Office vacancy rates in Bangkok 2005 22nd Feb 2006
Office vacancy rates in Bangkok fell from 17.2% at the beginning of the year to 13.3% at year end. 2005 was a good year for the office property market. Based on a survey conducted by the CB Richard Ellis research team, grade A rents in the Central Business District (CBD) rose by 23.3% while grade B rents in the same area rose by 19.6%. There is very little new supply under construction and CB Richard Ellis expects that the rents will continue to increase as demand exceeds supply. A total of 229,000 square metres of new office space will be completed in 2006. The recently completed 59,000 square metre Q. House Lumpini, located on the corner of Sathorn and Rama IV roads and next to the Lumpini MRT station, is already 45% leased. Exchange Tower with 36,000 square metres of office space and a 6,000 square metre retail podium at the Asoke-Sukhumvit-Rajada intersection will be completed in the first quarter of 2006. Tenants are already fitting out office premises and True Fitness is opening a 3,800 square metre fitness centre in the retail podium. The mixed use Column Tower, with 31,000 square metres of office space, and an Oakwood managed serviced apartment is expected to be completed by the first quarter of this year. Fenix Tower with 15,000 square metres of offices and a 10,000 square metre retail podium will also open in the second quarter of 2006. Comlink, formerly Thansetthakij 2 located on Vibhavadi-Rangsit Road, is scheduled for completion of 20,000 square metres in the first quarter this year. Later in the year, CB Richard Ellis expects that Supalai Grand Tower on Rama III Road (46,000 square metres), and Rasa Tower II on Phaholyothin Road (22,000 square metres) will also be completed. However, there is still limited new supply which is due to be completed in 2007 and 2008. “Total net take up in Bangkok was 306,666 square metres in 2005,” said Mr. Nithipat Tongpun, director and head of Office Services at CB Richard Ellis. “Since the year 2000, the annual net take up of office space has been between 250,000 and 350,000 square metres per year and we expect that take up in 2006 will be around 300,000 square metres”. Demand clearly exceeds supply and therefore, CB Richard Ellis expects that average rents will continue to rise. “Tenants will have to start budgeting for increased office accommodation costs. The difference between CDB grade A rents and suburban grade B rents is about 295 baht per square metre per month, so we may see some relocation to save costs,” added Mr. Nithipat. For tenants needing 1,000 square metres of space or more, there is very limited choice. The majority of grade A buildings are approaching full occupancy and, in many developments, 1,000 square metre premises are not available. Companies who know that they will need to expand when their lease expires now need to plan two years ahead because of the limited availability of space. For the last ten years, companies have been able to consider only buildings that have been completed but now users of large spaces will have to consider making commitments before the completion of buildings in order to secure sufficient space. For landlords, the low vacancy rates and increasing rents are welcome, but in order to maximize their returns from the market conditions, they need to invest capital by providing premises that match tenants’ requirements. Mr. Nithipat believes that we are entering the renovation stage in the property cycle, with office properties usually needing refurbishment every 10 years. Tenants now require modern facilities, good maintenance, and high quality common area corridors and lift lobbies on each floor. One of the biggest complaints of existing tenants in buildings is the condition of the washrooms. Although not a key selling point for new tenants, they matter to existing tenants who use them every day. Bangkok still represents good value in terms of office accommodation, particularly compared to other regional locations, according to the latest CB Richard Ellis Asia Pacific Office Market Review. Tokyo is seven times more expensive than Bangkok, while Hong Kong and Mumbai are five times as expensive and Singapore is double the cost.