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The future of Bangkok’s Chinatown

Bill Barnett

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by Bill Barnett of c9hotelworks.com (First appeared on linkedin.com)

The emergence of boutique hotels, hostels, hip bars and cafes has revolutionised the way Chinatown, Bangkok is seen. This, together with the entry of international branded operators setting the stage for exciting changes.

Overview of Chinatown

For over 200 years, Yaowarat Road in Bangkok or Chinatown has been a center of Chinese immigrants in Thailand. Although some newer development has taken away some of Chinatown’s authenticity, it is still to this day one of Bangkok’s most visited areas which hasgenerated a splendid mixture of the old and new, be it street-food vendors, temples, or art galleries. On top of that, what really draws both local and foreign demand to the area is the ultimate experience itself.

Jammed streets with full tuk-tuks, small vans, and street merchants are what the other areas cannot offer. With some buildings and land is left unused, there have been many redevelopment projects for hotels and residences, and now domestic and international hotel chains are entering the market. What follows, is meant to shed light on the transformation of Chinatown.

Tourism

With the combined number of passenger arrivals at Suvarnabhumi and Don Mueang International Airports close to 50 million in 2017, the gateway experienced a 5-year compound annual growth rate (CAGR) of 11%. Based on our research and market interviews with hotels in the area, the number of tourists visiting Chinatown has sharply increased over the past few years. Thus, hoteliers in the area foresee that Chinatown will be reinvented over the next five years

Chinatown is now one of the hippest areas in Bangkok, while a few short years ago Millennials would view Chinatown as an ‘ancestor’s area’ where elders meet up and have their Asian breakfast. Similarly, the traditional food scene still exists, except that the average age of visitors has dropped substantially and visitors now are becoming bar or café hoppers. What changed is how the vibe shifted over a short period of time.

Mass Transit

After five years of construction, the upcoming MRT station of Wat Mangkon is now close to completion. Scheduled to open to the public in mid-2019, this station will be the nearest mass transit connection to Chinatown and sits right across from the upcoming 224-key Holiday Inn Express Bangkok Chinatown.

The station’s name originated from the largest Chinese Buddhist temple in Bangkok, Wat Mangkon Kamalawat. Regardless of how trendy Chinatown is, the area is not expected to be another Thonglor as there is no plan for a BTS station. It will be advantageous to have better access to public transportation, but the MRT does not carry the same clout as the BTS since many tourists are not familiar with the MRT.

Hotel Performance

Due to the location of Chinatown, budget hotels face challenges in competing with similar hotels in other parts of Bangkok such as Sukhumvit. Boutique hotels in the area are on an upward trajectory, yet accessibility to public transportation in the area remains a key factor.

The average daily rate (ADR) of boutique hotels in Chinatown ranges from 2,000 up to 6,000 baht, with occupancy averaging over 75%. Due to the constraints on development scale, hotel inventories for the existing hotels range from a handful up to 70 or 80 rooms. Given a captive guest base, revenue from food and beverage cannot be overlooked. Hotel operators are generally more focused on generatingother income for their properties compared to other areas in Bangkok. According to our research, some hotels’ F&B contribution can reach 70%, while the market-wide average is 31%.

Demand Characteristics

Online travel agents (OTAs) play an important role in this market among all distribution channels as boutique hotels mainly target younger guests who search for more authentic locations. Some boutique hotels try to stimulate direct bookings by offering complimentary breakfast and discounts on F&B and spa packages. One of the best performers in the market is able to achieve 70% for direct bookings.

In general, OTAs account for 75% bookings on a broad basis. For the nationality mix, the Asian market accounts for 38%, followed by European and American markets with 34% and 29%, respectively. The purpose of stay is mostly leisure at 93%, and only 4% of guests come for business.

Land vs. Rental Prices

With a peak land price of 375,000 baht per square metre, Chinatown is one of the most expensive areas in Thailand. Such high land prices result from the limited land supply and the vintage-style buildings. It is important to highlight the inverse correlation between land prices and rental/lease rate in Chinatown. Rental prices vary but generally tend to be in the range of 300 baht per square metre per month, while they can be well over 1,000 baht per square metre in Bangkok’s CBD areas. With a business model heavily reliant on leasing property, small boutique hotel and hostel supply isexpected to surge in Chinatown.

International vs. Domestic Chain Offerings

There has not been an international hotel brand in Chinatown until recently, with the InterContinental Hotels Group (IHG) poised to enter. The agreement between IHG and Uniland Company Limited to open a Holiday Inn Express is expected to be completed bythe end of this year. On the other hand, the notable Thailand-based Burasari Group, who own and manage Shanghai Mansion Bangkok, has signed an agreement to manage a new 128-key property in Chinatown early this year, marking itself as a leading operator in the area.

Burasari Group, with seven hotels in the portfolio domestically and internationally, is expanding its hotel network within the country. The group has been managing Shanghai Mansion for almost 10 years and believes the upcoming changes in the area will elevate guest experience and draw more demand to Chinatown.

Pipeline Projects

Holiday Inn Express Bangkok Chinatown is part of the THB3-billion ’I’m Chinatown’ mixed-use project. Positioned as ‘Modern Chinese’ in terms of design, the project includes 5,000 square meters of retail space, a 224-key hotel and 46-unit residence for sale. With its strategic location situating across the upcoming mass transit station, the hotel will mainly target foreign tourists and business travelers. The property is expected a year-round occupancy over 80% with average room rate over 2,000 baht.

Another project in the Chinatown pipeline, which will be managed by Burasari Group, is the redevelopment of a 50 year old vacant hotel. With 128 keys, W22 will be situated on Wongwian 22 with an opening in the mid of this year. Positioned as a boutique budget hotel, it is targeting Asian travelers and tour groups. The hotel will offer multiple room types including dormitories, double, twin and family rooms with an average room rate of 1,000 baht projected.

The two projects will create a new dynamic. Firstly the HIEX will provide standardised accommodations with expected amenities such as a swimming pool, which only a handful of hotels in the area have. Secondly, the W22 hotel will not only offer an affordable stay but also a varietyof room types and a large common space for guests to relax.

PHOTO: shanghaimansions.com

Forward Outlook

Because of the continuously increasing number of cafes, bars, and restaurants, further hotel development is expected to highlight the importance of design. Although cultural experience hasbeen the whole point of coming to Chinatown, the ‘chic’ experience will be a secondary factor to generate demand. From the recent developments and upcoming hotels, all properties have their uniqueness in design no matter in common areas or F&B outlets.

Even the 10 year old Shanghai Mansion Bangkok has been able to maintain high performance due to its unique interior design. Looking across Bangkok’s luxury Riverside projects, such as Four Seasons and Capella which will come into the market soon, it is clear that luxury hotels have come out of the Bangkok Central Business District. With mass transit and proximity to the river, there is a high possibility to see more upscale development coming up in Chinatown.

In the bigger picture, the new MRT station will be a key turning point for the area and its future potential remains unique in its offering.

Bill Barnett has over 30 years of experience in the Asian hospitality and property markets. He is considered to be a leading authority on real estate trends across Asia, and has sat at almost every seat around the hospitality and real estate table. Bill promotes industry insight through regular conference speaking engagements and is continually gathering market intelligence. Over the past few years he has released four books on Asian property topics.

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Property

The rise of the mixed use retail development

The Thaiger & The Nation

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As our lifeststyles continue to change and morph along with technological and social evolution, so too our living spaces and the locations we choose to live. Behavioural changes among urbanites have led to the rise of mixed-use projects in Southeast Asian countries, according to property experts.

Christian Olofsson, shopping centre & mixed-use director of IKEA/Southeast Asia, told The Nation that the competitive environment in the retail industry precipitated the new format of incorporating non-traditional elements into a retail complex. Development of mixed-use retail properties is growing with the inclusion of residential units, entertainment revenues and healthcare facilities in a single site.

Catering to the needs of today’s consumers and staying relevant is the goal of the re-think among major players, Olofsson said. The new strategy could bring higher return on investment if the developer optimises the opportunity and is able to better meet the needs of modern consumers than are single-use developers.
The concept is less risky as it comes with a greater variety of revenue sources. It can also help average out the land costs by integrating a mix of components with different types of incomes.

Given the positives, IKEA decided to develop a mixed-use project – Mega City – next to Mega Bangna, Olofsson said.

According to a report by the Council of Tall Buildings and Urban Habitat, 451 tall building are listed as under construction globally until 2025, of which a third are mixed-use projects combining hotels, residential units, offices, service apartments and retail outlets. In Southeast Asia, excluding Thailand, 16 mixed-use projects are currently under construction – eight in Malaysia, five locate in Indonesia, and one each in Singapore, Vietnam and the Philippines.

The Council on Tall Buildings and Urban Habitat is the world’s leading institute on the inception, design, construction and operation of tall buildings and future cities around the globe. Founded in 1969 and headquartered at Chicago’s historic Monroe Building, the council is a non-profit organisation with its Asia headquarters at Tongji University in Shanghai, a research office at Iuav University in Venice and an academic office at the Illinois Institute of Technology in Chicago. It facilitates exchanges of the latest technologies for tall buildings through publications, research, events, working groups, web platforms, and an extensive network of international representatives.

James Pitchon, head of Research and Consulting at CBRE Thailand, said it is not possible to develop a single-use project on a large site, citing the likelihood of oversupply in the local market, be it an office or residential project. Developers of large sites need a range of diversified incomes, he added.

Consumers like the convenience of having a range of facilities in one place that are easily accessible in a climate control environment. Having easy-to-reach retail outlets and a hotel in the same complex appeal to office tenants, especially for the convenience of foreign clients and visitors.

Thais are also open to the idea of staying in a condo next to where they work and play, provided it comes with privacy and exclusivity along with the convenience, Pitchon said.

A JLL research said that the growth of mixed-use projects in ASEAN (the Association of Southeast Asian Nations) began to take off amid infrastructure development and changes to consumer behaviours in the region. The association marked its 50th anniversary last year and the region is gearing up for greater growth and investment.

Already powerhouses in the wider region, Southeast Asia’s economies are projected to grow at an annual average of 5 per cent until 2020. The real estate industry stands to benefit as demographics and market size draw further investments, given the manufacturing and logistics advantages. The upgrade in ASEAN infrastructure, especially the advancement of high-speed rail networks, will attract development of mixed-use projects connected to the train stations, as is the case in Japan and Hong Kong, the research said.

Find more than 30,000 properties for sale in Thailand at property.thethaiger.com

SOURCE: The Nation

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Property

Buying off plan? A few things to consider.

Legacy Phuket Gazette

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Many developers offer units and condo “off-plan” for sale at an early stage of the project development, even before the first brick has been laid. The lure is usually a lower price and getting the pick of the best location in the development.

Some of us may not be familiar with the term “off-plan”. Generally speaking, buying off-plan means buying units which exist only on the drawing table, construction of the project may not even have started. Off-plan sales are offered by developers as they often need to sell their product fast by pricing units extremely low in order to achieve fast and valuable finance to proceed with constructing their development.

Purchasing an off-plan unit may have considerable advantages compared to an investment in a completed project. Early birds may benefit from a significantly reduced price, which makes such off-plan purchases extremely interesting from an investment perspective as such units may rise in value during construction, even prior to completion.

Smart payment plans, typically a minor deposit payment, followed by a 30% first installment and a high final payment upon title transfer, allow buyers to effectively secure a high-value asset for a relatively low initial capital outlay. Furthermore, purchase at an early stage of a project ensures that a buyer can choose the best located units in order to satisfy his individual requirements as well as a future buyer in regard to a resale.

Buying off-plan also offers the chance to “flip” a unit prior to title transfer by way of assignment of the buyer’s rights under his/her sale and purchase agreement, which allows investors to save on transfer fees and taxes that occur from title transfer.

Summarised, such off-plan investment may create a “win-win” situation for both buyer and seller: buyers obtain a low price for a quality product with high resale value and sellers are able to receive fast project finance.

However, in order to secure your investment, due diligence should be ALWAYS be carried out to minimise risks and to prevent you from a worst-case scenario – a total loss of your invested funds. Basically, such due diligence should be conducted by a reliable and reputable law firm, whereby appointment of additional experts, such as a surveyor, might be recommended depending on individual requirements.

The importance of such due diligence, particularly when buying off-plan, in part arises from the fact that extremely important points – such as secured access, lawful title to the project’s land, as well as an
accurate application for the required construction permit or licenses – may not have been accomplished, completed or sufficiently verified by a developer.

Additionally, the financial stability of a developer offering such off-plan sales should always be of concern. In this context, the fullest attention should be paid to the reliability and track record of the developer. A professional real estate agent, representing only well reputed developers and ideally having the financial backing of big investors, can be the first credentials to look for to separate the wheat from the chaff.

Simply put, off-plan buying can be an interesting and promising investment, but extensive market research, awareness for potential risks, comprehensive due diligence as well as consideration of generally accepted risk management is mandatory to find the right product, which seems not only to be a bargain, but also fits with your personal requirements on a safe investment.

Select from over 7,000 properties in Phuket at property.thethaiger.com

This article was written by International Law Office Patong Beach. For any questions you can contact ([email protected]) or call ILO’s office 07 6222 1915.

International Law Office

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Property

Buying property in Thailand – the basics

Legacy Phuket Gazette

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by Kevin Hodges

There are many, MANY properties for sale in Phuket and around Thailand. In a market that has peaks and troughs it’s best to buy in partnership with respected sales agents who know the current market and can help you avoid some of the common pitfalls.

Buying property in Thailand is not straight forward, so you will need sound, professional advice which acts in your best interest. It can be a confusing experience due to laws, regulations, the language barrier and the many choices.

Real estate brokers in Phuket have the largest selection of property, land and long-term rentals – they have sales teams that are both foreign and Thai and can speak a variety of languages. property.thethaiger.com has over 30,000 properties listed in Thailand, over 7,000 in Phuket alone.

With a vast array of properties available, it is important to short list to maximise the use of your time and avoid viewing unsuitable properties by narrowing down choices.

Brokers act as a liaison between the buyer and seller, and the good news is that the buyer pays no broker fee – it is paid by the seller in Thailand. Here’s how it works.

Research

Brokers will work closely with buyers to compile a focused and realistic brief, which takes into account a buyer’s requirements and preferences relating to the budget, style, condition, size and location of the property. They can advise on the different locations and options available.

Short List

A broker will preview and shortlist suitable properties – this saves a buyer valuable time as the broker will only show properties that he or she has first previewed and that meet the buyer’s requirements.

Property Tour

Brokers accompany buyers on viewings to show the shortlisted properties. Once a suitable property has been identified, they provide an objective overview so that you are equipped with the knowledge to make an informed decision.

Negotiation

When the right property is found, the broker will assist both buyer and seller in negotiating a favorable price and terms.

Payment

A reservation agreement and nonrefundable reservation deposit of usually 2 per cent to 5 per cent is placed with the broker in the client’s account. This removes the property from the market, so no one else can buy it prior to the signing of the Sale & Purchase Agreement (SPA). Upon signing the SPA, 30-50 per cent of the price is usually required with the outstanding amount to be paid upon transfer of ownership.

The buyer should, at this time, ask how the seller wishes to receive payment – inside or outside of Thailand – to avoid bringing in funds when payment is required elsewhere. If funds are required in Thailand, a TT3 form must be completed for the amount required.

Conveyancing

Once the price is agreed and the reservation deposit is put down, the broker will introduce you to a reputable lawyer who has experience in property conveyance. The lawyer will use that expertise to ensure that the process runs as smoothly and quickly as possible.

Kevin Hodges – originally printed in Phuket Gazette.

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