Grade B offices in Bangkok outperform other segments in Q3

It was the only segment to increase its occupancy rate.

Bangkok’s Grade B office segment demonstrated the best performance this quarter by showing an improved occupancy rate, even with the introduction of new space. 

According to a Knight Frank report, the overall market occupancy rate experienced a slight decline of -0.2% pts Q-o-Q to 78% in Q3. Grade A witnessed the most reduction among all grades, declining by -0.6% pts Q-o-Q and -5.4% pts Y-o-Y to reach 82%. 

“Grade B saw a very slight improvement in occupancy rate by 0.1% Q-o-Q to 77%, but over the past year, it fell by almost -3% pts, similar to grade A. Lastly, the occupancy rate for grade C saw the most stable performance compared to other segments, decreasing by 0.4% pts Q-o-Q and 0.5% pts Y-o-Y, settling at around 78%,” the report added.

Here’s more from Knight Frank:

Looking at the pure demand side, the total occupied space in the Bangkok office market increased by 11,000 sq m, reaching a total of 4.68 million sq m. Grade A experienced minimal changes in total occupancy space since most of the recent transactions involved relocations. Grade B, on the other hand, witnessed a significant increase in occupied space, with a quarterly net absorption of 20,100 sq m, primarily driven by new lettings in newly completed buildings. 

This contrasts with Grade C, which had the lowest net absorption this quarter. We observed certain existing tenants moving away from Grade C properties towards newer, higher-grade properties, particularly those with low occupancy. This type of building aimed to quickly fill in their vacant space by reducing their effective rental rates.

In the third quarter of 2023, the office sector in Bangkok reported an average rent of THB 813 per square meter per month, indicating a stable pattern with a marginal decrease of 0.2% Q-o-Q and an expansion of 1.3% Y-o-Y. Grade A, with an average rental rate of THB 1,181, saw a slight drop of 0.3% Q-o-Q but exhibited a robust 4.1% growth Y-o-Y, driven by the addition of high-quality offices in the market. 

The average rent for Grade B stood at THB 839, marking a 0.3% decrease Q-o-Q and 0.6% Y-o-Y. Lastly, Grade C, priced at an average of THB 509, experienced a slight uptick for the quarter but decreased by 0.6% over the past year.