APPD Market Report Article


February 22, 2024

Anawin Chiamprasert, Head of Research & Consultancy, Thailand


THB 963


Negative net absorption towards end-2023

  • In 4Q23, the prime office market in Bangkok’s CBA witnessed negative net absorption of -17,900 sqm. This was primarily caused by flight-to-quality activities in Central Bangkok. Tenant relocations were minimal throughout the fourth quarter of the year.
  • Despite limited activities in the market, there were healthy pre-commitment rates for upcoming projects, ranging from 10% to 50%. The gross leasing volume reached 31,000 sqm in 4Q23 with 12 relocation activities in the CBA mainly driven by small-to-medium-size tenants.

Prime vacancy rates continue to rise

  • During the quarter, no new Prime office buildings were completed, maintaining total Prime stock at 1,476,000 sqm in the CBA. Despite a decline in the absorption of aged assets, a significant portion of the upcoming supply is set to open in early 2024. As a result, the projected vacancy rate rose to 20.8% by end-2023, representing a q-o-q increase of 121 bps.
  • The wave of new supply into the market will soon create substantial vacant space in older assets as tenant preferences shift towards higher-quality buildings. Consequently, the aged asset market is likely to actively seek measures to secure tenant occupancy levels, including offering rent-free periods and implementing asset enhancements to maintain competitiveness.

Flat rent growth while capital values remain high

  • The overall Prime gross rents remained unchanged at THB 963 per sqm, per month, in 4Q23. Despite prolonged rent-free periods and increased operating costs, the net effective rents likewise remained unchanged, marking a marginal decrease of 0.2% q-o-q, settling at THB 737 per sqm, per month.
  • In 4Q23, capital values remained high, reaching THB 155,200 per sqm, while market yields stabilised at 5.7%. This was attributed to the absence of significant transactions, the continuous increase in land value, and the high policy rate by the Bank of Thailand at 2.50% in late November.

Outlook: 2024 marked by new supply arrival

  • In 2024, a substantial quantity of new supply, specifically for the CBA market, is poised to enter. This influx of supply, totalling more than 452,200 sqm, is expected to stir up competition and subsequently lead to an increased vacancy rate, with projections indicating a rate of 24% by end-2024.
  • Stiff competition should continue through to 2028, with the vacancy projection range starting at 21% and peaking at 28%. New investment opportunities are expected to focus on mixed-use projects rather than standalone developments to differentiate in the market.

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

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