CBRE, a leading global real estate consulting firm, has revealed that overall, the real estate market in 2022 is performing better than in 2020 and 2021, although adjustments are still needed to cope with the direct and indirect impacts of the COVID-19 pandemic. This year marks a significant change in the commercial real estate sector, particularly in the service and retail industries.

“In the third quarter of 2022, most sectors in the Bangkok real estate market showed signs of recovery, with confidence beginning to rise as people return to a more normal state in both work and life. This positive trend is also a result of the increasing number of foreign tourists and the perception that strict living restrictions are no longer necessary after more than two years of continuous limitations,” said Ms. Chotika Thongsiriprapha, Head of Research and Project Development Consulting.

The service sector, including hotels and serviced apartments, continues to benefit from the gradual return of foreign tourists, with the number of international visitors more than doubling between the second and third quarters, leading to a significant improvement in the performance of the service market in Bangkok.

The service industry is gradually shifting from relying on domestic tourists back to having foreign tourists as the main driving force as it enters the high season or peak tourism period. This situation is expected to continue until the end of the year, with hopes that the number of foreign tourists will continue to grow in 2023.

On the retail side, this sector has been the most affected since the second quarter of 2020. Retail businesses not only had to quickly adapt to service closure orders but also needed to adjust and invest to meet the changing demands of customers. Effectively adapting to the new market dynamics and consumer needs is crucial for retailers, and ensuring business survival through necessary changes is of utmost importance. Notably, retailers who can respond to new consumer expectations are growing by differentiating themselves from competitors.

The need for adaptation is also critical for building owners and retail space providers. Without cooperation and support from property owners, retailers would struggle to make the necessary adjustments. Such assistance ranges from rent waivers and reductions to support in establishing online sales platforms and facilitating food delivery space. In fact, the level of cooperation between property owners and tenants in the retail sector is greater than in other industries, as both parties understand that collaboration enables them to adapt to almost any unforeseen circumstances.

Successful mall operators or retailers demonstrate a high level of adaptability. Relying solely on one sales platform is a high-risk strategy, but it is evident that both operators and major retailers today are committed to operating across diverse platforms, whether online, in-store, or through an omnichannel approach, resulting in intense competition among operators and retailers. However, the shared experiences of both parties foster cooperation.

In the office space market, although the net occupancy rate in the third quarter of 2022 remains slightly negative, CBRE is beginning to see signs of increased leasing transactions. While lease renewals were common in 2020-2021 and for most of this year, many companies are currently considering or negotiating office relocations, especially to new office buildings under construction that will meet international standards and be ready to welcome tenants in the near future.

While many companies are still in the process of deciding whether to relocate their offices, an increasing number, particularly multinational companies, have begun negotiations for office relocations that are likely to materialize or are seriously considering doing so. CBRE believes that the number of leasing transactions in 2022 will be higher than in 2021 and is expected to continue this trend next year, especially as many large new office buildings are completed and ready to accommodate tenants.

In the industrial sector, the market has shown improved changes, and foreign direct investment (FDI) in manufacturing has increased compared to the previous year. Additionally, sales of serviced industrial land plots (SILP) have also risen, particularly for electric vehicle and data center businesses, while demand for manufacturing space and warehouses, including build-to-suit properties, continues to grow. CBRE anticipates that this situation will persist.

“Although the short-term outlook appears positive with increased activity across various sectors, we must remain cautious of risks that could hinder business growth or negatively impact the market. Rising personal and corporate debt is a concern domestically, while global worries about the economic situation, the trend of a global economic slowdown, and various external factors contribute to uncertainty,” Ms. Chotika concluded.