Managing Director of Nexus Real Estate Advisory, Teerawit Limthongsakul, an expertise in commercial real estate, revealed that, during the past decade, Bangkok has been one of the fast-growing city in terms of rental rate and space of office building. A healthy market has attracted many new developers to develop new projects, and also attracted major players to expand their portfolio. Most of new developments are mixed-use development due to the dramatic rise of land price and limited stock of freehold plots; especially in the prime location such as Rama IV, Early 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 2.29 million sqm with half of it is considered as Grade A supply. It can be seen that number of Grade A office supply is doubling from the past few years and expanding continuously in Non-CBD area. The rental rate has been continually risen in both CDB and Non-CBD areas. Most of new projects are being positioned as the Grade A, due to the expensive land price and premium design.
Nexus research reveals an interesting number of future supply for the next 5 years that it will be more than 1.13 million sqm added into the Bangkok’s office market or almost 30% increase of supply. The average rental rate and vacancy rate are anticipated to experience a significant effect by the completed projects in the next 5 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 position in a premium market.
In the first quarter of 2018, the average rental rate for grade A office in CBD was about 960 Baht/sqm/month, which the highest rental rate was 1,400 Baht/sqm/month. On the other hand, grade A office in Non-CBD was about 820 Baht/sqm/month.
Mr. Teerawit states that the office market in the next 5 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 tenant to absorb new up-coming supply.
Source: Nexus Real Estate Advisory, Q1-2018
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