The boom in provincial Thailand

Khon Kaen is not exactly on the ‘must see’ list for tourists going to Thailand. It is one of the four major cities in Isan – the northeast part of Thailand, not too far from Cambodia and Laos. It’s home to many hard working rice farmers and is most well-known for supplying reliable construction and service industry workers to Bangkok.

But Khon Kaen is starting to change.

Knight Frank Chartered (Thailand), a property consultancy firm, says there is a brisk demand for condos in Khon Kaen. The city and the surrounding province saw the market come alive five years ago, which has accelerated over the past three years. Over 6,802 condo units were launched in 2011-13, and last year 3,284 units were launched, the highest number ever to enter the market.

All this in a city of only 100,000 people. It’s hardly what you would expect from a quiet provincial town, but it’s happening all over Thailand.

New cities and new ways to live

The cities are changing because the citizens are changing. Khon Kaen, for example, is home to a thriving university, and in recent years, it has seen a massive surge in enrolment. Many of the buyers of these apartments are students or staff at Khon Kaen University (KKU). I have a friend whose nephew studies there. The young man has dreams of becoming a photographer with his own studio, and although he comes from a simple background, he won a place at the university.

His generation in Asia is full of aspirations. They have grown up with relative affluence compared to their parents, and they want to live in material comfort.

We’ve seen this before in Europe and the US. After World War II, governments began to listen to the needs of the working class and made it far easier for people to go to college. This led to a bigger, richer middle class. They all needed somewhere to live and so the modern suburb was invented. As ordinary people got richer and better educated, they changed the physical world around them.

Here are a few ways to play it

The first of these is Central Plaza Hotel Group (CENTEL MK) which is setting up a new budget hotel chain called COSI Hotels. The first hotel is set to open in 2015 and plans are in place to have at least 30 operational by 2020. Once established in Thailand it plans to roll the chain out across Southeast Asia. Suparat Chirathivat Uahwatanasakul, vice-president of development at CENTEL, explains the rationale as follows: “We are seeing an entire new generation of travellers in both leisure and business travel sectors, who are cost-conscious, and who do all their research and booking online. Much of this market is driven by the growth of the budget airlines, which are allowing people to travel more easily and conveniently.”

Another example is Supalai (SPALI TB), a property developer, which has its core market in Bangkok, but is expanding aggressively into new provincial markets such as Ubon Ratchathani and Nakorn Rathasima (both in the northeast) this year. According to UOB Kay-Hian, the property developer will have the second largest exposure to provincial markets in 2014.

Tesco Lotus (the REIT-arm is listed in Bangkok as Tesco Lotus Retail Growth Freehold & Leasehold Property Fund, TLGF TB), the British-owned hypermarket, has opened its first regional distribution centre in Khon Kaen to service 300 Tesco Lotus stores in the north-eastern region. The centre cost Bt2.5bn and is designed to a similar standard as the UK. It’s the first regional distribution centre outside the central region.

Those are just a few of the opportunities we’ve spotted so far, but there will be more to come. I’m very excited to see how this trend develops in Thailand and across Asia.