bangkok office - knight frank...4 demand in q4 2018, demand for bangkok office space was relatively...

COMMERCIAL RESEARCH

BANGKOK OFFICE MARKET OVERVIEW Q4 2018

2

• As of December 2018, the total occupied space in Bangkok reached 4,566,773 square meters.

• In Q4 2018, the overall occupancy rate in Bangkok decreased slightly to 91.57%.

• Total take up for 2018 is 332,810 square meters, increasing 7% from the previous year.

• Mean asking rents increased from 745 baht per square meters to 765 baht per square meters.

• From 2019 to 2023, it is projected that 15+ projects will be completed, adding 978,775 square meters of new office space to the market. SUPPLY

A total of 3 new office buildings were completed outside the CBD in Q4 2018, adding 57,878 square meters of new office space. Meanwhile, 56,688 square meters of office space was removed mainly for renovation purposes. Overall, Bangkok office space increased by 1,190 square meters to a total of 4,953,636 square meters.

HIGHLIGHTS

MARCUS BURTENSHAWExecutive Director, Head of Occupier Services and Commercial Agency

SOURCE: KNIGHT FRANK (THAILAND) - OCCUPIER SERVICES & COMMERCIAL AGENCY

Thailand’s economy continues to expand at a solid pace, with the main drivers of growth taking the form of private consumption and investment. Despite the stalling of external demand due to US-China trade tensions, internal growth fundamentals remain strong due to the governmental support for infrastructure investments under the Thailand 4.0 initiative to develop a value-based economy powered by innovation, creativity and technology. Transport infrastructure developments have also reduced logistics costs and increased accessibility to non-central regions.

BANGKOK OFFICE MARKET

FIGURE 1

SUPPLY, DEMAND AND OCCUPANCY RATE, 2013 – Q4 2018“As we reflect on 2018 and look towards the year ahead, we have seen a widening gap between the rents and occupancy rates of the grade A and C sectors, and expect to see rents continue to climb, even in the face of new supply coming on stream. In a climate of low unemployment, tenants are increasingly viewing their office as a strategic tool to attract and retain one of the most precious resources in the city, talent. Firms are priortising the quality and location of their office space, even if they have to pay a little more. They value amenities and design standards that promote a healthy lifestyle and foster a collaborative inclusive working environment, that appeals to a much broader age group. Firms will enjoy more options in the months and years ahead that will be able to meet those criteria. They say “a rising tide lifts all boats” and rents are climbing across the board, but this trend could also spell trouble ahead for older, outdated properties who will face increasing pressure to modernise. ”

Total take up for the entire 2018 is 332,810 square meters, a 7% increase from the previous year. Since 2016, total take up has exceeded 300,000 square meters per year. Grade B office space was marked by a significant increase in take up to 222,790 square meters from 138,692 square meters in the previous quarter. Both Grade A and Grade C quarterly take up declined to 40,313 square meters and 69,706 square meters respectively.

3

BANGKOK OFFICE MARKET OVERVIEW Q4 2018


SOURCE: KNIGHT FRANK (THAILAND) - OCCUPIER SERVICES & COMMERCIAL AGENCY SOURCE: KNIGHT FRANK (THAILAND) - OCCUPIER SERVICES & COMMERCIAL AGENCY


COMMERCIAL RESEARCH

FIGURE 2

BANGKOK OFFICE TOTAL TAKE UP BY GRADE

FIGURE 3

BANGKOK OFFICE FUTURE SUPPLY (2019 - 2023)

TABLE 1

BANGKOK OFFICE FUTURE SUPPLY (SQUARE METERS)

FUTURE SUPPLYIn 2019, it is projected that 5 new buildings will enter the market, adding a total of approximately 208,609 square meters of office space. Three buildings with a combined space of 133,000 square meters will be located in the CBD. In the non-CBD areas, 2 buildings will add 75,609 square meters to the existing space.

From 2020 to 2023, 9 projects with office space available will enter the market, increasing total supply by 602,981 square meters. It is expected that almost all pipeline projects located in the CBD will be Grade A quality.

TABLE 2

BANGKOK OFFICE FUTURE SUPPLY (PROJECTS)

Office expected completion in 2019

4

DEMANDIn Q4 2018, demand for Bangkok office space was relatively consistent with the previous quarter. Net occupied space increased by 1,058 square meters to a total of 4,566,773 square meters, increasing 0.58% Y-o-Y. Meanwhile the overall occupancy rate is 91.57%, declining from the previous quarter but still up 0.25% Y-o-Y. Within the CBD, office spaces in the Ploenchit - Chidlom area enjoyed the highest occupancy rate at 97.21%, having increased by 0.8% Y-o-Y. Outside the CBD, Asoke – Petchburi had the highest occupancy rate at 92.55%, down 0.2% Y-o-Y.

Demand for Grade A office buildings remains strong given the occupancy rate of 95.0%, which decreased by 0.3% from the previous quarter. The occupancy rate of Grade B office buildings also dropped slightly to 93.4% from 93.6% in the previous quarter. Opposing the trend, the Grade C office occupancy rate rose to 88.4%, despite negative growth in the past three quarters.

Net absorption returned to positive at 1,058 square meters for this quarter, following a net absorption of -23,011 square meters in the previous quarter. Given the low level of supply added, this indicates that demand is fairly well matched with supply in Q4.



TABLE 3

OCCUPANCY RATE BY GRADE

FIGURE 4

BANGKOK OFFICE SUPPLY – DEMAND DYNAMICS

5

RENTAL RATESMean asking rents increased significantly in Q4 2018 from 745 baht per square meters per month to 765 baht, representing a growth rate of 2.6% Q-o-Q and 6.8% Y-o-Y. In contrast to the previous quarter, Grade A rents experienced positive growth, increasing by 4.7% Q-o-Q and 8.2% Y-o-Y to 1,083 baht per square meters per month. Both Grade B and Grade C rents also rose 8.7% and 8.4% Y-o-Y to 787 baht and 494 baht, respectively. Q4 2018 marks the 8th consecutive quarter of Y-o-Y rental growth for all 3 office grades.

RENT BY AREASAsking rents in the CBD are increasing at a significant pace. Leading the way is Wireless Rd., which has the highest average asking rent of 1,120 baht per square meters per month and the highest Y-o-Y growth rate at 27.1%. The lowest rents are commanded by offices outside the CBD in the Bangna area at 532 baht. Rents in the Asoke – Petchburi area are growing at a rate of 13.3% Y-o-Y, higher than any other area except Wireless Rd. This is possibly due to the area’s close proximity to the CBD and the limited supply of offices added to the CBD in 2018.



TABLE 4

BANGKOK OFFICE ASKING RENT BY GRADE (BAHT PER SQUARE METERS)

TABLE 5

BANGKOK OFFICE ASKING RENT BY AREA (BAHT PER SQUARE METERS)

BANGKOK OFFICE MARKET OVERVIEW Q4 2018 COMMERCIAL RESEARCH


FIGURE 5

BANGKOK OFFICE AVERAGE ASKING RENT BY GRADE

6Knight Frank Research, Reports are available at KnightFrank.co.th/Research

For the latest news, views and analysison the world of prime property, visit

KnightFrankblog.com/global-briefing

GLOBAL BRIEFING

Thailand Contacts

Phanom KanjanathiemthaoManaging Director+66 (0)2643 8223 Ext [email protected]

Surasak Limpa-ArayakulExecutive Director, Head of Valuation and Advisory+66 (0)2643 8223 Ext [email protected]

Roong SitthisankunchornExecutive Director, Head of Property Management+66 (0)2643 8223 Ext [email protected]

Marcus BurtenshawExecutive Director, Head of Occupier Services andCommercial Agency (OSCA)+66 (0)2643 8223 Ext [email protected]

Frank KhanExecutive Director, Head of Residential +66 (0)2643 8223 Ext [email protected]

Phuket Contact

Nattha KahapanaExecutive Director, Head of Knight Frank Phuket+66 (0)7631 8151 Ext [email protected]

Important Notice© Knight Frank LLP 2019 - This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.

RECENT MARKET-LEADING RESEARCH PUBLICATIONS

Knight Frank Commercial Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs.

Q2 2018Bangkok Office Market

RESIDENTIAL RESEARCH

BangkokcondominiUm market Q2 2015


BANGKOK SUPER PRIME AND PRIME CONDOMINIUM MARKET OVERVIEW H1 2016

COMMERCIAL RESEARCH

BANGKOK OFFICEMARKET OVERVIEW Q2 2018

2018PattayaCondominium Market





COMMERCIAL RESEARCH


2018Cha Am-HuahinCondominiumMarket





COMMERCIAL RESEARCH

CHA AM-HUAHIN OFFICEMARKET OVERVIEW Q3 2018

Q3 2018BangkokCondominium Market





COMMERCIAL RESEARCH


OUTLOOK Asking rents will continue to rise, albeit at a slower pace given that over 200,000 square meters of new supply, twice the amount in 2018, is expected to enter the market. Given that demand levels have remained consistent over the past 2 quarters, the new supply will increase options of high-grade office space to tenants, increasing their bargaining power

and compressing rental growth.

GLOSSARY Grade A Buildings – By virtue of their desirability, these prime properties command the highest rents in their market. You will find them located in the Central Business District located a near mass transit station, and have a floor plate of at least 1,000 square meters. Grade B Buildings – Is the largest sector of the office market, these are the buildings that are traditionally in the greatest demand, they might not be the most expensive properties in the market but represent good value for money.

Grade C Buildings – Typically older properties, these buildings provide office space for rent at the most competitive rents in the market.

bangkok office - knight frank...4 demand in q4 2018, demand for bangkok office space was relatively...

Documents