Development companies diversify into new businesses to reduce risks

Development companies diversify into new businesses to reduce risks

In the past, Thai developers have already adjusted their investment strategies to cover all types of projects: condominiums, townhouses, duplexes, hotels and retail spaces.

However, during COVID-19, real estate has become not the most reliable business, and developers are now diversifying their investments outside of their business sector again. To bring diversity to the core business and reduce the risk of excessive dependence only on the real estate market.

The previous turmoil in the real estate market was after the Asian financial crisis of 1997. The crisis led to the fact that developers focused their attention on the construction of houses or condominiums, especially in Bangkok, which brought the most profit. Some developers are engaged in one niche of real estate, others are engaged in several niches at once to be more competitive.

Some developers have applied diversification strategies for the first time, developing different types of housing projects, developing projects in other provinces, reaching different target audiences or investing in other types of businesses.

For example, Property Perfect has a joint venture with partners for the production of rubber gloves. Before the epidemic, Pruksa Holding carried out significant diversification, expanding into the medical and wellness business, founding the Vimut Hospital.

Sansiri has developed a strategy to enter new businesses in the field of healthy food and clean energy. Sansiri has previously invested in fintech, digital assets and electric car chargers.

Other developers decided to apply the traditional approach to diversification by development projects of other categories: hospitals, rehabilitation centers, etc.

Time will tell whether the diversification of developers into a business other than the main one will be successful. But at the moment, when real estate is just recovering from the crisis, narrow specialization ties the hands of companies and diversification can be an excellent solution for maintaining business.

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