Managing director of Nexus Real Estate Advisory Teerawit Limthongsakul, an expertise in commercial real estate, has revealed that, during the past decade, Bangkok has been one of the fast-growing city’s in terms of rental rate and space of office buildings.
A healthy market has attracted many new developers to launch projects, and has also attracted major players to expand their portfolios. Most of the new developments are mixed-use due to the dramatic rise of land prices and the limited stock of freehold plots; especially in the prime locations such as Rama IV, Sukhumvit and Phayathai roads.
With the total supply of 4.23 million sqm in the first quarter of 2018, Bangkok’s office market was strong with rent increase and low vacancy rate. In Central Business District (CBD), there is approximately 2.29m sqm, half of it is considered as Grade A supply, which has more than doubled from the previous few years as well as expansion in non-CBD areas. The rental rate has continually risen in both CDB and non-CBD areas, most new projects are being positioned as Grade A, due to the expensive land price and premium design.
Nexus research reveals an interesting number for the next five years with more increases; 1.13m sqm added into Bangkok’s office market, almost a 30 percent increase. The average rental rate and vacancy rates are anticipated to experience significant effect by the completed projects in the next five years. The largest supply will come from the ‘One Bangkok’ project with the total office space of approximately 500,000 sqm. Furthermore, many new projects are likely to provide a higher building standard and to be positioned in a premium market.
In the first quarter of 2018, the average rental rate for grade A office in CBD was about Bt960/sqm/month, with the highest rental rate Bt1,400/sqm/month. On the other hand, grade A office in non-CBD was about Bt820/sqm/month.
Mr Teerawit states that the office market in the next five years will be experiencing a significant increase of new office supply. The market would change from the landlord market to the tenant market according to tremendous future supply. However, the office market in Bangkok would be more neutral during that time after the supply of grade A office has been limited for over several years. In addition, the new trend of the office uses; especially the serviced office and the co-working space, would be one of the major tenants to absorb new up-coming supply.
Source: Nexus Real Estate Advisory, Q1-2018