The Nation


property scene

Renewed Japanese confidence in Kingdom spurs growth of Thai real estate market

Japan has long been one of the largest foreign investors, principally in manufacturing. It accounted for 30 per cent of all FDI last year. While the sentiment of Japanese manufacturers was dampened by the 2011 floods, Japan regained its confidence in Thailand and continued its commitment to invest and expand its production base here. With over 1,350 Japanese companies, the industrial real estate market has been driven by Japanese demand, besides local demand.

Japanese also account for the largest expat community - 32 per cent of work permits. Sukhumvit from Sois 39-55 and surrounding areas where the Japanese community is concentrated is seen as "Little Tokyo" with many Japanese restaurants and supermarkets. The Sukhumvit rental market is largely driven by demand from Japanese tenants.

In residential sales, Japanese investors have a very small share. However, after the Japanese tsunami in 2011, we began to see more and more Japanese buyers in the Bangkok condominium and resort home markets. We believe the trend will continue.

Japan has also had a large impact on the retail landscape from retail formats to brands, particularly in F&B, as Japanese food is one of the most popular cuisines. Within retail development, Japanese restaurants and chains are likely to outnumber Thai restaurants. Many of the retail concepts seen today have also been inspired by Japanese brands and trends.

During the rising real estate cycle of the 1990's and 2000's, the presence of Japanese developers in the Bangkok market was minimal compared to other countries such as Singapore and Hong Kong.

However, since 2010 there has been a general drive by Japanese developers to diversify overseas. Japanese real estate companies retain a strong interest in Southeast Asian markets and Thailand remains an attractive option. This year two significant joint ventures have already come to light.

Ananda Development and Mitsui Fudosan have agreed to set up Ananda MF Asia Co to operate on a project-by-project basis. The new JV has already acquired a five-rai site next to a mass transit line on Rama IV Road that will be developed into a condo.

Asian Property has also formed a joint venture with Mitsubishi Estate Group, Japan's largest property firm by assets, to develop three projects in the pipeline worth Bt7.50 billion.

Thailand is seen as a top choice for many Japanese real estate companies. They tend to be already familiar with the economy from their manufacturing experiences. The country also has an edge in the availability of technical know-how and skilled labour and an established Japanese expatriate community with a full range of facilities and amenities catering to this market.

We hope that Japanese companies will continue to play a greater role in the real estate market and make positive contributions as it has in other industries. Japan is well recognised for its key strengths in technology and construction quality and we believe this is where Japanese contractors can add value to the local industry and add a premium to new projects.

The role of Japanese contractors in our market has been limited to date, but they can certainly make significant inputs, particularly in the design and construction of high-rise developments.

The long established relations between Thailand and Japan mean a better understanding of each other's work culture and practices. CBRE also attaches significant importance to the Japanese market in the industry and has set up a dedicated Japan desk with Japanese staff to service this business.

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