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Improvement in Sentiment and Real Estate Market Activity

Bangkok – December 22, 2022 – According to CBRE, a leading international property consultant, overall, 2022 has been a better year than 2020 and 2021 for the real estate market despite another period of adjustment to the pandemic’s direct and indirect effects. This year has seen significant improvements in most commercial sectors, and particularly in the hospitality and retail markets.

Ms. Chotika Tungsirisurp, Head of Research and Consulting at CBRE Thailand

“The third quarter of 2022 saw a recovery in most sectors of the Bangkok real estate market, with sentiment getting a boost as more people returned to normality in terms of their work and social lives. This positive outlook has been bolstered by a rise in international tourist arrivals and a growing sense that, after over two years of restrictions, people no longer have to moderate their behavior,” said Ms. Chotika Tungsirisurp, Head of Research and Consulting at CBRE Thailand.

On the hospitality side, both hotels and serviced apartments continued to benefit from returning international tourists as well as expatriates and overseas visitors on business. With international tourist arrivals more than doubling between Q2 and Q3, all KPIs in the Bangkok hospitality market showed real improvement.

The gradual shift from the industry’s reliance on domestic tourism back to having international tourists as its primary driver continues. With high season approaching, it is expected that this momentum will be maintained through the end of this year, along with the hope that the growth in international tourist arrivals is sustained well into 2023.

The retail market has arguably been the most affected real estate sector since Q2 2020. The sector not only needed to quickly adjust to enforced store closures, it had to adapt and invest in order to cope with the changed demands of customers. Adapting efficiently to the new market conditions and consumer demands was critical for retailers; survival was paramount, of course, but it is noteworthy that the retailers capable of meeting these new consumer expectations were able to thrive by differentiating themselves from their competition.

This need to adapt has been just as important for retail mall owners and operators. Without the cooperation and assistance of landlords, retailers would never have been able to make the necessary adaptations. Such assistance ranged from suspensions and reductions of rent to helping with the setup of online sales platforms and facilitating space for the fulfilment of food deliveries. The level of collaboration between landlords and tenants in retail is greater than in other sectors, with both groups motivated by the knowledge that working together can result in successfully adapting to almost any unforeseen circumstance.

The importance of adaptability for any successful mall operator or retailer cannot be overstated. Reliance on a single sales platform is a high-risk strategy, but it is clear that the larger operators and retailers are now committed to operating on multiple sales platforms, be it online, in-store or via omnichannel. This has resulted in intense competition between operators and between retailers, but their shared experience has fostered greater cooperation between both sides.

Although overall net takes up in the office sector to Q3 2022 has been marginally negative, we are now seeing more signs of leasing activity. While lease renewal transactions dominated 2020, 2021, and much of this year, more companies are now actively negotiating potential relocations, particularly to newer, international-standard office spaces that are under construction and ready to receive tenants in the near future.

While many organizations consider whether to move or not, an increasing number of companies—particularly established MNCs—have already started negotiating potential relocations or are actively considering doing so. We believe the number of leasing transactions in 2022 will exceed that of 2021 and that this trend will continue into next year, particularly as a number of new large-scale office projects will see completion and be able to accept tenants.

The industrial sector has also shown improvement, and FDI in the manufacturing sector has increased on a year-on-year basis. We have seen an increase in SILP sales, particularly catering to the EV and data center market, while demand for existing manufacturing and warehouse space as well as built-to-suit premises continues to grow. We expect this increased activity to continue.

“While the short-term outlook looks positive, and activity levels have picked up in every sector, we are also cautious of headwind risks. Rising personal and corporate debt levels are a domestic concern, while there are growing concerns internationally about the world economy, the prospect of a global economic slowdown, and a number of other geopolitical factors generating heightened levels of uncertainty,” Ms. Chotika concluded.

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