CBRE foresees shift in Bangkok’s property landscape
A flurry of policy changes are in store
20 February 2019
The proliferation of large-scale mixed-use projects, the incoming land and building tax and a new city plan are expected to influence the Bangkok property market’s landscape over the next few years, according to consultant CBRE Thailand.
Managing director Aliwassa Pathnadabutr said the impact on the condo market from the land and building tax, which takes effect early next year, remains unclear and will depend on tax rates.
“The recent [proposed] rates are not high,” she said.
“If they remain, buying a condo unit as an investment or for rent will be still attractive because capital gains and rental yields are higher than the tax.”
Ms Aliwassa said the property market faces a series of changes, including rising interest rates, tighter mortgage regulations and the upcoming general election.
“Earlier, the general election had a positive impact on the property market,” she said. “But with a changing environment, the effect will depend on the new government’s stability and policies related to the property sector such as the Eastern Economic Corridor and the city plan.”
Bangkok’s new city plan, scheduled to take effect next year, will provide more floor area ratio in city locations to maximise land use. This will lead developers to review their plans and re-evaluate the situation.
Ms Aliwassa said many large-scale mixed-use projects in the pipeline, some of which are under construction, will have a negative impact on supply.
CBRE reports a total of 850,000 square metres of office space was under construction, while more than 1.5 million sq m is being planned ahead of construction.
“The market should keep an eye on Bangkok office supply being added during 2022-25 as over 1.5 million sq m will be completed in those years,” said Nithipat Tongpun, CBRE’s executive director and head of office services. “Office rents will rise at a slower rate because of this new supply.”
More than half will be located in the central business district (CBD), with the largest supply being developed at mixed-use development One Bangkok, the country’s largest private sector project with an investment of 120 billion baht.
According to CBRE, the highest year-on-year increase in average office rent was for the non-CBD Grade A segment, with a rise of 7.2% to 868 baht per sq m per month, followed by CBD Grade B with an increase of 5.4% to 767 baht.
Non-CBD Grade B saw an increase of 5.2% to 702 baht while office rent of CBD Grade A reached 1,025 baht per sq m per month, rising by 3.1% year-on-year.
This year there will be only two Grade A office projects being completed with a combined area of 74,000 sq m — Mitrtown Office Tower and Spring Tower — while average net take-up per year is 200,000 sq m.
Mr Nithipat said co-working spaces have continued to become an emerging source of demand, with 44,000 sq m of space leased over the last 18 months, especially in Grade A office buildings.
Co-working space operators have been looking for locations with an average size of 2,000 to 4,000 sq m in quality buildings at prime sites.
“When new supply increases, tenants will have more choices in selecting office premises,” he said.
“Developers should create office buildings that meet demand in terms of cost, location, specification and facilities.”