Bangkok residential market softening but other sectors remain resilient: Edmund Tie Research

While Bangkok’s residential market appears to be softening, with shrinking launches and take-up rates, other sectors remained resilient.
OCTOBER 23, 2019 - 2:52 PM

OVERALL outlook for business and investment in the Thai capital remains optimistic according to Edmund Tie's latest research report, citing resilient demand for commercial and retail space.

Total investment sales volume increased slightly by 1.1 per cent, from THB12.0 billion in Q2 to THB12.1 billion in Q3. 

The largest deal conducted over the course of the quarter was the investment in four projects by AIM REIT Management Company; the total investment was valued at THB4.3 billion.

Among other factors, the new incentive measures, including the "Thailand Plus Package", which were introduced by the Thailand Board of Investment, is expected to boost investors' confidence noted the report. 

In September, the Hong Kong Trade Development Council also announced the collaboration to facilitate closer business and investment ties between Thailand, Mainland China, and Hong Kong through the Belt and Road Summit. 

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Strong demand for prime office space

According to the report, occupancy rate in the central business district (CBD) is expected to hold firm in Q4. That being said, competition is expected to be intense in the next few years when supply outstrips demand. 

Over the course of the quarter, the Thai capital's office sector saw several completions which led to a supply increase of 0.8 per cent over Q2. As of Q3, the total supply was at 8.68 million square metres (sq m).

The stock of office supply in the CBD area was 4.68 million sq m, an increase of 1.0 per cent from 4.63 sqm in Q2. Supply of prime office buildings in the CBD increased from 1.45 million sq m in Q2 to 1.49 million sq m in Q3, representing quarter-on-quarter growth of 3.3 per cent. Office supply in the CBD accounted for 53.9 per cent of the total office supply in Bangkok.

The asking rent of prime offices in the CBD area averaged at THB1,075 psm per month in Q3, a slight increase of 0.5 per cent, compared to the average asking rent of THB1,070 psm per month in Q2. The occupancy rate of prime office spaces in the CBD increased slightly from 93.3 per cent in Q2 to 93.8 per cent in Q3. 

Retail occupancy expected to perform better in Q4

On the retail front, average occupancy in Q4 is expected to perform better as newly completed malls have been well-received by tenants said Edmund Tie Research. An estimated total of 71,958 sq m from new projects -  “I am Chinatown”, “Langsuan Village Walking Street”, “SUNNY at Summer Lasalle” and “Siam Premium Outlet” - are expected to be completed in Q4.

Average retail rents in midtown stayed flat at THB1,605 psm per month even as rates in downtown increased to THB2,600 psm per month, up from THB2,590 psm per month in Q2.

Weaker residential outlook

Due to weak market sentiments, only 6,562 condominium units were launched in Bangkok, down 51.6 per cent from Q2's 13,550 units. This follows the implementation of the LTV measures which took place in April. 

CBD condominium units accounted for 15 per cent of total units launched in Q3 with the remaining 85 per cent (5,557 units) outside the CBD. The average take-up rate of CBD condominiums in Q3 was at 24.8 per cent, slower than 41.6 per cent in Q2.

The average selling price of high-end CBD condominiums stood at THB334,564 psm in Q3 2019, 24 per cent higher than the average of THB 270,300 psm for the previous quarter. 

Edmund Tie Research noted in its report that while the economic stimulus package approved by the government is expected to restore confidence in developers and investors, the large stock of unsold condominium units will require some time to be absorbed.