More companies are looking away from Bangkok’s traditional central business district as office rents there increased by 15 percent in 2013 and by nearly 6 percent so far in 2014.
According to new research from JLL more firms are considering the Bangna-Trad area as an alternative business location, thanks to its competitive rents and convenient access to both Bangkok’s central business areas and the Eastern Seaboard.
Despite this, the office market along Bangna-Trad Road is suffering a severe shortage of quality office supply and this has created new opportunities for property developers that are looking to develop commercial projects in new locations outside the central business areas where land has becoming increasingly scarce and expensive, according to JLL.
Suphin Mechuchep, Managing Director of JLL, said: “The Bangna-Trad area has been predominantly known as a major manufacturing and logistics hub east of Bangkok. Over the past few decades, the area has emerged as a major commercial location, with a number of retail and office developments rising along the main road.
“While the number of major retail centres has continued to increase along Bangna-Trad Road to serve the fast growing residential market in the area and customers from downtown Bangkok, the area has seen no growth in new office supply since 1994.
“As a result, the office market there has been dominated by home offices and aging office buildings, many of which are poorly managed and outdated in terms of specifications and facilities.”
According to JLL’s Thailand Property Intelligence Centre, the office market on Bangna-Trad Road concentrates in the area between the Bangna- Sukhumvit intersection and Bangna-Trad Road km 10, and has a stock of 296,000 sqm, only approximately 30 percent of which is space deemed to be of acceptable quality.
Despite the lack of quality supply, demand for high-rise office space in the area has been increasing rapidly as indicated by a declining vacancy rate, currently at 17.4 percent, which has fallen twice as fast as the market average since 2010.
Importantly, a number of buildings of better quality are now experiencing single-digit vacancy rates.
Yupa Sathienpabayut, Director of Office Leasing at JLL, said: “Traditionally, demand for office space in the Bangna-Trad area came largely from companies that needed easy access to Bangkok’s central business areas and the Eastern Seaboard as well as to Suvarnabhumi International Airport.
“Today the area is attracting companies from a wider variety of industries looking to take advantage of relatively low rents and improved infrastructure, with many of these companies choosing to locate their back office functions in the area.
“Having said that, the office market on Bangna-Trad Road is not well equipped to meet this new demand.
“Most of the buildings of acceptable quality are either nearly or fully occupied,” said Yupa.
“There has been no new office development in this area over the past 20 years as achievable office rents along Bangna-Trad Road have until recently been too low to offer an attractive return for developers,” she explained.
However since 2010, office rents along Bangna-Trad Road have increased more rapidly than the market-wide average during the same period due to continued demand and tight supply of quality space.
Average rents along Bangna-Trad have risen from THB287 per sqm/month in 2010 to THB389 per sqm/month at present, a 35.4 percent increase. When compared to the 23 percent market-wide increase seen during the same period, it is clear that the area is heating up.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
