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News Release

Bangkok

Bangkok’s office buildings becoming popular retail locations

By Yupa Sathienpabayut


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Office buildings do not necessarily provide only offices for corporations. Many of them also make some space available to accommodate rising demand of various retailers, from cafés, restaurants and convenient shops to fitness clubs and beauty salons that seek alternative establishments for new outlets and business opportunities.

 

According to JLL's Thailand Property Intelligence Centre, there are approximately 1.5 million square metres of lettable retail space in office buildings across Bangkok. The majority of this space is situated on basement levels, ground floors, and second floors. This excludes retail space in mixed-use buildings with office space and branded retail components such as Silom Complex (Central), Siam Tower (Siam Discovery Center), The Offices at CentralWorld, Bhiraj Tower (The Emquartier) and Emporium Tower (The Emporium).

 

While rents for retail space in office buildings vary upon a number of factors such as locations, foot traffic, street exposure, and building's quality and profile, ground floor rents range between THB 1,500 and THB 2,500 per square metre per month in well-located buildings and between THB 700 and THB 1,000 per square metre per month in less sought-after locations.  Due to limited space and strong demand, these rents are generally higher than those for office space within the same building.

 

Rents for retail space on upper floors and basement floors are relatively lower. There are a few exceptions where retail space on upper floors commands higher rents. These include retail space on mezzanine or second floor that connects the building with a mass transit station.

 

Right business in the right place

 

Typical occupiers of retail space on the ground floor are food and beverage operators and retail banking service providers. In recent years, almost all of leading coffee shop brands such as Starbucks and Au Bon Pain have set their strong presence in several office buildings. Café Amazon, a coffee shop brand that is typically found at almost every PTT gas station, has expanded in retail malls and office buildings.

 

Convenient shops are another retail format that has emerged as a new source of demand for retail space in office buildings. 7-Eleven in particular has aggressively expanded into office buildings.

 

On floors with less foot traffic, retail businesses that are suitable to operate are those that have their own strong appeals or aggressive marketing strategies to attract potential customers. Food courts and supermarkets as well as fitness centres are prime examples.

 

Food courts are a business that typically operates on an office building's basement or upper floor. While they mainly serve employees of companies occupying space in the building, they can also attract customers from neighboring buildings.

 

In certain office buildings that are popular with pedestrians, retail space on a basement or upper floor with easy access can attract supermarkets. For example, Central Food Retail operates Tops Market on the basement floor of Empire Tower on Sathorn Road, and the second floor at CRC Tower, All Seasons Place on Wireless Road.

 

Both retailers and landlords adopt cautious approach

 

Though retailers have keen interest to expand into office buildings, they have adopted a cautious approach when selecting the space to set up a business in. Foot traffic and demographics (both building users and visitors) are top criteria for choosing a building. While high foot traffic ensures more visits to the retail space and higher sales, targeting right customers in the right place is no less important. 

 

Likewise, though landlords need tenants to fill up space as quickly as possible, they can be extremely picky when securing retailers for their office buildings. Generally, reputed brands are preferred. However, there are cases where landlords favor a lower profile F&B brand that caters more affordable food and drinks to building users. These landlords are those that put a greater focus on viability of the retail business that will operate in their buildings. Failure of retail occupiers can reflect badly on the building's profile. In addition, many landlords try to avoid securing directly competing retailers to ensure a higher chance of success for retailers operating in their building.

 

Win-win opportunity

 

Retail space in most of the well-located office buildings in Bangkok is fully or almost fully occupied. Most of the space that remains available is in newly completed buildings or under-construction office development projects. While supply is tight, there has been continued demand from retailers -- both established brands and startups -- looking for new business opportunities outside traditional retail malls.

 

Landlords of office buildings with ample ground floor space that might have not been designed for a retail use from the beginning may consider converting the space to capture this growing demand. This represents opportunities not only to generate more income from their real estate, but also to help boost the building's competitiveness. Retail support is among criteria that corporates use to select an office building.

 

About the author

Ms Yupa Sathienpabayut is Director of Office Leasing at JLL. For more insight, readers can contact her by email: yupa.sathienpabayut@ap.jll.com or visit www.jll.co.th.​