Real estate agency Knight Frank Thailand has highlighted that the scarcity of office space in Bangkok’s central business district (CBD) areas became even more pronounced during Q4 of 2015 – with growing demand but limited supply.
At the same time it saw occupancy rates is constantly creeping upwards.
The company added the office market is expected to witness a shortage within the next two years, which should result in a continuing rise in the rental rate. It also expects to see an expansion, or relocation, of businesses into non-CBD areas should the supply in the current CBD remained relatively stagnant.
Marcus Burtenshaw, Executive Director and Head of Commercial Agency Department at Knight Frank Thailand, said: “Tenants are facing a soft economy in a climate where office rents are likely to continue to rise, and they need to look at cost control strategies that could be employed in their workplace.
“Flexible working arrangements, standardised (and reduced) desk allocations, split operations or even moving to secondary locations might all be considered.”
According to Knight Frank Thailand Research, the office supply in 2015 stood at 4,671,593 sqm, an increase of 96,405 sqm or a mere 2.11 percent from the previous year.
The additional supply came from the completion of AIA Sathorn Tower, Major Tower and Bhiraj Tower at EmQuartier. Both Major Tower and Bhiraj Tower at EmQuartier are located in the inner Sukhumvit area, while AIA Sathorn is only building located on Sathorn Road, close to Chong Nonsi BTS station.
During 2015 53 percent of the total supply was located outside CBD areas while 47 percent was in within the CBD.
During 2016 the supply of office space is expected to be approximately 152,960 sqm from five office projects with approximately 87 percent of space located in non-CBD areas. After 2017 it is expected that the majority of new office space supply will be located in non-CBD areas such as Bangna, outer Sukhumvit, Ratchadapisek, etc.
Regarding demand the research revealed that the total occupied space stood at 4,334,324 sqm, representing an occupancy rate of 92.8 percent and an increase of 1.3 percent from last year.
The highest growth at the end of 2015 was seen in the Grade ‘A’ office in the non–CBD category, with an increase of 8.2 percent on a year-on-year basis. However, Grade ‘A’ offices in CBD areas enjoyed the highest occupancy rate of 94.3 percent, but also suffered the lowest growth rate year-on-year at 0.4 percent.
Knight Frank noted that this should not come as a surprise as the high occupancy rate did not allow for much further growth. Overall, on an annual basis, the office market showed a growth rate of 2 percent.
Contrary to expectations of many, Knight Frank Thailand believes the slowing growth in the overall Thai economy has not yet had a spillover effect on the office occupancy rate.
This is largely due to the rapid growth of the IT sector where local subsidiaries of major e-commerce businesses now occupy large spaces in buildings such as AIA Capital Center and CyberWorld on Ratchadapisek Road, and Empire Tower on Sathorn.
The growth in this sector has also created a trend where smaller start-up businesses start moving into larger office buildings from toowhouses in order to benefit from improved corporate images and the ease of access to mass-transit stations.