New Bangkok office supply of more than 1.2 million square metres slated for 2022-23 will put more pressure on occupancy of grade A spaces, which shrank to 84.7% in the first quarter this year, the lowest point over the past 34 quarters.
Phattarachai Taweewong, research and communication director of property consultant Colliers Thailand, said 92% of the two-year new supply or around 1.1 million sq m would be in grade A.
"In 2020-21, more than 80% of the new supply was in grade A," he said. "Pre-lease of many grade A buildings was very low. Some had only 10-30%, while some had none. Prior to the pandemic, a usual pre-lease was at least 70%."
This year, 21 new office towers are set to be completed with a total lettable area of 621,096 sq m.
Of this amount, 16 buildings with 517,593 sq m will be in grade A, while five towers with 103,503 sq m will be in grade B.
The grade A space will comprise 271,735 sq m in the central business district (CBD) and 245,858 in non-CBD.
Next year 13 new office towers are set to be completed with a total lettable area of 589,581 sq m -- all will be in grade A with 447,707 sq m in the CBD.
Mr Phattarachai said overall occupancy of grade A office space first reached 90% in the third quarter of 2013 and had never been lower than 90% until the first quarter this year.
"Annual demand dropped from 180,000-220,000 sq m prior to the pandemic to only 80,000-100,000 sq m in the past two years," he said. "The majority of shrinking demand was from foreign firms, while existing tenants relocated or had contract renewal."
In the first quarter of 2022, Bangkok office supply tallied 9.276 million sq m, up 0.97% from the fourth quarter last year.
New supply totalling 89,488 sq m was from three new towers which are all grade A, comprising S Oasis in the Chatuchak area (51,964 sq m), 111 Praditmanutham on Praditmanutham Road (11,740 sq m) and 140 Wireless on Wireless Road (25,784 sq m).
The occupancy of both grade A and B in the first quarter this year dropped to 84.7% and 93.1%, respectively, from 91.2% and 94.3% in the fourth quarter of 2021 as some new office towers had lower occupancy than expected.
New demand in the first quarter this year tallying 20,051 sq m remained from e-commerce businesses, consumer products companies and financial institutions.
Overall rents rose marginally by 0.18% from the fourth quarter last year to 751 baht per sq m per month, mainly driven by new supply with higher rents than the market rates.
Monthly rent per sq m in the CBD in grade A and B were 1,117 baht and 763 baht, respectively. On the northern fringe, the rates were 998 and 632 baht, while on the eastern fringe they were 995 and 597 baht for grade A and B, respectively.
