Bangkok office supply to hit 1.8m sqm by year-end

The vacancy rate is expected to remain high at 29%.

According to a JLL report, Bangkok’s total office stock is projected to reach 1.8 million sqm by end-2024. 

Although the pre-leasing rates in upcoming projects moderated, recent completions have started to fill up. The vacancy rate is expected to remain high with a slight improvement to 29.0%.

Here’s more from JLL:

While recent completions command premium rents, ageing buildings may face rent declines as competition intensifies. Rising development costs should boost capital values, with older assets seeking refurbishment. Minimal yield compression is expected through 2024.

Strong take-ups in new buildings lead the market

Prime net absorption totalled 17,500 sqm, primarily in new and recently completed buildings. Demand remained strong for old properties with large retail spaces, while some mid-age buildings saw occupancy drop as tenants downsized and moved to newer sites.

Gross leasing volume reached a two-year low of 3,800 sqm, down both quarterly and annually, contrasting with mid-2023 to early-2024 peaks. Activities included two relocations, one in-situ expansion and one new business entry.

Continuous supply growth drives vacancy upward

One Bangkok Tower 3 completed and opened in Q3 2024, adding 98,000 sqm to the market. Total prime office stock in Bangkok’s CBA increased to 1,561,300 sqm.

Prime vacancy rose 351 bps q-o-q to 29.7% following One Bangkok Tower 3’s opening. This rate exceeded the forecast peak and is likely to remain high throughout 2024, primarily due to the influx of new supply and imbalanced market demand.

Rising development costs pressure yield compression

Prime gross rents rose to THB 1,028 per sqm, per month, up by 2.1% q-o-q and 6.8% y-o-y. New buildings continued to lead the upward trend. Net effective rents grew more slowly due to longer rent-free periods, at 1.9% q-o-q and 6.5% y-o-y, to THB 786 per sqm, per month.

Capital values rose 2.8% q-o-q and 7.4% y-o-y to THB 167,000 per sqm. With rising land and construction costs outpacing rent growth, prime office market yields in the CBA contracted slightly by 5 bps q-o-q to 5.65%.