“Ploenchit-Chidlom-Radio” A Prime Office Location

The Office Market in Bangkok is undergoing rapid changes. However, the impact of increased supply and shifting tenant demands is not uniform across all areas. While the overall market faces challenges from a significant influx of new supply and changing work trends, certain properties and locations exhibit remarkable growth potential. In the next three years, supply pressures are expected to ease, and as companies begin to bring employees back to the office, buildings situated in prime locations with high quality will likely yield better returns. These differences highlight the importance of adaptability, innovation, and understanding the complex market dynamics to navigate future challenges and opportunities.

One area poised to benefit from these changes is the Ploenchit-Chidlom-Radio Zone, a prime office location that continues to attract multinational companies and major tenants. With its central city location, excellent public transport, and green-certified Grade A buildings, this area remains highly competitive despite the increase in new supply in Bangkok.

The Ploenchit-Chidlom-Radio Zone, the second-largest secondary district in Bangkok, comprises 38 office buildings with over 940,000 square meters of net leasable area. Although the occupancy rate has decreased from a peak of 95% in 2019 to 76% currently, which aligns with the average in Bangkok, a deeper analysis reveals that the area remains resilient and continues to grow.

Over the past five years, the area has seen a remarkable supply increase of 30%, or 220,000 square meters, surpassing the CBD growth rate of 24%. Despite the substantial new supply, demand remains strong, with leased space increasing by 5% during the same period, compared to just 1% growth in the CBD. Additionally, this area continues to be the most premium in the city, with an average rent of 1,090 THB/sqm/month.

In the next five years, until 2029, significant changes are expected. Limited space for both Freehold and Leasehold developments will result in less new supply in this area. Competition for vacant space will intensify, with residential and hotel developers entering the fray. Luxury Freehold condominiums are expected to have an average selling price of 600,000 THB per square meter or more, while hotel developers are seeking locations for luxury hotels and Branded Residences.

As a result of these constraints, the office market in the Ploenchit-Chidlom-Radio Zone is anticipated to see minimal new supply in the coming years, benefiting existing high-quality property owners. The only confirmed project that will add supply to this area in the next five years is CPN Siam Square, expected to be completed in 2027, with over 25,000 square meters of office space. While there may be other development projects in the early stages, they have not yet been officially announced and may be completed after 2029.

Considering the average annual supply withdrawal rate of 0.5% and assuming that net absorption remains consistent with post-COVID levels (2022-2024), it is expected that the occupancy rate of this sub-area will recover to 87% by 2029, significantly higher than the CBD average projected at 74%.

A closer examination reveals significant differences in the performance of office buildings in the Ploenchit-Chidlom-Radio Zone. As noted in our office market report, the trend of "moving to high-quality buildings" remains a key factor for lease renewals and office relocations across Bangkok, and this area is a clear example of that trend.

Some premium office buildings over five years old continue to perform excellently, with higher rental rates and occupancy rates exceeding the market average. For instance, Gaysorn Tower, Park Venture, and Siam Piwat Tower all have rents exceeding 1,300 THB/sqm/month and maintain occupancy rates above 90%. Despite the significant increase in new supply over the past five years, this demonstrates that such properties can retain tenants due to a combination of prime location, high-quality assets, and strong property management.

New Grade A buildings also show strong performance. For example, One City Center (OCC) and Siam Pathumwan House, both Grade A office buildings completed in 2023, currently have occupancy rates of 75% and 70%, respectively. Although slightly below the area average, they are showing improving trends. Since the completion of One City Center in Q1 2023, there has been approximately 70,000 square meters of new leasing activity in the Ploenchit-Chidlom-Radio Zone, with these two projects accounting for about 52,000 square meters, representing 74% of total leasing in the area during that period. The anticipated limited supply in the future, combined with the recognized appeal and premium location of this area, is likely to further drive up the value of these prime office buildings.

Mr. Nattha Khahapana, Managing Director of Knight Frank Thailand stated, “The office market in the Ploenchit-Chidlom-Radio Zone is recovering strongly, with occupancy rates expected to rebound to 87% by 2029, significantly higher than the CBD average of 74%. For the One City Center (OCC) project, we anticipate the occupancy rate will increase to 90% by 2026.”