Demand for office space perking up

"Despite some easing in oil prices, business sentiment has generally been hit by the troublesome political situation. However, growth opportunities in certain business sectors remained. Though hesitant to expand, the growth nevertheless being realised has meant an increasing number of employees and subsequently more office space being taken up," Suphin Mechuchep, managing director of the professional services firm specialising in real estate, said yesterday.

The firm's study found that 304,000 and 94,000 square metres of office space was completed in Bangkok in 2006 and 2007 respectively.

While 200,900sqm was taken up in 2006, the take-up level dropped by over 50 per cent to 102,200sqm last year. This reflects exceptionally low demand compared with the average annual take-up rate of over 250,000sqm between 2000 and 2006.

Demand showed signs of improvement this year with 65,000sqm of space being absorbed in the first half, an 80-per-cent increase from the latter half of last year. As leasing continues to be active, the net take-up level for Bangkok office space is expected to be well higher than last year.

However, although leasing activity is picking up, demand has remained slow and failed to keep pace with new supply.

Dan Tantisunthorn, head of research, said that while the net take-up level in 2008 is likely to exceed 150,000sqm, the Bangkok office market will see 252,000sqm of new supply by year-end, with 89,000sqm already completed in the first six months.

"This will put some more downward pressure on rentals," he said.

Average gross rentals for Grade A and B office space continued to drop. Average Grade-A rents decreased to Bt679 per sqm per month, a 1.7-per-cent drop from end-2007. For Grade B, average rents slightly fell to Bt524 after reaching a peak of Bt528 at end-2007.

"Opportunities have arisen for corporate occupiers to lock in the benefit of soft conditions now," he added.