OFFICE condominiums refer to office buildings which have been registered on a strata title and are available for sale on a freehold basis.
In Bangkok, out of the total supply of office space of 8.78 million square metres, there was approximately 1.97 million square metres of strata office space. Some examples of strata offices include Lumpini Tower on Rama IV, Sathorn Thani I and II, Lake Rajada, Ocean Tower I and II and CTI Tower. Of the strata title buildings, most of the buildings were developed between 1980 and 1999. There was only one developed post year 2000, called “The Trendy”, which was completed in 2008. Since then there has been no new supply in strata offices.
This is a type of property was once more popular in the 1990’s, but have essentially disappeared since the financial crisis. This type of office has not been in high demand since the end of speculative era prior to 1997 as they tend to cater to a niche in the office market. Large companies that would rather own their offices tend to want to own the entire building as well as land to maximise their control. Most multinational corporations and new/smaller companies tend to prefer renting office space to give them more flexibility in entering and exiting a space or allow them to expand and contract more easily. As a result, office condominiums cater to a specific niche of office demand, predominantly by smaller local Thai companies that want to own the office space they occupy and investors who want to rent out the office. With little demand for purchase, there has led to no significant new strata title offices for almost 20 years.
Apart from limited demand, another reason that developers have limited desire to develop strata title offices is that prices of residential condominiums in Bangkok have increased substantially, compared to the price of strata title offices. The average price of new condominiums in the central business district (CBD) area is Bt200,000 or more per square metre whereas prices of most existing strata title offices in CBD remain at or below Bt 100,000 per square metre. It is unlikely that new strata title offices can achieve the same price as residential products. As a result, developers choose to develop condominiums when considering their return on investment as it would not be possible to achieve the same sale prices as condominiums for strata title offices in the same area.
Though with no new supply of strata title office for several years together with higher office rents, some developers are planning strata title office developments.
The important thing is that the value proposition must be correct in terms of price, location, design, and modern facilities and amenities. The flexibility of the floor plan to allow customisation of space utilisation is also important. While buyers may not purchase an entire floor like investors of older strata title office, buyers of newer strata title offices may be looking for smaller “unit-based” purchases where they could buy one or more units in the building like a condo and connect them as needed. Building management must be planned well with attention given to mechanical and electrical systems management and modern technological infrastructures for things like internet, security, and building automation (smart building tech). One example is that older buildings use more centralised water-cooled air conditioning systems which make it hard for the unit owner to control their air conditioning and the charge for using that air conditioning. A modern building may use separated air conditioning systems in the office units to allow office owners to have more control of the temperatures and cost of cooling. The strata title office must strike the balance for these considerations weighted against the price they charge to make it attractive.
CBRE is not expecting a large increase in supply of strata title offices due to limited demand for this specific type of product, SME’s may still be niche market looking for space where modern strata title office could provide a good investment for these types of buyers. As office rents continue to rise, there has also been increased investor interest in existing, well located office condominiums especially those next to mass transit stations.