Q4 2011 | SERVICED APARTMENT
thailand
Bangkok Serviced Apartment Market
Bangkok Serviced Apartment Market Executive Summary The floods in the fourth quarter of 2011 had a positive effect on occupancy rates as many people who lived in flooded areas were forced to move to serviced apartments in the city. Early Sukhumvit area still retains the major share of the serviced apartment market with over 40% of the total supply although only two projects were completed during this period.
market indicators 2010 / 2011 new Supply RENTALS Occupancy
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The total new supply in 2011 was down from 2010, due to the lack of new developments. Many schemes due for completion in Q4 2011 are now scheduled to be completed in 2012. The average rental rate in Q4 2011 remains the same as the previous quarter, due to intense competition in the market and the need to keep residents by maintaining the rate and even reducing the rental rate in some locations. The Japanese are still the major customers of serviced apartments, especially the projects along Sukhumvit Road, due to the proximity to the BTS Sky Train, their office buildings, entertainment and retail areas.
Bangkok serviced apartment Market REPORT | Q4 2011 Historical Supply, 2011
Source: Colliers International Thailand Research
Approximately 800 units were completed in 2011 which was less than last year’s total of more than 600 units and the lowest in the past two years. The main supply for 2011 came from “Grande Centre Point Hotel
& Residence Sukhumvit – Terminal 21” with a total of 216 units completed in the fourth quarter of 2011. The total supply of serviced apartment units at the end of 2011 was approximately 17,800.
Additional Supply by Quarter
Source: Colliers International Thailand Research
Additional supply in Q4 was approximately 280 units bringing the total new supply in 2011 to around 470 units. More than 300 units were located in Early Sukhumvit area or approximately 65% of the total units completed in 2011. This is mainly due to the location being very convenient
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for expatriates who rely on using the Sky Train. In addition, many office buildings as well as shopping malls and supermarkets are easily accessed from this location by Sky Train.
Bangkok serviced apartment Market REPORT | Q4 2011 Supply by Location
Source: Colliers International Thailand Research
Most serviced apartment units are located in the CBD and Early Sukhumvit areas. The majority of the supply in Late Sukhumvit area is located on Sukhumvit 55 Road (Thonglor Road) which has good transport
links, entertainment, restaurants and retail shops which create a strong lure for people to live on the road.
Supply by Location and Grade
Source: Colliers International Thailand Research
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 an abundance of Grade A units provided through a number
of luxury branded apartments in Thong Lor Road which cater to the large Japanese community. Early Sukhumvit is the king of Grade B apartments and is a more unpretentious, relaxed area which also explains the location of more up-scale rather than luxury hotels. The “Other� areas contain more Grade C products due to the distance from the centre.
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Bangkok serviced apartment Market REPORT | Q4 2011
Cumulative Future Supply in 2012 – 2013 by Location
Source : Colliers International Thailand Research
Approximately 420 units are scheduled to be completed in 2012 which will be down on 2011 completions. The serviced apartment sector is not undergoing a boom as it has in the past due to the highly competitive market in some locations which has led to the postponement of new projects, especially along Sukhumvit Road.
in 2012 – 2013. Sukhumvit Road is still the most popular in Bangkok for serviced apartments, although only 120 units are scheduled to be completed in 2012 – 2013.
Some serviced apartments were under construction in Other area or the area outside the mass transit system and are expected to be completed
Historical Occupancy Rate by Quarter
Source: Colliers International Thailand Research
The occupancy rates in Q1 – Q3 2011 of both grades were similar and increased around 11% for Grade A serviced apartments in Q4 while only 0.5% for Grade B. Following the floods in Bangkok, displaced residents were forced to stay temporarily in serviced apartments for the last two
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months of 2011. Another factor is that many serviced apartment buildings reduced their rental rates in the last quarter of 2011 due to intense competition for residents between themselves, the hotel sector and the high-end apartments.
Bangkok serviced apartment Market REPORT | Q4 2011
Occupancy Rates by Location
Source: Colliers International Thailand Research
In all locations, the occupancy rate in every quarter was largely similar, with only the Central CBD, Southern Fringe and Other area registering increases in the last quarter. The Central CBD and Southern Fringe area were not flooded during the fourth quarter and a lot of flood victims moved to stay in serviced apartments in these two locations, due to the
convenience for commuting to work via the mass transit system. Similar reasons applied to Other area which was not flooded. Although it is far from the mass transit system, the rental rates are considerably lower than other locations.
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Bangkok serviced apartment Market REPORT | Q4 2011 Demand Drivers Number of Expatriates in Bangkok, Q4 2011
Source : Office of Foreign Workers Administration (Work Permit), Department of Employment of The Ministry of Labour and Colliers International Thailand Research Remark : Above information does not include Lao, Burmese and Cambodian citizens E = Estimated by Colliers International Thailand Research
Expatriates represent the primary source of demand for the medium and long-stay serviced apartment market. The number of expatriates in Bangkok in Q1 2010 decreased very slightly from the previous year, but in Q2 2010 dropped by more than 10,000 due to the political problems in the centre of Bangkok. However in Q3 – Q4 2010 there was an increase but the total number was still similar to 2009. In the last quarter of 2011,
the number of expatriates in Bangkok was over 57,000. Although many foreign investors were affected by the floods in the last quarter of 2011, particularly the Japanese who invested in industrial estates in the central part of Thailand, the number of Japanese in Thailand in December was still 8% higher than in the early part of 2011.
Proportion of Expatriates in Bangkok, Q4 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 of them staying along Sukhumvit Road. Although many provinces in
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Thailand including some parts of Bangkok were flooded which affected many foreign investors, the number of expatriates in Bangkok in the last quarter of 2011 still increased from early 2011.
Bangkok serviced apartment Market REPORT | Q4 2011 Rental Rate Rental Rate for One Bedroom Units, 2010 – 2011 by Location and Quarter
Source : Colliers International Thailand Research
The average rental rate in all locations was similar to the previous quarter, except in the Central CBD and Southern Fringe areas. The average rental rate in the Central CBD area continued to decrease from
the last quarter due to some projects increasing occupancy rates by reducing rental rates to attract more customers. The same was the case for the Other area.
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Bangkok serviced apartment Market REPORT | Q4 2011 Forecast 2011 was the recovery year following the problems in 2010. Although many provinces in Thailand, including some parts of Bangkok, were flooded during Q4 2011, the number of expatriates in Bangkok in December was still around 6% higher than in the first quarter of 2011 according to the statistics of the Office of Foreign Workers Administration (Work Permit). This is a positive sign for the serviced apartment market moving forward into 2012. Due to the majority of residents of serviced apartments in Bangkok being expatriates, the performance of the market depends on their numbers. The supply of serviced apartments in 2012 and for the next two years is set to slightly increase due to limited future supply in the pipeline. Sukhumvit Road still remains the most fashionable location for developers and occupiers. The Other area grew in 2011 in terms of supply and demand as some foreigners do not work in the CBD area but in the suburbs so they need to live close to their workplace, or may prefer to
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commute to their CBD offices so that their children can live close to suburban international schools. 2012 is expected to be a competitive year in this market as many foreigners in Bangkok have moved from serviced apartments to highend apartments or condominiums in the same location. Although they lack services and some facilities, the lower rental rates are more attractive for long stay residents. In addition, hotels are also competing with serviced apartments as many expatriates need to stay temporarily in a hotel first before moving to a more permanent apartments or condominiums.
Bangkok serviced apartment Market REPORT | Q4 2011
APPENDIX
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Bangkok serviced apartment Market REPORT | Q4 2011 Grading No recognised 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 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 up-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. • 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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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 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.
• 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.
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