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Flight To Quality Drives Office Rents To All-time Highs

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Office rents across Bangkok continue to hit record highs as landlords take advantage of an increasingly tight supply situation that has seen vacancy rates stabilize in the single digits, sustained levels not seen been since the late 1980s.

Rising rents and falling vacancies are being driven by a flight to quality – tenants relocating and in most cases expanding – from older buildings to new projects.

More than 68% of Bangkok’s current office stock is more than 20 years old and most buildings are rapidly becoming uncompetitive when compared with modern offerings.

Occupiers are increasingly drawn to newer properties such as AIA Capital Center, which offers a wide variety of lifestyle amenities including food and beverage options and an on-site fitness center. Others including Gaysorn Tower and FYI Center offer an abundance of attractive common areas that tenants can utilize.

As a result, rents in the prime grade (Grade A) segment are rising faster than those in secondary office spaces and the gap is widening.

Data from JLL’s Thailand Property Intelligence Center illustrates that the average gross rent for prime office space across Bangkok in July was 824 baht per square meter per month, 20% higher than the market-wide average rent of 668 baht, and 41% higher than the average gross rent of 513 baht for non-prime space.

Occupier flight to quality is also clearly reflected in different vacancy levels in the two market segments. Findings from JLL suggest that the average vacancy rates for prime and non-prime office spaces in July 2018 stood at 6.0% and 9.8% respectively.

Prime grade vacancy rates have held steady under the 7.0% mark since early 2016 while non-prime rates have only recently moved into the single-digit range. Thus, notwithstanding record-high rental levels across Grade A projects in the market, it is clear that many tenants in the market are willing to a pay a premium for Grade A office space, despite the significant difference in price relative to lower quality space.

We are seeing the same pattern play out in Bangkok’s central business areas (CBA), which include Silom, Sathon, Wireless, Childlom, Asok and Phrom Phong. Average prime grade rents in the CBA were up by 10.9% year-on-year to 881 baht per square meter per month in July, well above the 4.5% growth recorded in non-prime CBA average rents during the same period.

So what does this mean for the market in the future?

Through the end of 2019, there are 10 new office projects under construction that are available for lease totaling about 280,000 sq m of space. Approximately one-third of this space has already been pre-leased. Projects scheduled to be completed in the second half of 2018 have strong pre-leasing.

The T-One building near the Thong Lor BTS station and Lad Phrao Hills near the Phahon Yothin MRT station are nearly fully pre-let while Wizdom 101/True Digital Park near the Punnawithi BTS and Singha Complex near the Phetchaburi MRT station are reportedly between 50% and 70% pre-leased.

With tight vacancy and limited availability of space in upcoming projects, we expect rents to continue rising and keeping the market titled in landlords’ favor until at least 2021 when a new wave of supply is expected to come to market.

Andrew Gulbrandson is the Head of Research and Consulting at JLL. For more insights, readers can connect with him on visit




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