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News Release


Bright Prospects for Bangkok Office Market Despite Dim Economic Outlook

Rents break a record in 1H2015

Despite weak economic performance in the first half of 2015 and dim prospects for Thailand’s macro-economy for the remainder of the year, the Bangkok office market has remained healthy thanks to a good balance between demand and supply. Rents continued to hit new highs, with the average market-wide rental rate in July 2015 rising 25% from the previous peak in 2007, according to JLL, a professional services firm specializing in real estate.

Mrs. Suphin Mechuchep, Managing Director of JLL, said “Over the first half of 2015, the Thai economy was exposed to high uncertainty following a number of negative internal and external factors such as continuing high levels of household debt, declining domestic exports, and the global economic uncertainty following problems in Greece and China. At this stage, these unfavorable factors have not yet had any concrete impact on Thailand’s business sector. This is reflected by continued demand for office space in Bangkok in the first half of the year.”

JLL’s Thailand Property Intelligence Centre revealed that the Bangkok office market witnessed net absorption of 98,000 sqm of space in the first half of 2015, which exceeded the average first-half-year take-up level of 81,000 sqm recorded between 2010 and 2014.  The majority of space secured in the first half of this year was from the expansion of companies in the finance, insurance, logistics, and e-commerce sectors.

Vacancies declining

An additional 113,000 sqm of new space was added to the Bangkok office market in the first half of 2015, bringing the total stock to 8.4 million sqm. Of this total stock, only 9.2% remained vacant. This represents a significant improvement in vacancy levels comparing to 2009 when market-wide vacancy rate reached over 17%, mainly driven by a sharp drop in demand following the global financial crisis.

Rents hit new highs

As of July 2015, the average monthly gross office rent across Bangkok hit all-time high, reaching THB 506 per square metre, a 25% increase from the previous peak in 2007. At the same time, average Grade A rents in Bangkok’s central business areas (CBA), reached THB 787 per square metre, a 16% increase from the previous peak in 2007.

Growing trend towards decentralization

Rising rents and limited supply in the central business areas have led many occupiers to relocate to secondary locations where more supply is available at a more affordable rental rate. 

Ms. Yupa Sathienpabayut, Director of Office Agency at JLL, said “We have recently helped a number of companies relocate from the central business areas to new emerging business locations, notably to the Ratchadapisek and Rama 9 areas where there is ample newly completed high-quality office space.”

“Over the last two years, a sharp increase in office rents in the CBA has been a major factor encouraging companies to relocate to secondary locations. Now that the rental gap between prime Grade office buildings in and outside the CBA has become narrower, recent business relocations have been driven more by limited office supply in the CBA which prohibits companies from expanding their existing premises,” said Ms. Yupa. 

Investment market becoming more active

In the first half of 2015, Singha Estate Plc acquired Sun Towers, an office development complex on Vibhavadi Rangsit Road for THB 4.5 billion. “As capital values of office buildings in Bangkok have grown to such high levels that some owners are motivated to sell their assets to raise cash for new investment opportunities, we expect a few more office investment transactions to take place this year,” said Mrs. Suphin.

Positive outlook

With low vacancy levels across the market and a scarcity of large contiguous blocks of space attractive to large corporates with only 24,000 sqm of new supply expected to complete by end-2015, JLL expects vacancy rates to continue moving downward. Due to the limited supply and continued demand, conditions will remain favorable for landlords. 

“For the remainder of 2015, rents should continue to grow, but the pace of rental growth will vary by grade and location. For example, in the CBA, we expect office rents to grow at a slower pace as they have already risen to such a high level that there is a growing resistance from tenants. In addition, as the trend towards decentralization continues, some landlords in the CBA have become less aggressive in negotiating rental increases with large high-profile tenants upon renewal. On the other hand, the growing popularity of new emerging business locations such as Ratchadapisek and Rama 9 is expected to allow rents in prime grade office buildings in these areas to enjoy more rapid increases,” said Ms. Yupa.

Beyond 2015, another 231,000 sqm of lettable office space is now under construction and is scheduled for completion between 2016 and 2018. “If demand continues at the current pace, the Bangkok office market will be undersupplied. However, there are also new office development projects proposed for construction totaling more than 300,000 square metres of space and expected to complete within the next five years. If all of these projects proceed as proposed, the market will be in a better balance,” Ms. Yupa concluded.