Knight Frank Thailand Highlights This Year’s Office Trends, with Return of Tenant’s Market

Mr. Panya Jenkitvathanalert, Executive Director and Head of Office Agency, Knight Frank Thailand, said, Due to the effects of Covid19, many companies have begun to adapt to their employees working from homeAs tenants thus need to use lessoffice space, the overall office market in the 2020 has seen reduced occupancy and rental rates, while net absorption is -80,000 sq m., which is the lowest point it has been in 10 years. This is especially pronounced in foreign companies that engage in businesses where employees can work anywhere, such as in e-commerce, technology, advertising media and logistics, and a majority of these businesses have downsized their rental spaces. Meanwhile, some companies could not continue their businesses, and decided to close down, requesting to return their spaces immediately. This is reflected in the 4.7% year-on-year drop in the occupancy rate of the office building market.

Office rental prices in 2020 continued to increase and decrease in some areasFor Grade A office buildings, the price rose 2.8yearonyear, while rents of Grade B office buildings rose just 0.2% yearonyear and Grade C office buildings increased 1.3% yearonyear.

Much of the lettable spaces have returned to the market, and many landlords are in a waitandsee situation, but they offer more flexibility in lease terms and conditions, covering rent negotiations,onsite parking, lease durations and subletting. Some companies that were affected by the economic slowdown as a result of the Covid19 outbreak turned to partial leasing or subletting to save on costs, which usually involve significant restrictions from building ownersHowever, building owners are now permitting subletting as long as the tenants can find their own subleasers.”

Mr. Panya added, We are starting to see more marketsignals that point to it becoming a tenants marketThe market cycle is returning in favour of tenants, where they have the power to negotiate both the rental price and other terms, as well as enjoy greater options in the marketWe expect this trend to run for the next 4 to 5 years, especially in the next 5 years where there will be more than 40 new office buildings, or approximately 1,600,000 square metresOf this figure, over 900,000 square metres will be situated in the CBD areas and are all inGrade A office buildingsIn 2021, it is expected that128,404 square metres of space will enter the office market from buildings such as Siamscape, Silom Center, Vanissa Building, P23, Kronos Sathorn,and ONes Tower.

After this, there will be quite a lot of office buildings coming into the marketBuilding owners will have to compete on rental prices and facilities to keep and attract tenantsGrade B office buildings should try and improve the quality of their buildings as well as increasingly build relationships with customersMost importantly, they should control their rental pricesto be considerably lower than that of Grade A buildings, so tenants are not compelled to move to Grade A buildings and feel that they are a better value. At the same time, Grade A buildings do not need to adjust their rents downwards; however, building owners must be more flexible in the lease terms.Advertisement

On the whole, the office building market is expected to remain stable in 2021The market still has demand, especially for office buildings in Chidlom and Ploenchit to EkamaiMany companies have altered their businesses and adapted to the situation since the Covid19 epidemicThey changed their modes of work and have become more familiar with technologyThe tendency for many companies to downsize and return some of their leased space remains, as they see no need to use as much rental space as before.

In addition, this period is ideal forowners to renovate their buildings to support future needsCompanies that want to reduce and move their office space to another building that is better or cheaper should know thatrelocating or changing office space is costlyIf tenants would like good analysis and planning of their new office space, Knight Frank Thailand can provide Workplace Strategy and Project Services for the arrangement of office spaceThis helps to meet the needs of tenants and adjust the workplace to suit the organisations actual use, reaping the maximum benefits. We not only increase the efficiency of office space usagebut also reduce the organisations internal costs by more than 30per year, promoting the value of the organisation while still being able to attract and retain quality employees by increasing employee satisfaction towards the organisationAlso, we have Change Management services to help organisations prepare their employees for the new office space, as well as Workplace Project Management to handle office space projects. We work with all departments, and follow up and execute every step, from interior design and construction to risk management and cost controls. We modernise the office space and provide a Smart Workplace Design management system that enables users to focus on working in a digital office format.”

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