The efforts to cope with heightened competition, economic and financial challenges, and the impacts of multiple waves of the pandemic have driven residential project developers to adopt new strategies in recent years. Instead of focusing solely on a single market, CBRE, a leading global real estate consulting firm, analyzes the latest strategies of residential project developers in diversifying risks into other ancillary businesses.

Mr. Rattawat Kuvisitsuwan, Head of Research and Consulting at CBRE Thailand, stated, "In the past, residential project developers adjusted their investment strategies to cover all types of projects, with some investing in condominiums, hotels, and retail spaces. Currently, real estate developers are diversifying their investments beyond their areas of expertise to enhance the diversity of their core business and reduce the risk of over-reliance on the real estate market alone by incorporating lifestyle-related businesses such as health and wellness, food, and services into their investment portfolios."

The recent movement of residential project developers in Thailand is a shift from specialization to risk diversification, stemming from the real estate market cycle that emerged after the Asian financial crisis in 1997. This led developers to focus on developing housing or condominium projects, particularly in Bangkok, with some specializing in a single market. However, due to increasing competition, many developers are attempting to diversify risks by expanding project development to other provinces or different market levels, with developing projects in various locations being the first step in the investment diversification process.

Some developers have pioneered investment diversification strategies by developing various types of residential projects that cater to different target groups in the market or investing in other businesses. For instance, AP (Thailand) has expanded into developing single-detached houses, townhouses, and condominiums at all levels, while Land and Houses has invested in condominiums, hotels, and shopping centers in addition to housing projects.

“Unfortunately, many residential project developers have implemented risk diversification strategies at a time when they face the greatest challenges that Thailand and the world have ever encountered in terms of economic and financial conditions. The real estate market has been significantly impacted by the COVID-19 pandemic, and for survival, residential project developers have worked hard to clear remaining unsold units, suspend new project developments, and reassess strategies for the future. Many have decided that now is the right time to diversify investments into other industries outside the real estate market,” Mr. Rattawat added.

For example, Property Perfect has partnered in the rubber glove business, and before the pandemic, Pruksa Holding made a significant investment diversification by expanding into the medical and health business by establishing and opening Wimut Hospital.

Last year, several real estate developers announced plans to diversify risks into businesses that respond to health and wellness trends, including fintech, technology, and consumer goods. Sansiri has set future strategies to enter new businesses related to healthy food and clean energy, having previously invested in fintech, digital assets, and electric vehicle charging stations. Meanwhile, Nusasiri announced plans to transform into a holding company this year to invest in other businesses beyond real estate, including health, agriculture, and technology. Other real estate developers have chosen to adopt traditional approaches to risk diversification by adding supplementary elements to real estate projects, such as Asset Wise announcing a collaboration with Bangkok Healthcare Services to create rehabilitation centers for the elderly in some projects.

“Time will tell whether the diversification of residential project developers into businesses outside their core expertise will be successful. However, at this moment, specialization indicates a limitation when that business faces downturns. CBRE believes that investment diversification remains a suitable strategy to reduce risks and uncertainties,” Mr. Rattawat concluded.