What to expect from Bangkok’s office market in the near term

Sustainability is increasingly becoming a non-negotiable factor for tenants.

Panya Jenkitvathanalert, executive director and head of office strategy and solutions at Knight Frank, said “In the second quarter of 2024, the Bangkok office market expanded slightly, with growth in supply, occupied space and the asking rental rate. Although net absorption turned positive, the market occupancy rate continued to fall as supply continues to outpace demand.” 

Flight to quality remains a key characterization of tenant movement, although the definition of “quality” continues to evolve. Post-pandemic, many tenants have adapted their office space usage to prioritize flexibility, technology, and adaptability. It has become a lot more essential to create work environments that accommodate diverse work styles and emphasize employee well-being. 

Panya added “Sustainability and ESG considerations have gained traction for tenants when making real estate decisions. With carbon commitments in place and deadlines looming, some companies will only consider green-certified properties, even if non-certified options come with attractive incentives. 

As highlighted last quarter, there was a noticeable trend of tenants transitioning from home offices to traditional office buildings, driven by the demand for a wider choice of amenities and greater accessibility. This is another indication of flight to quality occurring market wide.” 

Older buildings that do not undergo Asset Enhancement (AE) or make improvements in Facility Management (FM) face even greater threat from the emergence of newer buildings that employ competitive pricing strategies, physical space and services that meet the needs of modern-day tenants. With close to 1.2 million square meters still in the supply pipeline over the next 2.5 years, pressures on occupancies and rents will continue to mount. 

Going forward, asking rents will become even more unreliable as market indicators, as the gap between asking and effective rental rates continues to widen. In the latter half of 2024, the Silom-Sathorn-Rama IV area is anticipated to see increased leasing activity with the official opening of One Bangkok phase 1, positioning it as the key market to watch as these dynamics continue to unfold.

“Competition in Bangkok's office sector remains intense, however, you can succeed across all building grades if you understand the market and what modern tenants need. Sustainability is now a non-negotiable factor for more tenants, so it’s crucial to have green-building features and emphasize ESG practices to make your property competitive and appealing in today’s market”, Panya concluded.