Bangkok Serviced Apartment Q3-2010

Bangkok Serviced apartment market report

thailand

www.colliers.co.th

Bangkok Serviced Apartment MarketExEcutivE Summarythe Bangkok serviced apartment market continues to face challenging times in 2010 following events in april and may which caused both long term and shorter stay occupancies to drop.

From the beginning of 2009 to the end of 2011 overall supply of serviced apartment units could rise by over 40%. this will be difficult for the market to absorb.

occupancy has risen from the lows of Q2 2010 as the political situation stabilizes. However the long term trend still seems to be downwards.

early Sukhumvit continues to be the mainstay location but Late Sukhumvit is well and truly on the map with the growth in thong Lor in particular.

Serviced apartments continue to compete head on with hotels for the shorter term stay market.

in such challenging times the market will need to look for new niche products such as in medical tourism or hybrid residence/offices.

markEt indicatorS

Q2-Q3 2010

Supply

dEmand

rEntalS

occupancy

occupancy

Q3 2010 | serviced apartment

BanGKOK serviced apartment marKet repOrt | Q3 2010

COLLIERS INTERNATIONAL | P. 2

GradinG

no recognized standard for rating serviced apartments exists in thailand and therefore colliers international thailand has classified them based on various criteria, in which 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 c

Located 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.

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.



hiStorical Supply

hiStorical Supply By yEar

additional Supply in 2010 By QuartEr

Source : colliers international thailand researchremark : e = estimated supply

Source : colliers international thailand research

For the first half of 2010 only around 20 serviced apartment units added, and then around 180 units were added in Q3 2010. new supply that was added in Q3 2010 was located in 3 locations, central Lumpini, early

Sukhumvit and Late Sukhumvit. total supply of serviced apartment units as of Q3 2010 was approximately 16,250 units.

the estimates for Q4 must be treated with some caution as some serviced apartment projects may be delayed from the last quarter of this

year to next year, because of the halting of the construction in april and may, due to the political protests in the centre.



Since 1991 and up until now, early Sukhumvit area has been popular for serviced apartments. although no mass transit system existed until the end of 1999, the appeal to western and Japanese expatriates meant that this area was the bulwark of the sector. other areas have also grown but

on a lower trajectory. in the past few years the Late Sukhumvit area has become a new prime location especially due to the rise of thong Lor as a fashionable area to live.

overall Sukhumvit road and its sois contain over half of all serviced apartment units in Bangkok with nearly 40% of total supply being located in early Sukhumvit area while around 18% can be found in central

Lumpini area. the mix of good transport links, entertainment, retail and office facilities creates a strong lure for people to stay in Sukhumvit.

Source: colliers international thailand research


Supply By ZonE

pErcEntaGE of Supply By location

pErcEntaGE of Supply By GradE

Supply By location and GradE




nearly half of total supply is in the grade B category in Bangkok while just over a third is grade a.

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 and as such contains more grade a units. Late Sukhumvit also contains more grade a units due to the location containing 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 the distance from the centre.



more than 2,300 units are scheduled to be completed from Q4 2010 to the end of 2011. total supply by the end of 2011 is slated to reach nearly 19,000 units. many developers are also planning for further serviced

apartment projects in Bangkok, so the market will face more severe competition than now.

Sukhumvit road will contain the majority of new supply in the next two years. more than 620 units will be located in early Sukhumvit area and approximately 525 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 is also convenient for the BtS line. more than 1,400 units are scheduled to

be completed in the rest of this year, but some projects may be delayed to the following year, due to the halting of construction during the political protests in Q2. the rise of ‘other” areas is based on the location of the airport.



cumulativE futurE Supply By location durinG thE yEar 2010 - 2011


futurE Supply

hiStorical occupancy




occupancy for BanGkok SErvicEd apartmEntS on Both ExtEndEd Stay and corporatE houSinG SuB-SEtS

occupancy ratES By location

average occupancy rates in Q2 have tumbled due to the april and may protests. this is mainly a result of short term guests cancelling but also many longer term stays, especially Japanese, left thailand to escape

from the perceived danger. Levels picked up in Q3 but have still not reached Q1 2010 figures.

in all locations occupancy fell during Q2 2010 but were more pronounced in some areas than others depending on the proximity to the protest area. therefore central cBd and central Lumpini suffered the most. Late

Sukhumvit probably gained from this as many guests were relocated to this area that was viewed as largely safe at the time.




expatriates represent the primary source of demand for the serviced apartment medium and long stay market. the global economic crisis affected expat numbers in Bangkok significantly in 2009, reducing the number by around 15,000. the number of expatriates in Bangkok in Q1

2010 decreased very slightly from last year, but in Q2 2010 dropped more than 10,000, due to the political problems in the centre of Bangkok However in Q3 2010 a pick up has been estimated but numbers are still down even compared to slowdown in 2009.

a slight pick up in work permits has been estimated for Q3 2010 and shows positive trends going forward.

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 e = estimated by colliers international thailand research

numBEr of ExpatriatES in BanGkok, Q3 2010

nEw work pErmitS iSSuEd in BanGkok durinG 2009 – Q3 2010 By QuartEr

dEmand drivErS

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

remark : the information above does not include Laos, Burmese and cambodians e = estimated by colliers international thailand research



proportion of ExpatriatES in BanGkok, Q3 2010

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

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

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

the serviced apartment market is divided into two distinct sub-sets in terms of demand for units. the first relates to corporate housing which is normally three months or over and is provided for expats as a package when posted for a new assignment. throughout the world in general this is the predominant form of demand as this type of accommodation is not usually booked using the global distribution Systems (gdS) such as amadeus that are prevalent in shorter stay hotels and airlines. in fact two thirds of serviced apartments in the world do not use this service. instead they focus on more traditional forms such as direct marketing, internet websites and personal visits due to the less commoditized and more individual relationship between the long staying guest and the apartment. on the other hand in thailand, a greater number of serviced apartments use the gdS systems which would indicate greater reliance on the extended stay market, focusing on business travelers and even tourists.

dEmand from ExtEndEd Stay and corporatE houSinG SuB-SEtS


rEntal ratE


the protest at rajprasong intersection has directly impacted the occupancy rate and rental rate in Q2 of 2010. the average rental rate in central Lumpini area decreased by nearly 20% in Q2, although increased

around 10% in Q3, but is still lower than the first quarter. central cBd retains by far the highest rental rates and has shown ever more signs of strength.

rEntal ratE for onE BEdroom unitS By location, Q1 - Q3 2010


forEcaSt


the serviced apartment landscape has become far more competitive over the past few years as internal and external problems are exacerbated by the growth in new supply. this is set to continue and become more pronounced.

overall, despite the occasional small scale terrorist attack, the situation has calmed and life in the city has returned more or less back to normal. tourism has rebounded but it is still too early to say how the market will be affected in the high season. Business travelers are flocking back and expats have returned but not in the numbers prior to the global Financial crisis and the period of instability in thai politics.

Serviced apartments, like hotels, must focus on standing out from the crowd and developing products that can be accommodated by its larger sized configurations compared to hotels. Some may move into the provision of home office functions for both short term and long term stays offering flexible fit out that allows a unit to be altered from purely residential into a hybrid or even to a fully fledged office/meeting location. the growth in medical tourism spells good opportunities for those who can grasp them. many middle eastern travelers come for this service and are noted for bringing their families along to provide support as well as a holiday. in this case two or three bedroom configurations are in demand and even personal maids may need to be accommodated. modifications may be necessary such as wheelchair access, larger door frames and adequate bathroom access for people with a disability.

the serviced apartment owners and operators must come to terms with their own identity as to whether they provide for the extended stay or corporate housing sub-set. although some form of mix is preferable serviced apartment must define themselves as places to live or places to stay.


colliErS intErnational thailand manaGEmEnt tEam proJect SaLeS & marketingWasan rattanakijjanukul | manager

adviSorY ServiceSnapatr tienchutima | manager

oFFice, indUStriaL & retaiL ServiceSnarumon rodsiravoraphat | Senior manager

reaL eState management ServiceSBandid chayintu | associate director

adviSorY ServiceS | HoSpitaLitY Jean marc garret | director

inveStment ServiceSnukarn Suwatikul | Senior manager

reSidentiaL SaLeS & LeaSingpatima Jeerapaet | managing director

reSearcHantony picon | Senior managerSurachet kongcheep | manager

vaLUation & adviSorY ServiceSnicholas Brown | associate directorphachsanun phormthananunta | manager

pattaYa oFFicemark Bowling | Sales managerSupannee Starojitski | Business development 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 772fax +6638 427 772 Email [email protected]

rESEarchEr:

thailandantony piconSenior manager | researchEmail [email protected]

rESEarchEr:

thailandSurachet kongcheepmanager | researchEmail [email protected]

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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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Bangkok Serviced Apartment Q3-2010

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