THE BANGKOK office market will see higher rents and falling vacancy rates because the supply of new offices is limited.
CB Richard Ellis estimates that less than 300,000 square metres of office space will be completed in the next two years, mainly in buildings where construction was halted after the 1997 crisis. Demand, however, is expected to be at least 300,000 square metres per year for the next two years, which will fuel rent increases.
Nithipat Tongpun, director and head of office services at CB Richard Ellis, believes that central business district (CBD) grade-A vacancy levels could fall to as low as 5 per cent, and rent will exceed the 1992 peak.
'There is very limited space available in the CBD grade-A market and few buildings coming on line over the next two years,' he said. 'Tenants will see landlords looking for substantial rent increases when leases come up for renewal and need to plan ahead.'
Demand is expected to grow with the economy, but rising rents will force tenants to plan ahead and think carefully about location.
Average CBD grade-A rents were 550 baht ($112) per square metre a month for 200 square metre lettings at the end of last year.
'We have already seen transactions at significantly higher levels than this in the first two months of 2005,' Mr Nithipat said.