The Bangkok office market continued its robust performance in the second quarter with rises in supply, demand and monthly rent, according to property consultant Colliers International Thailand. Phattarachai Taweewong, associate director of Colliers' research department, said office supply newly launched in Bangkok was still on the rise despite concerns over a possible oversupply in the future.
As of the end of the second quarter, office supply in Bangkok totalled 8,716,000 square metres. Of the amount, 46% was in the central business district (CBD), 43% in the city fringe and 11% in outer-city areas.
About 1 million sq m is under construction and due to be completed between the second half of 2019 and 2022, including 159,065 sq m in the second half of 2019, 232,263 sq m in 2020, 254,000 sq m in 2021 and 350,000 sq m in 2022. Of the total future supply, half will be in the CBD and 70% will be Grade A.
"The key driver for the large amount of new office supply is that the existing supply is limited, particularly in Grade A towers," Mr Phattarachai said. "Because freehold land in the CBD is scarce and land prices are so high, developers decided to build offices for rent." He said 70% of future office supply will be in mixed-use projects and situated on leasehold plots because developers want to maximise land use through varied developments that include condominiums.
The remaining 30% of future office supply will be either stand-alone towers, redeveloped or new developments by landlords, with the exception of O-Nes Tower, a new office tower developed by contractor Thai Obayashi Corporation, which bought 4.4 rai near BTS Nana station to develop. According to Thai Obayashi, the tower will have 29 storeys with 46,000 sq m of office space for rent and 1,200 sq m for retail. With an investment of 9 billion baht, the tower will be certified with international building standards, including LEED and WELL. It will be completed in 2021. Mr. Phattarachai said non-CBD areas are emerging for new office development. This includes locations along Ratchadaphisek, Rama IX, Phahon Yothin and Vibhavadi-Rangsit roads.
Non-CBD areas in northern Bangkok and locations on Phahon Yothin and Vibhavadi-Rangsit saw the highest occupancy rate among all grades, with 98.8% in the second quarter, largely driven by Grade C space. In the CBD, locations on Sukhumvit Road had the highest occupancy rate at 98.2%. Bangkok's average occupancy rate in all grades was 95.6%. Mr. Phattarachai said office rents will keep rising by 3-5% in the second half and further in the future as demand will be about 200,000 sq m a year. Average monthly rent for Grade A space in the CBD was 1,087 baht per sq m, but some projects newly launched in the first quarter charged up to 1,500-1,600 baht per square metre. Overall, the average rent of all grades in the CBD will rise by 5-10% a year, but some Grade A offices may see a rise of 5-10% per quarter because of strong demand and limited supply.
The average rent of Grade A and Grade B office space in non-CBD areas was 936 baht and 570 baht per sq m per month, respectively.
"The majority of office towers in Bangkok are 15 years and older," Mr Phattarachai said. "These towers should be renovated to attract tenants; otherwise, rents will not rise and occupancy will drop."