Office space near mass transit commands nearly 20% higher rents than market average
Companies are willing to pay premiums for their employees’ convenience
It is apparent that office buildings in Bangkok located near BTS or MRT stations have enjoyed exceptionally strong leasing demand from companies whose workplace strategy focuses on their employees’ convenient commute. But the convenience has a price to pay - companies with offices near BTS or MRT stations are paying 20 higher rents than the market average, according to property consultancy JLL.
Findings from JLL’s study show a clear correlation between proximity to mass transit systems and performance of office buildings in Bangkok. Whilst the market-wide average office vacancy rate across the city has hovered around the 9% since 2013, office buildings within 250 metres of a transit station have seen much lower vacancy rates fluctuating between 4% and 5% over the same period.
Mrs. Suphin Mechuchep, Managing Director of JLL, says: “Workplace strategy is emerging as an imperative for optimal employee productivity and also playing a growing role in helping organisations attract and retain talent. While it comprises several components, convenience has appeared to be the top priority. Occupiers’ strong preference for offices that are easily accessible via the BTS skytrain or the MRT subway exemplifies well the case.”
In response to strong demand, office buildings with a direct link or close proximity to rapid transit systems are enjoying not only lower vacancy rates but also higher rents.
JLL’s study indicates that the average asking rent across Bangkok has increased by 3% per annum over the last ten years and currently stands at THB 728 per sqm per month. Office buildings within 250 metres of a transit station have seen a 4% annual growth in the average asking rent over the same period to THB 866 per sqm per month at present, accounting for a 19% premium above the market average.
Ms. Yupa Sathienpabayut, Head of Office Leasing at JLL, says: “Prime Grade A office buildings located within a short walk or with direct access to a BTS or MRT station are currently fetching rents between THB 1,100 and 1,600 per sqm per month. These rates are well above the average prime Grade A office rents of THB 943 per sqm per month in central business areas and THB 876 per sqm per month across Bangkok.”
While there are a lot of factors influencing rents such as age and quality of the building and management, it is apparent that a direct link or close proximity to a BTS or MRT station provides a competitive advantage. “If we compare some office buildings located in the same area with similar age and quality, the one within the most convenient access to a transit system is definitely best preferred by tenants, particularly when rents show no significant difference.”
“There are a number of new prime Grade A office development projects that are planned for completion between now and 2022 and located within a short walk or with direct access to transit systems such as Silom Center (2019), Spring Tower (2019), The Parq (2019), Vanissa Building (2020), O-NES Tower (2022), One City Centre (2022) and The Rice (2022). These buildings are expected to enjoy much higher premiums than the market average, though market-wide vacancy rates may rise in 2022 when 382,000 sqm of new lettable office space is due to completion,” she concludes.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 91,000 as of March 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.
About JLL Thailand
The firm’s operation in Thailand began in 1990 and today is the country’s largest international property service provider with 1,600 employees and more than five million square metres of property and corporate facilities managed. In Euromoney Real Estate Survey 2018, JLL was voted as Thailand’s number one overall real estate advisor for the 8th consecutive year and also won top votes for agency/letting, research and valuation in the same survey. The firm was also named Thailand’s five-star winner in the commercial property consultancy and commercial real estate agency categories at the International Property Awards Asia Pacific 2019/2020. For more information, visit jll.co.th.