The global real-estate consultant anticipates Asia-Pacific’s total hotel transaction volume to hit US$9.5 billion (Bt297 billion) this year, marking a 15-per-cent increase from last year.

In 2018, transaction activity was fuelled by single-asset trades, which drove more than 83 per cent of the $8.3 billion invested in the region. Developers and private equity firms were the biggest buyers, acquiring more than half of all the properties traded.

Building on 2018, investment momentum is expected to accelerate as investors look to sell assets and ride the anticipated tourism boom, especially in Japan and Singapore. The most notable buyers will be Pan-Asian private equity funds that raised capital last year, but have yet to deploy it. Listed real-estate investment trusts (REITs), particularly Japanese ones, will look to Asia’s most liquid markets for purchase, while conglomerates and owner/occupiers will buy selectively in key markets.

“Despite a series of natural disasters, Japan’s hotel market captured investor interest globally. Nearly 30 per cent of all investment into Asia-Pacific was in Japan, overtaking China in the top spot,” said Nihat Ercan, head of hotel investment sales in Asia for JLL’s Hotel and Hospitality Group.

According to the report, investor sentiment in Japan will remain buoyed by the Rugby World Cup and the Tokyo Olympics – the market has already seen an 8.7 per cent growth in tourism year-on-year. Similarly, Singapore’s hotel market pulled in 7 per cent more tourists last year, driving positive RevPAR (revenue per available room) increases across all chain scales. In China, tourism demand outstrips supply – JLL tracked record high growth in RevPAR across major Chinese cities in 2018, including Chengdu up 20 per cent, Beijing up 15 per cent, Chongqing up 13 per cent and Wuhan up 12 per cent.

“While we remain in a late-cycle environment where yields are low with limited potential for further compression, most investors do not see a major downturn ahead. After a subdued final quarter in 2018, enquiries and deal making have perked up at the beginning of the year.

“Interest rates are now stabilised, so investors can focus on income growth and in markets where fundamentals remain strong,” Ercan concluded.

JLL expects investors looking at Asia-Pacific to factor a lower upside in income in their valuation assumptions, though liquidity across key cities and lower return requirements will drive transaction volumes.

On the global front, hotel occupancy rates and underlying property performance will remain strong while travel and tourism are slated for another record year. Investors seeking more yields are increasingly turning their sights toward hotels amid slower economic growth projections and geopolitical uncertainty. “Investment activity exceeded expectation in 2018 and we believe 2019 to be another strong year for global hotel investment, with a significant amount of debt and equity liquidity and competitive bidding for assets, given continued strength in fundamentals,” Mark Wynne-Smith, global CEO for JLL Hotels and Hospitality, said.

“Notwithstanding the more cautious backdrop, ongoing large portfolio and entity-level activity, hotels’ attractive yield profile and record levels of dry powder [marketable securities that are highly liquid] will drive global hotel investment momentum.”

Regus opened its latest premises in Bangkok at Singha Complex in Asoke area last week, boasting a total of 1,134 square feet. It is the company’s 21st branch in the Kingdom.

“This new opening is part of Regus’ commitment to continually expand into strategic locations across Thailand, and to meet the increasing demand for flexible workspace in the country. Hence, we continually strive to innovate and grow, and to provide the best flexible and convenient working experience that truly accommodates people looking for more inspiring options when working,” she added.

“The market for co-working space is driven by demand from new generations,” said Phattarachai Taweewong, research manager at Colliers International, a global real estate consultancy with offices in Thailand. “They want a place to work that is easy to reach at an affordable cost.”

Colliers estimates that co-working spaces in Thailand will increase by 25 per cent this year with both Thai and international firms contributing to the expansion. Hubba, a local company, opened the first co-working space in the Kingdom in the Ekamai area of Bangkok in 2012. Since then about 150 co-working spaces have opened across the country.

Phattarachai said there will be 269,000 square feet of new co-working space from 10 projects opening up in Bangkok in 2018, which will increase total co-working space to over 1.3 million square feet in the capital. While growth has been rapid, co-working spaces account for less than 2 per cent of total working space in Bangkok.

Four international companies – two from the United States and two from Singapore – are among those slated to open co-working spaces in Bangkok in coming months. Aside from WeWork, US-based Spaces will also open in three locations, while JustCo and The Great Room from Singapore will open in a total of six locations.

Meanwhile, other businesses are redesigning their offices as co-working places in the belief that creation of open spaces for all will stimulate new ideas, and as a challenge to their staff to share ideas and work together.

“My office design has changed to an open space where all in the department can communicate and have discussions that will challenge and improve cooperation between the staff,” Saowanee Jeeradechatham, associate head of corporate public relations of AP (Thailand) Plc, said. “It’s better than it was before, when the office was designed so that I had my own cubicle.

“The new layout and design opens space for us to see each other while we work, and it’s also easier to communicate together than with the old design. This helps us create new ideas and opens our minds to different ideas – and that improves my work.”

AP (Thailand) chief executive Anuphong Asavabhokhin was the driving force behind the office renovations. He believed that creating an environment based on co-working spaces would help staff to better communicate and collaborate. Anuphong saw it as a way to stimulate creativity in the workplace and to challenge AP’s staff to work together.

Kulnaree Meekaew, Ananda Development Plc’s corporate public relations manager, is also sold on the idea of collaborative space.

“We moved from the older office two years ago, to an office designed around collaborative space that was opened up for all staff to share their ideas. They can book a seat to work for the day when they need to work together. And I can change the seating when I book a space, so that it’s easier to work with the staff of other departments when we need to.”

Ananda in 2016 moved its two offices in Bang Na and Ratchadaphisek to the FYI Building. The new office is designed with a collaborate area known as “Ananda Campus”. This opens space for all parties to use to improve communication or to meet together.

CBRE research has tracked the rise in demand for co-working spaces within Asia, including in the Thailand market. The trend follows significant changes in work lifestyles.

The research found that the rapid growth of flexible spaces, which expanded by 57 per cent in 2017 in major Asia Pacific markets, is altering the structure of office leasing demands. In the first half of 2018 alone, 15 per cent of office leasing transactions in the region involved “agile spaces”.

While less than half of co-working operators in Asia Pacific are profitable, the larger and more established providers are performing well. Flexible space operators must ensure their business model is sustainable and can survive the next downward cycle, the research revealed.

Selected transactions involving buildings with flexible spaces in major business districts show they do not command a significant premium over similar properties without agile spaces. However, non-prime buildings with flexible spaces can achieve a capital value premium of around 5-10 per cent over similar properties without these spaces.

Meanwhile, a JLL research found that flexible workspace in Asia Pacific – including both serviced offices and co-working – surged 150 per cent from 2014 to 2017. The number of major, flexible workplace operators more than doubled in the Asia Pacific region during this period.

For now, co-working operators are reigning over the market. US-based WeWork recently opened its flagship space in Southeast Asia. Singapore’s sovereign wealth fund GIC has partnered with property firm Frasers to inject US$177 million (Bt5.54 billion) into expanding JustCo across Japan, China, Australia and India.

Yet as the concept of flexible space becomes more established, landlords and developers are set to become more active.

Landlords are already taking steps to bring their own flexible space offerings to the market. In Australia, local landlord Dexus has four centres and plans to expand further. Hong Kong real estate giant Swire not only set up its own co-working space called Blueprint, but has also signed a deal with WeWork as well as with The Great Room, a luxury co-working space operator.

Asia’s major landlords dominate central business districts across the region. In Singapore, the 15 largest landlords control 75 per cent of Grade A office buildings in the CBD while in Tokyo’s Akasaka / Roppongi submarket, five landlords control almost 90 per cent of Grade A office space.

“This gives these property owners considerably more leverage to determine the shape of the flexible space industry,” said Christopher Clausen, associate director, Asia Pacific research, at JLL. “Joint ventures or management contracts between landlords and flexible space operators are likely to become more common.”

Developers too are making their own play to benefit from the growing demand for flexible space.

For example, Lendlease’s Paya Lebar Quarter development in Singapore will dedicate up to 15 per cent of its office space to co-working while Capitaland is pursuing a similar strategy in China.

In Thailand, a number of international co-working space firms have also expanded their investment and open co-working spaces. According to a survey by CBRE, co-working space in Thailand totalled 20,400 square metres as of the end of 2018.

JLL research believed that although the flexible space market still accounts for less than four per cent of Grade A office space across key Asia Pacific markets, further growth was on the cards for 2018, and flexible space could grow to as much as 30 per cent of corporate portfolio by 2030. This parallels the demand in the market and a change in work lifestyles.

Co-working space operator JustCo also forecasts that Thailand’s co-working spaces will increase from the average one per cent of all spaces in 2017 to above five per cent in 2020. The company is among the firms planning to expand their co-working space investment in the Kingdom, the company’s founder and chief executive officer, Kong Wan Sing, said recently.

JustCo now manages 9,200 square metres of co-working space in Bangkok – at AIA Sathorn Tower and at Capital Tower. With the opening of its premises in Samyan Mitr Town this year, the space will increase to 17,200 square metres in the capital, and will reach 30,000 square metres in the capital by 2020, Wan Sing said.

“New skills and business models are needed in the digital economy,” concludes Clausen, JLL’s associate director, Asia Pacific research. “And many governments are encouraging creativity, collaboration and entrepreneurship as they take a pro-active step to move away from relying on manufacturing and old industries to give their economies a boost.”

This year, the company has budgeted Bt9.5 billion for purchase of land to develop residential projects in 2020.

Meanwhile, the company also has plans to invest Bt1 billion over the next three years in three new businesses that it expects will generate recurring income of Bt6 billion in 2022, he said.

To support the aggressive investments this year, the company plans to raise Bt4 billion from the issue of debentures to meet its target of keeping cost of finance at not over 3 per cent. The current interest cost is 2.8 per cent, he said.

The three new businesses are SEAC, Vaari, and Claymore in which AP (Thailand) Plc holds a 100-per-cent stake.

SEAC is a learning centre that creates training courses for people who want to gain experience and also improve their professional skills at a time of rapid digital and technological changes in their businesses. This company has a registered capital of Bt300 million. Set up last year, it operates in collaboration with a world class university in setting up training courses.

Vaari is the creator of an ecosystem that supports quality-of-life management. It will offer property management services that match the demand of customers by collaborating with other service providers and startups. The company has a registered capital of Bt30 million.

Claymore is a creator of design innovations that meet the different needs of residents. This will be a collaboration with startups both here and overseas to serve the different needs of residents. The company has a registered capital of Bt5 million.

“We expect the three new business to generate recurring income of up to Bt6 billion in 2022, or about 10 per cent of our total revenue target of Bt60 billion in that year,” Anuphong said.

He added that the company had decided to expand and try a new business model by targeting sustainable growth over the long term as technology and digital developments are disrupting all industries. He said property firms also have to move to disrupt themselves and find ways to sustain growth over the long term.

“Developing residences for sale will remain our core business as it generates up to 90 per cent of our total revenue. However, a new business model will drive sustainable growth in the long term,” Anuphong added.

In keeping with the growth of its core business, the company plans to launch 39 new residential projects worth a combined Bt56.8 billion this year. Five of the 39 new residential projects will be condominiums worth Bt22.4 billion. Three of five condominium projects will be developed as a joint venture with its Japanese partner, Mitsubishi Estate Group. The projects will be worth about Bt18.3 billion. It will develop the other two projects, worth Bt4.1 billion, on its own. The balance 34 projects will be low-rise residences, including single-detached houses, twin-houses and townhouses worth a combined Bt34.4 billion, he said.

The company expects its total presales this year to see 10-per-cent growth over 2018, with record total presales of Bt41.3 billion. The company also expects total revenue to grow by up to 15 per cent this year compared to last year.

In 2018, the company was successful in transferring its residential projects to customers, clocking up a 30-per-cent growth year on year, thanks to strong demand in the market. Up to 50 per cent of them came from condominium projects and the balance from low-rise residences.

Meanwhile, up to 60 per cent of condominiums transferred to its customers in 2018 were developed as a joint venture with its Japanese partner, he said.

At the end of 2017, the company had reported total revenue of Bt22.85 billion and net profit of Bt3.15 billion. In the first nine months of 2018, the company reported total revenue of Bt19.98 billion with net profit of Bt2.9 billion, up 36.75 per cent and 62.92 per cent respectively year on year.