_Bangkok Office Market Q1 2022

Mr.Marcus Burtenshaw, Executive Director and Head of Occupier Strategy & Solutions, said that "As we moved in 2022, all indicators show how the market is moving in favour of tenants. One of the most interesting findings emerges when we study and compare rental and occupancy movements across various districts in Bangkok. We found that the areas that had the steepest decline in occupancies correlated with the highest increase in asking rents. In other words, when faced with higher rents, tenants are voting with their feet and moving out. In the past, this wasn't always possible as one of the major factors that might prevent a firm from relocation was the expense of decorating their new office. However, firms that adopt a hybrid work model usually need less space, and those rental savings can offset the capital expense of relocating to a smaller, more efficient office.

It is not all bad news for landlords. Our research has also found that whilst occupancies fell across the entire market, green buildings (e.g. buildings with a LEED, TREES or similar rating) were found to be one of the most resilient sectors which saw occupancies fall by just 4.1% over the past year compared to a decline of 6.2% in Grade B and 4.6% in Grade A, over the same period. "

Economic Overview

Thailand's GDP in Q1 2022 expanded by 2.2% Y-o-Y. This quarter marks the second consecutive quarter of positive GDP growth. The driving factors were mainly the private expenditure, followed by the government spending.

The Office of the National Economic and Social Development Council (NESDC) assessed that the Thai economy would grow in the 2.5% to 3.5% range in 2022, improving from 1.6% in 2021, yet slightly lower than the previous forecast. On a positive note, domestic demand and tourism are likely to recover, and the impact of the Omicron outbreak on the economy is expected to dissipate for the rest of the year. However, the unresolved Russia-Ukraine war, rising inflation, and the global economic slowdown still harmed the Thai economy.

Headline inflation is expected to climb to 4.9% in 2022 than the previous forecast of 1.2% at the end of 2021. The significant rise in prices was, by and large, a consequence of a negative global supply shock arising from the sanctions on Russia, which is one of the largest suppliers of global energy, commodities, and construction materials. Nevertheless, the Bank of Thailand's Monetary Policy Committee viewed recent inflation as a cost-push factor rather than a demand-pull pressure at the late March meeting. This brought a vote to maintain the policy rate at 0.50%, which remained unchanged for almost two years, showing a strong emphasis on supporting economic recovery.

The Business Sentiment Index (BSI) in March increased to 50.7, reaching the 50-threshold due to the overall improving sentiment from post-pandemic recovery and relaxation of containment measures, namely the decreasing number of days required to stay in a designated venue while waiting for the RT-PCR test results, reducing health insurance coverage, and the substitution of ATK test for second RT-PCR test. However, the continuing tension between Russia and Ukraine drove up raw material prices, impeding the cost confidence to only 24.5 (the latest 5-year average = 40.1), the lowest figure in the recent 14-year period.

The 3-month expected BSI dropped drastically by 4.6% pts to 50.9, mainly driven by an all-time low of the cost sub-index. Most business sub-indices still stood above the 50-threshold except for the manufacturing and real estate sectors, which received a significant impact from the cost-push inflation.

Current Supply

No new office space was released to the market this quarter, resulting in the total office supply at 5.66 million sq m. However, the supply growth remained 4.7% Y-o-Y compared to an average of 2.0% in the last ten years. Out of the total office supply, the net lettable area of green office buildings stands at 905,000 sq m, up by 8.4% Y-o-Y, with an average annual growth rate of 13.4%.

Future Supply

According to our research, we expect future supply to remain unchanged from our previous estimate. From 2022 to 2024, the new supply at the end of each year is expected to be 440,000, 410,000, and 280,000 sq m, respectively. The total size of the future lettable area in the pipeline, at approximately 1.80 million sq m, accounts for almost one-third of the current level of office supply. More than 60% will be in the CBD.

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