Bangkok’s office market faces the challenge of balancing an increasing supply of 1.1 million square meters of leasable space with evolving tenant demands, leading to heightened competition among landlords in a rapidly changing environment.
Panya Jenkitvathanalert, Executive Director and Head of Office Strategy and Solutions at Knight Frank Thailand, noted that the anticipated 1.1 million sq m of new space in the coming years will require landlords to adapt their strategies.
“This will likely spur further innovations in design, services, and pricing strategies,” he stated. “Grade A properties, while demanding premium rents, need to distinguish themselves with unique value propositions.”
Of the 1.1 million sq m, 640,000 sq m are currently under construction.
“Next year will be crucial, as a record 550,000 sq m of new space is expected to enter the market. To remain competitive and cater to the diverse needs of today’s tenants, existing buildings must prioritize tenant retention,” Mr. Panya explained.
Knight Frank Thailand reported steady progress in Bangkok’s office market during the third quarter of 2024, supported by significant supply growth and increased leasing activity. The completion of major developments, such as the mixed-use One Bangkok project on Wireless-Rama IV roads, has raised the city’s total office inventory to 6.31 million sq m, highlighting the transformative impact of large-scale, integrated projects on Bangkok’s skyline.
In the third quarter, the office supply in Bangkok increased by 151,000 sq m, or 2.5% quarter-on-quarter, following the completion of One Bangkok Tower 3 and Tower 4, as well as Rangsit Business Park. Key differentiators for developers now include state-of-the-art amenities, wellness-focused designs, and improved accessibility.
This transition has led to the adoption of WiredScore and SmartScore certifications, underscoring the growing importance of digital connectivity and smart technology in contemporary office spaces. These certifications assess and promote a building’s technological and smart capabilities, becoming essential for landlords aiming to attract tech-savvy tenants.
Sustainability-driven developments are also gaining momentum, with the proportion of green-certified buildings increasing from 26% to 28% of the total supply. Meanwhile, 54,000 sq m of older office space was withdrawn from the market as three buildings exited.
Demand indicators show a promising recovery, with leasing activity nearly doubling from the second quarter, as more tenants transitioned staff back to on-site work, with some implementing full in-office policies.
Leasing activity accelerated for the third consecutive quarter, with take-up reaching 164,000 sq m, a significant increase compared to the previous quarter. Net absorption rose to 50,000 sq m, largely due to strong leasing at One Bangkok.
Consequently, the total occupied office space grew by 1% to 4.81 million sq m. Green-certified buildings saw the strongest demand, achieving net absorption of 80,000 sq m, while non-green buildings experienced a decline of 30,000 sq m in occupancy.
Both the central business district (CBD) and non-CBD areas experienced positive demand trends, with net absorption of 24,000 sq m and 26,000 sq m, respectively, indicating a broad recovery across Bangkok’s office market.
Overall, the market occupancy rate fell to 76%, a decline of 1.1 percentage points from the previous quarter and 2.6 points year-on-year, significantly below the 10-year average of 87%.
Occupancy in Grade A offices decreased from 80% to 74% as a result of new supply entering the market and intensified competition. In contrast, Grade B offices remained stable at 75%, continuing to underperform compared to other segments. Grade C properties were the only category to show improvement, with occupancy increasing from 79% to 80%.
Unlike other segments, Grade C stock tends to remain relatively stable, as these buildings often undergo asset enhancement or exit the market during downturns. Their affordability continues to attract steady demand from price-sensitive tenants, said Mr. Panya.
