Bangkok Office Market Q4-2011

2010 - 2011

new Supply

DemanD

RentalS

occupancy

Bangkok office MarketthailanD

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Bangkok Office MarkethighlightS Q4 2011 provided no new supply to the market which coupled with minimum relocation activity has caused occupancy levels to remain high. 2012 is set to bring new supply to the market in the northern fringe and outer cBD areas although this will represent a minimal increase in overall supply. this lack of new developments is set to continue over the next four years with floorspaceexpectedtoincreasebyaround5.5%only.

Most companies intending to relocate in the second half of 2011 had to put their plans on hold followingthefloods.SomemajorofficebuildingsintheNorthernFringeandOuterCityNorth werehit.Whilstlandlordsoffloodaffectedbuildingstookpityontheirtenantsandreducedrents fortheperiod,manyoccupiersmovedintotemporaryofficeswithinthedryCBD.

Despitethefloods,overalloccupancyratesinQ42011werelargelyunchangedfromtheprevious quarter. there were slight variances by zone with the outer cBD and northern fringe remaining stablewhilsttheSouthernFringe,WesternFringeandOuterCityNorthregisteredsmallfalls.

rental rates increased in almost every location except the cBD and northern fringe area for Q4.Despite theCBDremainingdry, themajorityofbusinesseswerestill affectedasoffice workersstruggledtocommuteinfromthefloodaffectedareas.Thiscausedmajordisruption whichhasaffectedoutput.Theplansofcompanieswhowereotherwiseproposingtoexpand during this period have been revised accordingly.

TherecoveryprocessintheBangkokofficemarketwasceasedbythelatelyfloodingtheoffice market seems slowdown of leasing activity between october and end of november. the all of businessareinterruptedandtheirplanshavetobepostponed.Thelagdirectlyaffectsdemand forofficespace.

Q4 2011 | office

maRket inDicatoRS

COLLIERS INTERNATIONAL | P. 2

Mostof theexistingsupplyofofficebuildingswasconstructed in the1990’s(around70%)duringtheperiodofrapideconomicgrowthdrivenbythesurgeinexportsales.ThefirstfiveyearsofthenewmillenniumwereafflictedbytheAsianfinancialcriseswhichcausednewconstruction

projectstogrindtoahaltby2003.Eventhoughthemarket improvedduringthesecondhalfofthedecade,only12%ofcurrentsupplywasbuiltbetween2005and2011.

Morethan118,000sqmofofficespacehitthemarketin2011ofwhich85%was located intheCBDwiththeremainder intheNorthernand

Fringeareas.Bytheendof2011,theBangkokofficestockhadreached8,016,000 sq m.

Source:ColliersInternationalThailandResearch


total Supply aDDeD foR each five yeaR peRioD

hiStoRical Supply in Bangkok

hiStoRical Supply

Bangkok office Market rePort | Q4 2011

aDDitional Supply foR each yeaR

Supply By location, Q4 2011




ThechartshowstheslowdowninnewofficesupplyfollowingtheAsianfinancialcrises.In2003newsupplyhadgroundtoahalt.Developmentrestartedthefollowingyear,increasingin2005and2006beforefallingbackagainin2007.Thesubsequentyear(2008)producedthelargestvolumeofnewofficespacesincethe1990’swhenover250,000sqm

was released. new supply decreased again in 2009 and dramatically in 2010 as a result in the local political problems coupled with the global financialcriseswhenonlyoneofficebuildingwascompleted.2011newsupplyof twoofficebuildings totalling 118,000sqmwas in linewith2005output.

TheCBDstillhasthelargestsupplyofofficespacealthoughtheNorthernfringe is growing fast due to its lower land values and greater supply of

developmentsites.SuitabledevelopmentsiteswithintheCBDarenowscarcewhichisreflectedinthelandvalues.



Thenextfouryearsisexpectedtoseeasmallincreaseinofficesupplywith nearly 440,000 sq m in the pipeline. the northern fringe will experience the largest growth rate with eleven new buildings planned

whichismorethan79%oftheexpectedpipelinesupply.Thisrepresentsamodestincreaseof5.5%inoverallsupplywiththemajorityofbuildingsexpected to complete in 2014.

The Outer City West and Outer CBD areas still enjoy the highestoccupancyratesat87%forQ42011withtheSouthernFringeandOuter

CityNorthhavingthelowestrateof80%.ProximitytotheCity’smasstransitlinestationsisstillasignificantdrivingforceinoccupancyrates.



cumulative futuRe Supply By location

occupancy Rate By location, Q4 2011


futuRe Supply

DemanD – take up


occupancy Rate in 3 main locationS, Q1 2009 – Q4 2011

actual anD futuRe eStimate of occupancy RateS



Occupancy rates have remained steady since Q3 2011with the CBDincreasing at a slightly higher rate than the outer cBD and northern fringe areas. this is largely as a result of the increase in temporary lettingswithintheCBDduringtheperiodofflooding.Inadditionasthe

two new buildings released in Q3 2011 (Sathorne Square and ParkVentureEcoplex)continuetofillup,CBDoccupancy issetto improvefurther.

occupancy rates over the next year are expected to increase slightly as pipeline demand is set to outstrip the limited new supply expected. the completionofSathornSquareandParkVentureEcoplexinQ32011hashadashorttermnegativeeffectonoccupancyrateswhichwillcontinue

untilthebuildingsfillup.Theincreaseindemandduring2012ishoweverlikely to be constrained by the continuing global economic crises as companiesdecidetopushbacktheirofficeexpansionorrelocationplansfor the time being.



More than 2,000 new companies were registered in 2011 by the Department of Business Development. although registrations were

significantly down during the flooding, the trend seems to be in anupward direction which should further drive demand in 2012.

Source:DepartmentofBusinessDevelopmentandColliersInternationalThailandResearch

newly RegiSteReD fiRmS DuRing JanuaRy 2009 – novemBeR 2011

Industrialgrowthisthemainforcedrivingtheofficemarketasitcreatesthe need for trading, financial, legal and insurance services amongstothers to support it. Exports recoveredwell from the global financial

crises in 2009 and enjoyed a steady pattern of growth until thewidespreadfloodingattheendof2011.

Source:BankofThailandandColliersInternationalThailandResearch

expoRtS fRom thailanD on a monthly BaSiS


DemanD DRiveRS


Rental Rate By location

Rental Rate By location



Unsurprisingly the cBD commands the highest rental rates due to the central location, abundance of grade a buildings and the proximity to the masstransitlinesparticularlytheBTSSkytrain.Rentalrateswithinthe

cBD increased towards the end of 2011, partially driven by the take up of temporaryofficeswhileratesoutsideoftheflooddefencesreduced.

it is not surprising that grade a rents are the highest due to their quality and location in the cBD and along the sky train route.


Rental Rate, Q4 2011

Rental Rate By gRaDe, Q4 2011



InQ42011,rentalratesforofficebuildingsintheCBDincreasedattheexpense of the outer cBD and northern fringe (which are outside of the flooddefences).TheNorthernFringehasnowovertakentheOuterCBD

and is commanding slightly higher rents. in light of current market conditions landlords have found it difficult to increase rents at leaserenewal.


hiStoRical Rental Rate in thRee main locationS, Q1 2009 – Q4 2011

Aswithcondominiumprojects,officerentalratesarehigherthecloserthey are to the mass transit line stations. Being close to a station is preferable due to the ease of movement around Bangkok for employees

andbusinessvisitorsalike.Anumberofofficedevelopmentsnowhavea direct pedestrian link to a BTS stationwhich further adds to theirappeal.Thisisreflectedintherentalratesachieved.


Rental Rate of office BuilDing in Bangkok By DiStance fRom BtS / mRt (metReS), Q4 2011



Followingthefloodingattheendof2011,thenextyearisexpectedtoseelimited new supply hitting the market with an influx of space in thepipeline for 2014. increasing land prices in the inner cBD, especially in areas along the mass transit lines have lead to a reduction in new development. Most new schemes planned are within the outer fringes, particularly in the northern fringe where land is cheaper and more abundant.Thenumberofnewretailandofficedevelopmentsalongtheratchadapisek road, especially in the vicinity of rama iX is likely to lead to an alternative cBD location which can compete with the existing cBD due to lower rents.

Theimpactofthefloodingcoupledwiththeglobaleconomicslowdownwillaffectthegrowthofcompanies.Itisdoubtfulhoweverthatmanywilldownscaletheirofficerequirements.Intermsoflocation,itistooearlyto saywhich areaswill benefit although CBD space inside the flooddefences and within close proximity to the mass transit line stations is likely to remain the most desirable.

foRecaSt



appenDix

office Zoning

The general lack of zoning restrictions in Bangkok has lead to officesupply being constructed in a variety of locations across the city. the originalCBDwaslocatedintheSilomandSurawongseRoadswhichishometothevibrantgoldmarkets.ThedevelopmentofthemajorityofBangkok’s modern office buildings in the 1990’s could not beaccommodated within this area and the cBD began to take shape in the easternsectionofSathornRoad.

WhiletheSukhumvitRoaduptoAsokewashistoricallyperceivedasanentertainment and residential area, a large number of grade a buildings sprung up in the nineties and continued to be developed over the subsequent years. this area is now considered part of the cBD with the originalSilomandSurawongse roadsnowclassedas theOuterCBDalongwithPetchburiRoadwheremoreGradeBofficesarelocated.Thisstructure could however evolve further.



collieRS inteRnational thailanD management team RESEARCHTonyPicon|AssociateDirector SurachetKongcheep|SeniorManager

PROJECTSALES&MARKETINGMonchaiOrawongpaisan|SeniorManager RESIDENTIALSALES&LEASINGNapaswanChotephard|Manager OFFICE&INDUSTRIALSERVICESNarumonRodsiravoraphat|AssociateDirector RETAILSERVICESAsharawanWachananont|AssociateDirector ADVISORYSERVICES|HOSPITALITYJeanMarcGarret|Director ADVISORYSERVICESNapatrTienchutima|AssociateDirector

REALESTATEMANAGEMENTSERVICESBandidChayintu|AssociateDirector

INVESTMENTSERVICESNukarnSuwatikul|AssociateDirector WasanRattanakijjanukul|SeniorManager

VALUATION&ADVISORYSERVICESPhachsanunPhormthananunta|Director WanidaSuksuwan|Manager PATTAYAOFFICEMarkBowling|SeniorSalesManagerSupanneeStarojitski|SeniorBusinessDevelopmentManager/OfficeManager

coLLierS internationaL thaiLand:

Bangkok Office 17/FPloenchitCenter, 2SukhumvitRoad,Klongtoey,Bangkok 10110 thailandtel+6626567000fax+6626567111 email [email protected] Pattaya Office 519/4-5,PattayaSecondRoad(OppositeCentralFestivalPattayaBeach),Nongprue,Banglamung,Chonburi20150tel+6638427771fax+6638427772 email [email protected]

ReSeaRcheR:

thailandSurachetKongcheepSeniorManager|Researchemail [email protected]

512officesin61countries on 6 continents

this report and other research materials may be found on our website at www.colliers.co.th. Questions related to information herein should be directed to the research Department at the number indicated above. this document has been prepared by colliers international for advertising and general information only. colliers international makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. any interested party should undertake their own inquiries as to the accuracy of the information. colliers international excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising therefrom.ColliersInternationalisaworldwideaffiliationofindependentlyownedandoperatedcompanies.

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Bangkok Office Market Q4-2011