By THE NATION
Three office buildings were completed with a combined net area of 78,000 square metres: True Digital Park, MS Siam Tower and Ladprao Hills.
The overall vacancy rate increased from 6.6 per cent in the previous quarter to 7.5 per cent in the opening quarter of 2019. The total net take-up (growth in total occupied space) was at 41,000 square metres, decreasing by 36.1 per cent year on year.
Future office supply continued to rise in the first quarter with construction starting on six more projects. Around one million square metres of new office space was under construction, increasing from 870,000 square metres the previous quarter.
This new space will be completed between the second quarter of this year and 2022.
About 60 per cent of total space under construction in Bangkok will be grade A office space for rent in the CBD, including Mitrtown Office Tower, The PARQ (Phase 1), Vanissa Building, the Unicorn, O-NES Tower, EmSphere, One City Centre, and the first phase of One Bangkok.
With around 1.2 million square metres of office space still at the planning stage where sites have been acquired, CBRE expects to see more construction starts. This will increase the projection of future supply beyond 2021. Although there is a lot of space under construction, most of it will be completed after 2021, meaning options will remain limited until 2020. Mitrtown Office Tower and the PARQ (Phase 1) will be the only two grade A office buildings in the core CBD due for completion in 2019 and 2020, respectively.
“Tenants who need space during this period will need to plan ahead because of limited choices” said Roongrat Veeraparkkaroon, head of advisory and transaction services for offices at CBRE Thailand.
By 2022, the total supply is expected to reach around 10 million square metres. The overall office market is likely to change with new supply exceeding CBRE’s forecast demand due to the amount of new buildings being completed during this period. Meanwhile, vacancies are expected to rise in old buildings and this may force the landlords to offer attractive rents and improve the quality of their space in order to retain or attract new tenants.
The population density of office buildings will be higher because of agile working, hence buildings will need to have the lift capacity to deal with the volume of traffic. Agile working is where employees do not have allocated desks.
More people per floor will require more sophisticated air-conditioning systems to keep constant temperature in all working areas and there will need to be better thermal insulation. The greater staff numbers will also mean that tenants will consider if there are enough toilets.
Tenants are also demanding better supporting amenities in buildings. This will be a major challenge for older buildings, thereby making it harder to retain the best quality tenants.
CBRE believes more tenants will move to agile workplaces, which means they will require less space but pay more rent per square metre as they will need good quality buildings.
The key question is how many companies are willing to pay significantly higher rents to get top quality premises. This will depend on the rental gap between new grade A and older grade A and grade B buildings. If the premium for the best quality buildings is significantly higher than for older buildings, it may be difficult for tenants to get approval for an increased rental budget.