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News Release

Bangkok

Flood impact on Bangkok office market remains limited


4 November 2011 / More than 30 major office buildings in the northern areas of Bangkok have been hit by floods, the whole impact of the flooding on the Bangkok office market has yet to unfold as the flooding continues to spread to more areas of the city. However, observations from Jones Lang LaSalle show the Bangkok office market has seen limited impact so far.
 
Mrs. Suphin Mechuchep, Managing Director of Jones Lang LaSalle, said “Most of the office buildings in the city are located in downtown areas which have remained dry. In addition, a typical office lease term of three years does not provide flexibility for tenants in office buildings located in the flood area to move out before their lease expires. However, as the floods continue to spread, it may be too early to tell how the Bangkok office market will be affected by the flooding.”
 
“Initially we have seen companies becoming less keen to make leasing decisions as they are waiting to see if or how their business operations would be impacted by the widespread floods. Having said that we expect this to be only temporary and leasing activity should recover once the floods recede,” said Mrs. Suphin.
 
Substitute offices in lower flood-risk areas needed
The widespread flooding in the northern corridor of Bangkok has generated demand for temporary substitute offices in the inner areas of the city which are at lower risk of flooding as the operations of some companies located in the flood areas have been disrupted.
 
‘We have received an increasing number of enquiries from companies for temporary offices in the inner locations of Bangkok. These companies are those whose offices are currently located in the areas that are affected by floods or that are at risk of floods. These enquiries require fully or partly fitted office units, sized between 50 and 300 sqm, that are available for an immediate occupation for a period of 1-2 months,’ said Ms Yupa Sathienpabayut, Director of Office Agency at Jones Lang LaSalle.
 
“There are a number of office buildings that can cater to these temporary workplace requirements as they have office units that became vacant after some tenants moved out and has not yet been reinstated by previous tenants. Basic office facilities including chairs, tables, phone lines and internet access are provided,” Ms. Yupa added.
 
“While rentals vary greatly from building to building, some building owners are asking for more generous rents as part of flood relief efforts. But generally, short term rents are 20 percent higher than rental rates offered on a long lease term.”
 
“We have also seen some big corporations looking for temporary offices in locations outside Bangkok such as Pattaya, Sriracha and Laemchabang as part of their Business continuity planning (BCP),” Ms Yupa noted.
 
Longer term outlook
The flooding that struck a number of major industrial estates in Thailand may have some impact on the Bangkok office market at a later stage, according to Mrs. Suphin. “Many companies that operate in industrial estates affected by the floods have corporate offices in Bangkok. More companies may opt to set up a separate corporate office in Bangkok to diversify operational risks,” she explained.
 
“On the adverse side, the Bank of Thailand has recently lowered its forecast for the country’s GDP growth in 2011 from 4.1 percent to 2.6 percent. Demand in almost every real estate sector will inevitably be impacted as it depends very much upon the country’s overall economic condition. To minimize the degree of the flood impact, the government must come up with a sound recovery plan to restore confidence,” Mrs. Suphin concluded.