Potential For Momentum In The Office Market In Second Half Of 2011
Online, July 13, 2011 (Newswire.com) - However, according to the latest Bangkok Office Market Report from Colliers International Thailand and recent elections results, there could be a resumption of activity in the near future that has been somewhat lacking for the past few years.
On the supply side, no new office space was supplied for the first half of the year and this helped to underpin occupancy and rentals with only limited movement in demand according to Antony Picon, Associate Director of research at Colliers, who believes that the market has remained sluggish with a wait-and-see approach in regards to business expansion. "But with a likely majority government and broad acceptance of the election result there could well be a period of relative stability that will encourage businesses to embark on growth strategies and thus propel demand", he added.
Indications that the market could be turning the corner can be found in Park Ventures "The Ecoplex on Witthayu", which has already pre-booked around 30% of leasehold office space prior to its opening in September of this year with rental rates in the region of 800 baht per square metre. Mr Patima Jeerapaet, Managing Director of Colliers in Thailand pointed out that new, modern, eco-friendly designed building in the CBD can command a premium in the market."I am delighted to say that we now have a new hot office property in Bangkok", he said. The developers are applying for U.S. Green Building Council LEED platinum certification and this is also a factor for the high rental rates commanded. "If developers can see a commercial benefit from integrating environmental features into their properties then this will spur the green building movement", commented Mr Patima.
The expected introduction in the second half of 2011 of around 100,000 sq m of space in the CBD will mean that increasing occupancy rates are more likely to manifest themselves in 2012 according to the report. "The office market will be relatively volatile for the next six months or so, with an anticipated increase in both demand and supply ", said Mr Patima. On a brighter note, Mr Patima noted that limited new supply after 2011 is likely to lead to the strengthening of occupancy and rental rates. However he was still concerned that while the fiscal situation in many western economies remained precarious, Thailand is still not out of the woods even with the domestic situation settling down. "We were talking about Greece this time last year and I suspect we will be talking about Greece next year so this situation will take a rather long time to abate", he maintained.
However according to Colliers, future stability in Thailand will be the main factor to propel demand, while the worst case scenario for the global economy is unlikely to be seriously factored in. Mr Picon said "Businesses are eager for good news and this could come about over the course of the next weeks and months from the formation of a stable government with an expectation of longevity within its four year term". While this would likely be a greater factor in driving demand than actual government policies, Mr Picon reflected on measures that could boost the office market further and contends that the new government should consider opening up the service sector to competition in order for businesses to compete successfully in the ASEAN Economic Area. "At present many service sectors have been somewhat protected to the detriment of the economy's competitiveness and the Board of Investment would be the best vehicle to enable greater openness with progressive incentives", he argued.
Offices located close to mass transit stations command a premium although many are newer buildings that would usually command higher rentals. The sharpest difference occurs in grade C buildings with around a 40% difference being registered. Mass transit only explains part of an office building's appeal. Access to expressways may be equally or even more important for tenants.
The effect of the expected introduction of Sathorn Square in H2 2011 is likely to have a short term detrimental effect on occupancy after a recovery in Q1 2011. However with modest growth predicted for the following two years and a limit on new supply, Colliers International Thailand predicts a gradual but sustained rise in occupancy rates in 2012. This will in turn lead to a certain hardening of rental rates. This analysis assumes that both domestic political concerns and the global financial situation do not take a turn for the worse.