The Bangkok commercial real estate market is expected to experience a ‘flight-to-quality’ trend to new office and retail assets. This shift poses challenges for higher vacancy rates in older buildings, as 40% of the existing Grade A office buildings are at least 30 years or older. Some of these ageing properties are grappling with low occupancy rates of 30-45%. These properties require revitalisation efforts to optimise their space, boost occupancy level and rental income. Revitalisation may also allow owners to potentially leverage on tax incentives such as land and building, or property tax exemptions during a given period.

Figure 1: Ageing office and retail supply in Greater Bangkok compared to the total supply

Source: JLL Thailand Research & Consulting, Q1 2024

Given the scattered ageing assets in Bangkok, one potential solution is to implement a ‘building communities’ strategy. This strategy is based on attracting like-minded individuals to create new communities by converting vacant spaces into new urban nodes. It’ll allow landlords to utilise space efficiently and benefit from possible land and property tax exemptions, similar to the Bangkok Metropolitan Administration (BMA)’s pocket park model. We believe there are three potential options for revitalisation.

Hawker centres: Given the reputation of Bangkok’s street food culture, introducing hawker centres within ageing buildings could enhance the overall environment of the community. These dedicated areas for street food stalls, particularly around old offices in the CBA such as Silom, Sathon, and Asok, would benefit from tax incentives, such as property tax exemption, offered by the Bangkok Metropolitan Administration (BMA) under a Public-Private Partnership scheme.

In Singapore, many hawker centres operate successfully through a subsidy. The Singaporean government invested in hawker centres, providing grants for stall renovation and new hawker incubation. These investments benefit city dwellers with affordable food, promote better waste management and attract a diverse range of customers,  enhancing the experience for current tenants.

Community spaces: While co-working spaces have gained traction in the market, there is still room for ‘life’. Community spaces provide tenants with activities and experiences beyond work. For instance, The Empire Residence at Empire Tower houses a common space for its tenants, and Slowcombo  focuses on wellness and mindfulness.

Similarly, Such A Small World at The Corner House Bangkok offers a co-playing café with games, music, and food & beverage services in a 100-year-old building. Dedicated spaces like these help landlords maintain current tenants or attract external demand, generating additional revenue from services such as F&B, entertainment, and different activities.

Indoor sports: Indoor sports have become increasingly popular as people seek activities to enjoy with family and friends after the stay-at-home era. Asoke Sports Club is one example of a sports community, occupying space in a relatively old building with offerings such as pickleball, beach volleyball, spikeball, and minigolf. More notably, pickleball courts generate four times more rent per sqm than tennis courts because of the smaller area requirements.

In summary, revitalising under-utilised and older spaces by building community centres benefit both landlords managing ageing assets as well as city dwellers seeking new activities. By negotiating tax incentives like property tax breaks and securing other benefits for public space provision, the BMA can encourage landlords to utilise their vacant spaces. Landlords can benefit by generating additional income through renting out smaller spaces or charging activity fees, ultimately improving their asset performance.

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