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News Release

Bangkok

Outlook remains positive for most property sectors in Bangkok

The Bangkok property market finished the first half of 2018 solidly with most of the key sectors enjoying favorable trading performance, according JLL, a professional services firm specializing in real estate.


Bangkok / 21 August 2018 – The Bangkok property market finished the first half of 2018 solidly with most of the key sectors enjoying favorable trading performance, according JLL, a professional services firm specializing in real estate. Strong demand has continued to support growth in the office, retail and hotel sectors. Condominium supply outweighed demand, but prices stayed generally stable.


Mrs. Suphin Mechuchep, Managing Director of JLL, says "Generally, fundamentals in Bangkok's property market have remained strong and stable so far this year as there have been no major externalities that have negatively impacted the market. Having said that, performances varied from sector to sector as each sector has its own set of opportunities and challenges."


Office market

Bangkok's office market is displaying the strongest fundamentals. Vacancy rates across the market have stabilized in the single digit range since 2013 with only minor fluctuations as new supply completes. The last time the market witnessed sustained single digit vacancy was between 1988 and 1991, prior to the boom period preceding the Asian Financial Crisis. At the same time, rental rates are at or near all-time highs regardless of location and segment.

In the first half of 2018, an additional 29,000 sqm of new space was added to the Bangkok office market, bringing the total stock to 8.9 million sqm. The average market-wide office rent rose from THB 651/sqm/month in January to THB 668/sqm/month in July, accounting for a 2.6% increase. During the same period average prime grade rents increased by 11.2% from THB 751/sqm/month to THB 824/sqm/month. Healthy rental growth is the result of low vacancy rates and limited availability of space in upcoming projects.  The market-wide average vacancy rate stands at 8.7% while the prime grade (Grade A) figure is just 6.0%. Rising rents and falling vacancies are being driven by occupier flight to quality – tenants relocating and in most cases expanding – from older buildings to new projects.

Ms Yupa Sathienpabayut, Head of Office Leasing at JLL, is bullish about the outlook for the Bangkok office market. "We expect rental rates to grow between 3% and 5% over the next 12 months as demand continues and new supply remains limited with only 280,000 sqm of for-lease space planned for completion between now and 2019. Nearly all of these projects have achieved high levels of pre-commitments from tenants. In fact, we also believe that vacancy rates will remain low and rents will continue to grow at a healthy clip at least for the next few years."

Condo market

Bangkok's condo market has been beset by high levels of domestic household debt in recent years, creating increasingly challenging conditions for developers that traditionally target mass market buyers. As a result, many developers have adopted new strategies, including moving upmarket, focusing more on landed housing, ramping up overseas marketing, and allocating investment to recurring income properties.

As of July 2018, there are more than 540,000 condo units across the market, with 451,000 units in the mass market segment and 89,000 units in the prime segment. In the first half of the year, 17,300 units were launched in the mass market segment, equivalent to 4% of existing stock in the same segment. The prime segment saw 13,200 units launched over the same period, equating to 15% of existing prime stock.

With many developers moving upmarket, the influx of new supply at the higher end of the price spectrum has put downward pressure of first-hand selling prices, which have stagnated since 2015 between THB 175,000 and 180,000/sqm.

Andrew Gulbrandson, Head of Research and Consulting at JLL, comments "While domestic demand for such higher end product coupled with marketing efforts targeting overseas buyers, particularly from mainland China and Hong Kong, has kept sales rates relatively healthy, it is becoming increasingly difficult for developers to see immediate success when launching new projects. In addition, though smaller developers such as Raimon Land and NYE Estate that have adopted a very strategic approach in targeting specific consumer bases have achieved the strongest results in recent years, increasingly challenging market conditions have encouraged many condo developers to diversify into other sectors such as office and hospitality."

"One potential bright spot on the horizon for both investors and owners is the proposed new land and building tax regime. Should these new regulations come into force in the near term, JLL believes this will have a positive impact with respect to affordability as it should encourage landowners to sell rather than face taxation on vacant land, which in turn should ease rising land prices and at the same time create new opportunities for lower priced products," he adds.

Retail market

In the first half of 2018, six new retail developments with a combined 48,000 sqm of lettable space was completed in Bangkok, raising the city's total retail stock to 6.5 million sqm. An additional 475,000 sqm of lettable retail space from 17 projects is planned for completion in the second half of the year, equivalent to 9.2% of the existing stock. Among these, the most notable projects include ICONSIAM by Siam Piwat, The Market Bangkok by The Platinum Group, and Gateway Bangsue by TCC Land Asset World, all of which are planned for completion in the final quarter of 2018.

Mr. Gulbrandson believes that the large amount of new supply coming on stream this year is likely to have a limited impact on the market-wide average vacancy rate which is standing at 8%.

"Most of the new space will come from prime retail centres being developed by operators with strong track records and are expected to have strong pre-commitment rates from both foreign and domestic retail brands that are looking to expand their presence in Bangkok," he says.

Hotel market

Bangkok's tourism continues to boom resulting in strong performance across all segments. After the midscale segment crossed the THB 2,000 ADR (average daily rate) mark for the first time in over 10 years in 2017, the growth has continued in 2018, with year-to-date June 2018 ADR reaching 


​that vacancy rates will remain low and rents will continue to grow at a healthy clip at least for the next few years."

Condo market

Bangkok's condo market has been beset by high levels of domestic household debt in recent years, creating increasingly challenging conditions for developers that traditionally target mass market buyers. As a result, many developers have adopted new strategies, including moving upmarket, focusing more on landed housing, ramping up overseas marketing, and allocating investment to recurring income properties.

As of July 2018, there are more than 540,000 condo units across the market, with 451,000 units in the mass market segment and 89,000 units in the prime segment. In the first half of the year, 17,300 units were launched in the mass market segment, equivalent to 4% of existing stock in the same segment. The prime segment saw 13,200 units launched over the same period, equating to 15% of existing prime stock.

With many developers moving upmarket, the influx of new supply at the higher end of the price spectrum has put downward pressure of first-hand selling prices, which have stagnated since 2015 between THB 175,000 and 180,000/sqm.

Andrew Gulbrandson, Head of Research and Consulting at JLL, comments "While domestic demand for such higher end product coupled with marketing efforts targeting overseas buyers, particularly from mainland China and Hong Kong, has kept sales rates relatively healthy, it is becoming increasingly difficult for developers to see immediate success when launching new projects. In addition, though smaller developers such as Raimon Land and NYE Estate that have adopted a very strategic approach in targeting specific consumer bases have achieved the strongest results in recent years, increasingly challenging market conditions have encouraged many condo developers to diversify into other sectors such as office and hospitality."

"One potential bright spot on the horizon for both investors and owners is the proposed new land and building tax regime. Should these new regulations come into force in the near term, JLL believes this will have a positive impact with respect to affordability as it should encourage landowners to sell rather than face taxation on vacant land, which in turn should ease rising land prices and at the same time create new opportunities for lower priced products," he adds.

Retail market

In the first half of 2018, six new retail developments with a combined 48,000 sqm of lettable space was completed in Bangkok, raising the city's total retail stock to 6.5 million sqm. An additional 475,000 sqm of lettable retail space from 17 projects is planned for completion in the second half of the year, equivalent to 9.2% of the existing stock. Among these, the most notable projects include ICONSIAM by Siam Piwat, The Market Bangkok by The Platinum Group, and Gateway Bangsue by TCC Land Asset World, all of which are planned for completion in the final quarter of 2018.

Mr. Gulbrandson believes that the large amount of new supply coming on stream this year is likely to have a limited impact on the market-wide average vacancy rate which is standing at 8%.

"Most of the new space will come from prime retail centres being developed by operators with strong track records and are expected to have strong pre-commitment rates from both foreign and domestic retail brands that are looking to expand their presence in Bangkok," he says.

Hotel market

Bangkok's tourism continues to boom resulting in strong performance across all segments. After the midscale segment crossed the THB 2,000 ADR (average daily rate) mark for the first time in over 10 years in 2017, the growth has continued in 2018, with year-to-date June 2018 ADR reaching THB 2,075 and occupancy registering at 85%. The upscale hotels have seen positive growth as well, registering an ADR of THB 3,447 (5.7% increase versus last year) and occupancy of 80.9% over the first six months of 2018. Similarly, luxury segment saw an improvement in overall performance with ADR rising to THB 6,442 (4.6% growth versus last year) and occupancy rates staying healthy at 77.2%.

Ms Pitinut Pupatwibul, Vice President for Advisory Services at JLL's Hotels and Hospitality Group, says "The major challenge for the Bangkok hotel market is with the large amount of new supply in the pipeline that may limit growth in occupancy levels in the near term. Our research suggests that over 1,000 new keys have been opened in 2018 and another 2,500 keys are scheduled to open in the balance of the year, with an additional supply of circa 6,500 keys on the horizon for 2019 and 2020."

"Thailand is expected to welcome 37.5 million visitors in 2018, 65% of whom are anticipated to visit Bangkok. This should help boost demand and sustain healthy conditions in the Bangkok hotel market despite the large amount of new supply coming on stream," she says.

Outlook

Mrs. Suphin says "We expect the Bangkok property market to maintain its momentum throughout the remainder of 2018. With 4.6% GDP growth in the second quarter and full-year annual growth expectations in the 4.2% to 4.8% range, Thailand's economic growth should help boost consumer and investor confidence and consequently encourage demand in both commercial and residential property sectors."



JLL is a leading professional services firm specialising in real estate. The firm has 300 corporate offices, operations in over 80 countries.