However, it will take months to see what the effect will be on sales and letting volumes, prices and rents. We do not believe there will be a sudden a dramatic downward movement in prices or rents.

The total supply of expatriate standard apartments in downtown Bangkok increased 2.3% year on year. Occupancy was 88.2%. Rents rose in some locations such as Central Lumpini but fell in other locations.

Despite the increase in the Bangkok hotel supply, Bangkok occupancy rates and REVPAR increased but the Average daily rate decreased in quarter 1.

International Tourist Arrivals increased by 27.1% on Q1 2010. Obviously Q2 numbers will be very poor and it remains to be seen how long it will take for business and tourist arrivals to recover.

The majority of new condominium launches in the first quarter were mainly small one bedroom units.

The office market remained weak. There was no increase in supply. Take up grew by 17,481 square metres. Grade A CBD rents fell by 3.8% year on year.

Retail Occupancy increased to 93.4%. Rents remained at similar levels. A number of shopping centres were closed in Central Bangkok for much of April and May.

882 Rai (349 acres) of SILPs were sold on industrial parks and estates in Q1 2010. This was an increase 891% y-o-y.

There was 175% increase in townhouse completions on quarter on quarter but developer built single detatched house completions fell by 74% quarter on quarter.

Housing

In Q1 2010 we saw a decrease of 20.5% Y-o-Y in SDH land allocation permits from the Land Department a drop from 760 to 604 for the Bangkok Metropolitan Region. In Bangkok the majority of land allocation permits were located in the northern and eastern zones due to the completion of the Airport Rail Link (ALR) which is scheduled to be fully operational by July 2010. In Q1 2010 there were 26 projects in Bangkok Metropolitan Area (BMR) that received land allocation permits.

23 % of the construction of the SRT Light Red Line (Bangsue – Taling Chan) has been completed. Furthermore, there has also been visible progress on the MRT Purple Line (Bangyai – Bangsue) progressive. This will increase the demand for the projects around western area but the main impact will be on completion of these lines.

Overall sales performance of TH projects also improved. All segments for townhouses and SDH have sold over half of their units, while most of newly launched projects have an average of 20%-40% sold of total units.

This is an extract from Bangkok Overall MarketView Q1 2010, click to download the full report.

The majority of condominium sales have come from Thai nationals not just looking to be end users but also to be buy to rent investors. The growing numbers of Thai buyers reflects the improvement in local consumer confidence.

The biggest surprise for many people this quarter is that generally prices did not fall in fact it was in many cases the opposite where prices in some recently completed projects actually rose. Developers are almost all focusing on new launches of one bedroom units. The amount of unsold developer inventory in recently completed projects and projects to be completed in 2010 together with resales prior to completion will slow the launch of new projects for 2 and 3 bedroom units downtown. Developers are going to focus on smaller units to keep the total price down but there appears to be having been a move away from studios to one bedroom units.

There was a significant increase in numbers of new projects launched in peripheral areas and in many cases there were strong sales.

The average achieved re-sale price of units in completed upscale and above units increased by 18.4% Y-O-Y.

The majority of new supply in Q1 consisted of 1 bedroom units followed by two bedroom types.

In Q1 2010, the overall occupancy rate decreased by 0.2% Q-o-Q to 74 % in this quarter.

The number of newly launched units in peripheral areas was 4,814 units.

Outlook

In this quarter, the focus of developers was on small units both in the central area and peripheral areas. Three developers – LPN, Sansiri and Noble reported that they had sold all the units at launch. Sales of larger units by developers in both projects that had been completed and were still under construction were slow. Land prices continue to increase especially in the Central Business District. We will see in the second and third quarters if developers can raise prices and still sell in high volumes.

This is an extract from Bangkok Residential Sales MarketView Q1 2010, click to download the full report

The total office supply in Bangkok was 7,978,543 sqm., down 0.1% Q-o-Q and up 1.5% Y-o-Y (it should be noted that there was a reclassification of buildings and readjustment of total net lettable office areas to reflect current usage). No new supply was completed in this quarter.

As of Q1 2010, overall take-up in the Bangkok office market was 6,832,801 sqm., up 0.7% Q-o-Q and 1.2% Y-o-Y. The total occupancy rate also improved slightly from 85% to 85.6% in this quarter.

The vacancy rate was 14.4%, a fall from 14.9% at the end of 2009.

In Q1 2010, the overall rents dropped for the fifth consecutive quarter, since the beginning of 2009. Grade A offices in the CBD area faced a 0.3% Q-o-Q and 3.8% Y-o-Y drop in rents, down to THB 683/sqm. in this quarter from THB 685/sqm. in Q4 2009.

In terms of net take-up, Grade A Non-CBD posted the highest level of net new take up with 22,027 sqm., mainly due to the movement of the Energy Complex’s tenants. Total net take-up stood at 17,481 sqm., which was up 17.1% Q-o-Q and 103.1% Y-o-Y.

In general, demand for office space remained weak during Q1 2010. Demand, particularly from multinational corporations, is likely to remain weak throughout the year.

Two office buildings are scheduled to complete this year which are Sathorn Square (73,584 sqm.) and Sivatel (5,880 sqm.) in 2010. In 2011, Park Ventures (28,000 sqm.) and KPI Head Office (11,010 sqm.) will be completed. All of these buildings are located in the CBD area.

Supply will continue to be limited in the coming years with only two Grade A CBD office buildings—Sathorn Square and Park Ventures—due to be completed. Due to the lack of any other new supply, these projects are expected to be able to attract tenants when demand recovers. In the current climate however office rentals are expected to stay flat over the next six months or may fall further as landlords compete to retain tenants and fill vacant space.

This is an extract from Bangkok Office MarketView Q1 2010, click to download the full Bangkok office report.

Values of prime land plots in the central Phloen Chit area have risen above 2008’s record levels to a new peak of 1.5 million baht per square wah. Sansiri Public Company Limited acquired 2-rai plot adjacent to the American ambassador’s residence on Wireless Road. The total transaction value was 1.2 billion Baht and Raimon Land have apparently sold 2-3-42 Rai out of a total of approximately 9 Rai on their Ploenchit site.

Thai Commercial Investment Fund (TCIF) plans to launch a freehold property fund investing in the Nation Tower Building which consists of 3 office buildings and 1 car park building in Q2 2010. The subscription period for the IPO was from 15 – 23 March 2010. The fund has a market capitalization at IPO of approximately THB 1.96 billion with par value of 10 baht per unit. The fund will offer a minimum guarantee return of 4-5% for three years.

In the first quarter of 2010, the Thai economy continued to improve with many economic indicators showing a V shaped recovery. The National Economic and Social Development Board expected GDP in this quarter will increase around 6% Y-o-Y. Thailand’s Equity markets have gained about 7% from the beginning of the year (S.E.T. Index increased from 735 to 788).

Outlook

Investor sentiment in the first quarter improved, contributed by developers’ new project launches and lending competition among financial institutions. Condominium sales in the mid- to high-end segments continued to grow especially in downtown areas or in areas near mass transit routes. We also saw development companies LPN, Sansiri and Noble sell out over 3,300 units in four condominium projects in 2 days which highlights the demand for condominium units in Bangkok.

Foreign investor interest in the Thai market is limited due to the political instability.

In Q1 2010, the government has agreed to extend some of the incentives measures for two months to stimulate the property development sector, the full package of incentives was due to end on March 28. The decision was made because approximately 10,000 people who had bought their homes might not be able to transfer their property right before the expiry date of the tax incentive measures.

This is an extract from Thailand Investment MarketView Q1 2010, click to download the full Thailand property investment report.

Real Estate Investment in Asia Surged in Q1, Says CBRE

But year-on-year rise reflects slump in 2009

Total direct real estate investment in Asia in the first quarter soared by 215%year-on-year to an estimated US$16.5 billion, reflecting a buoyant market, according to the latest quarterly Asia Investment Market View conducted by CB Richard Ellis

But the first quarter’s strong year-on-year growth in transactions also reflected a relatively low level of trading activity at the start of 2009.

Activity across Asia’s markets was largely driven by domestic investors, who accounted for 72% of investment volume.

“The quarter saw both opportunistic and core international institutional investors return to Asian real estate markets, attracted by the signs of a sustained recovery,” said Andrew Ness, executive director of CBRE Research Asia.

Highly capital-Up 215%ised Asian real estate funds and sovereign wealth funds also resumed portfolio expansion, which had stalled during the global downturn. Their return was marked by rising levels of acquisitions in Japan and Singapore.

Prime office properties continued to dominate, attracting more than $5.8 billion, or 35% of all investment. Office properties also provided seven of the quarter’s ten largest transactions.

Retail properties drew 14% of investment over the quarter, while residential properties attracted 13%.

But residential deals, despite providing a relatively high share of the total, were worth $16.5bn just $2.1 billion a 48% drop from the fourth quarter of 2009. This partly reflected tighter monetary policy along with fiscal and bank regulatory measures from Asian governments seeking to cool their residential markets, said Mr Ness.

A revival in Asia business and tourist travel showed up in the first quarter in a surge of activity in the hospitality sector, which saw seven hotel transactions concluded worth a total of $590 million. This sum contrasts with $62 million and $26 million recorded in the first and fourth quarter of 2009.

Industrial property transactions surged by 21% quarter-on-quarter to $1.5 billion.

The company expects the continued recovery of the regional economy, allied with low interest rate regimes, to provide a favourable investment environment for real estate investors.

Mr Ness said overall capital values are expected to stay on a steady upward trend and rental income is likely to improve in the short-term. These relatively stable real estate investment market conditions will attract both local and international investors to put their capital to work in the region.

There was an increase in the number of building transactions in Q4 2009. The most notable transactions were TPARK LOGISTICS PROPERTY FUND (TLOGIS) and CIMB Thai Bank. TPARK LOGISTICS PROPERTY FUND (TLOGIS) bought 15 warehouses with usable area of 70,731 square meters from Ticon industrial PLC, for THB 1.53 billion. According to a company report to the Stock Exchange of Thailand, CIMB Thai Bank sold its office building on North Sathorn Road for THB 1 billion to an unknown buyer. TCC Land bought the Peugeot office building on Surawong Road for THB 800 million according to the Prachachart Turakij newspaper. Pacific Star International (Thailand) announced that had sold 8 penthouses at The Sathorn Gardens condominium development covering 3,700 square metres to a single investor for around THB 100 million.

Q4 saw two major land transactions; L.P.N. Development Public Company Limited bought land in Bang-Krapi, Bangkok (7-1-70.1 rai or 2,970 sq.m.) for approximately 222.75 million Baht. Ek-Chai Distribution System Co., Ltd. (Tesco Lotus) purchased land in Kao-Yai Market Village project (26-3-14 rai or 10,714 sq.m.) from Siam Future Development PLC. 198 million Baht (equal to about THB 18,480 per wah).

Bangkok is now seeing upward trends in the property market; this is supported by a more positive outlook in the local economy (GDP turned positive to ~ 3.5% in Q4) an improvement of 63% in Thailand’s equity market from Q1 2009. The SET index increased from 450 in Q1 to 735 in this quarter.

Property Funds
During Q4 2009, property funds offered investors annualized yield of around 4.90% to 11.94%. TPARK Logistics Property Fund (TLOGIS) was listed on the Stock Exchange of Thailand during the quarter. The fund, worth 1.53 billion baht, is a specific property fund with an unspecified project life and par value of 10 baht per unit. It invested in freehold 15 warehouses with a usable area of 70,731 square meters, located on TICON Logistics Park Wangnoi (48-3-32 rai), Ayudhya Province and TICON Logistics Park Bangna, Chacheongsao Province (41-1-80 rai). The fund will offer a minimum guaranteed return of 7% for 7 years.

This is an extract from Thailand Investment MarketView Q4 2009, To download the full Thailand property investment report.

The hotel sector in Bangkok still faced reduced levels of tourism, down 3.8% Y-o-Y, in 2009. This figure is a marked improvement from the first half of the year with Q1 showing Y-o-Y decline of 13.4% and Q2 down 14.4%. The second half of the year showed a Y-o-Y improvement of 5.3% in Q3 and 18.4% in Q4. Easing political tensions and a slowly improving global economic situation are factors in the improvement. The number of tourists arriving in Thailand from East Asian countries, Thailand’s biggest tourist market, increased 20% Y-o-Y and 11% Q-o-Q. There was further positive news from European tourist arrivals, increasing 17% Y-o-Y and 28%
Q-o-Q.

As a result of improving market conditions, occupancy levels for luxury and first class hotels in Bangkok saw an improvement to 57% in quarter 4, up from 55% the same period last year and 45% in Q3 2009. However, the Average Daily Rate (ADR) showed a slight decrease, down 12.5% from THB 5,322 in Q3 2009 to THB 4,658 in Q4. Revenue Per Available Room (RevPAR) was at a rate of THB 2,677 in Q4, up 13.2% from THB 2,365 in the previous quarter. This was an Y-o-Y decline of 13.8% from THB 3,107 in Q4 2008.

The luxury hotel market improved slightly in Q4 2009. However, the supply of hotels continues to rise. Significant additions to the current hotel stock of 26,775 keys are expected over the next 4 years. There are approximately 581 new keys scheduled to be added to the hotel stock in Q1 2010, with an additional 3,069 keys by the end of 2010. There will be an estimated 9,452 additional keys by the end of 2013, bringing the total to 36,227. This represents a 35% increase on current figures. In addition to increased hotel supply, this sector faces strong competition from service apartments which are often chosen over 5 star hotels as guests can generally get more space at a cheaper price. The supply of serviced apartments is expected to increase by 25% by 2013.

Although occupancy levels and RevPAR have improved in this quarter, the increase in the number of hotel rooms and serviced apartments available in the future will add further strain to Bangkok’s hotel industry.

This is an extract from Bangkok Luxury Hotel MarketView Q4 2009, Visit CBRE Research to download full report.

Both the economy and the property market improved in the fourth quarter of 2009.

In the condominium sector developers focused on one bedroom units. LPN and Supalai both publicly listed developers sold over 4,000 condominium units in projects launched in one weekend in November. At the same time
there are developments being completed that still have unsold inventory.

The office market remained weak. Grade A CBD Rents fell by 7.8% over 2009 despite little new supply.

The Industrial sector saw land sales of 901 rai (356.13 acres) for the whole of 2009 and investor confidence was shaken by the halting of 76 new projects at the Map Ta Phut Industrial Estate because the original permit procedure
omitted a Health Impact Assessment required by the constitution.

Retail sales improved in the fourth quarter and there is limited future supply.

Tourist arrivals improved significantly in fact international passenger disembarkations at Suvarnnabhumi Airport only fell by 4% compared to 2008.

Hotel supply continued to increase and there are still more developments being planned.

Serviced apartments faced pressure from increased supply as well as hotels.

We did not see a mass exodus of expatriates and so the residential rental sector remained steady.

In terms of capital transactions one office building CIMB Tower was sold to local investor and residential developers continued to acquire both central and midtown sites.

Housing

In Q4 we saw an increase of 44% Q-o-Q in SDH land allocation permits from the Land Department up from 1,187 to 1,706 and it increased 46% Y-o-Y. There were 34 permits with a total of 6,386 units that received land allocation permits.

The SRT Light Red Line ( Bangsue – Taling Chan) is now under construction. This will increase demand the projects around western area. Furthermore, construction has begun on the MRT Purple Line ( Bangyai – Bangsue ). The housing projects around western area will benefit from this but maximum impact will be on completion.

Overall sales performance of TH projects also improved. All segments for townhouses and SDH have sold over half of their units, while most of newly launched projects have an average of 20%-40% sold of total units.

This is an extract from Bangkok Overall Marketview Q4 2009.  V isit CB Richard Ellis Research to download full report.

Asian commercial real estate markets witnessed a steady recovery of demand in the fourth quarter along with further improvement in the regional macro economic environment. This helped rentals stabilise and several markets recorded two consecutive quarters of rental increments, signaling the end of the downward cycle. However, most corporates remained cost-conscious and continued to adopt decentralisation and consolidation strategies to contain real estate costs.

The period saw multinationals and financial institutions in selected Asian cities display a renewed willingness to expand. Overall office rents in Asia fell 1.8% in the fourth quarter, a slower rate of decline as compared to the 3.1% fall recorded in the previous quarter. Prime retail rents in most cities remained stable, with key markets either recording an uptick or slower rate of decline. The industrial property sector stabilised further with industrial rents in most Asian cities ending their decline and recording minor escalation. Prices for luxury homes continued to edge up in Beijing, Shanghai, Guangzhou and Hong Kong at increments ranging from 6% to 10% q-o-q, while prices in other markets remained largely stable.

OFFICE MARKET

The Asian office market continued to approach the bottom of the current cycle during the fourth quarter as rental declines slowed further and absorption rates gradually picked up. The period saw multinationals and financial institutions in selected Asian cities display a renewed willingness to expand. The unemployment rate declined for three consecutive months in Taiwan and Hong Kong, whilst in Japan it fell from July 2009’s record high of 5.7% to 5.1% in December, reflecting the overall improvement in the Asian labour market.

Despite the positive news on the employment front, this did not translate into recovery of demand in the office sector in many Asian office markets as many companies continued to adopt consolidation and decentralisation strategies to reduce real estate related costs. The fourth quarter saw overall office vacancy in Asian cities edge up 30 bps q-o-q to 12.8%, although Beijing, Hong Kong, Taipei, Bangalore and several Southeast Asian cities all recorded a minor decline in vacancy level.

As the market outlook began to look more positive, landlords of prime buildings in leading Asian financial centres started to take a firmer stance on rents. Elsewhere, oversupply problems continued to exert significant downward pressure on rentals in a number of emerging markets. Overall office rents in Asia fell 1.8% in the fourth quarter, but the rate of decline decelerating from the 3.1% recorded in the previous quarter. The current downward cycle has now lasted for about 18 months but certain markets with stronger economic fundamentals have already seen the slide in rentals come to an end.

RETAIL MARKET

There were signs of recovery in Asian retail property markets in the fourth quarter as consumer confidence across the region remained firm on the back of improved economic conditions. Festive promotional activities conducted by retailers proved successful in lifting consumer spending. Demand for prime retail space remained firm and the overall level of retail leasing activity in the region gradually picked up. The fast fashion and food & beverage sectors continued to dominate leasing activity and remained fairly active in searching for new locations to expand.

Prime retail rents in most cities remained stable, with key markets either recording an uptick or slower rate of decline. Prime retail rents for well-located prime retail facilities in Shanghai, Hong Kong and some emerging markets continued to record a slight increase on the previous quarter, thanks largely to tight availability and/or improved demand for desirable space.

Looking ahead, the Asian retail market is expected to strengthen as consumer sentiment remains positive amidst the generally optimistic economic outlook. The Chinese New Year festive season will bring with it a further rise in retail sales activity. However, the threat of oversupply still looms in Singapore, New Delhi, Beijing, Shanghai and Guangzhou, all of which are expecting a large quantum of new retail space to come on stream in the near future.

INDUSTRIAL MARKET

Along with the gradual recovery of the export sector and continued expansion of domestic demand, industrial production across major Asian economies continued to record growth in the fourth quarter. Tokyo and a number of larger Chinese cities, including Beijing, Shanghai and Chengdu started to see increased demand from domestic companies and foreign firms looking to relocate. The improvement in overall market sentiment acted to further stabilise the sector, with industrial rents in most Asian cities ending their decline and recording a minor rise.

In China, strong domestic demand in major cities emerged as the main driver of demand for industrial properties, including both warehouses as well as business parks hosting hightech, pharmaceutical and new energy industries. A new policy introduced by the Hong Kong government to encourage the revitalisation of ageing or under-utilised industrial buildings is acting to stimulate demand, which resulted in a rise of capital values by 5.2% q-o-q. In Tokyo, the vacancy rate for warehouses and logistics units fell as domestic corporations looked to consolidate their subsidiaries and relocate to high quality large scale facilities. Local manufacturing companies in the Philippines begin to expand capacity to cater to the growth in domestic demand, while a number of developers in Vietnam commenced the construction of new industrial parks.

LUXURY RESIDENTIAL MARKET

The Asian luxury residential sales market enjoyed a strong fourth quarter as investor confidence gradually returned, underpinned by the persisting low interest rate environment and the strong rebound in equity markets. Prices for luxury homes edged up in Beijing, Shanghai, Guangzhou and Hong Kong by increments ranging from 6% to 10% q-o-q, while prices in other markets remained largely stable.

Despite the strong rebound in the sales market, leasing demand for luxury homes remained somewhat fragile in some cities, with Beijing, Guangzhou, Kuala Lumpur and Ho Chi Minh City recording a modest decline in rents in the fourth quarter. Leasing markets in Hong Kong, Shanghai and Bangkok gradually began to recover, with rents for luxury homes climbing by increments ranging from 1% in Bangkok to 6% in Hong Kong.

The next couple of months may see end-users and investors adopt a more cautious stance following the introduction of measures tightening lending for property in certain

markets, especially those which have recorded substantial increases in property prices over the past year. It is expected that the potential reversal of other preferential policies and fiscal measures with respect to the residential market could also restrain sales activity in a number of key Asian markets in the first half of 2010.

Download the full report on the Asian Property Market. To speak to a Property Investment advisor.

Asian REITs continued to recover in the second half of 2009 as the stock markets in Asia improved overall and conditions in the credit market became more relaxed. The total market capitalisation of Asian REITs rose 17.6% in the second half and 34.5% for the whole of 2009 thanks to the recovery in prices and the issuance of new shares. The market size of Asian REITs has yet to recover to pre-crisis levels, with their market capitalisation as of the end of 2009 still 17.4% lower than that recorded at year end 2007.

Second half of 2009 sees increase in refinancing and consolidation activity

The review period saw a rise in corporate activity in the Asian REIT market, mostly involving mergers and consolidation or refinancing. In Japan, four mergers involving J-REITs were announced following revisions to the tax code that clarified the definition of distributable profit, thereby clearing a former obstacle to acquisition or consolidation. Nippon Residential Investment, sponsored by the bankrupt Pacific Holdings, agreed to merge with Advance Residential Investment, while the failed New City

Residence J-REIT selected Daiwa House Industry Co as its new sponsor and will merge with BLife Investment Corporation. LaSalle Japan REIT agreed to be absorbed by Japan Retail Fund while Tokyo Growth REIT and LCP REIT also announced plans to combine. The above mergers are scheduled to be completed within the first half of 2010.

In Singapore, Australia-based investor AMP Capital acquired a 19.2% stake in MacarthurCook Industrial REIT (subsequently renamed AIMS AMP Capital Industrial REIT) and a 50% holding in the REIT’s management company for S$54.1 million (US$38.5 million). The portfolio of MacarthurCook Industrial REIT was valued at approximately S$494 million (US$351.5 million) as of 30 September 2009, reflecting a substantial discount on the acquisition price.

In the second half, the overall credit condition of Asian REITs improved as most managed to refinance or extend their loan obligations and advance their unit prices. The review period saw several J-REITs seek to collectively raise over JPY 65 billion (US$706 million) capital through new share issuances. In October, Nippon Accommodations REIT announced plans to raise a maximum of JPY 20.5 billion (US$220.7 million) through the issue of 42,000 shares, while November saw Kenedix REIT

raise roughly JPY 8.5 billion (US$91.5 million) through a public stock offering. December saw Japan Real Estate REIT announce a public offering of 42,000 new units to raise approximately JPY 25.1 billion (US$270.2 million), while Nomura Real Estate Residential Fund raised JPY 11.5 billion (US$124 million). The establishment of the Kanmin Fund, a Public-Private Real Estate Market Stabilisation Fund, during the review period also helped boost public confidence in the J-REIT sector. The Kanmin Fund is expected to have total capital of JPY 450-500 billion (US$4.8-5.4 billion).

Visit CBRE Research to download full report or contact us for more information.

Asian real estate investment markets recovered strongly in the second half of 2009 after enduring a difficult start to the year. Investment turnover bottomed out in the first quarter but improved thereafter as investor confidence returned, underpinned by low financing costs, the recapitalisation of private and public real estate funds/investors and the stabilization of prices across key markets. Direct real estate investment in the region jumped 56% y-o-y in the second half of 2009 to an estimated US$25 billion. The rising value of investment transactions in the second, third and fourth quarters of 2009, indicating the emergence of a consistent trend as opposed to a one-off improvement. Despite the relatively high turnover in the second half, the overall transaction volume of US$38 billion for 2009 was still 22% lower than that recorded in the previous year.

The period saw almost every Asian market record an increase in investment activity on a half-yearly basis. Renewed activity by domestic investors ensured Hong Kong was the most active market, accounting for US$7.3 billion or 29% of the regional total in the second half. China, Japan and Singapore also witnessed a strong rebound in investment activity, accounting for 22%, 17% and 10% of the total volume respectively.

Easier access to local lending facilities and leverage provided domestic real estate funds and investors with a competitive edge, allowing them to dominate the Asian investment market in the second half of 2009. Domestic and intraregional investors accounted for 83% and 15% of total volume respectively during the review period. The amount of interregional cross border investment activity accounted for just 2% of the total investment volume, down from the 4.5% recorded in the first six-months of 2009 and significantly behind the usual 16% to 30% of total investment activity recorded in recent years.

Visit CBRE Research to download full report or contact CBRE Investment for more information.

2010 has begun with a more positive market sentiment. The improving economic outlook globally and perception of Thailand’s political situation, together with low market prices compared to other mature property markets, have had a positive impact on consumer confidence in property investment in Thailand.

Following the economic crisis, the supply of new office, retail and industrial space is at an all-time low. These sectors are expected to improve this year, in line with the global and local economic recovery.

Thailand’s residential market in 2009 was primarily driven by local demand. This year, CBRE believes that local demand will continue to be strong and that individual foreign property investors will start to return to the market. Thai condominium prices remain attractive compared to other cities in the region, such as Shanghai, Hong Kong and Singapore where prices have risen sharply in the last six months.

Average Price of Luxury Residential Units in the Region (THB per sq.m.)

However, there are continuing concerns about Thailand’s political stability and the strength of the global economy.  If Thailand’s economy and politics are stable in 2010, the residential sector will see consistent positive growth.

Government Policy

The Government stimulus package will expire in March 2010 and it remains uncertain whether it will be extended.  CBRE believes the extension of this package will benefit buyers and developers of large condominium projects launched during the crisis which are due for completion and transfer within this year.

The initiative of this government to reform property and land taxation with a view to creating fairness sounds positive, but it will only be possible to determine the effect on the property market once the details of the proposed legislation have been finalised. “So long as the new tax legislation is on a fair basis and the tax rate not so excessively high as to discourage investment, CBRE sees this reform as beneficial for the market,“ Ms. Aliwassa Pathnadabutr, Managing Director of CBRE Thailand said. An additional measure that CBRE urges the government to consider is the extension of the long lease term from the current 30 years up to a maximum of 90 years. This will help improve the market mechanism and make large-scale commercial projects viable which would not be feasible if such developments were freehold due to the high land cost or if they were on a 30-year lease due to the limits on lease terms. The extension of the lease term will also have a direct benefit for resort destinations such as Phuket and Samui where the property markets are primarily driven by foreign demand.

Looking at 2010 and beyond, environmental issues are a key consideration for all industries including the property market. There will be more restrictions which may increase the cost for developers. The Environmental Impact Assessment (EIA) process is one of the key concerns and risks for developers as there are uncertainties in the details and timing required to obtain such a permit. This is one of the factors which are likely to delay the emergence of new supply.

Any additional incentives that would attract foreign direct investment in both manufacturing and the service industries would be welcomed, in order to enable Thailand to compete with rival destinations.

Office : The Market Should Improve in 2010

Bright future due to limited new supply

In 2010, there will be very limited new supply in the office sector.  Only 78,380 sq.m. are due to be completed, including Sathorn Square (72,500 sq.m.) and Sivatel Wireless Road (5,880 sq.m.). CBRE sees the limited increase in new supply as a positive indicator for the office market because any increase in take-up will reduce vacancy rates and lead to rental increases. At the end of 2009 the vacancy rate stood at 12%.

Even though net demand in 2009 dropped by more than 50 % to only 52,000 sq.m., average grade A CBD office rents fell by 7.26% to THB 690 per sq.m while grade B CBD office rents fell by 12% to THB 509 per sq.m.  This is considerably better than in other markets.  Rents fell by 52.6% in Singapore and 49.9% in Hong Kong in 2009.

Average Grade A CBD Office Rents in the Region (THB per sq.m.)

Following the recovery of the global economic, CBRE believes that companies will be less cost conscious and that 2010 will be a good time to take advantage of the low rents to relocate to newer buildings.

Sathorn Square – the only new grade A office building to be completed in 2010.

Condominium : The Most Exciting and the Most Competitive

Supply Outlook : More competitive market in 2010

The total supply of downtown condominiums increased to 61,522 units by the end of Q3 2009, up 14% year-on-year. In total, there are 17,664 units under construction in downtown Bangkok, of which 78% of which have been reportedly sold, leaving 3,879 units being marketed (completed and under construction).

In 2009, there were 3,912 units in 15 projects launched in the downtown area, with the majority being one-bedroom unit types. In 2010 CBRE expects a much more competitive market, with an increasing number of project launches as there is pent-up supply from developers who have delayed their projects since the onset of the economic crisis in late 2008 and also new supply from large developers who acquire plots of land for new developments.

Newly Launched Condominium Projects* Broken Down by Unit Type

Demand Outlook : Demand continues to be strong

CBRE sees a growing demand for condominiums driven primarily by a change in lifestyle which has led to the need to own a first or second home in the CBD or near mass transit routes to reduce the need to commute.  From an investment perspective, investors also increasingly recognise condominium purchases as an appreciating long-term investment asset. In the past, there were few Thai investors in the market. However, with lower interest rates and proven returns, investing in condominiums has become a popular investment choice for many Thais. It is also considered a safe and secure investment compared to the equities market which is much more volatile.

New Trends : Good locations, small furnished units with affordable prices

From the development side, developers need to ensure they are ahead of the game in trying to predict future location trends. The danger is that a popular location can quickly become saturated with new supply. The key to success is either to be the first to launch in an upcoming location, or to find a location with high barriers to entry.

New supply especially for the middle income market will focus on smaller units at affordable prices. In a competitive market with experienced buyers, products must offer quality as well as innovative and functional design in order to be successful. The reliability and reputation of the developer is another key consideration for buyers.

Luxury and Super Luxury Segments :  Limited future supply

The luxury and super luxury condominium segment is expected to slowly recover and develop into a niche market. Prime downtown land is rarely available for sale and prices will remain high, CBRE, therefore, does not expect many new launches for luxury condominiums in prime downtown locations.

With a wave of new launches focusing on smaller one-bedroom units along mass transit routes with prices ranging from THB 3 to 8 million, the majority of unsold two to three-bedroom units priced at over THB 15 million and developed before the crisis should soon be absorbed.  There will then be a shortage of two-bedroom units in the luxury market especially in prime locations. Short-term investors will speculate on one-bedroom units whereas long-term investors will focus on two and three bedroom units which are in demand among expatriates in the rental market, while smaller units are driven by local demand. With a limited supply of newly launched larger units CBRE believes the existing supply of such grade-A units in prime locations will continue to appreciate in value.

2010 Pricing Trends : Completed prime condo prices on the rise

In terms of price movement, CBRE sees no significant increase in prices per sq.m for mid-market condominiums as the economic recovery is still underway with the prevailing political problems which continue to concern buyers. The best selling segment is priced at THB 50,000 – 80,000 per sq.m in mid-town locations or within 15 kilometres of the CBD. Prices in this segment are unlikely to increase as the purchasing power of the target market is limited.  The developers have to compete on cost control and pricing.

Prices for completed high-end and luxury downtown condominium have increased slightly by 5.6% from THB 117,875 per sq.m from Q4 2008 to THB 124,539 per sq.m in Q3 2009 and CBRE believes that the prices of completed buildings in prime locations will continue to rise in 2010.

Prices of the future supply of high-end and luxury downtown condominium in 2009 fell slightly by 6.3% from THB 142,133 per sq.m in Q4 2008 to THB 133,134 per sq.m in Q3, 2009 due to the slow market conditions. New launches in 2010 are likely to see an increase in price per sq.m due to the higher construction costs but, as unit sizes are smaller, total unit prices will be on par with current levels.

Retail : More Focus

Improvement expected following return of consumer confidence

In the first three quarters of 2009, the supply of retail space grew by 6.6% or 327,125 sq.m. Whilst occupancy was stable throughout the year, rents were flat and even fell in some cases during the earlier part of 2009. The fourth quarter showed signs of consumer confidence and spending returning.

The trend for new retail centres in Bangkok is evolving from one-stop mega shopping complexes to more focused community malls and medium-sized lifestyle and entertainment complexes such as Esplanade Rattanathibet.

The major players in the retail market are Central, The Mall, Siam Future and Major Cineplex.  Retail developments to note this year are Terminal 21 which is currently under construction and located in Sukhumvit at the Asoke junction, Central Rama 9 and Mega Bangna which will house Thailand’s first IKEA store.

Serviced Apartments : Highly Competitive

Occupancy rates are likely to be flat and downward pressure on rents

The serviced apartment sector, which partially depends on tourists and business travellers as well as expatriates working in Bangkok, has suffered from growing supply which led to an overall drop in occupancy and rates in 2009.

Total supply increased to 12,392 units, up by 6.84% year-on-year, with a further 610 units expected to be completed by 2010 and approximately 2,000 units by 2013. Occupancy rates remained at 75% in Q3 2009. Occupancy was partly protected by a number of long-term contracts which are less volatile than the daily rate market. Average rates, however, fell by about 20% year-on-year.

The biggest challenge faced by this sector is the volume of new supply targeting both long-stay expatriates and short-stay businessmen and tourists.

Serviced apartments compete against apartments and particularly small condominium units for rent in the long-stay market and the rapidly growing supply of hotels in the short-stay market. The influx of new supply of both serviced apartments and hotels will continue to exert a downward pressure on both rates and occupancy.

Expatriate Rental Apartments

The total supply of expatriate-standard rental apartments in Bangkok increased to around 11,151 units, up by 4.5% year-on-year

Occupancy remained high at 91%. CBRE has not seen a dramatic drop in the number of expatriates in 2009 but, since companies are trying to maintain or reduce costs, so CBRE does not expect any increase in housing allowances.

Multinational companies continue to be cautious on their expansion plans given that the global economy is yet to fully recover. Thailand’s political problems are also an added factor which has restrained business expansion plans in Thailand.

CBRE does not expect that there will be a significant increase in the number of expatriates in 2010. There will be increased competition from individual “buy-to-rent” condominium owners seeking to lease out units in recently completed developments.  There are about 620 apartment units under construction but there are also 17,664 condominium units under construction and CBRE expects that up to 50% of the new condominiums have been bought by purchasers who want to lease out their units on completion. This increase in supply combined with little or no growth in demand will dampen any potential for overall rental growth.

New well-designed condominium and apartment buildings will continue to perform better than older buildings that have not been refurbished or redecorated.