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Thailand: Office and hotel outlook dim
After a full year of Covid-induced financial pressure with limited significant improvement in the economy, the outlook for the office and hotel markets remains challenging, according to the international property consultant CBRE.
Mounting supply is emerging in the office market as tenants consider scaling back space, while average occupancy of Bangkok hotels remained near rock-bottom in the first quarter of this year.
Office outlook: The Bangkok office market continues to push through the storm as tenants consider using less space to reduce rental expenses, while promoting work-from-home policies for some business units.
According to CBRE Research, total supply of office space in the first quarter increased by 25,000 square metres to 9.26 million sq m, with the completion of WHA Tower in the Bangna-Trad area, part of which will be for the use of the SET-listed logistics company. This has increased the supply in the Bangna-Trad area by 13% year-on-year, while the overall occupancy rate in the area stood at 80.4% in the first quarter.
Despite new demand for office space from some growing industries, net take-up for the first quarter was negative 23,521 sq m. The biggest impact was on Grade B buildings in the central business district (CBD), as some tenants had relocated to non-CBD locations where rents are lower, in addition to reducing the amount of space leased.
However, the Grade A non-CBD sector remained strong; in fact it was the only sector that recorded positive net take-up. As a result, the average overall occupancy rate dropped by 0.5 percentage points quarter-on-quarter to 90.6%.
“Within a three-year time period from now, CBRE expects to see over 1.3 million sq m of new office space being completed in Bangkok,” said Roongrat Veeraparkkaroon, head of advisory and transaction services (office) with CBRE Thailand. “Historically, it took around 10 years, from 2010 to 2020, for the office supply to increase by 1 million sq m. This will create downward pressure on both occupancy rates and rental rates.
In addition, she said, CBRE expects to see flat growth in rental rates across the market “except for newer Grade A buildings with occupancy of over 90% where rents could still grow”.
Hotel outlook: With the country still largely closed because of Covid, international tourism remains negligible. Arrivals in the first quarter totalled only 20,172, compared with 6.7 million in the first quarter last year, before the pandemic led to a shutdown of the country.
This will prove to be another challenging year for the hotel market across Thailand. The Bank of Thailand has reduced its forecast for international arrivals to 3 million, from 5.5 million predicted earlier. That’s a far cry from the 40 million foreign visitors the country welcomed in 2019.
With limited tourists, the average occupancy rate for Bangkok hotels dropped to 19.9% in the first quarter of 2021 from 54.7% in the same period last year, although there was a small recovery to 22.1% in March.
The average daily room rate (ADR) fell from 3,209 baht to 2,106 baht over the same period, as hotels refocus to target domestic demand and offer various promotions to revive occupancy.
“However, with the third wave of Covid-19 that came in April, the performance of the Bangkok hotel market in the next quarter is expected to be depressed,” said Atakawee Choosang, head of capital markets with CBRE Hotels Thailand.
As the pandemic lingers, many new hotels have decided to delay their opening plans, with only one new hotel opening in the first quarter of 2021, increasing the supply in the capital by 141 rooms to a total of 51,239.
Source: https://www.bangkokpost.com/business/2136967/office-and-hotel-outlook-dim