Bangkok--Jul 19--CB Richard Ellis
Grade A office rents are breaking through the 600 Baht barrier, according to the latest office market survey from international property consultants CB Richard Ellis.
Grade A office rents in Bangkok’s Central Business District (CBD) rose by 25% year on year, while in the same area office rents for grade B buildings rose by 21%.
According to a survey conducted by the CBRE Research & Consulting team, the office market had an overall vacancy rate of 15% in the second quarter of 2005, compared to 19% in the same quarter of last year. The CBD grade A vacancy rate was 8.2% in the second quarter of 2005. The total amount of occupied of grade A CBD office space increased by 2.2% compared to the previous quarter.
CB Richard Ellis estimate that lower than 200,000 square metres of new office space will be completed in the next two years, mainly in buildings where construction is now resuming after having been halted following the 1997 crisis. Demand is expected to be of at least 300,000 square metres per year for the next two years. This difference between supply and demand will further reduce vacancy rates and fuel rent increases.
Mr. Nithipat Tongpun, Director Head of Office Services at CB Richard Ellis, believes that CDB grade A rent will reach Baht 650 by the end of 2005 and Baht 700 in 2006 for 200-300 sq.m. transactions.
“There is very limited space available in the CBD grade A market and few buildings coming on line over the next two years.”
“Tenants have to plan ahead their space requirements, particularly tenants who do not have a cap on the renewal term as landlords will be looking for substantial rent increases when leases come up for renewal,” added Mr. Nithipat.
There is still a 30-40% difference in rents between grade A and grade B buildings, and we may see some tenants in existing grade A buildings move to grade B buildings to avoid an increase in their total rental costs.
CBD grade B space is filling quickly too: the vacancy rate was 17.5% in second quarter of 2005, compared to 22.5% in the same quarter last year.
Proximity to mass transit systems is proving to be a significant factor in determining rental levels. CB Richard Ellis has seen that buildings located close to BTS or MRT stations achieve higher occupancy rates and rents.
CB Richard Ellis believe that grade A rents will have to rise to Baht 800 or more per square metre before we see developers break ground to construct new buildings.
CB Richard Ellis noted that some Landlords of older buildings have commenced renovation works so that they can achieve higher rents.
For example, both Ploenchit Centre and Amarin Plaza are undergoing extensive renovations to upgrade all common areas of the office buildings. The Government Pension Fund is currently remodelling the ground floor of Abdulrahim Place on Rama IV.
The Bangkok office market is a simple matter of supply and demand. Office demand will exceed new supply, resulting in lower vacancy rates and therefore upward pressure on rents. Developers are still not breaking ground on new buildings and so the tight market situation will continue for the next two years.
About CB Richard Ellis
Headquarter in Los Angeles, CB Richard Ellis is a leading global real estate services firm. With more than 17,000* employees, the company serves real estate owners, investors and occupiers throughout 300 principal offices worldwide. The company’s core services include property sales, leasing and management; corporate services; facilities and project management; mortgage banking; investment management; capital markets; appraisal and valuation; research and consulting. CB Richard Ellis is a public company, listed on the New York Stock Exchange under the symbol CBG.
CB Richard Ellis established an office in Bangkok in 1988 and in Phuket in 2004. CB Richard Ellis (Thailand) Co., Ltd. has grown to be a leading real estate services provider, offering a full range of services including sales and leasing for all types of property, property and facilities management, valuation and advisory, and research and consulting. For more information, visit the company's website at www.cbre.co.th.
* Includes partner offices
For further information:
Mr. James Pitchon
Executive Director
02 654 1111
Mr. Nithipat Tongpun
Director — Head of Office Services
02 654 1111 Ext. 218
Ms. Ngamjai Jearrajarat
Corporate Communications Manager
02 654 1111 Ext. 522 End.