Even for those who don’t subscribe to the beliefs, many principles of the ancient art are rational and in line with buyers’ preferences

December and January usually indicate a low season for property sales as Thais celebrate the traditional New Year and the Chinese New Year. Thais and Chinese have close ties culturally, and these days many Thais seem to believe in Chinese astrology and feng shui.

Feng shui translates literally to “wind and water” and is based on a belief in patterns of the opposing but complementary forces of yin and yang and the flow of chi (energy). It is the Chinese practice of positioning objects, especially buildings and furniture, based on these patterns and energy. In the tradition of feng shui, the way a home is decorated and designed affects the fortunes of its residents.

I am not a feng shui expert, but in the property industry it is an area that cannot be neglected as more and more buyers put faith in it. As property agents, we know how feng shui can be either a deal closer or a deal breaker.

One feng shui master said that it is important to choose the right timing and location to associate with positive forces. This involves considering direction, timing, location and horoscope.

Today feng shui is practised by many people around the world, including Westerners. There are a wealth of theories on the subject, but it comes down to each individual’s beliefs and what they feel comfortable in implementing.

I have had the opportunity to listen to several feng shui masters and, combined with a knowledge of building design and customer feedback, I find that many feng shui principles are rational and in line with customers’ preferences. Below are examples:

1. Building structure: According to feng shui principles, buildings with curved structures are preferable to buildings with sharp angles, which represent the fire element and therefore are not ideal for residential purposes. And from a design point of view, buildings with sharp angles often have less efficient floor space and do not work well for residential developments, particularly if the building is sharp on top, thereby reducing the usable area on upper floors. Experience shows that rectangular floor plates work best for residential developments, but a slightly curved structure makes the design and architecture more interesting. However, a structure that is too curved can lose its functionality, so balance is needed.

2. Ventilation: Feng shui places a high value on good ventilation and air flow, especially in living areas and bedrooms. All rooms should have windows, although this may not be possible for smaller condominium units due to space and design constraints. Larger units and houses should be carefully designed to ensure that all rooms are well ventilated and have enough windows, including in the kitchen and bathrooms, as this will be a major advantage in selling the property.

3. Water features: According to feng shui principles, water features should be incorporated in the home. For houses, adding a fish or lotus pond is an attractive feature, as well as advisable from a feng shui perspective. For condominiums, one can add a fish tank or if possible select properties with a view of a river, lake or sea.

4. Access, entrance and exit: Good access to your home or building is considered desirable in feng shui, and again this makes sense from a design perspective. Access should be convenient, and if you live in a condominium there should be good traffic flow inside the car park and the entrance should be prominent, clearly marked and easily visible, particularly at night.

5. Lighting: Lighting is an important consideration in feng shui and in design in general. Exterior and interior lighting should be bright, particularly for commercial buildings. For example, 7-Eleven convenience stores are a good example of lighting that helps customers to easily locate the store and draws them into it.

6. Unit features: Feng shui principles consider many factors relating to the internal layout of a unit. Most attention should be paid to the master bedroom and living area. The living area should draw the “yang energy” _ it should be airy, bright with good ventilation and a lot of movement. This is one of the reasons why the balcony should be off the living room rather than bedrooms as a balcony provides movement from the natural environment. This makes sense both from a design and a feng shui viewpoint.

In the bedrooms, the bed headboard should not share a wall with toilets. This is underpinned on the belief that it will attract bad health. From a design viewpoint, it would also be noisy. Feng shui principles say mirrors should not be placed opposite the bed, and this is also practical from a design perspective because most people don’t want to see their reflections upon waking up at night. Most feng shui experts do not recommend having mirrors in the bedroom at all as a mirror represent the “yang energy” that creates activities, while a bed represents the “yin energy” that represents peace. Mirrors are more suitable for common areas of the residence such as living and dining spaces.

7. Direction: Preference in direction is not fixed in feng shui and depends on many variables. Most Asians also do not like west-facing units due to heat from the sunset, but will take them for good views. Buildings with good west-facing views such as The Lake, St Regis Residences and 185 Rajadamri have no problem being sold.

8. Colour scheme: Dark colours are to be avoided in some situations according to feng shui, and in general the majority of buyers prefer a light colour scheme. Black or dark colours are incorporated mainly in combination with other colours, and should be avoided altogether in front of residential buildings or entrances.

At the end of the day, whatever is recommended based on feng shui principles should be practical and functional if it is to be implemented. One needs to balance beliefs with practicality.

Comparing the condominium and office sectors in Bangkok, it is apparent that while the condominium market has been growing over the past decade, growth in the office sector has been limited.

Top-end condominium projects in Bangkok are comparable to those located in key cities in the region in terms of architectural design, layout and the finishing of interiors. However, there are very few grade-A office buildings being developed.

The two most recent additions to the office market are Sathorn Square and Park Ventures, both marking a milestone in terms of design and function. The buildings are filling up even though they are commanding the highest rents in the location – clear proof that the market is prepared to pay a premium for the right location.

New office buildings can either be built in the central business district, where prices have skyrocketed, or in areas surrounding the CBD such as Ratchada and Rama 9 roads, where land is still cheap. However, this may not be acceptable to clients who prefer to be downtown – a need that creates an opportunity for landlords who may own ageing office buildings in prime locations such as Silom, Sathorn or Sukhumvit.

Bangkok faces the problem of an ageing office supply; one of the common problems faced by older buildings is dropping rents and occupancy. Often the location of these ageing buildings might be very good, but the buildings can lack the lustre to draw in tenants willing to pay hugher rents. This is where renovation comes in.

Each building is unique and there is no fixed model that can fit all. Each building varies in the degree of renovation required and the areas that need to be renovated. When planning to refurbish, landlords should consider the tenants’ requirements and the sort of tenants targeted. Smaller buildings might attract tenants who have small space requirements. Landlords also need to consider their tenants’ industry/businesses in order to understand their leasing requirements.

The basic areas for renovation include the building facade, the lobby, the lift area and common toilets. The ceilings and lighting units should also be upgraded to a condition that is comparable to newer grade-A buildings.

Improving other areas, such as security, M&E and air conditioning, depends very much on whether the landlord considers the investment worthwhile. For instance, the security system can be improved by incorporating advanced technology such as destination control. This does not just cut down on the cost of security guards, but will also allow ease in management. Some landlords might also want to consider adding a retail element to the ground floor level, especially if the building is located on a main road in a prime area with a high level of passing traffic.

Most office renovations focus on common areas, and the restoration rakes place on an area-by-area basis while the building is still in operation. Many office buildings in downtown Bangkok have been renovated recently, including Amarin Tower, Q House Convent, United Centre and President Tower.

Despite recent flooding, Thailand enjoyed a significant surge in tourism last year, with visitor numbers totalling 17.1 million in the first 11 months of 2011 – an increase of 21.2% compared to the same period in the previous year.  While tourist numbers from all major regions globally recorded double-digit growth, the number of tourists from North-East Asia increased the most, with a 34.3% jump to 4.3 million arrivals. Forecast visitor numbers for the whole of 2011 are predicted to be 18.6 million – 17.7% more than the total of 15.8 million tourists who visited over the whole of 2010. This trend is expected to continue into 2012.

The Courtyard by Marriott Phuket at Patong Beach and the Hard Rock Café and Shop are located in Patong, the number one tourist destination on Phuket’s sought after West Coast.  It is very unusual for such a prime freehold property to come to the market in Patong, particularly with the benefit that the property will be sold without the restriction of a long-term hotel management contract, giving the buyer complete flexibility in positioning the property to capture Phuket’s growing tourism market.

The hotel comprises 390 rooms situated in an unrepeatable location in the heart of vibrant Patong, within a few minutes’ walk to the beach. The property was extensively renovated in 2008 and is currently operating as the Courtyard by Marriott Phuket at Patong Beach which opened in May 2008, with the Hard Rock Café and Shop opening in January 2009.

“We are extremely excited to take on these instructions. A hotel in this prime Patong, Phuket location is rarely made available to the market. Importantly, the hotel is not tied to a long-term management contract, giving owner-operators and investors the opportunity to introduce their preferred brand to the lucrative Patong market. In addition, the Hard Rock Café and Shop can also be acquired and this part of the property is operated under an agreement with the Hard Rock Group. The Hard Rock Café and Shop, Patong is one of the best performing Hard Rocks globally. The Cha-am hotel has been recently renovated and all 243 rooms have views over the Gulf of Thailand,” said Mr. David Simister, Chairman of CBRE Thailand.

Tourist arrivals in Phuket have grown from just over 1.5 million in 2006 to over 3.5 million in 2010, with total numbers for 2011 forecast to be in excess of 4 million. Patong is the single most popular destination for inbound tourists of all nationalities in Phuket. Patong now longer has a low season and as tourist numbers are expected to grow further with the expansion of Phuket International Airport to double its handling capacity from 6.5 million arrivals annually to 12.5 million arrivals annually.

The Courtyard by Marriott Hua Hin is located in the southern resort of Cha-am.  Long popular with Thais seeking a beach holiday within easy reach of Bangkok, the area is increasingly favoured by foreign tourists as more international hotel chains have been developed between Hua Hin and Cha-am. 

The 4-star hotel is ideally positioned directly on the best stretch of beach in the area which is wide and sandy and suitable for swimming.  It is also conveniently close to Cha-am, with the town’s many restaurants, shops and nightlife within walking distance.  Fully renovated in 2008, this stylish 243-room hotel has a comprehensive range of quality hotel and conference facilities.  Like the Phuket property, it is offered free of any management contract, thus giving the buyer the freedom to operate under any brand and take full advantage of Cha-am’s growing popularity as a tourist destination.

For sales enquiries, please contact CBRE’s Investment and Land Services on +66 2 654 1111 ext 307 or bkk_investment@cbre.co.th .

After the recent flooding, it is obvious that demand for condominiums has risen. With actual experience of having to move to live in a city condominium or apartment during the flood, many people have started thinking of buying one, either as a first home, a second home or for investment purposes. Among those who had never previously considered the condominium market, many questions are being asked.

Nowadays, there are thousands of condominiums to choose from, which could be either in completed buildings or off-plan (not yet completed). The advantage of buying in a completed building is that you will see the end product including the actual unit which you will get, the view, the lobby, the common areas, facilities and the overall atmosphere of the building. The disadvantage of buying in a completed building is that there are a limited number of units to choose from. Some developments have sold out but, today, in many new buildings there are still units left being sold by the developer or units being offered by existing purchasers. The latter are called re-sale units and can be purchased after the ownership is transferred to the existing purchaser or before transfer of ownership (known as “assignment of the contract” or which in Thailand is commonly known as “re-sell down payment”). Buying off-plan is the other option. The advantage with this is that you can have a wider choice of units and get the best possible prices when buying at the early stage of launching the project. The risk with buying off-plan is that you will not see the actual end product. Most projects will concentrate on building mock-up rooms for 1 – 2 unit types. The buyers should be aware of the pros and cons of both options. The guidelines for those who have just started looking at buying a condominium are:

Set the budget you want to spend. Do you need a mortgage or are you able to buy in cash? If you need a mortgage, you should calculate how much you can afford to pay in instalments every month and convert that back to the condominium price. Allow 10% – 30% of the price in cash as a down payment as necessary.

Choose the locations you would consider for your condominium and start researching properties available for sale. There are many channels you can access, the most popular being websites, newspapers, magazines and billboards. If you have limited time, you can contact a real estate agent, who will qualify your requirements and identify the buildings which best match them. Then they will take you to see each available option.

It is recommended that you should inspect at least 4 – 5 properties before making a decision. When buying in a completed building, check the defects in the actual unit and inspect the common areas, the condition of the car parking area, the common area maintenance fee and sinking fund, taxes, transfer fees and stamp duty, the mobile phone signal, internet connection and MATV (Master Antenna Television). Each building offers these amenities on a different basis. When buying off plan, it is recommended that you study the details of the floor plans, layouts and specifications provided in the units, and ask for a copy of the sale and purchase contract to read before paying the deposit. The contract should include all the details of the land title deeds, a description of the common area, specifications, facilities and amenities, the construction permit, floor plans and unit layouts. If the construction permit is not available, it should be noted that the deposit should be refunded if the project does not go ahead within a certain time period.

Pricing is one of the main concerns for many people who are wondering where we are on the property cycle. On average, the prices of Bangkok condominiums have increased slightly, by approximately 5.2 % y-o-y for completed buildings. However, the average asking prices of new launch projects have slightly decreased as the majority of new launches this year focus on the mid market rather than the luxury market. Only prime CBD locations and projects which are right next to mass transit stations have commanded higher increases. This year, many developers who have units left for sale after the building has been completed are offering the best promotions to clear their stock. Also, there are good offers from existing buyers who want to sell before ownership of their unit is transferred. Usually, during the holiday season, the downtown property market is quiet as most people have gone on holiday. This year, however, many people who have been affected by the floods are busy with renovating their houses. As such, it is probably likely to be the most active season yet and is a good time to buy a condominium given the variety of available stock and pricing.

The year 2011 has been one of the most fluctuating times for the residential property market, after the year started with slow movement and an influx of supply. Things improved with the hopes for the new government after the election. Then, the fourth quarter was marked by unexpected flooding with people busy looking after their properties. In 2012, the trend for the residential market will be for a focus on condominiums, while the housing market will need time to recover from the floods by way of new product designs, with buyers increasingly uncertain about location. Condominiums will be more popular among those seeking a city lifestyle. More people who had never lived in a condominium now have temporarily experienced living in condominiums in the downtown area during the floods. Although many were not used to being in a small space, we have found that many of these people like the convenience of a condominium lifestyle in terms of the downtown location, time savings and reduced hassle compared to a house.

Smaller Unit Sizes: The trend will be for smaller sized units. The size of the rooms will definitely be small at low-end to mid-range condominiums where the smallest one-bedroom unit will be around 25-30 square metres. In the high-end segment, rooms will also be less spacious than before but should be more efficiently laid out. For example, a popular size for one-bedroom units will be 45 – 55 sq.m., and 65 – 80 sq.m. for two-bedroom units, while a good three-bedroom unit can be 130 – 150 sq.m. rather than the existing 180 – 200 sq.m. The exception will be in the luxury and super luxury market where we have found that there is no definite answer concerning unit size and design.

Fully Furnished Units: Because more buyers today are end users than investors, they tend to choose condominiums that are ready to move in. From our experience in selling these condominiums, we have found that well-designed fully-furnished condominiums are more popular than those which are unfurnished. Previously, most developers offered only fully-fitted units as they believed that high-end purchasers would prefer to decorate the units to suit their tastes. Today, the market has changed. Those who have experienced the headache of furnishing a unit themselves know well that the results may not be as they had expected, and that the time and money invested may not match the outcome. To decorate a unit, you either have to hire a professional interior designer and contractors or you have to be prepared to “do-it-yourself” (DIY). Today, the conclusion is that fully-furnished units are the best option for a completed condominium project, provided that they are well designed and offer reasonably good quality for the price. However, for off-plan condominiums, a fully-furnished option will only be worthwhile if the buyers can see what it will look like.

Services to Occupiers: Another trend in living in a condominium will be the services provided by the management company. This can be a very controversial issue because the management company or the juristic person is supposed to look after only the common area. The common area fee is paid for the maintenance and management of the common area only. However, there is growing demand from condominium owners for repair and maintenance services, to sell and lease units, as well as offering housekeeping, valet parking and concierge services. Not all condominiums can afford to hire a branded hotel chain to manage this. However, the juristic person should be prepared to change the concept of the condominium and investigate how it will handle these requirements to benefit both the residents and the juristic person. This means ensuring that fees are charged to the residents for these additional services, with the money paid to the juristic person. In the meantime, there should be enough staff to handle the additional services to ensure the common areas are not ignored. If this is not done properly, one of the problems which arise in many condominiums is that the individual owners may ask for services from the staff and then pay the staff directly.

Detailed Designs: Trends in product design should definitely be influenced by the flooding. For example, basement car parking is to be avoided if not absolutely necessary. Machine and electrical rooms should be located above ground and electrical circuits should be designed with awareness of possible flooding at ground level. Flood barriers should also be considered, with a minimum number of entry points for water, to make it easier to control the entry of water into the building. Another controversial issue is the car parking area. In every building, little consideration has been given to the design of the car park because most developers have primarily been concerned about ensuring that the property complies with the regulations in terms of the number of cars rather than making sure that the parking area is really practical. Problems with the car park include insufficient parking spaces for the number of condominium units in buildings which have many small units. Other issues may be narrow access ramps and small parking spaces which cannot be realistically used. Issues which are particularly of relevance in high-end condominiums, where most buyers own expensive cars, include the provision of a car-wash area, drivers’ rooms and visitors’ parking. Other aspects include paying increased attention to detail to ensure realistic and practical designs, especially regarding the materials used which should be long lasting and easy to maintain rather than only looking good at the time of sale. In a more competitive market, all these points should form an integral part of the design plans and should be carefully considered as buyers are also likely to have more experience of living in a condominium.

Higher Prices: Bangkok condominiums have been undervalued for a couple of years compared with those in other key markets. With less new supply coming online in the Central Business District (CBD) and due to the new land costs and increased cost of construction, newly planned condominiums in 2012 especially in the high end segment and above will be more expensive. Pricing outside the CBD is more competitive and is likely to increase only in prime locations.

Hot Locations: The CBD and the areas surrounding mass-transit stations will continue to be in greatest demand. Other locations which will be popular will be an extension of the CBD which we call “midtown” and includes Rama IV, Ratchadapisek, Phra Kanong and Jatujak. These areas are just a short distance from the CBD and have supporting mass transit and retail facilities.

The industrial sector will depend on a solid government plan for relief, but the future for other sectors is bright.

This year’s floods have had a vast impact on the property market, with sectors affected across the board. But the impact varies from sector to sector, from residential to industrial.

RESIDENTIAL SALES MARKET
In the short term, residential project sales will slow down while the city is still affected by the floods, but in the medium to long term the crisis will have an impact on multiple levels from location to product and pricing.There will be a change in demand patterns in terms of preferred location and product.Buyers obviously will be hesitant to purchase in areas where heavy floods have occurred.The business areas of Lumpini, Silom, Sathorn and lower Sukhumvit will continue to be the preferred locations; other areas will be assessed once the flooding is over.

In terms of product, buyers will pay more attention to design features and flood protection measures. Housing developers need to ensure that both estate infrastructure and individual houses incorporate flood protection features when launching new projects.

Post-flooding, construction costs are likely to rise on high demand for construction materials and skilled labour, particularly qualified technicians and contractors to rehabilitate damaged properties. Projects under construction in affected areas such as Rangsit and along the MRT purple line are temporarily halted and construction can only restart once the flood subsides.

Affordability and pricing will also be affected, particularly for the entry-level and midmarket. The crisis will directly affect the spending power of those affected who may have lost their income or face additional expenses such as repair or replacement of damaged cars. This will slow down purchase decisions and shift the focus to lower-priced products.

At the higher end of the market, demand for second homes from wealthy Bangkok residents will rise, notably for city or resort condominiums. Resort markets such as Pattaya, Hua Hin and Phuket will benefit.

Overall, the market will likely see a shift toward condominiums and away from houses or townhouses, particularly among younger buyers. The perception will be that even if condominium buildings are inaccessible if flooding occurs, possessions and furniture will still be safe. This is not to say the market will completely turn away from housing developments, but we do expect housing sales to drop in the medium term until buyers’ confidence is restored and until developers can demonstrate effective prevention measures and designs that minimise flood damage.

HOTELS AND APARTMENT RENTALS
The apartment and condominium rental market is benefiting in the short run with a hike in demand for temporary stays from those whose homes have been flooded. Similarly,serviced apartments, despite lost business from reduced tourism, are benefiting not only from local demand but also from demand from foreign engineers who will arrive to repair damaged factories and production lines.

In the medium term the rental market will remain unaffected as most tenants are on one-year leases. However, the impact will be felt in the long term if Thailand cannot restore foreign investor confidence, particularly that of Japanese manufacturers who drive the expatriate rental market.

Thailand’s hospitality sector has once again been hard hit as many countries have issued travel warnings for Bangkok. Hotel occupancy and rates in Bangkok have plunged, but from past experience such as last year’s civil unrest, the tourism sector tends to bounce back quickly. Resort areas unaffected by the floods are also facing the impact, but to a lesser extent.

OFFICE MARKET
The office sector is one of the least affected sectors. While demand has been improving,concerns about the global economy will slow down decisions, but it is unlikely that companies will look to reduce space. In terms of location, it is again too early to say if a particular area will benefit as we do not yet know the full extent of the flood impact. It is,however, certain that direct connection to mass-transit stations will be a requirement as accessibility has been a key issue in the present situation. Mass-transit systems have continued to operate despite the streets above and below them being flooded.

The fundamentals of the office market remain strong. With limited supply coming online in the next three years, we are unlikely to see a dramatic drop in rents even if demand weakens.

RETAIL MARKET
The retail sector is facing multiple impacts,from the closure of main malls including Future Park Rangsit and three Central shopping centres (Pin Klao, Ram Intra and Lat Phrao). The supply chain has been disrupted with many distribution centres damaged or inaccessible. Nevertheless, major retailers such as Tesco Lotus, Big C and 7-Eleven have managed to restock and keep goods on the shelves. While the initial impact will be negative, the retail sector will be boosted after the flooding from reconstruction.

Post-flooding, major beneficiaries will be home improvement stores such as HomePro and the newly opened Ikea, and sales of white goods such as refrigerators and washing machines.

The medium- to long-term prospect for the retail sector will depend on overall economic performance and how quickly Thailand gets back on its feet.

INDUSTRIAL SECTOR
Seven industrial estates have been damaged so far, with more than 891 factories swamped.It is difficult to predict how long the recovery process will take, but in the short term the impact is severe with widespread disruption in the manufacturing and distribution chain.Even factories in unaffected estates face disruptions in production due to shortages of manufacturing parts from flood-damaged suppliers.

Thailand is the world’s second-largest producer of hard disk drives after China and is a major supplier of drive components. Such businesses may reconsider having such a large part of their global production located in Thailand.

The recovery process for the industrial sector will be strongly underpinned by the government’s effectiveness in offering supporting measures, and the individual estate operators’ measures to bring factories back into operation. Going forward, while existing operations will reopen, it is critical for the government to rebuild confidence and take effective steps to prevent similar disasters from occurring in the future. If not, Thailand is at risk of losing its credibility and foreign investment.

The government’s post-flood rehabilitation programme will be essential to the recovery of all sectors of the property market and will have a direct impact on the overall economic outlook and the Kingdom’s direction for the coming year.

This article was published on Bangkok Post dated 20 November 2011 written by James Pitchon, Executive Director of CBRE Research and CBRE Consutling, Thailand.

Growth in the CBRE Asia Pacific Logistics Rental Index accelerated to 2.0% q-o-q in the third quarter compared to 1.4% q-o-q in the second quarter. This was largely due to the strong performance of key Greater China markets, where retailers competed to secure quality logistics space in prime areas in anticipation of peak retail consumption during the Lunar New Year in January. Logistics rents in the Pacific held firm, although some markets recorded significant fluctuations.

In contrast to the acceleration in rental growth, capital values increased at a slower pace in Asian markets during the third quarter while values in Pacific remained largely steady due to a lack of sales activity and stagnant occupier demand. In China, industrial land values edged up marginally as manufacturers of exports were less aggressive in expanding their production bases, whilst in Singapore land values increased at a slower rate as developers remained wary of the possible weakening of demand from the manufacturing sector. Land values in Australia increased marginally in most markets.

Demand for logistics property in Asia Pacific continued to be driven by retailers and logistics firms focusing on national level distribution. In contrast, manufacturers turned less active towards expansion amid slowing export demand from the West. High quality industrial space was the subject of strong demand in Greater China and the Pacific. Some occupiers were actively pre-leasing quality space in new stock due to tightening availability of modern logistics facilities.
 
Andrew Hatherley, Executive Director of Industrial & Logistics Services, CBRE Asia said, “In the forthcoming quarters, it is expected that the manufactures’ relocation of operation to low cost markets will continue and will be the key demand driver for industrial sites and properties particularly in Southeast Asia, China and India markets. Meanwhile, the tight supply of modern industrial and logistic facilities along with strong domestic demand is likely to continue to drive prime industrial / logistics rents in the medium term across the Asia region.”

To read or download a full report of CBRE’s Asia Pacific Industrial MarketView, please click here.

For more information regarding factory and warehouse listings, please contact CBRE’s Industrial Services team on +66 2 654 1111 ext 221 or bkk_industrial@cbre.co.th .

Retail sales growth remained healthy in most parts of Asia Pacific during the period, rising by 7.6% y-o-y in September (excluding Japan). However, the rate of growth began to slow as consumers across the region turned slightly more cautious amid the weakening global economic outlook. The near term economic prospects for the region nevertheless remain positive, although mild moderation in growth is expected in the months ahead and much hinges on the performance of the United States and Eurozone.
 
The third quarter saw further expansion by domestic and international retailers in most markets despite slowing retail sales growth and weakening consumer confidence. International fast fashion retailers continued to expand and enter new markets, whilst firms in the luxury goods segment were particularly active in Greater China, Japan and the Pacific. Retailers in the watch and jewellery, electronics and F&B sectors were also in expansion mode.

Mr. Sebastian Skiff, Executive Director, CBRE Retail - Asia, said, “Several major new projects, notably in Beijing and Guangzhou were completed during the third quarter. Many Asian retail markets continue to witness a construction boom and a large quantum of additional retail supply is scheduled to be completed over the next couple of years. Nevertheless, the bulk of new stock in the development pipeline across Asia is situated in fringe locations or emerging retail areas, and thus the availability of quality and well located retail stock in prime areas will remain limited in key markets going forward.”

Retail rents in Asia will continue to rise going forward as domestic consumption remains firm and international retailers expand. The situation in the Pacific is also broadly positive in light of the low vacancy in key locations and sustained demand from overseas brands. Rental growth across the combined region will inevitably slow in forthcoming quarters, however, as the deteriorating global economic outlook sees consumers begin to cut back on discretionary spending, which may result in selected retailers adopting a more cautious attitude towards expansion.

To read or download a full report of CBRE’s Asia Pacific Retail MarketView, please click here.

For more information regarding Bangkok retail spaces for rent, please contact CBRE’s Retail Services team on +66 2 654 1111 ext 221 or bkk_retail@cbre.co.th .

Greater China remained the key driver to fuel regional rental growth as domestic firms and multinationals across all sectors retained strong expansionary demand with Beijing and Guangzhou enjoying brisk growth of 8.8% q-o-q and 7.8% q-o-q respectively. Markets in China saw vacancy fall to the lowest level since mid-2008 and led the regional decline in vacancy. Overall vacancy rate in 16 Asian markets declined to 9.3% q-o-q during the period.
 
Hong Kong saw rental growth slow to 1.3% q-o-q in the quarter amid reduced take-up by companies in the financial sector. Elsewhere, the volatile global economy coupled with rising secondary stock also caused occupiers in Singapore to turn more cautious towards expansion. Large pockets of space were starting to become available in both markets.

Rent in Delhi NCR and most Southeast Asian markets continued to pick up but new supply may limit growth in the future quarters. Elsewhere, the new supply pipeline in Tokyo, Hanoi and Seoul, where markets currently enjoyed relatively low vacancy levels, will also put substantial pressure on vacancy and rent going forwards.

Overall rental growth in the Pacific also began to ease in the face of falling occupier confidence. However, vacancy in prime office buildings in Pacific was exceptional low across all markets and the trend is likely to persist over the reminder of 2011 due to very limited new supply. 

Asia’s substantial development pipeline continues to contrast with the lean supply outlook in the Pacific although falling demand and supply pressures in Asia means developers may opt to delay some of these completions until 2012. Developers in selected markets have also turned more cautious towards new projects as the weak global economy weighs more heavily on business sentiment.

Despite the instability in regional stock markets and the worsening economic situation in the United States and Eurozone, the region remains well placed to weather the current short-term volatility. Mr. Nick Axford, Executive Director and Head of CBRE Research, Asia Pacific said, “Rental growth, however, is likely to continue to moderate slightly in the months ahead as the external economic volatility will continue to weigh on business sentiment in the region going forward. Occupier demand should remain firm in Greater China markets on the back of robust demand particularly from domestic companies. Externally-oriented markets such as Hong Kong and Singapore will be particularly vulnerable to further disorder in the global economy.” He continued, “Decreased occupier activity in Tokyo and India, coupled with a large quantum of new supply in the pipeline means rent would come under downward pressure. In contrast, the Perth and Brisbane office markets in the Pacific will continue to benefit from the commodities and demand for office space should remain positive.”

To read or download a full report of CBRE’s Q3 2011 Asia Pacific Office MarketView, please click here.

For more information about Bangkok office leasing, please contact CBRE’s Office Services team on +66 2 654 1111 or bkk_commercial@cbre.co.th.

• Australia continues to record growth in cross-border acquisitions
• Institutional investors most active but more corporations buying for self-use
• Market fundamentals remain healthy but investors will exercise more caution

Commercial real estate sales in Asia Pacific increased 36% q-o-q in the third quarter of 2011, although the bulk of the deals were completed in July and transaction volume tapered off in the following two months. Transaction volume in Asia grew by 55% q-o-q whilst the Pacific was largely unchanged, according to CBRE’s Asia Pacific Capital Markets MarketView report for Q3 2011.

The total volume of cross-border acquisitions across the Asia Pacific region rose by 112% q-o-q although this was largely due to Mapletree’s acquisition of Festival Walk in Hong Kong. In Australia foreign investors accounted for 51% of investment spend in the third quarter, a level even higher than the 39% recorded in the previous quarter and significantly stronger than trends witnessed in 2010. Singaporean investors continued to be the major overseas purchasers across the region.

Institutions remained the most active buyers during the period, accounting for a third of investment volume. Most were Asian-based and making acquisitions within the Asia Pacific region, whilst global funds either remained in selling mode or found it difficult to justify pricing. REITs remained generally acquisitive and comprised 17% of total turnover. Non-real estate companies were also acquiring property, either for self-use or as an investment alternative to deposits.

“The divergence between Asian based and other overseas investors witnessed in recent quarters is expected to continue in the fourth quarter. Investors from within the region remain cash rich and will continue to selectively seek opportunities to acquire quality assets. In contrast, some property funds with capital sourced from European investors will remain under pressure to reduce the size of their global portfolio by disposing of assets, including from within Asia,” said Greg Penn, Executive Director of Institutional Investment Properties for CBRE Asia. “At the same time, however, newly formed core funds from the United States and Eurozone are expected to begin looking beyond their home markets and into Asia Pacific in light of the more positive economic outlook in the region,” he continued.

“Real estate market fundamentals in Asia Pacific remain healthy and this, combined with the more positive regional economic outlook than elsewhere, will continue to attract investment,” commented Dr. Nick Axford, Executive Director and Head of CBRE Research, Asia Pacific. “However, rental appreciation in the office sector is beginning to ease and multinational occupiers are less willing to sanction significant capital expenditure for real estate. Investors will turn more cautious and deal volume is likely to moderate in the short term unless sellers become less aggressive on pricing.” he continued.

Notes to Editors

CBRE’s investment transaction data presented in this report is based on real estate transactions valued US$10 million and above. It included real estate transactions reported in 25 major markets in 12 countries across Asia Pacific.  It included office, industrial, retail and mixed use properties. Development site transaction is excluded. Transactions prices are tracked in local currencies and converted to US dollars using exchange rates as recorded on the last day of the respective quarters of the year.

For more information regarding investment property for sale, please contact CBRE’s Investment and Land Services.

If you wish to download a full report of Asia Pacific Capital Markets MarketView, please click here.

In the short-term, business is likely to slow down as people will be busy solving their own problems .

Overall, the flooding will result in changes in demand patterns in the residential sector in terms of preferred locations and product. In terms of location, the CBD which includes Lumpini, Silom, Sathorn and early Sukhumvit will be the preferred area, other areas will be assessed after the flooding is over. Demand for high rise condominiums is likely to rise as people may want to buy them  to use as a second home in the city center.

Purchasers considering buying residential properties in the future will pay more attention to the product, design features and flood protection measures of individual developments. Housing developers will also need to ensure flood prevention measures and features are incorporated when launching new developments.

The second home markets in Pattaya, Chonburi, Hua-Hin, Cha-am and nearby provinces will benefit from this crisis. Bangkok residents with disposable income will be inclined to purchase holiday homes out of Bangkok as many residents are now evacuating to Pattaya and Hua-Hin.

The move of Bangkok residents out of the city is also benefiting the hotel markets where CBRE is seeing a pick-up in occupancy for hotels and serviced apartments in Pattaya and Hua-Hin. Bangkok on the contrary is facing a drop in occupancy with cancellations from overseas tour groups and with travel warnings for Thailand. However, given the resilience of Thailand’s tourism industry, CBRE expects arrivals to quickly rebound once the flooding is over.

The office and retail sectors will experience minimal short-term impact. The office sector is experiencing a short-term slow down as businesses are delaying decisions, while the retail business is experiencing a slow down or closure in some areas which are directly affected by the flooding. In the long-term, retailers may re-think their distribution strategy and consider a wider geographical dispersion of their distribution centres in order to minimize the impact from any  future crisis. However, CBRE believes the retail sector will experience a quick recovery.

The most impacted is undoubtedly the industrial sector. At present, it is difficult to predict how long the recovery process will take, but in the short-term the impact is severe with widespread disruption in the manufacturing and distribution chain. The recovery process will be strongly underpinned by the government’s effectiveness in implementing supporting measures, as well as the individual industrial estate operators’ measures to bring factories back into operation. Going forward, whilst existing operations will re-open, it is critical for the government to re-build confidence and take effective measures to prevent similar disasters from occurring again in the future, if not, Thailand is at risk of losing its credibility and FDI.

Overall, the government’s recovery program will be essential to all sectors of the property market and will have a direct impact on the overall economic outlook and Thailand’s direction for the coming year.

Bangkok was established as Thailand’s capital in 1782, but its evolution into a modern metropolis has been relatively recent, dating back to around 1960. Covering approximately 1,570 square kilometres today, Bangkok has grown dramatically from a small city with a population under two million to a metropolis of more than 10 million.

However, urban planning has not been carried out properly in Thailand’s capital and business hub,especially when compared to major global cities such as Singapore, London or Sydney. Bangkok’s growth does not have much direction or strategy. One reason is the lack of balance between the city’s growth against development of mass transport and environmental quality. The first mass-transit system started operation in 1999, and 11 years on, the total distance has increased only from 23.5km to 79.45km.

One of the most contentious issues in the Bangkok property market recently has been city planning regulations. The latest regulations expired in May and have been extended for an additional year, while the new draft regulations are at the public hearing stage and not yet definite.

The new draft raises many questions and uncertainty in the property sector, and will certainly have many short and long-term implications for the market, both positive and negative.

From my study of the draft regulations, the aim is to maintain the high-density areas in the city centre and in areas identified as commercial zones, but to lower the density in smaller roads and sois in both commercial and residential zones.

The new regulations involve changes in several areas including minor changes in zoning (colour zones identifying land use) and the reduction of the floor area ratio (FAR) in selected areas, mostly residential,but with allowances for higher FARs near mass-transit stations to maximise the use of these systems. There are also minor changes regarding environmental issues,such as allowing a higher FAR for developments with more public space, car parking space, or those with more energy-saving features.

The key changes that underpin the draft regulation involve land usage and restrictions on built-area based on road widths, with the overall aim of achieving lower density along smaller roads and in residential zones. Road width requirements have changed significantly for large high-rise buildings exceeding 10,000 square metres, from the current requirement of 10m in width to between 16m and 30m, depending on the zone. Building heights will also be more restricted where the road access is smaller.

In the immediate term, the draft regulations have raised concerns for developers and landlords holding land banks in areas affected by the rules. They face uncertainty about what can or cannot be built in the future, which is resulting in a panic rush by developers to plan, design and obtain construction permits before the new regulations come into effect.

As a result, we may see a surge in new supply that is rushed to market, where the projects are designed based on current demand ad maximising land use,rather than planning based on future market needs.This could result in undesirable products that will face slow sales and subpar achieved prices.

Stricter regulations also mean a potential loss inland value. Land prices are most likely to decline in specific areas where less can be built based on new road width requirements. This will negatively affect landlords and developers who have acquired sites based on current regulations. The uncertainty could also result in a slowdown in land transactions in areas affected by the draft regulations.

While land prices for areas affected by the regulations are likely to fall, land located on roads that are more than 16m wide and main roads in the city centre and suburban areas near mass-transit stations is likely to increase in price. This means future prices of buildings along these areas are likely to be pushed up in line with increased land prices. Existing large scale highrise buildings are also likely to increase in value, but this will vary depending on the building design, condition and upkeep.

In the long term, a decline in prices in some areas could make property more affordable, benefiting middle-level income earners.

At present, those who are earning low to middle level incomes with a budget of one to three million baht to purchase a home are forced to buy 30-squaremetre condominium units as their budget constraints do not enable them to buy a single house, even in areas outside the city.

Lower land prices will change this, making larger and more affordable housing available that will see an increase in people’s standard of living.

Another positive impact that will come as a result of stricter regulations is a controlled supply of new condominiums and offices in central Bangkok. Although this may sound negative to the market, restrictions on future supply should reduce the risk of overbuilding and a bubble.

However, I noticed one area in the new regulations that lacks proper planning, which is the allowance of more commercial space in the nodes of high-density residential areas. In a residential area, there is a need and demand for large-scale retail and commercial properties that are conveniently located close to the communities to support the growing suburban population, thereby reducing the need to travel into the city.

Unfortunately what works for the retail market in terms of design and usage are large shopping complexes that require a built area of more than 10,000 square metres per building, and these continue to be restricted.

Retail planning should be treated separately and subject to different regulations or exemptions to ensure that retail development supports residential expansion.Large-scale retail in suburban locations is equally important as the sector’s development in the city’s business districts.

Urban planning is a controversial issue and we need a city planning strategy that best promotes a high overall standard of living and environmental quality.

The new draft city planning regulation is a good step forward. Whether the regulation will impose more or fewer restrictions, it should be concluded soon, as the current uncertainty will not do the property market any good.

Source : Bangkok Post dated 23 October 2011 by Aliwassa Pathnadabutr, Managing Director of CBRE Thailand