When the 1997 Asian financial crisis hit Bangkok, office development came to a halt and it hasn’t recovered until recently. A growing number of developers are set to launch new office buildings in Bangkok with rents having increased in the past seven years, reports local media.
Bangkok office rents dropped by more than 30 per cent while vacancy rates increased to nearly 40 per cent during the Asian financial crisis in 1997-98, according to CBRE research.
“The recovery has been slow and developers have focused on other sectors such as condominiums and in the income-producing sector — hotels and shopping centres. Attitudes are now changing as office vacancy rates continue to fall and rents continue to rise,” says Nithipat Tongpun, CBRE’s Executive Director, Head of Office Services, to the Bangkok Post.
New demand currently exceeds new supply with vacancy rates having decreased from 32 per cent in 2000 to 7.7 per cent now. Grade A office rents have performed well having increased by 150 per cent since 2000. The vacancy rate could fall further and rents are predicted to rise each year with only 500,000 sq. metres of office space in Bangkok set to come online by 2019.
“More developers are now looking at the office sector which has seen the best income growth performance compared to other property sectors with a 40 per cent increase in CBD grade A rents since 2010. Hotel average daily rates in Bangkok have only increased by 15 per cent in the same period, expatriate rental housing allowances have not increased and retail rental increases have slowed because of limited growth in retail sales,” says Nithipat.
Experts are keeping an eye on what the future holds as several developers have acquired sites where they will build office buildings. Up to 2 million sq. metres of office space could be built on these sites, according to CBRE research. The main concern is the amount of new space completed could significantly exceed demand causing vacancy rates to rise and forcing developers to slash rents.
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