Major developers are turning to mixed-use projects for sustainable income amid land supply shortage and changing consumer behaviors
Amid a shortage of available land in the central business district (CBD) of Bangkok, leading property developers have turned to mixed-use developments combining hotels, offices, retail outlets, parks and luxury residential units to boost revenue and generate sustainable income.
TCC Asset Co Ltd, the property arm of beverage tycoon Charoen Sirivadhanabhakdi, leads the trend with an investment budget of Bt148.5 billion for three mixed-use complexes One Bangkok, The PARQ and Samyan Mitr Town.
Magnolia Quality Development Corporation Ltd, the real estate unit of Charoen Pokphand Group (CP Group), has mapped up plans for three mixed-use projects Forestias, Whizdom 101, and Icon Siam, at a total investment of Bt170 billion.
In an portfolio expansion, Singha Estate of the Bhirombhakdi family, has invested in a mixed-use project on Asoke road. The Singha Complex has a market value of Bt4.2 billion.
Meanwhile, The Mall Group is developing Bangkok Mall, another mixed-use property of retail outlets and office space on Bangna-Trat road.
Siam Future Development Co Ltd is teaming up with SF Development Co Ltd and IKANO Retail Asia for the development of Mega City on land in the vicinty of Mega Bangna at a total cost of Bt67 billion. The project will consist of two hotels, residential and office buildings. The location is expected to draw 50,000 people.
Dusit Thani Plc has joined up with the Central Group to redevelop the famed Dusit Thani hotel on Silom road as a mixed-use project of hotel, residential units, retail and office premises.
Other property developers, such as Origin Property Plc, Supalai Plc, Grand Canal Land Plc, LPN Development Plc and Country Group, are also turning to mixed-use properties for higher revenue and sustainability.
A survey by The Nation shows an estimated total investment of Bt649.2 billion in mixed-use projects till 2025, mainly due to land shortage and Bangkokians' preference of staying close to where they work as well as retail and entertainment venues.
“Rising land prices and volatility in different property sectors are making single-use developments less favourable,” says JLL managing director Suphin Mechuchep.
Faced with the challenges and comฌpetition in the market, developers are increasingly opting for the development of mixed-use projects, both large-scale complexes and single buildings, according to property consultancy JLL.
“In addition to existing mixed-use developments, there are several new projects coming on stream including One Bangkok, The Icon Siam, The Parq, Samyan Mitrtown and Singha Complex,” she added.
A utilisation of space, mixed-use developments bring about land use synergies. Combining multiple facilities within a single project allows the developer to draw on common resources, lowering development cost and maximising land use.
Furthermore, each component within the development complements the others.
Retailers benefit from a steady flow of consumer traffics from condominium residents, with the convenience of shopping right on the doorstep, as well as hotel guests and office workers.
For office tenants, the diverse offerings within a mixed-use development raises the appeal of a company among the staff.
The presence of hotels and residential units within the same development provides an added benefit for office workers and visitors.
These conveniences reflect the goal of mixed-use developments in catering to the modern urban lifestyle.
“Mixed-use developments are not limited to large-scale projects as several single buildings also offer a mix of facilities in a growing trend,” Suphin said.
“In view of the changes in consumer behaviour and rising land prices, we revised the plans for our projects in the Vibhawadi-Jatujak area to mixed-use developments. The two properties Lumpini Tower Vibhawadi-Jatujak and Lumpini Park Vibhawadi-Jatujak are being built at a combined cost of Bt5 billion,” said PLN Development's chief executive officer and managing director Opas Sripayak.
He said the new business model was a result of surging land price in Bangkok's business district and areas close to the existing and planned mass transit routes.
He pointed out that if the company purchased a plot for residential development at over Bt1.5 million per square wah, the sales price will have to set at above Bt250,000 per square metre a level beyond the purchasing power of most housebuyers, in order to make a profit.
To generate higher sales and recurring incomes, the company has departed from single-use residential projects to mixed-use complexes with retail outlets and office space in line with customers' preference, Opas said.
Siam Commercial Bank's Economic Intelligence Centre (EIC)said that the trend of mixed-use developments has caught on in most countries, such as the Marina Bay Sands in Singapore.
With numerous developers competing in the Thai market, mixed-use projects will help property firms lessen business risks with recurring rental incomes from hotels, office space and retail outlets.
“Mixed-use projects comes with a new ecosystem through the integration of work, home, and lifestyle in one place. It also create higher market value for the properties,” the research said.
If a project is designed to be the landmark of a location, it will become a new tourist destination in the area. For example, after the opening of the US$5.5-billion Marina Bay Sands in Singapore in 2010, the number of tourists to the island state has grown from an average of four per cent a year to 10 per cent in the year 2010-2013, the centre said.
Prasert Taedullayasatit, honorary president of the Thai Condominium Association, also shared the view that the new business model was caused by changes in consumer behaviour and high land prices, making it difficult for the development of single-use projects.
Faced with the major expansion of leading property players in the market and the digital disruption, companies with limited financial resources are turning their attention to the design of unique residential projects and better aftersales services in order to stay afloat, he said.
The development of a mixed-use project requires long-term funding as the return on investment could take as long as seven years. Currently, most developers lack the financial prowess, said Prasert, who is also Pruksa Real Estate Plc's chief executive officer for the premium market.
Thus, lesser players will have to turn to smaller residential projects in locations close to the business district, retail outlets and other facilities, he said.
“Although we are not in a position for mixed-use projects, we could still develop residential properties that cater to the lifestyle of our customers as a way to cope with the capital and digital disruptions,” Prasert concluded.