From a few modest low-rises clustered on Silom and Surawong roads in the 1980s, office development has expanded along mass transit routes and brought mercantile monoliths to much of the city
Bangkok now has more than eight million square metres of office space, 84% of which has been developed in just the past two decades. Of the total, 41% or nearly 3.33 million square metres was completed during the economic boom years of 1991-95. The pace slowed in the next five years, understandably because of the 1997-98 Asian financial crisis, but developers still managed to add 2.3m sq m to the capital's office market, with another 1.1 million sq m completed since 2000.
The first area in which office buildings emerged in Bangkok was around Silom and Surawong roads, which has expanded over the years. Most office buildings completed before 1980 were in this area, which was home to the vibrant gold market and other trading businesses. None of these first buildings were large _ the average is only 8,000 sq m, with some smaller than 4,000 sq m.
Many modern office buildings with larger floor plates or building areas of more than 50,000 sq m were begun in the 1990s on other main roads such as Sathon, Sukhumvit, Rama IV, Ratchadaphisek, Rama I and Witthayu. With the growth of commercial activity, office development has continued to expand.
MASS TRANSIT EFFECT The area around Silom and Surawong roads still represents the biggest share of the office building market in Bangkok with around 36% of the total supply, followed by the area along Ratchadaphisek and Phahon Yothin roads with around 20%. However, only a very limited number of office buildings have been completed in and around Silom Road in the past decade or so, due to the increasing land prices in the area, especially along the BTS line.
The opening of the BTS in 1999 and the MRT in 2004 has driven the expansion of office development to new areas along the mass transit lines, and in pushing up office demand along the BTS and MRT lines. Being located near a mass-transit station is preferable for both employees and business visitors alike, so it's not surprising that most of the Grade A office buildings are located along the BTS line.
The increase in land prices around Silom Road, and the areas along BTS lines, especially on both sides of Sukhumvit Road, has been the main obstacle to the development of new office buildings in the Silom area. Because of this, some new buildings completed in the past few years are located on Ratchadaphisek Road, which is touted by some as a prime business district of the future. With good access via the MRT and other facilities similar to those in the Silom area, as well as lower land prices, there is no question that Ratchadaphisek has become highly attractive for new development.
FUTURE SUPPLY Nearly 290,000 sq m of office space is scheduled to be added to the market in Bangkok by 2014 in only three zones. The area around the junction of Ratchadaphisek and Rama IX roads will contribute a high proportion of the total supply, with more than 125,000 sq m scheduled for completion in 2014, although the total future supply in this area represents only a 2.6% increase in the total existing supply.
In addition, the latest draft of the new Bangkok town planning regulations allows office buildings larger than 10,000 sq m along Ratchadaphisek Road, while more conditions affect the Silom and Surawong areas. This limited additional space will be absorbed by the market and points the way to greater occupancy levels and strengthened rental rates over the next few years. Especially in the Silom area, the limited supply projected from 2011-14 is the main driver pushing up occupancy and rental rates of office buildings in 2012 and 2013.
RENTS: Selling prices for residential condominiums closer to mass-transit stations tend to be higher than for those farther away, and that also seems to be the case for offices. A number of offices have direct access to a BTS station which further adds to their appeal. The average rental rate per square metre per month at office buildings less than 200m from a BTS or MRT stations is the highest at more than 640 baht, while buildings located more than 1,000m from a mass-transit station command only 500 baht per sq m per month on average.
In addition, Grade A office buildings less than 200m from a BTS or MRT station are asking nearly 700 baht.
OCCUPANCY RATE: The average office occupancy rate of all locations in Bangkok is more than 84% and the highest is in the Silom area, at 86% as of the third quarter of 2012, a slight increase from the previous quarter. This was due to new companies leasing office space, as well as to some of those already in the area expanding their existing offices. The average occupancy rate increased everywhere due to positive signs in Thailand's economy and politics, with foreign and local investors setting up or expanding their companies in Bangkok. The city is the best location for companies looking for new opportunities in Myanmar, Laos and Cambodia.
OTHER FACTORS: Although the eurozone debt crisis has affected the global economy and become the main concern of foreign investors, it is also a positive factor for newer markets such as Asia, especially Asean. Many multinational companies are looking for opportunities in Myanmar, Cambodia and Laos by setting up their operations offices in Thailand to pursue new business in Asean.
The increase in the minimum daily wage has directly affected the cost of property management, which is forecast to increase by anywhere from 20% to 40%. This will also be a major factor affecting rental rates in the future, although landlords are trying to maintain current rents by reducing staff and installing CCTV systems to replace security guards, but they cannot keep control of all costs in the long term. In addition, the designs of office buildings in the future may be more high-tech and management-friendly, including features such as having a single control room for all of the building's systems.
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