ANALYSIS: Asean integration, tourism drive investment trends

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Aliwassa Pathnadabutr of Bangkok/The Nation Via Channel News Network

Yahoo News (www.ph.news.yahoo.com)

15 February 2013

http://my.news.yahoo.com/analysis-asean-integration-tourism-drive-investment-trends-061003846.html

Bangkok (The Nation/ANN) – The Asean Economic Community (AEC) is undoubtedly one of the hottest topics right now for all economic sectors. Every business is thinking ahead about what impact it might have on its industry. Most of the impressions of the AEC are on the positive side. Developers in most property sectors link what they anticipate is the positive impact of the AEC to their market. However, we should also look at the other side of the coin: drawbacks including human-resource shortages and Thailand’s lack of competitiveness against other Asian countries. Tourism is viewed as being another hot growth sector for Thailand this year. With a record high of 22 million foreign- tourist arrivals in 2012, the country is demonstrating lasting strength in tourism. Projections for 2013 are for the industry to beat last year’s record with 24.5 million arrivals. This is good news for hotels and serviced apartments, which can expect higher occupancy and the opportunity to push for higher room rates. While there are some concerns over the strengthening baht, I think it will have a minor impact and should not deter tourists. The cost of accommodation, food and beverages in Thailand is still low by international standards and the country is well positioned in the range of tourist destinations it offers. If the country is safe from internal political problems and the economy continues at its present pace, tourism growth should continue and the hotel oversupply should improve. The trend to be seen this year is the growth in the property markets of major provincial cities including Chiang Mai, Khon Kaen, Udon Thani and Phuket – areas that are being increasingly focused on by several listed developers. I have seen expansion from large retail developers such as Central to provincial cities over the last few years. In 2013, developers in provincial cities will focus on small condominium units with a low entry price, which will target the local market. Major cities with the right fundamentals in terms of infrastructure, location and potential as a hub for neighbouring countries should do well and development will expand to other commercial property sectors. Development in smaller cities will depend on how much real demand there is and how long demand can be sustained. Growth in each market remains to be seen. Another trend for the residential market that will get Thai buyers’ attention this year is central London. With the strong baht and the exchange rate hitting a low of 46 baht (US$1.5) to the pound sterling, London is the ideal safe haven for international investors. I have seen this trend emerging since last year when rich Thais purchased central London properties as an investment as well as for their children studying in Britain, and I believe this trend will continue in 2013. Last, buying condos in Bangkok will remain an “in” trend for the long haul, especially one-bedroom units near mass-transit stations. As long as the number of units is in line with the growing working population in Bangkok, lifestyle changes and the ever-increasing importance of public transport will continue to support this trend. While we know there is steady real demand from end-users and long-term investors, the danger is that there are also many speculators in this market. Each developer should be keenly aware of the risk of a high proportion of speculators who may not be able to complete their purchase. There are still more “in” and “out” trends in the property market. I will share them with you in the next column. Aliwassa Pathnadabutr is managing director of CB Richard Ellis Thailand.

Orion Support Incorporated (OSI)

Dear Rick,

Following up from my initial request to you for support in finding a new office location for our company, Orion Support Incorporated.   Well, we moved in to the LTA Building on Perea Street, fifty meters or so from Paseo de Roxas this weekend, only a 4 minute walk to AmCham and under excellent terms.

While I think you assigned both Morgan Mcgilvray and Sherdil Rana to support our original request; as you know, Morgan was very tied up with his wife giving birth during the period we identified this location and negotiated with the landlord, Mr. Mike Arroyo. Yes, the former First Gentleman. But in my short interaction with Morgan, I can see that he is a solid, young professional.

With regards to Sherdil, I want to tell you that with 35+ years of interviewing hundreds and hundreds of individuals, I was impressed with his professionalism, focused support and “can-do” attitude  from the point of identifying our potential office space, and through the negotiation stages prior to the signing of our 6 year contract.  I was impressed with his considered opinions, insightfulness with regards to Philippine business culture and his sage advice related to our strategy in the negotiation process.  Sherdil was able to negotiate a rental rate per square meter about 150 – 200 pesos less than the going rate in this area, and with only a 7% increase after 24 months. Add to that, he secured for us three parking slots at no additional cost, two months security deposit versus the standard three, and two months advance rent to be applied to the front end of our contract versus the back end as is the case in most rental contracts. And, he got the landlord to repaint the entire office with three coats of mildew resistant paint at their expense.   But best of all, we were given a 6 year lease, with only having to give two months notice and forfeit only our two month security deposit to move out anytime with no additional penalty!

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