Bangkok Grade A office vacancy rate to hit 20.3% by year-end

Tenants are expected to continue moving out of older prime buildings.

According to JLL, prime net absorption in Bangkok’s office property market totalled 37,800 sqm in 1Q22. Large positive movement in the quarter came from pre-commitment tenants moving into O-NES Tower. Large-size corporates continued to downsize, while pre-committed tenants have not yet moved into new completions.

Known leasing volumes in the quarter recovered to 26,000 sqm, with half consisting of new lettings, in-situ expansions and relocations. The remaining were renewals.

Here’s more from JLL:

New completions in 1Q22 totalled 46,000 sqm, which included Vanissa and 140 Wireless. Both projects are located in Central Bangkok, and they secured approximately 40% pre-commitment. Total prime stock increased to 1,472,800 sqm.

The CBA prime vacancy rate remained stable in 1Q22 from the previous quarter, at 18.8%. We expect a slight compression in the next quarter when new and recent completions fill up.

Rising capital values amidst flat rents

Prime gross rents remained stable at THB 932 per sqm per month, with minimal changes q-o-q and y-o-y. Landlords were unlikely to offer significant discounts, while new completions are offering gross rents similar to the market average. Net effective rents declined by -3.0% y-o-y to THB 715 per sqm per month due to high operation costs and a change in property tax.

Capital value growth picked up by 4.1% y-o-y. This was largely the result of higher construction costs, mainly steel products which are widely used in office construction and logistics costs. Market yield compressed to 5.4%.

Outlook: High competition should compress yields to record low

By end-2022, One City Centre (55,700 sqm) plans to open. CBA stock should total 1.53 million sqm. Pre-leases across new and recent completions became more solid, yet tenants should continue moving out of older prime buildings. Thus, the vacancy rate should reach 20.3%.

We expect minimal changes in gross rents; however, the increase in outgoings should pressure net effective rents to compress further. Declining rents and high capital values should in turn compress market yield to 5.35%.

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