Bangkok--30 Jan--CB Richard Ellis
The total take up of office space in Bangkok was 200,000 square metres in 2006, 33% less than in 2005. This was the lowest net take up since 1999, according to the latest report from CB Richard Ellis.
At the end of 2006, the total office stock in Bangkok was 7.4 million square metres, indicating an increase of 200,000 square metres, compared to 2005. The overall vacancy rate was 13.5%, compared to 13.3% in 2005, while total take up was 200,000 square metres, compared to 300,000 square metres in 2005.
The vacancy rate for grade A offices in the Central Business District (CBD) was 8.3% and for grade B office in the CBD, the rate was 14%.
Rents for grade A CBD offices rose by 10% in 2006, compared to 23% in 2005, while grade B CBD rents rose by 15% in 2006, compared to 19% in 2005.
Although there was limited new supply in 2006, the lower level of new demand resulted in rentals growing at a slower rate.
In 2006, CB Richard Ellis concluded 220 office leasing transactions for a total area of 130,000 square metres. “We were pleased with our performance in 2006, when our transactions accounted for 65% of new office take up,” said Nithipat Tongpun, Director and Head of Office Services, adding that “this confirms CB Richard Ellis as the leading office agent”.
This year, CB Richard Ellis expects that approximately 110,000 square metres of new buildings will be completed and a further 250,000 square metres are to be finished in 2008.
The only new grade A building to be completed in the CBD will be Athenee Tower on Wireless Road, which is scheduled to open by the middle of this year.
It is hard to predict what demand will be in 2007; the weakened demand in 2006 was due to a slower domestic economy. Since demand for offices comes mainly from the service sector, growth in 2007 could be affected by the more restrictive regulations on foreign investment in services.
If demand in 2007 totals 200,000 square metres or less, then rental growth is likely to be flat. However, if demand is more, rentals could increase sharply because the vacancy rate is low and new supply is limited.
Tenants whose leases are due to be renewed in 2007 will now have to expect to pay substantially higher rents. Over the last three years, grade A CBD rents have increased by 56% and tenants will have to pay the market rate on renewal.
The difference between grade A rents and grade B rents in the CBD is on average 200 baht per square metre. Fit out costs are around 15,000 baht per square metre and so there are only limited savings if tenants relocate from grade A to grade B space because, in Bangkok, the capital cost of fit out continues to form a high percentage of the rental compared to other countries. Tenants are only likely to relocate if they need to expand or contract or if the capital cost of the fit out has been fully depreciated.
According to the CB Richard Ellis’ Global Office Rent survey, rents in Hong Kong rose by 50% in 2006, with grade A rents at 2,500 baht per square metre and some transactions were recorded at 6,800 baht per square metre per month.
Singapore rents also rose by 50% in 2006, with average grade A rents now at 2,500 baht per square metre and some transactions were recorded at 3,440 baht per square metre.
Bangkok remains the fifth cheapest city in the Asia Pacific region to rent office space, with only Manila, Jakarta, Adelaide and Christchurch commanding lower office rents.
“Although take up was low in 2006 and rental growth was slower, the limited amount of supply means that tenants requiring premises of over 3,000 square metres have few choices. Our advice to large tenants is that they need to take action well before they require space because of the limited number of options,” concluded Mr. Nithipat.
For more information please contact:
Ms. Ngamjai Jearrajarat
Corporate Communications Manager
Tel: 02 654 1111 Ext. 522
Mr. Nithipat Tongpun
Director — Head of Office Services
Tel: 02 654 1111 Ext. 218