Knight Frank shares insights into four real estate sectors in 2024, competition in the age of information age, and opportunities in sluggish economy

Knight Frank shares insights into four real estate sectors in 2024, competition in the age of information age, and opportunities in sluggish economy

Knight Frank shares insights into four real estate sectors in 2024, competition in the age of information age, and opportunities in sluggish economy.

 

Knight Frank Thailand shared its vision at the “Knight Frank Foresight 2024 Pivoting Towards Opportunities” Forum, highlighting opportunities and challenges in four real estate sectors – housings, industrial, hotels, office buildings – amid stagnant demands and disabling factors. The situation of condominiums under 3 million baht is worrying due to loan rejection rate and weaker purchasing power while real demand is expected to push the sales volume of horizontal property to around 4,000 units. The industrial sector is expanding following the boom of EV vehicles and data center businesses. Meanwhile, the office building sector is seeing a surplus, yet green buildings are promising thanks to the strong ESG trend.

                        Mr. Nattha Kahapana, Managing Director, Knight Frank Thailand, talked about the purpose of “Knight Frank Foresight 2024 Pivoting Towards Opportunities” which was to brainstorm for opportunities in the real estate market shadowed by the economic slowdown in 2024, coupled with challenges and risk factors from within and outside the country.

 

Domestic factors include low inflation, household debt, rising production costs, slow growth of the housing market due to high interest rates, as well as the loan rejection rate by financial institutions. International factors stem from the uncertainty of the world economy and trade resulting from armed conflicts in many areas. Global financial markets are highly volatile due to the impact of high interest rates. All these factors pose direct and indirect impacts on the economy and the landscape of the real estate market in Thailand.

 

However, 2024 still sees a positive trend from rising private investment and growing private consumption as the tourism sector is recovering, together with government policies to lower cost of living and stimulate spending through the Easy E-Receipt program.

 

“In navigating a business through periods of volatility, acquiring timely and precise data becomes crucial for effective market analysis and strategic planning. The ability to swiftly obtain accurate information gives a competitive edge. I firmly believe that the data obtained directly from end users by Knight Frank plays a crucial role in gaining insights into overall opportunities and challenges in the real estate market. This information allows for a comprehensive understanding and a detailed analysis of specific sectors, including residential properties, industrial estates, hotels, and office buildings,” said the Managing Director of Knight Frank Thailand

 

Booming EV and Data Center accelerate growth in industrial sectors.

 

Marcus Burtenshaw, Executive Director, Occupier Strategy & Solutions, said that the rising star business to watch in 2024 is ‘Data Center’ which is attracting strong interest from domestic and international investors, signaling increasing demand in industrial sectors.

 

Thailand’s industry saw an excellent performance in 2023, led by the electric vehicle sector, which showed an impressive growth, not to mention electronic products that were steadily expanding. The Eastern Economic Corridor (EEC) also played a key role in attracting investors and generating over 80% of all transactions. In terms of land sale, as much as 8,867 rai of land was sold, almost double the amount of the previous year.

 

The hotel sector depends on the return of tourists.

 

According to Mr. Carlos Martinez, Director of Research & Consultancy, the hotel sector has bounced back to the pre-COVID era. Room rates per night have significantly increased even though the number of tourists has not yet recovered to the pre-COVID day.

 

The major challenge for the hotel sector in 2024 is to bring the number of tourists back to the same level as before COVID. Considering the room occupancy rate in 2023, the number of hotel guests is currently only about 75%.

 

“The hotel sector situation is looking up. The room rate per night has increased remarkably, even higher than during COVID time. However, operating costs, such as wages and electricity, are rocketing above the profit rate. Putting everything together, the main challenge in 2024 is whether the sector will be able to recover the number of tourists to the same level as before COVID to ensure satisfactory profits,” said Mr. Martinez.

Office buildings are having a surplus problem, but green buildings are growing well thanks to the ESG trend.

 

Mr. Panya Jenkitvathanalert, Executive Director of Head of Office Agency, said the office buildings market is facing serious challenges from declining space occupancy and increasing supply, leading to the onset of excess supply.

 

“Despite a significant increase in space demand within the year 2023, it still couldn't keep pace with the influx of supply entering the market. This resulted in heightened competition among office building providers, providing tenants with a greater array of options.”

 

In 2023 transitioning to 2024, there are good signs from multinational companies looking to base in Thailand, especially the EV operators from China which are actively scouting for office spaces. In Thailand, Ratchada is a prime location for this group of investors. Thai companies are increasingly expanding and utilizing office spaces more extensively. This is because having a prominent office presence is crucial for enhancing the corporate image and credibility, making it more appealing to attract skilled professionals.

Mr. Ayuthaporn Buranakul, Executive Director, Department Head Workplace Strategy and Project Service, said that ESG-friendly (Environment Social and Governance) office buildings, such as green buildings, are becoming more popular, including office spaces that emphasize work-life balance.

 

Apart from tenants seeking sustainable buildings, there is a growing demand for carbon credit consultants among businesses planning for their future operations. Knight Frank boasts a team of experts in this field, prepared to offer valuable advice and guidance to customers.

Housing faces a slow growth.

 

Mr. Frank Khan, Executive Director and Head of Residential, said that in 2024 residential market still faces challenges with the high rejection rate from financial institutions and higher cost of developing in the project from developers. This has resulted in the development of projects with a price point below 3 million baht being less viable. Meanwhile, the focus of developers is shifting towards customers in the higher bracket, those with purchasing power for residential properties exceeding 3 million baht.

 

It is important to keep an eye on the slow growth of the housing market as it caters to real demand, where properties are purchased for actual residential purposes. Despite the ongoing demand, it is becoming evident that the market is struggling to keep up with the increasing supply that has entered the market in recent times. In general, the total number of houses sold is estimated to be around 4,000 units in the year 2024.

 

In 2023, the condominium market presented a total of 745,335 units, with 527,067 units sold, constituting 70.7% of the inventory. The average price per square meter stood at 145,000 baht. However, the quarterly sales data indicated that the market achieved only around 30% sales in each quarter, lagging behind the initial 40% rate achieved at the beginning of the year. This gap was attributed to the abundance of projects priced below 3 million baht. Meanwhile, projects in the 10-15 million baht price range experienced robust sales.

 

“The data reveals that buyers in this price segment are not exhibiting a sense of urgency in property purchases. However, despite this, the market still witnessed the sale of around 80% of the 7,000 units that were made available. This has not significantly impacted the overall condominium market, as the number of new units introduced is relatively low when compared to the existing inventory in the market,” said Mr. Khan

 

Wealthy Thais continue to show a preference for properties in London, England. In 2023, Knight Frank successfully closed deals totaling over 1,000 million baht. The demand from Thai millionaires looking to invest in real estate in England is still on the rise in 2024.