Thailand’s investment market is evolving

October 29, 2021 / By  

The COVID-19 pandemic has had a severe impact on Thailand’s real estate markets. The lockdown and international travel restrictions were especially damaging for investor sentiment and consumer confidence. Now Thailand is planning to reopen its major tourism destinations, including Bangkok, Chiang Mai and Krabi, from November.  With an eye on the reopening, investors and developers wisely look at the potential long-term changes in the real estate investment market and how to best prepare.

According to JLL Thailand Research, 2020, transaction volume decreased by more than 40% in 2019, the lowest annual volume measured since the great recession of 2007-2009. Conversely, the first half of 2021 saw transaction volume touching 90% of 2020’s total volume.  The growth indicates that investors adapted to the market conditions and were able to find opportunities.

Figure 1: Annual Investment Volume (Excluding development land) (2008-2021 YTD)

Source: JLL Research

The logistics and industrial sector saw a significant increase in transaction volume in 1H21, up by 76.4% from 2020 and accounting for 56% of total volume. This increase in volume was in response to the explosive growth of the e-commerce industry in Thailand (as a share of the total retail market), thanks to lockdowns and social distancing. JLL predicts that investment in the logistics market will see continuous growth over the next five years as developers seek to ride the wave of demand generated by e-commerce operators and third-party logistics firms. The logistics sector poses an exciting opportunity for international investors to enter the Thailand market, particularly if they bring sector expertise and a loyal occupier base.

Social, environmental and sustainable awareness continues to have increased visibility throughout international real estate markets. Thailand is much the same, with a rising percentage of commercial buildings seeking to achieve green and wellness standards/certifications such as WELL and LEED. The trend looks set to intensify with an increasing number of Thai firms signing up for energy pledges, such as the UN’s Race to Zero Campaign. With real estate being a major source of emissions, owners and investors need to make serious considerations about their investment priorities. JLL expects that investors will increasingly focus investments in high-efficiency and certified buildings, which are viewed as safer long-term investments. Though the shift to sustainability was a trend before the pandemic, occupiers and investors appear to have increased enthusiasm as we now look towards the post-covid landscape.

JLL expects to see a considerable rebound in real estate investment volumes in 2022, as investor sentiment picks up, thanks to the high vaccination rate and the return of international travel. Logistics investment volume will continue to increase as a share of total investment volume. Green and efficient buildings will gain from the increasing interest of investors as they look to invest in assets that will keep their appeal in the long term. Thailand’s real estate investment market is changing rapidly with new opportunities in mature and emerging sectors, and investors will adapt quickly to avoid being left behind.

The major trends present in the market before the pandemic are likely to become central to investor consideration, with the market’s renewed focus and importance post-lockdown.

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