bangkok office market report q3 2012

Q2 2012 - Q3 2012

new Supply

demeand

reantalS

occupancy

thailand

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Bangkok Office MarketSummary

More than 26,640 sq m has been or is scheduled to be completed in 2012; approximately 24,200 sq m in the Outer CBD area and the rest in the Northern Fringe area. At the end of 2012 office stock in Bangkok will be around 8,042,700 sq m.

Q3 2012 | office

market indicatorS

total Supply added in each five-year period

Source: Colliers International Thailand Research

BaNgkOk OFFICe MaRkeT RePORT

The north of Bangkok is set to become a major business district as multi-national companies increasingly seek a presence in the city.

Bangkok currently has more than eight million square metres of office space, but demand is starting to outstrip supply, with little new land available in the Central Business District (CBD) and rents beginning to rise.

Starting next year, new offices will start to come on to the market north of the CBD, and dozens of projects are due for completion in the northern fringe of the city in 2014 and 2015.

The construction boom is fuelled both by local firms seeking to expand and by a growing demand for a regional base by companies

looking to the start of the aSeaN economic Community in 2015.

Thousands of companies have been registered in Bangkok every month since January 2012, and office occupancy is high throughout the city, with buildings near BTS and MRT mass transit stations able to charge premium rent.

Increases in the minimum wage are adding to the cost of building management. although some landlords have offset this by reducing staff, in particular by investing in CCTV cameras to replace security guards, the wage increase will eventually become one of the pressures driving rents up throughout the city.

hiStorical Supply

The CBD area represents the biggest share of the office building market in Bangkok with around 36% of the total supply, followed by the Northern

Fringe area and the Outer CBD area with 20% and 13%, respectively. The overall office supply is dispersed widely throughout the city.

More than 286,000 sq m of office space is scheduled to be supplied in Bangkok in 2014 in three zones. The Northern Fringe area represents the largest share with more than 71% of the total future supply in 2014, approximately 3.6% of the total current supply in Bangkok.

Limited available land in the CBD and Outer CBD areas and the increasing land prices over the past few years were major obstacles for all types of

real estate development, including office buildings. Most new office buildings were located in the Northern Fringe area, and had similar facilities to those in the CBD.

Source : Colliers International Thailand Research


Supply by location, Q3 2012

future Supply by location, Q3 2012

COLLIERS INTERNATIONAL | P. 2

Bangkok office Market rePort | Q3 2012

future Supply

occupancy rate by location, Q3 2012

occupancy rate in three main locationS, Q1 2010- Q3 2012




The Outer City West area had the highest occupancy rate for Q3 2012, although the Outer City West, Outer CBD and Northern Fringe areas all had similar occupancy rates. although the average occupancy rate in the

CBD was the second highest, the number of companies extending leases increased from 2011, due to limited current and future supply.

The occupancy rate in the CBD area increased slightly from the previous quarter, due both to new companies leasing office space and some of those already in the CBD expanding their existing offices. The average occupancy rate increased everywhere due to positive signs in Thailand’s

economy and politics, with foreign and local investors setting up or expanding their companies in Bangkok. The city is the best location for companies looking for new opportunities in Myanmar, Laos and Cambodia.


demand


The average occupancy rate in all parts of Bangkok continued to increase from 2011. Although some office buildings were added to the market in 2011 and 2012, most of the office space was occupied or reserved before the completion of the building, so the market was not affected. In addition, all of the office buildings completed in 2012 were small.

With modest growth predicted for the following two years and a limit on new supply, Colliers International Thailand predicts a gradual but

sustained rise in occupancy rates in 2012 - 2013. global economic conditions are still being affected by the EU debt crisis, but the AEC in 2015 is attractive to foreign investors, and they are in search of office space in Bangkok for their businesses in the region.

actual and future eStimate of occupancy rateS, Q3 2012



From January 2012 onwards, more than 1,900 new companies were registered every month at the Department of Business Development and

although there was an approximately 40% drop in april 2012, this was due to there being only 17 work month rather than economic factors.

Source: Department of Business Development and Colliers International Thailand Research

newly regiStered firmS from January 2010 to auguSt 2012

demand driverS


The average rental rate of office buildings depends on location, with the highest rate in the CBD, followed by the areas along the mass transit lines, including the Northern Fringe and Outer CBD areas. The average rental rate in the CBD area continued to increase from the previous year

and will do so in the future, due to limited supply. The Northern Fringe area is on the way to becoming a new business area in Bangkok in the future; the rental rate is still lower than the CBD area, but it offers similar facilities.

The average rental rate of grade a buildings was higher than grade B buildings by around 40%, and was approximately 75% higher than for grade C buildings. It is not surprising that the rent of grade a buildings

is higher than grades B and C, as most grade a buildings are located in the CBD area and the area along the mass transit system; in addition most of them also provide good facilities.

rental rate by location, Q3 2012

rental rate by grade, Q3 2012

rental rate





In the third quarter of2012, rental rates for office buildings in the CBD, Outer CBD and Northern Fringe areas increased slightly compared to the previous quarter.


hiStorical rental rate in three main locationS, Q1 2010 - Q3 2012

rental rate of office buildingS in bangkok by diStance from btS / mrt (metreS), Q3 2012


Selling prices for condominium projects closer to mass transit stations tend to be higher than for those further away, and that also seems to be the case for offices. Being located near a mass transit station is preferable

for both employees and business visitors alike. A number of offices have direct access to a BTS station which further adds to their appeal.



forecaSt

approximately 204,800 sq m or around 71% of future supply is scheduled to be completed in 2014 is located in the Northern Fringe area and only 50,000 sq m in the CBD area. While most of the movement in 2012 has been in the CBD, many companies moved in to the area from other locations. Limited supply in the CBD area from 2011 - 2014 is the main driver boosting the occupancy and rental rates of office buildings in the CBD area in 2012 and 2013.

The Department of City Planning Bangkok Metropolitan administration has still not finalised the new Bangkok Town Plan as of the third quarter of 2012. Bangkok town planning is the main concern for developers in Bangkok and it affects all property sectors, including office buildings.

Although the EU debt crisis has affected the global economic crisis and become the main concern of foreign investors, it is also a positive factor for the newer markets such as asia, especially aSeaN. Many multinational companies are looking for opportunities in Myanmar, Cambodia and Laos

by setting up their operations offices in Thailand for new business in aSeaN.

The increase in the minimum daily wage has directly affected the cost of property management; the cost of management will increase approximately 20 - 40%. This is also a major factor affecting the rental rates in the future, although landlords are trying to maintain current rents by reducing staff and installing CCTV systems to replace security guards, but they cannot keep control of it in the long term. In addition, the designs of office buildings in the future may be more high-tech and management-friendly, including features like having a single control room for all of the building’s systems.



appendiX



office Zoning

The general lack of zoning restrictions in Bangkok has led to the existence of significant office supply in a wide range of locations in the city, and the market perception of the CBD has evolved over the past 20 years. The original CBD was located on the Silom and Surawongse Roads, home to the vibrant gold market and other trading businesses. The development of modern office buildings in the nineties with larger floor plates could not be accommodated in this area and the CBD began to take shape in the eastern section of Sathorn Road.

While Sukhumvit Road up to asoke is primarily perceived as an entertainment and residential area, a large number of grade a buildings sprang up in the nineties and also in the past few years. It is therefore considered as part of the CBD. As a working definition, the CBD, for the purposes of office classification, is where a significant number of Grade A office buildings are located. As such, the old CBD is now considered the Outer CBD as well as Petchburi Road where more Grade B offices are located. Over time this structure could evolve.


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collierS international thailand management team OFFICE SERVICES Nattawan Radomyos | Senior Manager

INDUSTRIAL SERVICESNarumon Rodsiravoraphat | associate Director ADVISORY SERVICES | HOSPITALITY Jean Marc garret | Director PROJeCT SaLeS & MaRkeTINgMonchai Orawongpaisan | associate Director ReSIDeNTIaL SaLeS & LeaSINgNapaswan Chotephard | Manager RESEARCHTony Picon | associate Director Surachet kongcheep | Senior Manager RETAIL SERVICESasharawan Wachananont | associate Director ADVISORY SERVICESNapatr Tienchutima | associate Director

REAL ESTATE MANAGEMENT SERVICESPrasert Saiphrawan | Senior Manager

INVESTMENT SERVICESNukarn Suwatikul | associate Director Wasan Rattanakijjanukul | Senior Manager

VALUATION & ADVISORY SERVICESPhachsanun Phormthananunta | Director Wanida Suksuwan | associate Director PATTAYA OFFICEMark Bowling | Senior Sales ManagerSupannee Starojitski | Senior Business Development Manager / Office Manager

HUA HIN OFFICESunchai kooakachai | Senior Manager

reSearcher:

ThailandSurachet kongcheepSenior Manager | Researchemail [email protected]

522 offices in 62 countries on 6 continents

This report and other research materials may be found on our website at www.colliers.co.th. Questions related to information herein should be directed to the Research Department at the number indicated above. This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. Colliers International is a worldwide affiliation of independently owned and operated companies.

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bangkok office market report q3 2012

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