Appeal of offices remains strong

Sathorn Square

Sathorn Square

Bangkok remains tremendously appealing to institutional property investors looking for international-standard office buildings but supply has been a limiting factor, said William Wilfong, CEO of Golden Land Property Development Plc.

Apart from Sathorn Square, which Golden Land is due to complete in 2010, no office tower has been built in Bangkok since the Asian financial crash. And those already built are almost never available for sale.

”So there is a world of international capital ready to come to Thailand but the limiting factor is supply,” said Mr Wilfong, who added that institutional investors are always going to be drawn to Bangkok as a world-class gateway city and a place people want to be in.

However, Mr Wilfong, who was based in Singapore before moving to Thailand two years ago to lead Golden Land, said he found that owners were unwilling to sell property because this could be seen as a sign of financial difficulties.

He said he expected attitudes to change with the further development of a property fund market.

”This is still in its early stages but it is a vehicle for holding property that will be much more important in the years to come,” he said. ”Here, until fairly recently, there weren’t international buyers so if you sold a building it was really to a competitor - which is very different from the situation today.”

Mr Wilfong added that when a property fund acquires a building, typically the previous owner keeps one third of the shares. However, Golden Land is going to hold on to the 38-storey Sathorn Square office building, which he said is progressing well after the completion of five underground floors.

Golden Land also plans to build two office buildings on a large land plot opposite the Stock Exchange of Thailand.

Although the office market got a bad name through being hardest hit in the Asian financial crisis _ when the vacancy rate hit 40% _ Mr Wilfong is bullish on the sector’s future.

”Many local developers were badly burned back in 1997 and 1998 and faced several years of very high vacancy, whereas I came to Thailand two years ago and I look ahead and see that the market is already pretty tight,” he said.

”I think vacancy over the next two to three years is going to be considerably tighter, to the point where there could be a shortage of downtown office building space by the time we are ready for completion.”

Mr Wilfong claims statistics back his outlook. The net take-up rate of additional office space from 2000 to 2005 averaged 310,000 square metres per year. Although the situation has been difficult over the last two years, Bangkok has still seen take-up averaging 180,000 sq m a year.

Also, while the global economic situation has been turbulent, Mr Wilfong points out that Bangkok’s office rents are among the lowest anywhere in Asia _ barely one quarter the rates in Singapore and Hong Kong. ”So Bangkok remains a very affordable destination for international companies,” he said.

The target rent for the Sathorn Square building, with a net space of 72,000 sq m, starts in the range of 800 baht per sq m, and will rise as the building fills up.

Mr Wilfong claims the tower may also benefit from already being underway, as rumours suggest Environmental Impact Assessment (EIA) regulations will change to require all buildings of more than 10,000 sq m to get EIA approval.

”And if this comes to pass, it’s going to really lengthen development for any office building coming into the market,” he said.

Golden Land has worked to make the whole Sathorn Square mixed-use development distinctive, taking inspiration from the old Russian embassy, in the middle of the plot, which once belonged to Luang Sathorn, after whom Sathorn Road was named.

To prevent the embassy being overshadowed by eight- or 10-storey car parks, the company has dug down five storeys to accommodate vehicles.

The office tower will also have large floors of 2,000 sq m, something many large companies prefer for consolidating operations over fewer floors.

”The design of Sathorn Square was very difficult to keep it from looking fat,” said Mr Wilfong, ‘’so sweeping curves draw your eye upward and don’t really give the impression it’s a big blocky building. It wears its size very well.”

Within the complex sits Infinity Condominium, already finished and with transfers currently 25% completed. In another corner the W Bangkok hotel is being built in a joint venture with Dubai’s Nakheel Hotels and is expected to be completed in 2011.

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About the author

Nina Suebsukcharoen Nina Suebsukcharoen
Nina Suebsukcharoen is a senior journalist with The Bangkok Post, Thailand's first English language newspaper and specialises in the property and real estate sector.
Other posts by Nina Suebsukcharoen ( 19 )

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