Office market’s appeal undimmed

Interchange 21 at the Asok Junction

Interchange 21 at the Asok Junction

Many multinationals looking to expand.

Despite political uncertainty, Thailand remains an attractive destination for regional offices in Asia Pacific as international companies continue expanding business, according to Patima Jeerapaet, managing director of the property consultant Colliers International (Thailand).

He said international businesses that continued investing and expanding included financial services, insurance, IT and electronics and industrial estates.

Colliers currently has 20 deals in hand, representing 10,000 square metres of Bangkok office space. About a half dozen would be newly established financial service businesses, European-based institutional investors in property and IT, asking for 100 to 500 sq m each.

”[International business will continue investing] as long as the government’s policy is not changed. Policy risk is the most important factor they are concerned while political risk has less impact,” Mr Patima said.

Last week the company concluded a deal with the Canadian insurance company ACE INA Overseas Insurance Co Ltd which signed an agreement to lease 9,700 sq m of office space in Interchange 21 at the Asok Junction for three years.

”It sees the potential in Thailand and is confident in the insurance business despite the existence of 30-40 players from local and overseas companies,” he said.

The new tenant will expand its former space of 5,500 sq m and bring total occupancy in the building to 84% from 60% of the total area of 41,454 sq m.

With the current political uncertainty, it is sometimes easy for people to overlook the strong, long-term fundamentals that Thailand offers international firms and investors, said Mr Patima.

In the property sector, investment cycles and horizons were much more long-term. With prime office rentals remaining stable in the second quarter, international investors were seeing the value that commercial space in Bangkok offered, particularly when they compared rental rates with other international cities in Southeast Asia.

Annual uptake of office space in Bangkok declined from 300,000 sq m in 2004 to 167,000 sq m last year. Stabilising prime office rentals prompted a forecast uptake of office space totalling around 180,000 sq m this year, up 8%. As of the end of the first half, office space demand totalled 90,000 sq m.

The occupancy rate in grade A offices in the central business district was 86-87%.

According to Knight Frank Chartered (Thailand), Bangkok office market experienced lower vacancy rates while rental rates would be strong despite the current turmoil and the release of new buildings in the first half of the year.

Marcus Burtenshaw, the company’s director said that while the pace of rental growth had slowed since before the 2006 coup, the average rental rate for all grades of Bangkok office space still grew by 2.4% year-on-year from 509 baht per sq m per month to 521 baht in the second quarter of 2008.

The average monthly rental rate of grade A office stood at 667 baht per sq m, up from 652 baht in the same period last year. That for Grade B also rose to 528 baht per sq m from 513 baht while for Grade C was at 369 baht.

Vacancy rates of grade A in the second quarter of 2008 decreased from the elevated rate of 12.83% of the previous quarter, to 10.28%, as the new stock was taken up by the market.

Grade B and C buildings continued to experience low vacancy rates at 6.84% and 9.69% in the second quarter.

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