Q2 2012 | office

BAngkok oFFICE MARkET REPoRT

thailand

Bangkok Office Market

highlightS
one office building completed in Q2 2012 with a total area of around 20,000 sq m was added to the market. The average occupancy rate and rents in all locations remain similar to the previous quarters. Although there has been a slight rise from the previous quarter in some office buildings, not much effect has been felt across the wider market. Bangkok is highly attractive for investors who wish to take a first investment step into ASEAn, especially the sub-region of Myanmar, Laos and Cambodia. As a result, several international companies are looking for regional office space in Bangkok. The new Bangkok Town Plan is aimed at encouraging the expansion of Bangkoks business area to office buildings in late Sukhumvit areas and to the north along Ratchadapisek Road.

market indicatorS
Q1 2012 - Q2 2012 new Supply demeand reantalS occupancy

hiStorical Supply
total Supply added in each five-year period

Source: Colliers International Thailand Research

More than 70% of the existing office buildings were supplied to the market in the 1990s, a period of economic growth attributable to a surge in manufacturing exports. This is in stark contrast to the mere 2% added in the five years

following the effects of the Asian Financial Crisis (AFC). Even with the pick-up in the second half of the decade, only 13% of the supply appeared during the first decade of the century.

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Bangkok office Market rePort | Q2 2012

hiStorical Supply by year, Q2 2012

Source: Colliers International Thailand Research Remark: F = Forecast at the end of the year

The total office supply at the end of 2012 will be approximately 8,105,000 sq m. The Bangkok office supply has grown slightly over the past ten years. More than 85% of the total supply or more than 6,860,000 sq m of office space were completed before 2000 which means that the office

buildings in Bangkok are mostly older than 10 years. Some buildings continuously renovate and upgrade their facilities, while some lack maintenance.

additional Supply for each year, Q2 2012

Source: Colliers International Thailand Research Remark: F = Forecast at the end of the year

Approximately 20,000 sq m were completed in Q2 2012 and more than 87,000 sq m in total supply are scheduled to be completed over the remainder of 2012. Roughly 94,000 sq m of office building space were

completed annually from 2000 to 2008 while more than 615,000 sq m were completed per year from 1991 - 1999.

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Bangkok office Market rePort | Q1 2012

Supply by location, Q2 2012

Source: Colliers International Thailand Research

nearly 80% of the total supply is located in the area along existing mass transit lines. 36% of the total is located in the CBD, followed by the northern Fringe with around 20%. In the next two to three years the

proportion in the northern Fringe area will raise to 22% of Bangkoks total as many new office buildings are under construction and planned for completion in 2014.

future Supply
cumulative future Supply by location

Source: Colliers International Thailand Research

nearly 330,000 sq m of office space are scheduled to be supplied in Bangkok by 2014 in only four zones. The northern Fringe area will take a high proportion of the total supply as nearly 210,000 sq m are scheduled for completion in 2014 in the area, but this represents only a 2.6%

increase from the total existing supply. This limited additional space to the market will be absorbed and point the way to greater occupancy levels and strengthened rental rates over the next few years.

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Bangkok office Market rePort | Q2 2012 demand take-up

occupancy rate by location, Q2 2012

Source: Colliers International Thailand Research

The average occupancy rate in all locations of Bangkok is higher than 80%. The outer City West and outer CBD areas had the highest occupancy rate in Q2 2012 while the outer City north was the lowest and remained the same as the previous quarter. Although the average

occupancy rate in the outer City West area was highest, the total supply in this area is only 258,000 sq m and it is less than the CBD area that has over 2,625,000 sq m.

occupancy rate in three locationS, Q1 2010 Q2 2012

Source: Colliers International Thailand Research

occupancy rates in the three main locations still remained similar to Q1 2012, just a slight increase from the previous quarter. The average occupancy rates in the outer CBD and northern Fringe areas were higher than in the CBD area, due to these two zones being located along mass transit routes and offering cheaper rents.

Although approximately 20,000 sq m were completed in Q2 2012, most of this space is occupied by owners and thus there is minimal impact on the office market.

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Bangkok office Market rePort | Q2 2012

actual and future eStimate of occupancy rateS

Future
Source: Colliers International Thailand Research

The average occupancy rate for office buildings in Bangkok continues to grow with new supply added to the market in Q3 2011. other office buildings completed after these two buildings did not affect the office market as a whole as they were only small projects. With modest growth

predicted for the coming two years and given the limits on new supply, Colliers International Thailand predicts a gradual but sustained rise in occupancy rates from 2012 until 2013. This will in turn lead to a certain hardening of rental rates going forward.

demand driverS
newly regiStered firmS from January 2009 - may 2012

Source: Department of Business Development and Colliers International Thailand Research

Based on the statistics from the Department of Business Development, floods in the last quarter of 2011 also affected the number of new company registrations last november. nearly 3,500 companies were

registered in April and May 2012, and approximately 9,880 companies in the first five months of 2012, approximately 10% lower than the same period last year.

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Bangkok office Market rePort | Q2 2012 rental rateS, Q2 2012

rental rate by location

Source: Colliers International Thailand Research

The average rental rate in the CBD area remains the highest. It is approximately 49% higher than the average of the total market. This is because most grade A buildings are located in the CBD. Moreover, most

office buildings that have come online over the past few years were located in this area and they have all increased their rents to be higher than older buildings.

rental rate by grade, Q2 2012

Source: Colliers International Thailand Research

Rents remained stable across the board for Q2 2012. This reflects the continued lack of significant movement in the market. over the past three years there has been no discernable change in office rents for

grade A offices. This reflects the backdrop of political and economic uncertainty. Rates are still underpinned by the lack of significant supply during this period.

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Bangkok office Market rePort | Q2 2012

hiStorical rental rate in three main locationS, Q1 2010 Q2 2012

Source : Colliers International Thailand Research

The northern Fringe continues to edge the outer City in terms of rent. The difference is negligible. The CBD commands the highest rents by far.

The northern Fringe and outer CBD charge around 75% of the CBD average rent.

hiStorical rental rate by grade

Source: Colliers International Thailand Research

The rents of grade A office buildings have remained stable since 2007, while grade B office buildings recorded a drop of approximately 5 - 6%. Some landlords offer more favourable terms and incentives for tenants to maintain occupancy during difficult economic times, especially for small businesses, and this has adversely affected grade C rentals. As

grade C buildings age, their image and facilities become increasingly unattractive to tenants. owners should consider significant renovations in a similar fashion to the retail sector in order to maintain competitiveness.

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Bangkok office Market rePort | Q2 2012

rental rate of office buildingS in bangkok by diStance from btS / mrt (metreS), Q 2 2012

Source : Colliers International Thailand Research

Location is still the key factor that affects rents for comparable properties. offices located close to mass transit stations command a premium and many are newer buildings that would usually command higher rents anyway. The sharpest difference occurs in grade C buildings with

around a 40% difference. Mass transit only explains part of an office buildings appeal. Access to expressways and other supporting facilities in the area could be equally or even more important for tenants.

outlook
The northern Fringe area will become a new business area in the near future with most new office buildings in the pipeline located along Ratchadapisek Road. Moreover, this area also has shopping malls, entertainment zones, hypermarkets, office buildings and other supporting facilities, as well as MRT stations. The office building market is healthier than last year due to increasing demand and limited new supply. new international companies are entering Thailand and also many existing companies are expanding or planning to expand their offices. The prospect of the AEC in 2015 and the opening up of Myanmar are also a factors in raising demand for office buildings in Bangkok because Thailand is seen as an increasingly important regional centre for companies with operations in the subregion, that is Myanmar, Laos and Cambodia. The new Bangkok Town Plan affects not only the condominium sector but also the office market. The latest draft of 24 May 2012 does not permit office buildings larger than 10,000 sq m on roads narrower than 30 m in certain locations of Bangkok although these are permitted in other locations outside the CBD and outer CBD area. This indicates that the new town plan is trying to expand the business area to late Sukhumvit, Ratchadapisek and Phahonyothin Roads. The Department of City Planning Bangkok Metropolitan Administration has still not finalised the new Bangkok Town Plan as of the second quarter of 2012. An announcement is expected by 21 August 2012, although it could later be revised and finalised within this year or next.

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Bangkok office Market rePort | Q2 2012

appendiX

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Bangkok office Market rePort | Q2 2012 office Zoning

The general lack of zoning restrictions in Bangkok has led to the existence of significant office supply in a wide range of locations in the city and to how the market perceives that the CBD has evolved over the past 20 years. The original CBD was on Silom and Surawongse Roads, home to the vibrant gold market and other trading businesses. The development of modern office buildings in the 1990s with larger floor plates could not be accommodated in this area, and the CBD began to take shape in the eastern section of Sathorn Road. While Sukhumvit Road up to Asoke is primarily perceived as an entertainment and residential area, a large number of grade A buildings sprang up in the 1990s and also in the past few years. It is therefore considered part of the CBD. As a working definition, the CBD, for the purposes of office classification, is where a significant number of grade A office buildings are located. As such, the old CBD is now considered the outer CBD, including Petchburi Road where more grade B offices are located. over time, this structure could evolve.

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Bangkok office Market rePort | Q2 2012 collierS international thailand management team
oFFICE & InDUSTRIAL SERVICES narumon Rodsiravoraphat | Associate Director PRoJECT SALES & MARkETIng Monchai orawongpaisan | Associate Director RESIDEnTIAL SALES & LEASIng napaswan Chotephard | Manager RESEARCH Tony Picon | Associate Director Surachet kongcheep | Senior Manager RETAIL SERVICES Asharawan Wachananont | Associate Director ADVISoRY SERVICES | HoSPITALITY Jean Marc garret | Director ADVISoRY SERVICES napatr Tienchutima | Associate Director REAL ESTATE MAnAgEMEnT SERVICES Prasert Saiphrawan | Senior Manager InVESTMEnT SERVICES nukarn Suwatikul | Associate Director Wasan Rattanakijjanukul | Senior Manager VALUATIon & ADVISoRY SERVICES Phachsanun Phormthananunta | Director Wanida Suksuwan | Associate Director PATTAYA oFFICE Mark Bowling | Senior Sales Manager Supannee Starojitski | Senior Business Development Manager / office Manager HUA HIn oFFICE Sunchai kooakachai | Senior Manager

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