The image above comes from Bali. Are local farmers and land owners annoyed at being approached far too often to sell their land for resort and villa development?
A thought crossed my mind after seeing the photo: How much of Asia’s prime emerging coastal resort land is already in strong hands?
By strong hands I mean land owners who don’t need or want to sell, can keep the property undeveloped for a long time and pass it down through the generations, or develop the property themselves, or sell only at full or rich valuations. That is, if it comes on the market, not at a discount. The downside of land being in strong hands is that owners have no need to sell in a hurry leading to a slower pace of coastal development in places where this happens most.
Some examples of coastal resort land in strong hands include Bintan’s northern coastline owned by a Singapore public listed company, Gallant Venture. Another example is where many of Cambodia’s islands are in the hands of influential business groups.
There’s no easy way to find out how much of the coastal land is already in strong hands but I’m sure increasingly more as land owners start recognizing the tourism potential of coastal land – especially land in prime emerging locations.
With more coastal land being in stronger hands we can be sure of two things: (1) the era of highly discounted and cheap land will be over, except for outlying locations in coastline abundant countries like Indonesia and Philippines, and concurrently (2) limited and managed availability of sizable resort sites at recognized emerging destinations. Vietnam’s Cam Ranh bay is a good example where investors purchased beach front land some time back but building works have not even started. Refer to the March 2014 issue of the Vietnam Resort Report for more on Cam Ranh’s undeveloped projects.
Cheap land era over
Due to a more connected informed world and people recognizing Asia’s growing and traveling middle class, small land owners are becoming knowledgeable about the real value of their land. At the same time large domestic corporates, wealthy families and local business people have acquired over time and on the quiet. Already previously outlying places such as Nusa Lembongan are attracting valuations 8 times higher than a decade ago.
Governments, probably owning the largest land bank in undeveloped emerging locations will not likely release land without reasonable compensation which at least offsets some of the infrastructure cost associated with developing the place.
Limited preferred locations and large parcels
Some of the coastal land reclamation projects coming up in the Asia region are responding to limited or non-existent large development sites in proven destinations and coastal urban centers. Examples include Melaka Gateway, Seri Tanjung Pinang, Manila Bay and the controversial proposal to develop Bali’s Benoa Bay. Why? Because there’s more incentive and less risk for large corporates to enter into these projects compared to alternative small infill developments or new projects in emerging locations. Adding to this, urban planners have not or are not increasing development intensity in existing locations as well as inland hinterland. And furthermore, existing fragmented small land ownership makes amalgamation into large parcels very challenging or even impossible.
Take for example, TCC Land’s Cha’am resort town master plan shown below. It clearly demonstrates the challenge of amalgamating beach front land. The bulk of this project does not have direct access to the beach front except at the two extreme ends of the master plan.
What does this mean for developing large foot print resort hotels?
A 300 to 400 room low density large foot print resort will need anything from 10 to 20 hectares. Are large land parcels in good locations on the beach front readily available in today’s market for a reasonable price?
If sizable beach front development land is not available at your preferred location you can either wait for a re-development opportunity (game of chance), amalgamate smaller parcels (slow and uncertain) or get the best locations in emerging destinations where coastal land of size is relatively more available. But then the questions is, are established developers ready to take on risks associated with emerging destinations?