NEGATIVE interest rates and an avalanche of technological innovation is driving demand for property on a global scale with Bangkok clearly benefiting from the latter, Knight Frank said its Global Cities: The 2017 Report released today.
Investors’ expectations of what constitutes an acceptable return have been reduced by negative interest rates with this propelling capital towards real estate.
Additionally, this in-depth report which examines the market performance of 31 global cities, pointed out that the fastest growing cities are center stage of digital and creative revolutions and in many of those at the forefront supply is not keeping pace with demand for both commercial and residential real estate.
“Bangkok may have missed out on the dotcom boom of the early 2000s but the pivot towards the new digital economy has already begun. This is evidenced by the rise of automation and shift towards industry 4.0 in the manufacturing sector,” Marcus Burtenshaw, Knight Frank Thailand’s executive director said.
“Meanwhile venture capital is increasingly flowing to entrepreneurs in a whole host of creative services using Bangkok’s relatively low cost base to start up new e-commerce platforms and online marketplaces, e-logistics services, e-payment systems, fintech, and even gaming where talented Thai software developers are winning global competitions like Microsoft’s Imagine Cup.
“This is supporting the emergence of new commercial real estate types such as collaborative workspaces, where firms like Hubba and Glowfish are incubating new demand for traditional and serviced offices as these firms mature and grow.”
Knight Frank’s prime office rental forecasts from Q4 2015 to Q4 2019 show a huge range of future performance prospects with the Asia Pacific, where 12 of the 31 cities analyzed are located, also tracking this trend.
Bangkok is expected to see 8.3% rental growth during this period but Sydney is way ahead with projected growth of 27.5% while Singapore is the weakest with a forecast rental decline of 14.0%.
“Sydney, along with Melbourne, continues to see diversified demand drivers, as the Australian economy continues to show resilience despite the slowdown in demand for commodities; while Shanghai has boomed on the back of strong growth from technology related companies.
“In many ways the weakest projections come down to supply, with Kuala Lumpur, Beijing and Singapore markets all seeing a significant amount of new supply come to the market that new demand is being challenged to absorb,” Nicholas Holt, Knight Frank Asia Pacific’s head of research said.
Three of the five costliest cities across the globe are in Asia-Pacific with Hong Kong having the highest capital values for prime central office space followed by Tokyo in the second place and Singapore in the fifth.
“The analysis shows good value in major US cities when compared to their Asian and European counterparts. Even in the more expensive, supply constrained cities of New York and San Francisco, the differential in price per square foot versus Hong Kong and Tokyo looks attractive considering solid US economic prospects over coming years.
“With significant caution still prevailing around some secondary markets, investors are generally focused on liquidity, stability and security of income. For this reason, we expect the global gateway cities to remain as key investment destinations over the coming 12 months,” Neil Brookes, Knight Frank Asia Pacific’s head of capital markets said.
Knight Frank’s Skyscraper Index which examines the rental performance of commercial buildings over 30 stories shows that in the first half of this year Asia-Pacific cities saw the highest rental growth across the 23 global cities tracked.
Skyscrapers in Shanghai recorded the strongest rental growth in the first half of 2016, at 7.6%, followed by Sydney (6.5%), Hong Kong (5.9%) and Taipei (5.7%).
Singapore sits at the bottom of the chart with a decline of 7% attributed to significant new supply and a slowdown in the local economy.
Hong Kong remains the most expensive city to rent a prime office space, at US$278.50 per sq ft. This is significantly higher the runner-up New York (Manhattan) where rents have reached US$158 per sq ft.
TOP: The Chao Phaya River remains key to Bangkok’s commercial growth. Photo: Thai Residents photographers
By Thai Residents reporters