Thunsrisiam Co, the owner of Mahatun Plaza and Thai CC Tower, wants to develop an office building on Rama II Road because land costs there are lower than in the central business district (CBD) and it hopes to capitalise on demand away from inner-city locations.
Korrawit Sawatyanon, the general manager, said the new office tower is planned to be a recurring-income asset, likely replacing Mahatun Plaza, a 34-year-old office building on Ploenchit Road.
Mahatun Plaza, with 100% occupancy, is located on a leasehold plot for which the leasehold contract was renewed with 16 years remaining.
"Land prices in the CBD are above 1-2 million baht per square wah, making new office development not worth the investment," Mr Korrawit said. "Competition in inner-city areas is fierce, with a large amount of new office supply coming soon."
The Sawatyanon family, whose main business is making rope and fishing nets under Siam Brothers Corp, has a plot of two rai on Rama II KM2, where the land cost is about 100,000 baht per sq wah.
The family is looking for additional plots nearby for either development of an office tower or home offices because the location is close to an expressway and is scheduled to have an extension of the Purple Line electric rail in the future.
On Friday, Thunsrisiam opened MS Siam Tower, a 38-storey office building on seven rai at Rama III and Industrial Ring roads, with an investment of 2.6 billion baht.
It is the firm's first office development in 25 years after Thai CC Tower, one of the first office buildings on Sathon Road, in 1994. The tower is located on a leasehold plot owned by the Thai-Chinese Chamber of Commerce.
The company has seven rai remaining close to MS Siam Tower, with plans to develop an office building once MS Siam Tower reaches full occupancy. This 14 rai was a non-performing asset purchased from Bank of Ayudhya in 2015 with a land cost of 200,000 baht per sq wah.
Completed in the first quarter this year, MS Siam Tower has a total lettable area of 43,000 sq m, rent of 650 baht per sq m per month and an occupancy rate of 60%.
Some 40,000 sq m is office space, of which one-fourth is leased by IT firm SVOA Plc, which relocated from SVOA Tower on Rama III Road.
"We expect to have full occupancy by the end of 2020, as there is office demand spilling over from the CBD," said Mr Korrawit, the family's second generation. "The break-even period for MS Siam Tower is within 14 years with a yield of 8-9% a year."
MS Siam Tower is the first LEED-certified green building on Rama III Road and the first new office development in the past 11 years after Supalai Tower.