By Andrew Batt:
Bangkok office rents hit new record highs in October, underlining the rapid improvement in the Thai capital’s office market sector during the third quarter of this year.
According to CBRE Thailand, one transaction for a fully-furnished office was conducted at more than THB 1,000 per sqm per month – a new record – and one that is indicative of where the market is heading.
The two leading ‘Grade A’ buildings, Park Ventures Ecoplex and Sathorn Square, are now close to full occupancy. Although space is still available today, users requiring larger spaces are close to making binding commitments which will possibly fill the remaining space.
This changes the dynamics of the Bangkok office market and, for large tenants seeking contiguous floors in modern ‘Grade A’ buildings, space can now only be taken as a result of future vacancies. More significantly, landlords are not under pressure at this time to agree to concessions or to negotiate discounts for individual tenants as they are not critical to their overall income stream. In fact, many landlords will be raising rents on renewals in line with the latest open market rents.
Out of the 26 buildings in the Bangkok’s central business district (CBD) that CBRE classifies as being ‘Grade A’, 11 are already 100 percent occupied while the rest are nearly all at least 90 percent occupied.
“Lack of choice and limited availability of space are also becoming pronounced factors in the market and we have the following advice to give office tenants,” said David Simister, Chairman of CBRE Thailand.
Looking two to three years ahead, there will be a further round of prime ‘Grade A’ projects developed. Bhiraj Tower, a ‘Grade A’ office development with 47,000 sqm of lettable area, located on Sukhumvit Road opposite the Emporium with direct connection to the BTS Promphong station will be completed in 2014.
AIA Sathorn Tower, a ‘Grade A’ office building with 38,500 sqm of lettable space will be completed in 2015. AIA Capital Center, a ‘Grade A’ office development with 54,000 sqm of lettable area, located on Ratchadapisek Road close to the MRT Thai Cultural Centre station will be completed in 2014. G Land Tower, a ‘Grade A’ office development with 65,000 sqm of lettable area, located at the corner of Ratchadapisek -Rama IX Roads will be completed in 2014.
These new projects are all just starting construction so they will offer no immediate relief to the limited supply for at least the next 24 months. During that time, CBRE predicts that CBD rents will continue to increase. Demand will also increase due to companies expanding and new entrants to the market – all of which will mean that rents will only move in one direction
“Tenants seeking to renew leases, expand or relocate would do well to address their needs as soon as possible. Alternatively, they need to come up with a strategy to seek early-bird deals at the new office stock that is scheduled to come on stream from late 2014 onwards,” said Nithipat Tongpun, Executive Director and Head of Office Services at CBRE Thailand.
Andrew Batt, International Group Editor of PropertyGuru, wrote this story. To contact him about this or other stories email andrew@allproperty.com.sg
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