Bangkok to see over 400,000sqm of new office supply in 2024

This is expected to drive the vacancy rate to above 29% next year.

Looking forward, a JLL report said the Prime vacancy rate in Bangkok’s office market is expected to remain high at 20.3% as only one building is set to open by the end of 2023. 

However, in 2024, a significant supply influx is expected with upcoming projects totalling 413,900 sqm, breaking the annual completion record. JLL said this surge in supply is likely to result in intense competition, pushing the vacancy rate above 29% by the end of 2024.

Here’s more from JLL:

The recent prime ministerial election and subsequent political uncertainty in Thailand may lead to delays in corporate expansion plans until September. Despite the age of on-sale assets being over 25 years, strong interest from both domestic and foreign investors is expected to persist in the market.

Robust leasing activity concentrates in new projects

Prime net absorption reached a total of 21,800 sqm in 2Q23. A significant portion of the positive movement during this period resulted from upgrades to older buildings within the same submarkets. The flight-to-quality trend was particularly prominent in new and recently-completed developments, such as Park Silom and One City Centre.

During the quarter, known leasing volume amounted to 35,400 sqm, primarily driven by tenants relocating from older Prime buildings in the CBA. Pre-commitments for upcoming projects varied from 5% to 30%, with the majority remaining at 0% pre-commitment levels.

Prime vacancy rate remains high after new completion

Park Silom, a redevelopment located on the corner of Si Lom and Covent Road, was completed and added 56,867 sqm to the market in 2Q23. The building was constructed to meet LEED and WELL Gold standards. As a result, the total Prime stock in the CBA increased to 1,476,000 sqm.

Prime vacancy rate saw a significant increase of 161 bps q-o-q, reaching 21.5% in 2Q23. This rise was attributed to slow take-up among recent completions and surrendered spaces in older buildings.

Prime rents rise modestly while capital values stabilise

Prime gross rents increased by 3.0% y-o-y to THB 961 per sqm, per month, in 2Q23. Buildings with high occupancy saw their gross rents rise by 2%–5% y-o-y, although it remained unchanged for the overall market. However, due to longer rent-free periods and high operating expenses, net effective rents saw a slower growth rate, increasing by 2.7% y-o-y to THB 736 per sqm, per month.

Capital values remained high at THB 154,494 per sqm. Market yields stabilised at 5.7% in 2Q23, owing to the Bank of Thailand raising policy rates in May 2023.

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