Bangkok office rental rates rose by between 4 percent and 10 percent during the first half of 2015, with the accolade of Park Ventures Ecoplex claiming the title of the most expensive office building in Bangkok with rents of THB 1,200 per sqm per month being achieved.
According to the latest research by CBRE Thailand there are 8.4 million sqm of office space in Bangkok, and during the first half of 2015 the supply increased by 86,000 sqm as both AIA Sathorn Tower and Bhiraj Tower at EmQuartier were completed.
The overall net take-up increased by 4.8 percent year-on-year to around 100,000 sqm in the first half of 2015. The vacancy rate remained unchanged at 9.7 percent.
Despite rents rising by as much as 10 percent in every grade and every area, Bangkok is still one of the cheapest office locations in the world. Within the Asia-Pacific region only Canberra in Australia is cheaper.
Currently, the most profitable and best use for freehold land in most main road prime locations in Bangkok is for a condominium development. Because of the high land cost and the low office rent, few developers are buying land to build office buildings. This will keep new office supply limited in the future, according to CBRE.
There is only 340,000 sqm of office space under construction in Bangkok which is scheduled to be completed between now and the end of 2017. Gaysorn Tower 2 is the only Grade ‘A’ office in the central business district (CBD) that is under construction, while the construction of Singha Complex, another Grade ‘A’ CBD office, is expected to start this year and to be completed in 2018.
The Ratchada/Rama 9 location is emerging as an extension of the CBD with recently completed and under construction, new good quality buildings.
About 40 percent of total new office supply under construction in Bangkok is in the Ratchada/Rama 9 area, including G Land Tower, the Stock Exchange of Thailand New Head Office and Rungrojthanakul 4. There are also plans to start construction on the 125-storey Super Tower with 90,000 sqm of office space, retail and convention centre, next to G Land Tower at the Ratchada/Rama 9 intersection.
Nithipat Thongpun, Executive Director and Head of Office Services at CBRE Thailand, said: “Over the past few years, office leasing transactions in the CBD accounted for about 70 percent to 80 percent of CBRE’s new leasing transactions each year, however in 2014 the proportion of CBD transactions has dropped with an increase in transactions in Ratchada. This shows the popularity of Ratchada area as an office location.
“We do not expect that office tenants will move out of the CBD. The majority of tenants in the newly completed office buildings in Ratchada were already in Ratchada or in the north of Bangkok and wanted to expand or upgrade their office space, only a few came from the CBD,” added Mr. Nithipat.
Accessibility to a mass transit station is the most important factor for office tenants in deciding where they set up their offices. Looking forward besides, Ratchada/Rama 9, CBRE expects that other locations that have access to the existing mass transit lines such as Phayathai/Ratchathewi and late Sukhumvit (from Pra Kanong station to Bang Na stations) will be able to expand as office locations.
Based on the current market and economic conditions, CBRE expects that the Bangkok office market will continue to be steady in 2015 with falling vacancy rates and rising rents. The lack of new supply means that even if quarterly take up does not increase or falls due to weak economic conditions, occupancy levels will remain high, pushing up rents, but the rate of rental growth will be lower.
The majority of offices building in Bangkok are old. Only 14 percent of total office supply in Bangkok was built within the last 10 years. CBRE anticipates that new office take-up in the future will be in new office buildings because most of the existing offices are full and obsolete office buildings in inferior locations will not be able to attract tenants.
Landlords of older offices that are in reasonably attractive locations need to renovate their buildings in order to remain competitive.
This story was written by Andrew Batt, Group Editor of Dot Property Group. Send your news, views, press releases and comments to him at andrew.batt@dotproperty.co.th.
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