.

According to the latest e-Conomy Southeast Asia 2018 report from Google and Singapore-based Temasek, the digital economy in Southeast Asia is on track to hit $240 billion by 2025, which is $40 billion more than previous estimates.

As e-commerce continues to grow exponentially, Southeast Asia will account for 20% of worldwide e-commerce by as early as 2022.

Thriving Market

With a GDP worth of USD 602 billion, Thailand is the second largest economy in Southeast Asia, surpassed only by Indonesia. In addition to that, according to EcommerceIQ research, Thailand is also the second largest Business-to-Consumer (B2C) e-commerce market in the region.

At present, the Thai ecommerce market is valued at USD 3.5 billion. According to a Google Temasek study, Thailand’s e-commerce market value is expected to surge to 13 billion USD by 2025 on the back of strong global demand for Thai products.

As Ebay’s General Manager for Hong Kong, Taiwan and Southeast Asia border trade Jenny Hui has stated, Thai products are in global demand, with jewelries and watches, health and beauty products, auto parts, home and garden, and collectibles rapidly gaining popularity.

Electronics is currently the leading product category, accounting for USD 1.3 billion market share.

Fashion is second, accounting for USD 525 million. According to Statista, online shoppers in Thailand spend on average $283.95 USD online annually, and four years from now, this sum is expected to grow to $401.73 USD.

Young Mobile-First Generation of Users

What makes the country a true breeding ground for ecommerce is its great number of internet users – one of the highest in Southeast Asia. At present, Thailand has an Internet penetration rate of 57.4% with Millennials making up the majority and spending on average 53.2 hours a week online.

When comparing the number of Internet users over the past 10 years, there were only 16.1 million Internet users in 2008 and the number reached approximately 45 million in 2018; moreover, at present there are 124.8 million mobile subscribers, 44 million people using LINE messenger and 52 million Facebook users.

Internet-savvy young people here definitely play a key role in driving mobile commerce. Thailand is a regional leader in mobile commerce, as 52% of online transactions take place via mobile devices (only South Korea is higher with 58%). According to the Thailand Marketing Research Society, 71% of smartphone users in Thailand shop online an average of twice a month, while 90% intend to shop online in the future. 

On top of that, a growing middle class with increasing incomes also plays a huge role in…

The sales rate for new condos launched in Bangkok in the second quarter fell to 15.7 %, an all-time low, beating the lowest previous quarter (35%) in 2010 when the “red shirt” political crisis brought Bangkok to a standstill.

Risinee Sarikaputra, director of research, said to the Bangkok Post that “The normal quarterly sales rate for new condo launches is around 40-50%,” 

According to Knight Frank’s market research, Bangkok hit a decade-long record for new condos entering the market, with 65,000 new units launched throughout 2018, up 11% from 2017, the highest since 2009.

In the first and second quarter this year, new condo supply launched in Bangkok totalled 12,882 units and 14,988 units, respectively.

Knight Frank reported Bangkok had cumulative condo supply from 2010 to the first half of 2019 of 594,453 units with a sales rate of 84%, unchanged from 2017.

525,889 Empty homes in Bangkok

But according Dr.Sopon Pornchokchai, President of research and property valuation center in Thailand, Agency for Real Estate Affairs , there are 525,889 empty homes in Bangkok Metropolitan Region (BMR) which are mostly sold but does not have any residents.

Empty homes (Every type of residential units) are residential units which use less electricity than 15 units per month which indicates that there is almost no use.

These 525,889 empty houses make 10.3% of the 5,097,815 total housing units in BMR, which means that there is 1 empty house in every 10 houses. This ratio was lower than the situation during the Tom Yam Goong crisis, 20 years ago.

In 1995, Dr.Sopon Pornchochai founded 14.5% of empty houses from the total residential units in the market. Then in 1998, the ratio of empty houses reduced to 12.0% of the total residential units in the market.

9.2% of the total low-rise residential units are empty (there is 1 empty unit in every 11 low-rise residential units). While 13.9% of the total condominiums are empty (there is 1 empty unit in every 7 condominium units).

As condominiums are mostly used for an investment purpose while low-rise residential units are mostly used for residential purpose. Investors should invest in condominium carefully during this situation.
 

Bangkok, 8 May 2019 – According to a survey in Q4 2018 by CBRE, a leading international property consultant, Serviced Industrial Land Plots (SILPs) sales by major developers in Thailand increased by 50% Y-o-Y at a total of 1,000 rai (160 hectares) sold.

Of the total 1,000 rai (160 hectares) sold, 146 rai (23.4 hectares) were in Amata’s Thai-Chinese Park which developed SILPs specifically for Chinese manufacturers.

FDI in manufacturing jumped 130% in 2018

Foreign Direct Investment (FDI), as reported by the Bank of Thailand (BOT), in the manufacturing sector in 2018 increased by 130% Y-o-Y.

Many developers have reported that there was demand from Chinese manufacturers who were looking to relocate to Thailand due to the US-China trade war that has resulted in “Made in China” products having higher tariffs.

Vietnam has been the biggest beneficiary of Chinese manufactures relocating due to the trade war, but Thailand is also benefiting.

Japan has been the largest source of FDI in manufacturing sector in Thailand since the late 1980’s, but their position may be replaced by China in the future.

CP Land, a property arm of Charoen Pokphand Group, has formed a joint venture with Guangxi Construction Engineering Group, one of China’s largest construction companies, to set up CPGC Industrial Estate in Rayong on over 3,068 rai (490 hectares), targeting Chinese investors in four main industries including smart electronics, medical hub, digital and robotics.

“It is not just developers of SILPs on industrial estates that are gaining from China’s growing role in the Thai economy. Chinese e-commerce companies are going to drive the demand for Modern Logistics Properties (MLPs) in Thailand. Joint ventures were announced last year between WHA, Thailand’s biggest Modern Logistic Properties developer and China’s two biggest e-commerce companies, Alibaba and JD.com to build e-commerce fulfilment centres,”

said Adam Bell, Head of Advisory & Transaction Services – Industrial & Logistics, CBRE Thailand.

CBRE believes that e-commerce in Thailand is going to grow as rapidly as it has done elsewhere in the world, with Chinese e-commerce companies significantly increasing demand for MLPs.

The on-going trade war between US and China will continue to benefit the Thai industrial land market as manufacturers relocate to Thailand.

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Thailand’s nascent e-commerce industry is thriving and making serious money. According to the Ministry of Digital Economy and Society, Thai e-Commerce grew the most in ASEAN, the value of Thai ecommerce grew 14% in 2018, estimating that the value would increase to USD 103 billion, and its growth is expected to hit 20% this year.

The region is flourishing

According to the report Asia-Pacific B2C E-Commerce Market, over one half of total global online retail sales happens in the Asia-Pacific region. Over 50% of all the online shopping for retail goods and services takes place in the Asia Pacific region, and South-East Asia accounts for about 40% of the e-commerce market of the region.

Southeast Asia is definitely a new big e-commerce hit, and the region is currently a very attractive market for big players involved globally in the e-commerce sector and smaller local companies.

At a reflection point of Internet penetration and mobile devices rapid spread, the population of Southeast Asia is quickly adapting its behaviors to take advantage of new purchasing products and services online opportunities.

According to the latest e-Conomy Southeast Asia 2018 report from Google and Singapore-based Temasek, the digital economy in Southeast Asia is on track to hit $240 billion by 2025, which is $40 billion more than previous estimates.

As e-commerce continues to grow exponentially, Southeast Asia will account for 20% of worldwide e-commerce by as early as 2022.

Thriving Market

With a GDP worth of USD 602 billion, Thailand is the second largest economy in Southeast Asia, surpassed only by Indonesia. In addition to that, according to EcommerceIQ research, Thailand is also the second largest Business-to-Consumer (B2C) e-commerce market in the region.

At present, the Thai ecommerce market is valued at USD 3.5 billion. According to a Google Temasek study, Thailand’s e-commerce market value is expected to surge to 13 billion USD by 2025 on the back of strong global demand for Thai products.

As Ebay’s General Manager for Hong Kong, Taiwan and Southeast Asia border trade Jenny Hui has stated, Thai products are in global demand, with jewelries and watches, health and beauty products, auto parts, home and garden, and collectibles rapidly gaining popularity.

Electronics is currently the leading product category, accounting for USD 1.3 billion market share.

Fashion is second, accounting for USD 525 million. According to Statista, online shoppers in Thailand spend on average $283.95 USD online annually, and four years from now, this sum is expected to grow to $401.73 USD.

Young Mobile-First Generation of Users

What makes the country a true breeding ground for ecommerce is its great number of internet users – one of the highest in Southeast Asia. At present, Thailand has an Internet penetration rate of 57.4% with Millennials making up the majority and spending on average 53.2 hours a week online.

When comparing the number of Internet users over the past 10 years, there were only 16.1 million Internet users in 2008 and the number reached approximately 45 million in 2018; moreover, at present there are 124.8 million mobile subscribers, 44 million people using LINE messenger and 52 million Facebook users.

Internet-savvy young people here definitely play a key role in driving mobile commerce. Thailand is a regional leader in mobile commerce, as 52% of online transactions take place via mobile devices (only South Korea is higher with 58%). According to the Thailand Marketing Research Society, 71% of smartphone users in Thailand shop online an average of twice a month, while 90% intend to shop online in the future. 

On top of that, a growing middle class with increasing incomes also plays a huge role in…

Increasing alignment of corporate real estate’s (CRE) strategic goals with broader enterprise priorities is a key insight emerging from JLL’s top 10 CRE trends for 2019. 

They include a mix of both priorities that are shared across the business (including CRE), as well as real estate-specific strategic priorities and operational imperatives.

Enterprise wide priorities impact CRE as much as any other part of an organisation, or CRE has a role in delivering or enhancing:

• Responsible enterprise: Like other functions, there is mounting pressure for the organisation to be more transparent and accountable. This incorporates data protection, responsible procurement, and high standards of ethics.
• Inclusive workplace: Companies that embrace diversity and inclusion perform better, and an inclusive culture can improve innovation. CRE can play a major role by facilitating an inclusive workplace that supports diversity in all its forms.
• Urban futures. Businesses are considering extensive range of factors to inform portfolio, location and talent strategie It’s not just about cost; other factors like resilience, access to talent pools, innovation ecosystems and more are also key considerations.
• Collaborative ecosystems. Reinvention and new ways to innovate are core enterprise priorities. Developing a network of internal and external partners is crucial in driving continuous innovation

We are also seeing new and emerging CRE strategic priorities that support the business:

• Future Fit enterprise: JLL’s 2018 Future of Work Survey of over 500 real estate leaders worldwide points to a strong correlation between best in class CRE strategies and profit growth.  Organisations exhibiting characteristics such as experimentation with new technologies, and open innovation are more profitable than others. We call these enterprises ‘future fit’ as they are able to leverage their real estate to achieve business goals.
• Human performance. The confluence of technology and optimized workplace experience will boost employee and enterprise-wide performance and is an increasing focus for CRE.

Underpinning CRE and enterprise priorities, specific tactics and operational imperatives are emerging:

• Digital drive. Historically, CRE technology has not been a priority for CRE, but our research indicates that we are at a tipping point. CRE tech adoption and investment will accelerate sharply in 2019.
• Metrics that Matter. KPIs are a hot topic in CRE.  Performance measurement will extend to new areas, while traditional metrics will continue to evolve. CRE teams will identify the ‘metrics that matter’ that enable them to demonstrate their impact beyond cost.
• Flex isn’t just co-working, and it’s evolving rapidly. Companies both large and small are increasingly implementing new space concepts and flex models whilst also reimagining their existing workplace to be more agile and dynamic.
• Space activation. A shared priority with landlords and owners, corporates are actively looking to invest in…

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As the number of Japanese expats in Thailand decreased to lower than 20% of the total expats for the first time in 2019 and dropped to 34,133 as of April 2019, a 4% decline Y-o-Y, CBRE is seeing a change in demand and its impact on the rental apartment sector in Bangkok, despite a healthy performance.

Typically, when expats move with their family members to work in Thailand, the companies will cover accommodation for the whole family, the children’s tuition fees and sometimes allowance for the housewives.

This year, we are seeing more expats moving here individually rather than the whole family as companies look to lower their operating costs.

“In the projects which CBRE is managing like Jitimont Residence and Capital Residences, we are seeing more active demand for one-bedroom units which is different from what we have seen in the past. Two-bedroom units used to be more popular for expats moving to Thailand with their family.

Now, many apartments are fully occupied for their one-bedroom units and the demand is still increasing”

said Theerathorn Prapunpong, Director of Advisory and Transaction Services – Residential Leasing, CBRE Thailand.

Another constraint on the rental apartment market is the accommodation allowance from corporates which has not increased in many years.

This put pressure on landlords as they could not ask for higher monthly rental as that will risk giving away their tenants to landlords of other properties.

Less Japanese expats, but more Chinese

The decrease in the number of Japanese expats is being compensated by the rise in the second biggest feeder market, the Chinese expats.

However, CBRE believes that this increase will not become a new wave of demand for Bangkok rental apartments as Chinese expats prefer to rent condominium units in the Huai Khwang and the Sutthisan areas where the costs are lower and the Chinese community is more prominent.

With increasing competition from condominium units for rent in the market, budget control for expats’ accommodation and the new land and building tax, the biggest hit will be felt by landlords of older apartment buildings who will be forced to up their game to compete in the market.

An article written by Rathawat Kuvijitrsuwan, Associate Director at Research and Consulting, CBRE Thailand for Bangkok Post dated 24 July 2019.

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