Property shift detected

Property shift detected

Construction companies expanding into real estate investment for the first time since the 1997 crisis, says JLL

Singha Estate Plc sold its Sun Towers office complex on Vibhavadi-Rangsit Road for 5.7 billion baht to its sponsored REIT, the S Prime Growth Leasehold Real Estate Investment Trust (SPRIME).
Singha Estate Plc sold its Sun Towers office complex on Vibhavadi-Rangsit Road for 5.7 billion baht to its sponsored REIT, the S Prime Growth Leasehold Real Estate Investment Trust (SPRIME).

The total value of investments across all property sectors in Thailand reached 19.2 billion baht in the first half of this year. More than half of that total came from just two transactions in Bangkok: the sale of the Sun Towers office complex and the sale of an 11-rai development site near the Mo Chit skytrain station, according to the property consultancy JLL.

JLL's Thailand Property Intelligence Centre monitors publicly disclosed real estate investment activities in Thailand by private and public companies and funds. It recorded four transactions worth more than 1 billion baht each in the first half of 2019. The largest was the 5.7-billion-baht sale of Sun Towers, an office complex on Vibhavadi-Rangsit Road, by Singha Estate Plc to its sponsored REIT, S Prime Growth Leasehold Real Estate Investment Trust (SPRIME).

Sino-Thai Engineering & Construction Plc (STEC) was the second largest investor in the first half with two transactions totalling more than 5 billion baht. In April, STEC purchased an 11-rai development site near the Mo Chit skytrain station from U City Plc for 4.3 billion baht, to be developed into an office complex. In June, the STEC subsidiary ST Property & Logistics Co Ltd acquired the Summer Hill community mall and Summer Hub office building next to the Phra Khanong skytrain station from Boutique Corporation Plc for 957 million baht.

"Sino-Thai's investments thus far in 2019 mark the continuance of the re-entry of contractors and construction companies expanding into real estate investment, after nearly two decades of absence following the 1997 Asian financial crisis," said Suphin Mechuchep, managing director of JLL Thailand.

Other recent examples of construction firms investing in real estate include Saeng Fah Construction's joint venture with Aira Securities Plc and Sena Development Plc to develop Spring Tower, an office tower near the Ratchathewi skytrain station.

As well, the contractor Thai Obayashi in 2017 acquired a site next to the Nana skytrain station for a then-record 2.6 million baht per square wah. It is now building O-NES Tower, its first office building investment since the Nantawan Building, near the Ratchadamri skytrain station, in 1991.

The most expensive land transaction in 2019 on a per-square-wah basis was the acquisition in February of a 658-square-wah site in Thong Lor for 1.9 billion baht, or 2.86 million per square wah, by Shangri-La Hotel Plc.

"The price per square wah for the site acquired by Shangri-La is the highest per-square-wah price the market has seen for the development of a hotel, but did not break the all-time record of 3.1 million baht per square wah achieved by the 880-square-wah plot on Lang Suan Road that JLL sold on behalf of the owner in 2018," said Mrs Suphin.

"High land prices and the new land and property tax regulations slated for enforcement in 2020 have motivated and will continue to motivate more owners of underutilised land or land with underperforming buildings in Bangkok's prime locations to put their sites on the market this year.

"This will mean more opportunities for well-capitalised investors to acquire prime sites for their new development projects. We believe that visionary investors will still be able to achieve decent returns on investment in their future development projects despite rising land costs."

Outlook: JLL expects most of the upcoming major real investment activities in the remainder of 2019 to be land and commercial property investment transactions in Bangkok.

The firm also anticipates investment activities to rise in the industrial/logistics sector, particularly in the Eastern Economic Corridor, as more manufacturers are relocating their China-based operations to Southeast Asia and the fast growth of e-commerce has fuelled demand for logistics real estate in Thailand.

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