Ride the rails to office heaven

Prime quality alone does not guarantee leasing success but other factors can make a project stand out

Out of the 850,000 square metres of new office supply planned for Bangkok over the next five years, more than 80% is in prime development projects. Better quality equals higher rents is the primary reason driving the growth of new office supply. While prime quality counts for a lot, evidence shows there are a number of other factors that enable certain prime office buildings to achieve higher rents than many others.

STANDING TALL: Park Ventures Ecoplex has a very high occupancy rate. Photos: Suppl ied

JLL defines prime office buildings as buildings that meet various rigorous criteria for excellent location, design, fittings, facilities, management and amenities.

According to the firm's Thailand Property Intelligence Centre, the existing stock of office supply in Bangkok currently totals more than 8.5 million square metres. Of this, 3 million square metres are in Grade A projects, accounting for 35% of the total; that percentage has been more or less constant over the past decade.

However, the trend could be changing as most of the new office supply that is coming on stream is in Grade A development projects. By the end of 2021, Grade A space will account for 40% of the total office stock, based on new developments that are now under construction or have been proposed in Bangkok.

Q House Lumpini.

Grade A office buildings across the city are generally performing well, with record-low vacancies averaging only 6.6%, compared with 9.7% in the non-prime segment. They also command rents that are 28% higher than in non-prime buildings. Among prime developments, rents vary from building to building, however. So does the ability to attract tenants.

RIDING THE RAILS TO LOWER VACANCIES AND HIGHER RENTS: Close proximity to BTS or MRT stations has been a clear factor determining the competitiveness of an office building. JLL's study reveals that office buildings with easy access to a BTS/MRT station enjoy exceptionally strong demand, with vacancies averaging 4.7%, whereas buildings located farther away are seeing higher average vacancy rates at 12.5% or more.

Access to transit also has a significant impact on rents. While office rents across the entire Bangkok market rose by 15.8% in 2016, rents in office buildings located within 250 metres from a BTS/MRT station grew by 20.6%.

FYI Center.

It is interesting to note that approximately 60% of the future office supply planned for completion between 2017 and 2023 is in developments located no farther than 250 metres from a BTS/MRT station.

AGE COUNTS: The three-year net absorption of prime office space in Bangkok between 2014 and 2016 was 362,000 square metres. Of this, 80% was in buildings whose construction was completed in 2014 or after. The findings were no surprise as most of the newer buildings offer more modern office features and specifications as well as prestige.

Realising stronger demand for more modern buildings, some landlords with older buildings have undertaken renovations in efforts to enhance their competitiveness. After renovation, some prime buildings in well-located areas were able to fetch significant rental growth rates ranging between 15% and 20%.

Some of the notable renovations completed in 2016 were the overhaul of Sindhorn Tower on Witthayu Road with significant changes in both exteriors and interiors as well as improvements to facilities, and a major facelift for Siam Tower on Rama I Road.

GREEN ADVANTAGE: As more international and Thai corporations align themselves with the global sustainability agenda, the green features of an office building are now on the checklist for many prospective office occupants. For this reason, being green has become an increasingly important differentiator that is believed to contribute a lot to the strong competitiveness of some office buildings in Bangkok.

AIA Sathorn Tower.

The green building certification programme that is most recognised globally and in Thailand is LEED (Leadership in Energy and Environmental Design) by the United States Green Building Council.

Putting owner-occupied buildings aside, at the time of writing this article, there are only a handful of prime office buildings in Bangkok that are LEED certified, including Park Ventures Ecoplex, Sathorn Square, FYI Center, AIA Capital Tower and AIA Sathorn Tower. Most of these LEED buildings outperform many other prime office buildings.

Realising the green advantage, owners and developers of many existing office buildings and development projects in Bangkok have submitted their applications for LEED certification. Based on publicly announced intentions by investors, more than half of the city's known future supply is expected to be green.

BETTER MANAGEMENT, STRONG PERFORMANCE: Evidence shows there is a correlation between performance of office assets and the way they are managed. Leading office buildings such as Park Ventures Ecoplex, Sathorn Square, Bangkok City Tower and Q House Lumpini are prime examples. These four buildings have a combined occupancy rate of 97%, compared with the Grade A average of 91% in central Bangkok.

Just as important, achieved rents at these buildings are significantly higher than for other Grade A buildings nearby, with achieved en bloc figures fetching a 10-30% premium over nearby competitors.

Having said all that, performance of an office asset relies on a combination of different factors that complement one another. The fact that certain brand-new prime office buildings with high specifications achieve lower rents and occupancies than older prime office buildings located in the same area explains the case.

Yupa Sathienpabayut is director of office leasing with JLL. For advice on office leasing, readers can contact her by email: or visit the company's website at


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