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Bangkok Office Demand Starts to Increase

By on Dec 01, 2010 in Office

Bangkok Office MarketView Q3 2010

The total office supply in Bangkok stood at 7,978,543 sqm. at the end of Q3 2010, up 1.5% Y-o-Y. No new supply was completed in this quarter.

The overall take-up in the Bangkok office market was 6,866,172 sqm., up 0.1% Q-o-Q and 1.4% Y-o-Y. The total occupancy rate also improved slightly from 86% to 86.1% in this quarter.

The vacancy rate was 13.9%, a fall from the 14.0% recorded in Q2 2010.

After falling for the last seven quarters, average Grade A office rents (both in the CBD and Non-CBD) remained unchanged at THB 614/sqm. per month for the first time during Q3 2010. CBD Grade A office rents also remained unchanged at THB 680/sqm./month.

Total net take-up in Q3 2010 was 6,446 sqm., which was down 76.1% Q-o-Q and 30.3% Y-o-Y. Since the beginning of 2010, the total accumulative net take-up for the first 9 months was 50,851 sqm..

In the third quarter, we saw initial signs that tenants are now more confident about the Thai economy. We are seeing fewer signs of multinationals contracting and more enquiries from both local and multinational companies, either regarding new start-ups or expansions. No new prime office supply came on-stream during the quarter.

CBD Grade A office rents remained unchanged at THB 680/sqm./month for the first time in Q3 2010 after falling for the last seven quarters. The Business Sentiment Index (BSI) remained stable at 50.3 in August, compared to July which marked the end of the political turmoil. A slight improvement in market performance, production and employment components was recorded. The Bank of Thailand predicts that business sentiment in Thailand will continue to improve over the next few months, with a predicted BSI level of 56.7 in November.

Following the completion of Sathorn Square, in Q1 2011 no new Grade A CBD supply is set to come on stream until the opening of Park Ventures (27,000 sqm.) in late 2011. This should ensure that occupancy rates bounce back over the next 18 months. We believe that the market has reached a turning point where demand is starting to increase, coupled with very little future supply under construction. The test over the next two quarters will be whether we will see a significant increase in demand that will lead to an increase in rents.

This is an extract from Bangkok Offcie MarketView Q3 2010, click to download the full report.

Toby has been living in Bangkok for a number of years and has a strong research background. With his years in Thailand Toby brings a wide range of property knowledge to his research writing

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