Asset management and property risk
Time to take a closer look at the best way to improve performance of property portfolios, according to CBRE
Thailand’s real estate market is both competitive and dynamic, with developers and investors facing many challenges, especially this year.
Nicholas Vettewinkel, director of capital markets – investment and land – CBRE Thailand.
With many developers rescheduling projects, and investors revisiting their portfolio strategies, asset management has become a vital tool to manage risks for property owners, says the international property consultancy CBRE.
Asset management is a response to the rapid changes affecting the market and the economic burdens that follow each emerging wave of the pandemic.
“The rapidly changing dynamics of Thailand, Bangkok in particular, are putting new pressures on the Bangkok property market in 2021,” said Nicholas Vettewinkel, director of capital markets (investment and land) at CBRE Thailand.
“Against a backdrop of increasing supply in the residential, office and retail markets, the impact of Covid-19, and the implementation of the new Land and Building Tax, investors and developers are having to adapt.”
Few cities in the world, outside of China and Dubai, have undergone such a dramatic change in the property market due to the significant investment in mass-transit infrastructure over the last 15 years, Mr Vettewinkel observed.
“The development of mass-transit infrastructure [in Bangkok] has facilitated not only new pockets of development in key commercial sectors, but radically altered the previously established residential development model,” he said.
“With these structural changes, asset management could help property owners actively respond to the changes in the market affecting their portfolio.”
Mr Vettewinkel offers an example, involving a landowner that was advised by CBRE to acquire a small neighbouring land plot, located on a major road, to add to their extensive holdings. This facilitated highrise development and increased the buildable area of the combined land plot by nearly 300%.
Another interesting case study involves an investor who wanted to sell an old apartment building where occupancy had fallen below 50%. CBRE advised the client to renovate the property rather than sell it.
After the renovation, occupancy increased to 90% and rental rates improved by 20%. With the improved performance, the owner decided not to sell the property and it has continued to perform well despite the pandemic.
Effective property asset management requires detailed knowledge of the market, as well as an understanding of each property owner’s needs, financial requirements and tolerance of risk.
The key is to identify opportunities and risks and, through a thorough understanding of the market, deliver solutions to create positive outcomes for investors. Asset management is a template for property owners to enhance and maximise the positioning of their assets, but also help to manage and mitigate risks, based on a pre-agreed strategy.
“We have applied asset management techniques with all types of property assets, from land to complete buildings,” said Mr Vettewinkel. “This can range from acquiring neighbouring property to improve land shape and development potential or renovating a building to remain competitive.
“In a dynamic market like Bangkok where new supply is a constant threat to existing buildings, neglected properties can benefit from asset management to help determine the correct level of investment to improve the building’s performance. Doing nothing is not a viable option.”