Bangkok’s commercial property market

Experts advise those looking to expand or move into premium quality Bangkok office space to move quickly. With virtually no new space coming onto the market over the next two to three years, premium office space prices are expected to modestly rise, while incentives offered to tenants will drop off.

Mr Suttipan Kreemaha, associate director of Colliers International’s research and consulting division, says that although the market can be described as "stable overall", the effective rental rate is expected to rise for premium and A-grade office space in the short term. (Colliers grades property into premium, and grades A, B and B minus.)

"Previously tenants entering a lease of three years would have got three to six months rent free. But with the improvement in the market, the rent free period has fallen from six to three to two months now, which squeezes up the effective rate."

Specifically, the average effective rent in the premium category rose by 11.2 per cent in the year to the first quarter 2001, according to Colliers April 2001 Bangkok Bulletin. According to the report, the overall vacancy rate dropped from 34.9 per cent at the end of 2000 to 33.5 per cent at the end of this year’s first quarter. CB Richard Ellis put the vacancy rate at 31 per cent for the first quarter.

According to Mr Suttipan, the areas to shift into now are the CBD (which includes Ploenchit, Sathorn, Silom and Ratchadamri) or anywhere near a BTS station. He said the BTS opening has not had a great impact on rents, but it has led to some clients staying put when otherwise they may have moved elsewhere to upgrade.

Moving outside the CBD doesn’t guarantee you’ll get a better deal. "Prices don’t necessarily drop off," said Amy Rodil, director of CB Richard Ellis’s research and consultancy division. "They’re comparable or even higher, so long as the building is good quality and has good management."

Ms Rodil advises tenants planning on leasing to do so as soon as possible. "Especially if you are talking about high quality space. For the next two to three years – at least until All Seasons [on Wireless Rd] opens – the market is going to be a bit tight, with not much choice available. Rents are still cheaper than a few years ago – the peak of the market saw prices at Bt600/m2, now rents are around Bt400/m2. Now is the right time to look at moving."

Robert Collins, director of Jones Lang LaSalle’s commercial division, estimates that across the CBD vacancy rates are a lower 27 per cent. "At the peak of the market in 1996, vacancy rates were 18 to 22 per cent, so we’re close to the best we’ve had anyway. It’s the grade B and C buildings that are remaining dormant."

Consequently, Mr Collins says that these are the properties currently representing best value. "Grade B space is not bad, it’s just not as glamorous and isn’t in a key location. These are the buildings worth looking at in all geographical areas at the moment."

With rent free periods drying up, other incentives may start to drop off too – but some landlords may still be prepared to go that extra mile for a deal. Mr Collin’s advice when it comes to negotiating a deal is simple: "Just ask. Parking rates, air conditioning rates – every item is negotiable. Don’t just agree to what your landlord offers."

And if you want the best deal, heading to an agent is probably a better bet than attempting to negotiate alone. "You can’t exclusively rely on the information that your landlord gives you," Mr Collins said. "A good agent will know other deals that have happened recently, and should be able to negotiate you the best deal on that basis."

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