March 2012

Property Market MonitorBANGKOK

The Economy

Economic recovery from floodsAccording to the Bank of Thailand, the Thai economy began improving in December 2011 in the aftermath of widespread flooding around Bangkok. Inflation softened, underpinning stability in the overall economy. Although the unemployment rate rose slightly from the previous month, it remained low and is expected to decline going forward. Manufacturing, which has been adversely affected by the

flood, improved across all sectors, while exports increased modestly from the previous month. On the external front, uncertainty in western economies remained and still posed a challenge for the recovery and growth of the Thai economy.

Policy rate cut to accommodate economic recoveryThe Monetary Policy Committee (MPC) further reduced the policy interest rate this year to help push economic activity towards normal levels. With consideration of inflationary risks being well anchored and the headwinds from the global economy continuing to pose risks to Thailand’s economic growth, the MPC decided to reduce the policy interest rate by 0.25%, from 3.25% to 3.00%.

Business sentiment improves, albeit modestlyThe Private Sector Confidence index picked up slightly from last quarter but remained fragile, according to the Bank of Thailand. Consumer Confidence Index (CCI) also improved slightly, up from 18.5 to 21.4.

Going forward, investor sentiment and confidence will largely depend on the effectiveness of government flood relief and rehabilitation plans in restoring confidence.

Key Economic Indicators

GDP Growth (4Q11) -9%

Unemployment (4Q11) 0.6%

Consumer Price Index - Headline (Feb 2012) 3.38%

Bangkok Bank MLR (9 Mar 2011) 7.125%

Stock Exchange of Thailand Index (16 Mar 2012) 1,189.56

Thai Baht-USD Exchange Rate (16 Mar 2012) 30.86

Source: Bank of Thailand, National Economic and Social Development Board,Commerce Ministry, Labor Ministry, Bangkok Bank

Park Ventures, the latest mixed-use development in Bangkok’s CBD, comprising Grade A office and an Okura Hotel. The office component is managed by Jones Lang LaSalle.

Office

Key Indicators BMA CBD Grade A

Total Stock* (million sqm) 8.12 1.36

Net Addition (sqm) 118,000 99,000

Net Absorption (sqm) 192,000 52,000

Vacancy Rate (%) 14.9 21.7

Average Gross Rent (THB psm pm) 394 611

Rental Change 2H11 (%) –1.0 –2.15

Remark: * Subject to re-audit/review of building NLASource: Jones Lang LaSalle, January 2012

Moderate office supply across Bangkok in 2H11The total office supply in Bangkok rose marginally to 8.12 million sqm at end-2011 as several buildings across Bangkok were completed.

In the CBD, Park Ventures, comprising Grade A office and an Okura hotel, completed adding another 25,000 sqm of office space to the Bangkok and Grade A stock in 4Q11. Outside the CBD, several projects completed in 2H11, adding 27,000 sqm to the stock. These projects are KPI tower (11,000 sqm), Olympia Thai Tower II (2,000 sqm) and Rungrojthanakul Building (14,000 sqm).

Until the completion of Royal Rachadumri in 2013, the supply of Grade A office space in the CBD will be limited as no new supply will enter the market. In contrast, several Grade B offices in the Inner North are scheduled for completion in 2012. These include The 9th Tower A & B (56,000 sqm), The Nine (10,000 sqm), Central Plaza Rama 9 (10,000 sqm) and Palladium Square (26,000 sqm) for which completion was postponed from 4Q11 to 1Q12.

Office demand continued to recoverOffice demand across Bangkok expanded faster in 2011, due to falling rents and relocations/expansions in 2H11. Net absorption for all of 2011 jumped to 192,000 sqm, a 65% increase over net absorp-tion in 2010. Meanwhile, the vacancy rate for all grades of office space across Bangkok dropped to 14.9% at end-2011.

Pulse • Property Market Monitor • March 20122

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Rental Value Index Capital Value Index

Rents and Capital Values – CBD Grade A

Source: Jones Lang LaSalle

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Physical Indicators – BMA

Future Supply

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Source: Jones Lang LaSalle

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Pulse • Property Market Monitor • March 2012 3

Many notable transactions were reported in 2H11, including the expansion of Servcorp in Park Ventures, the expansion of L & H in Q.House Lumpini, the relocation of Covidien to Chamchuri Square, the relocation of AstraZeneca to Asia Centre, the relocation of Parfums & Beaute, as well as Club 21 and OSK Securities to Park Ventures.

Net absorption for CBD Grade A space also spiked, rising to 52,000 sqm in 2011, from only 72 sqm in the previous year. Despite flooding surrounding Bangkok, the leasing market remained active as the CBD areas were largely unaffected. Also, tenants took advantage of lower rents and new buildings to acquire better quality office premises in the CBD.

The completion of Park Ventures in 4Q11 did not push the vacancy rate for the CBD Grade A sub-market up as several pre-committed tenants already moved in. Coupled with an increase in demand through expansions and relocations to Grade A office in the CBD, the vacancy rate declined slightly to 21.7%, a 60 basis point drop q-o-q.

Office rent declines slowedDespite the expectation of tighter conditions going forward, average

gross rents for overall Bangkok and CBD Grade A space dropped slightly by 1% y-o-y to THB 394 and 2.2% y-o-y to THB 611, respec-tively as near panic about flooding in Bangkok weighed on the market. However, downward pressure on rents is likely to ease as new demand and pre-commitments for new supply is gradually being realised and leasing activity is expected to pick up.

Only one building sold during 2H11With highly volatile domestic and global financial markets, the office investment market remained quiet. Only a share of the strata-title Italthai Tower on New Petchaburi Road, outside the CBD in central east, was sold to a private buyer for approximately THB 1.2 billion.

Positive outlook expected in 2012Particularly for the CBD Grade A office market, capital value has started to pick up and is expected to rise over the medium term. A slight increase by 2% q-o-q to THB 69,699 in 4Q11 reflected a more positive outlook for the office market and the Thai economy going forward. Also, net take-up is expected to increase as limited supply is anticipated until at least 2013.

Residential

Active launches in Central Bangkok in 1Q12Major developers were lining up to launch new condominium projects in Central Bangkok following postponements from last quarter due to the severe flooding. Notable launches include four projects under the ‘Ideo Mobi’ brand from Ananda Development (Ideo Mobi Phayathai, Rama 9, Sukhumvit, Sathorn), which reportedly received strong pre-bookings. Asian Property has also been active with two upcoming projects under the ‘Aspire’ name (Aspire Rama 9 and Aspire Sukhum-vit 48). Others include The Capital Ekamai-Thonglor, the second condominium project from KPN Group and Siamese Ratchakru by Siamese Asset.

Recent Condominium Launches

Project Developer Total Average Price Units (THB psm)

Noble Unite Noble Development 255 109,000

Supalai ParkEkamai-Thonglor Supalai 660 56,500

Siamese Thirty Nine Siamese Asset 87 94,600

Dwell Preuksa Real Estate 289 149,000

The AddressSukhumvit 61 Asian Property 99 147,500

Source: Jones Lang LaSalle, January 2012

A share of the strata-title Italthai Tower on New Petchaburi Road was sold to a private buyer for approximately THB 1.2 billion. Jones Lang LaSalle acted as the exclusive sales agent on the transaction.

Pulse • Property Market Monitor • March 20124

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Number of Visitors (million) Annual Growth

*Based on international tourist arrivals at Suvarnabhumi International AirportSource: Office of Tourism Development, TAT, Jones Lang LaSalle Hotels

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Condo demand in non-flooded areas boosted On the back of renewed interest in centrally located high-rise developments, demand has strengthened in the non-flooded city centre, from both occupiers and investors. Take-up has improved, while the leasing market was active last quarter. Several projects in flood-spared areas enjoyed higher sales during the period.

However, the magnitude of the economic recovery and investor confidence in areas which have been affected by the flood remain largely dependent on the effectiveness of the government’s stimulus programmes and rehabilitation plans in instilling confidence.

Retail

Fierce competition expected in 2012The strong performance of the retail market has spurred on a massive amount of supply completing in 2012. Approximately 18 projects are expected to complete this year. Of this amount, eight projects, namely Rain Hill (10,000 sqm), Asiatique (30,000 sqm), Seacon Square Bangkae (300,000 sqm), The Vue (5,000), The Gateway Plaza (93,000 sqm), Mega Bangna (400,000), and Thanya Shopping Park (70,000 sqm), are considered prime grade centres.

Robust demand realised in 2011Demand for retail space, both from newcomers and branch expan-sion, was active in 2011. The major leasing transactions include Kidzania taking 8,000 sqm of space at Siam Paragon, Uniqlo opening its second and third branches at Central Ladphrao and Central Plaza Rama IX (taking 760 sqm and 1,600 sqm, respectively), and IKEA opening its first branch in Thailand with total space of 43,000 sqm at Mega Bangna.

Industrial

New incentives and measures to help aid recovery Thailand’s Board of Investment (BOI) recently announced the approval of new relief measures to encourage investment and business recovery among projects affected by the flood. The rehabili-tation measures applicable to both small- and large-scale investors, and both Thai and foreign businesses, will include tax incentives (up to a 150% cap on new investment plus remaining unused cap or up to 50% tax reduction) and exemptions (up to eight years) given to affected businesses under respective conditions.

Hotels

Tourism Demand Rebounds

According to statistics from the Office of Tourism Development, Bangkok received 12.3 million international visitors in 2011. This represents an increase of 18.4% over 2010. Strong growth is expected to continue in 2012, with the Tourism Authority of Thailand (TAT) forecasting international tourism arrivals to increase between 5% and 8% in 2012.

China Bangkok’s largest source market in 2011China, for the first time, was Bangkok’s largest source market in 2011, based on arrivals to Thailand by nationality at Suvarnabhumi Interna-tional Airport. A total of 1.23 million Chinese visited Bangkok in 2011, accounting for 10.5% of total international arrivals, registering a growth of 30.5% over 2010. Japan was the second largest source market with 1.03 million visitors, an increase of 14.2%. India was the third largest market accounting for 6.8% of total visitor arrivals and a substantial growth of 20.8% from 2010. Russia, was the fastest growing source market with growth of 50.5%, and contributed 5.7% of total arrivals with 704,074 visitors.

China 10.5%

Japan 8.5%

India 6.8%

Russia 5.7%

Korea 5.6%UK 5.4%

USA 4.5%Germany 4.1%

Australia 3.9%France 3.4%

Others 41.5%

Top 10 Source Markets in 2011

International Visitor Arrivals by Nationality to Bangkok

*Based on international tourist arrivals at Suvarnabhumi International AirportSource: Office of Tourism Development, TAT, Jones Lang LaSalle Hotels

Pulse • Property Market Monitor • March 2012 5

Major New Hotel Room Supply in Bangkok

As at January 2012 Source: Jones Lang LaSalle Hotels, Industry Sources

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Completed Supply 5-star 4-star 3-star 2-star

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 >2015 On hold

5-Star Hotel Performance in Bangkok

Source: STR Global, Jones Lang LaSalle Hotels

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Hotel Supply to IncreaseOur research indicates that at present a total of 44 hotels and 10,126 hotel rooms are in the pipeline for 2012 through to 2015 and onwards. The majority of this new supply is due to open in 2012 (52.3%) and in 2013 (24.8%). The greatest proportion of the future hotel room supply is in the 4-star hotel category (50%), followed by the 5-star category (37%).

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4-Star Hotel Performance in Bangkok

Source: STR Global, Jones Lang LaSalle Hotels

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5 Star Bangkok Hotel Market PerformanceFor the full year 2011, occupancy increased 7.3 percentage points to 58.1%, although ADR on the other hand improved only slightly by 1.5% to THB4,662. Due to the increase in occupancy, RevPAR grew significantly by 16.3% from THB2,331 to THB2,710.

4 Star Bangkok Hotel Market PerformanceFor full year 2011, occupancy increased 9.2 percentage points to 61.0%, whilst ADR improved by 5.4% to THB2,638. Due to the increase in both occupancy and ADR, RevPAR grew significantly by 24.1% from THB1,296 to THB1,608.

COPYRIGHT © JONES LANG LASALLE 2012 All rights reserved. No part of this publication may be published without prior written permission from Jones Lang LaSalle. The information in this publication should be regarded solely as a general guide. Whilst care has been taken in its preparation no representation is made or responsibility accepted for the accuracy of the whole or any part.We stress that forecasting is a problematical exercise which at best should be regarded as an indicative assessment of possibilities rather than absolute certainties. The process of making forward projections involves assumptions regarding numerous variables which are acutely sensitive to changing conditions, variations in any one of which may significantly affect the outcome, and we draw your attention to this factor.

For more information, please contact

Dan TantisunthornHead of ResearchThailanddan.tantisunthorn@ap.jll.com+662 624 6420

Jones Lang LaSalleBANGKOK19/F Sathorn City Tower175 South Sathorn Road Sathorn DistrictBangkok 10120 +662 624 6400

PHUKET23/113 Moo 2, Thepkasattri Road, Tambol Koh Kaew, Amphur Muang,Phuket 83000+667 623 8299

PATTAYAThe Village Shopping Center, Suite B 17 – 18383/2 Moo 12, Sukhumvit – Pattaya RoadNongprue, Banglamung, Chonburi 20150tel +66 38 074 663 - 5

Jones Lang LaSalle HotelsBANGKOK19/F Sathorn City Tower175 South Sathorn Road Sathorn DistrictBangkok 10120 +662 624 6400

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