, Thailand

Bangkok’s intensified supply-demand mismatch leads to rising office vacancy

Prime office vacancy rate remained high at 26% in Q2.

According to a JLL report, Bangkok’s prime office market welcomed one new premium project during the quarter, Supalai Icon Sathorn, adding approximately 19,400 sqm to the market. The total prime stock in the Central Business Area (CBA) increased to 1,463,300 sqm in Q2 2024.

“The Prime vacancy rate remained high at 26%, dropping by 40 bps q-o-q after absorbing the previous quarter’s supply influx. However, an imbalanced market emerged with excess supply, leading to a long-term increase in vacancy rates,” the report said.

Here’s more from JLL:

In Q2 2024, Bangkok’s Prime CBA recorded 20,200 sqm of net absorption. MNCs are focused on upgrading to higher-quality offices. The downsizing trend was also seen during the quarter, following companies’ cost optimisation.

Leasing activity in prime office buildings totalled 10,000 sqm in the quarter, primarily driven by MNCs’ relocation deals. There are mixed messages for upcoming projects as pre-commitment rates vary, ranging from 5% to 30%.

Rent growth is on the rise following the entry of premium supply

In Q2 2024, Bangkok’s prime gross rents increased to THB 1,007 per sqm, per month, growing by 0.3% q-o-q and 4.8% y-o-y. Net effective rents, likewise, grew at a similar pace of 0.7% q-o-q, reaching THB 772 per sqm, per month.

In addition, the increase in capital values persisted and reached THB 162,500 per sqm. Market yields stabilised at 5.7% due to the lack of substantial transactions, land-value appreciation and the high interest rate.

Outlook: Competitive market remains over the long haul

The CBA has witnessed substantial growth in premium supply, with another 130,400 sqm set to enter in H2 2024. It has driven the prime vacancy rate to nearly 30% as demand is lagging.

Looking ahead to 2028, market competition should further intensify, with projected vacancy ranging around 22%–30%. Additionally, tenants and landlords in the CBA are prioritising ESG, asset enhancement, renovations and green leasing initiatives.

Note: Financial and physical indicators are for the CBA Grade A office market. Data is on an NLA basis.

 

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