COMMERCIAL RESEARCH BANGKOK OFFICE MARKET OVERVIEW 2018
HIGHLIGHTS As of September 2018, the total occupied space in reached 4,574,565 square metres. In 2018, the overall occupancy rate of increased slightly to 91.80%. Average rent for office market was up 3.79% Y-o-Y to 750 baht per square metres per month. Grade A rents slid to 1,040 baht per square metres per month, marking the first decline after ten consecutive quarters of growth. BANGKOK OFFICE MARKET Recently, Thailand s government has promoted foreign investment in eastern provinces under Eastern Economic Corridor scheme. Apart from its industrial targets, the government has created Thailand 4.0 policy, aiming to make the country the next digital hub of Southeast Asia. These policies attract large international companies as well as startups to Thailand, underpinning demand for office space in. DEMAND In 2018, demand for office space in shrank. The net occupied space decreased by 23,011 square metres to 4,574,565 square metres, representing an overall occupancy rate of 91.80%. The area on Sukhumvit Road between Chidlom and Phrompong showed the highest demand in the third quarter when seen from occupancy rate at 96.18%. Demand for grade A office buildings remains strong, as evidenced by the occupancy rate of 95.34%, compared with 94.89% in the prior quarter. Meanwhile, we saw flatter demand for grade B and C office buildings. The occupancy rate of Grade B office buildings decreased to 93.62% from 94.48% in the prior quarter. The occupancy rate of Grade C office buildings dropped to 87.10% from 88.12% in the previous quarter. By the end of 2024, the office market will welcome 10 office buildings with an additional space of 895,794 square metres. FIGURE 1 SUPPLY, DEMAND AND OCCUPANCY RATE, 2013 2018 Supply Demand Occupancy Rate 5,000,000 3,750,000 92.47% 92.31% 92% 2,500,000 91.15% 91.57% 91.35% 91.55% 91.80% 91% 1,250,000 90.38% 90.38% 90% Ô-0 Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017 Q1 2018 Q2 2018 2018 89% TABLE 1 OCCUPANCY RATE BY GRADE Grade / Quarter 2017 Q4 2017 Q1 2018 Q2 2018 A 93.5% 94.0% 95.4% 94.9% B 94.1% 93.9% 95.0% 94.5% C 89.7% 89.1% 89.2% 88.1% Overall 91.7% 91.4% 92.3% 91.6% 2018 95.3% 93.6% 87.1% 91.8% NOTE: THESE FIGURES EXCLUDE MULTI-OWNER OCCUPIED PREMISES AND OFFICE BUILDINGS SMALLER THAN 5,000 SQUARE METRES. 2
BANGKOK OFFICE MARKET OVERVIEW 2018 COMMERCIALR ESEARCH SUPPLY In 2018, total office supply in remains the same at 4,962,158 square metres. In the next quarter, two office buildings with total spaces of 52,000 square metres will be added in non- areas. From the fourth quarter of 2018 to the end of, 6 office buildings will enter the market, with additional total space over 240,000 square metres. In non- area, there will be further 5 bulidings, with total area of 198,609 square metres. Meanwhile, only one building with an area of 45,000 square metres will be added in area. From 2020 to 2024, the office market will welcome 10 office buildings with 652,185 square metres. TABLE 2 BANGKOK OFFICE FUTURE SUPPLY Lettable Area Building Name (square metres) Completion Zone T1 Office Building Whizdom 101 Spring Tower CP Tower 4 Samyan Mitrtown The PARQ Magnolia Projeact Vanissa Building Ploenchit Embassy One The Forestias Oasis Super Tower Chuvit Garden Sriboonruang Dusit Thani Office expected completion in 2018 22,000 30,000 Q4 2018 Q4 2018 Total Office expected completion in 2018 : 52,000 square metres Office expected completion in 27,518 48,091 45,000 71,000 Total Office expected completion in : 191,609 square metres Office expected completion in 2020-2024+ 22,185 61,000 225,000 100,000 53,000 94,000 37,000 + 2020 2020 2021 2021+ 2022 2022 2024 Total Office expected completion in 2020-2024+ : 652,185 square metres TABLE 3 BANGKOK FUTURE SUPPLY BY YEAR (SQUARE METRES) Future Supply 2018 0 45,000 2020 22,185 2021 286,000 2022 0 77,000 Sum 430,185 52,000 146,609 0 100,000 94,000 465,609 Total 895,794 3
RENTAL RATES In 2017 and 2018, rental rates of office buildings was on an uptrend. The asking rental of available office space in the third quarter of 2018 climbed 3.79% Y-o-Y from 722 baht per square metres per month to 750 baht per square metres per month. However, the average rent edged down 0.32% Q-o-Q. In 2018, grade A rents expanded 4.70% Y-o-Y to 1,040 baht per square metres per month but decreased 0.41% Q-o-Q. Grade B rents grew 2.62% Y-oY to 740 baht per square metres per month but the rents were down 0.15% Q-o-Q compared to the previous quarter. Grade C rents climbed 3.62% Y-o-Y to 470 baht per square metres per month but declined 0.39% Q-o-Q. TABLE 4 ASKING RENT BY GRADE Grade / Quarter 2017 Q4 2017 Q1 2018 Q2 2018 A 994 1,000 1,027 1,045 B 720 727 735 740 C 454 454 468 472 Overall 722 727 743 752 RENT BY AREAS Average rents on Sukhumvit Road between Phrompong and Chidlom marked highest rank, with 982 baht per square metres. Meanwhile, asking rents on Rama 3 Road showed the lowest 2018 1,040 739 470 750 figure compared to other areas, with 466 bath per square metres per month. Interestingly, asking rents on Rama 3 Road advanced by 19.22% Y-o-Y, the highest growth compared to other precincts. FIGURE 2 AVERAGE ASKING RENTS BY GRADE ( 2005 2018) 1,200 1,000 800 600 400 200 0 620 2005 736 738 764 743 2006 2007 2008 2009 2010 738 735 743 306 339 334 337 341 374 374 377 386 2011 2012 2013 806 848 473 531 540 561 558 571 558 569 589 616 2014 2015 936 956 994 2016 2017 1,040 651 694 720 740 409 425 448 454 470 2018 FIGURE 3 AVERAGE ASKING RENTS BY ROADS (BAHT PER SQM PER MONTH) Sukhumvit Rd Sathorn Rd Wireless Rd Rama 9 Rd Paholvothin Rd Vibhavadee Rd Asoke Rd Silom Rd Rama 4 RdB angna Rd Rama 3 Rd 982 704 755 637 940 740 597 526 629 466 542 Q-o-Q change 4.22% 0% 1.62% 0.26% 1.33% 0.51% -1.49% -2.12% 1.00% 6.54% -0.73% y-o-y change 6.69% 10.17% 3.42% 4.50% 6.72% 0.11% -0.33% 1.14% 5.57% 19.22% -0.33% 4
GLOBAL BRIEFING For the latest news, views and analysis on the world of prime property, visit KnightFrankblog.com/global-briefing OUTLOOK Rental rates of office buildings hiked 68.69% since 2004, indicating great demand for office space in. From the fourth quarter of 2018 onwards, there are 16 office buildings in the pipeline, which will likely put downward pressure on rental rate growth. GLOSSARY Grade A Buildings By virtue of their desirability, these prime properties command the highest rents in their market. You will find them located in the Central Business District located a near mass transit station, and have a floor plate of at least 1,000 square metres. Grade B Buildings Is the largest sector of the office market, these are the buildings that are traditionally in the greatest demand, they might not be the most expensive properties in the market but represent good value for money. Grade C Buildings Typically older properties, these buildings provide office space for rent at the most competitive rents in the market. Thailand Contacts Phanom Kanjanathiemthao Managing Director +66 (0)2643 8223 Ext 124 phanom.kanjanathiemthao@th.knightfrank.com Surasak Limpa-Arayakul Head of Valuation and Advisory +66 (0)2643 8223 Ext 143 surasak.limpa-arayakul@th.knightfrank.com Roong Sitthisankunchorn Head of Property Management +66 (0)2643 8223 Ext 144 roong.sitthisankunchorn@th.knightfrank.com Marcus Burtenshaw Head of Occupier Services and Commercial Agency (OSCA) +66 (0)2643 8223 Ext 104 marcus.burtenshaw@th.knightfrank.com Frank Khan Head of Residential +66 (0)2643 8223 Ext 280 frank.khan@th.knightfrank.com Phuket Contact Nattha Kahapana Head of Knight Frank Phuket +66 (0)7631 8151 Ext 300 nattha.kahapana@th.knightfrank.com Knight Frank Commercial Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs. RECENTMARKET-LEADINGRESEARCHPUBLICATIONS condominium MARKET OVERVIEW market H1 Q1 2018 2016 Q2 2015 Q1 2018 Condominium condominium MARKET OVERVIEW market H1 Q2 2018 2016 Q2 2015 Q2 2018 Office condominium MARKET OVERVIEW market H1 Q1 2018 2016 Q2 2015 Q1 2018 Office AND PHUKET PRIME CONDOMINIUM condominium MARKET OVERVIEW market H1 2017 2016 Q2 2015 2017 Phuket Condominium Important Notice Knight Frank LLP 2018 - This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members names. Knight Frank Research, Reports are available at KnightFrank.co.th/Research 5