Positive short-term outlook for Bangkok office market

An artist conception of the Gaysorn Tower being built at the Phloenchit-Ratchaprasong intersection in Bangkok. (Photo supplied by Gaysorn Property Co Ltd)

The outlook for the Bangkok Office market remains positive for the next three years, mainly due to a lack of new supply but there were signs the demand growth rate was slowing in the second quarter.

Bangkok has a total office supply of 8.6 million square metres and the vacancy rate at 7.5% is still at a 20-year low. There are only 420,000 sq m of space due to be completed between 2017 and 2020. 

Despite the weak economy, growth in demand has been surprisingly strong over the past four years, with the annual occupation growth rate of about 200,000 sq m per year.

One of the drivers has been the emerging e-commerce sector as many companies have set up offices to establish their platforms in Bangkok.

The other area of growth has been in the consumer finance sector since banks and other financial institutions move to provide services on the internet rather than through bank branches.

The slower demand growth will not have a significant impact in the short term because of the limited supply currently under construction. The rate of rental growth could slow and becomes more segmented depending on building quality and location.

CBRE Thailand, a property consultant, sees quite significant rental discrepancies in the central business district’s grade-A office segment.

Four completed buildings in the Sukhumvit-Phloenchit sector achieve rents of 1,000 baht per sq m or more while slower rental growth and significant pockets of vacant space are seen in some of the older CBD buildings.

New buildings in the most popular locations turn out to be a success. The recently completed grade-A CBD development, Gaysorn Tower, was 70% pre-let before its completion in July 2017.

The 30,000-sq m development is located at the Phloenchit-Ratchaprasong intersection with direct covered access to the BTS skytrain at Chidlom station.

According to CBRE, some tenants are willing to pay a premium rent for a high-specification office building with the right facilities to attract tenants in prime sought-after locations. There is also some relocation from older grade-A buildings to new grade-A buildings.

There are over 2 million sq m of office space being planned where developers have acquired sites and announced plans to build offices but construction has not yet begun. The key question is when the planned space will be completed. If the completed new supply exceeds the demand, vacancy rates will rise and rents will fall.

It is not possible to estimate the rate of new completion until the construction of these projects actually begins.

Nithipat Tongpun is executive director, head of office services at CBRE Thailand. Thatchanan Siddhijai is manager at CBRE Research & Consulting, CBRE Thailand. They can be reached at      LinkedIn:  website: 

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