Foreign firms have halted their plans to expand investment in Thai properties since late last year following amendments to the Foreign Business Act (FBA) that have had a negative impact on their doing business, according to property broker CB Richard Ellis Thailand.

Director Nithipat Tongpun said foreign investors, especially in service businesses such as investment advice, IT and logistics, have suspended plans due to dubious points in Annex 3 of the act. Fearing they would be considered foreign companies, they have halted plans to buy or rent office space.

"Most of our customers who are looking for new offices in Thailand have delayed their decisions and are waiting to see whether the FBA amendments will have an effect on their businesses. This will affect the rental segment this year," he said.

Overall demand for office rentals is expected to grow by only 200,000 square metres this year, an increase of 2.6 per cent. Last year, rental demand grew 4 per cent to 7.5 million square metres.

Nithipat said the slight growth of new demand for office space since last year was because investors were concerned about political risks, while Thailand's slight economic growth last year also had a negative impact on investors' business expansion.

According CB Richard Ellis research, demand for new office space grew only slightly in 2006: 250,000 square metres, up only 4 per cent. Since the economic crisis in 1997, average growth has been 300,000 square metres.

However, rental prices increased 10 per cent last year. CB Richard Ellis expects rentals to continue to grow 10 per cent this year following strong demand from existing firms in the Central Business District: Silom, Sathorn, Sukhumvit, Wireless Road and Ploenchit.

Rental prices for a Grade A offices in these locations averaged Bt743 per square metre last year, up 23 per cent from 2005. Among businesses continuing to expand their office space are retail, finance, insurance, IT, call centres and logistics firms.