What new initiatives is Colliers Thailand currently involved in?
LANDY: Colliers Thailand is involved in a lot of new initiatives. The core businesses is consultancy so that is where we take our roots and I think what we have seen over the last couple of years is a lot more interest in kind of niche markets. So, we still do a lot of the traditional stuff, we look at the office market, the hotel market, residential, industrial, but we are also spending a lot more time these days on some of the more specialized areas. For example, retirement living, it wasn't on the agenda five years ago, these days we maybe have about three of four different groups interested in this area.
Another is F&B; some very specialized food and beverage providers are looking at opening up in the country from overseas. So, that’s on the consultancy side. As far as agency goes, which is our other core activity, we are doing a lot more in the residential area. We do a lot of project sales. We’ve just started our first project in Chiang Mai, which is very exciting for us. That is a really interesting market. So now we have Bangkok, Hua Hin, Pattaya, and Chiang Mai, although we don't have an office there yet. Apart from that we're looking at residential sales overseas, lot of Thais are looking to put money to work overseas and we are doing a lot with the UK at the moment.
What is the main catalyst for Thailand’s real estate sector?
LANDY: I think you have to look at demand as the number one factor and demand is influenced by many factors, but among the most critical is really liquidity. When people have cash or feel wealthy, they tend to buy property anywhere in the world, and Thailand is no exception. The second great source of demand is investment from overseas or FDI. Although Thailand had some bumps in the road shall we say, and things have not always been smooth, it is amazing how resilient this market is. You just have to look at the Eastern seaboard to see how much Japanese and other Asian and European and American investment is going into the manufacturing sector to understand how strong that demand is.
What is your outlook for Thailand’s secondary cities and up-country markets?
LANDY: Thailand has always been a very Bangkok-centric economy. About 20% of the population lives within 20 to 30 miles of Bangkok CBD. When it comes to development of the secondary cities, things have been slow to be honest. In the past most of the secondary city demand has been predicated on tourism. So of course the major tourist centers like Phuket, Pattaya, Hua Hin, and Chang Mai have done well on that tourist demand. More recently, some of these cities, especially Pattya and Hua Hin, have developed a stronger local demand. What's even more interesting is the development of what we call second tier cities such as Khon Kaen in the Northeast and various other cities around the country. What we are seeing here is not foreign demand but local demand as wealth spreads out and as those economies develop.
What kinds of investment are you seeing going into Hua Hin today?
LANDY: Hua Hin is seeing a lot of growth and we are seeing a lot of new investments coming to Hua Hin, mainly from local investors. There are some foreign investors, but not nearly as strong as in, say Phuket. Obviously, the core of the Hua Hin market is its strong attraction to local weekenders from Bangkok. That remains the core. That market is becoming much more sophisticated than it used to be. It used to be just a condo by the beach or maybe a house in the hills or maybe a golf course, but now we are seeing some very sophisticated high-end projects. We are involved in a waterpark that will be a huge international standard waterpark, and that is not the only one in Hua Hin. There is a new shopping center coming up, Blue Port, which will be another big addition to the attractions in the area. There is a wide range of very kind of quirky attractions; all kinds of stuff which makes it very attractive to the weekend market.
What kind of value proposition do you see in Hua Hin today?
LANDY: Hua Hin ranks very well as a value proposition. I think although land prices have gone up quite a lot, some people are now unable to afford to buy in that market, especially beachfront land, as we have been seeing prices escalate quite remarkably. But value for money wise, it is still very affordable in terms of if you are buying a condo or if you're buying a house in the hills. It’s not just Hua Hin. When we talk about Hua Hin, we are actually talking about a much wider area. The other area that is becoming very hot is Cha-Am, which is closer to Bangkok and has some very good developments and is also becoming very attractive as a value proposition competing with Hua Hin.
To what extent are you using Thailand as a launch pad for Myanmar?
You can get cheaper space [in Myanmar], it’s a myth to say that you can’t.
LANDY: Well, Colliers, as I think you know, is very geared up for Myanmar. We are very excited about this opportunity, so much so that we actually put our money where our mouth is and decided not to run it from a remote location but to put an office on the ground, and we've had people on the ground there now for two years. We’ve got our formal license and now we are fully established as a separate operating entity in Myanmar. It’s a very exciting market and we see growth for our business in two main areas. I would say one is in the tenant, what we call the tenant rep area.
Multinationals are coming into the country, and it is a very difficult place to settle in because the property prices are high, availability is low, and this is not a developed economy. So there are a lot of challenges. So I would say 50% of our work is dealing with or helping multinational companies or international companies settle, finding office space, factories, residential space, or retail space. The other half of our business is consultancy. So we're seeing a lot of demand, not only from international investors but also from landowners and developers, to get a third-party opinion on what they should be doing with land, how much it is worth, and how they should be running an investment project or development project. It’s very exciting work because it's really from the ground up.
Do you think the market in Myanmar is progressing in a sustainable manner or do you see a bubble forming?
LANDY: In terms of how Myanmar is progressing as an economy, is it overheating? It's a tricky one. I would say no, that frankly, and especially from the property point of view, my logic is that to be overheating you have to have a market that has a lot of supply coming on stream, we don’t. Myanmar is still very, very nascent. In the office sector, which everyone focuses on, there are these super high rents, and it is true. Rents are $75, $85, sometimes $90 per square meter per month, which is at the Singapore levels or 3 to 4 times what you pay in Bangkok. So, it is not cheap, but there are a couple of caveats to that.
First of all, when we look at those office rates, we are looking at maybe three or four office buildings with total space of perhaps 60,000 - 70,000 m². Compared to the Bangkok market where you have total supply of 8,000,000 m². So of course rents are going to go up because there is no supply. Now, if you are very desperate for space, and can’t afford those kind of rents, then there are alternatives. There are shop houses, stand-alone villas, there are other kinds of serviced accommodations. You can get cheaper space, it’s a myth to say that you can’t. So, is it overheating? I think that’s another story.
What about the pipeline for new supply and the level of planning taking place in Myanmar?
LANDY: The pipeline for new supply is developing, not as fast as some people would like, but it is coming on stream. We are definitively seeing better quality and Myanmar has this opportunity in many sectors, including property, to leapfrog certain stages of countries' development. The classic example is telecommunications, where they have gone straight to mobile phones and mobile banking, possibly before countries like Thailand or other countries in the region, because they don’t have the package of intermediate infrastructure.
So that's a good thing and you could say that is happening to some extent in property as well. So, instead of going through some of the disasters in urban design that other cities have experienced, they do have an opportunity to produce some very high-end buildings quite quickly and we are seeing a lot of people interested in producing that, whether they do or not is the question because one of the big obstacles to new developments for the moment is the lack of project funding. Most international lenders are still leery of the credit risk and the difficulty of getting proper collateral. So those obstacles need to be removed before we'll see any substantial new supply I think.