Despite Thailand's economic slowdown in the first half of the year, the business sector has continued to expand, reflected in firms acquiring more office space in Bangkok, says property services firm Jones Lang LaSalle.
Suphin: Limited impact on offices
Managing director Suphin Mechuchep said experience shows a correlation between the demand for office space and economic growth.
But it may be too early to say to what extent the recent slowdown will affect the Bangkok office market.
"Thailand's weaker economic outlook has affected sentiment in the business sector, as clearly reflected by the Thai stock market's slump and sluggish consumer confidence," said Mrs Suphin.
"But the actual impact of the first-half slowdown on the Bangkok office market appears limited."
The latest study by Jones Lang LaSalle reveals strong demand in the Bangkok office market this year. During the first half of 2013, the net take-up level of office space across Bangkok was 95,830 square metres, compared with 185,600 sq m taken up in all of 2012.
Yupa Sathienpabayut, director of office leasing at Jones Lang LaSalle, said the Bangkok office leasing market has remained busy.
"Though we have seen fewer inquiries from new business set-ups this year, many firms, including those that were newly established, are now expanding," said Ms Yupa.
Despite negative economic news, many large lease transactions are under negotiation and none has been cancelled, she said. As a result, Jones Lang LaSalle expects leasing transaction volume in the Bangkok office market to be on par with 2012, if not higher.
Many companies have sped up the lease negotiation process to avoid further growth in rents and ward off competition for increasingly limited space in prime office buildings.
On the other hand, some companies have delayed leasing decisions, due more to tough negotiations with landlords than any economic concern.
According to Jones Lang LaSalle data, average rent for Bangkok office space stood at 455 baht a sq m a month at the end of June 2013, up 11.8% from a year earlier. "There are more months for Thailand to tackle its economic woes this year," said Mrs Suphin.
"But if economic growth continues to contract in the second half of the year, demand in the office market will inevitably be affected. Having said that, limited new office supply planned for completion in Bangkok over the next 12 months may help soften the impact."