The completion of over 1.5 million square metres of new Bangkok office space within the next two years continues to put pressure on office landlords.

Ponpinit Upathamp, acting chief financial officer of SET-listed developer Grand Canal Land, said the majority of the new supply would be in the central business district (CBD) location on Rama IV Road.

"This new supply will affect the overall office market in the near future," he said.

Over the past few quarters, the Bangkok office market has witnessed changes in office space usage behaviour among tenants, especially those in the financial and technology sectors, he said.

"These tenants had adapted their strategy to utilise smaller spaces, affecting office landlords throughout the market, with occupancy gradually decreasing since the first quarter this year," said Mr Ponpinit.

The occupancy rate of the company's three office towers has fallen over consecutive quarters. The rate fell in the second quarter this year to 84%, down from 87% in the first quarter. In the fourth quarter of 2022, the rate fell to 90% from 91% recorded in both the second and third quarters.

The towers -- G Tower, The Ninth Tower and Unilever House -- are located near CentralPlaza Grand Rama IX and the Phra Ram 9 MRT station on Ratchadaphisek and Rama IX roads. The combined lettable area of the three buildings is roughly 145,000 square metres.

"Despite the fact that our major tenants needed smaller spaces, they chose to renew their contracts with us because of the convenient locations and proximity to amenities that cater to the needs of office staff," Mr Ponpinit said.

According to property consultant Knight Frank (Thailand), office space along Phetchaburi-Rama IX-Ratchadaphisek roads, a non-CBD location, had an occupancy rate of 79% in the second quarter of 2023.

This represented a decrease of 0.4% from this year's first quarter and a 1.3% drop compared to the second quarter of 2022.

However, it remained higher than the non-CBD market average of 74% which fell 0.1% quarter-on-quarter and 1.7% year-on-year.

The average rent per sq m per month being requested in this area remained unchanged at 723 baht, while the non-CBD market average stood at 663 baht per sq m per month, the same level that was recorded in the first quarter of 2023, but 0.3% higher than the second quarter of 2022.

The primary factor contributing to the annual growth of the non-CBD market's average rent was the Bang Na-Srinakarin area which saw a 6.7% increase to 616 baht per sq m per month, representing the highest rise in Bangkok.

Office space on Phahonyothin and Vibhavadi-Rangsit roads, also categorised as a non-CBD area, were the only areas that saw a drop in average rent in the second quarter to 682 baht per sq m per month. However, their occupancy rates rose by 1.8% and 0.4%, respectively.

In the CBD area, the average rent rose by 1% quarter-on-quarter and 2.8% year-on-year to 923 baht per sq m per month, but occupancy fell 0.3% quarter-on-quarter and 1% year-on-year to 83%.

Both Nana-Asok-Phrom Phong and Silom-Sathon Rama IV recorded an occupancy rate of 83%, a decrease of 0.8% and 0.7%, respectively, from the first quarter. The average rent being asked in these areas was 934 baht and 912 baht per sq m per month, respectively.

Phloenchit-Chidlom-Wireless Road had the highest average rent being asked at 1,062 baht per sq m per month, a rise of 0.9% quarter-on-quarter and 3.4% year-on-year. However, the occupancy rate fell from 84.9% in the second quarter of 2022 to 80% in this year's second quarter.

Office supply is projected to reach 368,000 sq m, 480,000 sq m and 302,000 sq m by the end of 2023, 2024 and 2025, respectively.

The total lettable area of these new developments is expected to reach 1.59 million sq m, representing 27% of the current office supply in Bangkok. Of this new supply, 64% or around 1.02 million sq m would be located in the CBD.