Bangkok office rents decline for the fifth consecutive quarter  | Real Estate Asia
, Thailand

Bangkok office rents decline for the fifth consecutive quarter 

Rents dropped 5.2% y-o-y in Q3 2021.

According to JLL, prime gross rents fell by -1.6% q-o-q and -5.2% y-o-y to THB 910 per sqm per month, with the substantial y-o-y decreases among three large buildings, i.e., Exchange Tower. Mercury Tower, and Sathorn Prime. Net effective rents were pressured down by -1.8% q-o-q and -4.8% y-o-y to THB 716 per sqm per month in 3Q21. 

Prime capital values fell slightly by -0.6% y-o-y to THB 153,344 per sqm. This, in turn, compressed market yields further to 5.60%. 

Here’s more from JLL:

We recorded -12,700 sqm of net absorption across the CBA prime grade buildings in 3Q21. Large-sized occupiers continued to surrender parts of their existing spaces to reduce costs amid the ongoing COVID-19 outbreak. While manufacturing companies continued relocating out of the city centre, tech firms and retailers expanded their footprints into the surrendered spaces. 

New deal activity in the quarter totalled approximately 18,000 sqm with most being new lettings. The majority of new deals were pre-commitments in upcoming buildings. 

Vacancy picks up after slow leasing activity in new completions 

Two prime office projects completed in 3Q21, including Kronos Tower on North Sathorn and SIAMSCAPE on Phayathai Road. Total prime stock increased to 1.34 million sqm. 

The vacancy rate increased sharply to 15.4% in 3Q21, as demand continued to shrink and new completions received minimal pre-commitments. We expect the vacancy rate to improve in the next quarter when Vanissa opens with moderate pre-commitments. 

Outlook: High vacancy to further pressure rental growth downward 

There are four prime projects scheduled to open within the next 12 months, totalling 127,000 sqm. Pre-commitments across three for-lease projects currently averaged to 30%. Thus, we expect that by the end of the year the vacancy rate should slightly fall to 14.5%. 

With Bangkok's muted economy and a wave of new supply coming to the market, we expect prime gross rents to decline further by -2.0% y-o-y but pick up slightly q-o-q by end-2021. Rent-free periods are not as flexible as before across older buildings, which puts pressure on net effective values. Thus, we see market yields compressing to 5.55% by end2021 and the market shifting to a neutral dynamic.

 

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