ECONOMIC REVIEW
- Occupancy rates continued to fall in Q4, from 90.2% in Q3,to 89.1%, as the market struggled with the poor economy and the second wave of COVID-19.
- Savills maintains a downward forecast for both rental rates and occupancy through 2021, due to the combined impact of COVID-19 and the large amount of upcoming supply entering the market.
- With total office stock in Bangkok prime area forecast to reach 2.9 million sq m by 2026, landlords are having to work harder to retain their existing tenants and to attract new ones.
- International occupiers are tentatively planning a return to the office from Q3/2021, though most will continue to provide flexible working arrangements for staff.
“ With the news of workers returning, landlords in Bangkok will likely breathe a sigh of relief, though with industry leaders stating that flexible working practices are set to continue, it appears too soon to celebrate.”
MARKET COMMENTARY
Bangkok’s prime offices experienced another quarter of decline, with occupancy falling to 89.2%, representing a 1.2 percentage point decrease from Q3/2020. The Bangkok office market has now experienced falling occupancy rates over the last five quarters, from 94.7% in Q3/2019 to 89.2% in Q4/2020. This downward trend is expected to continue through 2021 due to the pandemic and the completion of new office buildings, resulting in much higher stock levels.
Rental rates have remained steady at THB970 per sq m, demonstrating little change since Q2/2020, however, Savills notes that landlords have been increasing the length of rent-free periods, especially landlords of recently completed or soon to be completed office buildings, which are struggling to attract new tenants. Savills predicts that further decreases will be necessary for landlords to attract tenants in future, particularly to older buildings which will become unattractive compared to more modern stock.
