Office market remains robust

Office market remains robust

Despite work-from-home policies challenging demand, the office market will continue to be robust and attract overseas investment if Thailand can contain the outbreak after reopening, says property consultant Colliers International Thailand.

Phattarachai Taweewong, associate director of research and communications, said Thailand will be viewed as safe if the government can cope with the virus outbreak.

"If we can control the situation well after reopening, this will attract overseas investment," he said.

As the outbreak may affect office demand in the future, landlords should be more flexible by downsizing rental office space in order to rent out faster or making a lease contract shorter than three years, said Mr Phattarachai.

Compared with the retail, hotel and residential sectors, the office market was less affected by the Covid-19 outbreak, but some landlords offered discounted rent to tenants hit by the pandemic, such as hospitality and export sectors.

"Discounts will have a minimal impact on growth of overall rent this year as the discounts are very slight," he said.

"But if the situation after reopening worsens, office demand will be sluggish as many businesses may downsize."

Mr Phattarachai said landlords offered discounts since last month of 3-5% until the economy reopens, but most requests from tenants were for a temporary delay of rent payment for an additional 3-6 months.

"The office market, particularly grade A, remained strong as leases are for the long term, or 3-5 years," he said. "Working from home has not affected office demand yet, with staff returning to work."

According to Colliers, Bangkok office supply totalled 8.86 million square metres as of the end of the first quarter, with three new buildings adding to the market a combined lettable space of 57,071 sq m.

Demand in the period was around 45,000 sq m, mainly driven by co-working space, financial institutions and the government sector.

Each asked for a large space of more than 3,000 sq m, boosting the occupancy rate to over 80% at some office towers that were completed and opened in the first quarter.

The average overall occupancy rate in the first quarter was 95.3%, down 0.6% from the fourth quarter last year. The average rent for grade-A office space was 1,115 baht per sq m per month, up 0.3% quarter-on-quarter.

There will be 1.45 million sq m of future office supply gradually completed from 2020-2025, said Colliers. Of this amount, 58% will be in the central business district and 82% will be grade-A.

For the second to fourth quarters this year, there will be 329,255 sq m completed, projected Colliers.

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