Bangkok office demand rebounded in Q2 after a subdued start in Q1 as corporate firms continued to take on office space for expansion and consolidation.
Research from DTZ published in its Property Times report noted the easing of the political conditions in late Q2 helped improve overall business sentiment among foreign firms.
Total prime office stock was stable in Q2 at 1.7 million sqm as there were no new completions. The only completion expected this year in the central business district (CBD) is Bhiraj Tower with 50,200 sqm of prime office space. Another 44,500 sqm of office space is now under construction in the CBD and due for completion in 2015.
Strong demand continued to push occupancy levels upwards.
In Q2, office occupancy levels edged up by 0.7 percentage point q-o-q to stand at 91.2 percent. In line with this, net absorption rebounded positively to 11,077 sqm. The dearth of new office supply and shortage of existing space were the main factors pushing occupancy levels upwards.
Many established firms in Bangkok are still keen to consolidate, relocate and expand their operations, despite the ongoing political uncertainties, but are temporarily hindered by the lack of available space.
Sentiment has improved at the end of Q2 with the easing of the political pressures after the military takeover. The cautious, but positive, reforms taking place under the current temporary military leadership have boded well for business and investor sentiment, further paving the way for brighter prospects in both the leasing and investment markets.
There were several en-bloc office transactions recorded in H1, including the Siripinyo Building, Boss Tower and Equinox Tower. The bulk of real estate investment activity in H1 was dominated by property fund acquisitions. There has been a persistent appetite among institutional investors and overseas developers for income-producing offices, retail and hotel assets. With the overall improved market backdrop. DTZ expects more deals to be closed in H2.
Rents continue to increase amid resilient demand
Resilient demand continued to support rental growth with the average prime rent increasing by 1.4 percent quarter-on-quarter to THB720 per sqm per month .
In the report the real estate firm forecast rents to continue to increase, albeit at a slower pace in H2. However, overall rental growth is estimated at between 2-4 percent during the next three years.
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Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
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