In the Bangkok office market, 2017 was a period of a record-breaking pricing movement in the grade A sector. This, together with a relatively low volume of new supply delivered to the market, resulted in a significant increase in the occupancy rate.
Outlook
In terms of supply, a number of office projects are scheduled to enter the market in 2023, totaling over 900,000 square metres. However, during the past 5 years, the average annual demand for office space
was just 113,096 square metres. If we assume that the levels of new demand will increase with the same rate in next 5 years, the total annual new demand will be 565,480 square metres. So, if the conditions remain the same, we would thererfore expect to see higher vacancy rates across the market.
Demand
In Q1 2018, the activity of tenants in Bangkok remains strong. The net occupied space increased by 17,413 square metres to 4,563,551 square metres, bringing the occupancy rate to 92.31%.
Tenants continue to take advantage of market conditions tipping in their favour, and are upgrading to better quality space. So, the net occupied space in the CBD increased around 21,000 square metres, especially in the Silom-Sathorn areas. Furthermore, we saw the occupancy rate of grade A office buildings grow by 1.4% to 95.4%, the highest occupancy rate since 2016.
Table 1
Occupancy Rate by Grade
Source : Knight Frank Thailand Research
Figure 1
Office Supply, Demand and Occupancy Rate, 2012 – Q1 2018
Source : Knight Frank Thailand Research
Note: These figures exclude multi-owner occupied premises and office buildings smaller than 5,000 square metres.
Supply
As of Q1 2018, the total office supply in Bangkok dropped by 27,400 square metres to 4,890,731 square metres, as two office buildings were removed from the market. This quarter, only one office building
amounting to 6,000 square metres was completed in Paholyothin area. However, over the rest of the year, there will be a further 4 office buildings with 139,060 square metres that will enter the market.
Table 2
Bangkok Office Future Supply
Source : Knight Frank Thailand Research
Table 3
Total Future Supply
Source : Knight Frank Thailand Research
Rental Rates
The grade A office rents continued to see robust performance in Q1 2018, underpinned by strong demand and positive absorption. Average rents of all grades recorded the noticeable growth of 2.23% Q-o-Q to 743 baht per square metre per month. Grade A rents rose to another record at 1,027.4 baht per square metre per month, which increased Y-oY by 8.49%. Meanwhile, grade B and grade C rents grew to 734.9 and 467.6 baht per square metre per month, respectively. Interestingly, this quarter, we saw 14
office buildings in grade A sector record an asking rents higher than 1,000 per square metre per month. All of them are located in the CBD.
Table 4
Asking Rent by Grade
Source : Knight Frank Thailand Research
Rents by Areas
The average asking rents in the new commercial areas in Rama 9 and Petchburi have remained relatively stabilised at 540 baht per square metre per month with the occupancy rate of 90.2%. Meanwhile, rents in Srinakarin and Bangna grew by 4.1% to 511 baht per square metre per month. Furthermore, rents on Sukhumvit Road between Asoke and Chidlom increased by 2.3% to 805 baht per square metre per month, with the highest average occupancy rate of 97.63%.
