Bangkok office report q1 2010

c o l l i e R s i n T e R n aT i o n a l | THailanD

The Knowledge Report
B a n g Ko K o f f i c e M a R K e T | 1 s T Q U a RT e R | 2 0 1 0

executive summary
No new office supply came onto the market in Q1 2010 and only a very limited supply is expected
until Q4 2010 with the scheduled opening of Sathorn Square.

Very little relocation activity in Q1 reflecting the ongoing political impasse deterring companies
MaRKeT inDicaToRs
from making long term plans.

2009 - Q1 2010 Occupancy rates fell by 1% in the CBD and Outer CBD while the Northern Fringe recorded a
nearly 1% increase in Q1.

new sUPPlY Rental rates remained more or less the same in the CBD for Q1, although a fall in rates was more
pronounced in the Northern Fringe. This was likely to be a correction to the steep rise in 2009.
DeManD
As of March 31st, no discernable impact on the office market has come about from the ongoing
demonstrations. However if these become protracted and effect the CBD area then this could have
RenTals a negative impact over time as leasing contracts expire. Investors are also likely to put expansion
plans on hold or pull out completely.
occUPancY

office Zoning

The general lack of zoning restrictions in Bangkok has led to the existence of significant office
supply in a wide range of locations in the city and how the market has perceived the CBD has
evolved over the past 20 years. The original CBD was located in the Silom and Surawongse roads,
home to the vibrant gold market and other trading businesses. The development of modern office
buildings with a larger floorplate in the nineties could not be accommodated in this area and the
CBD began to take shape in the eastern section of Sathorn road. While Sukhumvit road up to
Asoke is primarily perceived as an entertainment and residential area, a large number of grade A
buildings sprung up in the nineties and also in the past few years. It is therefore considered as part
of the CBD. As a working definition the CBD, for the purposes of office classification, is where a
significant number of Grade A office buildings are located. As such the old CBD is considered Outer
CBD as well as Petchburi road where more grade B offices are located. Over time this structure could
evolve.

www.colliers.co.th

The Knowledge Report | 1st Quarter | 2010 | Bangkok Office Market

Zoning

2 collieRs inTeRnaTional


HisToRical sUPPlY

cUMUlaTive sUPPlY in BangKoK

Source : Colliers International Thailand Research

The office market landscape even today is a product of a five of around 186,000 sq m was completed which reflected the mori-
year boom period from 1992 to 1996 prior to the Asian Financial bund property market in general in Bangkok at that time. It was
Crisis. Even after the crisis projects continued to be completed only in the second half of the decade did growth in supply pick
culminating in the 140,000 sq m Empire Tower in 1999, still the up with over four and half times more new supply being added in
largest office building in the whole of Bangkok. The following the last five years compared with the first five.
five years were a fallow period for the office market as only a total

aDDiTional sUPPlY foR eacH YeaR


collieRs inTeRnaTional 3


sUPPlY BY Zone

office BUilDing sUPPlY BY Zone, 1994


The proportion of supply of office space by area shows how itself covers a wide area in Bangkok. Even with the Outer CBD
decentralized the office market is in Bangkok and how over the included the figure still comes to well below half of the total.
first 15 years this trend has become more pronounced. Less than
30% of office space is located in the CBD as of Q1 and the CBD



office BUilDing sUPPlY BY Zone, Q1 2010


Regional coMPaRison

ToTal sTocK of office BoTH cBD/non-cBD in selecTeD asia-Pacific coUnTRies

Source : Colliers International Thailand Research / Colliers International Country Offices

The diffuse nature of the Bangkok office market is highlighted by The interesting aspect of the office market in Thailand as a
a comparison with other countries in the region. A much great- whole is that almost all office space is located in Bangkok itself
er proportion of office space is located outside the CBD. The with only a negligible amount in the regions. Most office func-
situation regionally is likely to change in favour of non-CBD tions take place in shophouses and townhouses in similar fashion
locations due to the growth of the business process outsourcing to Phnom Penh in Cambodia. This contrasts with other Asian
(BPO) market and this is especially evident in the Philippines countries which have office located in other parts of their coun-
where a large number of offices are being built outside the Manila try such as Cebu in Philippines, Surabaya in Indonesia, Penang
CBD as well as other cities such as Cebu. in Malaysia and Busan in Korea.



office siZe

aveRage siZe of office BUilDing accoRDing To aRea


The Outer City West has the highest average size in Bangkok space limitations and smaller, older buildings located in west Si-
but due to the limited number of offices in this area, one build- lom and Surawongse. One notable feature is the smaller sizes in
ing; the Thai Farmers Bank Head Office, with over 74,000 sq m the Outer City East. In many Asian cities large office buildings
of NLA, raises the average somewhat. The CBD comes in sec- are located outside the centre in order to accommodate the BPO
ond place largely due to the number of grade A office buildings industries which often require a large floorplate but low rentals.
containing a large floorplate and consequently greater building
size. The smaller sizes reflected in the Outer CBD reflects the

sUPPlY BY owneRsHiP

sUPPlY BY owneRsHiP, Q1 2010


A significant number of offices are multi-owner in what are also fective for companies operating in non-working hours. However
referred to as office condos. Almost all of these were built prior there are disadvantages in the form of sometimes uncoordinated
to 2000 when investors were looking to make rapid capital gains property management and more expensive air conditioning sys-
during the boom period that preceded the economic crash in tems for companies using office predominantly in working hours.
1997. There are some advantages of occupying multi-owner of- However occupancy rates are in general higher in multi-owner
fice such as separate air conditioning systems which are cost ef- offices.



fUTURe sUPPlY

fUTURe sUPPlY BY locaTion


It is interesting to note that future supply for the next couple of While the trend in other cities in the region is to focus away
years will occur predominantly in the CBD area while no new from the CBD the situation in Bangkok is reversed as there is
supply will be constructed outside the Outer or Inner CBD. In already a large proportion of existing supply located outside the
fact the new supply will consist of only three projects with the CBD.
lion’s share coming from Sathorn Square at the end of 2010.

DeManD – TaKe UP

occUPancY RaTe BY locaTion, Q1 2010


The Outer City West area has the highest occupancy rate, due and Outer City East is the likely reason for the lower occupancy
to only 18 office buildings being located in this area and a low rates in these locations.
rental rate. The lack of mass transit lines in the Southern Fringe



DeManD BY gRaDe


The highest demand in Q1 2010 was for Grade B buildings which registered a higher occupancy rates.

DeManD DRiveRs

Thailand remains in fourth place in the A.T. Kearny’s Global is the dramatic rise of Vietnam, up nine places to tenth spot.
Services Location Index 2009 compared to 2007. This index A number of very large BPO companies have set up shop in the
ranks the top 50 countries worldwide for locating outsourcing outer districts. While Thailand could benefit from the enormous
activities, including IT services and support, contact centers potential growth it lags in relation to certain skills, especially
and back-office support. While ahead of Indonesia (5th) and second languages, that prevent it form being regarded as a key
Philippines (7th) it remains firmly behind Malaysia, China player.
and the king of them all, India. The Phillipines is making great
strides to become a key BPO centre. The other ominous sign



exPoRTs fRoM THailanD on QUaRTeRlY Basis

Colliers International Thailand Research
Source : Bank of Thailand

Industrial growth is the main driver that powers the office mar- demand for office space although ongoing financial problems
ket as this leads to the need for trading, financial, legal and in Europe and the general retracement of fiscal stimulus in the
insurance services amongst others to support it. After a dramatic majority of Thailand’ exports partners could spell many
drop in exports starting at the end of 2008, they have started problems, exacerbated by foreign currency weakness of the
to recover in the last three quarters. This bodes well for future Euro.

ToTal fDi foR vaRioUs secToRs as PeRcenTage 2000-2004




ToTal fDi foR vaRioUs secToRs as PeRcenTage 2005-2010 feBRUaRY


The charts show the predominance of industry in FDI spending very little investment is made into businesses that directly drive
compared with the services and financial sectors. However the office demand. The fact that the Board of Investment has largely
financial sector has held greater promise over the past five years focused their attention on the industrial would partially account
but the services sector still continues to languish. Much of this for this.
FDI would be related to the hospitality industry and therefore

occUPancY

occUPancY RaTe in 3 locaTions, 2001 – Q1 2010


The occupancy rate in the CBD area fell approximately 1% and new supply coming on stream accompanied by steady economic
in the Outer CBD a similar decrease was recorded. However the growth which drove overall demand. However the second half of
Northern Fringe recorded a 0.9% increase which is likely due to the 2000’s was a period of relative stagnation in the market due
the falls in rental rates. The overall rise in occupancy rates for to political tensions in the country alongside the global financial
the first half of the last decade can be attributed to the limited meltdown in 2008.



RenTal RaTe

RenTal RaTe BY Zone


Unsurprisingly the CBD commands the highest rental rates due located some distance from mass transit lines. While Colliers
to the location and number of grade A buildings. Interestingly International Thailand have research that shows that
rents in the Northern Fringe are considerably higher than the condominium prices are higher the closer they are to mass transit
Outer CBD. This could be explained by the fact that a signifi- stations, the same seems to be the case for offices. Being located
cant number of offices are located close to both the BTS and near a mass transit station is preferable for both employees and
MRT lines in the area while most offices in the Outer CBD are business visitors alike.

BY gRaDe


Grade A offices have greater rental rates than those of grade B. that competition between these grades is intense and tenants see
The difference between grade B and C is rather small reflecting less distinction between the two.



RenTal RaTe

HisToRical RenTal RaTe in 3 Main locaTions, 2001 – Q1 2010


In Q1 2010, rental rates for office buildings in CBD area fell in the Northern Fringe but this was likely to be a correction after
slightly by 0.3% compared to Q4 2009. Rates fell more sharply the steep rise in the previous year.

BY gRaDe


Rental rates of grade A office building have remain stable from favourable terms for tenants to maintain occupancy during
2007 while grade B recorded a small drop. Colliers International difficult economic times, especially for small businesses.
Thailand have noticed that some landlords have offered more



foRecasT

Limited new supply for the next two quarters is likely to main- resuming their growth strategies on the back of an increase in
tain current rental and occupancy rates despite ongoing political industrial activity.
tensions dampening demand. The addition of Sathorn Square
in Q4 2010 will be a significant amount of space to absorb if the A widening of incentives from the Board of Investment for the
current impasse continues throughout the year. non-hospitality service sector would help encourage growth in
the burgeoning BPO market as well as other areas that can help
Limited market activity is expected for Q2 due to the ramping to drive demand for office space. A focus on the regions would
up of political tensions that could define that quarter. A return help kick start office development where it is currently non-ex-
to stability could lead to a rise in occupancy due to companies istent.



collieRs inTeRnaTional THailanD 480 offices in 61 coUnTRies
on 6 conTinenTs
ManageMenT TeaM
Us$ 1.9 Billion in annUal RevenUe

1.1 Billion sQUaRe feeT UnDeR
ASSET MANAGEMENT ManageMenT
Wasan Rattanakijjanukul | Manager 15,000 PRofessionals
Nukarn Suwatikul | Manager

CONSULTANCY
Napart Tienchutima | Manager

COMMERCIAL / INDUSTRIAL /RETAIL
Narumon Rodsiravoraphat | Senior Manager

FACILITY / PROPERTY MANAGEMENT
Viroj Piromthong | Management Advisor
Bandid Chayintu |Associate Director
conTacT infoRMaTion
HOSPITALITY DEPARTMENT
Jean Marc Garret | Director
THailanD:
INVESTMENT Patima Jeerapaet Antony Picon
Nukarn Suwatikul | Senior Manager Managing Director Senior Manager | Research
patima.jeerapaet@colliers.com antony.picon@colliers.com

RESIDENTIAL
Surachet Kongcheep
Patima Jeerapaet | Managing Director Manager | Research
surachet.kongcheep@colliers.com
RESEARCH & ADVISORY
Antony Picon | Senior Manager
Surachet Kongcheep | Manager
Colliers International Thailand
VALUATION
Nicholas Brown | Associate Director Bangkok Office : 17/F Ploenchit Center, Klongtoey
Thanussorn Aukkrararerksaponk |Manager Bangkok 10110 Tel: 662 656 7000 Fax: 662 656 7111
Email : info.th@colliers.com

Pattaya Office : 492/2 Thappraya Road, Nongprue,
Banglamung Chonburi 20150 Tel: 6638 364 411-2
Fax: 6638 364 414 Email : info.pattaya@colliers.com

This report and other research materials may be found
on our website at www.colliers.co.th. Questions related
to information herein should be directed to the Research
Department at the number indicated above. This document
has been prepared by colliers international for advertising
and general information only. colliers international makes
no guarantees, representations or warranties of any kind,
expressed or implied, regarding the information including,
but not limited to, warranties of content, accuracy and
reliability. any interested party should undertake their own
inquiries as to the accuracy of the information. colliers
international excludes unequivocally all inferred or implied
terms, conditions and warranties arising out of this document
and excludes all liability for loss and damages arising there
from. colliers international is a worldwide affiliation of
independently owned and operated companies.

www.colliers.co.th

Bangkok office report q1 2010

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