Political stability sees growth in Bangkok’s office rents

BANGKOK: Office rental rates within Bangkok’s central business district (CBD) and non-central business district (non-CBD) have increased, specifically in the new Grade A buildings within the CBD.

The CBRE’s Bangkok Office MarketView Q4 2014 report cited the calmer political situation for increased office rental rates and noted that tenants had even proceeded with space expansion plans.

It said in the fourth quarter of 2014 (4Q14), average rents for Grade A offices in the CBD rose 0.6% quarter-on-quarter (q-o-q) and 3.7% year-on-year (y-o-y) to 850 baht (RM95.31) per sq m (psm) per month. Grade B CBD rents also saw a rise to 624 baht psm per month, a 2.5% increase q-o-q and 8% y-o-y. The report also found that in the non-CBD areas, Grade A office rentals rose to 668 baht psm per month (up 5% q-o-q and 9.9% y-o-y), while Grade B rentals went up to 564 baht psm per month, a 2.2% increase q-o-q and a y-o-y increase of 5.2%.

While the report foresees growth in rentals, it would be at a slower rate, especially for Grade A CBD offices since buildings that command premium rents are at full capacity. The capital’s office market has also seen a rise in occupancy rates. “The total occupancy rate for the Bangkok office market increased to 90.7% from 90.5% from the previous quarter. The occupancy rate increased by 0.3 percentage point (ppt) y-o-y.

“We have seen office leasing activity improve every quarter throughout 2014. The increase in new leasing transactions will result in a rise in net take-up at the beginning of 2015. 

“There is a time lag between starting to look for new premises and moving in — approximately six to 18 months, depending on the size of the the required space,” noted the report.

It said total office supply increased to 8.3 million sq m, a 0.6% increase q-o-q and 2.6% increase y-o-y. Supply grew by 49,500 sq m with the completion of the Channel 5 head office, U Place and Hitachi office buildings. The overall vacancy rate was 9.3% in 4Q14, dropping 0.2 ppt y-o-y.

In terms of 2015’s market outlook, the report suggests that the current trend of falling vacancy rates and rising rents will continue.

Nevertheless, a temporary increase in vacancy is expected with the completion of new supply.

According to the report, based on the new projects that have already been announced, 400,000 sq m of new office space will be completed between 2015 and 2017. Bhiraj Tower at EmQuartier, AIA Sathorn Tower and Gaysorn Office Tower 2 will be Grade A offices. Approximately 76% of total new office space will be Grade A ones, and about 44% of the total new office space will be in the CBD.

This article first appeared in The Edge Financial Daily, on March 27, 2015.