"Nexus Property Marketing" has revealed the real estate market in Bangkok over the past 20 years, divided into 3-4 cycles: Starting - Peak - Towards Sustainability. It is expected that in the year 2022 most developers will begin launching projects that meet the real needs of residents (Real Demand) more significantly, with the city condo and luxury condo segments returning to market demand.

          Meanwhile, condo prices will be adjusted by market mechanisms to reflect reality more accurately. The office building and shopping center markets continue to be significantly impacted by the COVID-19 pandemic. The survival of operators lies in adapting services to be clearer and more diverse.

          Ms. Nalinnarat Charoensupong, Managing Director of Nexus Property Marketing Co., Ltd. stated that over the past 20 years, we have seen market growth according to product characteristics, especially since 2020, or during the COVID-19 pandemic, when the real estate market underwent the most noticeable changes.

Condominium Market

In the condominium market over the past 20 years, there have been significant changes in terms of supply, demand, prices, locations, and consumer behavior. The market direction will continue to adjust according to rapidly changing consumer behavior and the pandemic, which has made market forecasting more challenging.

            According to research data over the past 20 years from Nexus, it was found that by the end of 2021, the supply of condos in the Bangkok metropolitan area was a total of 694,000 units. The growth of supply is divided into 3 cycles. In the first cycle, from 2001 to 2008, most condo developments were concentrated in the city center and surrounding areas, with a total of 123,000 units developed.

          The market began to change significantly in the second cycle from 2010 to 2018, with development expanding more into outer locations and more new developers entering the market. Supply increased dramatically, with a cumulative supply increase of 482,000 units over 8 years.

          However, during the third cycle from 2019 to 2021, the market contracted significantly due to economic impacts and COVID-19, with only 80,100 units added in the past 3 years. In 2021, only 16,800 new condos were launched, the lowest in 12 years.

            Meanwhile, condo prices in Bangkok over the past 20 years have increased by up to 3 times, from an average price of 48,000 baht per square meter in 2001, peaking in 2019 at an average price of 141,800 baht per square meter. The impact of COVID-19 has led developers to adjust product formats to better meet market demands, resulting in an average price reduction to 128,600 baht per square meter by the end of 2021.

            In 2021, new condos launched by developers will return to more affordable pricing, with research showing that new condos in 2021 had an average price of 86,100 baht per square meter, reflecting a shift towards the budget condo market.

Sales of condos are driven by real housing demand, with most buyers opting for ready-to-move-in condos at reasonable prices. In 2021, condo sales were the lowest in 12 years, with only 23,400 units sold, and the overall sales rate in the market was 94%. The condo market trend in 2022 is expected to gradually recover, with overall market prices stabilizing or rising slightly, as new developments will target the budget condo segment more.

          It is expected that the condo market in Bangkok will have no less than 30,000 new units launched, with supply growing in 2 main markets: the luxury market in the city center and the city condo - affordable condos in the outskirts.

Commercial Space Market

          Mr. Theerawit Limthongsakul, Managing Director of Nexus Real Estate Advisory Co., Ltd. revealed that over the past 20 years, the commercial space market has undergone various changes, including the amount of rental space, rental behavior, and rental prices, as well as other factors affecting market expansion, such as the construction of both above-ground and underground railways. Currently, the office building and shopping center markets have been significantly impacted by the COVID-19 pandemic. Additionally, the shopping center market tends to swing more due to sensitive factors that easily affect the market, such as consumer confidence, political instability, and pandemic events.

Office Building Market

 

 

The office building market has expanded significantly over the past 20 years, with good growth driven by the rail system, which has led to more office buildings along the rail lines.

            The market can be divided into 2 main periods: the first period from 2001 - 2008 was a growth phase following the recovery from the Tom Yum Kung crisis, with the market rebounding rapidly, especially in 2004, and contracting slightly in 2009. During the first period, new supply entered the market at an average of 8% per year, and the market grew approximately 1.5 times, with the rental rate in the first period averaging around 70%. Subsequently, it rose to a high level of around 90%-95%, even with a significant increase in supply in the market later on.

            After entering the second period from 2009 - 2021, the market began to expand again, with new supply entering the market at an average of 2%-3% per year. The COVID-19 pandemic caused the market to slow down again, contracting the most in 20 years. By the end of 2021, the total supply in Bangkok was approximately 6.3 million square meters, an increase of about 2.3 times from 2001, while the rental rate in the second period remained stable at around 90%-95% for nearly 10 years, before contracting again due to the COVID-19 pandemic, with the rental rate dropping to 88%, the lowest rate since 2004.

            Rental prices correspond to rental rates, with average rental prices increasing by 1 time over 20 years, from 380 baht/square meter/month in 2001 to approximately 800 baht/square meter/month by the end of 2021. Rental prices have increased by about 3%-5% per year consistently. The COVID-19 pandemic, along with the continuous increase in new supply in the market, has significantly reduced rental prices, with average rents decreasing by 1% Y-o-Y, the lowest contraction in 20 years for the office building market.

            Nexus expects that supply will continue to enter the market, with new supply totaling 1.9 million square meters expected in the next 5 years, accounting for over 90% of Grade A office space. This will likely lead to an increase in average rental prices from new buildings, as well as older office buildings that will be phased out in the future. However, the impact of COVID-19 significantly affects office space usage, making it difficult to forecast demand for office space.

 

Shopping Center Market

Regarding the shopping center market over the past 20 years in the Central Retail District (CRD), including areas like Siam Square, Ratchaprasong, and Phrom Phong, it has been affected by various events, divided into 3 periods:

The first period from 2001 to 2004 saw a cumulative supply of about 250,000 sq.m. However, the ripple effects from the financial crisis in 1997 led to foreign investors gradually withdrawing their investments, resulting in the closure of several malls, including the World Trade Center, now known as Central World. The SARS outbreak in 2003, the H1N1 outbreak, and the tsunami in 2004 caused the market to contract.

In the second period from 2005 to 2010, the economy recovered, and tourists became a significant purchasing power, with the addition of 2 large shopping centers: Siam Paragon and Central World, leading to a cumulative supply of approximately 550,000 square meters, more than double that of the first period. However, due to political instability and protests in the Ratchaprasong area, shopping centers in that vicinity suffered damage, leading to some areas being closed for repairs.

In the third period from 2011 to 2021, new supply entered the market, such as Central Embassy and EmQuartier, until the market slowed down again due to various factors, including a decrease in Chinese tourists following the boat accident in Phuket in 2018, and subsequently COVID-19, which brought tourist numbers to zero, forcing shopping centers to close to prevent the spread of the virus. By the end of 2021, the total supply was approximately 635,000 square meters, an increase of 2.5 times from 2001.

 

 

            Overall, the shopping center market has maintained a good rental rate, remaining stable at around 93%-97% over the past 20 years. However, the ongoing COVID-19 pandemic has significantly impacted shopping centers, with temporary closures, reduced domestic purchasing power, and a lack of spending from tourists, leading to a rental rate drop to 91% by the end of 2021, the lowest in 20 years.

            In terms of rental prices, ground floor rates have more than doubled from 1,700 baht/square meter/month in 2001 to 3,500 baht/square meter/month in 2021. Comparing the rental price increases over each period, the first period saw the highest growth rate of approximately 10% per year.

            Subsequently, new supply continued to enter the market, leading to increased competition, resulting in rental rates increasing at a decreasing average rate of 4%-5% per year in the second period. The market began to expand well again in the early third period until it was impacted by the slowing economy and the COVID-19 outbreak, forcing shopping centers to support tenants by reducing service fees. Many stores could not continue operations and had to leave the shopping centers, necessitating the search for new tenants to replace the old ones. However, the situation remains abnormal, leading shopping centers to lower rents to attract new tenants, resulting in rental growth rates dropping to only 2% per year.

            The COVID-19 pandemic has significantly impacted shopping center users, along with online platforms playing an important role in current spending, forcing shopping centers to adapt rapidly to changes. Nevertheless, Nexus still believes that the shopping center market will continue to expand in the future if economic confidence and tourism return. Additionally, there will be new supply from EmSphere and the expansion of Central Embassy to further enhance the market.

Source: Nexus Research, January 2022