Bangkok--2 Apr--CB Richard Bangkok is the third cheapest city in Asia in term of office space with only Jakarta and Kuala Lumpur offering lower office rentals, according to leading international property consultants CB Richard Ellis. London has the most expensive office rents in the world, at over 10,000 baht per square metre per month. Mumbai in India is the most expensive city in Asia with grade A rents of almost 6,000 baht per square per month. Meanwhile, Singapore rents increased by 100% in 2007 to around 3,800 baht per square metre per month, overtaking Hong Kong rents which rose to 3,600 baht per square metre per month. Rents in Ho Chi Minh City also doubled rising to 2,300 baht per square metre which is almost three times more expensive than Bangkok. Demand for office space in Bangkok is starting to recover with an increase in the number of transactions. The total increase in the amount of leased space was about 158,000 square metres in 2007, which is half the average new take-up achieved per year between 2000 and 2005. Supply only increased by 88,500 square metres in 2007. The limited amount of new supply supported office rents despite weak demand and rental levels remained flat in 2007 with average for grade A space in the Central Business District of 740 baht per square metre. This is in contrast to office markets in most other Asian countries where demand exceeded supply, leading to increases in rentals. Bangkok rents had been rising at 15-20% per year since 2000 but growth slowed in 2006 and rents were flat in 2007 due to weak demand. “Demand had fallen because of the political uncertainty, weak economic growth and proposed amendments to the Foreign Business Act which would have further restricted foreign ownership of companies in the services sector,” said Mr. Nithipat Tongpun, Director and Head of Office Services at CB Richard Ellis Thailand The problem is that much of the demand for office space and in particular grade A offices comes from multinational companies. The proposed restrictions on ownership meant that multinational companies decided not to expand or establish new companies in Thailand. This is in contrast to the manufacturing sector where the Board of Investment provides various incentives, including 100% foreign ownership. A total of 4,800 rai (1,920 acres) of land on industrial estates was sold in 2007 mainly to multinational manufacturers. These were the best sales figures for more than ten years. The new government has already announced incentives to stimulate the Thai economy. If the government were to liberalize the foreign ownership in the services sector, this would boost the Bangkok office market as well as create jobs. On average, a new job in the service sector is created for every 10 square metres of office space leased. Based on last year’s growth, only 15,000 new jobs were created in the services sector, compared to 30,000 jobs per year from 2000 to 2005. The Bangkok office market faces more challenges in 2008. The global credit crisis has meant that many multinational companies are looking very carefully at costs and getting approval to expand or set up new business will become increasingly difficult. In Bangkok, there is a total of 7.5 million square metres of office space, of which 6.6 million square metres are occupied. CB Richard Ellis expects that about 226,000 square metres of new office space will be completed in 2008, including the 90,000 square metres at Chamchuri Square on Rama IV and at Interchange 21 at the Sukhumvit Asoke junction. Another 241,300 square metres is expected to be completed in 2009. If demand returns to levels seen between 2000 and 2005, then demand will exceed supply and rents will start to rise again. Demand will be dependant on both Thailand’s political and economic situation as well as the performance of the global economy. Landlords of older buildings need to focus on retaining and attracting new tenants through the refurbishment of common areas such as entrance lobbies, lift lobbies and washrooms. In buildings that are over ten years old, it is becoming necessary to replace ceilings with new acoustic tiles. “We are hopeful that office demand will improve this year, despite concerns about the global economy but it will still be a competitive market with tenants being both cost conscious and demanding better quality buildings,” said Mr. Nithipat. The added competition that will be created as the result of the new supply in 2008 and 2009 will mean that landlords of existing buildings will have to ensure that the quality of their premises matches tenants’ demands if they want to maintain occupancy levels and increase rentals in the future. For further information: Mr. Nithipat Tongpun Director — Head of Office & Retail Services 662 654 1111 Ms. Ngamjai Jearrajarat Corporate Communications Manager 662 654 1111 Ext. 522