Thailand’s Real Estate Market Displays Continuing Resilience in 2024: JLL

Thailand’s Commercial Real Estate Sector Set for Strong Performance in 2024: JLL

Bangkok, February 28, 2024 – The commercial real estate sector in Thailand is projected to exhibit robust performance throughout 2024, buoyed by several key factors including the ongoing recovery in the tourism sector, expanding manufacturing industries, and increased interest in prime assets driven by sustainability and quality.

According to JLL (NYSE: JLL), a prominent global commercial real estate and investment management firm, Thailand’s real estate market is expected to showcase resilience in the upcoming year, with domestic policy initiatives and market confidence countering global macroeconomic uncertainties.

The dynamic performance of Thailand’s real estate market in 2023 underscores its promising trajectory. Noteworthy statistics from the previous year include a substantial 66% year-on-year increase in investment amounts in targeted manufacturing sectors.

Additionally, tourist arrivals surged by an impressive 152% compared to the previous year, surpassing government targets and indicating strong recovery and demand within the hospitality sector.

Furthermore, demand for prime office space in Bangkok’s Central Business Area (CBA) remained robust, particularly among multinational corporations.

Mr. Michael Glancy, Country Head of Jones Lang LaSalle (Thailand) Limited (JLL), emphasized Thailand’s resilience amidst global economic challenges.

He highlighted policymakers’ commitment to enhancing infrastructure and the availability of high-quality Grade A real estate in Bangkok as significant drivers for growth, providing a buffer against macroeconomic uncertainties, high capital costs, and geopolitical factors.

Looking ahead to 2024, JLL identifies four key growth drivers that will shape Thailand’s real estate market.

The Rise of Mega Projects: Transforming Thailand’s Real Estate Landscape in 2024

In 2024, Thailand and Southeast Asia’s real estate sector are poised for significant transformation, driven by strategic enhancements in infrastructure and the development of Grade A real estate in Bangkok.

A notable trend shaping Bangkok’s real estate market is the emergence of world-class mixed-use development projects, heralding the onset of a mega project era.

These projects, comprising a total of 10 mixed-use precincts, are anticipated to inject vitality into the landscape of Bangkok’s Central Business Area (CBA), with substantial offerings in Grade A office space, retail centers, luxury condominiums, and hotels.

By 2028, these transformative developments are projected to introduce over 900,000 square meters of Grade A office space, 300,000 square meters of retail space, 5,400 units of luxury condominiums, and 5,900 keys of luxury hotels to Bangkok’s CBA.

This influx of premium real estate not only augments the city’s skyline but also positions Bangkok as an alluring destination for investors, multinational corporations (MNCs), and skilled professionals seeking prime real estate opportunities.

The proliferation of mega projects underscores Bangkok’s status as a regional powerhouse and a key player in Southeast Asia’s real estate landscape.

As these ambitious ventures unfold, they are poised to redefine urban living, elevate commercial offerings, and propel Bangkok towards becoming a globally competitive city in the realms of business, leisure, and lifestyle.

Addressing the Aging Infrastructure Challenge in Bangkok’s Real Estate Sector

With approximately 60% of office spaces in the Bangkok Metropolitan Region surpassing the 20-year mark, the emergence of new premium supply presents a formidable challenge for the competitiveness of these aging assets.

Proactive landlords who adopt strategic and innovative investment approaches are demonstrating superior performance compared to both the market and their counterparts. It is imperative for developers to adopt a similar mindset and undertake strategic investments to mitigate the risk of potential obsolescence.

According to JLL, older office buildings in Bangkok’s Central Business Area (CBA) that have undergone significant renovations have managed to sustain rental levels close to the market average.

Conversely, properties that have not undergone renovation works have experienced tenant departures and declining rents, leading to a widening rental gap of 8.8% as of the fourth quarter of 2023.

This phenomenon extends beyond the office market, as a flight-to-quality and flight-to-green movement is gaining traction in the retail and logistics sectors, with indications of potential expansion into the hotel and residential sectors.

The Growing Importance of ESG Integration in Bangkok’s Office Market

ESG integration has evolved into a prerequisite in the Bangkok office market, with developers and investors prioritizing compliance with market standards through certifications such as LEED and WELL.

Multinational corporations (MNCs), which significantly drive demand for office and logistics spaces, often require ESG-certified spaces mandated by their headquarters.

According to data from JLL, 90% of new leasing activities in the past five years have been in green buildings, which can command up to a 14% premium. This trend exerts downward pressure on older assets that have not adhered to ESG standards, highlighting the imperative for industry players to embrace sustainability practices.

Navigating the Foreign Investment Landscape in Thailand’s Real Estate Market

Foreign investment plays a pivotal role in propelling the growth of Thailand’s real estate market, as the industry heavily relies on inbound capital.

Around 65% of existing office space is occupied by multinational corporations (MNCs), and international buyers accounted for over 10% of condominium unit transactions in Bangkok in 2023. With Thailand actively seeking to attract foreign investment, JLL suggests that enhancing the country’s competitiveness could involve exploring options like offering extended leasehold periods and investment incentives for specific asset classes.

Looking forward to the next 12 months, JLL foresees continued growth and transformation in Thailand’s real estate sector, driven by several key trends.

The emphasis on ESG integration, revitalization of aging properties, and strategic initiatives to attract foreign investment are poised to create mutually beneficial outcomes for all stakeholders within the real estate ecosystem.

Mr. Rathawat Kuvijitrsuwan, Senior Vice President of Advisory & Asset Management, Asia, JLL Hotels & Hospitality Group, remarked, “Over 47% of non-land transactions in the past decade have been in the hospitality sector, underscoring the strong investment appeal of Thailand’s tourism industry and its robust fundamentals, particularly evident in its swift recovery.

Thailand’s evolving landscape of foreign ownership presents new avenues for foreign investors, particularly in the hospitality sector.”

Mr. Anawin Chiamprasert, Head of Research & Consulting at Jones Lang LaSalle (Thailand) Limited (JLL), commented, “Amidst global economic uncertainties, Thailand’s real estate market has demonstrated resilience and is poised for evolution across various asset classes, positioning the country as a prime foreign investment destination in the Asia Pacific region.”