Bangkok’s office market in the new normal

Bangkok’s office demand adopts to the new normal as remote working reduces the need for fixed desks.

May 25, 2021

Given the renewed spread of the COVID-19 in Thailand in April 2021, it has become inevitable for corporates to switch back to work-from-home for the third time in a year. A number of office occupiers across Bangkok metropolitan areas have right-sized their spaces and withheld their expansion or relocation plans due to the uncertainty. On the bright side, e-commerce and other tech companies (e.g., ride-hailing and delivery services) are eagerly expanding after their demand has grown rapidly during the lockdown.

It has been a full year of work-from-home trial runs in Thailand. This short-term experiment has proved that many businesses still need collaboration spaces for certain tasks to aid in optimising performance. In other words, there still is and always will be a demand for office spaces. According to a JLL global survey in late-2020, 50% of respondents preferred to work both in the office and remotely, while 74% still wanted the ability to come to an office. Many businesses in Bangkok successfully adopted the ‘split team’ approach, which required only half the standard workstations. Some corporates let their employees work from anywhere permanently, yet come to the offices if needed. This has created a new way of work. Thus, demand for office spaces gradually shifts from fixed desks to having a desk for activities, collaborations and communal areas. As a result, we witnessed most office spaces shrinking in order to optimise spaces.

Figure 1: Office occupiers’ movement by industry from Q2 2020 to Q1 2021

Source: JLL Thailand Research

Since the first outbreak of COVID-19 in early 2020, we have seen different business sectors reacting to the market in different ways. Domestic banks that expanded rapidly over the past three years surrendered most of their leased spaces (more than 17,000 sqm) and instead chose co-working spaces as an alternative while most employees worked from home. In contrast, insurance and tech companies grew further and expanded significantly. Other business sectors have had options to relocate to buildings at lower rents or potentially upgrade to newer buildings at similar rents, as vacant spaces increased and landlords lowered rents to secure their occupancy.

Figure 2: Bangkok office demand by the length of occupancy at end-2020

Source: JLL Thailand Research

Over 2 million square metres of occupied space, or 38% of occupiers in the Bangkok metropolitan area, have been in the same place for over 15 years, and their capital expenditures on existing spaces have been paid off. One-third of those are located in the central business areas. About 500,000 square metres is with financial service businesses, which should make a significant impact on the market.

The ageing office spaces are no longer considered efficient, as young talents seek to work at places with wellness offerings and flexibility to work remotely. Businesses have the option to either relocate or inject their capital into office renovation or newly designed spaces. While the market is in a recovery stage, a million square metres of new office space for lease will come in the next three years. By then, tenants would have a variety of options to choose from and we look forward to seeing how landlords would come up with unique selling points or incentives in the near future.