Bangkok’s transit-oriented office market

February 26, 2018 / By  

The growth of Bangkok’s office market has long been driven by major investments in the city’s transport infrastructure. In the 1990s, new arterial roads and expressways facilitated office development in decentralised submarkets for the first time.

Throughout the 1990s and well into the 2000s, the vast majority of office occupiers prioritised (re)location decisions based firstly on rent and secondly on the availability of parking. As we approach 2020, occupier preferences are evolving in line with both larger corporate objectives and the rising influence that Gen Y and millennial employees have on location choice.

Top talent seek office locations near transit stations

As lifestyles of younger generations in the city shift towards urban high-rise living, top talent increasingly seek employers with an office that is easily accessible via Bangkok’s mass rapid transit network, including the BTS skytrain and MRT subway systems.

This has impacted the decision-making process for many occupiers: while they continue to take rental rates and parking availability into account when entering the market or relocating, a rapidly rising number of firms now consider proximity and/or direct access to the city’s mass transit network as a top priority to attract and retain quality staff.

The evolution of occupier preferences is having an increasingly profound impact on occupancy levels and rental rates in office buildings with respect to distance from transit. In early 2017 we analysed changes in occupancy and asking rents between end-2013 and end-2016 across more than 400 office buildings in Bangkok and the results are striking.

Source: JLL research
*Excludes owner-occupied and single tenant build-to-suit projects

At the end of 2013, Bangkok’s market-wide vacancy rate across all grades of space was 11.2 per cent. At that point in time, a clear occupier preference already existed for projects within 250 metres of a transit station (approximating up to a 5-minute walk) where the vacancy rate was 7.6 per cent. As might be expected, vacancy rates increased the further the office location from transit stations.

By the end of 2016, the market-wide vacancy rate declined to 10.7 per cent. During the same period, the vacancy rate for buildings within a 250 metre radius of transit fell to just 4.7 per cent  while vacancy rates for projects further out actually increased. Remarkably, vacancy rates across different classes of space (e.g., Grade A, Grade B, Grade C) were all below 5 per cent, indicative of strong occupier preference for transit-accessible space regardless of quality.

The impact of transit proximity on rental rates is also evident.

Source: JLL Research

In 2013, there existed a 14.2 per cent premium for space within 250 metres of a station relative to the market-wide average. By end-2016, the premium increased to 19.0 per cent as rents increased by 20.6 per cent  during the three-year period relative to the market-wide average growth of 15.8 per cent. As with occupancy, rental performance generally declines as distance to transit increases.

What does this mean for the future of Bangkok’s office market?

More than 60 per cent of the 2.1 million square metres of space scheduled for delivery through 2025 is within 250 metres of a transit station. We strongly believe that these projects will continue to be significantly more attractive to occupiers, whether the location is in the Central Business Areas (CBA) or in decentralised submarkets.

This is evident in projects scheduled to complete in 2018: the T-One building (Q3 2018) near BTS Thonglor station in the CBA is presently 70 per cent pre-leased, while Ari Hills (Q2 2018) near BTS Ari in the Central North submarket is nearly fully pre-leased.

We are presently updating our analyses to include 2017 figures and plan to release our inaugural “Bangkok Office Transit Index” in mid-2018 with more in-depth analyses, so stay tuned!

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