Bangkok’s office vacancy rate to hit 16.3% by end-2021

The rising vacancy rate will put further downward pressure on rents.   

Bangkok is set to have six prime projects completed within the next 12 months, totalling 164,000 sqm. However, JLL says pre-commitments across five for-lease projects are presently low and thus by the end of 2021, the vacancy rate should increase to 16.3%.

“As Bangkok’s economy is still facing significant COVID-19-related impacts in addition to a supply glut, we expect prime gross rents to further decline by -2.9% y-o-y by end-2021. We anticipate that rent free incentives offered by landlords will continue to increase and put additional pressure on net effective values.”

Here’s more from JLL:

We recorded -5,900 sqm of net absorption across CBA prime grade buildings in 2Q21 with buildings 15 years old or more accounting for nearly all negative activity. Large and medium-size occupiers continue to surrender parts of their existing spaces to reduce costs and accommodate more flexible working arrangements, while domestic banks continue to reduce space leased outside of their own premises.

New deal activity in the quarter totalled approximately 18,000 sqm, including 12,000 sqm of new lettings and 6,000 sqm of renewals. The majority of new lettings were pre-commitments in new buildings scheduled to complete over the next several quarters.

Vacancy continues to rise owing to minimal pre-leasing activity

No new supply completed in 2Q21 as three projects saw slight delays related to COVID-19 impacts on construction – these projects are presently expected to complete in 3Q21. Total prime stock stands at 1.31 million sqm.

The vacancy rate increased slightly to 12.0% in 2Q21. We expect to see another increase in 3Q21 when 58,400 sqm of new for-lease supply completes but where pre-commitments account for less than 10% of that space.

Rental decline continues across both old and new buildings

Prime gross rents fell by -0.3% q-o-q and -6.0% y-o-y in 2Q21. With the increasing rent-free months offered by landlords amidst an increasingly competitive market, net effective rents were pressured further and fell by -1.3% q-o-q and -11.3% y-o-y.

Prime capital values fell by -5.9% y-o-y, causing market yields to compress to 5.70%. Capital value decline has been less significant than rental decline in recent quarters as a result of continued investor interest (weight of capital) and investment costs associated with COVID-19 adaptation and mitigation.