A lack of supply and increasing demand has resulted in Bangkok’s office market looking much healthier now than just 12 months ago, according to data published in Colliers Thailand latest Bangkok Office Market report.
New international companies are entering Thailand and many existing companies are expanding or planning to expand their offices, the report noted. The prospect of the AEC in 2015 and the opening up of Myanmar are also factors that are contributing to increasing demand for office buildings in Bangkok, because Thailand is seen as an increasingly important regional centre for companies with operations in the sub-region that includes Myanmar, Laos and Cambodia.
The rents of Grade A office buildings have remained stable since 2007, while Grade B office buildings recorded a drop of approximately 5 – 6 percent. Some landlords offer more favourable terms and incentives for tenants to maintain occupancy during difficult economic times, especially for small businesses, and this has adversely affected Grade C rentals. As Grade C buildings age, their image and facilities become increasingly unattractive to tenants. Owners should consider significant renovations in a similar fashion to the retail sector in order to maintain competitiveness, Colliers Thailand suggested.
Just one office building completed in Q2 with a total area of around 20,000 sqm according to Colliers Thailand. The average occupancy rate and rents in all locations remain similar to the previous quarters, and although there has been a slight rise from the previous quarter in some office buildings, not much effect has been felt across the wider market.
Interestingly, more than 70 percent of Bangkok’s existing office building supply was built in the 1990s during periods of economic growth, however it means that much of the current stock is undergoing renovation or is showing signs of age.
Bangkok remains a highly attractive destination for property investors who wish to take a first investment step into ASEAN, especially the sub-region of Myanmar, Laos and Cambodia. As a result, several international companies are looking for regional office space in Bangkok.
The new Bangkok Town Plan is aimed at encouraging the expansion of Bangkok’s business area to office buildings in late Sukhumvit areas and to the north along Ratchadapisek Road.
Colliers Thailand expects the Northern Fringe area of Bangkok to become a new business area in the near future, with most new office buildings in the pipeline located along Ratchadapisek Road. Moreover, this area also has shopping malls, entertainment zones, hypermarkets, office buildings and other supporting facilities, as well as MRT stations.
The new Bangkok Town Plan affects not only the condominium sector but also the office market. The latest draft of May 24 does not permit office buildings larger than 10,000 sqm on roads narrower than 30 metres in certain locations of Bangkok, although these are permitted in other locations outside the central business district and outer central business district area.
This indicates that the new town plan is trying to expand the business area to late Sukhumvit, Ratchadapisek and Phahonyothin Roads. The Department of City Planning Bangkok Metropolitan Administration has still not finalised the new Bangkok Town Plan as of the second quarter of 2012. An announcement is expected before August 21, although it could subsequently be revised over the coming months and even years.
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