Bangkok to see over 420,000sqm of new office supply this year

The vacancy rate could hit 24% by year-end.

The year 2024 is set to see a considerable amount of premium supply influx, particularly in the Bangkok CBA, according to JLL. 

“With over 421,600 sqm of upcoming supply, market competition is anticipated to lead to a higher vacancy rate across the market, particularly among older assets. The projected vacancy rate could reach 24% by the end of 2024,” the analyst said.

Here’s more from JLL:

The overall market has shifted towards sustainability and ESG trends among landlords and occupiers, focusing on asset enhancement, building renovation and green leasing activities. The competitive landscape is expected to remain intense throughout 2028, with vacancy projections ranging from 21% to 27%.

Leasing activities are focused in new mega projects

Bangkok’s Prime office market recorded a noteworthy expansion volume in the CBA in 1Q24. The growth was supported by a significant uptake of 101,700 sqm, following the introduction of premium office spaces in Central Bangkok in the past few years. 

A substantial portion of new completions secured healthy pre-commitment rates upon opening, ranging from 30% to 60%. At the same time, the overall gross leasing volume in Prime office space accounted for 28,000 sqm in 1Q24, with ten relocation moves observed within the CBA, most of which were MNCs.

New completions contribute to rising vacancy rate

In 1Q24, Bangkok’s Prime office market saw three premium office additions, totalling approximately 172,800 sqm. The total Prime office stock in the CBA increased to 1,443,800 sqm. However, five ageing buildings were downgraded and removed from Prime stock as they failed to meet modern Prime Grade standards.

The Prime vacancy rate rose to 23%, up by 217 bps q-o-q after the first wave of supply influx, reaching the Asian Financial Crisis level back in 1997. As older assets struggled to secure occupancy, this intensified market competition among landlords, and they offered leasing incentives such as longer rent-free periods to attract and retain tenants.

Prime rents surpass four digits in Thai baht

The overall Prime gross rents marked a significant increase in 1Q24 to THB 1,004 per sqm, per month, reflecting a 4.2% q-o-q growth. Net effective rents also grew at a similar pace, by 3.9% q-o-q to reach THB 766 per sqm, per month. 

In addition, the increase in capital values persisted and reached THB 161,300 per sqm. Market yields stabilised at 5.7% due to the lack of substantial transactions, the land value appreciation and the high interest rate.

Note: Bangkok Office refers to Bangkok's CBA Grade A office market.