In 2013, we highlighted the potential for large state-owned development sites around Bangkok. State agencies were largely dormant in tendering these sites for private sector investment until 2019. This was when the State Railway of Thailand (SRT) successfully tendered 22 hectares of land at Makkasan, adjacent to a forthcoming high-speed rail (HSR) station just north of the city centre. Also in 2019, the SRT was unsuccessful in securing bids for a five-hectare parcel near Bang Sue Central Station in northern Bangkok, which we will focus on below.
Bang Sue Grand Terminal, which opens later in 2021, is slated to become Southeast Asia’s largest transit-oriented rail hub over the next decade. It is expected to serve up to 1.5 million passengers per day by 2037. The immediate vicinity encompasses 157 hectares of SRT-owned land, available for development. It is 30 percent larger than the districts of Otemachi, Marunouchi and Yurakucho, surrounding the Tokyo Station, and roughly half the size of the Pudong CBD in Shanghai.
Figure 1: Image of Future Development
Copyright by JICA Source: JICA, November 2017
Current land-use regulations permit up to 16 million square metres of GFA across the area, which could yield up to eight million square metres of NFA under local conventions. A 2017 JICA study, supported by JLL, suggested that only one-third of the total buildable GFA should be developed based on market conditions at the time, including a combined 800,000 square metres (NLA) of office and retail use, 30,000 condominium units, and 6,000 hotel keys, among other elements.
As we embark upon 2021, vacancy is rising across the office market as occupiers adjust to new realities post COVID. Retail operators and brands are working feverishly to adopt practices that facilitate omnichannel operations and adapt to the rapidly growing e-commerce market, which has grown 15-fold in the last four years. At the same time, the closing of international borders since early 2020 has put significant pressure on the condominium market, which was already weak and over-supplied pre-COVID as foreign investors have been unable to enter Thailand to view and purchase units.
Over the next five years, supply pipelines across property classes are scheduled to exceed projected demand. Owners and occupiers in the office market are likely to see rental values below pre-COVID levels for much of the next decade, much as was the case post-Asian Financial Crisis. Retail brands and operators are looking to a future where traditional bricks-and-mortar formats will look very different from today, while residential and hospitality requirements are also in the midst of transformation due to COVID-19.
The Makkasan project on SRT land proceeding with the expected delivery of roughly one million square metres of NLA across commercial, residential, hospitality and lifestyle between 2027 and 2030, on top of the existing supply. While this future pipeline will provide occupiers and investors with a wide selection of property types, we are slightly concerned whether the development of Bang Sue may be too much, too soon?
