Thailand's Colliers: Time to bargain on office rents

10% rise in Bangkok office vacancies in Q1

Office building tenants in Bangkok should seize the opportunity to negotiate with landlords to get cheaper rents during the global financial crisis, suggests property consultant Colliers International Thailand.

Managing director Patima Jeerapaet said the financial tsunami had affected major business sectors including automobiles, electronics and electrical appliances, banking, finance and securities, medical and services such as hotels, airlines and travel agencies.

"These [sectors] have been affected by the global crisis and many of them need to merge," he said.

Some recent mergers between securities and financial firms include Finansa, Syrus and Asia Credit Securities, and CIMB GK and BT Securities.

As a result, the Bangkok office space vacancy rate in the first quarter rose by 10%, while rents dropped by 10% compared with last year, with a decline of 15% for grade A office space.

Landlords had controlled the market for four years from 2004-07, being able to dictate rental fees. Now the tables have turned, and negotiation should be completed as soon as possible before conditions change, he added.

"Not all tenants will get lower rates or better bargains," Mr Patima said.

"Landlords will consider a tenant's situation and business type and may ask to see a financial statement or a report of how many staff cuts the company has made."

However, a new wave of tenants emerged in the first quarter: property firms, agents and brokers, and representative offices for new hoteliers starting operations in Thailand.

"Bangkok has the potential to be a regional hub as some multinational companies have relocated here. The government should take this chance to promote itself with incentives such as in Singapore, where the government cut office tax by up to 40%," he said.

Colliers advises tenants to apply four strategies:

- Early renewal: Tenants should negotiate with landlords before the current contract expires. This will benefit both parties as the landlord will get a guaranteed new contract while the tenant will get a better rent.

- Renew: Tenants should negotiate the rent and ask for other incentives such as decreases in parking fees.

- Blend & extend: This strategy should be applied in cases where a tenant has two or more contracts at an office building. Combine the contracts and set the same expiry date as it will be easier when moving out.

- Relocate: Now is a good chance to move from grade B to A as the rents are quite close and this adds bargaining power, but tenants should calculate moving costs and other expenses when making this choice.

Source: Bangkok Post 9 May 2009