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Q4 2011 provided no new supply to the market which coupled with minimum relocation activity has caused occupancy levels to remain high. 2012 is set to bring new supply to the market in the Northern Fringe and Outer CBD areas although this will represent a minimal increase in overall supply. This lack of new developments is set to continue over the next four years with floor space expected to increase by around 5.5% only. Most companies intending to relocate in the second half of 2011 had to put their plans on hold following the floods. Some major office buildings in the Northern Fringe and Outer City North were hit. Whilst landlords of flood affected buildings took pity on their tenants and reduced rents for the period, many occupiers moved into temporary offices within the dry CBD.
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2010 - 2011
new Supply
DemanD
RentalS
occupancy
Bangkok office MarketthailanD
www.colliers.co.th
Bangkok Office MarkethighlightS Q4 2011 provided no new supply to the market which coupled with minimum relocation activity has caused occupancy levels to remain high. 2012 is set to bring new supply to the market in the northern fringe and outer cBD areas although this will represent a minimal increase in overall supply. this lack of new developments is set to continue over the next four years with floorspaceexpectedtoincreasebyaround5.5%only.
Most companies intending to relocate in the second half of 2011 had to put their plans on hold followingthefloods.SomemajorofficebuildingsintheNorthernFringeandOuterCityNorth werehit.Whilstlandlordsoffloodaffectedbuildingstookpityontheirtenantsandreducedrents fortheperiod,manyoccupiersmovedintotemporaryofficeswithinthedryCBD.
Despitethefloods,overalloccupancyratesinQ42011werelargelyunchangedfromtheprevious quarter. there were slight variances by zone with the outer cBD and northern fringe remaining stablewhilsttheSouthernFringe,WesternFringeandOuterCityNorthregisteredsmallfalls.
rental rates increased in almost every location except the cBD and northern fringe area for Q4.Despite theCBDremainingdry, themajorityofbusinesseswerestill affectedasoffice workersstruggledtocommuteinfromthefloodaffectedareas.Thiscausedmajordisruption whichhasaffectedoutput.Theplansofcompanieswhowereotherwiseproposingtoexpand during this period have been revised accordingly.
TherecoveryprocessintheBangkokofficemarketwasceasedbythelatelyfloodingtheoffice market seems slowdown of leasing activity between october and end of november. the all of businessareinterruptedandtheirplanshavetobepostponed.Thelagdirectlyaffectsdemand forofficespace.
Q4 2011 | office
maRket inDicatoRS
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Mostof theexistingsupplyofofficebuildingswasconstructed in the1990’s(around70%)duringtheperiodofrapideconomicgrowthdrivenbythesurgeinexportsales.ThefirstfiveyearsofthenewmillenniumwereafflictedbytheAsianfinancialcriseswhichcausednewconstruction
projectstogrindtoahaltby2003.Eventhoughthemarket improvedduringthesecondhalfofthedecade,only12%ofcurrentsupplywasbuiltbetween2005and2011.
Morethan118,000sqmofofficespacehitthemarketin2011ofwhich85%was located intheCBDwiththeremainder intheNorthernand
Fringeareas.Bytheendof2011,theBangkokofficestockhadreached8,016,000 sq m.
Source:ColliersInternationalThailandResearch
Source:ColliersInternationalThailandResearch
total Supply aDDeD foR each five yeaR peRioD
hiStoRical Supply in Bangkok
hiStoRical Supply
Bangkok office Market rePort | Q4 2011
aDDitional Supply foR each yeaR
Supply By location, Q4 2011
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Source:ColliersInternationalThailandResearch
Source:ColliersInternationalThailandResearch
ThechartshowstheslowdowninnewofficesupplyfollowingtheAsianfinancialcrises.In2003newsupplyhadgroundtoahalt.Developmentrestartedthefollowingyear,increasingin2005and2006beforefallingbackagainin2007.Thesubsequentyear(2008)producedthelargestvolumeofnewofficespacesincethe1990’swhenover250,000sqm
was released. new supply decreased again in 2009 and dramatically in 2010 as a result in the local political problems coupled with the global financialcriseswhenonlyoneofficebuildingwascompleted.2011newsupplyof twoofficebuildings totalling 118,000sqmwas in linewith2005output.
TheCBDstillhasthelargestsupplyofofficespacealthoughtheNorthernfringe is growing fast due to its lower land values and greater supply of
developmentsites.SuitabledevelopmentsiteswithintheCBDarenowscarcewhichisreflectedinthelandvalues.
Bangkok office Market rePort | Q4 2011
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Thenextfouryearsisexpectedtoseeasmallincreaseinofficesupplywith nearly 440,000 sq m in the pipeline. the northern fringe will experience the largest growth rate with eleven new buildings planned
whichismorethan79%oftheexpectedpipelinesupply.Thisrepresentsamodestincreaseof5.5%inoverallsupplywiththemajorityofbuildingsexpected to complete in 2014.
The Outer City West and Outer CBD areas still enjoy the highestoccupancyratesat87%forQ42011withtheSouthernFringeandOuter
CityNorthhavingthelowestrateof80%.ProximitytotheCity’smasstransitlinestationsisstillasignificantdrivingforceinoccupancyrates.
Source:ColliersInternationalThailandResearch
Source:ColliersInternationalThailandResearch
cumulative futuRe Supply By location
occupancy Rate By location, Q4 2011
Bangkok office Market rePort | Q4 2011
futuRe Supply
DemanD – take up
COLLIERS INTERNATIONAL | P. 5
occupancy Rate in 3 main locationS, Q1 2009 – Q4 2011
actual anD futuRe eStimate of occupancy RateS
Source:ColliersInternationalThailandResearch
Source:ColliersInternationalThailandResearch
Occupancy rates have remained steady since Q3 2011with the CBDincreasing at a slightly higher rate than the outer cBD and northern fringe areas. this is largely as a result of the increase in temporary lettingswithintheCBDduringtheperiodofflooding.Inadditionasthe
two new buildings released in Q3 2011 (Sathorne Square and ParkVentureEcoplex)continuetofillup,CBDoccupancy issetto improvefurther.
occupancy rates over the next year are expected to increase slightly as pipeline demand is set to outstrip the limited new supply expected. the completionofSathornSquareandParkVentureEcoplexinQ32011hashadashorttermnegativeeffectonoccupancyrateswhichwillcontinue
untilthebuildingsfillup.Theincreaseindemandduring2012ishoweverlikely to be constrained by the continuing global economic crises as companiesdecidetopushbacktheirofficeexpansionorrelocationplansfor the time being.
Bangkok office Market rePort | Q4 2011
COLLIERS INTERNATIONAL | P. 6
More than 2,000 new companies were registered in 2011 by the Department of Business Development. although registrations were
significantly down during the flooding, the trend seems to be in anupward direction which should further drive demand in 2012.
Source:DepartmentofBusinessDevelopmentandColliersInternationalThailandResearch
newly RegiSteReD fiRmS DuRing JanuaRy 2009 – novemBeR 2011
Industrialgrowthisthemainforcedrivingtheofficemarketasitcreatesthe need for trading, financial, legal and insurance services amongstothers to support it. Exports recoveredwell from the global financial
crises in 2009 and enjoyed a steady pattern of growth until thewidespreadfloodingattheendof2011.
Source:BankofThailandandColliersInternationalThailandResearch
expoRtS fRom thailanD on a monthly BaSiS
Bangkok office Market rePort | Q4 2011
DemanD DRiveRS
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Rental Rate By location
Rental Rate By location
Source:ColliersInternationalThailandResearch
Source:ColliersInternationalThailandResearch
Unsurprisingly the cBD commands the highest rental rates due to the central location, abundance of grade a buildings and the proximity to the masstransitlinesparticularlytheBTSSkytrain.Rentalrateswithinthe
cBD increased towards the end of 2011, partially driven by the take up of temporaryofficeswhileratesoutsideoftheflooddefencesreduced.
it is not surprising that grade a rents are the highest due to their quality and location in the cBD and along the sky train route.
Bangkok office Market rePort | Q4 2011
Rental Rate, Q4 2011
Rental Rate By gRaDe, Q4 2011
COLLIERS INTERNATIONAL | P. 12
Bangkok office Market rePort | Q4 2011
InQ42011,rentalratesforofficebuildingsintheCBDincreasedattheexpense of the outer cBD and northern fringe (which are outside of the flooddefences).TheNorthernFringehasnowovertakentheOuterCBD
and is commanding slightly higher rents. in light of current market conditions landlords have found it difficult to increase rents at leaserenewal.
Source:ColliersInternationalThailandResearch
hiStoRical Rental Rate in thRee main locationS, Q1 2009 – Q4 2011
Aswithcondominiumprojects,officerentalratesarehigherthecloserthey are to the mass transit line stations. Being close to a station is preferable due to the ease of movement around Bangkok for employees
andbusinessvisitorsalike.Anumberofofficedevelopmentsnowhavea direct pedestrian link to a BTS stationwhich further adds to theirappeal.Thisisreflectedintherentalratesachieved.
Source:ColliersInternationalThailandResearch
Rental Rate of office BuilDing in Bangkok By DiStance fRom BtS / mRt (metReS), Q4 2011
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Bangkok office Market rePort | Q4 2011
Followingthefloodingattheendof2011,thenextyearisexpectedtoseelimited new supply hitting the market with an influx of space in thepipeline for 2014. increasing land prices in the inner cBD, especially in areas along the mass transit lines have lead to a reduction in new development. Most new schemes planned are within the outer fringes, particularly in the northern fringe where land is cheaper and more abundant.Thenumberofnewretailandofficedevelopmentsalongtheratchadapisek road, especially in the vicinity of rama iX is likely to lead to an alternative cBD location which can compete with the existing cBD due to lower rents.
Theimpactofthefloodingcoupledwiththeglobaleconomicslowdownwillaffectthegrowthofcompanies.Itisdoubtfulhoweverthatmanywilldownscaletheirofficerequirements.Intermsoflocation,itistooearlyto saywhich areaswill benefit although CBD space inside the flooddefences and within close proximity to the mass transit line stations is likely to remain the most desirable.
foRecaSt
COLLIERS INTERNATIONAL | P. 14
Bangkok office Market rePort | Q4 2011
appenDix
office Zoning
The general lack of zoning restrictions in Bangkok has lead to officesupply being constructed in a variety of locations across the city. the originalCBDwaslocatedintheSilomandSurawongseRoadswhichishometothevibrantgoldmarkets.ThedevelopmentofthemajorityofBangkok’s modern office buildings in the 1990’s could not beaccommodated within this area and the cBD began to take shape in the easternsectionofSathornRoad.
WhiletheSukhumvitRoaduptoAsokewashistoricallyperceivedasanentertainment and residential area, a large number of grade a buildings sprung up in the nineties and continued to be developed over the subsequent years. this area is now considered part of the cBD with the originalSilomandSurawongse roadsnowclassedas theOuterCBDalongwithPetchburiRoadwheremoreGradeBofficesarelocated.Thisstructure could however evolve further.
COLLIERS INTERNATIONAL | P. 15
Bangkok office Market rePort | Q4 2011
collieRS inteRnational thailanD management team RESEARCHTonyPicon|AssociateDirector SurachetKongcheep|SeniorManager
PROJECTSALES&MARKETINGMonchaiOrawongpaisan|SeniorManager RESIDENTIALSALES&LEASINGNapaswanChotephard|Manager OFFICE&INDUSTRIALSERVICESNarumonRodsiravoraphat|AssociateDirector RETAILSERVICESAsharawanWachananont|AssociateDirector ADVISORYSERVICES|HOSPITALITYJeanMarcGarret|Director ADVISORYSERVICESNapatrTienchutima|AssociateDirector
REALESTATEMANAGEMENTSERVICESBandidChayintu|AssociateDirector
INVESTMENTSERVICESNukarnSuwatikul|AssociateDirector WasanRattanakijjanukul|SeniorManager
VALUATION&ADVISORYSERVICESPhachsanunPhormthananunta|Director WanidaSuksuwan|Manager PATTAYAOFFICEMarkBowling|SeniorSalesManagerSupanneeStarojitski|SeniorBusinessDevelopmentManager/OfficeManager
coLLierS internationaL thaiLand:
Bangkok Office 17/FPloenchitCenter, 2SukhumvitRoad,Klongtoey,Bangkok 10110 thailandtel+6626567000fax+6626567111 email [email protected] Pattaya Office 519/4-5,PattayaSecondRoad(OppositeCentralFestivalPattayaBeach),Nongprue,Banglamung,Chonburi20150tel+6638427771fax+6638427772 email [email protected]
ReSeaRcheR:
thailandSurachetKongcheepSeniorManager|Researchemail [email protected]
512officesin61countries on 6 continents
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Bangkok office Market rePort | Q4 2011
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