An aerial view of Bangkok's high-rise residential and office buildings. (Photo: Nutthawat Wichieanbut)

Bangkok's office market must balance a growing supply pipeline of 1.1 million square metres of lettable space with shifting tenant demands, intensifying competition among landlords in an increasingly dynamic environment.

Panya Jenkitvathanalert, executive director and head of office strategy and solutions at property consultant Knight Frank Thailand, said the additional 1.1 million sq m anticipated over the next few years will prompt landlords to adjust their strategies.

"It will likely drive further innovation in design, services and pricing strategies," he said. "Grade A properties, while commanding premium rents, must set themselves apart through unique value propositions."

Of the additional 1.1 million sq m, 640,000 sq m are already under construction.

"Next year will be a critical period, with a record-breaking 550,000 sq m of new space entering the market. As the landscape evolves, existing buildings must focus on retaining tenants and maintaining competitiveness to meet the diverse needs of today's occupiers," said Mr Panya.

Knight Frank Thailand reported steady momentum in Bangkok's office market during the third quarter of 2024, bolstered by notable supply growth and increased leasing activity.

The completion of key developments, such as the mixed-use One Bangkok on Wireless-Rama IV roads, brought the city's total office stock to 6.31 million sq m, underlining the transformative impact of large-scale, integrated projects on Bangkok's skyline.

In the third quarter, Bangkok's office supply grew by 151,000 sq m, or 2.5% quarter-on-quarter, following the completion of One Bangkok Tower 3 and Tower 4, alongside Rangsit Business Park.

The key differentiators for developers include state-of-the-art amenities, wellness-focused designs, and enhanced accessibility.

This shift has fuelled the adoption of WiredScore and SmartScore certifications, highlighting the rising importance of digital connectivity and smart technology in modern office environments.

These certifications, which assess and promote a building's technological and smart capabilities, have become essential tools for landlords seeking to attract tech-driven, forward-thinking tenants.

Sustainability-focused developments also gained traction, with the share of green-certified buildings rising from 26% to 28% of total supply.

Meanwhile, 54,000 sq m of older office space was withdrawn as three buildings exited the market.

Demand showed promising signs of recovery, with leasing activity nearly doubling from the second quarter as more tenants transitioned staff back to on-site work, with some implementing full in-office policies.

Leasing activity accelerated for the third consecutive quarter, with take-up reaching 164,000 sq m, marking a significant increase from the previous quarter. Net absorption climbed to 50,000 sq m, primarily driven by robust leasing at One Bangkok.

As a result, total occupied office space grew by 1% to 4.81 million sq m. Green-certified buildings were the primary beneficiaries of this demand, recording net absorption of 80,000 sq m, while non-green buildings posted a decline of 30,000 sq m.

Both the central business district (CBD) and non-CBD areas saw positive demand trends, with net absorption of 24,000 sq m and 26,000 sq m, respectively, reflecting a broad-based recovery across Bangkok's office market.

The overall market occupancy rate declined to 76%, down 1.1 percentage points from the previous quarter and 2.6 points year-on-year, plunging well below the 10-year average of 87%.

Occupancy in Grade A offices dipped from 80% to 74%, driven by an influx of new supply and fierce competition.

In contrast, Grade B offices remained stable at 75%, continuing to underperform relative to other segments.

Grade C properties were the only category to improve, with occupancy rising from 79% to 80%.

Unlike other segments, Grade C stock remains relatively unchanged as these buildings often undergo asset enhancement or exit the market during challenging periods. Their affordability continues to attract consistent demand from budget-conscious tenants, said Mr Panya.