Business sentiment in Thailand, especially Bangkok, has improved, which will likely release pent-up demand for Bangkok office space, according to Jones Lang LaSalle (Thailand). This, coupled with tight supply, will allow office rents to rise further during the rest of the year.
Despite the political uncertainty of the first half of 2014, which resulted in a decline in net absorption of office space in the capital, average market-wide gross rents managed to climb. They registered a 2.8 percent increase during the first six months of this year, and a 17.3 percent increase from the previous peak in 2007. In prime grade buildings in the central business areas, rents increased by 1.2 percent in the first half of this year, and 9 percent from the previous peak, also in 2007.
As of the end of June, average monthly gross office rents reached THB 475 per square metre across Bangkok, and THB 739 per square metre in prime buildings in the central business areas, representing all-time highs. Some prime buildings are asking much higher rents, ranging from THB 900 to THB 1,300 per square metre.
Three new office projects are planned for completion in the second half of this year: SJ Infinite 1, formerly known as Equinox Phahol-Vibha, on a corner of the Phaholyothin-Vibhavadi intersection; AIA Capital Center at the MRT’s Thailand Cultural Centre station; and Bhiraj Tower at the Skytrain’s Phrom Phong station. Such additions will bring the city’s total office supply to 8.31 million square metres by year-end.
The market-wide vacancy rate dropped to 9.7 percent at the end of June, a record low since JLL began tracking office vacancy in 1995. Prime grade buildings in the central business areas enjoyed a lower vacancy rate of 8.2 percent. While the above new projects have healthy pre-commitment levels, their introduction into the market is expected to cause a short-term increase in vacancies as the new space fills in.
