New office development projects in Bangkok that are expected to open later this year are experiencing strong pre-commitment levels, continuing a trend that began in 2013.
Healthy demand for space in new projects is being driven by large domestic as well as multi-national firms that are seeking to expand their office footprint, but being faced with limited options in existing buildings as vacancy rates in existing prime office buildings are near all-time lows. This news comes from real estate firm JLL.
One prime example it cites is G Tower on Rama IX Road, the latest addition to The Grand Rama 9 New CBD project, an iconic mixed-use development by Grand Canal Land PCL. Planned for completion in the third quarter this year, more than 65 percent of the office space in G Tower has already been pre-leased.
Krungthai-AXA Life Insurance is G Tower’s first major anchor tenant, and will occupy nearly 15,000 sqm when the project completes later this year. Secured by JLL, Krungthai-AXA Life Insurance’s relocation represents the largest office leasing transaction recorded in Bangkok during 2015. With several other major occupiers presently finalising negotiations, G Tower should be nearly 100 percent pre-leased on opening.
Other office development projects in Bangkok scheduled to begin operations in 2016 that have seen strong pre-leasing demand include FYI Center, the 19-Storey Rungrojthanakul Building and M Tower.
Yupa Sathienpabayut, Director of Office Leasing at JLL, said: “As most of the existing prime office buildings have limited space remaining, numerous large-scale lease negotiations are taking place at office development projects that are now under construction or have not yet become fully operational. Most of these projects still have more space to accommodate large occupiers while lease terms are relatively more flexible, compared to completed prime buildings that are almost fully occupied.”
“This trend has continued into 2016 as most of the existing prime office buildings have failed to accommodate new large occupiers or expansion of the existing tenants, due to limited space remaining.”
The trend of more companies securing leases in new office development projects is being reinforced by an increasing number of companies looking to consolidate business operations.
Observations from JLL indicate that a number of companies with business units scattered in different locations are now looking to consolidate their operations under one roof. While the consolidation should help boost business productivity, it will also help companies boost efficiency of their workplace by allowing different business operations to share office facilities such as reception areas, meeting rooms and pantry rooms.
“Most of the companies that are considering consolidation of business operations are large multi-national corporates and require office space in well-located prime buildings. This is good news for office development projects whose construction will be completed soon and which still have space to accommodate large tenants,” added Ms. Yupa.
According to JLL’s Thailand Property Intelligence Centre, the Bangkok office market has enjoyed a single-digit average vacancy rate for the second consecutive year in 2015, and is currently standing at 9 percent. Prime office buildings enjoy lower vacancies, averaging 7 percent.
“Having said all that, not all of the office development projects whose construction is nearing completion are seeing such strong pre-leasing demand. While some developments have not yet started an aggressive marketing campaign, others are situated in less preferred locations or are asking relatively higher rents that are not suitable to the location or project,” concluded Ms. Yupa.
