Bangkok

BANGKOK (Dec 9): International real estate consultant firm CBRE has published a market view report of Bangkok’s office, luxury hotel and retail sectors for 3Q2015.

Office

Office rents continued to rise as vacancy rates fell and rents increased. By the end of 3Q2015, total office supply increased to 8.4 million sq m, a 1.5% rise year-on-year (Y-o-Y) despite being unchanged from the previous quarter (2Q2015), with no new buildings completed in 3Q2015. The overall vacancy rate of 8.8% showed a slight drop of 0.7% Y-o-Y.

There will be about 374,000 sq m of expected new office space between the remainder of 2015 and 2017 to bring the tally up to about 8.8 million sq m by the end of 2017, of which 80% will be Grade A offices, and 30% of the total supply will be located in the central business district (CBD).

As at 3Q2015, the total amount of occupied office space in Bangkok stood at 7.66 million sq m, with a rise of 0.5% quarter-on-quarter (Q-o-Q) and 2.4% Y-o-Y, while vacant space measured about 740,000 sq m, with a decrease from its previous 780,000 sq m in 2Q2015.

Grade A offices had an occupancy rate of 90.4% from its 89.5% in 2Q2015; its average rents registered the highest increase compared to the third quarter of 2014 (3Q2014) with a 1.9% Q-o-Q and 10.1% Y-o-Y rise at THB700 sq m per month, and a 1.1% Q-o-Q and 4.1% Y-o-Y increase to THB880 sq m per month for those outside of and within the CBD respectively.

 

Hotels

In the hotel sector, the American Depositary Receipt (ADR) for all grades increased 6% Y-o-Y to THB3,200, with revenue per available room (RevPAR) recording THB2,300 according to STR Global, a hotel market research company, in 3Q2015.

Tourist arrivals for 3Q2015 were 7.3 million, growing 24% Y-o-Y. Arrivals grew by 8% when compared to the third quarter of 2013 (3Q2013).

“The bombing at the Erawan shrine in late August caused a short-term dip in tourist arrivals,” the report stated. “In 2015, the drop was approximately twice that of the previous year: 22% in 2015 compared with 10% in 2014. Chinese tourists were the most spooked, with their September arrivals dropping 33% month-on-month (M-o-M) in 2015 versus 6% the previous year.”

Luxury hotel performance, hinging on strong Chinese arrivals at 2.1 million visitors in 3Q2015, showed a growth of 73% Y-o-Y. No new supply entered the market within the quarter, retaining Bangkok’s total supply of downtown hotels with 42,500 keys. Explaining that hoteliers would rather wait for high season in 4Q2015 to open new hotels, CBRE also witnessed renewed interest in hotel ownership from local investors as well as key hotel management chains.

“We estimate that another 5,400 keys will be complete 2018, representing a growth of 13%,” the report added.

 

Retail

Bangkok’s retail sector saw a slump in its retail sales. However, in 3Q2015, the total Bangkok retail space supply increased 2.4% Q-o-Q or 6.3% Y-o-Y to 7.0 million sq m with an additional 162,058 sq m of net lettable area.

“Despite the slowdown in retail sales, there is more than 1.1 million sq m of retail space under construction in Bangkok that will be completed by 2017,” the report remarked, also stating that the weak economy has led to a slowdown in provincial cities’ retail development and community mall development.

Occupied retail space rose by 2.3% Q-o-Q or 3.2% Y-o-Y to 6.4 million sq m, though overall occupancy rates dropped to 91.2% due to renovations of retail centres. Thailand’s Consumer Confidence Index (CCI) decreased to 73.4 from the average CCI of 75.5 in 2Q2015 in September 2015, while the retail sales index recorded an increase of 2.8% Q-o-Q, or decrease of 1.5% Y-o-Y, to 201.58 in July 2015.

“Taking into account the combination of a significant increase in new supply and continued weak consumer sentiment, we think it will be very challenging for developers to be able to raise rents and we are predicting little or no rental growth for the next 12 months unless there is significant increase in consumer spending,” CBRE remarked.

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