Construction companies expanding into real estate investment for the first time since the 1997 crisis, says JLL

Construction companies expanding into real estate investment for the first time since the 1997 crisis, says JLL

Thailand’s total value of investments along all property sectors the first of this year has reached 19.2 billion baht. Just two transactions in Bangkok made more than half of the total, with the sale of an 11-rai development site near the Mo Chit skytrain station and the sale of the Sun Towers office complex, according to the property consultancy JLL.

Publically disclosed real estate investment activities in Thailand by private and public companies and funds are monitored by JLL’s Thailand Property Intelligence Centre. In the first half of 2019 it recorded four transactions worth more than 1 billion baht each. The largest was the 5.7-billion-baht sale of Sun Towers, an office complex on Vibhavadi-Rangsit Road, by Singha Estate Plc to its sponsored REIT, S Prime Growth Leasehold Real Estate Investment Trust (SPRIME).

The second largest investing in the first half was Sino-Thai Engineering & Construction Plc (STEC) with two transactions totaling more than 5 billion baht. STEC acquired an 11 Rai site near the Mo Chit skytrain station in April. Purchased for 4.3 billion baht from U City Plc, the site is to be developed into an office complex. The STEC subsidiary ST Property & Logistics Co Ltd in June purchased for 957 million baht the Summer Hill community mall and Summer Hub office building. This property is located next to the Phra Khanong Skytrain station and the previous owner was Boutique Corporation Plc.

"Sino-Thai's investments thus far in 2019 mark the continuance of the re-entry of contractors and construction companies expanding into real estate investment, after nearly two decades of absence following the 1997 Asian financial crisis," said Suphin Mechuchep, managing director of JLL Thailand.

Additional cases of real estate investment by construction firms include Sena Development Plc to develop Spring Tower, an office tower near the Ratchathewi skytrain station and Saeng Fah Construction's joint venture with Aira Securities Plc and

Thai Obayashi, a contracting firm, acquired a site next to the Nana skytrain station in 2017 for a then-record 2.6 million baht per square wah. Currently the O-NES Tower is being built on this land. It is the first office building investment since the Nantawan Building, near the Ratchadamri skytrain station, in 1991.

February marked the most expensive land transaction of 2019.   That was when Shangri-La Hotel Plc purchased a 658-square-wah site in Thong Lor for 1.9 billion baht, or 2.86 million per square wah.

"The price per square wah for the site acquired by Shangri-La is the highest per-square-wah price the market has seen for the development of a hotel, but did not break the all-time record of 3.1 million baht per square wah achieved by the 880-square-wah plot on Lang Suan Road that JLL sold on behalf of the owner in 2018," said Mrs Suphin.

"High land prices and the new land and property tax regulations slated for enforcement in 2020 have motivated and will continue to motivate more owners of underutilized land or land with underperforming buildings in Bangkok's prime locations to put their sites on the market this year.

"This will mean more opportunities for well-capitalized investors to acquire prime sites for their new development projects. We believe that visionary investors will still be able to achieve decent returns on investment in their future development projects despite rising land costs."

Outlook: Most of the major real investment activities in the remainder of 2019 are expected to be land and commercial property investment transactions in Bangkok, according to JLL.

With more manufacturers relocating their China-based operations to Southeast Asia the firm anticipates investment activities to rise in the industrial / logistics sector, particularly in the Eastern Economic Corridor. The fast growth of e-commerce has feed the need for logistics real estate in Thailand.

Source: 

https://www.bangkokpost.com/business/1720739/property-shift-detected