MARKETVIEW Disruptions and contractions result in negative net take-up Bangkok Office, Q3 2020 QUARTERLY HIGHLIGHTS Total office supply in Bangkok as of Q3 2020 was 9,165,588 sq.m., increasing by 0.2% from the previous quarter from the completion of three new office buildings. Net take-up in this quarter went to negative 17,859 sq.m. from numerous contractions in size by tenants, mainly in Grade B Non- CBD buildings. The occupancy rate in the Bangkok office market dropped to 91.1% from 91.6% in the previous quarter, decreasing by 0.5 percentage point Q-o-Q and 1.9 percentage point Y-o-Y. With limited activity in the market, the average rental rate for Grade A office buildings remained the same as previous quarter at THB 1,100 per sq.m. COVID IMPACT After the lockdown measures have been lifted and businesses can resume operations, we have started seeing the clearer impact of COVID-19 pandemic to the Bangkok office market. The mounting financial pressure and more widespread implementation of flexible work hour or work from home strategy have resulted in the change in way of working and space requirements from tenants. This has shown clearly in the drop in take-up in this quarter which we believe will continue in the last quarter of the year as well. Grade A CBD Rents +4.1% Y-o-Y Grade B CBD Rents +0.7% Y-o-Y Grade A Non CBD Rents +2.5% Y-o-Y Source: CBRE Research, Q3 2020 2020 CBRE (Thailand) Co., Ltd. | 1 Q3 2020 CBRE Research Figure 1: Office Supply, Demand and Vacancy Source: CBRE Research, Q3 2020 Grade B Non CBD Rents +1.6% Y-o-Y Total Take-up Total Supply Vacancy Rate Q3 2020 Overall Market Q-O-Q Demand 8.35 million sq.m. Supply 9.17 million sq.m. Grade A CBD Rent THB 1,100 per sq.m. - Overall Occupancy 91.1% Space Under Construction 1.17 million sq.m. BANGKOK OFFICE 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000 10,000,000 11,000,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q12020 Q22020 Q3 2020 2020F 2021F 2022F 2023F Vacancy Rate sq.mMARKETVIEW As of Q3 2020, the total Bangkok office supply was at 9,165,588 square metres, increasing by 0.22% Q-o-Q and 2.12% Y-o-Y, from 9,145,088 square metres in Q2, from the completion of Summer Point and Lumpini Tower Vibhavadi- Chatuchak Tower A and B and removal of some buildings which have been repurposed. By the end of the year, we expect another 59,600 square metres of office space, all from Grade B Non-CBD buildings, to be completed. The amount of supply under construction remains our key concern with over 1.17 million square metres being built from now until the end of 2023 and another 72,000 square metres in 2024 from Central Park Offices in Dusit Central Park. The key highlight in this quarter was the first negative take-up in the Bangkok office market since 1998. The total net-take up in Q3 2020 was -17,859 square metres, cancelling out the 16,805 square metres in the previous quarter. This has resulted in the year-to-date net take-up of only 20,886 square metres compared to 127,965 square metres in the same period last year. The biggest drop was in the Grade B Non-CBD buildings which we believe is due to the nature of tenants in these buildings which have higher sensitivity to financial pressure resulting in more widespread contraction in sizes of many tenants. Grade A Non-CBD category performed well as the only category with positive take-up at 8,372 square metres in this quarter mainly due to the move-in of EIA to the new Tipco Tower 2. 2020 CBRE (Thailand) Co., Ltd. | 2 Q3 2020 CBRE Research BANGKOK OFFICE TABLE 1: BANGKOK OFFICE MARKET Source: CBRE Research, Q3 2020 Figure 2: Completed, Under Construction and Planned Office Supply by Area Note: The figure is revised every quarter. Our forecast on future supply may be subject to change. Source: CBRE Research, Q3 2020 Source: CBRE Research, Q3 2020 Total Market (sq.m.) Total CBD (sq.m.) CBD Grade A (sq.m.) Non-CBD Grade A (sq.m.) Total Stock 9.17 million 4.51 million 1.54 million 0.67 million Total Take-up 8.35 million 4.15 million 1.39 million 0.62 million Total Vacancy 0.82 million 0.39 million 0.15 million 0.05 million % Vacant 8.9% 8.9% 9.9% 5.8% Summer Point, Non-CBD Grade B, completed in Q3 2020 Completed CBD Under Construction CBD Planned CBD Planned Non CBD Under Construction Non CBD Completed Non CBD 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 2012 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F 2023F sq.mMARKETVIEW The overall vacancy has dropped to 91.1% from 91.6% in the previous quarter as a result of increase in supply and a drop in take-up. However, the upside is that many tenants in recently completed buildings such as Spring Tower and The PARQ have not completed their physical move-in, meaning that there are still rooms for improvement in the following quarters. CBRE has adjusted down our forecast on the level of take-up for 2020 from 100,000 square metres at the beginning of COVID-19 pandemic at the end of Q1 to 40,000 square metres, one-fifth of the usual demand level in the previous years, after witnessing an unprecedented trend of contractions across the market. There was very limited movement in rental rate in the market in this quarter where most of the submarkets have flat Q-o-Q growth except in Grade B Non-CBD area where there was a 0.5% increase. The average achieved rent for Grade A CBD remained at THB 1,100 per square metre for the third consecutive quarter, increasing by 4.1% from the same period last year. CBRE believes that we will not see any growth in rental rate in the near future with a potential to dropping in 2022 or 2023 as there will be a supply influx in that period. CBRE Asia Pacific is currently putting together an updated occupier survey under the theme of The Future of Office to better understand the change in requirement and usage of office space from occupiers around the Asia Pacific region, including Thailand. We will share with you the key results from this survey once it has been completed in the next quarter. 2020 CBRE (Thailand) Co., Ltd. | 3 Q3 2020 CBRE Research Figure 4: Rental Rates BANGKOK OFFICE Non-CBD Grade B CBD Grade B CBD Grade A Non-CBD Grade A Note: Based on 100-300 sq. m. transactions Source: CBRE Research, Q3 2020 Figure 3: Net Take-up Source: CBRE Research, Q3 2020 Q1 Q3 Q4 Q2 (50,000) 0 50,000 100,000 150,000 200,000 250,000 2012 2013 2014 2015 2016 2017 2018 2019 2020 sq.m. 1,100 796 898 732 300 400 500 600 700 800 900 1,000 1,100 1,200 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 2020 Q2 2020 Q3 2020 THB /sq.mMARKETVIEW QUARTERLY REPORTS BANGKOK OFFICE All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including projections, has been obtained from materials and sources believed to be reliable at the date of publication. 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CBRE will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on information in this publication. Bangkok Property Report The Bangkok Property Report, now in its 23 rd year, is CBRE Thailands flagship quarterly subscription publication, with data from a tried and tested database reinforcing its reputation as Bangkoks definitive property sector source. The Bangkok Property Report provides in-depth analysis of the Bangkok real estate market, including property supply and demand, occupancy, take-up, prices, rental trends and other indicators. CONTACTS FOR MORE INFORMATION ABOUT THIS BANGKOK OFFICE MARKETVIEW, PLEASE CONTACT: Office Services, Thailand Roongrat Veeraparkkaroon Director 46 th Floor, CRC Tower, All Seasons Place, 87/2 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 t: +66 (0)2 119 1500 ext 2709 e: Phuket Property Report The Phuket Property Report, the latest half yearly subscription report by CBRE Research in Thailand, is an initiative designed to bring professional analysis and transparency to the growing Phuket property market. The report provides detailed information and analysis from CBREs comprehensive and unrivalled Phuket and overall Thailand database, combined with our own exhaustive market and property surveys. Research & Consulting, Thailand Rathawat Kuvijitrsuwan Associate Director 46 th Floor, CRC Tower, All Seasons Place, 87/2 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 t: +66 (0)2 119 1500 ext 2930 e: