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Bangkok Office – Q 2 2009

By on Sep 22, 2009 in Office, Research

Overall take-up of the Bangkok office market was 6,763,812 m2, up 0.2% q-o-q and 0.9% y-o-y. The driver of demand in this quarter was DTAC which took up 61,000 m2 in Chamchuri Square. The occupancy rate of the Bangkok office market also improved slightly to 86.0% from 85.8% in the last quarter. The vacancy rate was 14.0%, indicating a fall from 14.2% recorded in Q1 2009. Overall, Bangkok office rents fell.  During Q2 2009, Grade A CBD office rents fell to THB 700/m2 from THB 710/m2 in Q1 2009, down 1.4% q-o-q and 5.7% y-o-y. Net new take-up improved significantly in Grade A CBD offices, while net take-up in other segments was negative. The total net take-up in Q2 2009 was 13,524 m2, up 57.1% q-o-q but down 63.5% y-o-y. Although demand remained weak there was 13,500 m2 of growth in the total amount of occupied office space in the second quarter.  Net take up for the first half of 2009 was 22,131 m2. The positive figures were mainly due to DTAC expanding from its existing premises of 35,000 m2 to 61,000 m2 at Chamchuri Square.

There was a limited amount of new letting but only a few cases of downsizing. For multinational companies, which make up the majority of demand for office premises, restrictions on any capital spending meant that they were unlikely to move. The capital costs of relocation which include about THB 2,000/m2 to reinstate existing premises and new fitting-out costs of about THB 15,000/m2 mean that it is often not worth relocating to get a slightly cheaper rental unless the size requirement has been significantly reduced. The completion of the Energy Complex in the second half of 2009 will have a significant effect on other buildings in the northern corridor.  The Energy Complex has been fully let to PTT and its subsidiaries who will be relocating from other buildings in the northern corridor. Apart from the Energy Complex, only three buildings will be completed in the next three years.  Sathorn Square (73,584 m2) in 2010, Sivatel (5,880 m2) in 2010 and Park Ventures (28,000 m2) in 2011. Any recovery in the economy will lead to an increase in demand and, with limited new supply, rents will rise.

Bangkok Office Supply, Demand and Vacancy
We do not expect that developers will start construction on new office projects until rents increase. The remaining future development in 2009 is the Energy Complex, which is located in the Non-CBD area and will increase the total Bangkok office space by 119,000 m2.  This development is already 100% committed and will be occupied by subsidiaries of the PTT Group and the Department of Energy.  The project is located on Vibhavadi-Rangsit Road and is expected to be completed in the second half of 2009. Sathorn Square and Sivatel are both scheduled to be completed in the mid half of 2010. The total lettable area for both projects combined is 79,464 m2. In 2011, Park Ventures is projected to be completed. The project is a mixed-use project which will have an estimated 28,000 m2 of office space and will also have a hotel.  The completion of Park Ventures will bring the total office space in Bangkok to 8,090,899 m2 in 2011.

Occupancy
The occupancy rate for Bangkok office market increased slightly to 86.0% from 85.8% in Q1 2009. The higher occupancy rate in Chamchuri Square has been the source of improvement for the Bangkok offices occupancy rate. The opening of Energy Complex could increase the vacancy rate when it first opens, however, we are expecting the buildings to be fully-occupied by the first half of 2010. The occupancy rate in the CBD area has improved to 86.7% from 85.5% in the last quarter. In contrast, the occupancy rate of Non-CBD areas dropped from 86.1% to 85.3 for this quarter.

Supply
As of Q2 2009, the total office supply remained at 7,864,435 m2, a 3.9% increase y-o-y with no increase in the quarter. The majority of the office supply in Bangkok was Grade B, representing 77.3% of total supply in the market. Grade A office supply was 1,788,471 m2, while Grade B office supply stood at 6,075,964 m2. Grade A office supply will grow with the completion of the 119,000 m2 Energy Complex, the only new supply to be added in any grade, during the second half of the year.

Net take-up during this quarter improved compared to Q1 2009, at 13,524 m2.  This was an increase of 57.1% q-o-q but a fall of 63.5% y-o-y.  There was 1,100,623 m2 of vacant space. The source of growth in take-up during Q2 2009 was largely driven by DTAC which completed its move to Chamchuri Square occupying 61,000 m2 and vacating 35,000 m2. For the Grade A space in the Non-CBD area, we expect to see growth when companies move into the Energy Complex by the end of 2009 and in early 2010.

There were some companies which downsized but, in many cases in Bangkok, it is cheaper to remain in existing premises because of the high cost of relocation.

As of Q2 2009, the overall office market rents were moving downwards.  Grade B CBD rents recorded the highest fall, from THB 538/m2 in Q1 2009 to THB 514/m2, falling 4.5% q-o-q and 11.4% y-o-y.  Grade B Non-CBD rents also dropped 2.7% q-o-q to THB 440/m2.  This quarter has shown a consecutive drop in overall rents continuing from Q1 2009. Grade A office rents in both CBD and Non-CBD areas fell.  Grade A CBD rents fell from THB 710/m2 to THB 700/m2, down 1.4% q-o-q and 5.7% y-o-y. Grade A CBD rents have now fallen by 5.8% in the first half of 2009. Grade A offices in the Non-CBD  faced a drop in rents of 1.2% q-o-q and 2.8% y-o-y to THB 583/m2.

Outlook
Although demand remained weak there was 13,500 m2 of growth in the total amount of occupied office space in the second quarter.  Net take up for the first half of 2009 was 22,131 m2. Any recovery in the economy will lead to an increase in demand and, with limited new supply, rents will rise.

Bangkok Office Q2 2009 – Report download

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