Office tenants have been moving away from older office buildings in the Central Business District to newer facilities in the suburbs of Bangkok and this is a trend that looks likely to continue this year, the results of a new report by Knight Frank Thailand show.
“New buildings that are competitively priced in areas that were once considered ‘fringe’ locations are becoming much more desirable,” says Marcus Burtenshaw, Executive Director and Head of the Commercial Agency Department of Knight Frank Thailand, to the Bangkok Post. “Some of those buildings are now easier to reach, better connected by mass transit and boast new facilities and features that older buildings are hard-pressed to match.”
With Bangkok office rents at record high levels, owners of centrally located grade B properties must consider renovations and repositioning in order to stay competitive with newer buildings outside of the city centre. Occupied space in grade B buildings in the CBD has dropped in recent years for a number of different reasons, says Burtenshaw. Instead of staying at grade B office buildings in the CBD, many companies prefer newer spaces that offer modern features and cheaper rents despite lesser locations.
By the end of 2016, the supply of office space totalled 4.78 million sq. metres, an increase of 2.5 per cent from the previous year, says Knight Frank Thailand Research. A total of 184,471 sq. metres of new supply will be completed in 2017 and nearly double that will be on the market within the next 3 years.
Occupancy in Bangkok continues to rise, increasing 1.1 per cent in the 4th quarter of 2016, but CBD grade A properties accounted for most of this increase. The average rental rate for grade A offices outside of Bangkok’s CBD areas increased 13.1 per cent last year when compared to 2015, but can still be cheaper than grade B office space in the CBD.
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