An influx of new property supply from 10 world-class mixed-use development projects located in the central business district (CBD) is set to transform Bangkok and Thailand, according to property consultant Jones Lang LaSalle (Thailand) (JLL).
Michael Glancy, country head, said the Thai real estate market has evolved significantly since the late 1990s.
With the arrival of the 10 mixed-use projects, Bangkok now boasts some of the best and most affordable commercial real estate in the Asia-Pacific region.
"Over the next four years, Bangkok will experience an unprecedented phenomenon with the completion of a substantial amount of grade A office spaces, prime retail malls, luxury condos and luxury hotels from these mixed-use projects," he said.
The total amount will comprise around 911,000 square metres of grade A office space, 534,000 sq m of retail space, 5,400 condo units and 5,900 luxury hotel keys. These megaprojects are accelerating the flight-to-quality trend.
From 2023 through the first quarter of 2024, leasing activities of seven new prime office buildings in the CBD saw a total take-up of 208,000 sq m which is over 4.5 times higher than the average annual demand of 46,000 sq m in the CBD over the past decade.
Anawin Chiamprasert, JLL's head of research and consulting, said half of the total CBD take-up moved to One Bangkok, a new mixed-use project on the corner of Rama IV-Wireless roads.
"The Bangkok office market is perceived to be facing oversupply, but in reality tenants are relocating from old buildings that no longer meet their requirements to new towers," said Mr Anawin.
He said 147,000 sq m represented a net absorption of buildings aged less than five years old. Part of this demand came from tenants based at office towers that are over 25 years old as JLL found a significant fall in the occupancy rate at these buildings, totalling around 150,000 sq m.
"Flight-to-quality or relocations from older to newer buildings will be a trend that continues," he said. "This phenomenon will not only occur with Bangkok but also in major cities around the globe, such as New York and Singapore."
Of the 208,000 sq m in total take-up, JLL closed deals for 67,295 sq m, marking an increase of more than 20% from 55,000 sq m in 2022.
Roughly 63,000 sq m or 94% were relocations from old buildings while 4,295 sq m were new lettings.
All of the new lettings were from multinational corporations (MNCs) with the majority of them in the retail sector.
In the prime CBD, MNCs' share over the past 10 years was 65% on average, suggesting Bangkok office space in the CBD areas depends mainly on MNCs.
Since 2019, 80% of the new lettings among MNCs came from the leading markets, led by Japan which accounted for 24%, followed by France (18%) and the US (16%), with Singapore and the UK coming in fourth and fifth, respectively.