REVIEW OF BANGKOK PROPERTY MARKET : REVIEW OF BANGKOK PROPERTY MARKET


Outline of Presentation: Outline of Presentation I. Economic Review II. Market Update Office Retail Condominium Apartment Serviced Apartment Hotel Industrial


ECONOMIC REVIEW: ECONOMIC REVIEW


Economic Review: Economic Review Summary of Economic Indicators Sources: Actual & Preliminary Data (1998-2004) from BOT, NESDB and NSO Forecast Data from EIU 2007F


OFFICE MARKET: OFFICE MARKET


Bangkok - All Grade Office Market Overview : Bangkok - All Grade Office Market Overview Average Gross Rentals Per Month Annual Supply U/C Probable 365 341 Rentals (Bt/sq.m./month)* 79,100 165,700 Net Absorption (sq.m.) 13.3% 14.4% Vacancy Rate (%) 83,000 164,000 - Suspended (sq.m.) 141,000 147,000 - Probable (sq.m.) 463,000 315,000 - Under Construction (sq.m.) 687,000 625,000 Future Supply (sq.m.) 7,074,000 7,068,000 Total Stock (sq.m.) 8,800 104,000 Withdrawal 15,000 5,700 New Completions (sq.m.) Jan-06 Jul-05 As at Market Summary Update over the past six months * Rentals for All Grade, Bangkok


Slide7: Boundary of Central Business District (CBD) 1. The Northern Central Business District (CBD North) Area Encompassing Rajdamri, Wireless, Langsuan, and Ploenchit Road 2. The Southern Central Business District (CBD South) Area Covering areas in Sathorn, Silom, Surawongse and Si-Phraya Road


Definition of Prime Quality Office Space: Factors Used for Grading Buildings Column free and centre core Size of floorplates and dimension Flexibility of layout Vertical transportation Type of air conditioning (VAV vs CAV) Quality of internal and external finishes (Glazing/ Type of façade/ Lobby finishing) Parking Traffic circulation within the development Accessibility to public and mass transit systems Other amenities provided in the building or in the immediate vicinity Standard of building management Definition of Prime Quality Office Space


CBD – Prime Grade Office Market Overview : CBD – Prime Grade Office Market Overview Update over the past six months Average Gross Rentals Per Month Annual Supply U/C


Office Market Outlook: Office Market Outlook Overall office market sentiment is expected to remain strong on the back of the strong appreciation in rents despite the slowing pace of economy and prevailing political uncertainty. This has encouraged more new project developments, leading to a gradual pick up in level of new supply. Over the next 18 months (end 2007), most new supply will be located outside CBD. No major completion is expected in CBD. Rent in the CBD is expected to rise further. The lack of choices in the CBD and rising occupation cost could draw demand to shift towards newer developments located in the City Fringe area where improved transportation has influenced their choices.


RETAIL MARKET: RETAIL MARKET


Slide12: Bangkok- Retail Market Overview Annual Supply


Retail Market : Outlook: Retail Market : Outlook More intense competition is expected in the Rajaprasong area, where two giant retail operators, i.e. Siam Paragon and Central World Plaza, will be the main players. The opening of Siam Paragon will change Thailand’s retail landscape, forcing most players to rethink about their approaches. Repositioning through store facelifts and offering of various retail formats, with an eye on the more upscale market are presently witnessed. Consumers confidence is not expected to recover over 2H06 provided that the political conflicts drag on. The opening of Suvarnabhumi International Airport will be one of the positive factors that could boost spending by locals and tourism potential in 2006.


CONDOMINIUM MARKET: CONDOMINIUM MARKET


Slide15: Boundary of Residential Central Bangkok Area 1. CBD Area Encompassing Silom, Sathorn, Surawongse, Si-Phraya, Rajdamri, Wireless, Langsuan, and Ploenchit Roads 2. Sukhumvit Road Starting from Sukhumvit Road Soi 1-63 and Soi 2-42 City Fringe South Encompassing Rama III, Charoenkrung, Chan, Nanglinchee, Naradhiwas Rajanakarindra Roads Inner North : Phaholyothin Area 5. Riverside : Along Chao Phraya River south of Siphaya Road


Slide16: Central Bangkok- Condominium Market Overview


Condominium Market : Outlook: Condominium Market : Outlook The extension routes of BTS and MRTA will widen the potential area for condominium developments outside Central Bangkok area. More new units will be launched outside Central Bangkok area. The current political issue will have a greater direct negative impact on the level of take-up in the high end residential sector. Demand level could be dampened by the large amount of units completed over the next 3 years and higher cost of acquisition due to an increase in interest rate.


APARTMENT MARKET: APARTMENT MARKET


Slide19: Boundary of Residential Central Bangkok Area 1. CBD Area Encompassing Silom, Sathorn, Surawongse, Si-Phraya, Rajdamri, Wireless, Langsuan, and Ploenchit Roads Sukhumvit Road Starting from Sukhumvit Road Soi 1-63 and Soi 2-42 3. City Fringe South Encompassing Rama III, Charoenkrung, Chan, Nanglinchee, Naradhiwas Rajanakarindra Roads Inner North : Phaholyothin Area Riverside : Along Chao Phraya River south of Siphaya Road


Slide20: Central Bangkok - Apartment Market Overview Market Summary Update over the past six months - Proposed (Units) 0 46


Apartment Market: Outlook: Apartment Market: Outlook Sustained economic expansion, though at a slower pace, will continue to support growth in demand for luxury rental accommodations in Bangkok. The leasing market is expected to be active towards the end of the year following the increase in number of expatriates. Given higher competition from condominium units for rent in 2006, landlords of existing projects are expected to be competitive in their asking rentals. Limited new completions make new apartment projects able to command much higher rents than market average.


SERVICED APARTMENT: SERVICED APARTMENT


Slide23: Central Bangkok Serviced Apartment Market Overview Future Supply (units) Jul-05 Jan-06 Market Summary Update over the past six months As at


Serviced Apartment Market: Outlook: Serviced Apartment Market: Outlook Overall demand for serviced apartment in Bangkok is expected to remain strong over 2006 following the growing number of newly issued work permits and the permission to rent units on a short-stay basis after obtaining hotel license Level of future supply will determine the level of competition in each sub-location. In the next six months, strong competition is expected in Sukhumvit area, resulting in a possible decline in the occupancy level as well as a greater discount offered by developers to maintain occupancies. Apart from locations and quality of projects, the standard of services and management will be a key competitive edge amongst serviced apartment projects.


HOTEL: HOTEL


International Arrivals to Thailand: International Arrivals to Thailand International arrivals to Thailand exhibited strong growth between 1997 and 2002 until SARS and the Iraq war affected arrivals in 2003 Strong 16.4% y-o-y rebound in 2004 despite unrests in southern provinces and avian flu; impact of tsunami limited as it occurred during last few days of the year Impact from tsunami showing in 2005 – 3.5 million visitors during YTD April 2005, down 9.5% y-o-y May have difficulty achieving target of 13.38 million in 2005 due to tsunami impact Prospects for 2006 optimistic – ambitious target of 15.12 million visitors; longer term plan to reach 20 million arrivals by 2008


Major International Source Markets* in 2004: Major International Source Markets* in 2004 Malaysia and Japan remained as Thailand’s two largest international source markets in 2004 Other major source markets include South Korea, Malaysia, Singapore, Mainland China and the UK Arrivals from Mainland China expected to increase as the Thai government has reached an agreement with the Chinese government to encourage tourism between countries under the ‘searn-Sukhothai accordance’ TAT hopes to target 1.5 million Chinese visitors in 2006


International Arrivals to Bangkok: International Arrivals to Bangkok As a key gateway to Thailand, international arrivals to Bangkok have generally followed a similar trend to that of Thailand Strong 19.6% y-o-y rebound in 2004 to 11.7 million visitors backed by recovery in global and regional economies; growth also driven by higher MICE arrivals and growth of budget airline industry YTD 2005 – no official data from TAT but figures from the Association of Thai Travel Agents (Atta) shows that tourist arrivals handled by its members at Bangkok International Airport (Don Muang) dropped by 10.25% y-o-y to 1.54 million Outlook for 2006 positive – supported by continued efforts to increase tourist traffic


Major International Source Markets* in 2004: Major International Source Markets* in 2004 Mainland China and Japan remain as Bangkok’s top source markets in 2004 while the US replaced South Korea as the third major source market Significantly more arrivals from the US, Australia and Malaysia Strong growth in Mainland Chinese visitors, up 24.2% y-o-y in line with the growing outlbound Mainland Chinese market Noticeable decline in South Korea arrivals in 2004 – possibly due to greater preference for resort destinations e.g. Phuket (+128%) and Pattaya (+75%) recorded strong y-o-y growth


Domestic Tourism in Bangkok: Domestic Tourism in Bangkok Huge domestic tourism market The number of Thais visiting Bangkok rose 16.3% y-o-y during 2003 as the SARS outbreak in Asia and Iraq war led more Thais to travel within their country Crossed the 20-million mark in 2004 with TAT reporting 21.1 million Thais visited Bangkok


Bangkok Hotel Market Overview: Bangkok Hotel Market Overview Total of 313 accommodation establishments in Bangkok with 60,924 rooms in 2004; this represents an addition of 6,020 rooms during the year Overall hotel market is very active in 2004/YTD 2005 - with announcements of new projects, rebranding exercises and refurbishment works Statistics from Jones Lang LaSalle Hotels show more than 4,500 new rooms in the pipeline (as at end Sept 2005) Major future supply include Millennium Hilton Bangkok (543 rooms), Le Meridien Bangkok (350 rooms), Crowne Plaza Sukhumvit (342 rooms)


Five-Star Hotel Performance in Bangkok: Five-Star Hotel Performance in Bangkok Trading performance improved in 2004 – supported by growth of tourism sector and the MICE segment This continued into YTD Sept 2005, despite the persistent troubles in Southern Thailand Room demand remained strong, with occupancy averaging 74.4% during YTD Sept 2005 – up 3 percentage points y-o-y Likewise, average daily rates (ADR) strengthened by 10.3% y-o-y to THB 4,768. This helped to raise revenue per available room (RevPAR) to THB 3,547 for YTD Sept 2005 or 15% y-o-y


Bangkok Market Outlook: Bangkok Market Outlook Overall tourism and hotel industry outlook positive Aggressive efforts by the Government to increase arrivals Phase 1 opening of new Suvarnabhumi International Airport in 2006 will allow the airport to handle 45 million passengers annually Growth in higher-yielding MICE segment – new facilities to be completed at Siam Paragon and the Central World Hotel and Convention Centre Sustained growth in tourism industry will translate into firmer demand levels for city’s hotels and upside potential in room rates However, the substantial supply of new hotels lined up over the next few years may exert some pressure on occupancy and ADR growth if the tourism sector’s growth momentum cannot be sustained


INDUSTRIAL MARKET: INDUSTRIAL MARKET


Thailand– Key Industrial Area : Thailand– Key Industrial Area


CURRENT MARKET CONDITION: DEMAND: CURRENT MARKET CONDITION: DEMAND The total sold land in the Eastern Seaboard area stood at 33,700 rai, equivalent to a sale rate of 67%. Demand grew steadily from 1,800 rai in 2003, 2,300 rai in 2004 and 2,400 rai in 2005. Most of occupied land is located in the industrial estate which reflects tenant’s preference for more reliable standard of service and infrastructure provisions as offered by the IEAT governed industrial projects. Industrial Projects


CURRENT MARKET CONDITION: DEMAND: CURRENT MARKET CONDITION: DEMAND Automotive industry consisting of three main groups of industries, i.e. automotive assembly, automotive parts and upstream supporting industries:- Auto Alliance (Thailand) Co., Ltd. (Ford&Mazda) and General Motors (Thailand) Ltd. in Eastern Seaboard I.E., Toyota Motors (Thailand) Co., Ltd. in Gateway City I.E. and BMW Manufacturing (Thailand) Co., Ltd. in Amata City I.E. Electronic industry:- Distar Electric in Laem Chabang I.E., Mitsubishi Electric in Amata Nakorn I.E., and Samsung Electronics in Saha Inter-Holding I.P. Steel industry and Petrochemical and chemical industries. BHP Steel (Thailand) Co., Ltd. and Mitsubishi Chemical (Thailand) Ltd. in Eastern I.E. Recently, a promising trend in demand emanated from mini Factory for rent providers. Major players are Ticon and TFD. Tenant Profile


CURRENT MARKET CONDITION: SELLING PRICE: CURRENT MARKET CONDITION: SELLING PRICE Over the last 3 years, average asking price stayed relatively unchanged around Baht 2.5-3.0 Million The rigid price adjustment was mainly because developers took caution in adjusting prices against investors’ concerns on economic uncertainties and there was also a certain amount of supply (16,578 rai) still available in the market.


MARKET OUTLOOK: FUTURE DEMAND: MARKET OUTLOOK: FUTURE DEMAND 2006: demand is expected to be stable, in line with current political uncertainties and negative economic outlooks such as rising oil prices, high inflation, and rising interest rates. 2007-2008: demand will be stronger with the net take-up increasing 5% each year, following expanding trading partners’ economies and the completion of SBIA. 2009-2010: demand is likely to grow faster, with the net take-up increasing 10% each year, assuming risks from political and economic uncertainties are subdued. Factors Affecting Demand:- Demand Level:-


The Property Clock-Prime Quality: The Property Clock-Prime Quality


Slide41: Jones Lang LaSalle Research & Consultancy