Throughout Asia, ongoing global financial turmoil continued to erode investment and business confidence, causing prime office leasing activity to slow dramatically. A broad-based reduction in office rentals has been seen as landlords have made tenant retention a top priority. Many tenants are now focusing on cost-saving measures, especially in view of continued difficult economic conditions.
However, in Thailand, the picture was different. DTAC signed the country’s largest ever lease during Q4 2008, in a deal for 61,500m2 in Chamchuri Square, a new grade A office development on Rama IV. Chamchuri Square is the largest new office building completed since the 1997 crisis, and over 80% of the building has been committed already.
Q1 2009 saw Citibank sign a lease for more than 20,000m2 of space in Interchange 21, a Grade A development on Asoke, just across from Exchange Tower. This new development has also seen over 80% of its space already committed despite opening just a few months ago.
"With a limited amount of new Grade A supply on the horizon, including Asia Centre this year and Sathorn Square next year, we expect the top end of the office market to be one of the first sectors to rebound," states Mr. Nithipat Tongpun, Director & Head of Office Services at CB Richard Ellis Thailand. "Prime rental rates in Thailand have not fallen, unlike Singapore and Hong Kong."
The office vacancy rate rose at a rapid pace across Asia during the fourth quarter with a rise recorded in 14 of the 17 markets tracked by CB Richard Ellis. Overall vacancy across the region rose by 4% bps between January and December 2008, but the lack of supply in many Asian commercial centres ensured that 12 markets recorded a vacancy rate of below 7% at of the end of 2008. The contraction of the finance and banking sectors exacerbated the downward pressure on rents with Tokyo suffering a fourth consecutive quarterly fall, albeit at a slightly slower rate of 1%. Office rentals in Hong Kong and Singapore recorded their biggest quarterly slump since 2000, falling 21.1% and 19.9% respectively.
CB Richard Ellis does not see much reason for companies in Thailand to move to decentralized areas to save money on office rent because there is not much difference in rent between similar quality buildings in the CBD and decentralized areas. Additionally, there are also high capital costs to relocate, including the cost of moving, fit-out, restoring premises to their previous condition and other associated expenses, which mean that savings of THB 100-200/ m2 are not very worthwhile, unless there is a significant reduction in the amount of space leased.
