The Bangkok office market is expecting an increase in new office space, creating a surplus supply between 2024 and 2026. With this upcoming influx of space, existing office property landlords are advised to consider renovating or adding new amenities to retain their current tenants, as new office towers will seek to attract both new clients and tenants of existing properties looking to relocate.
Panya Jenkitvathanalert, executive director and head of office agency at property consultant Knight Frank Thailand, indicated that the supply of office space exceeded demand in the previous year. This surplus is expected to intensify in the coming year, with approximately 150,000 square meters added by One Bangkok alone, marking a significant change for the industry.
Opportunities still exist amid this challenging period, as the visa-free scheme for Chinese visitors could potentially attract more businesses from China, specifically in the electric vehicle manufacturing sector and its related downstream operations.
There has been a trend of local firms relocating from home offices to high-rise office buildings to attract young talented staff and take advantage of decreasing office rental rates. As such, Mr. Panya suggested that landlords renovate their existing properties or add new amenities, like co-working spaces or links to mass transit stations, to retain tenants.
He emphasized that retaining existing tenants is the main priority for improving old office buildings, while attracting new tenants serves as a secondary goal. The average rent for office space as of the end of 2023 stood at 816 baht per square meter per month, with grade A office space at 1,181 baht per square meter per month, grade B at 840 baht, and grade C at 510 baht on average.
Despite a slight rental growth, the annual rates for all office space grades were lower than the 10-year average due to pressure on the supply side. Mr. Panya also noted a substantial upcoming supply, amounting to about one-fourth of the current supply, with a large portion expected in central business district (CBD) areas this year.
To retain tenants with expiring contracts, some office landlords are offering discounts or one-year free rentals for larger spaces. In 2023, Bangkok’s office supply rose by 4.6% to 6.05 million square meters, while demand reached 4.7 million square meters, resulting in an overall occupancy rate of 77.7%, down from the 10-year average of 88%.
Grade A experienced the largest decline in occupancy rate, dropping by 6.6 percentage points to 81%, while the occupancy rates for grade B and C were 76% and 78% respectively. The office market in the CBD demonstrated robust demand driven by new buildings, indicating a preference for modern, up-to-date office spaces, while non-CBD areas showed a varied demand pattern, reflecting diverse tenant needs and preferences.
Many new office towers, particularly grade A, have incorporated energy-saving and sustainable features, catering to multinational firms with net-zero or ESG policies.
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