Highlights
- During Q2 2018, the total occupied spaces of the office market in Bangkok reached 4,603,875 square metres.
- As of June 2018, Bangkok’s overall occupancy rate was recorded at 91.6%, driven by strong absorption in the CBD market.
- The average asking rents in Bangkok increased by 7.12% Y-o-Y in Q2 2018.
- Grade A office rents increased to 1,045 baht per square metre per month for ten consecutive quarters, with a cumulative 9.11% increase since Q2 2017.
Mr. Marcus Burtenshaw, Executive Director of Occupier Services & Commercial Agency, Knight Frank Thailand commented that “over 140 companies now call Bangkok the home of their regional or international headquarters, and as office rents continue to climb to record levels, inefficient office layouts are becoming an increasingly expensive burden on the bottom line. So now more than ever tenants should study their accommodation needs to ensure that they are using an appropriate amount of space. This might be as simple as looking at how often desks and meeting rooms are occupied. But this era of record office rents might also represent an opportunity to explore how new business concepts like agile working could be employed to reduce accommodation costs through efficient offices designed to support activity based working”.
Currently, low levels of vacancy for office spaces have led to sustained rental growth which, coupled with limited new supply, is creating a market that is increasingly balanced in favour of landlords.
Demand
According to Knight Frank Thailand Research, as of Q2 2018, demand growth for office space in Bangkok remains positive. The net occupied space increased by 40,324 square metres to 4,603,875 square metres, representing an overall occupancy rate of 91.6%.
In terms of locations, the highest demand was registered on Sukhumvit Road between Phromphong and Chidlom with occupied space at 97.2%.
Figure 1
Supply, Demand and Occupancy rate, 2013 – Q2 2018
Table 1
Occupancy rate by grade
Note: These figures exclude multi-owner occupied premises and office buildings smaller than 5,000 square metres
Table 2
Future Supply by Year
Supply
The second quarter of 2018 welcomed 87,600 square metres of new office space, bringing the total supply to 4,968,458 square metres as two new buildings were completed.
This quarter, the total grade A office space grew by 50,600 square metres to 1,316,952 square metres. Meanwhile, grade B and C were 2,142,127 square metres and 1,509,379 square metres, respectively.
Over the rest of 2018 to 2019, most new projects with more than 240,000 square metres will be added in Non-CBD areas.
Meanwhile, in 2020 to 2023, there will be a further 9 office buildings with 599,185 square metres that will enter the market.
Table 3
Bangkok Office Future Supply
Rental Rates
The upward trend of rental rates was observed both in 2017 and 2018. The average asking rents for vacant space in Bangkok grew from 702 baht per square metre per month to 752 baht per square metre per month, which increased Y-o-Y by 7.12%.
Interestingly, grade A rents recorded the steepest escalation to 1,045 baht per square per month, which increased by 9.77% when compared with Q2 2017. This is the 10th consecutive quarter of growth for grade A office rents in Bangkok.
Meanwhile, grade B and grade C rents continued to rise Y-o-Y by 4.96% and 5.12% to 740 and 472 baht per square metre per month, respectively.
Table 4
Asking Rent by Grade
Rents by Areas
In the CBD, rents are showing sustained improvement. Average rents on Sukhumvit Road between Phromphong and Chidlom showed the highest figure at 952 baht per square metre per month compared to all the precincts. Meanwhile, asking rents on Rama 3 Road showed the lowest figure at 437 baht per square metre per month.
Figure 2
Asking Rent by Grade Q2 2015 – Q2 2018
Figure 3
Average Asking Rents by Roads
Outlook
Sustained strong demand amid tight supply has resulted in the strong rental growth, which increased by 73.9% since 2004. However, the new supply that will start coming on-stream from 2020 onwards may help to keep the pace in rental increase in check.
