Q4 2012 office thailand Bangkok office Market REPORT Bangkok Office Market Summary market indicators 2011-2012 new Supply demand rentals occupancy Economic success and bureaucratic delays are driving up the cost of doing business in Bangkok, with office rents likely to rise as demand for space outstrips supply. By the end of 2012 Bangkok had around 8,042,700 sq m of office space, more than 26,600 sq m of new office space was completed in 2012. However, land on which to build is now both expensive and scarce, and uncertainty over future planning rules has meant that few new offices will be finished this year. The Bangkok Metropolitan Administration s Department of City Planning has still not finalised the new Bangkok Town Plan, and uncertainty over what it will contain is hindering all forms of property development in the city. Political stability in Thailand, new investment opportunities in Myanmar and Laos, and preparations for the ASEAN Economic Community in 2015 are all helping to drive demand for office space in Bangkok, with foreign companies choosing the city as a good base for their operations throughout the region. The few office buildings that will be completed in 2013 are all north of the Central Business District (CBD); areas north and east of the CBD are developing in to important business districts in Bangkok as companies seek out cheaper rents in parts of the city with good public transport links. Historical Supply Historical supply by year, Q4 2012 More than 26,600 sq m of new office space was completed in 2012, and the total Bangkok office supply at the end of the year was approximately 8,042,700 sq m. However, more than 85% of the total supply (6,860,000 sq m) of office space was completed before 2000, which means that most office buildings in Bangkok are more than 10 years old. www.colliers.co.th
Supply by location, Q4 2012 Source : Colliers International Thailand Research Nearly 80% of the total supply is located in the area along existing mass transit lines. Around 36% of the total (nearly 2,884,000 sq m) is located in the CBD, followed by the Northern Fringe with around 20% of the total (around 1,628,500 sq m). In the next two to three years, the proportion in the Northern Fringe area will increase to 22% of Bangkok s total, as many new office buildings are under construction and planned for completion by the end of 2015. Future Supply Cumulative Future Supply By location, Q4 2012 Nearly 254,900 sq m of office space is scheduled to be supplied in Bangkok by 2014 in just two zones; the Northern Fringe and the Eastern Fringe. The Northern Fringe area will account for a high proportion of the total supply, with nearly 205,000 sq m scheduled for completion in 2014. This limited additional space will be absorbed and points the way to greater occupancy levels and strengthened rental rates over the next few years. COLLIERS INTERNATIONAL P. 2
Demand Take-up Occupancy rate by location, Q4 2012 The average occupancy rate in all locations of Bangkok is higher than 80%. The Outer City West and Outer CBD areas had the highest occupancy rates in 2012, while the Outer City North had the lowest. Although the average occupancy rate in the CBD is not the highest, it experienced the greatest growth in 2012. This was due to the CBD s status as the best location for multinational companies looking for office space in Bangkok. Occupancy rates in three locations, Q1 2010 to Q4 2012 Occupancy rates in the three main locations remained similar to those of Q1 2012, with just a slight increase compared to Q3. The average occupancy rates in the Outer CBD and Northern Fringe areas were higher than in the CBD due to these two zones location along mass transit routes and the cheaper rents on offer. Although approximately 20,000 sq m were completed in Q2 2012, most of this space is occupied by owners; therefore this new space has had a minimal impact on the office market. COLLIERS INTERNATIONAL P. 3
Annual taken-up area from 2007-2012 Due to the global economic crisis and Thailand s continuing political instability, 2009 was the worst year for the office market. After the general election and setting up of the government in 2011, the office market has grown significantly. The annual taken-up area in 2011-2012 was more than 100,000 sq m per year. Although still lower than in the past, it is a good sign of potential growth in 2013-2015. Actual and future estimate of occupancy rates, Q4 2012 The average occupancy rate for office buildings in Bangkok continued to grow from Q3 2011. Although some office buildings were completed and added to the market in 2012, many small projects and the rental spaces of buildings were occupied by building owners, so the office market was only lightly affected. COLLIERS INTERNATIONAL P. 4
Demand drivers Newly registered firms from January 2009 - November 2012 Source: Department of Business Development and Colliers International Thailand Research Based on statistics from the Department of Business Development, more than 2,200 companies per month were registered in Bangkok from July to November 2012, and more than 2,500 companies in October, which was the highest number recorded in the past five years. Rental Rates Rental rate by location, q4 2012 As most grade A buildings are located in the CBD, the average rental rate in the CBD remains the highest in the city. Moreover, most office buildings that have come online over the past few years are located in this area, and they have all increased their rental rates above those of older buildings. COLLIERS INTERNATIONAL P. 5
Rental rate by grade, Q4 2012 Average rental rates of grade A office buildings increased slightly from 2011, although those of some grade A buildings in the CBD already exceeded THB 700 / sq m / month. Some were even higher than this, but the average of the whole market still had not changed much from 2011. For the other two grades, statistics changed very little from 2011. Historical rental rates in three main locations, Q1 2011 to Q4 2012 Rental rates in the Northern Fringe area continued to increase ahead of those in the rest of the city, but the difference is negligible. The CBD commands the highest rental rates by far. The Northern Fringe area and Outer CBD charge around 70% of the CBD average. COLLIERS INTERNATIONAL P. 6
Rental rates of office buildings in Bangkok by distance from BTS / MRT (metres), Q4 2012 Offices located close to mass transit stations commanded a premium, and many were newer buildings that would usually command higher rents anyway. The average rental rate of grade A office buildings located less than 100 metres from mass transit stations were highest, at nearly THB700 / sq m. / month, while the rental rates of grade B and C buildings are only 40% to 70% that of grade A buildings. COLLIERS INTERNATIONAL P. 7
Summary 2012 and Forecast 2013 The office building market is healthier than it was last year due to increasing demand and limited new supply. New international companies are entering Thailand, and many existing companies are expanding or planning to expand their offices. The prospects of the AEC in 2015 and the opening up of Myanmar are also factors in increasing demand for office buildings in Bangkok, because Thailand is seen as an increasingly important regional centre for companies with operations in the subregion, i.e. Myanmar, Laos and Cambodia. The Bangkok Metropolitan Administration s Department of City Planning has still not finalised the new Bangkok Town Plan as of the last quarter of 2012. Bangkok town planning is the main concern for developers in Bangkok, and it affects all property sectors including office buildings. The new Bangkok town plan is scheduled to be announced in 2013. The limited availability of land plots at reasonable prices in the CBD and Outer CBD areas is the major obstacle for office building development there, so most of new office supply is located outside the CBD and Outer CBD areas, particularly in the Northern Fringe area. The latter will become a new business area in the next few years, with most new office buildings in the pipeline located along Ratchadapisek Road. Moreover, this area also has shopping malls, entertainment zones, hypermarkets, office buildings, MRT stations and other supporting facilities. Political stability in Thailand and the opening of Myanmar and Laos during the past one to two years, along with the 2015 institution of AEC, were the major drivers for office demand in 2012. Many foreign investors and businesspeople are looking for office space in Bangkok, especially in the CBD. In addition, multinational companies currently in Bangkok expanded their existing office space from other areas into the CBD or along the BTS lines. Bangkok office market rental rates in 2012 increased compared to 2011 and are expected to continue to rise in 2013, especially in the CBD. This is due to limited existing and future office supply, in the CBD and Outer CBD areas as well as the increase in the minimum daily wage. COLLIERS INTERNATIONAL P. 10
APPENDIX COLLIERS INTERNATIONAL P. 11
Bangkok Office Market REPORT Q4 2012 Office Zoning The general lack of zoning restrictions in Bangkok has led to the existence of significant office supply in a wide range of locations in the city, and the market perception of the CBD has evolved over the past 20 years. The original CBD was located on the Silom and Surawongse Roads, home to the vibrant gold market and other trading businesses. The development of modern office buildings in the nineties with larger floor plates could not be accommodated in this area and the CBD began to take shape in the eastern section of Sathorn Road. COLLIERS INTERNATIONAL P. 12 While Sukhumvit Road up to Asoke is primarily perceived as an entertainment and residential area, a large number of Grade A buildings sprang up in the nineties and also in the past few years. It is therefore considered as part of the CBD. As a working definition, the CBD, for the purposes of office classification, is where a significant number of Grade A office buildings are located. As such, the old CBD is now considered the Outer CBD as well as Petchburi Road where more Grade B offices are located. Over time this structure could evolve.
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