Office rejig proposed as demand dips

Office rejig proposed as demand dips

JLL suggests owners add new features

Suphin Mechuchep, chairperson of JLL Thailand.
Suphin Mechuchep, chairperson of JLL Thailand.

Old office buildings should be renovated to retain tenants amid lower demand driven by larger new supply of more than 2 million square metres in 2022-26 and changing behaviours, according to property consultant JLL Thailand.

Suphin Mechuchep, JLL's chairperson, said landlords of old office buildings in good locations should modernise their properties, adding amenities such as coffee shops, fitness, wellness centres or restrooms with touchless technology.

"Office market competition will increase due to several factors, not only a rise in the vacancy rate of existing supply during Covid-19 but also an influx of future supply slated for the next five years," she said.

According to market research by JLL, Bangkok office supply totalled around 9.9 million sq m as of 2021.

New annual supply soared extremely high in the past two years at 470,000 sq m in 2021 and 350,000 sq m in 2020.

During 2022-26, around 440,000 sq m of new supply will be completed per year or a total of 2.2 million sq m in five years.

Meanwhile, office demand last year shrank to 70,000 sq m in a net absorption which accounted for less than half of the average amount in the pre-pandemic period or 145,000 sq m per year during 2014-19.

In 2020, the absorption rate was 122,000 sq m.

"People's lifestyles and behaviours have changed since the pandemic," she said. "To comply with fast-changing technology and social distancing, they shifted to work from home or from anywhere outside the office," she said.

The decreasing demand resulted in a higher vacancy from lower than 10% in 2015-20 to 15% last year.

More supply and less demand also weakened average monthly rent of office in all grades by 1.3% year-on-year to 618 baht per sq m in 2021.

For grade A space, the rental rate dropped 2.8% to 908 baht, said Mrs Suphin.

"With future supply being added, vacancies will continue to rise, but rents will likely drop by 1-2% which is similar to the past two years," she added.

She suggested existing office buildings adjust themselves by adding features like hot desks in common areas as some office workers may be required to go back to physical sites a few times a week.

"They may install technology to improve indoor air quality or help reduce carbon emissions. New supply should apply energy-conservation certificate LEED or WELL to draw tenants," said Mrs Suphin.

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