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CASH-STRAPPED FOREIGN OFFICE SELLS BANGKOK EMBASSY FOR £420M

January 31, 2018

The scale of financial pressure on the British diplomatic service has been underlined by a Foreign Office announcement that it has raised £420m by selling its embassy in Bangkok to fund modernisation projects across its global estate.
The sale represents the largest land deal in Thai history and the Foreign Office’s biggest ever sale. The department said the proceeds, equivalent to a third of its core annual budget of £1.2bn, would pay for 30-40 modernisation projects around the world, including renewing the wiring in its Paris embassy and refreshing the decor at the Washington embassy.
The Foreign Office has long complained about budget cuts, even as it prepares to project the UK’s diplomatic heft in a post-Brexit world. By comparison, the budget of the Department for International Development (DfID) is booming.
The foreign secretary, Boris Johnson, has been looking at how he can capture parts of the DfID budget without breaching international rules on the definition of aid. A series of pooled budgets have been established, including the conflict, security and stability fund. The transparency of the spending in these budgets has been repeatedly challenged.
The Bangkok embassy is being sold to a joint-venture consortium of Hongkong Land, a member of the Jardine Matheson Group, and Central Group. The new embassy will be based in the AIA Sathorn Tower in the central business district.
The colonial-era embassy was built in 1922 on a 3.5-hectare (9-acre) site on the outskirts of Bangkok that is now prime real estate. The villa is housed in a compound that features a large garden and is considered one of the jewels in the crown of the city’s Wireless Road – a wide, tree-lined avenue also known as “Embassy Row” – that is home to top restaurants, international hotels and shopping malls.
Announcing its sale, Johnson said: “Britain is a leading player on the global stage and I’m determined to ensure that our diplomats have all the necessary tools to do their job effectively. This includes working in modern, safe, fit-for-purpose premises, not just in Bangkok but around the world.”
Simon McDonald, the permanent undersecretary at the Foreign Office, said: “In a tight fiscal environment it is right that we take tough decisions to ensure that the UK can maintain a global presence while getting the best value for taxpayers.
“This deal will ensure that we have modern, state-of-the-art premises in Bangkok, confirming our long-term commitment to our relationship with Thailand, while releasing much-needed funds to modernise other embassies around the world, including in Cairo, New Delhi and Washington.”
A survey by the Lowy Institute, an Australian foreign affairs thinktank, ranked the UK seventh in the world in terms of international footprint measured by the number of embassies. However, the sale of the Bangkok embassy has prompted fresh concern that the Foreign Office is struggling to find resources.
“It would be a great mistake to scale back our presence when our message is ‘global Britain’,” the former foreign secretary William Hague told a Lords select committee on Wednesday.
One former Conservative Foreign Office minister said the disconnect between what the British people still expected the diplomatic service to do, and “the unbelievably skimpy” resources at its disposal revealed something deeper about the UK’s inability to adjust to its place in the world, and the global spread of prosperity.
“There is a gap between rhetoric about our global role and reality of the Foreign Office resources that is rarely communicated to the public,” the former minister said. “Basically, we have been bluffing about what we can achieve. We can no longer change the course of events in China, Vietnam or even Zimbabwe, but we often refuse to admit this to ourselves.”
A Commons select committee will shortly launch an inquiry into the resource implications of the phrase “global Britain”, and its members are determined to find out whether British diplomats, excluded from the resources of the EU foreign policy service, know how they can effectively wield influence.
The Foreign Office core budget, required to fund 274 posts in 169 countries, has been in steady decline, down from a core budget of £2.1bn in 2012. It is now dwarfed by the French diplomatic budget, as well as the legally protected £13bn aid fund largely available to DfID.
Hague insists the Foreign Office needs special treatment if it is to succeed in promoting the UK’s interests abroad.
Another former minister was more blunt: “Yes, we can sell the family silver for a bit and, yes, we punch above our weight, but unless we are careful, we are about to step into the ring with people way above our weight and without any gloves.”

KNIGHT FRANK THAILAND REPORTS BANGKOK OFFICE MARKET OUTLOOK

November 2, 2017

Mr. Marcus Burtenshaw, Executive Director and Head of Commercial Agency Department, Knight Frank Thailand, Co., Ltd., says “Tenants in Bangkok’s office market are faced with a problem. The market still favours the developer. Tenants face increased rents upon renewal, and few relocation prospects offer competitive terms for comparable quality and location. Now more than ever it pays to look ahead. We urge tenants to conduct a thorough analysis of their office accommodation strategy at least one year before their lease expires, and even longer if their scale demands it, or if regional or global corporate real estate departments are involved”

Highlights - Business sentiment in Thai economy improves
The amount of new office space leased in Bangkok expanded around 36,368 square metres in Q2 but fell 37.1% from Q1
Overall occupancy rate was at 90.82%
Quarterly average rents stable across the market but still rose by 1.5% per annum
 
Supply - The current office supply in Q2 2017 stood at 4,877,670 square metres. The newly launched office buildings this year include Gaysorn Office Tower (32,312 sqm) and Bhiraj Tower at BITEC (31,880 sqm). In the future, the majority of the new buildings within the next 3 years will be located in areas considered to be Non-CBD but they are rapidly emerging to become new commercial districts.

Future Supply - We currently expect 64,192 square metres of new supply to be completed at the end of this year. In addition to under construction projects, the total amount of new supply of 350,511 square metres would be added to the market in 2019.

Demand - In the second quarter, net occupied space of the office market was 4,454,894 square metres, representing an overall occupancy rate of 90.82%. The average vacancy rate of Grade A buildings was 7.5%, while Grade B was 6.45% and Grade C was 12.14%. The amount of new office space leased in Bangkok expanded around 36,368 square metres but fell 37.1% from the previous quarter. This demand has been a very faint positive every year since 2012.

BANGKOK OFFICE MARKET SEES RISING CO-WORKING SPACE DEMAND

October 25, 2017

While most of the existing co-working spaces in Bangkok are located in stand-alone buildings and non-commercial properties, an increasing number of co-working space brands have now operated in office buildings.
The trend is being fostered by strong interest of regional and international co-working space operators that are looking for opportunities to set their footprint in Bangkok, according to property consultancy JLL.
Among many examples of co-working space providers operating in office buildings in Bangkok are Glowfish at Asoke Towers and soon Sathorn Thani, Draft Board at Orakarn Building on Chidlom Road, Meticulous Offices and Cluster Offices at SSP Tower on Ekamai Road, Kloud at Flourish Building on Ratchada Soi 18, Pencave at mixed-use Naiipa Art Complex on Sukhumvit Soi 46, and BIGWork at Sathorn Nakorn Tower.
Some of the co-working space providers previously focused on serviced offices and meeting facilities but later added co-working spaces as one of their new products to fulfil rising demand from start-ups, small business and freelancers, as well as large corporations. Prime examples are Regus at more than 10 office buildings, Antares Office at RSU Tower on Sukhumvit Road and CEO Suite at Athenee Tower on Wireless Road. 
No market is without challenge
Yupa Sathienpabayut, head of office leasing at JLL, says: "Several regional and global co-working space brands are looking for opportunities to set up their big operations in Bangkok. They are looking to secure 1,000-3,000 sq m of space in grade-A office buildings within walking distance to BTS or MRT stations.
"Most co-working space providers prefer partnerships with office building owners, proposing a profit-sharing structure where the provider pay lower rents to the building owner and provide direct or indirect payments to the building owner, depending on co-working space provider's profitability," says Ms Yupa. 
"However, such a profit-sharing model is a new concept that is not popular among office building owners in Bangkok, who still prefer a more secure income stream from rentals. This trend is likely to continue in a short to medium term, particularly in the currently undersupplied office market," she adds.
Co-working space providers looking to secure space in well-located Grade-A office buildings are facing the same challenge -- most of these buildings are fully occupied or have only limited space remaining.
"To tackle the office supply constraint, some operators have considered existing secondary Grade buildings in sought-after locations near mass transit stations as alternative options, while others are looking at office development projects that are near completion," says Ms Yupa.
The future
Pioneered by start-ups, entrepreneurs and freelancers, a growing number of companies, large and small, are exploring how to incorporate the concept, a trend that has been seen in other major cities around the globe and will soon emerge in Bangkok.
From Singapore to San Francisco, big businesses are setting up in co-working spaces to mingle with nimble start-ups and early-stage entrepreneurs, according to JLLrealviews.com.
Professional services firm KPMG is one such corporation, with a number of desks leased at the Manhattan branch of WeWork, a rapidly evolving co-working giant in more than 30 cities across the globe. WeWork’s corporate clients include Merck, Dell, McKinsey & Co and Salesforce.com, who lease desks for their employees so they can work alongside -- and learn from -- freelancers and small businesses.
"Co-working offers a social environment that encourages interactions and knowledge sharing. This is well in line with the changing lifestyle of workers and culture of corporates in the emerging digital economy. For this reason, we expect co-working spaces to become a major component of the Bangkok office market in the near future," Ms Yupa concludes.

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