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Bangkok and Asia Pacific Office Vacancies Fall

By on Nov 14, 2013 in Office, Property News, Research

Bangkok office rents rose for every grade of building in every location as vacancy rates continued to fall for an eighth consecutive quarter, according to the latest research by leading international real estate advisor, CBRE Thailand.  In Q3 2013, the average grade A office rent increased to THB 706 per sq.m. per month from THB 696 per sq.m. per month last quarter while the average grade B rent increased to THB 550 per sq.m. per month from THB 538 per sq.m. per month in Q2 2013.  The overall vacancy rate in Bangkok was 10.2%, a decrease of 0.9% Q-o-Q and 2.56% Y-o-Y, as demand continued to grow steadily and there was no new supply completed in the quarter.

There is limited future supply of office space under construction and demand is growing steadily. CBRE expects Bangkok office rents to continue to rise.

Office vacancy rates in other cities in the Asia Pacific region dipped in Q3 2013, as few office building completions offset low leasing volume driven by a subdued level of occupier demand. Against this background, demand for office space in Asia Pacific weakened — on the heels of cautious occupier sentiment—with net absorption for Q3 totalling 622,680 sq.m. (6.7 million sq. ft.), the lowest figure recorded since the market began to recover from the global financial crisis in Q1 2010.

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“Whilst we expect a number of substantial and high profile transactions to be completed in Q4 this year, occupier sentiment will generally remain cautious into 2014. Multi-national companies (MNCs) will continue to develop cost-effective occupational solutions – with a particular focus on decentralized areas – and rationalization 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,” says Mr. John Falkiner, Managing Director, Transactions, CBRE Asia.

 

Opportunity for 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 the next 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 Mr. Jonathan Hsu, Director, CBRE Research, Asia Pacific.

 

The CBRE Asia Pacific Office Rental Index stayed flat for an eighth consecutive quarter. Rents were unchanged on a year-on-year basis, and Grade A rents in most markets continued to display little movement during the period, 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 the majority of new supply set to be completed in emerging markets. India and China account for 74% of new supply scheduled for completion during that period, much of which will be in secondary locations. However several new schemes in India are likely to be delayed further which may help ease oversupply pressure. A number of 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.

 

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