Q3 2011 | office

Bangkok office Market

thailanD

Bangkok Office Market

highlightS
Occupancy rates fall in CBD on back of significant new supply. Sathorn Square and Park Ventures ecocomplex opened their doors in Q3 2011, adding around 100,000 sq m to the CBD. Rental rates remain largely unchanged q/q. maRket inDicatoRS
Q2 2011 - Q3 2011 new Supply DemanD RentalS occupancy

Global financial fears are likely to maintain low office relocation and upgrades for the next quarter.

occupancy Rate in 3 main locationS, Q1 2009 Q3 2011

Source: colliers international thailand research

the occupancy rate in the cBD area fell from the previous quarter by nearly 0.6%, due to two new buildings being completed with a total area of around 100,000 sq m which has directly affected the occupancy rate.

The Northern Fringe occupancy rate increased by around 0.25% despite two office buildings being added to the market in Q3.

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Bangkok office Market rePort | Q3 2011 hiStoRical Supply

commulative Supply

Source: colliers international thailand research

More than 118,200 sq m has been or is scheduled to be completed in 2011, approximately 100,000 sq m in cBD area and the rest in the

Northern Fringe area. At the end of 2011 office stock in Bangkok will be around 8,016,000 sq m.

Supply by location, Q3 2011

Source: colliers international thailand research

The CBD area represents the biggest share of the office building market in Bangkok with around 36% of total supply, followed by the Northern

Fringe area and Outer CBD area with 20% and 13% respectively. Overall office supply is dispersed widely throughout the city.

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Bangkok office Market rePort | Q3 2011 FutuRe Supply

FutuRe Supply by location

Source: colliers international thailand research

Nearly 285,084 sq m of office space is scheduled to be supplied in Bangkok in the next four years in four zones, with the lions share expected in 2014. Eight office buildings are scheduled to be completed in the Northern Fringe area in the next four years. Overall expected

additional new supply will represent a 2.7% increase in total supply with more than 13% for the Northern Fringe area. Over the period of four years this presents a limited amount for the market to absorb.

DemanD take up
occupancy Rate by location, Q3 2011

Source: colliers international thailand research

the outer city West area still commands the highest occupancy rate for Q3 2011, and the Outer City North has the lowest occupancy rate. The

Southern Fringe occupancy rate recorded the second lowest figure due to its location away from mass transit lines.

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Bangkok office Market rePort | Q3 2011

actual anD FutuRe eStimate oF occupancy RateS

Source: colliers international thailand research

The effect of the introduction of Sathorn Square and Park Venture Ecocomplex in Q3 2011 are likely to have a short term detrimental effect on occupancy after a recovery in H1 2011. However with modest growth predicted for the following two years and a limit on new supply, Colliers

international thailand predicts a gradual but sustained rise in occupancy rates in 2012. However the recent downturn in global economic conditions is likely to continue to dampen sentiment and therefore defer office relocation and expansion to a certain degree.

DemanD DRiveRS
newly RegiSteReD FiRmS DuRing JanuaRy 2009 auguSt 2011

Source: Department of Business Development and colliers international thailand research

Since January 2011 onwards more than 2,000 new companies registered at the Department of Business Development and although volatile on a

month to month basis the trend seems to be in a positive direction which bodes well for office demand.

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Bangkok office Market rePort | Q3 2011

expoRtS FRom thailanD on a monthly baSiS

Source: Bank of thailand and colliers international thailand research

Industrial growth is the main driver that powers the office market as it leads to the need for trading, financial, legal and insurance services, amongst others, to support it. Exports started to recover from the GFC in

2009 with a steady pattern of growth despite setbacks from political disturbances.

Rental Rate, Q3 2011

Rental Rate by location

Source: colliers international thailand research

Unsurprisingly the cBD commands the highest rental rates due to the location and number of grade A buildings. Rents in the Outer CBD dropped while increases were recorded in the CBD and Northern Fringe areas. This could be explained by the fact that a significant number of offices in the Northern Fringe are located close to both BTS and MRT as

well as Srirat Expressway, while most offices in the Outer CBD are located some distance from mass transit lines and many are relatively old with smaller floorplates. Office buildings located near a mass transit station are preferable for both employees and business visitors alike.

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Bangkok office Market rePort | Q3 2011

Rental Rate by gRaDe Q3 2011

Source: colliers international thailand research

Grade A buildings command higher rentals than grade B buildings. There is also some distinction between B & C grade offices although not so pronounced.

Is not surprising that the rent of grade A building higher than grade B & c, due to most of grade a buildings being located in the cBD area and the area along the mass transit system.

hiStoRical Rental Rate in thRee main locationS, Q1 2009 Q3 2011

Source: colliers international thailand research

In Q3 2011, rental rates for office buildings in the CBD area remained more or less the same when compared to Q2 2011. In light of the current

softened market conditions landlords have found it difficult to raise rents during renewal negotiations.

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Bangkok office Market rePort | Q3 2011

Rental Rate oF oFFice builDing in bangkok by DiStance FRom btS / mRt (metReS), Q3 2011

Source: colliers international thailand research

Selling prices for condominium projects closer to mass transit station tend to be higher and, the same seems to be the case for offices. Being located near a mass transit station is preferable for both employees and

business visitors alike. Recently a number of offices have direct access to a BTS station that further adds to the appeal.

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Bangkok office Market rePort | Q3 2011 FoRecaSt

After a significant increase in new supply in the CBD for Q3 2011 the next few years are expected to see no new supply coming on-stream in the CBD. Increasing land prices in the urban areas, especially close to the mass transit lines has meant that office development is scheduled to be located in the fringes, primarily in the Northern Fringe area. Retail and office developments along Ratchadapisek road, especially in the vicinity of rama iX, are likely to lead to an alternative cBD location that can compete with lower rentals and put pressure on the existing CBD area. However the CBD may simply expand to encompass the new growth areas. The recent deterioration of the global financial system is likely to affect office expansion and relocation even after the political situation in Thailand has stabilized following the election. However, overall inventory levels in most significant economies remain low compared to the advent of the global downtown in 2008 allowing room for growth. Also the sovereign debt issue has not significantly worsened but Greeces impending default has shaken bond markets and investors and put other larger economies in the unwelcome spotlight along with a fear of lack of cohesion from the Eurozone countries and within the USA for creating overarching mechanisms that can provide support for fragile banking systems. Also lacking are credible plans to reduce the high levels of government debt to GDP ratios in the longer term. At present news relating to the global financial situation is a trying one for any investor or business with sentiment and share prices falling with alarming frequency. At present this has not translated into a reduction of exports for Thailand and is unlikely to have any fundamental effect on the Thai economy. However the current situation will prolong pent up demand for office space that has afflicted the office market in Bangkok since 2006. Although it is difficult envisioning Bangkok supplanting Singapore as the financial hub of the ASEAN area, the growing interest in Cambodia, Laos, Myanmar and Vietnam could see Bangkok as a sub-regional centre supporting theses frontier markets and further incentives for regional Operating Headquarters by the Board of Investment could allow the Bangkok office market to benefit from this emerging trend.

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Bangkok office Market rePort | Q3 2011

appenDix

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Bangkok office Market rePort | Q3 2011 oFFice Zoning

the general lack of zoning restrictions in Bangkok has led to the existence of significant office supply in a wide range of locations in the city and how the market has perceived the CBD has evolved over the past 20 years. The original CBD was located at the Silom and Surawongse roads, home to the vibrant gold market and other trading businesses. The development of modern office buildings in the nineties, with a larger floor plate could not be accommodated in this area and the CBD began to take shape in the eastern section of Sathorn road.

While Sukhumvit road up to asoke is primarily perceived as an entertainment and residential area, a large number of grade a buildings sprung up in the nineties and also in the past few years. It is therefore considered as part of the CBD. As a working definition the CBD, for the purposes of office classification, is where a significant number of Grade A office buildings are located. As such the old CBD is now considered the Outer CBD as well as Petchburi road where more grade B offices are located. Over time this structure could evolve.

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Bangkok office Market rePort | Q3 2011 collieRS inteRnational thailanD management team

512 offices in 61 countries on 6 continents

A leader in real estate consultancy worldwide 2nd most recognized commercial real estate brand globally 2nd largest property manager 979 million square feet under management Over 12,500 professionals

OFFICE & INDUSTRIAL SERVICES narumon rodsiravoraphat | Senior Manager RETAIL SERVICES Asharawan Wachananont | Senior Manager ADVISORY SERVICES | HOSPITALITY Jean Marc garret | Director PROJECT SALES & MARKETING Monchai Orawongpaisan | Senior Manager RESIDENTIAL SALES & LEASING Napasawan Chotephard | Manager aDViSorY SerViceS napatr tienchutima | associate Director REAL ESTATE MANAGEMENT SERVICES Bandid chayintu | associate Director inVeStMent SerViceS Nukarn Suwatikul | Associate Director Wasan rattanakijjanukul | Senior Manager reSearcH tony Picon | associate Director Surachet kongcheep | Senior Manager VALUATION & ADVISORY SERVICES Nicholas Brown | Associate Director Phachsanun Phormthananunta | associate Director Santipong kreemaha | Senior Manager Wanida Suksuwan | Manager PattaYa office Mark Bowling | Senior Sales Manager Supannee Starojitski | Senior Business Development Manager / Office Manager

coLLierS internationaL thaiLand: Bangkok Office 17/F Ploenchit Center, 2 Sukhumvit road, klongtoey, Bangkok 10110 thailand
tel +662 656 7000 Fax +662 656 7111 email info.th@colliers.com

Pattaya Office 519/4-5, Pattaya Second Road (Opposite Central Festival Pattaya Beach), Nongprue, Banglamung, Chonburi 20150 tel +6638 427 771 Fax +6638 427 772 email info.pattaya@colliers.com

ReSeaRcheR: thailand tony Picon associate Director | research email antony.picon@colliers.com

ReSeaRcheR: thailand Surachet kongcheep Senior Manager | research email surachet.kongcheep@colliers.com

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