The government's bold plans for the Eastern Economic Corridor have opened up opportunities for property developers and investors, with Sri Racha in Chon Buri province being the brightest spot.
Japanese nationals are the largest group of expatriates in Thailand with a population of 36,000. Apart from Bangkok, where half of all Japanese expatriates are living, Sri Racha in Chon Buri province is the second capital for them.
The industrial development centre in the Eastern Seaboard has created many blue- and white-collar jobs for workers, and many expatriates who are employed in the manufacturing plants are Japanese. These factories are located mainly on industrial estates in Chon Buri and Rayong. Due to the location, most Japanese expatriates will choose to live in Bangkok, Pattaya, and Sri Racha.
Sri Racha has grown to become a preferred area for many Japanese expatriates, mainly because it offers convenient access to their workplace while not being far from Bangkok or Pattaya. The established Japanese community in Sri Racha is similar to the Japanese community in the Sukhumvit-Thong Lor area because Sri Racha is equipped with Japanese-style supermarkets and community malls like Aeon and J-Park and it serves as the second location of the Thai-Japanese Association School.
Unlike other groups of foreign executives, the Japanese expatriates in Thailand prefer to live in serviced apartments where facilities and hotel-like services are provided rather than rent condominium units and manage household chores on their own. This is partly because most Japanese expats stay for less than five years and want a hassle-free, fully serviced living experience during their time in Thailand.
In downtown Bangkok, where land price is higher, there is limited interest from developers in building new serviced apartments as it is more profitable to build a condominium and realise returns faster. In contrast, the landlords in Sri Racha are more interested in the serviced apartment sector as the expatriate market is vibrant there and they have been able to achieve rents that are as high as the serviced apartments in Bangkok.
The surge in industrial land sales and the new factories that have opened as a result have driven demand for serviced apartments. Developers have responded by building more supply and, as a result, the Sri Racha market has witnessed a rapid growth of serviced apartment supply -- most of which was completed by the end of 2013. The supply surged by almost 80% to more than 3,600 units.
Most of the hotels and serviced apartments are located within a two-kilometre radius of the city's largest retail development, Robinson Sri Racha. As expatriates usually do not own a car, the better-performing serviced apartments are typically located within a walking distance of amenities. Most serviced apartments offer shuttle services for tenants to ferry them around popular amenity locations.
Like in Bangkok, the serviced apartments in Sri Racha usually have a full range of facilities like traditional Japanese breakfast packages, laundry services, washing machines, cooking and dining equipment, ofuro/jacuzzi or a bathtub in each room.
As new, better-quality apartments emerge, tenants in older apartments have moved to newer, more modern buildings, resulting in a sharp drop of more than 20% in the occupancy rate of older and lower-quality buildings in the past three years. This has led developers of older buildings to renovate their units and common areas to better compete with newer projects.
Even though the market size is smaller in Sri Racha, the future supply in the pipeline is almost the same as it is in Bangkok. There are at least 1,300 future units of hotels and serviced apartments under construction. This will put even more pressure on older projects and make it increasingly difficult to fill up their buildings. There is also interest from branded management companies like Ascott to build another serviced apartment in the area after the success of their first project, which opened in 2015.
With the government planning to invest heavily in the Eastern Economic Corridor (EEC), this area has been in the spotlight for investors looking for opportunities, including those in the residential sector.
At the same time, while there is potential for growth, it may be too early to expect demand of residential units from the announcement of EEC to grow immediately. If future supply continues at the same pace, there will be a gap to fill as real demand catches up with the future supply of upcoming residential units.
Timing is important and investors and developers interested in taking a position in the EEC market need to be watchful of real demand to balance future growth projections with current supply and take-up rates.
Ms Chotika Tungsirisurp is an associate director, and Ms Tornbonkot Patcharaprakiti is a senior analyst at CBRE Research and Consulting, CBRE Thailand. They can be reached at bangkok@cbre.co.th Facebook: CBRE.Thailand Twitter: @CBREThailand LinkedIn: CBRE Thailand and website: www.cbre.co.th