Foreigners shun new Thailand property

New investment in Thailand this year will come mainly from local investors as foreigners might focus on their current holdings and on their home countries, according to the international real estate firm Jones Lang LaSalle (JLL).

"With the political turmoil affecting our top investment-attracting tourism industry, we don't expect to see foreign investors to be back in the next couple of quarters," said Umpon Thepnumsommanus, JLL's director of investments.

He predicted that in the second half of 2009, giant developers would continue buying land. "It's a good opportunity for strong developers to continue expanding. Although there is less demand for residential projects, there also are fewer competitors," Mr Umpon said.

JLL forecasts that net demand for office space in Bangkok this year will drop by 10-15 percent, but there will be no sharp drop in rental rates due to limited new supply.

Source: TradingMarkets.com 30 April 2009

The global downturn is forecast to cause demand to shrink to 70,000-80,000 square metres, a much smaller contraction than in 2008 when demand sank by 25 percent to 90,000 sq m from 120,000 sq m the previous year.

Dan Tantisunthorn, head of research at JLL, sees many negative factors for the office market this year with companies saving costs by downsizing space.

But he believes the drop will be offset by new demand as some companies expand their investment to strengthen their market position in the crisis. He said the only contraction in office use was in 1998, during the last major crisis, when 56 financial institutions closed.

"We don't see a collapse in rents under these circumstances," he said.

Average monthly rental for grade A office space fell slightly to 662 baht per square metre at the end of the first quarter from 671 baht at the end of 2008.

Suphin Mechuchep, JLL's managing director, said new office supply entering the market was not large enough to affect rental prices.

"In the past three to four years, many property developers had turned to invest in condominiums rather than office buildings which slowed the growth in office supply. It's a tenants' market this year," she said.

At the end of 2008, there were 7.71 million square metres of office rental space in Bangkok, 86 percent of which were occupied. New rentable areas this year will total 216,000 sq m.

About 400,000 sq m of new supply, a 5 percent increase in space, are expected to enter the market in the next four years.