30 YEARS OF THE BANGKOK OFFICE MARKET
Bangkok, 21 June 2018 – 30 years ago, when CBRE established an office in Bangkok, the total office supply was less than one million square metres and the rents were THB 250 per square metre per month.There were no grade A office buildings and the best quality developments were Sathorn Thani, Sindhorn Tower I and Amarin Tower. 30 years on, the total office stock is now almost nine million square metres and average grade A central business district (CBD) rents are just under 1,000 baht per square metre. The top three buildings based on rent levels are Gaysorn Tower, Park Ventures Ecoplex and Bhiraj Tower at EmQuartier.
The first grade A building in Bangkok was Diethelm Towers, now called GPF Witthayu Towers, on Wireless Road which was completed in 1992 and achieved rents of over 800 baht per square metre per month. This was the first building to have variable air volume, air-conditioning improving the ability to keep all parts of the office floor at a constant temperature.
The 1997 Financial Crisis had a huge impact on the Bangkok office market, the closure of the finance companies and downsizing of other tenants meant that in 1998 the total amount of occupied office space fell by almost 300,000 square metres and vacancy rates rose to almost 40%.
Rents in most buildings halved when leases came up for renewal. It was only in 2004 that grade A rentals were able to reach the levels that they were at in 1994.
Some of the biggest changes have been in the design and specification of office buildings. Thai developers have listened to tenants’ requirements in terms of providing column free, regular-shaped floor plates, ceiling heights of more than 2.8 metres, adequate lift provision and sophisticated air-conditioning systems. The highest specification office buildings in Bangkok such as Gaysorn Tower, AIA Sathorn Tower and Park Ventures Ecoplex match the quality of the best office buildings in other countries.
About 80% of the total Bangkok office stock is single ownership buildings and there has been no new strata-title office condominium development for more than 20 years. This is because tenants prefer single ownership buildings because of better management and the ability to deal with a single owner making it easier to expand within the same building.
The way that tenants use office premises has also changed dramatically, in most cases the days of each manager having their own enclosed office are gone and the move has been towards open-plan, flexible work space.
In some cases, companies have moved to activity-based workspace, without each employee having an allocated desk. This has resulted in a much greater population density on office floors requiring better air-conditioning and more efficient lifts.
“Tenants are demanding a greater range of services from landlords and do not just want to pay rent for a concrete box,” said Roongrat Veeraparkkaroon, Director of Advisory & Transaction Services - Office at CBRE Thailand.
Tenants also want a higher specification. “They want to be able to control climate in different areas of the office and to adjust lighting levels. They also require more facilities in the property not just a coffee shop and convenience store,” commented Ms. Roongrat. Some tenants want flexible workspace providers such as serviced offices and co-working space to be in the building.
30 years ago, office tenants were just starting to demand features like fire sprinklers, now they are much more sophisticated and demanding a higher specification and more facilities. Many large multinational and Thai companies are concerned about sustainability and want energy efficient buildings with LEED certification.
A new generation of office buildings are now being designed in Bangkok with construction due to start from 2018 onwards and these buildings will have to cater to the increasingly complex demands from tenants who want higher specifications and a greater range and level of services within the building. Tenants are demanding a much higher standard of property management in terms of maintenance, safety procedures and customer service.
Location has always been a critical factor, but the completion of the BTS skytrain in 1999 changed tenants’ priorities. “Today, almost every tenant CBRE speaks to wants to be near and preferably with direct covered access to a mass transit station,” said Ms. Roongrat.
Rent is still one of the most important factors for tenants when choosing their new office premises, followed by the location, which is how close the office building is both to the CBD and a mass transit station.
Selecting an office building is now not just about location and cost. Recruiting the best employees is challenging and providing an attractive workplace in terms of location, quality of building and the workspace itself can provide companies with a unique selling point to help them win the struggle to attract talent. This means that the quality of design, specification, facilities and services in a building are becoming increasingly important.
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