Office, condominium sectors lead strong property market in first quarter

Demand for office space remained strong as corporate space users continued with consolidation and expansion plans, raising both occupancy and rental rates. Occupancy rose from 88.5 per cent to 89 per cent, translating to a net absorption level of 8,520.72 square metres. Average rent also rose by 2.3 per cent on quarter to Bt675 per square metre per month, reflecting the highest growth in 15 straight quarters.
With no supply coming on to the market, prime office stock remained at 1.7 million square metre. The lack of new office space is aggravating the situation, particularly in the Grade A central business district (CBD) office market. The absence of new supply until late next year is likely to provide advantages to landlords in terms of uplift in occupancy.
Space pressures will push rents upwards possibly to Bt1,000 in selected prime buildings.
Low Ming Tze, associate director of consulting and research at DTZ Thailand, said yesterday that stability in politics and the rebound in regional economies will continue to shore up corporate confidence and their business expansion strategies, creating a positive leasing environment in the short term.
Nonetheless, the mismatch between space availability and tenant demand will continue to drive rental increments at least until new space comes onboard next year.
An estimated 2,965 units were launched in the Bangkok CBD, up 53 per cent from 1,900 units in the last quarter of last year. Popular residential areas within the CBD are Sukhumvit, Phyathai and Surasak-Sathorn. The bulk of launches were in Surasak-Sathorn and Sukhumvit. Recent launches in the CBD continue to be dominated by major players, particularly local listed developers.
Low said the condo launch frenzy has not subsided as consumers continue to snap up units that are priced within their mortgage or purchasing means amid attractive down-payment schemes. Local developers are responding by launching projects in locations close to mass-transportation lines and with amenities, which have become key factors for many local purchasers.
As developers pass high land and construction costs to homebuyers, CBD condo prices will continue to rise more sharply. High-rise condo projects in attractive neighbourhoods such as Sukhumvit and Sathorn are now commanding prices of at least Bt120,000 per square metre.

RESALE VALUES UP
Moving in tandem with the primary market, capital values for CBD resale condos rose 0.9 per cent quarter on quarter to reach an average of Bt86,000 per square metre. As prices of launches continue to rise strongly, selective buyers are opting for secondary properties offering value for money, despite slightly inferior factors such as age and quality.
Rising land and construction costs are the main barriers of entry for smaller developers, which will likely seek opportunities in fringe and suburban areas.
Punnee Sritunyalucksana, director of retail, said strong purchasing activity from domestic consumers and tourists has been the main driver for retailer activity. Many foreign retailers continue to actively seek debut opportunities in the Bangkok retail scene.
“As the retail scene becomes more sought after among existing and new brands, we see developers and landlords continuing to invest in existing projects in terms of expansion and renovation work and also to introduce new projects,” Punnee said.
There were no major movements in the average occupancy of both downtown and midtown areas, which hovered at a healthy 91.6 per cent and 96 per cent. The absence of new supply resulted in a lack of significant movement in both locations.
The capital’s downtown retail stock increased by 41,664sqm to 1.15 million square metres. New supply came from the completed renovation of Siam Centre and the opening of One Fenix Square. In midtown Bangkok, there were no completions, leaving retail stock unchanged at 582,736sqm.
Average rent for retail space was unchanged for downtown and midtown locations at Bt2,320 and Bt1,570. Rent is expected to increase at a gradual pace of 1-2 per cent per year until 2015 under a conservative scenario.
DTZ and UGL Services are now united under a single global brand – DTZ, a UGL company.