More developers are facing difficulties launching easy-to-market, high ROI single-use property projects because of continuously rising land price inflation. Surging prices bring about tough competition in specific property sectors and unreasonable development costs.
In a bid to offset losses and effectively deal with current development challenges, Thailand's real estate industry is looking towards alternative solutions such as mixed-use development. Pegged to grow in popularity and appeal, JLL consultancy asserts that mixed-use development is a viable solution to large complexes and single-use properties.
Suphin Mechuchep, managing director of JLL, explains that mixed-use real estate is a combination of commercial, office and accommodation spaces. These are “nothing new in Bangkok” since there are already existing mixed-use developments including Singha Complex, The Parq and One Bangkok just to name a few.
With this type of development in place, space can be utilised more productively. A single development that accommodates multiple uses is a reflection of better land use. It also saves resources and opens more doors for resource-sharing, which reduces development expenses and increases overall land productivity.
Another advantage of mixed-use development is that each component plays a significant role and stands to gain.
Commercial leaseholders and retailers can benefit from regular foot traffic. Residents, guests and tenants within the same building will provide them with steady income sources.
Easily accessible retailers and shop owners, on one hand, offer more convenience to residents and office tenants, who need not go far to buy food or do some shopping. Visitors and employees may also find hotels and residential spaces within the same building convenient to their respective accommodation needs.
Mixed-use developments facilitate diversity and accessibility – qualities that make them more appealing to companies, tenants and long-term renters. This growing trend of multipurpose buildings mirrors today's urban lifestyle.
Complexes with several buildings designated for various purposes appear to be the go-to trend among developers. Butsmall redevelopment sites that accommodate only one high-rise structure are still prevalent in several central business districts like Sathorn-Silom and Sukhumvit.
The lure of higher prices or the potential impact of new real estate and building tax laws and ordinances may soon cause these sites to be sold by their owners. Putting up redevelopment plots for sale based on current prime-land deals may fetch at the very least 2 million baht per square wah. There are not enough single-use property development options, mostly just between a high-end hotel and a luxury condo.
Mrs. Suphin recommends focusing on office development, “given the fact that Bangkok offices are currently undersupplied” in the midst of surging rental costs, while Bangkok's condominium and hotel sectors remain highly competitive.
Mixed-used development is a sound solution to volatile property sectors and rapidly rising real estate risks. This solution is expected to reap long-term benefits where future property developments are concerned, according to Mrs. Suphin.
A crucial recipe for sustainable success, concludes Mrs. Suphin, is building a development design that facilitates efficient property management. In other words, all components must come full circle, from retail to accommodation to office.