Demand in Bangkok's office market has started to slow down after constant growth the past three quarters as large companies scale down expansion plans, according to the international real estate firm Jones Lang LaSalle (JLL).
"The impact of the global economic meltdown has become more evident since the crisis erupted in October," said Yupa Sathienpabayut, head of markets at Jones Lang LaSalle.
"Occupiers that were actively looking for office expansion opportunities over the first three quarters of the year are now cutting their growth and occupancy plans."
While new demand for business expansion has contracted, demand for office space from new business setups has completely dried up.
Over the third quarter, JLL was involved in office leasing transactions totalling more than 10,000 square metres of space across Bangkok. Most of these transactions involved lease renewals and relocations.
"Most of these companies are looking for ways to minimise occupancy costs through renegotiation of lease terms with landlords, relocation to a more affordable building or downsizing," said Ms Yupa.The only good news was that so far there were no reports of multinationals shutting down their Bangkok offices, she said.
Total stock of Grade A office space in Bangkok's central business district (CBD) remained unchanged at 1.47 million sq m in the third quarter. Asia Centre will add approximately 28,000 sq m to the market on completion by year-end.
Demand for Grade A offices in the CBD continued to recover since a second-quarter drop with a total of 12,600 sq m being taken up, but the overall vacancy rate rose to 19.5% in October from 18.6% in July due mainly to the relocation of the Administrative Court to the new government office centre on Chaeng Watthana Road.
Despite a higher vacancy rate, the average Grade A office rental in the third quarter stayed relatively stable at 679 baht per sq m per month.