Boom Year Expected For Commercial Property In Bangkok

[george]

Boom year expected for commercial property in Bangkok

Construction workers at the site of a new highrise building in Bangkok. After fleeing Thailand in the wake of the 1997 Asian financial crisis, companies are back to expand in the kingdom due to its strong economy, with office rents projected to jump 20 percent this year in Bangkok

BANGKOK: -- After fleeing Thailand in the wake of the 1997 Asian financial crisis, companies are flocking back to expand in the kingdom due to its strong economy, with office rents projected to jump 20 percent this year in Bangkok.

With surging demand yet limited supply, office vacancies in the Thai capital dropped to 12 percent in 2005, the lowest since the Asian crisis, according to global real estate giant CB Richard Ellis.

"In the late 1990s, Bangkok was one of the cheapest places in the world to rent an office. From 1999, we had positive take-up, meaning that at the end of each year more space was occupied," said the company's executive director James Pitchon.

"Rents have risen significantly. It's not the bargain that it was in 2000," Pitchon said, adding vacancies for top-level offices in Bangkok's prime business districts were even smaller, standing at around seven percent.

Suphin Mechuchep, managing director of leading real estate firm Jones Lang LaSalle (Thailand), said Bangkok office rents would soar by 20 percent in 2006 due to strong demand.

"Demand for office space in Bangkok, particularly in the grade A segment, is very strong. Businesses continue to expand, boosting demand for office space," Suphin said.

Rents for Grade "A" offices, which have undivided floors, good quality air-conditioning, spacious car parks and attractive entrance halls, now reach 620 baht (16 dollars) per square meter a month on average, up 55 percent from 2000, according to Jones Lang LaSalle.

With the Thai economy seen growing 5.0 percent in 2006, Pitchon said various industries including financial firms, which closed Bangkok operations after the economic crisis, are again expanding their business here.

"We are seeing expansion particularly in IT because Thailand has lagged behind the rest of the world in IT investment," he said, adding banks, life insurers and consumer goods makers were also boosting operations in Thailand.

Thailand provided the spark for the Asian financial crisis when it let its currency float in July 1997 amid balance of payments troubles.

That set off a chain reaction of collapsing Asian currencies and soaring interest rates throughout the region which crippled economic growth and led to massive World Bank and International Monetary Fund bail-outs.

With foreign financial firms fleeing Thailand following the crisis, Bangkok office vacancies shot up to a record high of 38 percent in 1999, according to CB Richard Ellis.

"After the 1997 crisis, many office building projects were halted. Instead of demand growing, demand fell so a vacancy gap was huge," Pitchon said.

Patti Tomaitrichitr, a property analyst at KGI Securities, said despite recovering demand this year, few new offices were opening because developers were still cautious about making big investments after the crisis.

"The office market is the last property sector to have recovered from the 1997 crisis. Developers are still very careful to step into this market because they got burned a lot by the crisis," Patti said.

She said recent spikes in oil prices made developers more reluctant to build new buildings as they pushed up the price of overall construction costs.

Jones Lang LaSalle said the average development cost of a highrise office building, excluding land cost, now stands at 21,000 baht per square meter, up 40 percent from 2001.

"Not many developers can do that. It takes huge investments and banks are still careful about property lending," Patti said.

Although office rents in Bangkok are set to post double-digit growth in 2006, CB Richard Ellis said the Thai capital still remains far cheaper than other regional metropolises such as Hong Kong and Singapore.

Office rents in Singapore cost twice as much as those in Bangkok and Hong Kong is five times more expensive. London, the world's most expensive city for office rent, costs 30 times as much as the Thai capital, according to the firm.

Like the Thai economy, Pitchon said the Bangkok office market would continue to be healthy this year and ahead.

"So far we are not in a bubble situation. Demand seems reasonably steady and office demand really depends on the overall health of the economy," he said.

--AFP 2006-01-15

[think_too_mut]

Rents for Grade "A" offices, which have undivided floors, good quality air-conditioning, spacious car parks and attractive entrance halls, now reach 620 baht (16 dollars) per square meter a month on average, up 55 percent from 2000, according to Jones Lang LaSalle.

--AFP 2006-01-15

The article appears to be incorrect. The price quoted must be per square feet (so, multiply 620B by 9).

That would measure up with the later comparisons with Singapore (where 1 sqm is 280US$ per month) and other places.