Bangkok's Commercial Space Prices Are Rising
The rents of Grade A office space in Bangkok has already reached THB 850 per square meter per month, which is a record breaking high – topping the peak which was last seen 20 years ago. Of course, the rental rates are a cycle and affected by various factors, so the increase in rental rates in Bangkok is not alarming, nor is it surprising as the previous year’s flood crisis has certainly thrown a wrench in the country’s economy, especially when it comes to land properties, but the increase in rents are still worth looking into. One example of office rents that are posting a huge increase is Park Ventures, which has recently finished a Grade A eco office building. The rental rates posted for said space is THB 850 psm monthly, effectively serving as the peak of Bangkok’s all time high rents. By comparison, the last property that had this level of rent was GPF Tower (formerly Diethlem Tower) on Wireless Road, which was built in 1992, 20 years ago.
The Start of an Upward Cycle
The sector has seen very little change since 2009 when it comes to rental rates, but the peak rent commanded by Park Ventures now will start an upward cycle, as the buildings with the best quality and location will follow suit and raise their rents. Currently, around 14.3% of Bangkok’s 8.12 million sqm office stock is vacant, but majority of the vacant space is situated in buildings that are in unpopular places or in older buildings that are already obsolete. Pitchon states that the current estimate is that the amount of space under construction and due for completion by 2013 is only 390 thousand sqm. As the demand for space increases, it is natural that the rents and vacancy rates will rise and fall in accordance.
A Shift in Trends
Bangkok offices have always been the most affordable in the Asia Pacific region, compared to Hong Kong offices and those in Singapore and Mumbai, which are four to 7 times more expensive. However, we are starting to see a shift in the paradigm, with Bangkok office rents rising, while those in Hong Kong, Singapore and Mumbai are exhibiting a downward slide. Another problem is the fact that the current high rental levels in Bangkok make it unfeasible to build new office projects unless the land has been acquired at levels that are way below the current market level. We can only expect developers to invest in new offices when the rent exceeds THB 1,000 psm monthly. This is why there’s such a dearth of space that are under construction. On the other hand, Bangkok tenants are showing signs of willingness to pay for quality office developments in good, strategic locations.
Companies are willing to pay a premium if the space is within close proximity to transportation hubs or networks, if their modern aircon systems can maintain a constant temperature, if there is a lift access to all the floors, and various other factors related to the quality of the building.