Office supply in Bangkok continued to be limited during Q1 2015, especially for Grade ‘A’ offices in central business district (CBD) locations, according to latest research from real estate firm DTZ.
This was mainly due to the limited availability of prime land in the CBD combined with high land prices.
AIA Sathorn Tower was the only major completion in Q1 2015, with net office space of 38,500 sqm, whilst Bhiraj Tower is expected to complete in Q2 (see figure 4 below). The total stock in the market in Q1 was 1.74 million sqm.
Following the completion of AIA Sathorn Tower and Bhiraj Tower in Q1 and Q2 2015 respectively, new supply will be very limited until 2016.
Office space remains in high demand
The demand for Grade ‘A’ office space remained strong during Q1 2015, with a total occupied area of 1.57 million sqm. Office vacancies increased temporally due to the new completion of AIA Sathorn Tower. The vacancy rate stood at 9.9 percent, up from
8.5 percent in Q4 2014, and 9.5 percent y-o-y.
Net absorption was high in Q1 2015, totalling 10,830 sqm (see figure 5). This was largely due to tenants from the insurance, telecoms and logistics sectors moving to offices in the CBD.
Absorption for Grade ‘A’ offices is expected to remain positive and to increase when more tenants move into Bhiraj Tower in the following quarter, according to DTZ.
As the political situation becomes increasingly stable and the national economy continues to improve modestly DTZ expects to see steady growth throughout 2015 for the office market.
In addition, the government recently approved a number of special tax and non-tax incentive schemes to encourage foreign companies to establish their International Headquarters (IHQs) and International Trading Centres (ITCs) in Thailand, as well as to promote Thailand as a hub for the ASEAN Economic Community.
Rentals increased, especially for offices near BTS mass-transit stations
Office rents increased steadily and are likely to continue to increase as demand for offices remained strong. The average rental levels for prime locations in Q1 2015 reached THB760 per sqm per month, representing an increase of 7 percent y-o-y from THB710 per sqm per month in Q1 2014 (see figure 6 below).
Office buildings that are located adjacent to BTS stations with sky bridges connected to the buildings command the highest rents. Park Venture commands the highest asking rent with the rate of THB1,300 per sqm per month, followed by Exchange Tower with the asking rent of THB1,100 per sqm per month.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
