Archive for the ‘Thailand’ Category

Inflation And The Cost Of Owning Bangkok Real Estate

Friday, November 16th, 2012

For many years, the common area management (CAM) fees in the condominium building in which I live have continued to rise. Although many developers will underestimate the costs required to properly manage a building prior to completion, the CAM fees in my own building have risen by 2.8% on a compounded basis over the past 14 years since its completion in 1997. Compare this to the consumer inflation rate of only 2.4%. With the domestic economy continuing to be robust, the pipeline of new real estate supply continuing to be high and wages, as well as other expenses, continuing to face upward pressure, I would not be surprised to face another request from our management committee to increase fees yet again. As Bangkok has undergone a new wave of urbanisation and the economy has continued to thrive, both commercial and residential owners and co-owners around the city are facing the inevitable burden of higher management and running costs for all real estate assets.

The main challenge for property management companies has been to keep costs down even as demand for their services has continued to expand rapidly. Bangkok’s real estate markets showed the first substantive signs of recovery in 2003 and 2004, as commercial real estate rents began rising and new residential projects were launched. Renewed private investment and economic growth saw demand for office space rising, and 41 buildings and roughly 1.2 million sqm of space were added since 2000. Most significantly, urbanisation, rising incomes, changing demographics and the adoption of mass transit helped spur development of new high density residential with 158 buildings comprising nearly 160,000 new units over the past twelve years. Meanwhile, a robust tourism and hospitality industry has boosted the need for hotel rooms, with 157 hotels offering over 15,000 rooms developed during the same time. The changing shape of the city and the way people work and live, have changed consumption patterns with a corresponding boom in retail development. Over the past decade, some 144 retail projects and over 3.9 million sqm of retail space have been added.

All this happened as service industries, such as in finance, banking, law, advertising, media and technology have continued to rapidly expand, further boosting demand for service professionals. A government-led rise in the minimum wage has only served to propel the growth momentum in service wages. Recruiting and securing experienced and qualified technicians, engineers, building managers and even security guards in Bangkok are extremely competitive. Meanwhile, utility costs stand well above levels seen in years past. Furthermore, last year’s floods have pushed insurance premiums up as much as 150%. At the same time, owners and landlords continue to press for lower property management costs. An increasingly securitised real estate market (e.g., via property funds) sees financial managers focused on the bottom line and minimising costs. Individual condo owners who rent out their units are reluctant to see higher proportions of their rental income going to CAM fees. Inevitably, investors will need to accept lower income returns and homeowners higher costs in order to maintain and preserve the value of their real estate assets.

About the author
Dan Tantisunthorn is the Head of Research for Jones Lang LaSalle in Thailand.

Posted in Economy and Real Estate Markets, Thailand | No Comments »

Where Is The Volume And Liquidity In Bangkok’s Residential Resale Market?

Friday, August 10th, 2012

As the Thai economy emerged from the aftermath of the Asian Financial Crisis over the past ten years, the capital of Thailand, Bangkok, has seen a new wave of rapid urbanisation. Across the city, a diversity of residential developments has mushroomed, responding to rising incomes, better and expanding infrastructure, evolving demographics, tense competition, wider access to financing for mortgages and changing preferences and lifestyles. With the new supply of residential space, particularly condominiums, continuing to expand annually, the question of whether there is an oversupply or even a bubble in the housing market is often raised. Based on the sales rates of new projects (which are healthy), there is no clear indication that this is the case. However, a good indication that the new residential developments are sustainable would be a robust, transparent and liquid secondary or resale housing market.

The Thai data on residential supply, demand, occupancy, prices and rents and the time a property has spent in the market is quite incomplete. The private sector does a reasonable job of tracking specific sub-markets, while various government agencies collect data such as new housing registration. However this information is only somewhat useful in analysing market conditions. In addition, there is very little data on the resale of residential property in Thailand. Based on anecdotal evidence alone, it is hard to make a complete assessment of the residential property market conditions there. As highlighted in Jones Lang LaSalle’s 2012 Global Real Estate Transparency Index, Thailand’s score has continued to improve. Much of this has been driven by better disclosure on commercial real estate, particularly from listed property funds. Higher transparency would certainly be achieved with better data collection and reporting on residential resales.

However, the anecdotal evidence suggests that the process and market for reselling residential property remains limited. There are a variety of reasons for this, including low leverage on residential property, which does not put pressure on owners to sell, buyer preferences towards new homes rather than those that have already been lived in, the fact that Thai families traditionally live with multiple generations under one roof, the conversion of primary residences into rental properties and a prevailing notion that real estate can always be sold in the future at a higher price. Nevertheless, if the housing market is going to continue expanding, a more robust and liquid second-hand market will have to develop.

As the residential market continues to grow and evolve, the resale and leasing markets will need to become more liquid and transparent. Fundamental changes in how people study, work (in multiple careers and jobs), cohabitate (e.g. in nuclear rather than extended families), socialise (e.g. in public places rather than at home) and retire (e.g. by downsizing and unlocking equity) will drive individuals to change residences more often. Furthermore, in the past, most individuals saved for many years to buy a home in cash, but today mortgages are much more widely available. Mortgage lending, outstanding, has risen from THB 427 billion in 2003 to THB 1.2 trillion in 1Q12. As individuals change residence they will need to resell their existing homes as soon as possible to minimise the financial costs of their new living spaces, further contributing to a more liquid and transparent residential resale market.

About the author
Dan Tantisunthorn is the Head of Research for Jones Lang LaSalle in Thailand.

Posted in Residential Research, Thailand | No Comments »

Revitalising Bangkok’s Riverfront

Friday, May 18th, 2012

Given the wide network of canals and waterways that run through the city, Bangkok’s Chaophraya riverfront has historically played a significant role in the development of the city since its establishment as the capital in 1782. Transportation, commerce, government, tourism and education have all evolved along its river banks, but as the city modernised, the river and canal system gradually gave way to modern roads and mass transit infrastructure, which new development has followed. Although activity over the past few decades has generally moved away from the river, its continued role as a transportation artery and its natural endowments have brought renewed interest, with redevelopment starting to emerge along the river banks.

Certain landmarks along the river, like the Oriental Hotel established in the late 1800’s, and temples, have maintained their utility, charm and relevance. Other buildings have not stood the test of time so well, with many being demolished for new projects and as a result, high density residential developments have risen on both sides of the river near the Saphan Taksin bridge, where the BTS skytrain crosses to the Thonburi side. The riverside area now accounts for 10% of the total stock of condominium units in central Bangkok. Vacant land has also attracted new hotel and residential developments on the western bank which offer impressive views of central Bangkok’s evolving sky-line. River buses, cross-river ferries and water taxis offer quaint, but efficient transport from, across and along the river, feeding into the modern BTS skytrain system. The Bus Rapid Transport provides mass transport via dedicated bus lanes on Rama 3 Road and Ratchadapisek Road which follow and cross the river at Krungthep Bridge. In an increasingly congested city, these river developments offer a more open and natural environment.

Particularly in the core areas, where riverfront land is becoming increasingly scarce, we are seeing a new wave of modern redevelopment. A prime example of this is the new Asiatique retail complex on Charoen Krung Road. Developed in the early 1900s by the East Asiatic Company Ltd, the site originally housed warehouses and wharves dedicated to the import-export trade, but after lying idle for many years, the site has been brought back to life as a modern shopping centre, equipped with dining, entertainment and other facilities. The design and renovation retain the original feel, and allow both locals and tourists alike the chance to experience a unique riverside atmosphere. River City, renowned as one of the best places in Bangkok to buy antiques, has recently undergone a facelift and there are plans to bring the historic General Post Office (GPO) on Charoen Krung Road back to its former glory through restoration and an adaptive re-use as a mixed-use development.

As Bangkok continues to evolve, many areas across the city are witnessing new patterns of development. Given its history, natural endowments and improving infrastructure we are likely to see a re-birth of the importance of Bangkok’s riverfront, as the area recaptures its former prominent role in the capital’s skyline.

About the author
Dan Tantisunthorn is the Head of Research for Jones Lang LaSalle in Thailand.

Posted in Land Supply, Residential Research, Retail Research, Thailand, Urban Development | No Comments »

In Disaster-prone Asia Pacific, Preparation Is Key

Friday, March 23rd, 2012

“The Wise Rabbit sat under a tree and pondered about life in general. ‘The world is full of difficulties and dangers. First, there are natural catastrophes such as earthquakes and landslides and storms. Second, there is always the danger of famine, of shortage of food and water. Third, there is the danger of thieves and robbers.’ He then remembered an important appointment and went away.” – Maung Htin Aung, Burmese folktales, 1948

APAC has endured extensive natural disasters historically, and those in recent years have devastated surrounding communities, severely impacted companies’ operations and negatively affected national GDPs.

Drawing on the collective experience of 200 Jones Lang LaSalle client sites affected in Christchurch, Brisbane, Queensland, Japan and Thailand in 2011, Surviving the Disaster Zone: Lessons Learned in Asia Pacific explores what has worked well in preparation for and during a crisis. The author, Rob Timmermans, highlights the best practice during each phase of an incident:

  • • Preparation. When a hazard warning is issued in advance, convene a crisis management team and consider what can be done to minimise the impact, for example taping up windows, sandbagging or ordering portable generators. Involve service providers early to ensure critical resources are on standby when needed.
  • • Event. During the down time when all preparations have been made and yet people are not able to commence recovery efforts, focus should be on people’s safety and managing the physical and psychological impacts on staff. Appoint a single point of contact for staff and provide timely updates using all available communications channels (including social media).
  • • Recovery. In the aftermath of the event, the priority is to ensure facilities are safe and/or to identify short-term alternative space. Nominate the corporate real estate team as the ‘authority’ in declaring a facility safe to occupy following a disaster.

Beyond these tactical learnings, it is critical to have strong business continuity plans (BCPs) in place. Rob advises to:

  • • Incorporate standard management practices into the plans as employees will be far better equipped to make swift and relevant decisions if they are in line with their day-to-day responsibilities.
  • • Look beyond traditional stand-alone BCPs and integrate off-site options such as the ability for staff to effectively work from their homes using broadband technology, allowing many functions to be executed without interruption.
  • • Opt for geography-specific approaches for back-up sites. Natural disasters have an impact will beyond the immediate surroundings so it is important to consider inter-state or offshore location options for back-up operations.
  • • Schedule BCP trials when some key members of the crisis team are not available, as will most likely be the case when a crisis hits. This will demonstrate wether the support network is capable or flawed.
  • • Build pre-emptive BCP relationships between CRE teams and service partners or between landlords and tenants, to streamline negotiations and deployment of resources during time-critical periods.

Fortunately, unlike the not-so-wise rabbit in my introduction, firms across the region are now proactively reviewing BCPs, a task no longer seen as a mere box-ticking exercise.

About the author
Anne Thoraval is the Head of Corporate Research for Jones Lang LaSalle in APAC, based in Singapore.

Posted in Asia Pacific, Australia, Corporate Real Estate, Facility Management, Japan, New Zealand, Thailand | 1 Comment »

Bangkok’s Booming Retail Real Estate

Tuesday, February 28th, 2012

In years past, a trip to the mall, even for some basic shopping, often meant a serious commitment of time – because one would often be stuck in traffic and have to search for a parking space – and then face a lack of choice in terms of both products and brands. Over the past five years, however, Bangkok has welcomed 1.25 million sqm of new retail space in new centres across the city, an increase of nearly 25%, bringing the Thai capital much closer towards its goal of being a shoppers’ paradise.

While the Ratchaprasong area still hold the title of Bangkok’s core shopping district, with high-profile centres like Siam Paragon, Central World, Gaysorn Plaza, Siam Discovery, and MBK, all within walking distance of each other, other areas and retail formats have mushroomed across the metropolitan area. Hypermarkets Tesco Lotus and Big C continue to prosper in both the city and the suburbs. The increasingly ubiquitous neighbourhood malls attract residents from increasingly affluent local areas, while specialty retail outlets in locations easily accessible by foot traffic and mass transit stations are benefitting from the ongoing urbanisation of Bangkok. Meanwhile, traditional street-front retail shophouses are undertaking facelifts to remain relevant in the wake of losing customers to modern retail malls.

Driving this trend is continued economic growth, rising incomes, and higher disposable income. Despite numerous negative factors, for example, political turmoil, the global financial crisis and recent natural disasters, Thai consumption has expanded more than 40% this past decade. Better mass transit infrastructure, particularly the Bangkok Transit System (BTS) skytrain, and the underground Mass Rapid Transit (MRT), has made it much easier to get around the city. Higher density and more upmarket residential developments across the city have created new catchments supporting the viability of neighbourhood malls. Finally, competition among retailers, from both established local and new international brands, is resulting in more space being demanded to support their expansion.

So far, most retail projects have enjoyed good returns but the impact of rising rental income on this modern retail boom and the potential pitfalls ahead have yet to become evident. Success does breed competition, and Bangkok will see an all-time record amount of supply in 2012 with over one million sqm in new and renovated malls scheduled to come on stream. Recent success has attracted independent and less experienced retail developers. However, sustaining a successful retail development in Bangkok requires a high level of expertise, proactive management, and innovation. In the near term, the robust consumer demand will mask the lack of experience of these new developers. Over the longer term, however, it will be important for these smaller players to step up to the game through targeted product offerings and active tenant management to compete effectively with the leading Thai retail managers and sustain the city’s long term retail growth.

About the author
Dan Tantisunthorn is the Head of Research for Jones Lang LaSalle in Thailand.

Posted in Consumer Spending, Demography, Retail Research, Thailand, Urban Development | No Comments »

Bangkok’s Lingering Floods

Tuesday, November 8th, 2011

After years of political chaos, global financial crisis, tsunami and bird flu, things had finally started to look brighter for the Thailand economy midway through 2011. With this flooding some say is the worst in 100 years, lingering and their overall impact yet to be fully assessed, the country just can’t seem to catch a break. Besides the direct and indirect damage on the economy being inflicted (the Bank of Thailand has already revised down its GDP growth forecast to 2.6% from 4.1%), the prospect of more flooding in the future will certainly play a bigger role in how Bangkok’s real estate market here evolves over the coming years.

At this point in time, no one can be sure how much worse things may get, nor how much longer the city and surrounds will need to endure this situation. An estimated 10-12 billion cubic metres of water pooling north of Bangkok still need to be drained into the Gulf of Thailand. The brunt of the damage has been borne by residents, retailers and industrialists in these areas north and west of central Bangkok. The situation remains precarious and there can be no guarantee that even Bangkok’s CBD will be spared.

Although still early, the impact is being felt as far as North America with Honda revising down forecasts as its inundated factories can no longer produce critical electronic parts. Residents have had to abandon homes or relocate in some cases which were later to also become inhabitable. Supply chain disruptions and impassable roads have left retailers shelves bare if they are able to open at all in certain areas. Meanwhile, high rise apartments and serviced apartments have filled up with residents taking refuge from the water. Office building parking lots are crammed full as owners try and protect their vehicles from the rising waters.

Whether the current flood is a one-off event or an emerging trend that the country will need to continue to deal with in the future, the government, businesses and residents will certainly need to adjust to this situation. How quickly this happens will depend on the benefits of rebuilding in the present locations with new measures to minimise flooding versus the costs of relocating to better protected zones.

About the author
Dan Tantisunthorn is the Head of Research for Jones Lang LaSalle in Thailand.

Posted in Economic Research, Thailand | No Comments »

Where is Bangkok’s CBD?

Wednesday, June 29th, 2011

Depending on whom you ask, Bangkok’s central business district can actually be one of numerous locations across the city. From the days when the Chao Phraya River and the city’s intricate canal network provided much of the infrastructure for commerce, to an era when residents and visitors had few alternatives to spending much of their day stuck in the notorious road traffic, the biggest influence on how the city works these days is the mass transit infrastructure, BTS skytrain and MRT underground. As a result, rather than having a single commercial heart, the city is evolving around key nodes with a blend of high density office, retail, hospitality and residential developments clustering in these areas.

Coinciding with the launch of a high profile residential project, five business groups will collaborate to establish “Ploenchit City”, a new central business district between the Chidlom and Ploenchit BTS stations. The area already offers its fair share of office, retail, hotel and residential space, but new development includes the Park Ventures office/hotel complex, Central Embassy and Park Hyatt hotel, and the Noble Ploenchit condominium development. The group expects traffic to rise from the current level of 50,000 people per day to over 200,000 by 2016.

The initiative could shift some of the momentum built up by development around the Asoke-Sukhumvit intersection over the past couple of years. The relocation of Citibank to the recently completed Interchange 21 at the Asoke-Sukhumvit intersection highlights a shift towards density being realized at these infrastructure nodes. Also at the Asoke-Sukhumvit intersection, Exchange Tower completed in 2006 was one of the first office buildings to link directly with a BTS station. Meanwhile, the completion of Terminal 21 at the end of this year will be the first major retail center linking to the Asoke-Sukhumvit BTS sky-train and underground MRT stations.

And despite these recent developments, the Chong Nonsi intersection, at Sathorn and Narathiwat Roads, still offers the largest amount of grade A office space. The Bangkok Metropolitan Authority recently completed construction of the platform over the intersection which allows easy pedestrian access between the BTS and Bangkok Rapid Transit stations as well as the many high quality buildings in the area. The recently completed Sathorn Square office building, built in conjunction with Bangkok’s soon to be first W Hotel has further raised the profile of this already prominent intersection.

In all these areas, individual commercial developments are less able to stand alone on their own and are increasingly reliant on integration with the infrastructure and other buildings in the area. Other key mass transit locations also comprise high density commercial and residential offerings, and new development plans are already entering the pipeline. As these nodes evolve and attracting traffic becomes increasingly competitive, we can expect to see more collaboration among landlords and developers promoting their area as the best commercial zone in Bangkok.

About the author
Dan Tantisunthorn is the Head of Research for Jones Lang LaSalle in Thailand.

Posted in Demography, Investment Research, Land Supply, Office Research, Thailand, Workplaces | No Comments »