Thailand’s commercial real estate sector is expected to witness an upward trend in the coming year as the market becomes stronger due to growing demand from consumers, according to local and foreign experts.
The current market situation, while not always upbeat as the Thai economy has been impacted by global volatility, has been often been described as resilient, supported by the healthy luxury residential segment of Bangkok.
“Although having been affected by global volatility, the impact of China’s slowdown and weakening demand in general over the past year or so, Thailand will remain on an upwards course in 2016 with several property firms projecting growth of around 5-10 percent with the Greater Bangkok luxury market expected to lead the regional resort areas into positive growth,” according to Clayton Wade, managing director of Premier Homes.
Resurgence of group tours and leisure travellers
Wade, who has been named conference chairman of the Property Report Congress Thailand 2016, a high-level real estate networking forum that will take place on 22 September, from 08:00 to 16:00, at the Plaza Athenee Bangkok (a Royal Meridien hotel), says each segment of the Thai property market has their strengths and areas for improvement.
For the hospitality sector, which has benefitted from the country’s tourism industry over the past decade, the projected revenue per available room (RevPAR) growth is between 2 and 3.5 percent, thanks to the strength of upscale and luxury segments, and the rise in international tourists arrivals, which should be almost 33 million for 2016 led by Chinese visitors and the resurgence of the Russian tourists, who are especially interested in regional locations.
“The opening of the new Phuket International Airport this quarter, for example, will favourably influence continue growth in Greater Phuket area for mid-scale to upper scale hotels and condominium as Phuket emerges as a mass tourism destination,” notes conference moderator Charles Blocker, co-founder and CEO of IC Partners Limited, a capital management and advisory company focused on hospitality, commercial and industrial real estate assets and related investment joint ventures investments and family offices in ASEAN.
Hotel developers and operators across the country, meanwhile, are advised to look out for the rise of internet booking systems that provide the lowest rates and charge a high percentage of commission.
According to respected hospitality expert Frank Jaanmat, managing director of LightHouse, and panel speaker at the upcoming Property Report Congress Thailand 2016, investments in new high-end hotels could potentially drop for the above reasons.
“I expect however a continued growth in the mid-range hotel rooms because of the increase in, for instance, Chinese group tours and cheap charters flying directly to the favourite holiday destinations,” he comments.
Office segment has become the outperforming sector
Elsewhere, Thailand’s office sector could see an increase in both rental rate and occupancy rate, especially in Grade-A office space in Bangkok’s downtown area. There is a huge potential in the office space for sales in the suburb area as well, especially in certain growth areas such as Rama 9 or Ekamai-Ramindra, says panel moderator Dr. Theerathon Tharachai, chief financial officer of Project Planning Service PCL.
He believes that Bangkok’s office segment seems to be the last sector to rise in the last decade of Thailand real estate. “Due to the low yield, which is mostly by the relatively low rental rate, for many years since 2008-09 Global Financial Crisis, there were little growth in supply in this sector until recently. For the last two or three years, however, the office segment has become the outperforming sector.”
Tharachai adds that he expects the office real estate market to continue to perform well in at least a few more years. “There are many interesting Grade-A projects coming up in the capital that will push up the average rent in office market overall. It should give a positive impact to the overall market in general. Then the market may slow down a little bit after all these big projects add a lot of new supply into the market.”
In the era of the ASEAN Economic Community, the Grade-A office market in Bangkok’s main central business district remains healthy, per panel speaker Sukkawat Prasurtying, chief investment officer at AIA Group. “Any new supply is gradually absorbed by multinational corporations that are expanding after a period of cost saving,” he notes, citing the AIA Sathorn Tower and Bhiraj Tower as the office sector’s prime offerings.
There are planned office developments of approximately 1 million sqm due for completion after 2018, Prasurtying says. This is equal to 12.8 percent of the existing stock of 7.8 million sqm in 2016.
Designing a realistic future
Retail and design experts, meanwhile, are more focused on quality and not numbers when speaking about the sector’s future.
“I wish I could paint a more rosy picture, but I do feel things will be very competitive as consumption demands are likely to remain laggard for the remainder of this year and next. In a weak economy, one is more likely to find stability and growth in more focused products. Truly understanding your customers and being honest and relevant to their needs is of essence,” shares panel speaker Vicharee Vichit Vadakan, co-founder and managing director of The COMMONS, one of the retail nominees at the 11th Thailand Property Awards 2016.
Workshop speaker and internationally renowned architect and designer Thomas Leeser, principal at Leeser Architecture, notes that consumers are always looking for a new experience, so the focus on quality design and planning is significant. “So as long as the commercial side of the real estate industry understands that it is not shopping that needs to be the focus, but the urban experience that would draw an audience, the market will only grow stronger. As long as the market can be creative enough, it will draw an audience.”
Another design panel speaker, Stephen O’Dell, director at SODA (Architecture | Interiors) and registered architect in New York City, is delighted to see a significant uptick in Thailand’s hospitality and residential sectors for the past six months.
“The design and work climate seems to be on the upswing here. We are seeing a significant amount of new activity here in Thailand in 2016 after what seemed like a year or two of slow period for large-scale projects. Perhaps this is due to our expanding design and brand presence in Asia-Pacific, but I’m glad to see the design sector bustling with activity.”
O’Dell’s says his participation at the Property Report Congress Thailand 2016 will allow him to meet and interact with industry colleagues to gain any new insights on the Thai property market and the ASEAN.
A total of 23 industry experts and influencers from Thailand and overseas will speak at the whole-day event, with the opening remarks to be given by Liam Aran Barnes, brand director and editor-in-chief of Property Report, Asia’s leading luxury real estate, architecture and design media platform.
After hosting successful real estate conferences in Manila, Ho Chi Minh City, Yangon and Kuala Lumpur, Property Report brings its Property Report Congress series to Bangkok. It will feature keynote addresses and panel discussions on crucial issues that will impact Thailand’s commercial real estate segment, such as overall investor trends and key locations, retail developments, the office market, and the ever-evolving design sector.
Renowned property consultant and advisor Suphin Mechuchep, managing director of Jones Lang LaSalle Thailand, will give the opening keynote speech, while her JLL colleague Andrew Gulbrandson, head of research at Jones Lang LaSalle Thailand, is set to give the Thailand market overview keynote.
Organised by PropertyGuru, Asia’s leading online property portal group, Property Report Congress Thailand 2016 be followed by the 11th Thailand Property Awards 2016 black-tie gala dinner in the evening, from 18:00 to 22:30, which will be attended by 600 of the country’s top real estate developers, executives and industry professionals.