Bangkok Serviced Apartment Market Q1 2011

Q4 2010/Q1 2011

new Supply

RenTAlS

OccupAncy

Bangkok Serviced apartment market

ThAilAnd

www.colliers.co.th

Bangkok Serviced Apartment MarketexecuTive SummARythe serviced apartment sector continued to show further signs of recovery from the lows of Q2 2010. overall rental rates and occupancy were up q/q.

it appears that the lingering effects of the april/may events of 2010 which directly impacted areas seems to be dissipating rapidly with central Lumpini and central cBd recording very positive figures for Q1 2011.

However this is no time for complacency as the sector faces another significant infusion of supply over the course of the year that will put pressure on the gains made over the past six months.

the earthquake and tsunami in Japan may have a small short term negative influence, however in the longer term expected increased Japanese investment into thailand will also positively affect the serviced apartment sector.

Q1 2011 | SERVICED APARTMENT

mARkeT indicATORS

COLLIERS INTERNATIONAL | P. 2

BANgkok SERVICED APARTMENT MARkET REPoRT | Q1 2011

in 2010 around 540 units were supplied to the market. over the course of the previous decade the main surges occurred in odd years rather than even and this year is no exception. even though no new serviced apartments began operation in Q1 2011 it is expected that around 1,770

will come online by the end of 2011 including the centre point at the new terminal 21 complex with 500 units. total supply of serviced apartment units as of the end of 2011 is expected to be approximately 18,200.

the distribution of serviced apartments differs according to location, based on the particular profile of each area. central Lumpini contains many large embassies and is therefore seen as being the most prestigious location to live in and as such contains more grade a units. Late Sukhumvit also contains more grade a units, due to the existence of a number of luxury branded apartments in thong Lor road, catering to the

large Japanese community there. early Sukhumvit is the king of grade B apartments, as it is a more unpretentious, relaxed location, which also explains the location of more Upper Scale rather than Luxury hotels. the ‘other’ areas contain more grade c products, due to their distance from the centre.

Source: colliers international thailand research


hiSTORicAl Supply by yeAR

Supply by lOcATiOn And gRAde, Q1 2011

hiSTORicAl Supply

expecTed FuTuRe Supply in 2011



more than 1,700 units are scheduled to be completed in 2011. despite this robust addition to supply to the market the highly competitive market conditions are leading to some projects being postponed, especially in the Sukhumvit area.

Sukhumvit road will host the vast majority of new supply this year. more than 620 units will be located in early Sukhumvit area and approximately

470 units in Late Sukhumvit area. the main driver is not only the popularity of this road as a residential destination but also that the relative price of land is lower than the more central locations and it is also convenient for the BtS line.


average occupancy rates in Q2 tumbled due to the april and may protests, mainly as a result of short-term guests cancelling. the corporate housing subset also suffered with many expats, especially Japanese, leaving thailand temporarily to escape from perceived danger.

although Q4 2010 produced mixed fortunes, the first quarter of 2011 was very encouraging for both grade a and B segments on the back of improved figures for tourism.

the positive news for Q1 2011 relates to robust recovery in the areas directly affected by the protests in april/may 2010, that is central cBd and central Lumpini. this is important as there were concerns that continuing occasional peaceful protests may still deter people from

residing in these locations but these worries have clearly been abated. However in all zones occupancy recorded rise q/q and Late Sukhumvit continued to be the star performer, topping 80%.



OccupAncy FOR bAngkOk SeRviced ApARTmenTS On bOTh exTended STAy And cORpORATe hOuSing Sub-SeTS

OccupAncy RATeS by lOcATiOn

hiSTORicAl OccupAncy RATe





numbeR OF expATRiATeS in bAngkOk, Q1 2011

pROpORTiOn OF expATRiATeS in bAngkOk, Q1 2011

Source: office of Foreign Workers administration (Work permit), department of employment of the ministry of Labor and colliers international thailand research

remark: above information does not include Lao, Burmese and cambodian citizens

Source: office of Foreign Workers administration (Work permit), department of employment of the ministry of Labour and colliers international thailand research

the number of expatriates in Bangkok still continues its upward trend following the nadir in Q2 2010. However the number is still similar to

2009 and below 2008 prior to the global Financial crisis (gFc).the total number of expatriates in Bangkok in Q1 2011 shows a modest rise q/q.

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

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

demAnd dRiveRS

RenTAl RATe OF gRAde A And b by ROOm Type, Q1 2011


the average rental rate of grade a unit is greater than grade B by approximately 2 – 8%, depending on room type.


rentals rates continued their slight assent in Q1 2011 except the Southern Fringe which more or less flatlined and central cBd which recorded another quarter of strong growth and has now reached the 100,000 baht per month barrier. the other key markets for high end serviced apartments, namely early and Late Sukhumvit and central Lumpini, are

all bunched in the high 50,000 baht per month level. although Late Sukhumvit is further out many high end newer branded apartments have appeared in the past few years raising the average rental price and the area is particularly popular with Japanese corporate housing residents.


RenTAl RATe FOR One bedROOm uniTS by lOcATiOn, 2010–2011 by QuARTeR

RenTAl RATe




STRengThSthe serviced apartment sector in Bangkok is very strong in terms of branding and overall quality of accommodation and facilities. most of the top international brands have a presence and local names also provide a powerful underpinning for the market.

the sector competes strongly with hotels for the long stay market as well as corporate accommodation for expats, especially Japanese.

a number of clusters of serviced apartments exist in various parts of the city and disruptions in one area mean that the other locations are able to provide back up accommodation. most of the chains have apartments in these various locations. this was evident during the april/may events in 2010 and Late Sukhumvit benefitted as a result.

companies are continuing to consider the use of serviced apartments instead of hotels for their travelling employees as the use of kitchen facilities and more homely, informal atmosphere appeal to the jaded business traveler. they also remain cheaper and provide more room thus providing greater flexibility for use as a temporary office, for example.

weAkneSSeSSignificant new supply in the sector could lead to pricing pressures in the future as serviced apartments compete in a harsher competitive environment.

reliance on the Japanese market for the corporate housing subset makes the sector vulnerable to any large scale disruption involving Japan. the recent earthquake and fears of a direct hit on tokyo sometime in the future have highlighted such concerns.

OppORTuniTieSthe development of trade within aSean and between aSean and large economies such as india and china could spell a boom both in the corporate hosing and long stay sectors. many expats like to stay is serviced apartments in the initial period of their stay before moving to lower cost apartments for lease.

Limited new supply of expatriate high end apartment for lease buildings means that serviced apartments can continue to compete successfully in the corporate housing sector.

ThReATSa resumption of disturbances in the centre around the election period could cause the fragile recovery in occupancy to fall again in those areas likely to be affected such as Lumpini.

increasing cost pressures are causing companies to scale down the accommodation provided to their expat staff thus threatening the higher end apartments.

the earthquake and tsunami in Japan is likely to lead to a drop in the number of arrivals from that country in the short term. However it is expected that more industrial activity will eventually shift from Japan top

overseas and this could be of benefit to thailand. the Japanese provide the mainstay for the corporate housing segment of the market and further growth in expats living in Bangkok will directly benefit the serviced apartment sector.

SwOT AnAlySiS


Appendix


no recognized standard for rating serviced apartments exists in thailand and therefore colliers international thailand has classified them based on various criteria, ofwhich a summary is given below. gRAde ALocated in prime locations and luxury residential areas. Furnished to an exceptionally high standard. offering recreational facilities and amenities similar to a Luxury or Upper Scale hotel. managed by a top international branded operator or comparable local brand.

gRAde bUsually located in the centre but also in less prime locations. Furnished to a high standard but usually offers recreational facilities and a variety of services similar to an Upper or mid Scale hotel. managed by a lower-end international or domestic operator. gRAde cLocated in secondary locations. Furnished to a comfortable, but not luxurious, standard. Fewer provisions of facilities and amenities, similar to that of a mid-scale or economy hotel.

gRAding

ZOningthe serviced apartment area can be divided into five areas or pockets of concentration:

• Central CBD this is the area that encompasses Silom, Sathorn, Surawong, Si phraya and rama 4 road, as well as other sois in between, such as Soi Saladaeng, Soi convent, Soi pipat.

• Central Lumpini Areathe central Lumpini covers the areas along rama i, rajadamri, Wireless, ploenchit, Langsuan, phayathai and phetchaburi roads, as well as other sois in between, such as Soi Langsuan and Soi ruamrudee.

• Early Sukhumvit Areathis is the section of Sukhumvit road between Soi 1 and Soi 35 to the north and Soi 2 and Soi 24 to the south.

• Late Sukhumvit Areathis is the section of Sukhumvit road between Soi 37 and Soi 77 to the north and Soi 24 and Soi 50 to the south.

• Southern Fringe Areathis is the area that stretches along the bank of the chao phraya river on charoenkrung road. narathiwas ratchanakarin road and rama iii road are located in this area.

• Other Areasmost of the remaining grade B & c serviced apartments are scattered across the city, including phayathai, phetchaburi, ratchadapisek, mitmaitri, Srinakarin Bangna and ramkhamhaeng road.



cOllieRS inTeRnATiOnAl ThAilAnd mAnAgemenT TeAm

adviSorY ServiceS | HoSpitaLitY Jean marc garret | director proJect SaLeS & marketingmonchai orawongpaisan | Senior manager reSidentiaL SaLeS & LeaSingnapaswan chotephard | negotiator oFFice & indUStriaL ServiceSnarumon rodsiravoraphat | Senior manager retaiL ServiceSasharawan Wachananont | Senior manager adviSorY ServiceSnapatr tienchutima | associate director

reaL eState management ServiceSBandid chayintu | associate director

inveStment ServiceSnukarn Suwatikul | associate director Wasan rattanakijjanukul | Senior manager

reSearcHantony picon | associate directorSurachet kongcheep | Senior manager

vaLUation & adviSorY ServiceSnicholas Brown | associate directorphachsanun phormthananunta | associate director Santipong kreemaha | Senior manager Wanida Suksuwan | manager pattaYa oFFicemark Bowling | Senior Sales managerSupannee Starojitski | Senior Business development manager / office manager

CoLLIERS INTERNATIoNAL ThAILAND:

Bangkok office 17/F ploenchit center, 2 Sukhumvit road, klongtoey,Bangkok 10110 thailandTel +662 656 7000FAx +662 656 7111 emAil [email protected] Pattaya office 519/4-5, pattaya Second road (opposite central Festival pattaya Beach), nongprue, Banglamung, chonburi 20150Tel +6638 427 771FAx +6638 427 772 emAil [email protected]

ReSeARcheR:

thailandantony piconassociate director | researchemAil [email protected]

ReSeARcheR:

thailandSurachet kongcheepSenior manager | researchemAil [email protected]

480 offices in 61 countries on 6 continents

• the third largest commercial real estate services company in the world

• the second most recognised commercial real estate brand globally

• US$2 billion in annual revenue• over 2 billion square feet under management

• over 15,000 professionals

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.

www.colliers.co.th

accelerating success.

United States: 135canada: 39Latin america: 17asia pacific: 194emea: 95


Bangkok Serviced Apartment Market Q1 2011

Real Estate

Transcript of Bangkok Serviced Apartment Market Q1 2011