Land scarcity in prime locations for new property developments and a surge in land prices have prompted investors to look at old buildings for turning or renovating them into new projects, according to property consultant CBRE Thailand.
Managing director Aliwassa Pathnadabutr said the property market will see a greater takeover of old buildings in prime locations where land plots are scarce and expensive.
"In some locations in the central business district areas, there are no longer plots of land available for new development," she said. "Developers are now looking to buy old buildings in prime areas and demolish them for condo development."
Ms Aliwassa said some investors have also eyed old hotels or offices to renovate, as the wait to start generating income is relatively shorter than with new developments.
Land prices are currently so high the development of income-producing property is not attractive, she said.
According to CBRE research, land prices last year broke a record high at 1.9 million baht in Chidlom-Ploenchit-Lumpini area, 1.75 million baht on Sukhumvit Road and 1.45 million baht in the Silom-Sathon area.
Averages price per square wah for large plots used to be lower than for smaller plots, but land prices for a 15-rai plot where Nai Lert Park Hotel was formerly situated, acquired by Bangkok Dusit Medical Services Plc, was 1.8 million baht per sq w.
"Prime land prices will continue to climb into 2017 and new land price records will be set, although land price inflation will be more subdued in midtown and suburban areas," she added.
According to a source from the property market, a new record high is likely to be made this year if a plot on Wireless Road owned by the British embassy is sold.
There are currently two finalists in the bidding: Central Group, owned by the Chirathivat family and TCC Group, owned by liquor tycoon Charoen Sirivadhanabhakdi.
The source said Central Group is highly likely to win the bidding, as it was reported to offer higher prices.
In addition, the group needs the land, which is next to Central Embassy mall that had been developed on a plot bought by Central Group from the British embassy.
Tos Chirathivat, chief executive of Central Group, said recently the group will invest in a new mixed-use project if it wins the bid to buy a 25-rai plot of land from the British embassy this year.
According to the source, Mr Charoen prefers to bargain the prices to as low as possible when he purchases any land.
According to CBRE, there is still strong demand for any kind of quality income-producing asset but few owners are willing to sell and those that do tend to sell to a vendor-sponsored real estate investment trusts.
As the rise in land prices continues, new condo prices will keep rising as well. During 2010-2016, the asking price of new condo supply increased 10.9% per year on average.
Highest average condo prices per sq metre were in central Lumpini with 250,363 baht, followed by Sukhumvit at 239,946 baht and Silom-Sathon at 220,395 baht while the average price was 247,613 baht.
Resold condo prices in the high-end segment is expected to rise 8% per year from 2017-2019.
Last year the average price of a re-sold condo was 198,482 baht per sq m while that of future or off-plan units were at 247,613 baht.
As of the fourth quarter last year, a number of existing completed condo supply in downtown rose by 8.7% year-on-year to 122,403 units, with around 25,000 units being completed in the future.
Those in midtown and suburban areas rose 15% to 462,692 units with around 111,700 units being complete in the future.
The larger increase in midtown and suburban areas than that in downtown was due to a large number of units could not be transferred to buyers.
"Units in midtown and suburban areas are in a middle-to lower-end segment, which mostly had trouble in getting mortgage loans. These untransferable units returned to the market," she added.