Despite signs of a slowdown in the economy in the first half of this year, business has continued to expand and companies are continuing to acquire office space in Bangkok, according to Jones Lang LaSalle.
"There are more months for Thailand to tackle the economic woes this year," Suphin Mechuchep, managing director of the professional-services firm specialising in real estate, said. "However, if the Thai economy continues to contract in the second half of the year, demand in the office market will inevitably be affected.
"Having said that, limited new office supply that is planned for completion in Bangkok over the next 12 months may help soften the impact."
Experience shows that there is a correlation between the demand for office space and economic growth. However, it may be too early to say to what extent the economic slowdown experienced in the first half will affect business and consequently the Bangkok office market, she said.
The weakening economic outlook has affected business sentiment as clearly reflected by the stock market's slump and sluggish consumer confidence. But the actual impact of the economic slowdown on the Bangkok office market has appeared limited.
"So far, we have continued to see companies expanding operations, reflecting business growth and increased employment," Suphin said.
The company's latest study found that the Bangkok office market had continued to enjoy strong demand so far this year. During the first half, the net take-up of office space across the city was 95,830 square metres, versus 185,600sqm last year.
Yupa Sathienpabayut, director of office leasing, said the Bangkok office-leasing market had remained very busy.
"Though we have seen fewer inquiries from new business start-ups this year, many companies, including those that were newly established, are now expanding. Major leasing transactions in the first half of the year were secured by companies in the consumer product and banking sectors.
"We have also seen more serviced-office operators securing space in well-located office buildings to serve foreign companies that need to have an office in Thailand as a hub in Southeast Asia, in preparation for the opening of the ASEAN Economic Community in 2015.
"Despite negative economic news, there are many large lease transactions now under negotiations, and none of them have been cancelled. As a result, we expect leasing transaction volume in the Bangkok office market by the year-end to be on par with 2012, if not higher."
With limited new supply and continued demand, most landlords have become less flexible. Besides higher asking rents, incentives that were widely offered during the market downturn, such as rent-free periods, have shrunk, so some companies are now considering alternative locations where more affordable rents are offered, she said.
The average rent for Bangkok office space stood at Bt455 per square metre per month as at end-June, up 11.8 per cent from end-June last year. Prime Grade A office space in the central business district fetches average rent of Bt727, with a few buildings in the area asking for Bt850-Bt1,000.