Tight supply could drive Bangkok office rents 5-9% higher this year, says CBRE

CBRE’s research also anticipates that the tight office-supply situation will continue in 2018 and 2019, while the supply situation from 2020 onwards will depend on how many developers start construction on new office projects this year.
The property agency’s research unit, CBRE Research, reports that although office supply in Bangkok has expanded by 140,000 square metres, vacancy has continued to fall to 8 per cent and rents are therefore expected to rise by 5-9 per cent this year, depending on location and grade.
New office supply under construction is limited, with only 225,000 square metres due to be completed this year, and 167,000 square metres due for completion in 2018. 
This has led to tenants having to sign leases in new buildings even before construction has been completed, according to CBRE Research.
Bangkok had a large surplus of office space supply for many years, meaning that tenants had a wide variety of space in completed buildings, and did not need to commit to buildings while they were still under construction, the company said.
However, the office-vacancy rate dropped, for the first time since the early 1990s, to below 10 per cent in 2013, and has continued to fall since, limiting tenants’ choices in existing buildings, and particularly in the best-quality central-business-district (CBD) developments with direct access to mass transit.
Moreover, the choice of available space for large users in completed buildings is even more limited, and there are currently no completed CBD grade-A office buildings with more than 5,000 square metres on consecutive floors, CBRE said. 
This means that tenants now have to sign leases on buildings that are still under construction in order to secure offices that match their requirements, said NithipatTongpun, executive director – head of CBRE’s Office Advisory and Transaction Team.
Meanwhile, property agency Knight Frank has announced the results of its “Asia-Pacific Office Occupier Survey 2016/17”, carried |out among more than 200 companies located in Asia-Pacific spanning across eight industries: consulting; consumer products; finance/accounting/legal; manufacturing/agriculture; pharmaceutical/biotechnology/healthcare; petroleum/energy; public sector/ non-government organisations; and technology and communication.
Marcus Burtenshaw, head of Commercial, Knight Frank Thailand, said 2016 had been a difficult year for many businesses around the region, and this was reflected by the findings in its survey. 
“Faced with economic uncertainty and increased competition this year, more respondents to our survey chose rent as their most important building-selection criteria than ever before, putting cost control ahead of image and accessibility.
“Yet, many businesses are still not looking at their leases until the last six months of the term, which leaves them with insufficient time to properly investigate and weigh alternative accommodation scenarios that are open to them. 
“Knight Frank recommends tenants to review their options at least 12 months before their lease expires, providing time to conduct renewal negotiations and if needed, still provide time to find, secure and decorate an alternative location, ” he said.
 
India and China
Viral Desai, head of Occupier Solutions, Knight Frank India, commented: “The office space in India has been extremely buoyant in the last year. It has seen absorption of approximately 40 million square feet [3.7 million square metres] of space. 
“The demand is largely driven on account of two factors – first, large domestic consumption driven by BFSI [banking, financial services and insurance], manufacturing and pharmaceuticals and second, technology talent. 
Given the technology talent that exists in India, a lot of business from North America and Europe comes to India,” he said.
Peter Zhang, head of Tenant Representation, Commercial Services, Knight Frank Shanghai, said that in China, prior preparation for lease renewals varied between Tier-one, -two and -three cities, given the differing levels of sophistication of landlords and tenants. 
Businesses in Tier-one cities, being more prepared, typically commence negotiations with their landlords at least six months prior to lease expirations, while Tier-two and -three cities typically connect with landlords one to two months prior to expiry, leading to rushed and sometimes above-market rentals, he said. Tenants are exposed to business-continuity risk and unprofessional landlords might just lock down their premises, Zhang added.