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News Release

Bangkok

Strong Demand for Office Space in Bangkok Despite Economic Slowdown


​Despite the economic slowdown that Thailand experienced in the first half of this year, the business sector has continued to expand, as reflected by companies continuing to acquire more office space in Bangkok, according to Jones Lang LaSalle, a professional services firm specializing in real estate.

Mrs. Suphin Mechuchep, Managing Director of Jones Lang LaSalle, said “Experience shows that there is a correlation between the demand for office space and the economic growth. However, it may be too early to say to what extent the economic slowdown experienced in the first half of this year will impact the business sector and consequently the Bangkok office market.”

“Obviously Thailand’s weakening economic outlook has affected the sentiment in the business sector as clearly reflected by the Thai stock market’s slump and sluggish consumer confidence. But the actual impact of the first-half-year economic slowdown on the Bangkok office market has appeared limited. So far, we have continued to see companies expanding operations, reflecting business growth and increased employment,” she said.

The latest study by Jones Lang LaSalle revealed that the Bangkok office market has continued to enjoy strong demand so far this year. During the first half of 2013, the net take-up level of office space across Bangkok was 95,830 sqm, as compared with the total of 185,600 sqm taken up in 2012.

Ms Yupa Sathienpabayut, Director of Office Leasing at Jones Lang LaSalle, said “The Bangkok office leasing market has remained very busy this year. Though we have seen fewer enquiries from new business setups this year, many companies including those that were newly established are now expanding. Major leasing transactions in the first half of the year were secured by companies in the consumer product and banking sectors. We have also seen more serviced office operators securing space in well-located office buildings to serve foreign companies that need to have an office in Thailand as a hub in South East Asia, in preparation for the opening of the ASEAN Economic Community in 2015.”

“Despite negative economic news, there are many large lease transactions now under negotiations and none of them have been cancelled. As a result, we expect leasing transaction volume in the Bangkok office market by the year end to be on par with 2012, if not higher.”

Ms Yupa also noted that many companies have accelerated the lease negotiation process to avoid a further growth in rents and due to rising competition for increasingly limited space in prime office buildings. On the other hand, some companies have delayed their leasing decision due more to tough negotiations with landlords than concerns over economic conditions.”

“With limited new supply and continued demand, most landlords have become less flexible. Aside from higher asking rents, incentives that were widely offered during the market downturn, such as rent-free periods, have shrunk.  As a result, some companies are now considering alternative locations where more affordable rents are offered,” she said.

According to Jones Lang LaSalle’s study, the average rent for office space in Bangkok stood at THB 455 per sqm per month as at end June 2013, representing an 11.8% increase from end June 2012. Prime grade A office space in Bangkok’s Central Business District fetches the average rent of THB 727 per sqm per month with a few buildings in the area asking for higher rents ranging between THB 850 and THB 1,000 per sqm per month.

“There are more months for Thailand to tackle the economic woe this year. However, if the Thai economic growth continues to contract in the second half of the year, demand in the office market will inevitably be affected. Having said that, limited new office supply that is planned for completion in Bangkok over the next 12 months may help soften the impact,” Mrs Suphin concluded.