There is a surfeit of equity in the Bangkok real estate investment market with expectations high that it will achieve the highest transaction volumes in seven years, according to JLL’s adjusted forecasts for 2014. There are acute shortages of high-end living space in the capital, which has helped to enhance the confidence of developers and generated a wave in new construction projects.
This in turn has affected Bangkok office rents, having reached a new high in the second quarter of 2014 in the face of sluggish demand. Political tensions in the first half of the year dampened business sentiment but the fundamentals in the real estate sector remain robust. Coming into the third quarter, the market has maintained strong momentum.
At the end of June, average office rentals touched 475 baht per square metre and nearly 750 baht per square metre in prime grade buildings in the CBD. A number of these buildings are now asking much higher rents, extending to between 900 baht and 1,300 baht per square metre.
In the first half of the year investment volumes were 28 per cent higher than in the previous year, but there was an unexpected reduction in prime yields. American, European, Middle Eastern and African regions demonstrated the sturdiest growth volumes but the Asia Pacific region has strained to keep pace with the volumes recorded in 2013. However, investor interest still remains strong. Global investment volumes are expected to be 20 per cent higher than in 2013 at US$700 billion.
In the rentals market, median gross rents were recorded to have achieved a 2.8 per cent increase in the first half of the year and just over 17 per cent increase from 2007. Bangkok’s office stock is currently over 8 million square metres but vacancy rates have dropped to nearly 10 per cent year-on-year at the end of June.
Retail markets in America and Europe have consistently climbed this year due to the recovery of overall economic conditions and 2014 should see M&A activity expand in the commercial retail market as it responds to increased consumer demand. This condition is also true of Asian markets as international retailers search for growth opportunities in the region.
London and Dubai are ahead in the world’s high-end residential sector, although there are certain signs of cooling in both of these markets. Strong demand in Bangkok’s real estate market is perhaps the product of these global uplifts in overall property value.