Driven by unabated demand from Japanese expatriates, Si Racha, a coastal town in Chon Buri, continues drawing new investment in serviced apartment, hotel and condo projects from Bangkok-based developers.
New projects this year include a 6-billion-baht serviced apartment and hotel by V.M.P.C. Co; Nusasiri Plc's Nusa Sriracha condo and hotel worth 4.3 billion baht, and the 460-million-baht Casa Condo Sriracha by Quality Houses Plc.
Prinya Tieanworn, chief executive of property developer V.M.P.C. Co, says Si Racha's potential will never drop though there will be many more residential projects coming to the area.
"A successful project depends largely on location," he says. "The so-called Little Tokyo is in the heart of Si Racha on the beachside area of Sukhumvit Road where facilities for the Japanese lifestyle are available within a walking distance."
V.M.P.C.'s Si Racha project, which is waiting for an environmental impact assessment report approval, may take a few years to complete and start operation. But the company believes demand among Japanese expats and other foreigners will remain strong.
According to property consultant Knight Frank Chartered (Thailand), there were 2,432 serviced apartment and hotel rooms from 22 projects in Si Racha as of the end of 2014, with 76% in Si Racha city or Si Racha Nakhon.
Of the total rooms, 61% were operated by individual investors and 39% by local brands like Kantary, Kameo, Cape and Karavel by the Kasemkij Group, owned by the Pangsrivong family.
There had been no international hospitality chains in Si Racha until early this year with the entry of Singaporean operator The Ascott Ltd, a wholly owned subsidiary of Singapore's large developer CapitaLand.
Launched in mid-January, the 136-room Citadines Grand Central Sri Racha is the first property Ascott operates outside Bangkok, where it has around 1,800 rooms at nine properties. Ascott saw potential in expanding to the Eastern Seaboard, where many multinational companies are based.
Thai conglomerate Saha Group is developing a serviced apartment and condo in Si Racha on a 12-rai site near Motorway No.7 close to its first community mall, J-Park, which opened last year.
Risinee Sarikaputra, director for research and consultancy at property consultant Knight Frank Chartered (Thailand) Co, says serviced apartments and hotels in Si Racha are very attractive for investment as the current supply is limited.
Serviced apartment and hotel supply in Si Racha is in heavy demand, with occupancy rates as high as 95.7% on average last year. There were a few projects where the occupancy rate was below 90% as they only went into operation early this year.
In Si Racha city, the average occupancy rate was 96.6% as there are many restaurants, shopping malls and entertainment venues. However, even the average occupancy rate at projects outside the city was high at 92.9%.
"There was strong demand from Japanese expatriates working in industrial estates in Laem Chabang, Chon Buri and Rayong, accounting for 90% of the total," says Ms Risinee.
They took a long-term lease from one month to three years. Most of them were in middle management.
Among local brand operators, the Kasemkij Group was the most successful with a full occupancy at three of the four projects it operates in Si Racha. Major factors were regular renovations and a Japanese sales manager, able to communicate with guests.
Si Racha continues to pull in investment from Bangkok-based developers.
"Demand for rooms for rent in Si Racha is for small units with one bedroom as the majority of expatriates are single," she adds.
She says land plots for future development in Si Racha city are very scarce, so new developments will be out of the city. To attract demand, they should provide enough facilities like restaurants and laundry services.
Si Racha last year drew around 10,000 Japanese, up from 3,000 to 4,000 in the past four years. Of this number, 70% were managerial level or above, says Surachet Kongcheep, associate director of the research department at property consultant Colliers International Thailand.
"The number rose exponentially after the great floods in 2011 as many Japanese investors in the industrial sector shifted their factories from flooded areas to eastern provinces," he says.
According to the Board of Investment, there were 672 projects from Japanese investors with a total spending of 293.33 billion baht in 2014, up 19.6% and 3.7% year-on-year, respectively.
Si Racha is the third most crowded district in Chon Buri, following Muang and Sattahip district. Located 100 kilometres from Bangkok, it is the most popular residential location outside Bangkok among Japanese expats.
Like Bangkok's Phrom Phong and Thong Lor areas, Si Racha city has facilities for the Japanese lifestyle such as bookstores, rental book shops and DVD rental outlets where Japanese films and TV shows are available, as well as Japanese restaurants, Japanese-language schools and Japanese-style entertainment venues.
There are also medical facilities, the very first factor Japanese will take into account when choosing a location.
As the number of serviced apartments and hotel rooms is not sufficient to meet strong demand, this provides an opportunity for condo rental, seen by sharp-eyed investors who gain a yield of as high as 12-19% per year.
"Japanese prefer staying in serviced apartments rather than condos, though the former's rental rate is higher by 20% because it's their employer's budget for their accommodation. But if there's no choice, condos are an alternative," says Mr Surachet.
In 2013-14, there were 3,280 condo units newly launched in Si Racha city with units sized between 25-150 square metres and priced from 52,000-100,000 baht per sq m. The sales rate was 83% and more than 80% of the purchases were an investment for rent.
According to Knight Frank, the condo supply launched in Si Racha before 2009 totalled 1,475 units. The number rose to 7,000 at the end of last year, with 3,000 launched in 2013 alone.
Mr Surachet says that if the number of new serviced apartment rooms is limited and condo supply increases, the lifestyle of temporary residents in Si Racha may change to staying in condos just like what happened in Phrom Phong and Thong Lor.
Besides Japanese expats, demand for rental residential property comes from Thai employees working in industrial estates in Chon Buri. Some of them group together to rent a single house with more than three bedrooms.
In 2013-14, large developers launching single house projects in Si Racha district included Supalai, Quality Houses and C.P. Land. Even conservative developer Lalin Property launched its first provincial project in Si Racha.
Siriphong Somboon, managing director of D-Land Group, a property developer in Bangkok's southern zone and Samut Sakhon, says demand for rented houses is strong in Si Racha due to the large workforce in the surrounding industrial estates.
The company's first provincial project outside Bangkok and Samut Sakhon was in Si Racha near Pinthong Industrial Estate with a three-storey shophouse where two apartments for rent are provided on each floor to tap investment buyers.
Each room, sized 24 sq m, is rented out at a rate of 3,500 to 4,000 baht per month, while downstairs space can be rented out for office space or for shops.
Launched six months ago, D-Complex Si Racha is worth 600 million baht. Some 60% of the total 115 units priced 3.9-5 million baht have been sold. Buyers were investors and executives who wanted to invest in a unit.