With a downbeat economy and rising office supply, tenants have sought rent cuts of up to 25% to stay afloat. Varuth Hirunyatheb

A slowing economy and growing office supply has prompted tenants to seek rent reductions to keep their businesses afloat, with discounts of up to 25% reported in the past quarter, according to property consultancy Knight Frank Thailand.

Panya Jenkitvathanalert, partner and head of office strategy and solutions at the consultancy, said Thailand's economy is expected to slow in the second half of 2025, prompting many tenants to postpone major real estate decisions.

"They are adopting a more cautious stance," he said. "Even companies not directly exposed to exports are bracing for knock-on effects, including weaker domestic demand, postponed investment plans, and stricter cost controls. These factors could dampen leasing momentum in the coming quarters."

In the second quarter, rents declined across both Grade A and Grade B segments. Grade A rents fell by 1.2% to 1,233 baht per square metre per month, while Grade B rents dropped by 0.7% to 866 baht. Grade C rents remained stable at 543 baht.

Despite these declines, the market's average asking rent in the second quarter edged up slightly to 847 baht per sq m per month. The increase was largely attributed to the introduction of new buildings priced below existing peers within their respective grades, but still above the overall market average.

"Both newly launched and existing buildings have been offering rent reductions of 15-25% to tenants, and such discounts are expected to continue into the second half of the year," said Mr Panya.

According to Knight Frank, rent reductions offered to tenants, particularly in the Grade A and Grade B segments, became more apparent in the second quarter of 2025, alongside a further decline in occupancy rates for both categories.

This marked a reversal from consecutive increases over the past year, with rents rising from 1,178 baht and 833 baht in the first quarter of 2024 for Grade A and Grade B, to 1,193 baht and 845 baht in the second quarter, 1,241 baht and 867 baht in the third quarter, and 1,246 baht and 869 baht in the fourth quarter, before softening again in 2025.

New supply outpaced take-up, driving the overall occupancy rate down by 0.7 percentage points to 76.8%, noted the consultancy. Occupancy for Grade A buildings dipped by 0.4 percentage points to 77%, while Grade B fell 1.6 points to 74%. In contrast, Grade C space gained 0.7 points to 80.5%, supported by limited new supply and continued cost-conscious decisions among occupiers.