Bangkok Overall, Q4 2014

MARKETVIEW

Condominium Downtown Supply Hotel Downtown Supply Office Supply +5.1% y-o-y +3.3% y-o-y +2.6% y-o-y

CONDOMINIUM Figure 1: Newly Completed Bangkok Condominiums

No. of Units Midtown/Suburban Downtown

Record-breaking prices of over THB 80,000 300,000 per sq.m. have been achieved 70,000 in five downtown condominium 60,000 projects in 2014. This reinforced our 50,000 belief that the downtown condominium 40,000 30,000 sector is a low-volume high-value 20,000 market with limited new supply. 10,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

2016 2017F 2018F The number of condominium units 2015F launched increased by 281% Q-o-Q in Figure 2: Average Re-sales Prices of Downtown the downtown area and 13% Q-o-Q in Completed Freehold Units (High End and above) the midtown/suburban area. Due to political turmoil in the first half of the Sukhumvit Silom/Sathorn

year, the total number of THB/sq.m Average Price (THB/sq.m.) Central Lumpini 200,000 189,667 condominiums launched throughout 180,000 177,114 2014 decreased by 37% in the 160,000 173,333 140,000 168,341 downtown market and 29% in the 120,000 midtown/suburban market, compared 100,000 80,000 to 2013. 60,000 40,000 20,000

The hot spot for midtown/suburban

2005 2006 2007 2008 2009 2010 2011 2012 2013

condominium launches in 2014 was 2004

Q1 2014 Q1 Q2 2014 Q2 2014 Q3 2014 Q4 along the MRT’s Purple Line. Throughout the year, 7,500 units were Source: CBRE Research, Q4 2014 launched in this area, accounting for Looking forward in 2015, we believe 58% of newly launched units along that the trend of forming joint ventures under-construction mass transit lines. to finance projects among Thai This has pushed developers to search developers, and between Thai for new locations along other under- developers and foreign investors, will construction mass transit lines where continue in the upcoming year. The there is less competition. Bangkok condominium market sentiment in 2015 will largely depend Still, the key issues in the on the pace of economic recovery, midtown/suburban market are how developers’ ability to transfer many speculative condominium buyers completed units and the presales of will default if they cannot resell before newly launched projects especially in completion and how many end-user the midtown/suburban market where buyers will be able to get mortgage buyers are most affected by the rising loans with tightened banks’ criteria. household debt.

MARKETVIEW BANGKOK OVERALL

OFFICE Figure 3: Bangkok Office Market

Total Supply Total Take-up Total Bangkok office supply increased sq.m. Vacancy Rate Vacancy Rate by 0.6% Q-o-Q due to the completion of 9,000,000 45.0% the Channel 5 Head Office Building, U- 8,000,000 40.0% 7,000,000 35.0% Place and the Hitachi Office Building 6,000,000 30.0% with a net lettable area of 20,000 sq.m., 5,000,000 25.0% 22,500 sq. m. and 7,000 sq.m., 4,000,000 20.0% 3,000,000 15.0% respectively. 2,000,000 10.0% 1,000,000 5.0%

0 0%

The vacancy rate was 9.3%, dropping F

2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2010 2011 2012 2013 2014

2016F 2017F slightly by 0.2 percentage points Q-o-Q. 2015 The total net take-up for Q4 2014 was Source: CBRE Research, Q4 2014 38,923 sq.m., decreasing by 38.9% Y-o-Y. Total net take-up for the whole of 2014 was 180,000 sq. m., a 18.9% drop Y-o-Y. A reasonable level of demand and limited supply have caused office rents to rise by 4% - 10% Y-o-Y in all grades and areas.

In Q4 2014, average Grade-A CBD rents increased by 0.6% Q-o-Q and 3.7% Y-o- Y to THB 850/sq.m./month.

There is limited supply due for completion in 2015-2017. Less than 400,000 square meters of office space is Bhiraj Tower at EmQuartier, Sukhumvit under construction. About 30% of space under construction will be Grade-A in Due to be completed in Q1 2015 the CBD.

We expect that rents will continue to rise because of high occupancy levels and limited new supply.

FYI Centre, Rama IV Due to be completed in Q4 2016

RETAIL Figure 4: Bangkok retail Supply, take-up and Occupancy Rate

In Q4 2014, the total Bangkok retail Net Area Total Supply Total Take-up Occupancy (sq.m.) supply was 6.7 million sq.m., Occupancy Rate Rate increasing by 6.3% Y-o-Y with six 7,000,000 100.0% 98.0% 6,000,000 additional new retail centres. The 96.0% biggest new development completed 5,000,000 94.0% 92.0% was the 50,000-sq.m. The Crystal 4,000,000 90.0% Ratchapruek, a community mall located 3,000,000 88.0% at Ratchapruek, a suburban location. 86.0% 2,000,000

84.0%

1,000,000 82.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

The overall occupancy rate stayed at 2000

Q2 1014 Q2 2014 Q3 2014 Q4 94%. The volume of occupied retail 2014 Q1 space increased to 6.3 million sq.m., up Source: CBRE Research, Q4 2014 by 4.2% Y-o-Y. In November 2014, the retail sale index increased by 1% Q-o-Q but decreased by 4% Y-o-Y.

New retail construction continued to grow. Bangkok is one of the hotspots for development in Southeast Asia with more than 1.7 million sq.m. of new retail space due to be completed in the next few years. Most of the new supply will be in suburban locations which are The Crystal Ratchapruek mostly in emerging residential areas and along the extensions of mass transit systems.

There will be more competition between newer malls and existing malls in suburban areas, such as the upcoming Bangkok Mall which will be up against Mega Bangna and CentralPlaza Bangna. Bangkok Mall, “Big Box “’grocery retailers have been Due for completion in 2017 suffering poor sales and both Tesco Lotus and Big C are considering reducing the amount of space they occupy themselves, by converting this excess space to rental space for third party tenants.

This is a trend that is also being seen on other more mature markets such as the UK.

MARKETVIEW BANGKOK OVERALL

APARTMENT Figure 5: Supply, Demand and Occupancy Rate

In Q4 2014, the supply of apartments Supply Demand Occupancy Units (single ownership multi family Occupancy Rate Rate buildings) in the downtown area of 14,000 100% 12,000 Bangkok totalled just under 12,000 90% units, increasing by 0.2% Q-o-Q but 10,000 decreasing 1.2% Y-o-Y. Two new 8,000 80%

apartments located in the Sukhumvit 6,000 70% area were completed with a total of 29 4,000 60% units. 2,000

0 50%

2009 2005 2006 2007 2008 2010 2011 2012 2013

The Central Lumpini area posted the 2004

Q2 2014 Q2 2014 Q3 2014 Q4 highest achieved average rents with 2014 Q1 Grade-A rents of THB 456/sq.m./month. Source: CBRE Research, Q4 2014 The occupancy rate in Q4 2014 was 95.6%, increasing by 0.6 percentage points Q-o-Q and 0.8 percentage points Y-o-Y. There was upward pressure on rentals because of strong demand for large units with increased expatriate numbers and a limited new supply of two- and three-bedroom apartment and condominium (multiownership) units

HOTEL Figure 6: Future Supply in Downtown Bangkok

In 2014, nine new hotels were No. of keys New Supply completed. Sukhumvit remained the Existing 50,000 most popular hotel location in Bangkok. The total supply of downtown 40,000 hotel keys is set to increase more than 30,000 12% by 2018 with the addition of around 5,500 keys. 20,000

10,000

Total tourist arrivals to Thailand 0

2008 2006 2007 2009 2010 2011 2012 2013 2014

decreased by only 6.7% Y-o-Y despite 2005

2018F 2015F 2016F 2017F the political problems, travel warnings and the enforcement of martial law. Source: CBRE Research, Q4 2014 Arrivals at Bangkok’s international airports fell more by 7.6% Y-o-Y, pushing down the average occupancy rate of hotels of all grades in Bangkok from around 74% in 2013 to 62% this year. Hotel room rates in Bangkok also dropped slightly by 2% Y-o-Y.

MARKETVIEW BANGKOK OVERALL

HOUSING Figure 7: New Supply of Developer-Built Single-Detached Houses in the BMR In Q3 2014, 16,000 new low rise

residences including single detached Units houses, semi detached houses, 30,000 townhouses and shophouses were 25,000 completed, increasing by 17.7% Q-o-Q but decreasing by 12.9% Y-o-Y. 20,000 15,000 10,000 With the political climate continuing to remain stable in Q4 2014, consumer 5,000

and developer confidence is returning.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

However, banks have become stricter 2003

Q1 2014 Q1 2014 Q3 about loan to income ratios as 2014 Q2 household debt remains high. Sales Source: Land Department, REIC and CBRE Research, Q4 2014 performance will depend on the availability of mortgage finance in the lower end of the market.

SERVICED APARTMENT Figure 8: Supply, Demand and Occupancy Rate

The supply of serviced apartments Supply Demand Units stood at 15,297 in Q4 2014, a decrease Occupancy Rate of 0.1% Y-o-Y because of a change of 20,000 100% use and closure of some existing 16,000 80% buildings. One serviced apartment was completed in this quarter. 12,000 60%

8,000 40% A strong recovery in the tourism industry has helped boost occupancy 4,000 20% rates in Q4 2014. The average

0 0%

occupancy rate of serviced apartments

2005 2006 2007 2008 2009 2010 2011 2012 2013

4 2014 4

Q2 2014 Q2 2014 Q3 Q increased by 1.8 percentage points 2014 Q1 Y-o-Y. The average achieved rent for serviced apartments in downtown Source: CBRE Research, Q4 2014 Bangkok decreased by 2.6% Y-o-Y.

MARKETVIEW BANGKOK OVERALL

INDUSTRIAL Figure 9: Demand and Occupancy Rate of SILPs

Total Serviced Industrial Land Plots Take up New Take-up Occupancy (SILPs) sales on our surveyed estates Rai Occupancy Rate Rate and parks for the whole of 2014 were 120,000 100% 1,730 rai (276.8 hectares or 684 acres) 100,000 80% 64% down Y-o-Y. 80,000 60% 60,000 40% The Board of Investment (BOI) 40,000 announced new policies and criteria for 20,000 20% investment promotion. The new policies

0 0%

will grant incentives based on industry

2002 2011 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 type rather than geographic location. 2003 The policies will be effective for applications that are submitted after 1 Source: CBRE Research, Q4 2014 January 2015 to 31 December 2021.

Figure 10: Supply, Demand and Vacancy Rate of RBFs There was a rush to submit applications Total Space Total Take-up Occupancy before the rules changed, a total of Sq.m. Rate Occupancy Rate 3,469 projects were submitted to BOI 3,000,000 100% with a combined value of THB 2,192.7 2,500,000 billion in 2014 – increasing 117% Y-o-Y. 80% The highest investment value was in the 2,000,000 60% Services and Infrastructure sector which 1,500,000 accounted for 37% of total investment 40% 1,000,000 value but will not create demand for 20%

industrial property. 500,000

0 0%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 The total supply of Ready Built Factories (RBFs) was 2.4 million sq.m., Source: CBRE Research, Q4 2014 an increase of 18.9% Y-o-Y. New yearly take up was about 60,000 square Figure 11: Supply, Demand and Vacancy Rate of MLPs metres. The occupancy rate of ready- built factories (RBFs) was 66.7% in Q4 Total Space Total Leased Space Occupancy 2014. Rental rates were the same as Sq.m. Occupancy Rate Rate quarter 3 2014. 2,500,000 84% 82% 2,000,000 80% 78% The total supply of Modern Logistics 1,500,000 76% Properties (MLPs) was 2.3 million 74% 72% sq.m., an increase of 39.7% Y-o-Y. New 1,000,000 70% 68% yearly take up was about 400,000 square 500,000 66%

metres. The occupancy rate of Modern 64%

0 62%

Logistics Properties (MLPs) was 75% in

2 2013 2

Q3 2014 Q3 Q 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q4 Q4 2014, down from 78% in previous 2013 Q1 quarter. There was a little change in rents. Source: CBRE Research, Q4 2014

INVESTMENT Figure 12: Estimated Gross Freehold Initial Yield

The Bank of Thailand held the policy Percentage (%) rate at 2.00%. 9 8.0-9.0% 8 7 5.0-6.5% 5.5-7.0% 5.5% The 10-year government bond yield 6 5 decrease by 69 bps Q-o-Q from 3.56% in 4 2.8% Q3 2014 to 2.87% in Q4 2014. 3 2 1 Property Fund yields increased by 38 0 10-Yr Residential Office Retail Industrial bps Q-o-Q from 5.62% in Q3 2014 to Government 6.00% in Q4 2014, moving in the Bond opposite direction to the-10 year government bond. Source: SET and CBRE Research, Q4 2014

There were three REIT launches this quarter, WHART, LHSC and TREIT.

The lack of transactions makes analysis of yields difficult. Our yield information is estimated and is based on our market knowledge.

Most yields for property investments have remained quite stable. Average gross residential yields for individual condominium units stayed at 5.5% at the end of Q4 2014. We base residential yields every quarter on the leasing transactions completed by our leasing team over the previous three months and so yields can vary from quarter to quarter based on where we have concluded transactions.

MARKETVIEW BANGKOK OVERALL

QUARTERLY REPORTS

Bangkok Property Report

The Bangkok Property Report, now in its 18th year, is CBRE Thailand’s

flagship quarterly subscription publication, with data from a tried and

tested database reinforcing its reputation as Bangkok’s definitive

property sector source.

The Bangkok Property Report provides in-depth analysis of the Bangkok real estate market, including property supply and demand, occupancy, take-up, prices, rental trends and other indicators.

Phuket Property Report

The Phuket Property Report, the latest quarterly subscription report by CBRE Research in Thailand, is an initiative designed to bring professional analysis and transparency to the growing Phuket property market.

The report provides detailed information and analysis from CBRE’s comprehensive and unrivalled Phuket and overall Thailand database, combined with our own exhaustive market and property surveys.

Thailand Hotel Report

The CBRE Thailand Hotel Report provides the most up-to-date and in- depth analysis built on CBRE’s comprehensive databases and unrivaled experiences in the hotel market in Thailand – available now in a quarterly format.

It provides a one-stop access to CBRE’s market-leading data and analysis, enabling timely, informed decision-making on management, development, and investment strategies in the hotel market, and offering subscribers a tactical edge.

Bangkok Retail Report

The CBRE’s Bangkok Retail Report is produced quarterly by a professional retail research team who closely monitor the complex retail database so that our in-depth analysis will definitely be the most meaningful.

The report covers all necessary topics which could be a part of your strategic future business plan. Retail supply, demand, take-up, occupancy, and other indicators that have an effect on the retail market such as retail sale index are all provided.

MARKETVIEW BANGKOK OVERALL

CONTACTS

FOR MORE INFORMATION ABOUT THIS BANGKOK OVERALL MARKETVIEW,

PLEASE CONTACT:

CBRE Research, Thailand

James Pitchon

Executive Director 46th Floor, CRC Tower,

All Seasons Place,

87/2 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 t: +66 (0)2 119 2901 e: [email protected]

Chotika Tungsirisurp Senior Manager 46th Floor, CRC Tower, All Seasons Place, 87/2 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 t: +66 (0)2 119 2929 e: [email protected]

Nattaporn Kaewviyudth Senior Analyst 46th Floor, CRC Tower, All Seasons Place, 87/2 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 t: +66 (0)2 119 2924 e: [email protected]

Thatchanan Siddhijai Senior Analyst 46th Floor, CRC Tower, All Seasons Place, 87/2 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 t: +66 (0)2 119 2919 e: thatchanan.siddhijai [email protected]

All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including projections, has been obtained from materials and sources believed to be reliable at the date of publication. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. Readers are responsible for independently assessing the relevance, accuracy, completeness and currency of the information of this publication. This report is presented for information purposes only, exclusively for CBRE clients and professionals, and is not to be used or considered as an offer or the solicitation of an offer to sell or buy or subscribe for securities or other financial instruments. All rights to the material are reserved and none of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party without prior express written permission of CBRE. Any unauthorised publication or redistribution of CBRE research reports is prohibited. CBRE will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on information in this publication.