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Bangkok Office Market Demand and Rent Set for Growth

By on Aug 28, 2011 in Office

With a more positive political outlook, the Bangkok office market is beginning to see a move forward and growth in demand and rent, following a period where the market has been held back due to the combination of the global crisis and Thailand’s political uncertainty, according to a leading property consultant CB Richard Ellis (CBRE).

Whilst office demand has been slow, the market as of Q2 2011 was more active with clearer signs of expansion from existing tenants and a marginal increase in occupancy rates from the previous quarter to 86.5%.  CBRE’s office enquiries were up 34.2% q-o-q, an upswing indicating the market is heading towards the right direction.

An analysis of CBRE’s office enquiries also shows that 59% of enquiries involved an expansion, indicating that the key demand driver is from the expansion of existing businesses and space requirements from existing tenants rather than demand from entry of new multinational companies (MNC’s). Key growth industries in the past several years have been in the service and consultancy sectors.

The trend of expanding businesses and space requirements is expected to continue and with limited new supply coming to the market, rents will increase. In 2011, Park Ventures Ecoplex and Sathorn Square are the only two Grade-A CBD office buildings to be completed, adding approximately 100,584 sq.m. to the office supply. The only other new Grade-A CBD building currently in the construction pipeline is the UBC III building on Sukhumvit 35 which will offer 50,200 sq.m. of lettable space and is due for completion in Q1, 2014.

On the supply side, developers of new office buildings have a clear development direction and ensure that the building specifications matches tenants’ requirements such as ceiling heights, the core to window depth, a column free space layout, knock out panels enabling tenants to install a private inter-floor staircase, direct BTS link, destination control lifts with turnstiles for security in an elegant lobby.

The developer of Park Ventures Ecoplex, a new Grade-A office on the corner of Wireless and Ploenchit Roads, for example, has surveyed top Grade-A office buildings across the Asia Pacific region and carefully studied tenant’s requirements beforehand to ensure they deliver a specification and design that matches tenants’ needs. As the project’s consultant, CBRE was also involved during the design process and provided our unique insight on the market and tenants’ needs today and in the future which is underpinned by our dominance in the Bangkok office market where CBRE concludes over 70% of the market transactions.

“Due for opening on 1st September, over 20% of the space at Park Ventures has already been leased before completion to tenants ranging from international fashion companies, consultancy firms, international serviced offices and leading MNCs. The top quality Grade-A project has also achieved the highest rent in the current market at THB 800 to THB 820 per sq.m. per month., almost back to the peak rent prior to the crisis,” said Mr. Nithipat Tongpun, Executive Director, Office Services at CBRE Thailand. The project is perfectly positioned on the BTS Sukhumvit line with a direct BTS link. Park Ventures’ eco-concept and sustainability has also been the key to attracting tenants and the record rent.

Apart from technical specifications, companies are increasingly focused on sustainability and energy efficiency, particularly MNCs who require LEED certified buildings. The Leadership in Energy and Environmental Design (LEED) accreditation is awarded to projects which have been designed to minimise the impact on the environment while improving the indoor environment for occupants. Features that maximise energy efficiency, water efficiency and use of sustainable materials are some of the essential criteria. More tenants are now embracing the green trend and setting higher standards for their work place environment with factors such as indoor air quality and circulation and natural lighting being key considerations as these factors have measured benefits in terms of a company’s effectiveness and efficiency. There are currently three office complexes in Bangkok which qualify as green buildings. Energy Complex is one of Thailand’s first LEED Platinum certified buildings, while Park Ventures is currently applying for LEED Platinum and Sathorn Square applying for LEED Gold.

In addition to quality and environmental considerations, access to mass transit is essential and the focus remains on the CBD areas which accounted for 71% of all CBRE office enquiries in Q2 2011.  The preference continues to be near mass transit stations along the Sukhumvit Line from Siam to Ploenchit, a direct BTS link or where two mass transit systems intersect such as Interchange 21 and Exchange Tower are added benefits.  New Grade-A buildings which meet these requirements can achieve a rent of up to THB 800 per sq.m. per month, higher than the market average of THB 680.

With market indicators pointing in a positive direction, the current market is ideal for tenants looking to make their move. It is recommended that tenants who need to make their move in the next two to three years make their move decisions now to take advantage of existing rents and an opportunity to upgrade to newly completed premises. With a limited new Grade-A supply and almost no new supply in the pipeline coupled with continued business expansion, rents will increase as soon as take up reaches a certain point.

Nora has been in the Corporate Communications arena for a number of years. Nora's role is to communicate all newsworthy items that are of a PR nature.

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