PROPERTY / CB RICHARD ELLIS VIEW

Bangkok office space take-up starts to slow

The outlook for the Bangkok office market this year remains unpredictable after net take-up rates plunged last year to the lowest level since 1999, according to the real estate firm CB Richard Ellis (CBRE).

The company said that total take-up of office space in Bangkok was 200,000 square metres in 2006, a third less than the 300,000 sq m in 2005.

''This was the lowest net take-up since 1999,'' said Nithipat Tongpun, director and head of office services.

At the end of 2006, the total office stock in Bangkok was 7.4 million sq m, an increase of 200,000 sq m from 2005. The overall vacancy rate was 13.5%, compared to 13.3% in 2005.

CBRE said it was hard to predict what demand would be this year since office demand came mainly from the service sector. Growth in 2007 could be affected by the more restrictive regulations on foreign investment in services.

The company noted that the weakened demand in 2006 was due to a slower domestic economy.

''If demand in 2007 totals 200,000 sq m or less, then rental growth is likely to be flat. However, if demand is more, rentals could increase sharply because the vacancy rate is low and new supply is limited,'' Mr Nithipat said.

The vacancy rate for grade-A offices in the central business district (CBD) was 8.3%. For grade-B offices in the CBD, the rate was 14%.

Rents for grade-A CBD offices rose by 10% in 2006, compared to 23% in 2005, while grade-B CBD rents rose by 15%, compared to 19%.

Tenants whose leases are due to be renewed in 2007 can now expect to pay substantially higher rents. Over the last three years, grade-A CBD rents have increased by 56%, and tenants will have to pay the market rate on renewal.

This year, the company expects that approximately 110,000 sq m of new buildhdings will be completed. A further 250,000 sq m are to be finished in 2008.

CBRE said Bangkok remained the fifth cheapest city in the Asia-Pacific region in which to rent office space. Only Manila, Jakarta, Adelaide and Christchurch command lower office rents.

''Although take-up was slow in 2006 and rental growth was slower, the limited amount of supply means that tenants requiring premises of over 3,000 sq m have few choices,'' said Mr Nithipat.

Bangkok Post
Wednesday January 31, 2007