Bangkok Grade B office occupancy rate hits record low of 74%

This reflects a 6.8% decline compared to Q2 2021.

The occupancy rate of Grade B office spaces in Bangkok continued to fall to a new all-time low in Q2 despite recording positive net absorption, according to a Knight Frank release.

The total amount of occupied space increased slightly from 4.53 million sq m in Q1 2022 to 4.57 million sq m in Q2 2022, with market occupancies remaining at 80.1%. Q2 was a good period for the upper segments as we have seen more positive market movements for these groups. 

Here’s more from Knight Frank:

Grade A became the best-performing segment this quarter, where the occupancy rate rebounded by more than 3% Q-o-Q, followed by grade A at 1.6% Q-o-Q. The occupancy rate for grade B continued to decline by 2.0% Q-o-Q or 6.8% Y-o-Y to a new all-time low at 74%, although this was partly a result of new supply added to the market this quarter. Grade C, which saw the smallest fall since COVID-19 emerged, remained steady in Q2, with occupancies of around 80%.

Since we expect to see a lot more future supply added to the market, which will dampen the occupancy rates once included, we have introduced net absorption by segment, controlled for grade changes, to see the pure impact from the demand side. On a quarterly basis, all grades saw positive net absorption, including grade B, which experienced a decline in occupancy rate. On an annual basis, the data still supported the flight to quality effect as net absorption of grade C dropped by -45,000, followed by grade B at -24,000 sq m, while the net absorption of grades A- and A rose by 29,000 and 12,000 sq m, respectively.

The average asking rent increased at a slow pace of 0.4% Q-o-Q or 1.2% Y-o-Y to 801 Baht per sq m per month in Q2, below the 10-year rental growth, which averaged at 3.6% per annum. Quarterly rental growth rose for most grades. Grade A had the biggest rent hike in Q2 at 1.1% Q-o-Q, but the average rent for Grade A did not reach its peak two years ago. Grade C was the only segment which experienced negative growth this quarter. Still, its rental growth was the second highest in an annual term at 3.9% Y-o-Y and the highest since COVID-19 began at 6.9%.