Property - Real Estate
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Large deals continue in Bangkok office market

Where should I invest my money?

A-list stars ‘crunched’ in Dubai


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Large deals continue in Bangkok office market

Two of the ten largest transactions in the history of the Bangkok office market, including the largest ever, have been completed in the past three months, despite the fact that the Asian office markets entered a downward cycle in the fourth quarter, according to CBRE Research.
Throughout Asia, ongoing global financial turmoil continued to erode investment and business confidence, causing prime office leasing activity to slow dramatically. A broad-based reduction in office rentals has been seen as landlords have made tenant retention a top priority. Many tenants are now focusing on cost-saving measures, especially in view of continued difficult economic conditions.
However, in Thailand, the picture was different. DTAC signed the country’s largest ever lease during Q4 2008, in a deal for 61,500m2 in Chamchuri Square, a new grade A office development on Rama IV. Chamchuri Square is the largest new office building completed since the 1997 crisis, and over 80% of the building has been committed already.
Q1 2009 saw Citibank sign a lease for more than 20,000m2 of space in Interchange 21, a Grade A development on Asoke, just across from Exchange Tower. This new development has also seen over 80% of its space already committed despite opening just a few months ago.
“With a limited amount of new Grade A supply on the horizon, including Asia Centre this year and Sathorn Square next year, we expect the top end of the office market to be one of the first sectors to rebound,” states Nithipat Tongpun, Director & Head of Office Services at CB Richard Ellis Thailand. “Prime rental rates in Thailand have not fallen, unlike Singapore and Hong Kong.”
The office vacancy rate rose at a rapid pace across Asia during the fourth quarter with a rise recorded in 14 of the 17 markets tracked by CB Richard Ellis. Overall vacancy across the region rose by 4% bps between January and December 2008, but the lack of supply in many Asian commercial centres ensured that 12 markets recorded a vacancy rate of below 7% at of the end of 2008.
The contraction of the finance and banking sectors exacerbated the downward pressure on rents with Tokyo suffering a fourth consecutive quarterly fall, albeit at a slightly slower rate of 1%. Office rentals in Hong Kong and Singapore recorded their biggest quarterly slump since 2000, falling 21.1% and 19.9% respectively.
CB Richard Ellis does not see much reason for companies in Thailand to move to decentralized areas to save money on office rent because there is not much difference in rent between similar quality buildings in the CBD and decentralized areas. Additionally, there are also high capital costs to relocate, including the cost of moving, fit-out, restoring premises to their previous condition and other associated expenses, which mean that savings of THB 100-200/ m2 are not very worthwhile, unless there is a significant reduction in the amount of space leased. (Source: CBRE Research)


Where should I invest my money?

With stock markets plummeting around the globe due to the uncertainty of the global economy, and with some banks being allowed to fail, the question on everybody’s lips is: Where should I invest my money; under the mattress?
Laughable as that may seem, sales of safes have skyrocketed while, according to The Daily Mail (UK), even some furniture manufacturers have developed beds with in-built safes. But is this really a viable or realistic option for your money?
To stimulate consumer spending, the world’s central banks have been forced by governments to introduce unprecedented cuts in interest rates. The pound, for example, is now at its lowest rate since the Bank of England was established in 1694.
The result of this is that commercial banks, although not lending money easily - and with 100% mortgages withdrawn in many countries - have cut interest rates dramatically, which has in turn stimulated the incentive for investment in property where it’s assumed they have reached the end of the downturn.
Investors are hardly getting any interest at all from their bank deposits, and with dividend payments either being cut or suspended due to the slowdown in profits, selective investment in real estate is a great alternative at the moment - it may actually be the safest of all options, if one discounts the fact that markets in the West remain unsure that property prices have bottomed out yet.
Under normal economic conditions, a zero rate of interest would guarantee that property prices would be high, with the ability to borrow money at almost no cost and, at the same time, enjoy a yield above bank rates, which would have led to insatiable demand for real estate.
However, we are not living under “normal conditions”; we are living in extraordinary times, and the factors that have diluted these very “favourable conditions” are the drying up of credit and falling property prices in the West.
Christopher Heath, director of Soho Properties, in Bangkok, commented: “We are now seeing international investors taking a good look at what deals are available in the Thai property market, as property yields abroad and from other financial instruments are far more difficult, particularly in Europe, the US, Hong Kong, Singapore and Australia.
“The only real drawback here is that the Thai baht is quite high, although many analysts predict that its rate, supported by the Central Bank to keep exports buoyant, must surely retreat, and soon.
“For cash-rich buyers, this is a golden opportunity to pick up some real bargains, particularly from developers who have been affected by the credit crunch.
“Another option is to go for deals where developers are guaranteeing rental yields. This option works out really well for investors who can access a lower funding rate than the guaranteed rental yield.”
It should be noted, however, that the assumption that banks are just not lending is misplaced; loans to financial corporations at the tail-end of last year rose nearly 43%.
Governments have put trillions of dollars into the banks and their economies in general in the form of stimulus packages, but the banks are wary of loans to businesses and individuals at present, which will have to be addressed in the very short term if the money from the bailouts is not to be entirely squandered.
Paul Davies of Bangkok Property Condos & Homes Ltd. says: “The devaluation of properties in Thailand is far less than many other countries and the bounce-back from the global recession should be quicker in Thailand and Asia in general, therefore taking advantage of a re-sale in the future.
“There is also the fact that many people may take earlier retirement or redundancy packages due to the global slowdown and follow the many expats already here into the sun and enjoy the lower cost of living.”
In Thailand, because of the Asian economic crisis of 1997, banks have not been permitted to invest in derivatives or risky loans, so the excesses and lack of liquidity of the Western banks do not apply.
Indeed, property prices in Thailand are not falling anywhere near as fast as they are elsewhere; in fact, there has actually been a very small downturn in the Bangkok property market.
In a related development and, to an extent, a boost in confidence for the Thai property sector, Accor, a European leader and one of the world’s largest groups in hotels and services, is putting its bets on Thailand’s tourism over the next few years, lining up four more hotel projects with Fico Group.
“Thailand will be able to recover quicker than other countries,” Michael Issenberg, chairman and chief operating officer for Accor Asia Pacific, said. “I believe in the long-term potential of Thai tourism and will continue to expand in Thailand in the next few years.”
What this amounts to is that as the Thai tourist industry starts to recover from the global fallout, investors in the Thai economy - more specifically, in its underlying property assets - will be well placed for high yields and large capital gains when the economies of the world eventually recover.
The Thai economy, whilst certainly sluggish, has not been as dramatically affected by the global slowdown as elsewhere due to its large current account reserves, and its property market has taken advantage of historically low interest rates.
Uncertainty is abundant at the moment, but it would be a very wise idea to take some time in assessing the possibilities of investing in the Thai property market, as property yields are a far surer answer than stuffing your money under the mattress and hoping for the best. (Source PRLog/Soho Properties)


A-list stars ‘crunched’ in Dubai

Even those with A-list bank balances can’t avoid the economic turmoil – Brad Pitt, Michael Jackson and the Beckhams have all fallen victim to the dreaded crunch as the value of their luxury properties in Dubai plummet to Z-list status.
Once the superstar of the United Arab Emirates; oil rich Dubai has witnessed extraordinary price growth over the last few years as eager investors pumped millions into the Dubai property market, eager to cash in on the boom.
Hollywood heavyweights were also keen to have a finger in the Dubai pie and celebrities galore flocked to the man-made emirate, with some even going so far as to endorse new Dubai developments – Boris Becker and Hillary Swank, you know who you are.
Valued at $160 million, the Boris Becker Tower is built on one of the most prestigious addresses in Dubai, in the centre of the business district and features 19-storeys of class- A commercial space with freehold titles.
Miss Swank chose to endorse the $440 million Aquitainia development in the middle of offshore development ‘The World,’ one of Dubai’s most ambitious and costly projects.
The King and Queen of Hollywood, Brad and Angelina, reportedly bought a whole island in Dubai – snapping up a slice of The World.
But fast forward a year or so and here we are, slap bang in the middle of the worst economic situation since, some say, the Great Depression.
Dubai has fallen foul of the global recession and has been hit by a massive housing market crash which has cost investors, including celebs, billions of pounds.
Properties worth 5 million dollars in October last year are now on the market for just half that amount.
According to Ronald Hinchey, Resident Partner at Cluttons Dubai, dire times lie ahead for Dubai.
“The property market in Dubai is staring into a black hole and any hope of a recovery in 2009 is just wishful thinking.
“Company sales were at two or less a month, compared to about 15 during the peak months of July and August last year and mortgage valuations, which peaked at about 250 a month for around 17 mortgage providers, were down to 50 per month,” added Hinchey. (Source - PRLog/themovechannel.com)