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Published on July 26, 2007

Many businesses, especially in the finance, insurance, exports and IT sectors, have cut rental costs by up to 39 per cent by moving their back offices out of Bangkok's central business district to newer business centres, according to a recent study.

The CBD covers Silom, Sathorn, Rajdamri, Wireless, Rama IV and Phloenchit, while the new office centres are located near mass-transit routes in Ratchadaphisek, Sukhumvit and Asoke.

Rents for grade-A offices in

the CBD will rise by 2.5 per

cent this year to Bt666 per square metre while space in the new

centres is going for Bt403.

Caroline Murphy, head of markets for real estate services

and investment management firm Jones Lang LaSalle, said yesterday that when revenue dropped, especially due to the baht appreciation, almost all firms that wanted to cut operating costs decided to move their back and head offices

to the new business hubs.

The rapid-transit systems will also help their staff save on commuting costs, she said.

The average vacancy rate for all grades of office space across Bangkok has contracted slightly to 13.2 per cent while vacancies in grade A buildings in the CBD have averaged 11.3 per cent.

However, office supply will increase from 7.4 million to 7.5 million square metres when Athenee Tower with 40,000 square metres of space on Wireless Road, and CyberWorld with 61,000 square metres on Ratchadaphisek Road are completed. That will push the CBD vacancy rate up to 12-13 per cent by year-end because demand remains stagnant after most businesses delayed their expansion plans and reined in expenses.

Next year will see nearly 200,000 square metres of office supply entering the market, which might boost the vacancy rate to almost 15 per cent if the economy continues to chug along at a slow pace like this year, Murphy said.

However, she believes that next year will be better after the general election installs a democratic government to run the economy.

Dan Tantisunthorn, the company's head of research, said prices for CBD condominiums showed signs of growing only 1.5 per cent to Bt81,000 in the first half of this year from Bt80,000 last year because of greater competition from developers rolling out projects since last year.

Condos in central Bangkok now total 54,280 units, including 3,630 completed over the past six months. More than 20,000 units are under construction, with 20 projects comprising 5,420 units launched in the first half for completion next year.

Condo demand in central Bangkok remains strong because home-buyers want to lower their transportation costs. However, prices might stay steady or rise only slightly because the market faces intense competition.

Developers of detached housing have also expanded from only sales to rentals.

They have converted units in central Bangkok to residences for mainly foreigners who want to live in a home rather than an apartment.

Managing director Suphin Mechuchep said residential leasing would be the new business for her company. It serves market needs and reduces housing stock for developers who face high competition now.

"The property market will be steady in the second half, nearly the same as in the first half. But it will pick up next year when political stability returns," she said.

Somluck Srimalee

The Nation