Q2 2011 (half year) | SERVICED APARTMENT
thailand
Bangkok Serviced Apartment Market
Bangkok Serviced Apartment Market Executive Summary No stand alone projects opened in H2 2011. A serviced apartment component of a mixed used development is becoming more popular. Total supply estimated to be around 17,800 units at the end of 2011. Occupancy down around 1.8% from Q1 2011. market indicators Q1 2011 / Q2 2011 new Supply RENTALS Occupancy
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Rental rates remain stable in softened market conditions. Japanese investment could increase further following tsunami and this will lead to more expats thus fueling the corporate stay market.
Bangkok serviced apartment Market REPORT | Q2 2011 (HALF YEAR) Historical Supply Historical Supply, as of Q2 2011
Source: Colliers International Thailand Research
No new stand-alone serviced apartment project opened in the first half of the year although a number of units were added to two new hotels in the centre. Around 890 units are scheduled to be completed in the second half of 2011. Jasmine Resort Hotel opened a section of its project
in March and 50% of this project, or around 122 units are for serviced apartments. All units will be available upon the grand opening of the project in Q3 2011. Total supply of serviced apartment units as of the end of 2011 is expected to be approximately 17,800 units.
Supply by location and year, as of Q2 2011
Source: Colliers International Thailand Research
Early Sukhumvit is significantly higher than any other area with approximately 3,500 – 5,700 units. Since 1992 onwards until the first half of 2011, Early Sukhumvit area has shown the highest share, while
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the current supply of other areas is still not over 3,200 units in each location.
Bangkok serviced apartment Market REPORT | Q2 2011 (HALF YEAR) Cumulative future supply by location and year, as of Q2 2011
Source: Colliers International Thailand Research
More than 1,000 units are scheduled to be completed in the second half of 2011 and approximately 150 units in 2012. The total number of serviced apartment units in Bangkok by the end of 2011 will be more than 17,800. Over 300 units or 50% of future supply in 2011 will be located in the Early Sukhumvit area. In the past, serviced apartments focused on foreigners with most of them located in the City area along BTS lines. However increasing land prices have meant that in the past few years developers are focusing more on outside of the city area, especially new BTS extension lines and some locations to the east, such
as Phetchaburi road, Rama 9 Road, Srinakarin Road and Bangna Road. A lot of hotel and condominium developers also convert some units in their own project and change 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 seems to be becoming a trend as developers seek to offer more options due to the softening hotel market.
Historical Occupancy Rate Occupancy for Bangkok serviced apartments on both extended stay and corporate housing sub-sets
Source: Colliers International Thailand Research
Average occupancy rate in Q2 dropped approximately 1.8% in both grades q/q. Compared to the previous Q2 in 2010 rates have rebound strongly but that period was during the events in April and May. However
they still remain slightly lower than the numbers recorded in Q2 2009 which was in the midst of the Global Financial Crisis.
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Bangkok serviced apartment Market REPORT | Q2 2011 (HALF YEAR)
Occupancy rates by location
Source: Colliers International Thailand Research
The occupancy rate fell in four locations, while in the Southern Fringe and “Others� areas there was a small rise. These two areas, while often far from mass transit lines, serve the needs of business travelers and expats visiting or working in those particular locations as well as being more affordable. The main customers for serviced apartments in the prime locations in Bangkok are Japanese, so the tsunami in Japan in March had some
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negative affect, due to some cancelling their reservations or corporations decreasing budgets. With Japan expected to bounce back strongly from this event the effect is seen as temporary and in fact it is expected that more Japanese will invest in the future to diversify their production base and this will be an added spur for the corporate long term stay market.
Bangkok serviced apartment Market REPORT | Q2 2011 (HALF YEAR) Demand Drivers Number of expatriates in Bangkok, as of Q2 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
The number of expatriates in Bangkok still remains similar to the first quarter. However the number is still similar to 2009 but still below 2008,
prior to the Global Financial Crisis. The total number of expatriates in Bangkok in Q2 2011 is approximately 54,100.
Proportion of expatriates in Bangkok, as of Q2 2011
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 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. There has been a steady rise in the number of Japanese expats in Thailand with just over 21,000 being recorded in 2005 to a little over 24,000 as of Q2 2011.
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Bangkok serviced apartment Market REPORT | Q2 2011 (HALF YEAR) Rental Rate Average Rental Rate for One Bedroom Units by Location and Grade, as of Q2 2011
Source: Colliers International Thailand Research
Rental rates of grade A serviced apartments in Central CBD area are the highest due to the location, but not much different from the Central Lumpini area which is also considered a prime location. Early Sukhumvit area is similar to Late Sukhumvit as many high end apartments are located in Thong Lor. Many branded serviced apartments are located in these four locations.
Rental rates of grade B serviced apartments in Early Sukhumvit area are higher due to it being popular for expats who work in Bangkok with easy access to the BTS and lively entertainment scene.
Average Rental Rate of 1 Bedroom unit during Q1 2010 – Q2 2011 by Grade
Source: Colliers International Thailand Research
Rental rates remained stable for Q2 2011 with only a very slight fall being recorded in the grade B category. In a similar but lesser extend as hotels, serviced apartment rentals remain soft due to challenging conditions that remain as a result of continued economic uncertainty. In the
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aftermath of a severe downturn many companies seek to reduce their costs to maximize profits and rentals for expatriate staff is one area that is susceptible to cutbacks.
Bangkok serviced apartment Market REPORT | Q2 2011 (HALF YEAR) Average Rental Rate of Serviced Apartment by Branded and non-branded, as of Q2 2011
Source: Colliers International Thailand Research
The average rental rate of international branded serviced apartments is higher than non-branded by approximately 154%. Although branded serviced apartments tend to be of a higher grade, there is likely to be a ‘brand effect’ that enables apartments to target expats travelling and
living in various countries where that brand exists which can ensure continuity and confidence. As a result many developers seek both wellknown Thai and foreign serviced apartment brands.
Forecast With developers seeking to hedge their bets more when it comes to property in Bangkok, especially in the hospitality sector, a serviced apartment component rather than a stand alone building is becoming more prevalent today and this is a trend that looks set to grow. Developers of high-end condominiums throughout the country are seeking well known brands to add prestige but also a greater potential for revenue generation for units that can attract more buyers and increase selling prices. Hotels are now beginning to embrace a serviced apartment component that can bring a more solid if less lucrative income stream, in what are increasingly turbulent times for the upper-scale and luxury hotel industry. Serviced apartments are the most ambiguous form of real estate in that they can imitate hotels in the form of offering short term stays, the apartment for lease sector is in direct competition for corporate long term accommodation and now condominiums are offering a service component as part of a branded residence concept within a strata title building, even some units take on the function of offices in some cases. This amorphous nature of the serviced apartment represents arguably more of strength rather than a weakness as the future dynamic changes occurring throughout Asia require greater flexibility to respond and the chameleon like nature of the serviced apartment sector seems most appropriate to prosper from such changes.
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Bangkok serviced apartment Market REPORT | Q2 2011 (HALF YEAR)
APPENDIX
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Bangkok serviced apartment Market REPORT | Q2 2011 (HALF YEAR) Grading No recognized standard for rating serviced apartments exists in Thailand and therefore Colliers International Thailand has classified them based on various criteria, of which a summary is given below.
Grade A
Located 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.
Zoning The 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 Area The 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.
Grade B
Usually 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 lowerend international or domestic operator.
Grade C
Located in secondary location and furnished to a comfortable, but not luxurious, standard. Fewer provisions of facilities and amenities, similar to that of a Mid-scale or Economy hotel.
• Late Sukhumvit Area This 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 Area This 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 Areas Most of the remaining Grade B & C serviced apartments are scattered across the city, including Phayathai, Phetchaburi, Ratchadapisek, Mitmaitri, Srinakarin Bangna and Ramkhamhaeng Road.
• Early Sukhumvit Area This is the section of Sukhumvit Road between Soi 1 and Soi 35 to the north and Soi 2 and Soi 24 to the south.
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Bangkok serviced apartment Market REPORT | Q2 2011 (HALF YEAR) COLLIERS INTERNATIONAL THAILAND MANAGEMENT TEAM
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researcher:
Thailand Antony Picon Associate Director | Research email antony.picon@colliers.com
Thailand Surachet Kongcheep Senior Manager | Research email surachet.kongcheep@colliers.com
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