Office occupiers continue to seek higher-quality space in markets with robust infrastructure and social amenities, despite the weaker global economic growth in Q1 2019 and worries about the U.S.-China trade war. The race to attract talent by securing the most desirable work environments remains intense. Due to the limited supply and moderate construction amount in pipelines in most cities, prime office occupancy costs have risen to new heights.
These increases persist even as space efficiency and cost management are top concerns for many tenants around the world. The continuing challenge for office occupiers is how to secure quality space and location that meet the increasingly exacting demands of the workforce, while also controlling costs. In this context, measuring superior productivity and user-experience of such space becomes ever more important.
Bangkok is following this global trend. A handful of the best grade A buildings in the central business district (CBD) are achieving rents significantly higher than the average. These buildings are not just in prime locations, but are also technically better than their competitors in terms of air conditioning, lifts, energy efficiency and several other factors.
The highest rents achieved in Bangkok are in Gaysorn Tower at THB 1,500 per square metre per month; Park Ventures at THB 1,300 per square metre per month and Bhiraj Tower at EmQuartier at THB 1,250 per square metre per month, higher than the average CBD grade A rent of THB 1,040 per square metre per month for a small unit.
The rate of increase has, however, slowed over the last 12 months and was below the five-year average. There will be a limited amount of new supply up to 2021; but, after that, new supply will exceed historic levels of growth in demand. Many of the new buildings will be of a very high standard in terms of design, specification and amenities.
For many tenants, there is an incentive to upgrade as they move to agile workplace where there are no fixed desks. The population densities will be greater and so buildings need better lifts and air conditioning systems to deal with the additional staff. Employees also want better amenities and facilities and, if companies want the best talent, they will have to have the best office environment.
The unanswered questions are how many office tenants will be willing to pay a premium rent that is higher than the average grade A rent for a better-quality building and how big will that premium be.