Office growth mirrors the economy

The growth in Bangkok’s office market increased in line with the remarkable development of the Thai economy in the late 1980s and early 1990s, as the total supply of office space expanded from around 1.5 million square metres in the early 1990s to about 7.5 million sq m currently.
Companies began to realise the advantages of having quality offices in terms of location, convenience, prestige and effects on employee productivity. Thailand’s economic revolution drove demand for increased office space, and office projects began to offer better premises and facilities, including central air-conditioning, higher ceilings, and improved building floor plates. Tenants and developers soon moved away from office condominiums, as the strata title of such developments made it more difficult to offer seamless building management and services.
Bangkok’s Central Business District (CBD) is now defined by CB Richard Ellis as the area incorporating Silom, Sathon, Surawong, Rama IV, Phloen Chit, Wireless, early Sukhumvit, and Asok roads, and sois in between, but in the early days, the CBD was synonymous with the Silom area. During the 1990s, Thaniya Plaza was one of the most sought-after addresses, with monthly rents of 800-900 baht per square metre. As development increased, the CBD expanded to Sathon and Rama IV, where both the U Chu Liang Building and Abdulrahim Place are located. Opened in 1995, Rama Land Building was one of the first mixed-use developments in Bangkok, combining office, hotel and retail space. Office projects also sprouted up in the diplomatic area of Wireless Road, with All Seasons Place, another mixed-use project, a landmark in this area.
Before the Asian financial crisis, Thailand was one of the most attractive Asian economies for foreign investment, which fuelled demand for and growth in the office sector. However, the 1997 crisis led to many finance companies closing, pushing up vacancies, while other office projects that were under construction were suspended, or in some cases, abandoned as developers ran out of funds. The oversupply worsened in late 1998, and the total supply of roughly 6.3 million square metres suffered through vacancy rates of more than 30%. Vacancies were more pronounced in the CBD.
Some of the buildings suspended during the crisis were later revived by investors who purchased them at a bargain and completed the projects. Q House Lumpini, one of the most prestigious buildings in Bangkok today, was one such case. Other examples include the soon-to-be-completed Chamchuri Square (formerly C.U. Hightech Square), and Exchange Tower, located at the Asok-Sukhumvit junction.
The landscape for office development has changed since the crisis in many ways, as developers recognise the need to distinguish their products in order to compete. Design, facilities and services have all improved. More attention has been paid to the need for regular floor plates to eliminate wasted space. As companies have focused on cost savings, there has been a move toward smaller, more efficient offices, which requires floor plans that allow for easy subdivision. Most new buildings now offer higher ceilings, along with designs that cut down on noise.
Office rents in Bangkok are low when compared to other major cities both regionally and internationally. According to a recent CBRE report, office rents in Bangkok are the lowest of any major city in Asia, with the exception of Jakarta and Kuala Lumpur, and only a fraction of those in Hong Kong and Singapore.
Occupancy rates are now high in Bangkok (close to 90%), and given continually rising construction costs and the scarcity of quality CBD land, we believe that rents will have to increase soon as demand increases, and also in order to make future development worthwhile. Bangkok’s CBD is now firmly anchored by the BTS and MRT systems. Although office space outside the CBD can be had at a 10-30% discount over CBD space, this is a much smaller difference than in most other cities.
Going forward, demand for Bangkok office space will be driven by the country’s growing services sector. Any changes in regulation that encourage foreign participation would accelerate this growth. At the moment, Thailand lags many of its competitors in terms of the incentives given to international companies for setting up in Thailand, but we are hopeful that this will change as the country adopts to an increasingly competitive global economy.

Condominiums to get costlier in second half

Firms now see construction expenses stabilising, will factor them into projects

developers are planning to launch Bt50 billion worth of city-condominium projects in the second half. But home-buyers will have to shell out more money, because many firms have hammered in the rise in raw-material costs while pricing new projects.

With construction costs expected to stabilise in the second half of the year, developers are planning to launch city-condominium projects worth Bt50 billion during that period.

However, home-buyers will have to shell out more, because many developers have factored in the rise in raw-material costs while pricing new projects.

Many companies, including Plus Property, Sansiri, Property Perfect, Asian Property Development, LPN Development and Chaopraya Mahanakorn, delayed the launch of projects in the first half in the face of rising construction costs.

Property Perfect put off launching of six residential projects worth Bt18.3 billion until the second half, said chief operating officer Teerachon Manomaiphibul. Two of the six projects, Metro Par Ratchada and Metro Park Sukhumvit, are condominiums. The projects are worth Bt4 billion each.

"We delayed launching new city-condominium projects in the first half because we could not estimate how far the construction costs would climb and so could not decide prices for projects. Raw-material prices have seen a rapid rise since last year up through the first half. But we believe the prices will be stable [in the second half]. So we'll launch two city-condominium projects worth a combined Bt8 billion. We've factored in the rise in construction costs while setting prices for the new projects," he said.

LPN Development managing director Opas Sripayak said the company planned to launch four new city-condominium projects under the Lumpini Condo Town brand. The projects, worth about Bt8billion, will target the lower-income group by offering homes at prices under Bt1 million.

"The successful launch of Lumpini Place Rama IX-Ratchada last month boosted confidence in our business-expansion plans for the second half of the year," he said.

Asian Property Development senior executive vice president Visanu Suchatlumpong said his company planned to launch five new city-condominium projects worth a combined Bt10.5 billion in the second half.

They are the Bt800-million The Address on Phya Thai Road, the Bt3.2-billion Life@MRT Ratchada, the Bt1.6-billion Life@Ratchada-Huai Khwang and two projects worth Bt4.9 billion each in Sathorn Soi 12 and Sukhumvit Soi 28.

The company has revised prices 10-14 per cent for the new projects. The average price has risen from Bt70,000 a square metre to between Bt80,000 and Bt90,000, depending on the project's location, Visanu said.

"We've had to raise prices for new projects, in order to offset the rise in construction costs," he said.

Sansiri subsidiary Plus Property also plans to launch six new city-condominium projects worth a combined Bt10 billion in the second half.

Plus Property CEO Mayta Chanchamcharat said his company had delayed the city-condominium projects, because it wanted raw-material prices to stabilise before hammering in the rise in construction costs into new projects.

The company will launch the six projects under the My Condo label but with revised prices. The average prices will rise from Bt1.1 million to between Bt1.9 million and Bt2.1 million.

At a glance

n Property Perfect will launch two city-condominium projects after factoring in rise in costs.

n Asian Property Development has revised prices 10-14 per cent.

n Plus Property has hiked average prices from Bt1.1 million to between Bt1.9 million and Bt2.1 million.

By Somluck Srimalee
The Nation
Published on July 1, 2008

Now's the time to sell condos

Oversupply could push prices downward

Anyone thinking of selling a condominium should do so soon because prices are likely to drop in six to 12 months due to political uncertainty and oversupply, says Ian Soo, managing director of Hamptons Property.

Prices have already stabilised and as more units come on the market, they may be pushed down.

"I think there is an oversupply of units in central Bangkok and I think if you combine that with some sort of political uncertainty then what you will find is less demand," said Mr Soo. "This is effectively going to put pressure on prices."

He said that the downward price pressure was unlikely to be very pronounced in the 1-3 million baht condominium or townhouse segment. "I think the high end of the market will have some stock that will be harder to sell now, so it's more likely to affect the luxury end of the market."

As a lot of the property that was launched a few years ago is now coming on the market, developers will watch how sales pan out over the next six to 12 months. They are in a difficult position because of rising costs, but that does not mean they are going to be able to pass these on to the buyers.

"They can do that when the economy is strong and there is easy credit but not when the economy is stagnant," said Mr Soo.

While this raises fears that lower-quality buildings might be built, Mr Soo does not expect established companies to cut corners but will have to absorb some or all of the costs.

Whether lower prices could turn into a buying opportunity depends on what sorts of units come on the market, in Mr Soo's vie.w

And while sellers would get higher prices if they sell today, he said those who have money to spare are always going to be looking for investments, and property with rental yields of around 6% is not a bad place to park money. "But I think people are being a little bit cautious in this type of environment."

Some expatriate buyers too are holding back, though he says those who have money to invest are still active in the market.

The bright spot is in the rental market, which is unlikely to be affected by the anticipated price drop. But greater choice could lead to better-value units becoming available.

Demand right now is mostly for high-quality one- to two-bedroom units, even though the space is smaller. "There will always be people who will want 300 to 400 square metres, perhaps in an older building further away from the skytrain, but the majority of working professionals living here ... prefer smaller, more modern units."

Hamptons' clients, he says, prefer Sukhumvit as far as Ekamai, plus Silom and Sathon, and these are expected see both rental and buying demand.

Mr Soo said the real estate slowdown was widespread right now, but has not been as serious as in the UK and US because there are more cash buyers in Thailand, which has insulated the country from the credit crisis.

While many think it is good to buy during turbulent times, he said that a lot of people should keep their assets in cash if they are not sure what the situation will be like in a few months.

Although those who bought property during the 1997 meltdown did earn a big profit, this is seems easy in hindsight. "The economic crash of 1997 was huge, very sudden. This economic slowdown is not as dramatic."

Mr Soo urged the government to allow foreigners to get mortgages in Thailand. "They represent a very important part of the property market and expecting them to pay cash or not giving them financial support, something that they should do, is a mistake I think. Not all foreigners are really so rich that they can buy in cash."

NINA SUEBSUKCHAROEN

Developers adjust to cooling of condo fever

The condominium market that began heating up a few years ago is likely to start cooling down and reach a balance point as developers are more cautious about launching new projects when building material costs are volatile. At the same time, prospective buyers of condominiums may hesitate because of concern about higher costs of living and a decrease in their ability to afford new homes.

In fact, higher oil prices had been the factor creating strong demand for the condominium market as people were concerned about travelling expenses. Special interest was shown in those units near mass-transit routes and their planned extension lines.

According to a survey by Agency for Real Estate Affairs (AREA), the average sales rate of condominiums in six major locations _ Ratchada/Lat Phrao/Ratchayothin, Phloen Chit/Sukhumvit/Ekamai, Onnuj/Baring, Silom/Rama III, the western bank of the Chao Phraya River and Bangkok's outskirts _ rose by 40% in 2007 compared to 2006.

However, the average sales rate dropped by 7% in the first quarter of 2008 to 9,247 units from 9,895 in the same period last year.

The only two locations to enjoy an increase in sales were Sukhumvit and the western bank of the Chao Phraya River, up by 33% and 20% respectively.

The highest decrease in sales was in Ratchadaphisek with 46%, followed by Silom/Rama III with 43% and the outskirts by 0.1%, showing a significant downward trend in the condominium market.

Opas Sripayak, managing director of the low-priced condominium leader L.P.N. Development Plc, said the number of new condominiums launched in the first quarter of the year decreased compared to the same period last year.

''Some developers were not confident as volatile prices of steel and rising construction costs pushed unit prices higher while purchasing power was reduced because of inflation,'' he said.

Many developers shifted to develop more low-rise units as supply was limited and they expected single houses and townhouses would be more interesting to homebuyers while tax incentives lasted.

''Everything is becoming more expensive,'' Mr Opas said. ''Low-priced condominiums will be popular during a time of weak purchasing power.''

Teerachon Manomaiphibul, chief operating officer of the listed developer Property Perfect Plc, said higher construction costs were largely being driven by the doubling of steel prices and skyrocketing oil prices since last year.

As a result, construction costs for a condominium building that consumes a lot of steel have risen by at least 30% for construction of less than eight storeys and 35% for more than eight storeys.

Meanwhile, saleable area in a condominium building also has been reduced as stricter rules about environmental concerns require additional utilities in a high-rise residential building.

''Rising construction costs have forced many condominium developers to break their project plans. There will be no more projects at 30,000 to 40,000 baht a square metre,'' Mr Teerachon said. As condominium prices soar, townhouses in the same location might be an alternative.

''Though a condominium project may be sold out, if construction doesn't start or the financial status is not strong, developers may face lower margins and delays in unit transfers,'' he said.

Condo Focus (May 08)

Click the image to download the report

Real Estate scores over Bank deposits

Developer’s research indicates higher returns even after factoring in inflation

At a time when fixed deposits earn interest at only 2.5 per cent, property companies and agencies suggest buying residential property located close to the masstransit system – an investment that can generate a return of 7 per cent to 100 per cent.

The returns will depend on the term of the investment.

According to research by CB Richard Ellis Thailand, resale prices for residential projects located close to the mass-transit system and the Central Business District from the Asoke intersection to Soi Thong Lor range between Bt110,000 to Bt130,000 per square metre. This shows an increase of between 37.5 per cent and 62.5 per cent from Bt80,000 to Bt90,000 per square metre last year.

The rental price for serviced apartments in Silom and Sathorn has shown a strong rise from Bt289.5 per square metre in 2004 to Bt399 per square metre this year, a jump of 33.7 per cent. The Sukhumvit area is a close second with rents rising from Bt280.5 per square metre in 2004 to Bt365 per square metre, a rise of 30.1 per cent. Central Lumpini now commands rents of Bt360.5 per square metre, a rise of 18.6 per cent from Bt304 per square metre in 2004.

The demand for residential properties in the Central Business District is coming from foreigners who work in Bangkok. The two-bedroom type unit, with covered area falling between 90 and 130 square metres, has seen the strongest demand.

Residential projects at resort destinations such as Phuket, Koh Samui and Hua Hin have also seen strong demand. Investors buying property at these locations can expect a return on investment at an average of 7 per cent a year. If they sell the property within one or two years, they can expect a significant return on investments, CB Richard Ellis Thailand managing director Aliwassa Pathnadabutr said.

Kasikornbank’s first senior vice president Chatchai Payuhanaveechai said if one has the money to buy a property at a good location close to the mass-transit system, one can expect returns of 7 per cent to 8 per cent a year. This is much better than making a long-term deposit in the bank, which earns only 2.5 per cent. When adjusted with inflation – presently at 6.2 per cent – the return is negligible.

Chatchai said if there is no ready cash to buy a property, investors can apply for a mortgage loan. This will generate higher returns if the investor selects the best location.

For example, if an investor buys a property at a price of Bt100,000 per square metre, the monthly payment on a mortgage loan comes to Bt56,000 a month. Investors can earn Bt50,000 a month by renting out the property. That will help generate money for the monthly instalment.

Chatchai said the property should be located close to the mass-transit routes or a main road which will allow for an easy commute. Such properties are easier to sell and rent out.

Harrison executive vice president Kitisak Jampathippong said residential properties on Sukhumvit Road now sell for Bt100,000 per square metre, signifying a rise of between 30 per cent and 60 per cent from last year. The frequency of resale of residential properties on Sukhumvit Road averages at two or three times a year. Resale prices are expected to rise between 10 per cent and 20 per cent each time, he said.

At a time of high inflation and low interest rates, Kitisak said buying residential properties is a good investment choice. However, investors must study the value of the property.

“An investor has to select the project that has lots of facilities and offers an easy commute. That does not mean the project has to be located close to the mass-transit system alone. If the project is located close to a main road or expressway, it is still a good location, especially if the project offers good facilities and a good environment for buyers,” Kitisak said.

SOMLUCK SRIMALEE THE NATION

Bangkok score over cities in the Region

In recent years, condominiums have become the highlight of the Bangkok property scene. The cost of commuting and rapidly changing lifestyles of Thais are the driving forces behind the boom, especially in the downtown condominium market.

Condominiums are attractive to not only the young, but are in high demand among the elderly as they choose them over big houses. The availability of a wide range of options in the condo market in Bangkok, in terms of unit sizes and grades, has also made the segment more attractive.

Even though the prices of condominiums have gone up substantially in recent years, investors in the region still consider Bangkok luxury condominiums good value for money.

To take a comparative view, a super-luxury three-bedroom unit in the new Royce Private Residence Sukhumvit, covering 255 square metres, costs between Bt38 million and Bt40 million, while a similarsized unit in Dynasty Court in the mid-levels of Hong Kong costs about Bt250 million.

Meanwhile, a four-bedroom unit at Ritz Carlton Residences in Singapore, covering 284sqm, costs a whopping Bt360 million.

Bangkok offers better value over Ho Chi Minh City.

A 193- sqm home at the Millennium Residence in Bangkok’s Sukhumvit area, a high- rise with panoramic lake views, costs between Bt23 million and Bt25 million, compared to the about Bt32 million that a three- bedroom unit covering 163sqm in District 1 of the Vietnamese capital costs.

Investors with a budget of between Bt13 million and Bt15 million can buy a brand- new luxury two-bedroom condominium covering about 100sqm at the Athenee Residence on Wireless Road or The Met in Sathorn.

In Hong Kong and Singapore, the same amount of money would fetch just a 32-sqm studio.

In Bangkok, older properties are still cheaper and the coverage area larger.

For example, a 260-sqm, threebedroom unit at President Park costs Bt15 million, while a 366-sqm, fourbedroom unit at the Habitat Sukhumvit costs just Bt21 million.

Prices in Bangkok are about the same as in Beijing and Shanghai. Only Jakarta, Manila and Guangzhou offer lower prices.

Many investors may ask whether property prices in Bangkok will match those in Singapore or Hong Kong.

Prices in Bangkok, in most cases, have been driven by an increase in land prices and construction costs.

Bangkok is one of the few cities in Asia where the construction cost per square metre of saleable area is higher than the land cost element.

In the past, the land cost constituted less than 15 per cent of the total development cost.

However, with significant increases in land prices, especially in the city centre, the land cost has now gone up to about 22 per cent to 25 per cent of the overall cost.

In Singapore or Hong Kong, the land-cost element can exceed 60 per cent.

We have seen similar trends in prime residential areas of Bangkok, where there is a large price differential compared to the sutuation in non-prime locations.

Prices of condominiums in prime downtown locations of the city are likely to increase further, but will never catch up with those in Hong Kong and Singapore where there is a severe limitation on prime land for development.

This controls the supply and makes the market more stable for investors ensuring lower volatility in prices.

Also, the regulations over foreign exchange and ownership in these cities are more flexible and more investor-friendly than in Thailand.

Other related issues, such as taxation on investment and capital gains, are also clearly defined.

However, Bangkok remains a location that offers a wider range of high- quality properties in prime locations, at affordable prices for international investors.

Bangkok’s lifestyle is also more attractive, given the city’s superior healthcare, communications, shopping and transportation facilities.

With the existing selection of attractive projects, an investment in a Bangkok condominium is likely to generate good returns over the short and long term.

ALIWASSA PATHNADABUTR (Bangkok Post)

The Sukhumvit 28 condominium

AP seeks more foreign buyers

Asian Property Development Plc (AP) plans to tap the luxury condominium segment with the launch of two new projects, in Sukhumvit Soi 28 and Sathon Soi 12, worth a combined five billion baht in the third quarter of the year.

The new projects will be joint ventures with Pacific Star, an international real estate investment firm. It will hold 49% in each, and they’ll be developed with a new design and under a new brand.

‘‘The partner can help us bring international property development ideas to locals. They build our confidence to develop luxury condominiums as they join us from the design process and give us an advice on the master concept,’’ said Visanu Suchatlumpong, a senior executive vicepresident with AP.

With the partner’s network abroad, the company can market to foreign buyers. It aims to increase the proportion of foreign buyers from less than 10% to 30%, says Mr Visanu.

With more foreigners as target purchasers, the new condominiums will adjust unit sizes. For example, a twobedroom unit marketed to a foreign buyer would be 80 square metres, 25% larger than those marketed to Thai buyers.

‘‘Unit prices per square metre will be at least 130,000 baht as the market price in the central business district has risen significantly from last year,’’ Mr Visanu said.

He noted that top-end developments in the Sathon area were fetching 200,000 baht and up per sq m and in the early Sukhumvit sois prices averaged more than 100,000 baht.

The Sukhumvit 28 condominium will be located on a newly acquired two-rai site on Sukhumvit Road near Soi 28. It will have 300 units worth two billion baht. Unit prices will start at six million baht.

The Sathon 12 development worth three billion baht will be located on a 3.5-rai plot in Soi 12, 150 metres from Sathon Road. It will have 490 units sized between 50 and 80 sq m. The developer plans to change the brand, currently known as The Address Sathon 12.

Earlier, AP and Pacific Star had a joint venture for the Life@MRT Ratchada condominium but they changed to the Sukhumvit 28 site. The Ratchada project, worth three billion baht, will be launched in May with 900 units sized between 55 and 60 sq m.

Environmental regulations requiring developers to provide one mature tree for every one ton of air-conditioner capacity have been abolished. However, environmental impact assessment (EIA) regulations are now stricter.

As a result, AP needs to adjust unit prices of the Ratchada project from 70,000 baht to between 75,000 and 88,000 baht per sq m as the stricter rules will increase its development costs by 10-15%. It will offer buyers some furniture to compensate for higher prices.

In Ratchada-Lat Phrao area, the company will also develop Life@MRT Lat Phrao 18 after acquiring the plot this month. The project value and unit number will be the same as at the MRT Ratchada project.

Late this month, AP will also launch sales of Life@Sukhumvit 67 worth 350 million baht, comprising 29 units priced from two million baht. AP shares closed on Friday at 6.95 baht, up 10 satang, in trade worth 29.9 million baht.

KANANA KATHARANGSIPORN

Asian Property Development Plc (AP) plans to tap the luxury condominium segment with the launch of two new projects, in Sukhumvit Soi 28 and Sathon Soi 12, worth a combined five billion baht in the third quarter of the year.

The new projects will be joint ventures with Pacific Star, an international real estate investment firm. It will hold 49% in each, and they’ll be developed with a new design and under a new brand.

‘‘The partner can help us bring international property development ideas to locals. They build our confidence to develop luxury condominiums as they join us from the design process and give us an advice on the master concept,’’ said Visanu Suchatlumpong, a senior executive vicepresident with AP.

With the partner’s network abroad, the company can market to foreign buyers. It aims to increase the proportion of foreign buyers from less than 10% to 30%, says Mr Visanu.

With more foreigners as target purchasers, the new condominiums will adjust unit sizes. For example, a twobedroom unit marketed to a foreign buyer would be 80 square metres, 25% larger than those marketed to Thai buyers.

‘‘Unit prices per square metre will be at least 130,000 baht as the market price in the central business district has risen significantly from last year,’’ Mr Visanu said.

He noted that top-end developments in the Sathon area were fetching 200,000 baht and up per sq m and in the early Sukhumvit sois prices averaged more than 100,000 baht.

The Sukhumvit 28 condominium will be located on a newly acquired two-rai site on Sukhumvit Road near Soi 28. It will have 300 units worth two billion baht. Unit prices will start at six million baht.

The Sathon 12 development worth three billion baht will be located on a 3.5-rai plot in Soi 12, 150 metres from Sathon Road. It will have 490 units sized between 50 and 80 sq m. The developer plans to change the brand, currently known as The Address Sathon 12.

Earlier, AP and Pacific Star had a joint venture for the Life@MRT Ratchada condominium but they changed to the Sukhumvit 28 site. The Ratchada project, worth three billion baht, will be launched in May with 900 units sized between 55 and 60 sq m.

Environmental regulations requiring developers to provide one mature tree for every one ton of air-conditioner capacity have been abolished. However, environmental impact assessment (EIA) regulations are now stricter.

As a result, AP needs to adjust unit prices of the Ratchada project from 70,000 baht to between 75,000 and 88,000 baht per sq m as the stricter rules will increase its development costs by 10-15%. It will offer buyers some furniture to compensate for higher prices.

In Ratchada-Lat Phrao area, the company will also develop Life@MRT Lat Phrao 18 after acquiring the plot this month. The project value and unit number will be the same as at the MRT Ratchada project.

Late this month, AP will also launch sales of Life@Sukhumvit 67 worth 350 million baht, comprising 29 units priced from two million baht. AP shares closed on Friday at 6.95 baht, up 10 satang, in trade worth 29.9 million baht.

KANANA KATHARANGSIPORN

Sukhumvit 49 - 110,000 baht per sq m

KPN’s Vincente condominium in Sukhumvit 49 features 35 fully furnished units from 59 and 101 sq m and priced from 6.5 million to 11.5 million baht or 110,000 baht per sq m on average.

KPN Lifestyle back in business

After freezing activity for three years, KPN Lifestyle Co Ltd has resumed the business with a high-end condominium project on Soi Sukhumvit 49 and a plan for a luxury villa project in Krabi.

‘‘We have no pressure in launching new projects and we will develop a property project when we acquire the right plot in the right location. Timing is another factor we consider,’’ said chief executive Korn Narongdej.

The company plans to launch four villas worth around one billion baht late next year. They will be located on a 10-rai uphill site, 30 minutes from the Krabi International airport.

As the project will target foreign buyers, it plans a roadshow in Europe. Lot sizes will range from two to three rai each with prices from $5-7 million (157 million to 220 million baht).

Late last month, the company launched sales of the Vincente condominium with 35 fully furnished units worth 300 million baht. The seven-storey project, 70% financed by Siam City Bank, will be located on a 251-square-wah site in Soi Sukhumvit 49 which the company bought two years ago at 180,000 baht per square wah.

Unit sizes will range between 59 and 101 sq m with one- and two-bedroom types priced from 6.5 million to 11.5 million baht each or 110,000 baht per sq m on average. It has sold 10 units and expects to close sales by year-end when construction is completed.

‘‘We constructed major parts of the project before the launch as experience from the first project taught us to control costs,’’ said the youngest son of the Narongdej family, which owns the KPN Music Academy.

‘‘Some costly materials were unnecessary and customers didn’t see, feel or acknowledge the value of them.’’

The company learned the hard way from its first project, The Cadogan condominium, which ended up with a 20% higher cost and a drop in net profit.

Mr Korn also runs KPN Estate Co, which has 1,000 apartments for rent in the Din Daeng, Bang Na and Ramkhamhaeng areas, at 3,000 to 8,000 baht a month.

KANANA KATHARANGSIPORN

Suk31 - 3B-Bath - Royce project (Bangkok)

Major-AIG project unveiled

KANANA KATHARANGSIPORN

MJAI Development Co, a joint venture between AIG Global Real Estate Investment (Asia) and Major Development Plc, has launched its first project, the three-billion-baht Royce Private Residences on Soi Sukhumvit 31.

AIG Global Real Estate Investment (Asia), the property arm of the US insurer, chose Major because it saw the potential for condominium development in Bangkok, according to its managing director Patrick M.S. Lee.

AIG normally expects double-digit returns on real estate, he added.

The initial investment for construction would be two billion baht for the Royce Private Residence. Half of the amount would be supported by Tisco Bank, he said.

‘‘We will see the response from this project before deciding to investing more. AIG has no limitation of investments in real estate sector in Thailand. We don’t focus only on super-luxury [projects] or condominiums as the company wants to explore the opportunities in other segments.’’

AIG can contribute to MJAI by sharing its client database. The joint venture also plans roadshows in Singapore and Hong Kong to seek potential customers.

Suriyon Poolvoralaks, the president of Major Development, said demand for condominiums remained strong, especially in prime locations.

Of the total condominium projects launched last year, 35% are located in Sukhumvit Road, 18% on the riverside, 14% on Rama III Road, and 13% on Silom and Sathorn Roads. The take-up rate in central Bangkok was 73% or 15,195 units.

However, super-luxury projects lagged far behind, accounting for only 1% of total launches or only four projects including The Sukhothai Residences and St Regis Hotel & Residences on Ratchadamri Road.

He said the average unit price of super luxury condominiums rose by 23.7% year-on-year, or at 136,300 baht per square metre. ‘‘In the super-luxury segment, there are fewer players and the segment has high potential to grow. All of them are located in Silom, Sathorn and Rajdamri areas but none in Sukhumvit,’’ said Mr Suriyon.

The company launches Royce Private Residence, located on a three-rai plot on Soi Sukhumvit 31, with 165 units, sized from 111 to 462 sq m, with prices ranging between 15 million and 52 million baht or 150,000 baht per sq m.

Since a soft launch last weekend, the company has already recorded 30% of sales to its existing customers. It aims to sell at least 50% of the project by the end of the year and expects a gross profit margin at 30-35%.

The company will also launch another two projects next month worth a combined six billion baht. One is a low-rise condominium in Hua Hin on a 16-rai plot, with a unit price at 140,000 baht per sq m. The other is a high-rise condominium in Pattaya at 120,000 baht per sq m. It plans to sell a total of 400-500 units from the two projects.

MJAI Development Co, a joint venture between AIG Global Real Estate Investment (Asia) and Major Development Plc, has launched its first project, the three-billion-baht Royce Private Residences on Soi Sukhumvit 31.

AIG Global Real Estate Investment (Asia), the property arm of the US insurer, chose Major because it saw the potential for condominium development in Bangkok, according to its managing director Patrick M.S. Lee.

AIG normally expects double-digit returns on real estate, he added.

The initial investment for construction would be two billion baht for the Royce Private Residence. Half of the amount would be supported by Tisco Bank, he said.

‘‘We will see the response from this project before deciding to investing more. AIG has no limitation of investments in real estate sector in Thailand. We don’t focus only on super-luxury [projects] or condominiums as the company wants to explore the opportunities in other segments.’’

AIG can contribute to MJAI by sharing its client database. The joint venture also plans roadshows in Singapore and Hong Kong to seek potential customers.

Suriyon Poolvoralaks, the president of Major Development, said demand for condominiums remained strong, especially in prime locations.

Of the total condominium projects launched last year, 35% are located in Sukhumvit Road, 18% on the riverside, 14% on Rama III Road, and 13% on Silom and Sathorn Roads. The take-up rate in central Bangkok was 73% or 15,195 units.

However, super-luxury projects lagged far behind, accounting for only 1% of total launches or only four projects including The Sukhothai Residences and St Regis Hotel & Residences on Ratchadamri Road.

He said the average unit price of super luxury condominiums rose by 23.7% year-on-year, or at 136,300 baht per square metre. ‘‘In the super-luxury segment, there are fewer players and the segment has high potential to grow. All of them are located in Silom, Sathorn and Rajdamri areas but none in Sukhumvit,’’ said Mr Suriyon.

The company launches Royce Private Residence, located on a three-rai plot on Soi Sukhumvit 31, with 165 units, sized from 111 to 462 sq m, with prices ranging between 15 million and 52 million baht or 150,000 baht per sq m.

Since a soft launch last weekend, the company has already recorded 30% of sales to its existing customers. It aims to sell at least 50% of the project by the end of the year and expects a gross profit margin at 30-35%.

The company will also launch another two projects next month worth a combined six billion baht. One is a low-rise condominium in Hua Hin on a 16-rai plot, with a unit price at 140,000 baht per sq m. The other is a high-rise condominium in Pattaya at 120,000 baht per sq m. It plans to sell a total of 400-500 units from the two projects.

KANANA KATHARANGSIPORN