Bangkok is far and away the country's main property destination, and the majority of developers remain focused on the capital. As it has been for the past few years, the condominium market continues to be the most active sector, driven by changing demographics and the spread of mass transit. The other interesting sector is retail, which has changed a lot in the past five to six years due to the proliferation of community malls.
Although limited new office supply was completed in 2012, demand has increased steadily, and the office market last year was more active than it had been for the previous few years. Therefore this is a good place to begin our review and forecast:
OFFICE MARKET
The total office supply in the capital at the end of 2012 was 8,105,000 square metres. While growth has been steady over the past decade or so, it's interesting to note that on average, only 94,000 sq m of office space were completed each year from 2000 to 2008. That compares with an annual average of 615,000 sq m from 1991 to 1999. More than 85% of the total current supply, or 6,860,000 sq m, was completed before 2000. Some building owners and managers renovate and upgrade their facilities regularly to remain competitive and command good rental rates, while some buildings have lost their appeal because of limited maintenance.
The average occupancy rate of Bangkok office buildings is more than 80% and the outlook for the year ahead remains good. Grade A buildings in centrally located business areas in particular have recorded a steady increase in their occupancy rates for more than a year. This reflects the fact that no new Grade A buildings were added to the market in 2012 and none are scheduled to be completed in 2013. The limited new supply has pushed rental rates in prime areas above 700 baht per sq m per month on average, and even more for Grade A space.
One important factor driving demand for offices in Bangkok is the capital's attractiveness to investors looking for a base from which to do business in Asean, especially Myanmar, Laos and Cambodia. Many multinational companies have expanded their existing space and several new companies are also searching for their first offices in Bangkok, particularly in centrally located areas. However, all signs point toward the continuing evolution of newer business districts. The new Bangkok town plan is aimed at encouraging the expansion of business areas farther east along Sukhumvit Road and to the north along Ratchadaphisek Road, which has already emerged as the capital's second most active business district.
CONDOMINIUM MARKET
More than 44,000 condominium units were launched in the capital and about 25,000 were completed and registered in 2012. The total supply is now 348,900 units, of which 216,750, or 62%, are located in suburban Bangkok areas not along existing mass-transit lines.
Many new projects were launched in in 2012, but most were not located on main roads. With good plots at suitable prices becoming scarce, especially on both sides of Sukhumvit, Silom and Sathon roads, some developers are shifting toward low-rise condominiums on smaller plots and in smaller sois.
Unit sizes have also decreased over the past few years while prices per sq m have continued to rise. Most developers of condos in the city try to keep unit prices below four million baht in order to attract buyers, though units at many buildings in the inner city start around there, reflecting the high cost of land. The average take-up rate of condominiums in Bangkok is approximately 70%, while some projects in better locations with reasonable prices have sold out in a few days.
Condominium building techniques are changing as well. Many developers are focusing more on precast and prefabricated systems because of a labour shortage. The shortage reflects the increase in the minimum wage and the opening up of Myanmar, to which many migrant workers are returning. This has also caused completion dates for some projects to be postponed.
RETAIL MARKET
New retail supply reaching the market in Bangkok in 2012 totalled 657,550 sq m, bringing the total to 6,489,700 sq m. Of the total, 3,415,000 sq m or 53% was located in suburban Bangkok.
Another 247,000 sq m are scheduled to be completed in 2013, with 122,700 sq m in shopping malls and the rest in community malls.
Many of the projects in the pipeline were postponed from the last quarter of 2012 due to the shortage of construction workers.
Community malls will still be the most fashionable over the next two years, with another 155,000 sq m scheduled to be completed in 2014.
The Bangkok retail market has been the most interesting feature of the property industry during the past five to six years, due mainly to the community mall phenomenon. New laws and zoning regulations, coupled with increasing land prices in Bangkok, have been the main factors limiting large-scale retail development, so developers are focusing on smaller-scale properties.
The total area of community malls in Bangkok is competing with that of hypermarkets and will be higher in 2013; from 2007 to 2012 the space in community malls increased by 350,000 sq m, while hypermarket expansion was far less active, due in large part to the exit of Carrefour and the absorption of its stores by Big C.
In addition, many foreign luxury brands are looking to open their first shops in the high-end shopping malls in Bangkok.
Convenience stores have also become a hotly contested battleground since Central Retail Corp took over Family Mart in Thailand.
Although 7-Eleven has by far the biggest share in this sector, there is still room for growth. Many brands are focusing on convenience stores by increasing the number of branches throughout Thailand.
The diversified trading company Berli Jucker is also ready to enter the fray with its own BJC Smart Store brand early in 2013.
FORECAST
The past year was one of the best in recent memory for all property sectors in Bangkok, due to the absence of any negative factors, be it political unrest or natural disasters. Consumer and business confidence were also generally good.
The main factors affecting the property market in 2013 will be the labour shortage which is affecting all sectors, as well as the new Bangkok town plan.
Continuing preparations for the upcoming Asean Economic Community will be a positive factor for the property market in Thailand, especially Bangkok and some provinces bordering neighbouring countries, while local politics, as always, has the potential to be a negative and destabilising factor.
Surachet Kongcheep is senior manager of research at Colliers International Thailand. He can be reached at surachet.kongcheep@colliers.com.