The floods in late 2012 caused disruption for Bangkok's real estate markets. But all sectors have recovered quickly, says Surachet Kongcheep
After the floods in the last quarter of 2011, many residential projects in the central
part of Thailand and some parts of Bangkok were under water. The water may have receded but the disaster is still in the hearts and minds of many.
Many flood victims have thought of moving to non-flood areas for the safety of their families - especially in inner Bangkok or other affected provinces. The majority of flood victims in Bangkok worked in the capital and even though their homes were under water, they still had to go to work. As a result, many are looking for condominiums as a second home to stay in during the week and return to their main residences during the weekend.
More than 14,170 condominium units were launched in the market in the first quarter of 2012. This was the highest number recorded in the past five quarters. Only 5,157 units were launched in Q4 2011. In addition, the average take-up rate of all newly launched projects was higher than in the past year. New mass transit extension lines are the main factor stimulating the condominium market in the Bangkok's suburbs. There are some lines under construction and scheduled for completion within the next five years.
A lot of landed development projects in the central part of Thailand were under water last year. This turned the focus of many developers to non-flood areas for launching new projects. Projects launched earlier in flooded areas still cannot attract buyers, although prices are the same or even cheaper than other locations.
The average take-up rate in non-flood areas during the first four months of 2012 was higher than in the same period in 2011. All major developers are focusing more on the condominium market in Bangkok and landed development in other main cities nationwide. A few developers may have already launched residential projects throughout the country but have plans to launch more in 2012 and in the future. Their destinations are the major cities for tourism, such as Chiang Mai, Phuket, Pattaya, Khon Kaen, Hua Hin, Cha Am and Hat Yai. All residential projects by major developers outside of Bangkok show high take-up rate and are usually sold out within a very short time.
Moving to the commercial sector, several retail centres in the central part of Thailand were affected by the floods last year, although not directly. Many were shut down for a few days or more. This was due to the water blocking access to their centres.
All retail centres in Thailand had a special marketing strategy after the floods in late November 2011 to build up demand for the New Year festival. The local people constitute the majority of demand for retail businesses in Thailand, except for some retail centres in Pattaya and Phuket that focus on foreigners.
Most retail centres in Thailand have enjoyed high occupancy rates and many of them are almost fully occupied. The main retail developers and operators in Thailand are now focusing more on other main cities across the country, especially on some border provinces, because of the Asean Economic Community (AEC) in 2015.
The main obstacles to retail development in Thailand are increasing land prices in the cities, especially in Bangkok, laws and regulations, as well as opposition from local people in some provinces. However, retail developers and operators are launching new developments in smaller sizes as community malls in the Bangkok suburbs. In addition, they also are focusing more on individual supermarkets although this is an intensely competitive segment.
Tesco Lotus Express and convenience stores like 7 Eleven seem to be expanding in all areas of Thailand. The main players in retail business are also focusing more on online shopping in order to increase revenue. Although income from this channel is much lower than from the main sources, it can enable them to get access to new locations.
During the flood, some office buildings in Bangkok, although not directly affected, had to shut down due to the lack of accessibility during that time. Most office buildings in Bangkok are located in the inner city area so they were not affected by the floods.
The average occupancy rate of office buildings in Bangkok is over 80%, especially in the central business district (CBD) and outer-CBD areas. The area along the sky train and subway has more than 85% occupancy. The average rental rate in the CBD area is 35% higher than the rental rate in other locations. The highest number of office buildings scheduled to be completed in the next one to two years are located outside the CBD area. This is because of the limited availability of land and the increasing land prices in the CBD and outer-CBD area. The CBD in Bangkok keeps growing north along Ratchadapisek Road.
The flooding badly affected the central area - especially Ayutthaya and Pathumthani provinces - and six industrial estates and one factory was under water. Approximately 890 factories were closed down. Two months after these factories recovered from the flooding, nearly everything was back to normal with the government taking measures to restore confidence and to convince both local and foreign investors that such disasters would not be repeated.
In 2012, the main concern for all investors is a long-term flood protection system provided by the government and a donation-collecting campaign for flood victims. Moreover, government agencies, including the Board of Investment, the Industrial Estate Authority of Thailand and related organisations, need to restore their image following the damage from the floods.
Many companies directly affected by the floods shifted production facilities elsewhere. Aopico Hitech, a supplier of car parts to major automobile manufacturers, shifted production from Ayutthaya to Rayong and Chonburi. Canon Hitech moved production to a plant in Nakhon Ratchasima as well as to Vietnam, and it is not known if production will move back to Ayutthaya. Amata and Hemaraj which have industrial estates in Rayong and Chonburi claimed that a number of companies are planning to relocate to their industrial estates from flood-affected areas.
Surachet Kongcheep is senior research manager at Colliers International Thailand