CBD land prices continue to skyrocket

While large developers froze their land purchases in Bangkok's central business district (CBD) over the past six months, individual investors kept buying plots to develop small condominium projects or resell them for attractive yields of 15-20%. 

The front view of the former Merry Kings department store with 20,000 square metres in lettable area in Wong Wian Yai, which is now up for sale by CBRE.

The most active location in the first half was Sukhumvit Road, followed by Sathon Road, said Kulwadee Sawangsri, executive director and head of investment and land services at property consultant CB Richard Ellis (Thailand) or CBRE.

Most of the transactions CBRE made were small plots of 300-700 square wah. Buyers acquired them to develop seven- or eight-storey condo projects in small sois.

"There were no more revenue-producing assets in the CBD such as office buildings for investors to shop for. Many rushed into land, as land investment is like nothing else. If you miss out, you can't find it again," said Ms Kulwadee.

Some investors bought land to resell in the future, as yields are very attractive.

In the first half, CBD land prices rose by 15-20% year-on-year, according to CBRE's transactions.

"During the political turmoil, most large property firms did not buy land in the CBD, as the condo sector was sluggish. But private or individual investors kept shopping around," Ms Kulwadee said.

Land on sois recorded the most transactions, as prices were lower than on main roads. It was easier to find since many homeowners wanted to sell and move.

In the first six months, CBRE recorded 3 billion baht in land transactions, up by 20% year-on-year.

By year-end, it expects to see growth of 30% from 5.5 billion baht in 2013.

The most expensive plot sold by CBRE cost 1.6 million baht per sq w, while last month SET-listed developer Quality Houses Plc reported it spent 1.8 million baht per sq w to buy a three-rai plot on Sukhumvit Road near Nana skytrain station.

"It is still a seller's market," she said.

A seven-storey building that formerly housed Merry Kings Department Store in the Wong Wian Yai area is for sale by CBRE. The 30-year-old building is situated on a 707-sq-w plot on Somdet Phrachao Taksin Road, with a lettable area of about 20,000 square metres. The building has been unoccupied for many years. The owner bought it as a non-performing asset from Phayathai Asset Management Co five years ago.

Submissions by bidders will last until Aug 15, with CBRE as the sole agent. The winner will be announced in October.

Ms Kulwadee said the building can become a retail space again. Its neighbours are a market and shops, and its location is a transit spot for many people.

As the Bangkok city plan does not allow construction of large buildings in Wong Wian Yai, the building should be kept as is for business value.

Source: Bangkok Post and CBRE Bangkok