Residential developers are increasingly turning to hotels and warehouses to diversify their revenue streams, as sluggish demand and tighter mortgage lending limit growth in their core housing businesses.
SET-listed SC Asset Corporation is expanding its recurring-income businesses, with hotels and other commercial assets playing a larger role in supporting earnings.
“We are focusing on businesses capable of generating recurring income alongside our residential development operations,” said Namtip Promchua, SC’s chief finance and accounting officer.
The strategy reflects its efforts to build more resilient revenue streams by adding businesses that are less dependent on homebuyer purchasing power and mortgage approvals.
In the first half, SC recorded 925 million baht in recurring income, up 75% year-on-year, driven by the expansion of its hotel and logistics portfolios, whose contributions to recurring income surged to 41% and 13%, respectively, from 5% and 6%.
Meanwhile, revenue from residential sales rose 33% to 9.4 billion baht, mainly driven by condos, which increased 3.8-fold to 4 billion baht following the completion of a project in May. The project had secured more than 90% in presales before completion.
By contrast, revenue from low-rise houses, its main revenue contributor, fell by 11% to 5.3 billion baht due to weak demand, intense competition, and a large inventory in the market.
SC’s hotel arm operates three properties totalling 545 rooms, maintaining an average occupancy rate of 65% during the first six months of the year.
Complementing its hospitality business, SC’s US residential assets in Boston achieved nearly 100% occupancy across four apartment buildings comprising 59 units.
Meanwhile, SCX Logistics, the warehouse business of SCX Corporation, which is SC’s recurring-income asset management arm, has built a 200,000-square-metre warehouse portfolio, with more than 90% of construction completed and full tenant occupancy secured.
To sustain growth, SC plans to add another 200,000 sq m of logistics space in the second half through strategic joint ventures.
The expansion of hotels and logistics assets is part of SC’s strategy to build a more diversified income base, generating recurring cash flow alongside its residential development.
SET-listed Origin Property is also seeing a growing contribution from hotels and warehouses, which it expects to become increasingly important earnings drivers under its three-year business plan.
Pitipong Trinurak, co-chief executive of Origin Property, said hotels and warehouses would remain the company’s key value-creation businesses, alongside selective residential development and expansion into new markets.
Origin operates eight hotels with an asset value of around 11 billion baht, while its Alpha warehouse business has roughly 360,000 sq m of operating space.
Alpha reported 100% occupancy in the second quarter, with all of its operating sites fully occupied, highlighting the stable demand for logistics and warehouse facilities.
The company plans to add another 150,000 sq m of warehouse space to its pipeline, mainly around Bang Na, Laem Chabang and industrial estates.
For hotel business, Origin is planning to launch Moxy Phuket Chao Fah and Motto Chiang Mai Nimman, which are among the projects planned under its latest development pipeline.
Those two hotels will have around 300 rooms, with a combined investment value of about 1.1 billion baht, further expanding Origin’s hospitality portfolio, Mr Pitipong said.
“Our strategy is based on building and operating assets until occupancy reaches an appropriate level before monetising them through real estate investment trusts or sales to investors,” he said.
This model allows Origin to generate operating income while assets are held, followed by potential gains when they are monetised and capital is recycled into new developments.
The company expects non-residential businesses to account for half of its profit this year, with hotels and warehouses becoming increasingly important contributors.
The shift comes as residential developers face slower sales growth, high mortgage rejection rates and cautious consumer spending, encouraging them to seek income from commercial and hospitality assets.
Origin’s second-quarter revenue reached 1.9 billion baht, while net profit rose to 151 million baht, supported partly by gains and cash from hotel and land disposals.
The developer expects asset-related businesses to continue to support earnings as more hotels and warehouses mature and become suitable for exits or other forms of monetisation.
SC is pursuing a similar diversification strategy, using commercial and hospitality assets to broaden its earnings base and reduce reliance on residential transfers.
For developers, the growing contribution from hotels and warehouses represents a structural shift from a predominantly project-based business towards a portfolio model combining residential sales with recurring operating income.
The trend could become increasingly important as developers seek more stable cash flows while waiting for Thailand’s residential market to recover.