Competition for office tenants sees rental prices fall

Industry experts say the vacancy rate in Bangkok’s office market is 27% as companies embrace flexible working practices

 

The Bangkok commercial property sector is struggling with significant oversupply, with office vacancy rates reaching 27% in the final quarter of 2024.

 

This surge in vacant space has triggered unprecedented rent reductions and intensified competition among landlords trying to secure tenants in a rapidly evolving work environment.

 

Aukit Pronpattanapairoj, head of Office Leasing at Cushman & Wakefield Thailand, has warned that vacancy rates are expected to climb further throughout 2025. 

 

His prediction comes as an additional 725,000 square metres of new office space is set to enter the market within the next two to three years, predominantly in Bangkok’s Central Business District (CBD).

 


“This substantial influx of new developments threatens to exacerbate the current oversupply situation, creating even more intense competition for tenants,” Aukit explained.


  

The office space occupancy rate for 2025 is forecast to decline to 72.2%, a significant reduction from the pre-pandemic level of 77% recorded in 2019, and considerably lower than the market peak of 95% achieved in 2012. 

 

Average office rents, which had remained stable at around 1,100 baht per square metre per month between 2020 and 2022, are projected to fall to approximately 950 baht/sqm/month this year.

 

Industry analysts attribute this market shift primarily to the widespread adoption of flexible working practices following the Covid-19 pandemic. Many organisations have embraced hybrid and remote working models, substantially reducing demand for traditional office accommodation.

 

This trend has led numerous multinational corporations to downsize their leased premises. Notable examples include Microsoft, which has reduced its footprint from 2,000 to 1,500 square metres; IBM, scaling back from 7,500 to 3,500 sqm ; and Ericsson, decreasing from 3,700 to 2,000 sqm.

 

The oversupply and fierce competition have prompted developers of new office buildings to offer unprecedented discounts of up to 30%, significantly higher than the pre-Covid norm of 10-15%. Meanwhile, older properties are increasingly offering incentives such as six to seven months of rent-free periods for long-term lease agreements, rather than direct price reductions.
  

Regional disparities across Bangkok are becoming more pronounced, with areas such as Bang Na and Ramkhamhaeng seeing rental rates of just 400-500 baht/sqm/month due to local oversupply. Similarly, in the Phayathai - Vibhavadi area, rents have fallen to 600-800 baht/sqm/month, with occupancy rates as low as 30% in some buildings.

 

The challenging market conditions have led to the indefinite postponement of several major development launches, including The Parq Phase 2 and One Bangkok, which together would add approximately 150,000 sqm of supply.

 

Other significant projects, including Bangkok Mall and Cloud11, have also delayed construction due to external factors.

 

While the recovery of Bangkok's office market is expected to be gradual, industry experts anticipate that new supply will be more carefully managed to align with actual demand, potentially leading to a market equilibrium by 2030.

 

However, Michael Glancy, managing director for Thailand, Indonesia, Philippines, and Vietnam with property consultancy JLL Thailand, is more optimistic. 

 

He pointed out that the supply broadly aligns with growing demand for premium office space, which has surpassed expectations in the post-Covid landscape.

 


“Bangkok is witnessing net absorption rates three times higher than the average over the last two years,” Glancy noted. “This highlights that the demand for quality spaces continues to grow, even with the influx of new premises.”


 

The contrasting viewpoints underscore the complex dynamics at play in Bangkok's commercial property sector as it navigates the aftermath of pandemic-induced changes to working patterns and adapts to evolving tenant requirements.

(2025/02/28-00:00)