Trends in the real estate market for 2023

Thailand entered 2023 with positive forecasts from both economic and market perspectives overall. The real estate consulting firm CBRE Thailand identified key trends to watch in the residential, office, retail, hospitality, and industrial-logistics sectors.

Residential real estate

The year 2022 was another calm year for the apartment sector in central Bangkok, with over 95% of new units located in mid-range and suburban areas, targeting the low- and mid-level market. Domestic buyers show a preference for low-rise homes, favoring less dense development, more spacious, and adaptable spaces. This year, developers will be even more active in launching low-rise projects that meet real demand. In the city center apartment market, CBRE expects developers to continue focusing on releasing their ready-to-move-in inventory before assessing the potential for launching new projects in the second half of the year. CBRE anticipates that developers will continue to launch residential complex projects in mid-range and suburban areas, with one trend being mixed-use projects that incorporate residential and commercial elements. "End users have clear expectations and requirements that developers must meet to generate sales. Buyers continue to place great importance on space, functionality, privacy, open green areas, well-being, and technology," said Artitaya Kasemlawang, head of the real estate sales department (projects) at CBRE Thailand. "Developers of luxury and ultra-luxury housing projects must provide adaptable spaces to allow multiple family members to work from home, ensure living space for multiple generations under one roof, and provide sufficient parking with charging stations for electric vehicles." "For the secondary apartment market, buyers are more willing to purchase older, larger apartments that require renovation, as they often offer space that is typically not found in newer projects," added Prafinlia Fuengkwankhan, head of the real estate sales department (ad-hoc).

OFFICES

While much of 2022 was marked by the extension of existing leases by domestic companies, particularly among large tenants, international companies in Bangkok made significant progress in reviewing their future needs, with some already deciding to move to new Class A premium office spaces. Against the backdrop of a significant increase in international standards and green office buildings, international companies that have developed new work policies, especially hybrid work policies, are seizing the opportunity to enhance the quality of their workplaces. This allows them to meet corporate ESG requirements and also address talent retention and attraction issues, creating a work environment that encourages spending time in the office. CBRE expects greater leasing activity in 2023, as Thai companies decide to move from buildings they have occupied for over 20 years to take advantage of hybrid work in buildings that set a new standard. "Engaging with employees and implementing a work strategy will be key for tenants to embrace the future of work," said Sarut Virakul, Director of Offices at CBRE Thailand. "While rising fit-out costs will also be a key factor for tenants, landlords will be motivated to offer very competitive leasing packages in an effort to persuade large businesses to relocate."

Retail trade

In the retail sector, collaboration between landlords and tenants has been more active during the Covid-19 years than in most other sectors. This level of mutual understanding benefits both parties as the sector continues to evolve.

INDUSTRY AND LOGISTICS

The demand for industrial land will continue in 2023 as developers rush to expand existing industrial zones and develop new ones to meet the demand associated with the "China Plus One" policy. To keep pace with competing countries in the region in attracting investments, updated incentives from the Investment Council will be needed. With ongoing investments in key infrastructure, especially along the Eastern Economic Corridor and professionally managed industrial zones, Thailand is well-positioned to take advantage of the demand that has been suppressed in recent years. "We expect that data center operators, semiconductor manufacturers, and both traditional and electric vehicle producers will continue to see Thailand as a very promising option for establishing their businesses," said Adam Bell, head of industrial and logistics at CBRE Thailand. "Thailand is strategically well-placed to attract more foreign direct investment to support these growing sectors."

HOTELS

The tourism sector is entering 2023 with optimism that it can continue to improve hotel performance and the arrival of foreign tourists, thanks to the fact that Chinese tourists, both individuals and groups, can once again travel abroad freely. While the focus will inevitably return to international tourists, it is important to remember the significant role of domestic tourists during the time when Thai borders were closed and arrivals were limited. Hotels will need to continue enhancing their efficiency as they restore operations at existing properties, as more than 10,000 rooms are expected to be completed by the end of 2025, increasing the supply in Bangkok by 12%. Although many hotels experienced a higher average daily rate (ADR) in December 2022 compared to December 2019 before the pandemic, occupancy was still lower, and overall performance in 2022 significantly declined compared to 2019 due to a substantial difference in international arrivals. Hotel owners and operators will focus on controlling hotel costs, especially those that include long-term ESG strategies, as well as investing in technology and retaining staff, since many who lost their jobs are reluctant to return to the industry. "Owners and operators will dedicate time and resources to ensure better conditions to take advantage of the expected increase in international arrivals and improve financial performance after losses in recent years," said Atakavi Chusang, head of the hotel department at CBRE Thailand. "There may be opportunities for investors to acquire properties, as we see a narrowing of the price gap between seller and buyer expectations with improving market sentiment."