Mr. Marcus Burtenshaw, Executive Director and Head of Commercial Agency Department, Knight Frank Thailand, Co., Ltd., says “Tenants in Bangkok’s office market are faced with a problem. The market still favours the developer. Tenants face increased rents upon renewal, and few relocation prospects offer competitive terms for comparable quality and location. Now more than ever it pays to look ahead. We urge tenants to conduct a thorough analysis of their office accommodation strategy at least one year before their lease expires, and even longer if their scale demands it, or if regional or global corporate real estate departments are involved”
Highlights
- Business sentiment in Thai economy improves
- The amount of new office space leased in Bangkok expanded around 36,368 square metres in Q2 but fell 37.1% from Q1
- Overall occupancy rate was at 90.82%
- Quarterly average rents stable across the market but still rose by 1.5% per annum
Supply
The current office supply in Q2 2017 stood at 4,877,670 square metres. The newly launched office buildings this year include Gaysorn Office Tower (32,312 sqm) and Bhiraj Tower at BITEC (31,880 sqm). In the future, the majority of the new buildings within the next 3 years will be located in areas considered to be Non-CBD but they are rapidly emerging to become new commercial districts.
FIGURE 1
Bangkok Office Supply and New Supply from 2012 to Q2 2017
Source: Knight Frank Thailand Research
Note: These figures exclude multi-owner occupied premises and office buildings smaller than 5,000 square metres.
Future Supply
We currently expect 64,192 square metres of new supply to be completed at the end of this year. In addition to under construction projects, the total amount of new supply of 350,511 square metres would be added to the market in 2019.
TABLE 1
Bangkok Office Future Supply
Source: Knight Frank Thailand Research
TABLE 2
Total Future Supply
Demand
In the second quarter, net occupied space of the office market was 4,454,894 square metres, representing an overall occupancy rate of 90.82%. The average vacancy rate of Grade A buildings was 7.5%, while Grade B was 6.45% and Grade C was 12.14%. The amount of new office space leased in Bangkok expanded around 36,368 square metres but fell 37.1% from the previous quarter. This demand has been a very faint positive every year since 2012.
Note: These figures exclude multi-owner occupied premises and office buildings smaller than 5,000 square metres.
FIGURE 2
Office Supply, Demand and Occupancy Rate, 2012 to Q2 2017
Source: Knight Frank Thailand Research
FIGURE 3
Bangkok Office Demand and Supply Analysis, Q1 2014 to Q2 2017
Source: Knight Frank Thailand Research
TABLE 3
Occupancy Rate by Grade from Q1 2015 to Q2 2017
Source: Knight Frank Thailand Research
Rental Rates
The rental rates for office space in Bangkok have been driven upward over the past six years. The average asking rental rate in Q2 2017 was around 702 baht per square metre per month, remaining stable from the previous quarter. However, the price increase over the same period last year was at 1.5%. This trend is expected to continue in Q3 and the foreseeable future.
The average monthly rental rate of a Grade A office was 952 baht per square metre, while Grade B was 705 baht per square metre and Grade C was 450 baht per square metre.
In the second quarter, we have seen many office buildings in Bangkok command rental rates of more than 1,000 baht per square metre per month.
FIGURE 4
Asking Rent of Bangkok Office by Grade, Q1 2015 to Q2 2017
Source: Knight Frank Thailand Research
TABLE 4
Office Asking Rent by Grade and Percentage Increase
Source: Knight Frank Thailand Research
FIGURE 5
Asking Rent of Bangkok Office by Major Roads, Q2 2017
Source: Knight Frank Thailand Research
