APPD Market Report Article


February 28, 2023

Jeremy O'Sullivan, Head of Research, Thailand


THB 936


Solid pre-commitment rates in upcoming projects

  • Prime net absorption totalled 6,000 sqm in 4Q22. Large positive take-ups were tracked among recent completions, while the overall market remained flat with small movements. Large anchor tenants continued rightsizing, whereas in contrast, tech-related MNCs expanded their footprint in the same premises.
  • Known leasing volume in 4Q22 totalled 9,300 sqm with all being signed to upcoming projects. All deals in the quarter will upgrade their spaces from old Grade A and B+ buildings into newer ones within the same area.

Vacancy rate remains high in 4Q22

  • Prime vacancy rate recorded at 17.9% in 4Q22, compressed marginally by 41 bps q-o-q and 96 bps y-o-y. The rate remained high post-pandemic especially among the older buildings. Recent completions were slow to fill up their space.
  • There were no new completions in the quarter. Total prime stock in the Central Business Areas (CBA) stood at 1,472,800 sqm. There is currently more than a million sqm of stock in the pipeline between 2023 and 2027, all being built for lease. This should double the office stock in a short period of time. 

Rents remain flat while capital value slightly compresses

  • Prime gross rents remained flat at THB 936 per sqm per month in 4Q22. Most buildings retained stable rents across the market, however there were five buildings with positive growth of over 5% q-o-q and four buildings with negative quarterly growth of below -5% q-o-q.
  • Market yield increased to 5.7% in 4Q22 after the BoT raised the interest rate. Capital values declined by -1.2% q-o-q, yet remained high after existing buildings continued to renovate and sought to apply for green credentials.

Outlook: Supply influx in 2023 is expected to surpass demand

  • Looking ahead to end-2023, there is upcoming supply of 297,000 sqm, reaching a record high annual completion since 1999. Though robust leasing activities are expected in the near term, this supply influx should drive the vacancy rate up above 26%.
  • Rents should pick up significantly when a wave of high-quality supply enters the market. Investors in the Asia Pacific region are likely to continue showing interest in office investment in Bangkok.

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

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