CBD office occupancy rate decline set to persist
An aerial view of high-rise buildings in Bangkok’s central business district. Somchai Poomlard
Following the extension to the lockdown until August, the office market slowdown will continue in the third quarter with a further decrease in occupancy rate, according to property consultant Edmund Tie & Co Thailand.
Neeranuch Kanokvilairat, manager of research & consulting, said some office tenants were using less office space as they had reduced the number of employees to cope with the negative impact from the pandemic.
“Some companies needed to relocate to other office buildings which had lower expenditure as they tightened their belts for business survival. Some needed to close down their business due largely to a prolonged impact from Covid-19,” she said.
In the second quarter of 2021, the occupancy rate of prime central business district (CBD) office spaces in Bangkok dropped to 89.43% from 90.85% in the first quarter.
The downward trend is set to continue in the third quarter following the lockdown measures in July and August. It was a consecutive decrease since the second quarter last year, the first decline in several years, she said.
The average rental rate in prime CBD also declined from 1,065 baht per square metre per month in the first quarter of 2021 to 1,055 baht in the second quarter — a drop of 1%.
The sharpest quarterly drop was in the second quarter last year with a decrease of nearly 2%.
“The decline of rental in prime and secondary offices in the CBD was due to the rental discounts given to tenants whose financial condition was severely hit by the prolonged impact of the pandemic,” she said.
Amid the virus crisis that generated high infections in Bangkok and several provinces, developers are expected to delay the opening of new office buildings until the end of the year.
“The opening schedule could be further delayed, subject to whether there will be an improvement in the infection rate and a relaxation of the lockdown measures,” she said.
Ms Neeranuch said the impact of the outbreak will cause more business closures and force many of them to expand cost-cutting measures or downsize their operations. Many companies will revise their space requirements, putting further pressure on the occupancy rate.
Landlords tend to maintain the provision of financial relief measures, such as rental waivers and rental discounts, to keep existing tenants amid weak demand, while large supply forces them to be more flexible in rental rates and lease terms to fill up their office space.
There is a growing demand for LEED or WELL certified buildings, which offer PM2.5 filtration and virus sanitisation systems, deploy sustainable and green energy and provide a green area and open area for outdoor relaxation.
New prime office buildings will be equipped with automatic and sensor technology and digital innovations to upgrade office facilities and support the digital transformation.
Bangkok office supply was recorded at 9 million sq m, a slight increased of 0.8% compared to 8.9 million sq m in the first quarter of 2020.