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Bangkok Overall – Q 2 2009

By on Oct 20, 2009 in Research, Residential

Summary
The second quarter of 2009 started badly with civil disturbances in Bangkok over the Songkran (Thai New Year) holidays in April. However, despite this inauspicious commencement to the quarter there were signs of improvement in certain property sectors.

The luxury condominium market saw a significant improvement in the number of sales compared to the first quarter. The majority of purchasers were Thais who bought both from developers in buildings under construction and resales in buildings about to be completed. The total number of condominium units in downtown Bangkok grew, up 4.3% Q-o-Q and 14% Y-o-Y to a total of 60,507 units. We expect a that a further 15,739 units will be completed between July 2009 and the end of 2012.

The total supply of serviced apartments increased by 3.2% Q-o-Q and 14.2% Y-o-Y to 12,392 units in Q2 2009. The majority of new projects are located in the Sukhumvit area.

Overall take-up of the Bangkok office market was 6,763,812 m2, up 0.2% Q-o-Q and 0.9% Y-o-Y. The demand driver for this quarter was DTAC taking up 61,000 m2 in Chamchuri Square. The occupancy rate of the Bangkok office market also improved slightly to 86.0% from 85.8% in the last quarter. Overall, Bangkok office rents fell. During Q2 2009, Grade A CBD office rents fell to THB 700/m2 from THB 710/m2 in Q1 2009, down 1.4% Q-o-Q and 5.7% Y-o-Y. The Energy complex is one of only 4 office buildings that will come to the market over the next two years. The project will increase the total office space by 119,000 m2 and is expected to be completed in the second half of 2009.

In Q2 2009, the Bangkok retail occupancy rate dropped to 91.1% from 92.9% in the last quarter. Total retail space occupied increased to 4,760,220 m2, up slightly 0.9% Q-o-Q and 4.5% Y-o-Y. The midtown area had the highest increase in take-up at 1.6% Q-o-Q and 2.8% Y-o-Y. The suburban area followed with an increase of 0.9% Q-o-Q and 8.4% Y-o-Y. Total retail sales although recovering slightly in May are still below the levels for 2006-2008 which will restrict tenant’s ability to expand or pay increased rents. Vacancy rates increased slightly and we do not expect that rentals will rise this year until retail sales improve.

The industrial sector has seen virtually no new sales of serviced industrial land plots with only 255 Rai sold in quarter 2 and a total of 344 Rai for the whole of the first half of 2009 compared to sales of 4,170 Rai for the whole of 2008. We have not however seen a large number of industrial properties being offered for sale due to factory closures. The total value of BOI-approved projects decreased by 56.1% Y-o-Y , to THB 115.2 billion from THB 180 billion, for the first seven months of the year.

Foreign Direct Investment (FDI) into the industrial sector dropped 17% Y-o-Y in 5M2009, while foreign direct investment from Japan, Thailand’s major foreign investor, has decreased by 27% Y-o-Y.
The hotel sector continues to see rising supply and falling demand resulting in lower occupancy rates, room rates and revpar. Occupancy levels for upscale hotels are now at 44% for an 11% drop on Q1 figures of 55%. As a result of poor occupancy levels Average Daily Room Rates (ADR) dropped at upscale hotels from THB 5,992 in Q1 to 5,308 in Q2 a reduction of 11.4% Q-o-Q and down 9% Y-o-Y. RevPar figures were also down at a rate of 2,277 (THB), a decline of 29.7% Q-o-Q and 45.7% Y-o-Y.
The situation is very different to the 1997/98 financial crisis when almost every property sector in Thailand was over supplied and credit was suddenly cut of with the closure of finance companies and banks.

The sector facing the biggest challenge is hospitality properties both hotels and serviced apartments because of the amount of new supply which continues to increase combined with a fall in demand.

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