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Limited New Supply and Healthy Take-Up Driving Bangkok Office Rental Growth in 2016
07 Dec 2016
The Bangkok office market performed well over the course of 2016, with limited new supply and healthy take up driving rental growth and further reducing already low vacancy rates, according to CBRE Research, Thailand.
While the nation mourns the October 13th passing of His Majesty King Bhumibol Adulyadej, business has remained active. Net take-up is on track to reach around 180,000 square metres by year end and CBRE Research has continued to witness healthy pre-leasing demand, a trend first noted in 2015, prior to which significant tenant commitments in advance of a building’s completion were rare.
Bangkok office rents are set to increase by an average of 6.5% this year, with Grade A and B rents rising by around 8% and 5%, respectively. Bhiraj Tower at EmQuartier was able to achieve a rental rate of THB 1,000 per square metre per month for a small, standard specification unit, becoming one of three completed office buildings in Bangkok to pass the THB-1,000-per-square-metre mark. Park Ventures Ecoplex, which originally broke the THB-1,000-per-square-metre rent level back in 2013, went on to set a new market record of THB 1,300 per square metre, again for a small, standard specification unit.
Mr. Nithipat Tongpun, Head of Office Services, CBRE Thailand reported that a total of 151,000 square metres of new office space will be completed in 2016, including two new buildings, Thairath and Osotspa, both owner-occupied, with 26,000 square metres to be completed in Q4. The completion of these two buildings increased the total Bangkok office supply to 8.54 million square metres, representing a year-on-year increase of 1.7%. The Bangkok office market saw its first wave of obsolescence, with the demolition of both Kian Gwan One and Vanissa Building removing 28,000 square metres from Bangkok’s leasable office stock. He expects this trend to continue as owners of dated buildings consider options against a backdrop of central land price appreciation and rising rents.
Despite an increase in supply, the overall occupancy rate has increased to 91.8% year to date. Accumulated net take-up is on track to reach 180,000 square metres for 2016, a slight reduction from 2015, but sufficient to reduce the overall vacancy by 0.8 percentage points year-on-year. Pre-leasing demand continued to be strong, with Gaysorn Tower and M Tower, both slated for completion in Q2 2017, building on the success of FYI Centre in securing significant commitments from tenants over 6 months prior to completion.
While a number of developers have earmarked considerable land holdings for office developments, collectively able to accommodate about one million square metres of leasable space, only 463,000 square metres is due for completion through to 2019. In this context, CBRE believes that the overall occupancy rate will continue to grow and that office rents will further rise over the coming 12 months.
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