Q1 2013 | OFFICE
THAILAND
BANGKOK OFFICE MARKET REPORT
Bangkok Office Market EXECUTIVE SUMMARY Office space in Bangkok is getting more expensive as demand from international companies outstrips supply. No new office buildings were added to the market in the first quarter of 2013, although around 55,700 sq m is expected to be completed later this year. The Northern Fringe is the most popular area for office building development, and nearly 240,000 sq m of space is expected to be completed there by the end of 2014.
MARKET INDICATORS Q4 2012 - Q1 2013 NEW SUPPLY DEMEAND REANTALS OCCUPANCY
In the meantime, rental prices and occupancy rates for office space are significantly higher than they were in the first quarter of 2012, especially in the Central Business District (CBD). The growth in demand is largely fuelled by multi-national companies establishing new offices in Bangkok, and by the expansion of existing firms. The launch of the ASEAN Economic Community in 2015, and growing interest in the emerging markets of Myanmar, Cambodia and Laos, makes Bangkok an attractive hub for companies looking to expand operations in the region. The total office supply in Bangkok during the first quarter of 2013 was approximately 8,042,700 sq m. Most office buildings in Bangkok were completed before 2001, so are already more than 10 years old. Many of these older buildings have been renovated in recent years, and more are due to be refurbished during this year.
HISTORICAL SUPPLY CUMULATIVE SUPPLY IN BANGKOK, Q1 2013
Source: Colliers International Thailand Research Note: F = Estimated figures at the end of the year
Approximately 26,640 sq m of office space was completed and came on the market in 2012, while more than 55,700 sq m is scheduled to be completed in 2013. The total office supply in Bangkok at the end of 2012 was approximately 8,042,700 sq m, and there will be nearly 8,098,500 sq m by the end of
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2013. Only around 1,115,000 sq m of office supply has been added to the market during the past ten years, but more than 6,927,000 sq m was completed before 2001, as most office buildings in Bangkok were completed during the boom period between 1992 and 1999.
BANGKOK OFFICE MARKET REPORT | Q1 2013 SUPPLY BY LOCATION, Q1 2013
Source: Colliers International Thailand Research
The CBD area represents the biggest share of the office building market in Bangkok, with around 36% of the total supply, followed by the Northern
Fringe area and the Outer CBD area with 20% and 14%, respectively. Overall, the office supply is dispersed throughout the city.
FUTURE SUPPLY CUMULATIVE FUTURE SUPPLY BY LOCATION, Q1 2013
Source: Colliers International Thailand Research
More than 327,300 sq m of office space is scheduled to be completed in Bangkok over the next three years. The Northern Fringe area is the most popular for future development, with approximately 238,900 sq m or 73% of the total future supply scheduled to be completed there by 2015;
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all future supply in this area is located on Ratchadapisek Road. The limited available land in the CBD and Outer CBD areas is the majority obstacle for property development including office buildings.
BANGKOK OFFICE MARKET REPORT | Q1 2013 DEMAND – OCCUPANCY RATE AVERAGE OCCUPANCY RATE BY LOCATION, Q1 2013
Source: Colliers International Thailand Research
The Outer CBD area had the highest occupancy rate in Q1 2013, while the Outer City North had the lowest. Although the CBD area is the most fashionable location for all tenants, only around 36% of the total supply
is located in this area, so the average occupancy rate was not the highest. However, in the next few years the average take-up rate in CBD area will be the highest in the city, due to limited future supply in the area.
OCCUPANCY RATES IN THREE LOCATIONS, Q1 2010 - Q1 2013
Source: Colliers International Thailand Research
The average occupancy rate in three main locations has slightly increased since the last quarter of 2012. New demand for office space has dramatically increased from last year, especially in the CBD area,
because many multinational companies are looking for office space or expanding their existing offices. Many of these companies postponed their expansion plans from last year to 2013.
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BANGKOK OFFICE MARKET REPORT | Q1 2013
ACTUAL AND FUTURE ESTIMATE OF OCCUPANCY RATES, Q1 2013
Source: Colliers International Thailand Research
Only 26,600 sq m of office supply was completed in 2012, most of which is occupied by the building owners, so only a small amount came on to the market. Approximately 55,700 sq m is scheduled to be completed in the second quarter of 2013, which will directly affect the average
occupancy rate for the whole market. Due to the increasing demand in 2012 and continued growth in 2013, the average occupancy rate will pick up in the next few months.
DEMAND DRIVERS NEWLY REGISTERED FIRMS DURING JANUARY 2011 - FEBRUARY 2013
Source: Department of Business Development and Colliers International Thailand Research
According to statistics from the Department of Business Development, the number of new company registrations in January 2013 was the highest on record, at more than 3,000. Although the number in February
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was decreased by around 28% from the previous month, it was still more than 2,000 companies.
BANGKOK OFFICE MARKET REPORT | Q1 2013 RENTAL RATES, Q1 2013 RENTAL RATES BY LOCATION
Source: Colliers International Thailand Research
The average rental rate for all office buildings in the CBD area was the highest in Bangkok, due to the location and the number of Grade A buildings. Most office buildings in the CBD area are located not far from
Sky Train stations, thus making the average rental rates higher compared to other locations.
RENTAL RATES BY GRADE, Q1 2013
Source: Colliers International Thailand Research
The average rental rate for Grade A office buildings in Bangkok is approximately THB750 per sq m, while the asking rate of a Grade A building in the CBD area starts at around THB780 - 850 per sq m per
month. However, the rental rates actually achieved tend to be approximately 5 - 10% lower than the asking rate.
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BANGKOK OFFICE MARKET REPORT | Q1 2013
HISTORICAL RENTAL RATES IN THREE MAIN LOCATIONS, Q1 2011 - Q1 2013
Source: Colliers International Thailand Research
The average rental rates for office buildings in the CBD, Outer CBD and Northern Fringe areas dramatically increased in Q1 2013 when compared to the same quarter in 2012, especially in the CBD area. Most office buildings in the Outer CBD area are rather old and some buildings are far
from the BTS line, while most new office buildings completed during the past few years are located in the Northern Fringe area, so the average rate in the Outer CBD is lower than in the Northern Fringe area.
RENTAL RATES OF OFFICE BUILDINGS IN BANGKOK BY DISTANCE FROM BTS / MRT (METRES), Q1 2013
Source: Colliers International Thailand Research
Offices located close to the mass transit stations command premium rates. These are mostly newer buildings that demand higher rents. The sharpest difference occurs in Grade C buildings, which are around 40% cheaper than Grade A buildings. Mass transit only explains part of an
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office building’s appeal. Access to expressways may be equally or even more important for tenants.
BANGKOK OFFICE MARKET REPORT | Q1 2013 FORECAST The average occupancy rate in the office market is expected to be higher than last year due to ever increasing demand and limited new supply. Many multinational companies are still looking for office space in Bangkok, and some are planning to expand their existing space. The average rental rate in the first quarter of 2013 increased from 2012 by around 5 - 10% depending on location and building specifications. Although most buildings have already increased slightly from the past year, some buildings in the CBD area may increase their rates again in the second half of 2013, due to limited supply.
The area along Ratchadapisek Road, starting from Rama 9 junction, is becoming the new Bangkok Business zone and most new office buildings expected to be completed in 2015 are located in this area. The development of the ASEAN Economic Community and the growing interest in Cambodia, Laos and Myanmar could fuel Bangkok’s position as a regional hub. In the past few years, most old office buildings and retail centres in Bangkok were renovated and redecorated. Renovation is still the most fashionable trend in office buildings and the retail market in 2013.
The main obstacle for office building development in the CBD and Outer CBD areas is that land prices are escalating while rents remain relatively static. Most future supply is therefore located outside the CBD area as there is little available land with reasonable prices suitable for office building development in the CBD.
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BANGKOK OFFICE MARKET REPORT | Q1 2013 COLLIERS INTERNATIONAL THAILAND MANAGEMENT TEAM OFFICE SERVICES Nattawan Radomyos | Senior Manager PROJECT SALES & MARKETING Monchai Orawongpaisan | Associate Director RESIDENTIAL SALES & LEASING Napaswan Chotephard | Manager RETAIL SERVICES Asharawan Wachananont | Associate Director RESEARCH Surachet Kongcheep | Senior Manager INDUSTRIAL SERVICES Narumon Rodsiravoraphat | Associate Director ADVISORY SERVICES | HOSPITALITY Jean Marc Garret | Director ADVISORY SERVICES Napatr Tienchutima | Associate Director REAL ESTATE MANAGEMENT SERVICES Thanasit Tonsatcha | Associate Director INVESTMENT SERVICES Nukarn Suwatikul | Associate Director Wasan Rattanakijjanukul | Senior Manager
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RESEARCHER: Thailand Surachet Kongcheep Senior Manager | Research EMAIL surachet.kongcheep@colliers.com
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