Demand rises for offices in 'secondary' city locations

However, these transactions were concentrated in secondary-grade buildings or in secondary locations, reflecting tenants' rising sensitivity regarding occupancy costs, according to international property agency Jones Lang LaSalle.

Caroline Murphy, head of marketing, said yesterday that with a new government in place, a cautiously positive outlook for economic growth had prevailed. Stimulus measures have supported confidence and companies have started expansion plans and are considering relocation.

Many companies are also looking to take advantage of near-term, tenant-favourable market conditions due to the impending completion of a significant number of new buildings enhancing location choice availability in the market.

Over the past few years, supply constraints have provided limited opportunity for medium to larger-sized occupiers to relocate.

The US slowdown, fuel price hikes and rise in the cost of living cause companies to continue to be cautious when expanding. A major factor in the expansion or relocation equation remains control of occupational costs.

Lease transactions last quarter were concentrated in office rentals ranging from 350 to 500 square metres, including secondary-grade buildings in the central business district or Grade-A buildings located outside the central business district (CBD).

Buildings located on mass-transit routes continue to attract the strongest demand.

Office inventory stands at 7.5 million square metres. The average vacancy rate declined from 14.1 per cent in January 2007 to the current rate of 13.6 per cent. Prime-grade office rents were adjusted downward to Bt652 per square metre per month last month, from Bt656 in January.

Average rents for non-prime grade office space fell marginally to Bt508 per square metre per month over the first quarter.

Leasing activity outside the CBD was buoyant, with large transactions being reported in Grade-B and Grade-A buildings offering more affordable rents.

However, negotiations for large spaces at prime-grade CBD buildings are under way.

The net take-up of office space last year of 102,200 square metres reflects exceptionally low demand compared to the average annual take-up rate of more than 210,000 square metres from 2000 to 2006.