Bangkok tops for office rentals in Q1

Bangkok remained the strongest performer in office rentals for the Asia-Pacific in the first quarter, boosted by improved economic sentiment, says property consultancy Knight Frank.

The consultancy reported yesterday that its Asia-Pacific Prime Office Rental Index for the first quarter of 2017 showed that Bangkok office rentals recorded the highest growth rates in Asia-Pacific quarter-to-quarter (3.1%) and year-on-year (9.6%).

Rents have been on the rise for more than two years and are expected to keep going up because of strong absorption amid tight supply, Knight Frank said.

Marcus Burtenshaw, executive director and head of commercial agency, said that despite a generally unremarkable macroeconomic climate, strong growth in Thailand’s service sector is leading to what seems like unceasing demand for office space, pushing rents ever higher.

Faced with the reality of higher rents, tenants are increasingly demanding more from their buildings. There are not limited to good access to mass transit, grand lobbies and high ceilings. Tenants want more natural light, improved security systems, and quality food outlets that cater to the budgets of all of their employees, he said.

“Looking ahead, a supply-side lag and a growing service sector mean that this climate of rising rents is likely to continue for some time to come,” Mr Burtenshaw said.

According to Knight Frank Asia-Pacific Prime Office Rental Index, both Tokyo and Manila tied at the bottom of the index with a 1.1% decline quarter-on-quarter.

In Tokyo, vacancy rates for prime space have been increasing as Tokyo’s office market comes off its peak.

Despite a drop this quarter, Manila’s office rental take-up has been robust against the backdrop of its strong economy. Rents have risen over the past 15 consecutive quarters up until the first quarter of 2017.

Mainland Chinese companies remained the most important source of new take-up on Hong Kong (2.5%), as landlords stayed aggressive due to limited supply, thus further pushing up rental levels up.

Over the next 12 months, Knight Frank expects rents in 15 out of the 20 tracked cities to either remain steady or increase, up from 12 in the previous forecast.

Nicholas Holt, head of research for AsiaPacific, said US political uncertainty, rising interest rates and Chinese capital controls all made waves during the first quarter of 2017.