AIA Thailand will invest more in office buildings here to increase its property investment to 3.5% of its portfolio in the next five years.
The insurance company aims to have an additional 100,000 square metres of office space by 2020 in a show of confidence in Thailand's economic fundamentals.
The 29-storey AIA Sathorn Tower on Sathorn Road has 38,000 square metres of space for rent. AIA expects the building to be fully occupied nearer the completion of the new Suksa Wittaya skytrain station.
Chief investment officer Sukkawat Prasurtying said office buildings were the best long-term investment choice in Bangkok. The vacancy rate for office space tends to fall while other recurring-income assets such as hotels and serviced apartments are in an oversupply.
According to property consultant Jones Lang LaSalle (Thailand), a lack of high-grade office space in Bangkok in the last quarter of 2015 sent rents rising by more than 2.6% from the previous quarter -- the highest increase in Southeast Asia.
"We are looking for a land plot in prime locations to develop an office building but it's difficult to find one to suit our investment policy as the land price has soared to more than 2 million baht per square wah," Mr Sukkawat said.
Acquiring office towers with tenants is not attractive as owners usually offer an unattractive price while a more interesting building is not offered in the market.
AIA Thailand's investment portfolio totals 700 billion baht, with about 2% for property comprising four buildings. Two buildings are its AIA Tower 1 and 2 on Surawong Road with a total lettable space of 24,000 sq m.
The other two are new towers completed in 2014 and 2015 -- AIA Capital Center on Ratchadaphisek Road with 55,000 sq m and AIA Sathorn Tower on Sathon Road with 38,000 sq m.
With combined value of 10 billion baht, both buildings have Leadership in Energy and Environmental Design certification at gold level. AIA Capital Center has 95% occupancy and a monthly rental rate of 700 baht per sq m.
"We expect the occupancy rate at AIA Sathorn Tower will increase once the new Suksa Wittaya skytrain station starts construction and it will be fully occupied when the station is nearly completed," Mr Sukkawat said.
BTS Group Holdings Plc will spend 450 million baht to construct Suksa Wittaya station between Chong Nonsi and Surasak stations in 2017. It will take 18 months to be completed.
AIA Sathorn Tower has an occupancy rate of 50% with a monthly rental rate of 800 baht per sq m.