Mr. Marcus Burtenshaw, Executive Director and Head of Commercial Agency Department, Knight Frank Thailand, Co., Ltd., has pointed out that the trend of tenants moving away from older centrally located buildings to new properties in ‘fringe’ locations is likely to continue. New buildings that are competitively priced in areas that were once considered ‘fringe’ locations are becoming much more desirable, they might be easier to reach, better connected by mass transit and boast new facilities and features that older buildings are hard pressed to match.
In this period of record high rents there has never been a better time to consider renovations and repositioning of centrally located Grade B properties.
Supply
According to Knight Frank Thailand Research, as of the end of 2016, the office market supply stood at 4,783,312 square metres, increasing about 115,804 square metres from 2015. The newly launch office buildings during 2016 include FYI Tower (48,095 sqm), G Tower (South Tower; 23,299 sqm), Rungrojthanakul 5 (15,705 sqm), Metropolis (13,990 sqm) and M Tower (14,715 sqm). There are some office buildings that we have taken out from the supply since they are no longer for rent while some buildings were demolished; these include Vanissa building, Phayathai Building, and Kian Gwan Building I, with approximately 32,931 square metres in space.
Figure 1: Bangkok Office Supply and New Supply from 2012-2016
Source: Knight Frank Thailand Research
Note: These figures exclude multi-owner occupied premises and office buildings smaller than 5,000 sqm.
Future Supply
We expect 184,471 square metres of new supply to be complete in 2017. The future supply of the office market will be approximately 335,811 square metres that are currently under construction and are expected to be complete within three years from now.
Table 1: Known Future Office Supply in Bangkok
Source: Knight Frank Thailand Research
Demand
At the end of 2016, there were approximately 4,451,150 square metres being occupied, representing an occupancy rate of 93.1% of the total market supply and an increase of 0.9% from 2015. The buildings that were completed within the last two years (for example, AIA Sathorn Tower and Bhiraj at EmQuartier) have the most take-up space.
Figure 3: Bangkok Office Supply, Demand and Occupancy Rate, 2012-2016
Source: Knight Frank Thailand Research
Note: These figures exclude owner-occupied premises and office buildings smaller than 5,000 sqm.
The total annual take-up is calculated from the change in the amount of occupied space of office buildings in Bangkok. During 2016 this was approximately 118,141.24 square metres. Non-CBD for both Grade A and B have high annual take-up areas, with approximately 80,386.91 square metres and 50,874.01 square metres, respectively.
The amount of occupied space in Grade B buildings in the CBD actually fell by 25,432.78 square metres. This could be due to a number of reasons, but perhaps the chief amongst them could be that in the face of rising rents tenants are choosing to relocate away from Grade B office buildings in the CBD to new buildings in the city fringe.
Figure 4: Bangkok Office Demand and Supply Analysis, 2012 – 2016
Source: Knight Frank Thailand Research
Overall, the occupancy rate for the office market in Q4 2016 increased by 1.1% on a quarter-on-quarter basis. The CBD Grade A market showed the strongest year-on-year occupancy growth at 2.5%.
In 2016, office tenants in Bangkok rented an additional 118,141 square metres. This demand for office space has been positive every year since 2012; however, the pace of growth has fallen slightly over the past two years. Over the past few years, with a limited supply of office space in CBD areas, we anticipate a shift in office take-up from the CBD towards Non-CBD areas as some of these areas are within a convenient reach from the CBD through mass transit systems.
Figure 5: Annual Net Take-Up from 2012 – 2016
Source: Knight Frank Thailand Research
In 2016, the average rental rate of Grade A offices in Non-CBD areas showed a high growth rate at 13.1% from the previous year. Grade A offices in the CBD have the highest rental rate at 960 baht per square metre, followed by those in the Non-CBD area at 818 baht per square metre. The average rental rate for Grade B in both CBD and Non-CBD areas are lower at 671 baht and 504 baht per square metre, respectively. There was approximately a 4.9% rise year-on-year for Grade B in the CBD and 5.2 % rise year-on-year for those in Non-CBD areas.
Rental Rates
Figure 6: Bangkok Office per sqm Asking Rent by Grade and Location, 2012-2016
Source: Knight Frank Thailand Research
Table 3: Office Asking Rent by Grade and Location, and Percentage Increase
When looking at asking rents by major roads, the highest quotes could be found from properties on Ploenchit Road, following by Rama 4 and Inner Sukhumvit Roads. The office building that command the highest rental price is Siam Tower, at around 1,350 baht per square metre, followed by Park Venture, Bhiraj Tower at EmQuartier, Exchange Tower and Ramaland Building, respectively.
Figure 6: Bangkok Office per sqm Asking Rent by Major Roads, 2016
Source: Knight Frank Thailand Research
