Bangkok office rents rose for every grade of building in every location as vacancy rates continued to fall for the eighth straight quarter, according to CBRE Thailand.
“The overall Bangkok office vacancy rate is continuing to fall, particularly in Grade A CBD [central business district] offices, which fell from 11.8 per cent in [the second quarter] to 9.9 per cent in [the third]. Expansion by tenants in their buildings was the biggest contributor to the decrease in the vacancy rate of Grade A CBD offices,” Nithipat Tongpun, head of office services for the Thai unit of the international real-estate company, said yesterday.
In the third quarter, Grade A office rents increased to Bt706 per square metre per month from Bt696 in the second quarter, while Grade B rents rose to Bt550 from Bt538 over the same period last year.
Bangkok vacancy rates dropped 0.9 percentage point quarter on quarter and 2.56 percentage points year on year to 10.2 per cent, as demand continued to grow steadily and no new supply was completed in the quarter.
There is limited future supply of office space under construction. Bangkok office rents are expected to continue to rise.
Office vacancy rates in other cities in the Asia-Pacific region dipped last quarter, as a low number of office-building completions offset low leasing volume driven by a subdued level of occupier demand. Occupiers, with a few exceptions, remained cautious, and this conservative attitude was reflected in the limited volume of leasing transactions. Of the deals that were signed, most involved renewals. Expansions were limited.
Last quarter, overall Asia-Pacific vacancy declined slightly from 9.82 per cent to 9.43 per cent. Vacancy fell in 11 markets, was flat in eight and rose in seven. Only 436,800sqm of office space was completed, well down on the 901,490sqm of new supply added in the previous quarter. This was the lowest quarterly volume of stock completed since the fourth quarter of 2006, when the rate was 539,000sqm.
Asia-Pacific demand for office space weakened on the heels of cautious occupier sentiment, with net absorption for the quarter totalling 622,680sqm, the lowest figure recorded since the market began to recover from the global financial crisis in the first quarter of 2010.
While some substantial high-profile transactions are expected to be completed this quarter, occupier sentiment will generally remain cautious into next year, CBRE believes. Multinational companies will continue to develop cost-effective occupational solutions – with a particular focus on decentralised areas – and rationalisation and consolidation will remain key demand drivers.
“Leasing activity by domestic corporations will continue to be strong in many markets and smaller-to-medium-sized requirements will account for the bulk of leasing deals,” said John Falkiner, managing director of transactions at CBRE Asia.
Better leasing deals?
Overall Asia-Pacific office rents have been flat for the past two years and are likely to remain so in the short term, except for markets like Bangkok. However, downward pressure is likely to increase as a large volume of new supply becomes available – with annual new supply expected to reach all-time highs in two years.
“The pressure on rental levels will increase in 2014 as a large volume of new supply comes on stream giving occupiers the opportunity to secure attractive leases. We should start to see occupiers considering postponing expansion plans or pre-committing to this new supply to secure better terms,” said Jonathan Hsu, director of CBRE Research Asia-Pacific.
The CBRE Asia Pacific Office Rental Index stayed flat for the eighth quarter in a row. Rents were unchanged on a year-on-year basis, and Grade A rents in most markets continued to display little movement, although there were a few exceptions, with Jakarta posting the strongest rental growth.
Annual new supply coming online will reach an all-time high in 2014 and 2015, with most new supply set to be completed in emerging markets, the agency predicts. India and China account for 74 per cent of new supply scheduled for completion during that period, much of which will be in secondary locations.
Several new schemes in India are likely to be delayed further, which may help ease oversupply pressure. Some first-tier cities in China, excluding Beijing, will also see the addition of a large volume of new stock over the next couple of years, as will Jakarta.
Source | The Nation 12 November 2013 http://bit.ly/1cfEKKX