C.P. Land Plc, a property arm of Charoen Pokphand Group, plans to acquire existing office towers to generate income quicker than investing in new developments.
Sal Mulasastra, an executive vice-president of C.P. Land, said greenfield projects are considered less attractive right now, given the large amount of future office supply in Bangkok projected from 2022.
"The Bangkok office market is robust, with very high occupancy. The development of new office buildings right now is not smart," he said.
"If construction starts this year, it will be completed in 2021 or later, when a large amount of office space will be added to the market, resulting in higher competition."
According to property consultant Colliers International Thailand, new office supply in Bangkok totalling more than 1.6 million square metres will be completed in 2019-23.
The largest amount of completed projects will be in 2021 and 2023, with 435,000 sq m and 400,000 sq m, respectively, while annual demand is around 200,000 sq m.
In 2019, 2020 and 2022, new office supply will be completed totalling 212,000 sq m, 276,000 sq m and 280,000 sq m, respectively.
As of the end of 2018, office supply in Bangkok totalled around 8.7 million sq m with an occupancy of 92.7%.
An average of 180,000 sq m of new supply was added per year during the past four years, said Colliers.
Mr Sal said existing office towers also come with tenants, which makes income more secure.
"When the new land and buildings tax comes into effect in January 2020, office towers with high vacancy rates will struggle as they have a new cost from this tax," he said.
C.P. Land is constructing its 12th office tower, C.P. Tower North Park, in North Park on Vibhavadi-Rangsit Road with an investment of 1.25 billion baht. It is scheduled to open in October 2019.
The 19-storey tower will have a total lettable area of 25,500 sq m with a rental rate of between 550-650 baht per sq m per month.
Some 30% is pre-committed to rent, with a majority from the data centre and IT consulting sectors.
It aims to have an occupancy of 50% next year and 80-100% in 2021, with a break-even date within eight years.
"If it takes longer than 2021 to reach full occupancy, it will be more difficult for us to compete as many other developers are completing their supply by that year," said Mr Sal.
C.P. Land owns more than 600,000 sq m of offices for rent in 11 towers in Bangkok and key provinces.
Occupancy in Bangkok is higher than 90%, while that in the provinces is higher than 50%.
The strongest rates in the provinces were in Khon Kaen and Hat Yai, which had full occupancy.
