Office space surge on the cards

More than 1.13 million square metres are expected to be added to Bangkok’s office market over the next five years, up nearly 30%, says Nexus Real Estate Advisory.

Average rental and vacancy rates are forecast to experience significant effects from the completed projects in the next five years.

The largest supply will come from the One Bangkok project, with total office space of 500,000 sq m.

Many new projects are likely to boast higher building standards, being positioned in the premium market, said Teerawit Limthongsakul, managing director of Nexus Real Estate Advisory.

“The office market in the next five years will experience a significant increase of new office supply,” he said. “The market will change from a landlord market to a tenant market in line with tremendous future supply.”

But the office market in Bangkok will be more subdued during that time as the supply of Grade A office space has been limited in recent years.

In addition, new trends in office use, especially serviced offices and co-working space, will help absorb new supply.

Over the past decade, Bangkok has been one of the fastest-growing cities in terms of rental rates and office building space.

A healthy market has attracted many new players to develop projects, while prompting major players to expand their portfolios.

Most of the new projects are mixed-use developments because of the dramatic rise in land prices and limited stock of freehold plots, especially in prime locations such as Rama IV, Sukhumvit and Phaya Thai roads.

With total supply of 4.23 million sq m in the first quarter of 2018, Bangkok’s office market was strong, with rent hikes and low vacancy rates. In the central business district (CBD), there is some 2.29 million sq m in office space, half of which is considered Grade A supply.

The quantity of Grade A office supply has doubled in recent years, particularly expanding in non-CBD areas. The rental rate has been continually rising in both CDB and non-CBD areas. Most of the new projects are being positioned as Grade A because of expensive land prices and premium designs.

This quarter, the average rental rate for Grade A office space in the CBD has been 960 baht per sq m per month, while the highest rental rate is 1,400 baht per sq m per month.

On the other hand, Grade A office space in non-CBD areas averages 820 baht per sq m per month.