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Bangkok still cheapest office location in region despite rising rents

By on Feb 10, 2015 in Office

bangkok-office-cheapest-in-asia-pacificIN 2014, Bangkok office rents rose by 4 to 7 per cent based on grade and area despite the weak economy. The overall vacancy rate was 9.5 per cent and CBRE Research estimates total net new take-up stood at around 180,000 square metres. However, looking from a global perspective, Bangkok office rents remain cheap, ranking 115 out of 126 cities surveyed by CBRE.

The four most expensive locations were London’s West End, Hong Kong’s Central district and Beijing’s Finance Street and CBD with total occupation costs of between Bt5,500 to Bt8,000 per square metre per month compared to Bt900 – Bt1,000 per square metre per month in Bangkok’s best office buildings. The cheapest location for office space in the world was in Durban, South Africa, with prime office rents of Bt450 per square metre per month.

The biggest increase in rents across the world was in Dublin, Ireland, where rents rose by almost 35 per cent in one year and in the Philippine capital of Manila where rents had risen by 20 per cent last year. The biggest drops were in Santiago, Chile, where prime office rents fell by 13.5 per cent and in Lyon, France, where they fell by 10 per cent.

Bangkok was the cheapest office location in the Asia-Pacific Region.

There is limited new supply and only two grade-A buildings – Bhiraj Tower at EmQuartier and AIA Sathorn Tower – that will be completed in Bangkok’s central business district this year. Overall, less than 200,000 square metres of new office space per year is expected to be completed this year and next in Bangkok and even with relatively conservative forecasts, new demand is expected to exceed new supply and rents are expected to continue rising.

Few new office developments are underway in Bangkok, as office developers compete with condominium developers for prime sites given zoning and planning regulations allow either use. With record high condominium prices in prime locations, condominium developers are expected to continue outbidding office developers for sites because their returns will be higher.

CBRE expects this will mean that there will few new office developments. Office rents will have to rise by 30 to 50 per cent before returns on office development begin to match those currently being achieved by condominium development.

In addition to limited new supply, Bangkok’s office stock is ageing. Some of the older buildings with slow lifts, poor air-conditioning and poor floor plates are becoming obsolete, especially those that have not been substantially refurbished or are in locations not linked to the mass-transit system. These buildings are less popular with tenants who prefer modern, better-located buildings. This will increase the demand for quality buildings in most popular locations.
Aliwassa Pathnadabutr
Managing Director
CBRE Thailand

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