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Occupancy and rental rates for office space in Bangkok have grown continuously this year to date, according to the latest research from Colliers International Thailand.
Demand continued to show improvements during Q4 2014, and this trend is expected to continue providing the political situation remains stable. No significant negative changes was noted in the global economy, and the Thai Baht was lower than last year.
The Government recently approved tax and non-tax incentive packages to attract and encourage international companies to establish their International Headquarters (IHQs) and International Trading Centres (ITCs) in Thailand.
According to the real estate firm, supply remained limited due to the lack of new supply entering the market. Large space occupiers have limited relocation options. New developments expected to be completed betweeb 2Q and 4Q 2015 and 2016 totals approximately 207,700 sqm, and the majority of this space is outside the traditional Bangkok central business district.
Occupancy rates in the key locations within Bangkok are above 90 percent, with Grade ‘A’ buildings in close proximity to mass-transit systems enjoying greatest occupancy. Lower-quality buildings located in areas not currently serviced by mass transit systems are not in great demand.
Rental rates have been rising over the past 12 months, and this trend is expected to continue. Most office buildings in Bangkok are older than 15 years, and they cannot upgrade or increase their rental. Landlords need to renovate and upgrade their internal facilities to attract more new tenants as well as high rental rate.
The office market in Bangkok has shown high occupancy rate in the past years due to demand from multinational and Thai companies. With that demand showing signs of continuous improvement and the lack of any significant supply, it is expected that occupancy rates will remain at their high levels throughout 2015.
Asking rents are expected to continue to increase throughout 2015, assuming that the political situation remains calm and that the global economy does not experience any significant negative downturns.
The average vacancy rates achieved their lowest levels during the past years, but rental rates are still not high compared with the growth of occupancy rate. Average rental rates of Grade ‘A’ buildings in Bangkok’s central business districtares around THB900 per sq m / per month, which is still lower than in other capital cities in ASEAN. However, some new buildings are asking for between THB900 to THB1,200 per sqm / per month.
Approximately 56 percent of total office space in Bangkok comprises Grade ‘B’ buildings, and offer lower rental rates in the same location as Grade ‘A’ buildings. New Grade ‘A’ office buildings outside the central business district areas are more interesting than Grade ‘A’ buildings due to lower rental rates and the location that is adjacent to existing mass-transit facilities.
In its forecast, Colliers reported the average rental rate will continue to steadily increase during 2015 due to limited existing and future supply a a time of continued growth.
The areas along Ratchadapisek and Phahonyothin Roads are the most interesting locations for office development due to lower land prices and easy access to the adjacent BTS and MRT routes.
Landlords of older buildings are likely to renovate, redecorate or upgrade their facilities but they are unable to increase rents to the levels quoted by newer buildings in the same location.
Some property developers will probably become the main players in the office building market after occupying many leasehold land plots in Bangkok, Colliers concluded.
To access the full Colliers Q1 2015 Bangkok Office Market reports click here.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg