What does the future look like for Thailand’s office property market?

Landlords are increasingly adopting the build-to-suit and ready-to-move-in models.

For Q3 2023, data from Knight Frank indicate that the Bangkok office sector experienced a marginal decline in average asking rent of 0.3% Q-o-Q, settling at THB 813/sqm/month. 

While the rent remained relatively stable, there was an uptick in rent-free periods and more attractive incentives on offer. The market occupancy also saw a slight decrease of 0.2% Q-o-Q, reaching 78%. 

Here’s more from Knight Frank:

We observed significant leasing momentum, especially from businesses in the manufacturing, information technology, and business services sectors. In addition, green buildings still continue to outperform traditional buildings in terms of demand. Looking ahead to future supply prospects, the total space for office projects currently under construction or in the pipeline amounts to approximately 1.62 million sq m, and this quarter alone has seen an addition of 48,000 sq m.

In this highly competitive leasing landscape, we have seen a growing number of landlords expand their products and services to differentiate themselves and address the evolving needs of their prospective tenants. There is a rising trend among landlords offering a built-to-suit (BTS) solution, primarily targeting larger and more established companies that can commit to long-term leases. 

This arrangement allows tenants to design specific amenities and optimise their space right from the outset, ensuring that their unique business requirements and long-term objectives are satisfied. Moreover, the costs associated with the build-out are distributed throughout the lease term, enabling tenants to sidestep significant upfront capital expenditures. 

Apart from the build-to-suit solution, the ready-to-move-in model is another concept increasingly adopted by landlords. This option is geared towards businesses that might have previously chosen co-working spaces due to their flexibility, convenience, and easy setup process. Ready-to-move-in spaces are typically designed to align with modern and hybrid workstyles and are aimed at smaller or newer businesses seeking more privacy than co-working spaces can offer. 

In addition, these move-in-ready units help simplify the complexities of office setup, reduce the substantial capital expenditure required for the fitting out, and provide businesses with the flexibility to scale their operations in response to market demands. However, this convenience comes with a higher rental charge, usually in the range of 40-50% above the standard rates.

Mr. Panya Jenkitvathanalert, Executive Director of Office Strategy and Solutions at Knight Frank Thailand, has noted that, "The office market has seen a notable uptick in activity, energised by the completion of new buildings that offer businesses a wider array of choices. At the same time, the trend towards sustainability and well-being continues to grow, becoming key considerations for companies when setting up new offices or making relocation decisions."