APPD Market Report Article


December 1, 2021


THB 910.0


Leasing activity recovers in mid-2021

  • We recorded -12,700 sqm of net absorption across the CBA prime grade buildings in 3Q21. Large-sized occupiers continued to surrender parts of their existing spaces to reduce costs amid the ongoing COVID-19 outbreak. While manufacturing companies continued relocating out of the city centre, tech firms and retailers expanded their footprints into the surrendered spaces.
  • New deal activity in the quarter totalled approximately 18,000 sqm with most being new lettings. The majority of new deals were pre-commitments in upcoming buildings.

Vacancy picks up after slow leasing activity in new completions

  • Two prime office projects completed in 3Q21, including Kronos Tower on North Sathorn and SIAMSCAPE on Phayathai Road. Total prime stock increased to 1.34 million sqm.
  • The vacancy rate increased sharply to 15.4% in 3Q21, as demand continued to shrink and new completions received minimal pre-commitments. We expect the vacancy rate to improve in the next quarter when Vanissa opens with moderate pre-commitments.

Rents declined for the fifth consecutive quarter

  • Prime gross rents fell by -1.6% q-o-q and -5.2% y-o-y to THB 910 per sqm per month, with the substantial y-o-y decreases among three large buildings, i.e., Exchange Tower. Mercury Tower, and Sathorn Prime. Net effective rents were pressured down by -1.8% q-o-q and -4.8% y-o-y to THB 716 per sqm per month in 3Q21.
  • Prime capital values fell slightly by -0.6% y-o-y to THB 153,344 per sqm. This, in turn, compressed market yields further to 5.60%.

Outlook: High vacancy to further pressure rental growth downward

  • There are four prime projects scheduled to open within the next 12 months, totalling 127,000 sqm. Pre-commitments across three for-lease projects currently averaged to 30%. Thus, we expect that by the end of the year the vacancy rate should slightly fall to 14.5%.
  • With Bangkok’s muted economy and a wave of new supply coming to the market, we expect prime gross rents to decline further by -2.0% y-o-y but pick up slightly q-o-q by end-2021. Rent-free periods are not as flexible as before across older buildings, which puts pressure on net effective values. Thus, we see market yields compressing to 5.55% by end-2021 and the market shifting to a neutral dynamic.

Note: Bangkok Office refers to Bangkok's CBA Grade A office market.

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