The occupancy rate for Bangkok office space is expected to keep dropping over the next few years because of the enormous supply of more than 1.6 million square metres in the pipeline.
Panya Jenkitvathanalert, executive director of office strategy and solutions at property consultant Knight Frank Thailand, said the occupancy rate for Bangkok office space has declined continuously since the first quarter of 2018, which set a high of 93%.
"Based on anticipated future supply of 1.62 million sq m expected for completion between 2024 and 2028, the office occupancy rate in Bangkok is projected to experience a consistent decline over those years," he said.
The majority of the new supply is slated for next year, totalling around 650,000 sq m, with over half or roughly 390,000 sq m located in the central business district (CBD).
Around 385,000 sq m each will be completed in 2025-26 and the remaining will be finished in 2027-28.
In the third quarter of 2023, the overall occupancy rate of Bangkok office space across all grades dropped to 78% from 79% in the second quarter, and 81% in the third quarter of 2022.
By grade, the highest occupancy rate was grade A with 82%, followed by grade C with 78% and grade B with 77%, with all of them experiencing a decline from 87%, 79% and 80%, respectively, in the same period of last year.
By location, while all areas in the CBD showed a quarterly decrease in occupancy rate, all areas in non-CBD, except Bang Na-Srinakarin, had a quarterly increase.
In the third quarter of 2023, average asking rent declined by 0.3% quarterly to 813 baht per sq m per month, but it rose by 1.3% from the same period of last year.
All areas except Phetchburi-Rama IX-Ratchadapisek saw a year-on-year growth in asking rent.
"While the rent remained relatively stable, there was an uptick in rent-free periods and more attractive incentives on offer," said Mr Panya. "We saw significant leasing momentum, especially from businesses in the manufacturing, IT and service sectors."
As of the third quarter of 2023, the total office supply in Bangkok reached 5.99 million sq m, increasing by 25,000 sq m or 0.4% from the second quarter.
The newly added supply came from Quant S25 on Sukhumvit Soi 25, P23 on Sukhumvit Soi 23 and Sukhumvit Hills near Bangchak BTS stations.
While the total supply rose by 5.4% from the third quarter of last year, the supply from green buildings surged by 26.8% to reach 1.34 million sq m.
The overall net absorption figure in the third quarter was 11,000 sq m, notably slower compared to the 53,000 sq m recorded in the second quarter of 2023.
The net absorption for green space remained positive at 27,900 sq m, whereas that for non-green space turned negative at -16,900 sq m. This suggested a trend where some occupiers were shifting from conventional office space to green spaces.
"The office market saw a notable uptick in activity, energised by the completion of new buildings that offer businesses a wider array of choices," said Mr Panya.
He added there was a growing number of landlords expanding their products and services to differentiate themselves and address the evolving needs of their prospective tenants.
"There is a rising trend among landlords offering a built-to-suit solution, primarily targeting larger and more established companies that can commit to long-term leases," he said.
This arrangement allows tenants to design specific amenities and optimise their space right from the outset, ensuring that their unique business requirements and long-term objectives are satisfied.