Boston, MA -- (ReleaseWire) -- 02/10/2014 -- The Thai commercial real estate sector is proving resilient to the political turmoil in the country, with investors appearing unfazed by protests on the streets of Bangkok. Our view is that bouts of political unrest are in many ways 'the new normal' in Thailand, and unless unrest is particularly prolonged, we do not see much impact on investor sentiment.
New rules on listing real estate investment trusts (REITS) on the Thai stock exchange are due to come into effect in January 2014. The country currently has a large number of property funds, but none will be approved once the REIT rules come into effect. While there appear to be questions over how REITS will be taxed, there have been reports that some property firms are planning to list REITS in 2014.
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We see steady rental rates in the office sub-sector in all three cities, with Bangkok in particular recovering from some oversupply in the market. The development pipeline in Bangkok is relatively small, which should be positive for landlords.
The retail sub-sector is the only one in which we see growth in rents in 2014, up by 5% in each city. This is supported by rising incomes and strong tourist arrivals. Retail rental rates are particularly high in the capital, Bangkok, affected by the rise in luxury retailing in the city.
While export figures in 2013 have disappointed, we believe that over the longer term Thai exports will rise steadily, providing solid demand for industrial space. Warehouseing and logistics space is also in demand in Thailand, to serve the country's goods export sector. This is particularly the case in Pattaya-Chonburi. However, it is only in Bangkok where we see industrial rents rising over the next year, as the capital starts from a lower base than multinational manufacturing centres elsewhere in the country.
- New rules are in place stating that from January 1 2014 property funds will no longer be allowed to make initial public offerings (IPO) on the Stock Exchange of Thailand. Instead, REITs will be used. There are already reports of REITs preparing to list, although we note that there are also concerns over a lack of clarity on how REITs will be taxed.
- WHA Premium Factory and Warehouse Freehold and Leasehold Property Fund is reported to be planning a REIT in 2014.
- Bangkok office developments in the pipeline include Equinox at Paholyothin Rangsit, AIA Capital Tower at Ratchadapesek, Bhiraj Tower at Sukhumvit, Magnolia Boulevard at Ratchadamri road and G Land Tower at Rama 9.
- Retail developments in Bangkok include Central Embassy and EmQuartier.
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