Bang Na-Trat area likely to start attracting more prime office developments, says JLL
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The Bang Na-Trat area is an alternative business location thanks to its competitive rents and convenient access to both Bangkok's central business areas and the Eastern Seaboard, according to research by Jones Lang LaSalle (Thailand).
JLL managing director Suphin Mechuchep said the area was predominantly known as a major manufacturing and logistics hub east of Bangkok, but over the past few decades, it has emerged as a major commercial location, with a number of retail and office developments rising along the main road.
While the number of major retail centres has continued to increase along Bang Na-Trat Road to serve the fast-growing residential market in the area and customers from downtown Bangkok, the area has seen no growth in new office supply since 1994.
As a result, the office market has been dominated by home offices and ageing office buildings, many of which are poorly managed and outdated in terms of specifications and facilities, she said.
According to the company’s Thailand Property Intelligence Centre, the office market on Bang Na-Trat Road is concentrated in the area between the Bang Na-Sukhumvit intersection and Bang Na-Trat Road km10 and has a stock of 296,000 square metres, only about 30 per cent of which is space of acceptable quality.
Despite the lack of quality supply, demand for high-rise office space in the area has been increasing rapidly as indicated by a declining vacancy rate, currently at 17.4 per cent, which has fallen twice as fast as the market average since 2010.
Importantly, a number of buildings of better quality are now experiencing single-digit vacancy rates.
JLL’s director of office leasing, Yupa Sathienpabayut, added that traditionally, demand for office space in the Bang Na-Trad area came largely from companies that needed easy access to Bangkok’s central business areas and the Eastern Seaboard, as well as to Suvarnabhumi Airport.
Today the area is attracting companies from a wider variety of industries looking to take advantage of relatively low rents and improved infrastructure, with many of these companies choosing to locate their back-office functions in the area, she said.
This trend is continuing as rapidly rising office rents and limited available supply in Bangkok’s central business areas are forcing more companies to consider secondary locations.
“Having said that, the office market on Bang Na-Trat Road is not well equipped to meet this new demand. Most of the buildings of acceptable quality are either nearly or fully occupied,” she added.
“There has been no new office development in this area over the past 20 years as achievable office rents along Bang Na-Trat Road have until recently been too low to offer an attractive return for developers,” she explained.
However, since 2010, office rents along Bang Na-Trat Road have increased more rapidly than the market-wide average during the same period, due to continued demand and tight supply of quality space.
Average rents along Bang Na-Trat have risen from Bt287/square metre/month in 2010 to Bt389 at present, a 35.4-per-cent increase. When compared to the 23-per-cent market-wide increase seen during the same period, it is clear that the area is heating up.
“We have seen a few buildings now asking for Bt600-Bt650/square metre/month,” she said.
These rental levels will be attractive enough to encourage new Grade-A office developments in the area.
There is already one office development project that is under construction on Bang Na-Trat Road – Bhiraj Tower at Bitec. Upon completion in 2016, the 29-storey development will provide 31,880 square metres of lettable space and will be the first prime-grade office building on Bang Na-Trat Road.
JLL believes more will be coming, Yupa added.
