bangkok office market report q2 2010

8/9/2019 Bangkok Office Market Report Q2 2010

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Th K d R p rc o l l i e R s i n Te R n aTi o n a l | T H a i l a n D

e ut summ ry No new o ce supply came onto the market in Q2 2010 and only very limited supply will beexpected until Q4 2010 with the scheduled opening o Sathorn Square.

Very little relocation activity in Q2 refecting the ongoing political impasse deterring companiesrom making long term plans.

Occupancy rates ell by about 1% in every area including the CBD, Outer CBD and the NorthernFringe.

Rental rates remained more or less the same in the CBD or Q2, although a all in rates was morepronounced in the Northern Fringe. This was likely to be a correction to the steep rise in 2009.

As o June 30th, no discernable impact on the o ce market has come about rom the ongoingdemonstrations. However i these become protracted and e ect the CBD area then this could havea negative impact over time as leasing contracts expire. Back o ces or split locations could be a

uture trend.

o ice Zoning

The general lack o zoning restrictions in Bangkok has led to the existence o signi cant o ce sup-ply in a wide range o locations in the city and how the market has perceived the CBD has evolvedover the past 20 years. The original CBD was located in the Silom and Surawongse roads, home tothe vibrant gold market and other trading businesses. The development o modern o ce buildingswith a larger foor plate in the nineties could not be accommodated in this area and the CBD beganto take shape in the eastern section o Sathorn road. While Sukhumvit road up to Asoke is primar-ily perceived as an entertainment and residential area, a large number o grade A buildings sprungup in the nineties and also in the past ew years. It is there ore considered as part o the CBD. As aworking de nition the CBD, or the purposes o o ce classi cation, is where a signi cant numbero Grade A o ce buildings are located. As such the old CBD is considered Outer CBD as well asPetchburi road where more grade B o ces are located. Over time this structure could evolve.

MaRKeT inDicaToRs

Q1 2010 - Q2 2010

new sUPPlY

DeManD

RenTals

occUPancY

www.colliers.co.th

B a n g Ko K o i c e M a R K e T | 2 n D Q U a RTe R | 2 0 1 0


2/13collieRs i nTeRnaTional2

The Knowledge Report | 2 nd Quarter | 2010 | Bangkok O fce Market

Zoning


3/13col li eRs inTeRnaTional 3


HisToRical sUPPlY

Source: Colliers International Thailand ResearchRemark : E = Estimated supply

Source : Colliers International Thailand Research

The o ce market landscape even today is a result o a ve yearboom period rom 1992 to 1996 prior to the Asian FinancialCrisis. Even a ter the crisis, projects continued to be completedculminating in the 140,000 sq m Empire Tower in 1999; whichremains the largest o ce building in the centre o Bangkok. The

ollowing ve years were a allow period or the o ce market asonly a total o around 186,000 sq m was completed. It was only inthe second hal o the decade did growth in supply pick up with

over our and hal times more supply being added in the last veyears compared with the rst ve.

No new supply came to the market during the rst hal o 2010however in Q4 2010 two new o ce buildings are scheduled tobe completed in the CBD and Outer CBD area with a total areao around 79,000 sq m.

cUMUlaTive sUPPlY in BangKoK

aDDiTional sUPPlY oR eacH YeaR



Regional coMPaRison

The di use nature o the Bangkok o ce market is highlighted by

a comparison with other countries in the region. A much greater

proportion o o ce space is located outside the CBD.

Almost all o ce space is located in Bangkok itsel with only anegligible amount in the regions. Most o ce unctions outsideo Bangkok take place in shophouses and townhouses in similar

ashion to Phnom Penh in Cambodia. This contrasts with otherAsian countries which have o ces located in other parts o theircountry such as Cebu in Philippines, Surabaya in Indonesia,

Penang in Malaysia and Busan in Korea. Pattaya may emergeas a secondary o ce location in the uture although this will bedependent on incentives by the Board o Investment to stimulatethe service sector outside o Bangkok.

Cebu (Philippines) 450,000 sq m o o ce space or BPO marketDa Nang (Vietnam) 60,000 sq m [also 2 main cities]Surabaya (Indonesia) About 12 o ce buildingsBandung (Indonesia) About 5 o ce buildingsPenang (Malaysia) Over 1 million sq m o ce space

Johor Bahru (Malaysia) Approx 560,000 sq m

Source : Colliers International Thailand Research /Colliers International Country O fces

Source : Colliers International Thailand Research /Colliers International Country O fces

ToTal sTocK o o ice BoTH cBD/non-cBD in selecTeD asia-Paci ic coUnTRies

o ice sPace in seconDaRY locaTions in soUTH easT asia




o ice siZe


aveRage siZe o o ice BUilDing accoRDing To aRea

The Outer City West has the highest average size in Bangkokbut due to the limited number o o ces in this area, one build-ing; the Thai Farmers Bank Head O ce, with over 74,000 sq mo NLA, raises the average somewhat. The CBD comes in sec-ond place largely due to the number o grade A o ce buildingscontaining a large foor plate and consequently greater buildingsize. The smaller sizes refected in the Outer CBD refects the

space limitations and smaller, older buildings located in westSilom and Surawongse. One notable eature is the smaller sizesin the Outer City East. In many Asian cities large o ce buildingsare located outside the centre in order to accommodate the BPOindustries which o ten require a large foor plate but low rentals.This appears not to be the case in Bangkok.




Source : Coll iers International Thailand Research

Source : Coll iers International Thailand Research

sUPPlY BY owneRsHiP, Q2 2010

UTURe sUPPlY BY locaTion

A signi cant number o o ces are multi-owner in what are alsore erred to as o ce condos. Almost all o these were built pri-or to 2000 when investors were looking to make rapid capitalgains during the boom period that preceded the economic crashin 1997. There are some advantages o occupying multi-ownero ce such as separate air conditioning systems which are coste ective or companies operating in non-working hours. How-

ever there are disadvantages in the orm o sometimes uncoordi-nated property management and more expensive air condition-ing systems or companies using o ce space predominantly inworking hours. However occupancy rates are in general higherin multi-owner o ces.

Two o ce buildings are scheduled to be completed in 2010 withone building located in the CBD area and another just outsidein the Outer CBD area. The total area o o ce space will rise by79,000 square meters representing an increase o around 1% o

current supply. However Sathorn Square, scheduled to open inQ4 2010, will represent the largest o ce tower in the CBD sinceEmpire Tower in 1999.

sUPPlY BY owneRsHiP

UTURe sUPPlY




The Outer City West area still commands the highest occu-pancy rate or Q2 2010, and the Southern Fringe has the lowest

occupancy rates. The CBD occupancy rate recorded the secondlowest gure.

The occupancy rate in the CBD area dropped by approximately0.4%, while the outer CBD area ell by 0.2%. However duringthe protest at Rajaprasong intersection numerous o ce build-

ings around the area closed their doors, but a ter the politicaldisturbances ended, the occupancy rate still remained the sameas the last quarter.



occUPancY RaTe BY locaTion, Q2 2010

occUPancY RaTe in 3 locaTions, 2001 - Q2 2010

DeManD - TaKe UP




newlY RegisTeReD iRMs DURing JanUaRY 2009 - MaY 2010

Source : Department o Business Development and Colliers International Thailand Research

DeManD DRiveRs

BUsiness conTingencY Planning

Regional oPeRaTing HeaDQUaRTeRs (RoH)

January 2010 recorded a surge in company registrations but this was ollowed by a steep downturn and has remained low during theApril and May disturbances.

The events o April and May 2010 raised the awareness o companies o the need to develop contingency plans in order toreduce the disruptions resulting rom disturbances either naturalor man-made. One key area regards location and the act thatmost companies operate in only one o ce location. Many o ceshad to close their doors during the demonstrations and businessactivity was severely curtailed or even suspended in many cases.A large number o companies operated briefy rom temporaryback up o ces and many are now considering using a perma-nent back up o ce in order to provide a speedier response. Otheroptions include the use o service centres or even operating romtwo separate locations in which both would act as parallel backup o ces.

Each plan would represent a stimulation o demand or o cespace. However each would also increase the costs o doingbusiness in Bangkok and such contingency planning would likelyonly take place in the event o protracted disturbances whichis by no means certain. As such the increase in demand thatwould result would represent a silver lining to the dark cloud o businesses closing down and oreign enterprises feeing thecountry.

The government needs to restore countrys image and attractoreign investment a ter the political problem a ecting the

investment climate in the country. The government approvednew tax incentives or Thai and oreign rms setting up region-al headquarters in Thailand. Zero corporate tax rates apply toincome earned or services provided to companies outsideThailand and 10% corporate tax rate or income rom domesticservices or 15 years. Also included is a reduced personal incometax rate o 15% or eight years or expatriates working in ROHs.The lower personal tax rate applies only or ROHs that gener-

ate at least hal o their income rom services provided to rmsoutside o Thailand. Although this improvement will likely leadto some companies headquartering in Bangkok, other actorssuch as poor English skills and ongoing political unrest act as astrong deterrence. Hong Kong and Singapore look set to remainthe preeminent regional centres or the oreseeable uture.




Industrial growth is the main driver that powers the o cemarket as this leads to the need or trading, nancial, legal andinsurance services amongst others to support it. A ter a dramaticdrop in exports starting at the end o 2008, they have startedto recover in the last three quarters. This bodes well or uture

demand or o ce space although ongoing nancial problems inEurope and the general retrenchment o scal stimulus in themajority o Thailand exports partners could spell manyproblems, exacerbated by oreign currency weakness o the Euroand other trading currencies.

Unsurprisingly the CBD commands the highest rental rates dueto the location and the number o grade A buildings. Rents inthe Northern Fringe are considerably higher than the OuterCBD. This could be explained by the act that a signi cant num-ber o o ces are located close to both the BTS and MRT lines inthe area while most o ces in the Outer CBD are located some

distance rom mass transit lines. While Colliers InternationalThailand have research that shows that condominium prices aregenerally higher the closer they are to mass transit stations, thesame also seems to be the case or o ces. Being located near amass transit station is pre erable or both employees and businessvisitors alike.

exPoRTs RoM THailanD on QUaRTeRlY Basis

Colliers International Thailand ResearchSource : Bank o Thailand


RenTal RaTe BY Zone

RenTal RaTe




Grade A o ces have greater rental rates than those o grade B.The di erence between grade B and C is rather small refecting

that competition between these grades is intense and tenants seeless distinction between the two.

In Q2 2010, rental rates or o ce buildings in CBD area ellslightly by 0.3% compared to Q4 2009. Rates ell more sharply

in the Northern Fringe but this was likely to be a correction a terthe steep rise in the previous year.

RenTal RaTe BY gRaDe Q2 2010

HisToRical RenTal RaTe in 3 Main locaTions, 2001 - Q2 2010






HisToRical RenTal RaTe BY gRaDe

Rental rates o grade A o ce building have remained stable rom2007 while grade B recorded a small drop. Colliers InternationalThailand has noticed that some landlords have o ered more

avourable terms or tenants to maintain occupancy duringdi cult economic times, especially or small businesses.





oRecasT

Due to the three year leasing term contracts and costs o relocating o ce, itremains to be seen whether the events o April and May 2010 in the CBD areawill a ect occupancy in this location in the uture as tenants may wish to locate tolower pro le zones. Further disruptions in Bangkok could go some way in shapingthe direction o the o ce market, depending on how they mani est themselves andin which locations.

There would appear to be pent up demand or o ce space but remains subdued dueto the ongoing political tensions that could unleash into resh disturbances andviolence. While this situation remains the o ce market will remain stagnant astenants hold o on strategic planning and landlords provide avourable conditions

or contract extension.

The limited amount o new supply over the past year has allowed rentals andoccupancy to remain rm in this current environment. However with theintroduction o over 70,000 sq m o o ce supply in the CBD or Q4 2010, this willlikely provide challenges or older grade A buildings as high pro le companies areattracted to newer o ce buildings. Expect landlords in the CBD to go urtherin enticing tenants to renew contracts that expire over the next year.



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conTacT in oRMaTion

THailanD:Patima JeerapaetManaging Director [email protected]

Narumon RodsiravoraphatHead of [email protected]

Antony PiconSenior Manager | [email protected]

Surachet KongcheepManager | [email protected]

Th r p rt d th r r r h m t r m y b u d ur b t t . r . .th. Qu t r t d

t rm t h r h u d b d r t d t th R r hD p rtm t t th umb r d t d b . Th d um t

h b pr p r d by c r i t r t r d rtd r rm t y. c r i t r t m u r t , r pr t t r rr t y k dpr d r mp d, r rd th rm t ud

but t m t d t , rr t t t, ur y dr b ty. a y t r t d p rty h u d u d rt k th r

qu r t th ur y th rm t . ci t r t ud u qu y rr d r mt rm , d t d rr t r ut th d um

d ud b ty r d d m rr m. c r i t r t r d d f t

d p d t y d d p r t d mp .

480 o ices in 61 coUnTRieson 6 conTinenTs

Us$ 1.9 Billion in annUal RevenUe

1.1 Billion sQUaRe eeT UnDeRManageMenT15,000 PRo essionals

Colliers International Thailand

Bangkok O fce : 17/F Ploenchit Center, 2 SukhumvitRd. , Klongtoey, Bangkok 10110Tel: 662 656 7000 Fax: 662 656 7111Email : [email protected]

Pattaya O fce : 519/4-5, Pattaya Second Road(Opposite Central Festival Pattaya Beach),Nongprue, Banglamung, Chonburi 20150Tel: 6638 364 411-2 Fax: 6638 364 414Email : [email protected]

collieRs inTeRnaTional THailanDManageMenT TeaM

ASSET MANAGEMENTWasan Rattanakijjanukul | Manager

Nukarn Suwatikul | Manager

CONSULTANCY Napart Tienchutima | Manager

COMMERCIAL / INDUSTRIAL /RETAIL Narumon Rodsiravoraphat | Senior Manager

FACILITY / PROPERTY MANAGEMENTViroj Piromthong | Management AdvisorBandid Chayintu |Associate Director

HOSPITALITY DIVISION Jean Marc Garret | Director

INVESTMENT Nukarn Suwatikul | Senior Manager

RESIDENTIALPatima Jeerapaet | Managing Director

RESEARCH & ADVISORYAntony Picon | Senior ManagerSurachet Kongcheep | Manager

VALUATION Nicholas Brown | Associate DirectorPhachsanun Phormthananunta |Manager

PATTAYA OFFICEMark Bowling | Sales ManagerSupannee Starojitski |Business Development Manager


bangkok office market report q2 2010

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