Bangkok Service Apartment Q2-2012

Q1 2012 - Q2 2012

new Supply

RenTAlS

OccupAncy

ThAilAnd

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Bangkok Serviced Apartment MarketexecuTive SummARyNew serviced apartments are still being built and projects will continue to open until at least 2014, but they face increased competition from condominiums and apartments that offer a similar level of comfort and amenities in the same areas of the city, but at lower rents.

An additional challenge is that the Thailand Hotel Association is trying to persuade the Ministry of the Interior to crack down on serviced apartments offering daily or short term lets, which are not permitted without a hotel licence. Should the Ministry take action, enforcement of this rule will have a significant impact on the sector.

The number of new serviced apartment developments being built has fallen every year since 2009 and will continue to decline.

Fewer serviced apartments came on to the market in the second quarter of 2012 than in the first, but a drop in demand of 4.8% has kept rents stable. An estimated total of 18,100 serviced apartments will be available in Bangkok by the end of this year.

Three new serviced apartment projects opened in the first half of the year with approximately 280 units in three locations, woof which are in the City area. The total supply of serviced apartment units as of the end of the first half of 2012 is approximately 17,970 units and it is

expected to be approximately 18,100 units at the end of 2012. Due to intense competition, especially in the City area, development of new serviced apartments in Bangkok has decreased every year since 2009.

Q2 2012 | SERVICED APARTMENT

mARkeT indicATORS

hiSTORicAl Supply, Q2 2012

Source: Colliers International Thailand Research

BANgkok SeRvICeD ApARTMeNT MARkeT RepoRT

The number of serviced apartments in Early Sukhumvit is significantly higher than any other area by approximately 115 - 650%. From 1992 until the first half of 2012, the early Sukhumvit area has shown the highest

share of total market, while the lowest supply of serviced apartments in Bangkok is in the Southern Fringe area, where there are fewer than 1,000 units.

More than 200 units are scheduled to be completed in the second half of 2012, and around 70 are due in 2013. The total number of serviced apartments in Bangkok by the end of 2012, including these 200 units, will be nearly 18,100. Nearly80 units, or approximately40% of supply for the remainder of 2012, will be in the Late Sukhumvit area. In the past, all serviced apartments focused on foreigners or expatriates in Bangkok, most of whom needed to stay in the City area or close to the mass transit system. Now, because of limited budgets over the past few years and the opening of new BTS extension lines to the east and west, some have

decided to stay outside the CBD area to take advantage of cheaper rents.

Many hotel and condominium developers have also converted some units in their own projects in to serviced apartments; therefore many luxury hotels, upper-scale hotels and some condominium projects in Bangkok have monthly rental packages similar to stand-alone serviced apartments. This is becoming a trend as developers offer more options due to the softening hotel market.

Source : Colliers International Thailand Research


Supply by lOcATiOn And yeAR, Q2 2012

cumulATive FuTuRe Supply by lOcATiOn And yeAR, Q2 2012

COLLIERS INTERNATIONAL | P. 2

BANgkok SERVICED APARTMENT REPoRT | Q2 2012

hiSTORicAl OccupAncy RATe, Q2 2012



The average occupancy rate in Q2 dropped approximately 4.8% in both grades QoQ, but was still higher than the same period last year. Foreigners are focusing more on condominiums or apartments in the

City area, which are available in the same locations and with similar facilities to serviced apartments but for lower monthly rents.


The occupancy rate fell in five locations, while in the ‘Other’ area there was a significant rise. The ‘Other’ category includes areas far from mass transit lines, where serviced apartments cater to the needs of business travellers and expats visiting or working in those particular locations, and rents are more affordable. In other locations, compared to the first quarter, occupancy dropped from between2.5%to13%, with the extent of

the fall depending on the cost of rent in those areas. Due to the global economic crisis, companies and individuals have needed to control their residence budgets and have postponed expansion plans. Most customers for serviced apartments in Bangkok are Japanese, and have faced additional challenges as their country is not fully recovered from the effects of last year’s tsunami.


OccupAncy RATeS by lOcATiOn, Q2 2012


demAnd dRiveRS

The number of expatriates in Bangkok continued to increase from last year. The number is similar to 2009but still below that of 2008, prior to

the Global Financial Crisis. The total number of expatriates in Bangkok in Q2 2012is approximately 59,400.

The Japanese still represent the largest group of expatriates in Bangkok and are the main target group for serviced apartments, with most staying along Sukhumvit Road and its numerous sois. other nationalities are

often in lower pay brackets and the rental rates of serviced apartments would be beyond their reach.

Source: Office of Foreign Workers Administration (Work Permit), Department of Employment of The Ministry of Labour and Colliers International Thailand Research

Note: The above information does not include Laotian, Myanmar and Cambodian citizens.

Source: Office of Foreign Workers Administration (Work Permit), Department of Employment of The Ministry of Labour and Colliers International Thailand Research

numbeR OF expATRiATeS in bAngkOk, Q2 2012

pROpORTiOn OF expATRiATeS in bAngkOk, Q2 2012


AveRAge RenTAl RATe FOR One-bedROOm uniTS by lOcATiOn And gRAde, Q2 2012

AveRAge RenTAl RATe OF One-bedROOm uniTSFROmQ1 2010 TO Q2 2012 by gRAde

Source : Colliers International Thailand Research


Rental rates forgrade A serviced apartments in the Central CBD area are the highest due to the location and grade of the project, but are not much different from the Central Lumpini area which is also considered a prime location. The early Sukhumvit area is similar to Late Sukhumvit as many luxury serviced apartments are located around Thong Lor. Most branded serviced apartments are located in these four locations.

Rental rates for grade B serviced apartments in the early Sukhumvit area are highest due to it being popular with expats who work in Bangkok, and its easy access to the BTS.

Rental rates for both grades increased slightly inQ2 2012 compared to the first quarter. Most branded serviced apartments in Bangkok increased their rates in the first quarter, especially in the Central CBD and Central

Lumpini areas. grade B serviced apartment rents are similar to last year.


RenTAl RATe


The Thailand Hotel Association continues to try to force the Ministry of the Interior to provide control measures on serviced apartments without a hotel license, which are not permitted to allow “per day” or short-term clients. Should the government take action, this will have an effect on the serviced apartment market. In addition, some condominium developers have kept some units as monthly rentals and set up a subsidised management company. In the future, most condominium projects in the City area will become major competitors to serviced apartments, due to being in the same locations, with similar facilities, but at a lower rent.

There will be limited future supply of serviced apartments in the next one to three years, due to intense competition in Bangkok. Although the number of expatriates in Bangkok will continue to increase every quarter, they will have a lot of choices for their residences so rental rates in the second half of this year should remain similar to the first six months of 2012.

Bangkok is the best location for those who are looking for investments in Myanmar and Laos, due to poor supporting facilities in both countries. Most will stay in Bangkok and set up their regional offices here for operations in Myanmar and Laos.

Mass transit extensions to the outer City area are also attracting residential developers. Some serviced apartment developers are also focusing more on the areas along the new extension lines which are scheduled to be completed in 2015, especially the areas with international schools and hospitals.

FORecAST



www.colliers.co.th

cOllieRS inTeRnATiOnAl ThAilAnd mAnAgemenT TeAm ADvISoRY SeRvICeS | HoSpITALITY Jean Marc garret | Director pRoJeCT SALeS & MARkeTINgMonchai orawongpaisan | Associate Director ReSIDeNTIAL SALeS & LeASINgNapaswan Chotephard | Manager ReSeARCHTony picon | Associate Director Surachet kongcheep | Senior Manager

oFFICe & INDUSTRIAL SeRvICeSNarumon Rodsiravoraphat | Associate Director ReTAIL SeRvICeSAsharawan Wachananont | Associate Director ADvISoRY SeRvICeSNapatr Tienchutima | Associate Director

ReAL eSTATe MANAgeMeNT SeRvICeSprasert Saiphrawan | Senior Manager

INveSTMeNT SeRvICeSNukarn Suwatikul | Associate Director Wasan Rattanakijjanukul | Senior Manager

vALUATIoN & ADvISoRY SeRvICeSphachsanun phormthananunta | Director Wanida Suksuwan | Associate Director pATTAYA oFFICeMark Bowling | Senior Sales ManagerSupannee Starojitski | Senior Business Development Manager / Office Manager

HUA HIN oFFICeSunchai kooakachai | Senior Manager

ReSeARcheR:

ThailandSurachet kongcheepSenior Manager | ResearchemAil [email protected]

This report and other research materials may be found on our website at www.colliers.co.th. Questions related to information herein should be directed to the Research Department at the number indicated above. This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. Colliers International is a worldwide affiliation of independently owned and operated companies.

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