MarketResearchBANGKOK OFFICE MARKET HIGHLIGHTS | 4TH quARTER | 2008
B A N G KO K O F F I C E M A R K E T
The Quarterly Reportc o l l i e R s i n T e R n aT i o n a l | T H a i l a n D
BanGKoK oFFice MaRKeT HiGHliGHTs• The global economicmeltdowncoupledwith local political uncertaintieswas beginning to impacttheBangkokofficemarketinthesecondhalfof2008.Thisimpactwillbecomemore pronouncedin2009astenantslookatdownsizingorclosuresandlandlordsrespondbyoffering discountedrentstobothexistingandnewtenants.
• By the end of 2008, there was approximately 7.71million squaremetres of office space in Bangkok, of which 38% was located in the Inner CBD, 10% in the Outer CBD and the remainderinnon-CBDareas.Ofthetotalstock54%wasclassifiedasGradeB,26%asGrade Aand20%GradeC.
• Approximately275,717squaremetresinsevenofficebuildingswasaddedtotheBangkokoffice supplyin2008,ofwhich89,029squaremetres(32.3%)wasintheInnerCBDZoneandwas classifiedasGradeA.
• In2009,newsupplyof190,009squaremetresisprojectedtobeaddedintheBangkokoffice,but thisexcludes470,000squaremetresinthenewGovernmentCentreonChaengwattanaRoad.
• DemandforprimespaceintheBangkokCBDremainedfirminthefirsthalfof2008,however duringthethirdandfourthquarteroftheyear,theabsorptionratedecreasedslightlydueto theglobaleconomiccrisisaswellasthepoliticaluncertaintyinThailand.Largerelocations pre-committedin2008andlimitednewprimesupplyshouldensurethatoccupancyratesdonot declinemarkedlyin2009.• TheaveragerentalrateofGradeAofficeintheInnerCBDwasTHB700persquaremetreper monthinQ42008,whilstGradeBofficeintheInnerCBDwasTHB590persquaremetreper month.Downwardpressureonrentswillseeadeclineofatleast5%overtheyear.
MaRKeT inDicaToRs
Q4 2008 Q1 2009F
sUPPlY
DeManD
RenTal RaTe
occUPancY RaTe
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B a n G Ko K o F F i c e M a R K e T | 4 T H Q U a RT e R | 2 0 0 8
The twin effects of the global economic recession and political instability in Thailand will make the overall office market slow down in 2009. The top end of office market will be one of the first sectors to rebound. office landlords are planning to forgo upwards-only rent renewal clauses this year to help their customers to maintain their businesses.
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The Quarterly Report | 4th Quarter | 2008 | Bangkok Office Market
BanGKoK oFFice MaRKeT oVeRVieW
Many multinationals choose Thailand as the base for theirregionalheadquartersbecauseofrelatedindustrialfacilitiesandBangkok is acknowledged as an important communicationsand transportation hub, offering an attractive and affordableworkingandlivingenvironment.Themainreasonisthatofficesare affordable and long term expatriates and directors can befurnishedwith a lifestyle thatwould be either very expensiveornotasagreeableorsafeinotherSouthEastAsiancountries.However,evenbeforetheonsetoftheeconomiccrisis,Thailandwaslosingsomeof itsattractivenessduetoaprolongedperiodofpoliticaluncertainty,theimpactofwhichcanbeseeninthedeclining absorption rates in the Bangkok officemarket since2004.TheBangkokofficemarketin2008heldfirmforthefirstthreeconsecutivequarters.However,theimpactoftheglobalrecession
was beginning to be felt in the last quarter of the year, withcompaniesrevisitingexpansionplansandtheagendachangingtopotentialclosuresanddownsizing.
The current political situation makes it hard to see a brightpicture.TheBusinessSentiment Indexposted just38.3pointsinOctober,thelowestlevelsinceearly2000.Withthegloomyinvestmentpicture,exportsexpandedonly7.4percentinOctoberincreasing only 1.9 percent year-on-year, compared with 3.3-percentgrowthinSeptember.Itisprojectedthatunemploymentwill be 2-3 percent of the workforce in 2009 ormore than 1millionpeople.
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The Quarterly Report | 4th Quarter | 2008 | Bangkok Office Market
sUPPlY TRenDs
Office Locations
As at the end of 2008, the Bangkok officemarket comprisedapproximately7.71millionsquaremetreslocatedineightareas
orpocketsofconcentration:
• Inner Central Business District (Inner CBD)
This area includes Sathorn Road, Silom Road, Surawongse Road, Wireless Road, Ploenchit Road, LangsuanRoad,RajdamriRoad,RatchaprasongRoad, RamaIRoad,PhayathaiRoadandRamaIVRoadstarts
fromPhayathaiintersectiontoSathornintersectionandcomprisestheprimeofficedistrict in thecity, thepreferredheadquarterslocationoffinancialinstitutionsandmultinationals.
• Outer Central Business District (Outer CBD)
This area popular with expatriates and tourists spans from Sukhumvit Soi 1 to Soi 21 and Sukhumvit Soi2toSoi16,RamaIVRoadfromSathornintersection
toRatchadapisekintersectionandNewRatchadapisekRoad.
• East Zone
This area covers Sukhumvit Road from Sukhumvit Soi21to77andSukhumvitSoi16toSoi50,RamaIV
from Ratchdapisek intersection to Kluaynamthai intersection,NaRanongandKasemraj.
• South Zone
ThisareacoversRatchada-RamaIIIRoad,Narathiwas Road,RamaIIIRoadandCharoenkrungRoad.
TaBle 1 : sUPPlY aDDeD in THe inneR cBD in 2008
PROjecT naMe LOcaTiOn aRea (SQ M) OPened
chamchuree square Rama iV 89,029 Q3 2008
Total 89,029
Source : Colliers International Thailand Research
TaBle 2 : sUPPlY aDDeD in THe oUTeR cBD in 2008
PROjecT naMe LOcaTiOn aRea (SQ M) OPened
interchange 21 sukhumvit soi 21 45,000 Q3 2008
The Trendy sukhumvit soi 15 20,000 Q3 2008
Total 65,000Source : Colliers International Thailand Research
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•NorthZone
ThisareacoversPathumwan,PhayathaiRoad,Ratcha-
prarobRoad,andRatchathewiRoad.
•EasternCorridor
ThisareacoversNewPetchburiRoadfromSukhumvit- AsoketoKlongtonpasstoPattanakarnRoad,Srina-
karinRoad,RamkamhaengRoad,RamaIXRoad,LadpraoRoadandBangnaTradRoad.
•NorthernCorridor
ThisareacoversRatchawithiRoad,Dindaeng,Asoke- RatchadapisekRoad,RatchadapisekRoad,Phaholyothin
Road,RamaVIRoad,VibhavadeeRoad,ChaengwattanaRoad,WongsawanRoad,TiwanonRoadandNonthaburi.
•WestZone
ThisareacoversBaromratchachonnaniRoad,RamaVII Road,PhetkasemRoad,SuksawatRoadandRatBuranaRoad.
The Quarterly Report | 4th Quarter | 2008 | Bangkok Office Market
TaBle 3 : sUPPlY aDDeD in THe noRTH Zone in 2008
PROjecT naMe LOcaTiOn aRea (SQ M) OPened
Wanasorn Building Phayathai Road 17,796 Q2 2008
Total 17,796
Source : Colliers International Thailand Research
TaBle 4 : sUPPlY aDDeD in THe noRTHeRn coRRiDoR in 2008
PROjecT naMe LOcaTiOn aRea (SQ M) OPened
east Water Vibhavadee Road 12,077 Q1 2008
Pakin Tower Ratchadapisek Road 30,000 Q2 2008
cyberworld Tower Ratchadapisek Road 61,815 Q4 2008
Total 103,892
Source : Colliers International Thailand Research
Total Current Supply
During 2008, approximately 275,717 squaremetreswas addedto theBangkok office stock, representing growth of 3.7% andbringing total supply of office space to approximately 7.71
millionsquaremetres.Theaveragerateofgrowthofnewsupplywas2.35%peryearfrom2004to2008.
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The Quarterly Report | 4th Quarter | 2008 | Bangkok Office Market
FiGURe 1 : sUPPlY oF oFFice sPace, 2004-2008
Source : Colliers International Thailand Research
The majority of office supply was in the Inner CBD area,representingabout38%ofthetotal,followedbytheNorthern
Corridor, and Eastern Corridor, representing about 21%, and11%,respectively.
FiGURe 2 : sUPPlY oF oFFice sPace BY locaTion, Q4 2008
Source : Colliers International Thailand Research
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Officespacecanbecategorizedintothreegrades:GradeA,GradeBandGradeC.ColliersInternationalcategorizesGradeAoffice
buildingsbasedonthefollowingcharacteristic:
TotalsupplyofGradeBofficespaceisapproximately4.14millionsquaremetres,representing54%ofthetotalofficesupply,while
GradeAofficespaceisapproximately2millionsquaremetres,representing26%.
The Quarterly Report | 4th Quarter | 2008 | Bangkok Office Market
TaBle 5 : GRaDe a oFFice sPeciFicaTion cRiTeRia
cRiTeRia gRade a
Floor plate> 1,000 sq mcolumn freeHigh efficiency floor plate
ceiling height Min. 2.6 M
air condition system central chiller system, with typical VaV system. separate air-conditioning for tenant computer room.
Fire ProtectionWater sprinklersHeat/smoke detectorat least 2 fire exits
security system 24 hours ccTV & Guard
elevator separate high zone and low zone.1 separate service lift
Waiting time for elevator less than 30 second.
common area interior & exterior – high quality finishes.
Facilities Retail outlet eg. Retail Banking, Restaurants, Food court & Minimart.
car parking : free of chargeTotal car parking space
1 space : 100 sq m1 space : 65 sq m
Property Management Professional and to international standard.
Source : Colliers International Thailand Research
FiGURe 3 : sUPPlY oF oFFice sPace BY GRaDe, Q4 2008
Source : Colliers International Thailand Research
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Future Supply
New supply of office space in the pipeline and scheduled forcompletion from 2009 totals approximately 849,762 squaremetres, mostly concentrated in Government-owned projectsin the Northern Corridor: the 470,000 square metre newGovernment centreonChaengwattanaRoad.Asmostof this
newsupplywillbepre-committedbyGovernmententities,newsupplybeingdevelopedforopenmarketrentalsremainsrelativelylimited,ataround190,009squaremetres.
The Quarterly Report | 4th Quarter | 2008 | Bangkok Office Market
FiGURe 4 : FUTURe neW sUPPlY oF oFFice sPace BY YeaR, 2009-2011F
Source : Colliers International Thailand Research
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TaBle 6 : oFFice BUilDinGs scHeDUleD FoR coMPleTion, 2009-2011F
BuiLding naMe deveLOPeR LOcaTiOn LeaSeaBLe aRea (SQ M)exPecTed
cOMPLeTiOn
asia centre city Realty limited south sathorn Road 27,850 2009
central chaengwattanacentral Pattana Public company
limitedchaengwattana Road 20,000 2009
energy complex energy complex co., ltd. Phaholyothin Road 119,000 2009
sala @ sathorn st. louis Holding co., ltd. south sathorn Road 17,359 2009
sivatel sivayathorn company limited Wireless Road 5,800 2009
The new Government centre Dhanarak asset Development
co., ltd.chaengwattana Road 470,000 2009
sathorn square north sathorn Realty sathorn Road 70,000 2010
naamerican international
assurance co., ltd. (Thailand)south sathorn Road 38,500 2011
Park VentureUniventures Public company
limitedWireless Road 30,000 2011
central Rama iXcentral Pattana Public company
limitedRama iX Road na 2011
Trilogy Golden land Plc. Rama iV Road 20,000 na
UBc iii na sukhumvit Road 31,253 na
Former Pre-cadet school Projectcentral Pattana Public company
limited
Rama iV & Wireless
Roadna na
na (Former British embassy)central Pattana Public company
limitedPloenchit Road na na
na (opposite lumpini Park) KWs (Thailand) limited Wireless Road na na
na Ke land Kaset navamin Road na na
na Tcc Group Kaset navamin Road na na
na (land near airport link) na Makasan Road na na
na Tcc Vibhavadee Road na na
Total 849,762
The Quarterly Report | 4th Quarter | 2008 | Bangkok Office Market
Source : Colliers International Thailand Research
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TaBle 7 : selecTeD oFFice RenTal TRansacTions, Q4 2008
BuiLding naMe TenanT aRea (SQ M)
QH sathorn KTaM company limited 567
QH Ploenchit nobel Biocare 768
Wave Place solvay (Thailand) limited 2,500
all season Tower adidas (Thailand) limited 2,500
exchange Tower UTi Worldwide inc. 641
exchange Tower Grande asset Hotels and Property Plc 641
exchange Tower Japan international cooperation agency (Jica) 1,300
chamchuree square Total access communication Plc (DTac) 61,500
interchange 21 ace ina overseas insurance co., ltd. 9,600
cyberworld Tower cs loxinfo Plc 3,600
athenee Tower Deutsche Bank 4,000
Pakin Tower Tisco Bank Plc 5,000
supalai Grand Tower Tilleke & Gibbins international limited 8,500
Bangkok city Tower Trinity securities Group 1,000
asia centre KGi securities (Thailand) Plc 3,500
Source : Colliers International Thailand Research
TaBle 8 : selecTeD oFFice RelocaTions To THe neW GoVeRnMenT cenTRe
gOveRnMenT dePaRTMenT PReviOuS BuiLding ReQuiRed aRea (SQ M)
Revenue office itthipol Building 4,220
national economic and social advisory council Phayathai Plaza 7,140
national Health security office (nHso) Jasmine international 8,110
office of the ombudsman eXiM Bank Building 11,790
central institute of Forensic science Thailand software Park Building 4,140
Department of investigation Rnc Building (sukprapruet) 7,300
office of the election commission of Thailand srijulasarp Building 48,330
The administration court empire Tower 23,100
central Bankruptcy court Bangkok insurance Building 9,280
Total 123,410
Source : Colliers International Thailand Research
The Quarterly Report | 4th Quarter | 2008 | Bangkok Office Market
Further to the completion of thenewGovernmentCentre inChaengwattanaRoad,approximately123,410squaremetresof
space in commercial buildingswill be vacated by governmententities,asindicatedbelow:
DeManD TRenDs
Demandfor theprimespace inBangkok’sCBDremainedfirmin the first half of 2008, however during the third and fourth
quartersoftheyear,theabsorptionratedeclinedduetotheglobaleconomiccrisisaswellasthepoliticaluncertaintyinThailand.
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occUPancY anD RenTal RaTes
The overall occupancy rate of the Bangkok officemarket hasremained relatively stableataround89.07%atyear-end2008.ThehighestoccupancyratewasintheOuterCBD,(91.42%),
followed by the Eastern Corridor (91.29%) and East Zone(91.29%).
Theannualnetabsorptionofofficespacehasbeenonadownwardtrend since 2004, decreasing by an average of 10% annually.Despite the weakening economy, however, further declinein2009will be countered to someextentby somemajornewabsorption,headedbythe61,500squaremetremoveofDTAC,
adealcompletedin2008buttobeimplementedinthenewyear.However,newmajordealsandexpansionsareunlikelytofeaturemuchinthemarketin2009astheeconomiccrisisplaysoutandcompanies lookmore todownsizingandrenegotiatingexistingleasesthanexpansionorrelocation.
The Quarterly Report | 4th Quarter | 2008 | Bangkok Office Market
TaBle 9 : TaKe-UP anD occUPancY RaTes, Q4 2008
LOcaTiOnTOTaL Office SuPPLy
(SQ M)
TOTaL OccuPied
SPace (SQ M)OccuPancy RaTe (%)
inner cBD 2,922,535 2,590,929 88.65%
outer cBD 820,700 750,245 91.42%
east Zone 590,418 538,981 91.29%
south Zone 443,789 356,543 80.34%
north Zone 237,211 196,846 82.98%
West Zone 266,264 256,253 96.24%
northern corridor 1,591,849 1,413,054 88.77%
eastern corridor 836,481 763,592 91.29%
Overall 7,709,247 6,866,443 89.07%
Source : Colliers International Thailand Research
FiGURe 5 : annUal aBsoRPTion oF oFFice sPace, 2004-2008
Source : Colliers International Thailand Research
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TherentalrateofGradeAofficespaceintheInnerCBDrangedfromTHB580 – 750 per squaremetre permonth at the endof2008,althoughdealsaroundTHB600-650persquaremetrewere more typical towards year-end. The average rental rateofGradeA in theCBDareawasTHB700per squaremetre.ThroughoutAsia,ongoingglobalfinancialturmoilcontinuestoerodeinvestmentandbusinessconfidence,causingprimeoffice
leasing activity to slow dramatically. The stormy conditionsin the secondhalf of 2008have already influenced the rentalrateinthefourthquarterof2008,withlandlordsstrugglingtomaintainrentsatcurrent levels. Newprojects startedtoofferlarge discounts to fill space, while renewals were increasinglycompletedatpriorrentsorevensome10%lower.
RentalratesforGradeBofficespaceintheInnerCBDrangedfromTHB300-700persquaremetrepermonth.Abroad-basedreductioninofficerentalshasbeenseenaslandlordshavemadetenantretentionatoppriority.
However,theaveragerentalrateofGradeBofficeintheInnerCBDwas THB 590 per squaremetre permonth. The stormy
conditions in the secondhalfof2008havealready influencedtherentalrateinthefourthquarterof2008,withsimilarimpactasinGradeArents.
The Quarterly Report | 4th Quarter | 2008 | Bangkok Office Market
FiGURe 6 : RenTal RaTes FoR GRaDe a oFFice sPace, Q4 2008
Source : Colliers International Thailand Research
FiGURe 7 : RenTal RaTes FoR GRaDe B oFFice sPace, Q4 2008
Source : Colliers International Thailand Research
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Outlook:
The twin effects of the global economic recession and political instability inThailandwillmaketheoverallofficemarketslowdownin2009.Thetopendof officemarket will be one of the first sectors to rebound. Office landlordsareplanningtoforgoupwards-onlyrentrenewalclausesthisyeartohelptheircustomerstomaintaintheirbusinesses.Whilethecostofrelocationwilldetermany tenants from moving out of existing premises, many tenants can beexpected topush for lower rentals at renewal,whilenewprojects are alreadyofferingsubstantialdiscountstosecuremajortenantsandensureoccupancyratesthroughwhatcouldbeaprolongeddownturn.Overall,wewouldexpectrentstodeclinebyatleast5%in2009.
ApartfromsubstantialnewGovernment-ownedspacecomingontothemarket,private sector landlordsareadding relatively little space. Asa result, even ifnetabsorptionremainsstaticin2009,overalloccupancyratesareunlikelytobegreatlyaffectedthisyear.
conTacT inFoRMaTion
THailanD: Patima Jeerapaet Managing Director Colliers International17/F Ploenchit CenterKlongtoeyBangkok 10110Tel: 662 656 7000Fax: 662 656 7111
Risinee Sarikaputra Director | Research
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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.