Bangkok office rents rose to their highest levels ever in 2012 surpassing the previous 1992 peak, according to a report by leading international property consultancy firm CBRE Thailand. Average grade A rents in the central business district (CBD) reached a level of 770 baht per square metre per month and Park Ventures Ecoplex on Wireless Road became Bangkok’s most expensive office building achieving rents of 925 baht per square metre per month in 2012.
Bangkok’s grade A CBD rents rose by 9% in 2012; however Bangkok’s office rents were still the cheapest in the Asia Pacific Region.
An artist’s impression shows the interior of Bhiraj Tower in Bangkok.
The total amount of office space in Bangkok reached 8.1 million square metres and the overall occupancy rate was 88% compared to 86% at the end of 2011. Total net take up (the growth in the amount of occupied office space) was 160,000 square metres in 2012 compared to 83,000 square metres in 2011, demonstrating the increase in demand.
There was 45,000 square metres of new space completed in 2012. There are only 430,000 square metres under construction due for completion between this year and the end of 2015.
Only 88,000 square metres will be completed in Bangkok’s CBD, Bhiraj Tower a 50,000 square metre grade A building opposite Emporium is due for completion in 2014 and AIA Sathorn a 38,500 square metre grade A building is due for completion in 2015.
“There is limited choice of space in grade A CBD buildings,” says James Pitchon, Executive Director and head of CBRE Research & Consulting. “Sathorn Square and Park Ventures Ecoplex, the two most recently completed grade A developments, are now 70% and 87% committed. Tenants wanting more than 3,000 square metres on consecutive floors have few choices.”
Despite the 9% increase in grade A rents, Bangkok remains the cheapest office location in the Asia Pacific region. Hong Kong was the most expensive location with prime office rentals of 6,600 baht per square metre per month more than eight times more expensive than Bangkok even though prime Hong Kong rents fell by 18% during 2012. Out of 31cities in the Asia Pacific Region covered by CBRE Research, 20 cities saw rents rise and 11 cities saw rents fall.
Four out of the five most expensive office locations in the world were in the Asia Pacific region. Hong Kong (Central) was the most expensive followed by London (West End), Tokyo (Marunouchi Otemachi), Beijing and New Delhi.
Globally office markets have cooled over the past year with slowing economic growth in China, recession in Europe and a tepid economic recovery in North America. There was a marked slowdown globally in leasing activity in the banking and finance sector. Nonetheless prime office occupancy costs increased in 74 of 133 markets tracked by CBRE.
Global office occupancy costs have increased 2.1% over the past year led by the Americas with a 5.2% annual increase, Asia Pacific at 2.6%. Tight market conditions, strong demand for high quality space and limited new supply are the major factors driving big increase in occupancy costs in prime office markets across the globe.
CBRE predicts that demand for Bangkok office space will grow compared to 2012 and because of limited new supply rents will continue to rise, especially for grade A CBD buildings.