Recent completions boost take-ups in the CBA, while older buildings face challenges; slow take-up for 3 consecutive quarters

• The flight-to-quality trend continued in Q1. CBA prime office net absorption totalled 17,300 sqm, driven by relocation demand to new premium projects. Aged buildings saw occupancy losses, with landlords offering extended rent-free periods to retain tenants.
• Prime gross leasing volume showed significant improvement to 56,000 sqm, doubling from Q4 2024. Most of this was driven by relocations to the recently completed One Bangkok. Smaller-size deals became more prominent in new buildings such as Grand Centre Point Lumpini.

No new completions due to construction delays; vacancy rate declines slightly

• No new completions were recorded in Q1 2025 as the construction of APAC Tower and One Bangkok Tower 5 was delayed. The total prime office stock in the CBA remained unchanged at 1,571,000 sqm.
• The prime vacancy rate decreased slightly to 27.8%. However, the rate was expected to remain stable in the near term, mainly due to delays in new supply and stagnant demand.

Moderate growth in rents and capital values as yields hold steady

• Recent completions drove prime gross rents to THB 1,030 per sqm per month, up 2.6% y-o-y. Net effective rents increased at a similar pace of 2.7% y-o-y. Overall rent-free periods were extended, largely in older buildings.
• Capital values showed modest growth of 0.2% q-o-q to THB 169,000 per sqm during the quarter, driven by rising development costs. The prime office market yield remained stable at 5.6%.

Outlook: Premium office supply surges in the CBA amid challenges for older stock

• Three projects are expected in 2025, with total stock projected to reach 1.8 million sqm by year-end. The vacancy rate is forecast to compress to 26.6%. New premium supply is anticipated to drive moderate rental growth, below 1.9% y-o-y.
• The overall market anticipates higher capital values, while aged buildings or those affected by the earthquake may see a significant decline in value due to heightened safety concerns and the need for substantial renovations or maintenance.