Bangkok's property market ended 2012 on a positive note, with strong demand propping up rental values, occupancy and take-up rates across all major sectors.
These are the findings of a report by the California-based DTZ, the property consultancy unit of Australia's UGL Ltd.
After several years of retarded growth, the prime office sector rebounded positively in the second half of last year, registering increases in both rents and occupancy on the back of strong demand from corporate clients.
Strong leasing activity pushed occupancy levels to 88.5% in the fourth quarter, from 85.1% in the same period of 2011.
The general political calm and the rebound in business sentiment bode well for the office sector.
Average rents in the fourth quarter of 2012 rose by 2.4% year-on-year to 660 baht per square metre per month.
Selected prime buildings now command asking rents of 850-900 baht per sq m per month.
Low Ming Tze, DTZ Thailand's associate director of consulting and research, said with no new supply throughout the year, prime office stock in the fourth quarter of 2012 remained unchanged at 1.7 million sq m.
Due to the tight supply and lack of new high-quality space, the mismatch between available space and tenant requirements became more apparent in the fourth quarter.
Firms are choosing to stay put and undertake renewals until suitable new space becomes available.
Hinging on economic and political stability, both domestic and foreign business demand will drive office leasing activity this year.
The lack of space will continue to spur rental increases until the shortage is alleviated in 2014.
Retail rents in last year's fourth quarter held firm as the lack of new supply kept leasing activity dormant.
Downtown and midtown retail stock was unchanged at 1.11 million sq m and 580,000 sq m, respectively.
New supply expected for the fourth quarter was delayed in both locations, ending the year with a cumulative new supply of 860,000 sq m and 920,000 sq m, respectively.
About 180,000 sq m of new supply is scheduled to come on board in Bangkok this year, of which an estimated 55% will be in downtown locations.
There was no significant tenant movement in either location. Average occupancy levels remained unchanged in the fourth quarter at 91.2% downtown and 95.4% midtown. Many retailers undertook renewals during the quarter.
Compared with the fourth quarter of 2011, retail rents rose slightly in downtown locations, by 0.2% to 2,300 baht per sq m per month, while midtown rents remained unchanged at 1,575 baht per sq m per month.
Rental values will hold steady in the short term until new shopping centres come on board to spur leasing activity and gradually lift average rentals by at least 2-5% this year.
The condominium sector was quick to regain post-flood momentum as new launches surged in both the central business district and non-CBD locations.
CBD launches in the fourth quarter provided 1,900 units, up from 1,700 in the third quarter. Full-year launches were up by 16.4% from 2011 for a total of 6,400 units.
Unlike previous quarters in which launches were concentrated mostly in the Sukhumvit Road area, fourth-quarter launches were mainly in the Silom-Sathon zone (57%).
Toned-down anti-government rallies and the absence of floods improved homebuyer sentiment. Overall take-up for launches in the fourth quarter stood at 53%, while it was about 58% for the entire year.
While sales activity was dependent on quality and location, certain projects were able to achieve 80-100% sales within just weeks of their launch.
Healthy demand was also witnessed in the resale market, particularly for projects close to mass transit links and major landmarks or amenities.
Capital values for CBD resale condominiums in the fourth quarter rose by 0.7% quarter-on-quarter and 1.7% year-on-year to an average of 85,200 baht per sq m.
The regular launches of new projects in the CBD will make sales more competitive, particularly those ranging between 80,000 and 130,000 baht per sq m, which form the bulk of launches.
Homebuyers are becoming increasingly discerning, so proximity to mass transit will continue to be the primary selling point for the wider consumer group.
Pornpun Chalitkriengkai, DTZ Thailand's associate director of residential and investment, said resale price growth will be uneven, with projects commanding good accessibility and convenience enjoying greater price appreciation.
Developers' reputations will also play a bigger role in influencing purchasing decisions, particularly for CBD condominiums.
The announcement of new mass transit lines bodes well for Bangkok's urban expansion, widening opportunities for developers and expanding home ownership.
The completion of the Purple and Dark Blue lines will help to lift prices of suburban condominiums.
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- Writer: Post Reporters