Mr. Panya Jenkitvathanalert, Executive Director and Head of Office Agency, Knight Frank Thailand, said, “Due to the effects of Covid–19, many companies have begun to adapt to their employees working from home. As tenants thus need to use less office space, the overall office market in the 2020 has seen reduced occupancy and rental rates, while net absorption is -80,000 sq m., which is the lowest point it has been in 10 years. This is especially pronounced in foreign companies that engage in businesses where employees can work anywhere, such as in e-commerce, technology, advertising media and logistics, and a majority of these businesses have downsized their rental spaces. Meanwhile, some companies could not continue their businesses, and decided to close down, requesting to return their spaces immediately. This is reflected in the 4.7% year-on-year drop in the occupancy rate of the office building market.
Office rental prices in 2020 continued to increase and decrease in some areas. For Grade A office buildings, the price rose 2.8% year–on–year, while rents of Grade B office buildings rose just 0.2% year–on–year and Grade C office buildings increased 1.3% year–on–year.
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Much of the lettable spaces have returned to the market, and many landlords are in a wait–and–see situation, but they offer more flexibility in lease terms and conditions, covering rent negotiations, on–site parking, lease durations and subletting. Some companies that were affected by the economic slowdown as a result of the Covid–19 outbreak turned to partial leasing or subletting to save on costs, which usually involve significant restrictions from building owners. However, building owners are now permitting subletting as long as the tenants can find their own sub–leasers.”
Mr. Panya added, “We are starting to see more market signals that point to it becoming a tenants’ market. The market cycle is returning in favour of tenants, where they have the power to negotiate both the rental price and other terms, as well as enjoy greater options in the market. We expect this trend to run for the next 4 to 5 years, especially in the next 5 years where there will be more than 40 new office buildings, or approximately 1,600,000 square metres. Of this figure, over 900,000 square metres will be situated in the CBD areas and are all in Grade A office buildings. In 2021, it is expected that 128,404 square metres of space will enter the office market from buildings such as Siamscape, Silom Center, Vanissa Building, P23, Kronos Sathorn, and O–Nes Tower.
After this, there will be quite a lot of office buildings coming into the market. Building owners will have to compete on rental prices and facilities to keep and attract tenants. Grade B office buildings should try and improve the quality of their buildings as well as increasingly build relationships with customers. Most importantly, they should control their rental prices to be considerably lower than that of Grade A buildings, so tenants are not compelled to move to Grade A buildings and feel that they are a better value. At the same time, Grade A buildings do not need to adjust their rents downwards; however, building owners must be more flexible in the lease terms.
On the whole, the office building market is expected to remain stable in 2021. The market still has demand, especially for office buildings in Chidlom and Ploenchit to Ekamai. Many companies have altered their businesses and adapted to the situation since the Covid–19 epidemic. They changed their modes of work and have become more familiar with technology. The tendency for many companies to downsize and return some of their leased space remains, as they see no need to use as much rental space as before.
In addition, this period is ideal for owners to renovate their buildings to support future needs. Companies that want to reduce and move their office space to another building that is better or cheaper should know that relocating or changing office space is costly. If tenants would like good analysis and planning of their new office space, Knight Frank Thailand can provide Workplace Strategy and Project Services for the arrangement of office space. This helps to meet the needs of tenants and adjust the workplace to suit the organisation’s actual use, reaping the maximum benefits. We not only increase the efficiency of office space usage but also reduce the organisation’s internal costs by more than 30% per year, promoting the value of the organisation while still being able to attract and retain quality employees by increasing employee satisfaction towards the organisation. Also, we have Change Management services to help organisations prepare their employees for the new office space, as well as Workplace Project Management to handle office space projects. We work with all departments, and follow up and execute every step, from interior design and construction to risk management and cost controls. We modernise the office space and provide a Smart Workplace Design management system that enables users to focus on working in a digital office format.”