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Thailand Real Estate Report Q1 2011
Business Monitor International, Nov 2010, Pages: 66
The Thailand Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Thailand's Real Estate industry.
The recent political instability has been, and is likely to remain, bad news for Thailand’s economy. The publisher is expecting GDP to post some growth in 2010, after contracting by around 2.5% during 2009. Growth should continue in 2011. Government consumption will be the main driver (thanks to the ‘Strong Thailand 2012’ stimulus package) and, probably, greater household spending. We note that measured unemployment remains low, but caution that this may be depressed by numbers of otherwise jobless industrial workers who have returned to work in their home villages in rural Thailand. Meanwhile, foreign investor sentiment towards the country remains bleak.
Even if there were no political crisis, the various protagonists in Thailand’s commercial real estate sector would face challenging times. The basic problem, affecting all three sub-sectors, is one of gross oversupply of rentable space relative to demand. Our sources indicate that the vacancy rate in Bangkok’s office sub-sector is around 25%. The city’s luxury hotels face competition from condominiums that have been converted into Serviced Apartments. Elsewhere, the effective supply of office space has been swollen by businesses operating from homes.
Meanwhile, new projects continue to be completed. The inescapable conclusion is that, in much of Thailand, pressure on commercial rents will continue to be downwards. Our in-country sources are looking for rental rates to increase by 5-10% in all sub-sectors over the coming year. We think that this is over-optimistic. Looking further, we anticipate that yields will rise as rents rise by more (or fall by less) than capital values. The divergent movements in yields in the three cities for which we have gathered data – Bangkok, Rayong and Pattaya-Chonburi – suggest that market participants are reacting in different ways to profoundly challenging conditions.
Interviews with our in-country sources were conducted in late January and early February 2010, and again in mid-2010.
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