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Renovating an Office Building Pays Off in the Long Term

By on Jan 24, 2012 in Property News

Published on The Nation dated 23 January 2012 by Aliwassa Pathnadabutr, Managing Director of CBRE Thailand

Comparing the condominium and office sectors in Bangkok, it is apparent that while the condominium market has been growing over the past decade, growth in the office sector has been limited.

Top-end condominium projects in Bangkok are comparable to those located in key cities in the region in terms of architectural design, layout and the finishing of interiors. However, there are very few grade-A office buildings being developed.

The two most recent additions to the office market are Sathorn Square and Park Ventures, both marking a milestone in terms of design and function. The buildings are filling up even though they are commanding the highest rents in the location – clear proof that the market is prepared to pay a premium for the right location.

New office buildings can either be built in the central business district, where prices have skyrocketed, or in areas surrounding the CBD such as Ratchada and Rama 9 roads, where land is still cheap. However, this may not be acceptable to clients who prefer to be downtown – a need that creates an opportunity for landlords who may own ageing office buildings in prime locations such as Silom, Sathorn or Sukhumvit.

Bangkok faces the problem of an ageing office supply; one of the common problems faced by older buildings is dropping rents and occupancy. Often the location of these ageing buildings might be very good, but the buildings can lack the lustre to draw in tenants willing to pay hugher rents. This is where renovation comes in.

Each building is unique and there is no fixed model that can fit all. Each building varies in the degree of renovation required and the areas that need to be renovated. When planning to refurbish, landlords should consider the tenants’ requirements and the sort of tenants targeted. Smaller buildings might attract tenants who have small space requirements. Landlords also need to consider their tenants’ industry/businesses in order to understand their leasing requirements.

The basic areas for renovation include the building facade, the lobby, the lift area and common toilets. The ceilings and lighting units should also be upgraded to a condition that is comparable to newer grade-A buildings.

Improving other areas, such as security, M&E and air conditioning, depends very much on whether the landlord considers the investment worthwhile. For instance, the security system can be improved by incorporating advanced technology such as destination control. This does not just cut down on the cost of security guards, but will also allow ease in management. Some landlords might also want to consider adding a retail element to the ground floor level, especially if the building is located on a main road in a prime area with a high level of passing traffic.

Most office renovations focus on common areas, and the restoration rakes place on an area-by-area basis while the building is still in operation. Many office buildings in downtown Bangkok have been renovated recently, including Amarin Tower, Q House Convent, United Centre and President Tower.

Aliwassa has been the Managing Director οf CBRE Thailand for a number of years. As a Thai national, Aliwassa is extremely knowledgeable about the sale of property in Thailand, specifically large scale high value condominium developments largely in Bangkok.

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