Highlights

- In Q2 2018, the total office space in Bangkok amounted to 4,603,875 square meters.

- As of June 2018, the overall office occupancy rate in Bangkok stood at 91.6%, largely due to high occupancy in the central business district.

- The average rental rate for office space in Bangkok increased by 7.12% compared to the previous year in Q2.

- The rent for Grade A office buildings rose to 1,045 Baht per square meter per month, marking the tenth consecutive quarter of growth, with a cumulative increase of 9.11% since Q2 2017.

Mr. Marcus Bertenshaw, Executive Director and Head of Brokerage at Knight Frank Chartered (Thailand) Ltd. stated, “Currently, there are over 140 international and regional headquarters in Bangkok. Inefficient office space layouts can become a costly burden. As rental rates continue to rise, tenants should assess their workspace needs to ensure efficient and appropriate use of office space. This can be easily observed through the frequency of desk and meeting room usage. However, in an era of high office costs, it may be a good opportunity to explore new business concepts, such as agile working, which can help reduce space costs by utilizing workspaces that are suitable for the tasks at hand.”

The current low vacancy rate has led to rental growth, combined with limited new supply, resulting in a more balanced market that benefits property owners.

 

Demand

According to research from Knight Frank Thailand, in Q2 2018, the demand for office space in Bangkok continued to grow. Net occupied space increased from 40,324 square meters to 4,603,875 square meters, reflecting an overall occupancy rate of 91.6%. In terms of location, the highest demand area is along Sukhumvit Road between Phrom Phong and Chidlom, with an occupancy rate of 97.2%.

Graph 1

Supply, Demand, and Occupancy Rates 2013 – Q2 2018

Source: Knight Frank Thailand

Table 1

Occupancy Rates by Building Grade

Source: Knight Frank Thailand

Note: These figures do not include buildings with multiple owners and those with less than 5,000 square meters of space.

 

Table 2

Future Supply by Year

Source: Knight Frank Thailand

 

Supply

In Q2 2018, the amount of new office space increased by 87,600 square meters, bringing the total supply to 4,968,458 square meters due to the completion of two new buildings.

This quarter, Grade A office space increased from 50,600 square meters to 1,316,952 square meters, while Grade B and C buildings had areas of 2,142,127 square meters and 1,509,379 square meters, respectively.

In the remaining months of 2018 and into 2019, most new projects entering the market will be located outside the central business district, with a total area of over 240,000 square meters. Meanwhile, from 2020 to 2026, it is anticipated that nine new office buildings will be added, totaling 599,185 square meters entering the market.

Table 3

Future Supply of Office Buildings in Bangkok

Source: Knight Frank Thailand

 

Rental Rates

Rental rates in 2017 and 2018 show a continuous upward trend. The average rent for vacant office space in Bangkok increased from 702 Baht per square meter per month to 752 Baht per square meter per month, representing an increase of approximately 7.12% compared to the previous year.

Interestingly, the rent for Grade A buildings rose the most to 1,045 Baht per square meter per month, an increase of 9.77% compared to Q2 2017, marking the tenth consecutive quarter of rental growth for Grade A office buildings in Bangkok.

  Meanwhile, Grade B and C buildings also showed rental increases of 4.96% and 5.12% compared to the previous year, with adjusted rents of 740 and 472 Baht per square meter per month, respectively.

Table 4

Set Rental Rates by Building Grade

Source: Knight Frank Thailand

 

Office Rental Rates by Location

In the central business district, rental prices continue to rise. The average rent along Sukhumvit Road between Phrom Phong and Chidlom is the highest at 952 Baht per square meter per month compared to nearby areas, while the rent on Rama 3 Road is the lowest at 437 Baht per square meter per month.

Graph 2

Rental Rates by Building Grade Q2 2015 – Q2 2018

Source: Knight Frank Thailand

 

Graph 3

Average Rental Rates by Street

Source: Knight Frank Thailand

Market Overview

The increasing demand for office space amidst limited supply has led to significant rental growth, increasing by 73.9% since 2004. However, the new supply expected to enter the market from 2020 onwards may help slow down rental rate adjustments.

Thank you for the information from www.knightfrank.co.th