Market Research B a N G KO K S E RV I C E D A PA RT M E N T M A R K E T BANGKOK SERVICED APARTMENT MARKET | 1 st h a l f | 2 0 0 9
c o l l i e r s i n t e r n at i o n a l
| T H AILAN D
The Knowledge Report B AN G KO K s e rv i c e d a pa rtm e n t M A R K E T |
1 st h a l f
|
2009
BANGKOK SERVICED APARTMENT MARKET HIGHLIGHTS Market Indicators 1h 2009 2h 2009F
SUPPLY DEMAND rental rate occupancy rate
• Low demand of serviced apartment caused by the economic recession. The key measures implemented so far have included staff retrenchment and the reduction of housing budgets, which generally led to the change in the demand structure in the serviced apartment market. • As at the end of the first half of 2009, there were approximately 14,043 units in 108 serviced apartment projects located in Bangkok. • There were approximately 1,456 units from 13 serviced apartment projects added to the total supply during the first half of 2009. • During the first half of 2009, there were approximately 3,566 new expatriates arriving in Bangkok. It is predicted that the number of new work permits will decline in 2009. • The average occupancy rate of serviced apartment is estimated to decrease by 13.75%, from 71.94% in 2008 to 62.05% in 2009. • The slowing demand had pushed down the average rental rate per square metre of Grade A serviced apartment is estimated to decrease by 10% in 2009, to THB 1,130 per square metre per month in 2009. However, the ARR of Grade B is estimated to decrease by 5% in 2009 from just 881 in 2008 to 837 in 2009.
Serviced apartments do not suffer in a downturn as severely as hotels, which are more dependent on tourism. The long run demand from expatriates and tourists coming to Thailand will increase. The existing serviced apartment operators will have to focus on achieveing a balance of short-stay and long-stay guests as well as developing loyalty programmes to maintain occupancy rates.
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The Knowledge Report | 1st Half | 2009 | Bangkok Serviced Apartment Market
BANGKOK SERVICED APARTMENT MARKET OVERVIEW Due to the onset of the global financial turmoil and its knock-on effect on the global economy coupled with our local political issues, many business sectors, ranging from financial institutions, exports and manufacturing industry, have been affected by the crisis. The export of automobiles in March fell by 38.5 per cent from the same period last year. The Japanese industry’s was the biggest sales drop in 35 years due to the recession. There were nine industries showing lower confidence: cement, wood, food, sugar, herbs, power plants, rubber, aluminium and handicrafts. Automobile manufacturers became increasingly concerned
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about the situation, as their exports to the Middle East had slumped more than 20 per cent in March. Thailand’s major export markets are the Middle East, Australia and Asia. Low demand for serviced apartment was caused by the economic recession. The key measures implemented so far have included staff retrenchment and the reduction of housing budgets, which generally led to a change in the demand structure in the serviced apartment market.
The Knowledge Report | 1st Half | 2009 | Bangkok Serviced Apartment Market
Supply Trends Serviced Apartment Locations As at the end of the first half of 2009, there were approximately 14,043 units in 108 serviced apartment projects located in Bangkok.
• Central Business District Area (CBD)
There are approximately 1,991 units of serviced apartment located in this area. In the first half of 2009, there were two new serviced apartment projects added in this area.
Table 1 : Supply added in the Centre Business District area in 1H 2009
Project name
Location
No. of units
Marriott Executive Sathorn Vista
Soi Suanplu
184
212 Serviced Apartment
Chan Road
TOTAL
18 202
Source : Colliers International Thailand Research
• Central Lumpini Area
There were two serviced apartment projects added in this area in the first half of 2009.
Table 2 : Supply added in the Central Lumpini area in 1H 2009
Project name Rongratana Executive Residence Anantara Baan Rajprasong Serviced Suites
Location
No. of units
Soi Langsuan
22
Rajdamri Road
97
TOTAL
119
Source : Colliers International Thailand Research
• Sukhumvit Area
There were six serviced apartment projects added to the supply in this area in the first half of 2009.
Table 3 : Supply added in the Sukhumvit area in 1H 2009
Project name
Location
No. of units
Montara
Sukhumvit Soi 55
41
Viscaya Residence
Sukhumvit Soi 31
14
Oakwood Residence Thonglor
Sukhumvit Soi 55
67
Adelphi Grande
Sukhumvit Soi 41
169
Ambassador Royal Suite Serviced Apartment
Sukhumvit Soi 13
170
Sukhumvit Soi 2
50
Marco Polo Serviced Apartment TOTAL
511
Source : Colliers International Thailand Research
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The Knowledge Report | 1st Half | 2009 | Bangkok Serviced Apartment Market
• Southern Fringe Area
In the first half of 2009, there was only one serviced apartment project added in this area.
Table 4 : Supply added in the Southern Fringe area in 1H 2009
Project name Radisson Suites
Location
No. of units
Narathiwas Road
300
TOTAL
300
Source : Colliers International Thailand Research
• Other Areas
Most of the remaining Grade B & C serviced apartments are scattered across the city, including Phayathai, Petchaburi, Rama 9 Roads, Mitmaitri, etc. There were two serviced apartment project added to the supply here in the first half of 2009.
Table 5 : Supply added in the Other areas in 1H 2009
Project name
Location
No. of units
Arasia Luecha Park
Phaholyothin Soi 3
93
Hope Land Executive Residence Sukhumvit 46/1
Sukhumvit Soi 46/1
231
TOTAL
324
Source : Colliers International Thailand Research
Historical Supply Total supply of serviced apartments is approximately 14,043 units, representing an increase of 11.57% on the total supply in 2008. The sharp increase was found in the year 2007, representing an
increase of 17.76% on the total supply in 2006. The average growth of supply was 13.04% from 2004 to 1H 2009.
Figure 1 : Supply of serviced apartment units, 2004 & 1H 2009
Source : Colliers International Thailand Research
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The Knowledge Report | 1st Half | 2009 | Bangkok Serviced Apartment Market
Supply by location The highest amount of supply is in the Sukhumvit area, with approximately 6,792 units, followed by Central Lumpini area
and the Central Business District area, with 2,182 units and 1,991 units, respectively.
Figure 2 : Supply of serviced apartment units by location, 1H 2009
Source : Colliers International Thailand Research
The market share of serviced apartments targeting expatriates can be categorized into Grade A and Grade B. Grade A serviced apartment projects are defined as projects in good locations and easily accessible. Grade A projects also provide spacious rooms, with amenities that combine comfort and quality, to encourage their customers to stay for long durations. The unit comes with luxury facilities, such as bathrooms equipped with a separate shower area and a bath tub, independently controlled air conditioning system, parquet
flooring and a safety deposit box in each room. The layout must be practical for living, with good design and attractive interior. The property must be managed by a reputable manager/operator. There must be adequate facilities for the residents.
Total supply of Grade A serviced apartments is approximately 5,135 units, representing 37% of the total number of serviced
apartments, while the supply of Grade B serviced apartments is approximately 8,908 units, representing 63%.
Figure 3 : Supply of serviced apartment units by grade, 1H 2009
Source : Colliers International Thailand Research
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The Knowledge Report | 1st Half | 2009 | Bangkok Serviced Apartment Market
Sukhumvit has the highest number of Grade A serviced apartments, with approximately 1,810 units, followed by Central Lumpini, with 1,770 units and CBD, with 995 units. Most Grade
B serviced apartments are concentrated in Sukhumvit, with 4,982 units, followed by the Southern Fringe and the Other areas, with approximately 1,313 units and 1,205 units, respectively.
Figure 4 : Supply of serviced apartment units by location and grade, 1H 2009
Source : Colliers International Thailand Research
Future Supply There were approximately 1,456 units, from 13 serviced apartment projects, added to the total supply during the first half of 2009.
which is very important to the city lifestyle in the future. Thus, we will see the new development of serviced apartments spread to many areas.
Of these, six projects were Grade A and seven projects were Grade B. It is interesting to see Grade A serviced Apartment in the Southern Fringe area.
Based on current building schedules, the new supply of serviced apartments is projected to be approximately 3,885 units by 2012. The majority of this new supply will be added in 2009, with approximately 1,097 units to be added in the second half of 2009, whilst 1,456 units are already added in the first half of 2009. Thus, by the end of 2009, the supply of serviced apartment is estimated to be 15,140 units.
Due to the extension of the mass transit line, we can see that the future supply of serviced apartments will expand in many areas. Thailand is growing and developing in the same direction as Hong Kong and Japan. Most people choose to stay in serviced apartment units close to facilities in order to save travelling time,
Figure 5 : Future new supply of serviced apartment units by year, 2H 2009-2011 & beyond(F)
Source : Colliers International Thailand Research
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The Knowledge Report | 1st Half | 2009 | Bangkok Serviced Apartment Market
The growth in supply of serviced apartments in 2006 was high, at approximately 17.76%. Table 6 : Supply of serviced apartment units, 2004-2011f
Unit supply at the beginning of
Additional supply during
the year (Units)
the year (Units)
2004
7,730
362
4.68%
2005
8,092
385
4.76%
2006
8,477
679
8.01%
2007
9,156
1,626
17.76%
2008
10,782
1,805
16.74%
2009f
12,587
2,553
20.28%
2010f
15,140
1,150
7.6%
2011f & beyond
16,290
1,638
10.06%
Year
% change y-o-y
Source : Colliers International Thailand Research
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The Knowledge Report | 1st Half | 2009 | Bangkok Serviced Apartment Market
Table 7 : Serviced apartments scheduled for completion, 2h 2009-2011f
No.
Project name
No. of units
Location
Estimated completion
1
Amari Residence
2
Baan Angsana
128
Soi Soonvijai
2009
NA
Sukhumvit Soi 3
2009
3 4
Fragrant Real Estate
350
Makkasan Road
2009
Jasmine City by The River
NA
Rama IV Road
2009
5
Oakwood Residence Garden Tower
170
Bangna Trad Road
2009
6 7
Paradiso 31
46
Sukhumvit Soi 31
2009
Pan Pacific
142
Sukhumvit Soi 55
2009
8
Siam Kempinski
97
Rama I Road
2009
9
Somerset Sukhumvit Thonglor
262
Sukhumvit Soi 55
2009
10
Sukhumvit Park Bangkok- Marriott Executive Apartment
300
Sukhumvit Soi 24
2009
11
The Aetas
78
Soi Ruamrudee
2009
12
The Silq
42
Sukhumvit Soi 19
2009
13
Twin Residence
79
Sukhumvit Soi 63
2009
14
Grass Suites
NA
Thonglor Soi 12
2009
15
The Alcove Thonglor 5
53
Sukhumvit Soi 55
End of 2009
16
Sivatel
79
Wireless Road
2010
17
Fraser Suite Sukhumvit
250
Sukhumvit Soi 6
2010
18
Jasmine Resort & Park Hotel
300
Sukhumvit Soi 69
2010
19
Istimar Residence
77
Sathon Road
2010
20
Somerset Amar Garden
122
Sukhumvit Soi 2
2010
21
St Regis
22
Rajdamri Road
2010
22
Oakwood Trilliant Park
133
Sukhumvit Soi 18
2011
23
Benchasiri Place Bangkok- Marriott Executive Apartment
92
Sukhumvit Road
2011
24
L&H Sukhumvit 19
600
Sukhumvit Soi 19
2011
25
Oriental Residence
145
Wireless Road
2011
26
Planned Project
78
Sukhumvit Soi 107
2011
27
Oakwood Serviced Apartment
112
Sukhumvit Soi 24
2011
28
Four Wing Residence
128
Srinakarin Road
NA
29
Planned Project (Onnut Ladkrabang)
NA
Onnut Ladkrabang
NA
30
Project of Mahanakorn
NA
Narathiwas Road
NA
31
Planned Project
NA
Narathiwas Soi 7
NA
Total Source : Colliers International Thailand Research
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3,885
The Knowledge Report | 1st Half | 2009 | Bangkok Serviced Apartment Market
Demand Trends Demand for serviced apartments traditionally came from expatriates in their early months of moving to Thailand or the last months of their posting. Typical length of stay would range from one to three months, as the expatriate would require that time to select a permanent residence such as an apartment, single house or town house, or to cover the period following the expiry of an annual lease before moving on. More recently, demand for the serviced apartments market has developed into two major groups: short-stay tourists and business
travellers (the short-stay market), and new expatriate arrivals to Bangkok (the long-stay market). Some guests who would have formerly stayed in hotels have shifted to serviced apartments because they offer full facilities at more reasonable prices, especially when compared with five-star hotels. The current economic circumstances should benefit some of the serviced apartment projects because some guests are seeking lower-priced accommodation.
Number of Expatriates in Bangkok Official figures from the Office of Foreign Workers Administration (Work Permit), Department of Employment of the Ministry of Labour reveal that the number of new expatriate arrivals in Bangkok was lowest in 2005, with only 1,872 persons. The economic slump will affect the demand of the serviced apartment
market, many companies having implemented more stringent cost controls, cash flow management, financial restructuring and even retrenchment. The new expatriates moving to Bangkok is forecasted to decrease to 6,419 persons in 2009.
Figure 6 : New work permits issued in Bangkok, 2004 – 2009f
Source : Office of Foreign Workers Administration (Work Permit) Department of Employment,The Ministry of Labour
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The Knowledge Report | 1st Half | 2009 | Bangkok Serviced Apartment Market
Number of tourist arrivals at Suvarnabhumi International Airport Short-stay demand for serviced apartments comes from both leisure tourists and business travellers. Offical figures from Office of Tourism Development reveal that the number of international tourist arrivals at Suvarnabhumi International Airport during the first half of 2009 was 4,434,518 persons, down by 26.8% from 5,623,119 persons in the first half of 2008.
South Asia (India), Asean (Malaysia, Singapore), Europe (Germany, UK, France), USA, Australia and the Middle East make up the majority of inbound travellers to Thailand. Approximately half of the total came from the Asian region in the first half of 2009.
From the breakdown of international travellers at Suvarnabhumi International Airport, visitors from East Asia (Japan, China), Figure 7 : international tourist arrivals at suvarnabhumi International airport by region, 1h 2009
Source : Office of Tourism & Colliers International Thailand Research
Occupancy and Rental Rates Both Grades Occupancy The average occupancy rate for the overall serviced apartments in Bangkok increased between 2004 and 2005 by 5.9% (from 83.92% to 88.87%), but declined each year from 2006 to 2008.
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As a result of global recession and global economic crisis, the occupancy rate of serviced apartment would fall to 62.05% in 2009.
The Knowledge Report | 1st Half | 2009 | Bangkok Serviced Apartment Market
Figure 8 : Average occupancy rate of overall serviced apartments, 2004 –2009f
Source : Executive Serviced Apartment Alliance Meeting (EXSAAM) & Colliers International Thailand Research
Grade A & B Occupancy The average occupancy rate for Grade A serviced apartments in Bangkok increased between 2004 and 2005 by 7.37% (from 81.87% to 87.90%), but declined each year from 2006 to 2008.
The occupancy rate of Grade A is forecasted to decrease to 69.5% in 2009 and Grade B would decrease to 68% due to the majority of Grade B supply.
Figure 9 : Average occupancy rate of Grade A & B serviced apartments, 2004 –2009f
Source : Executive Serviced Apartment Alliance Meeting (EXSAAM) & Colliers International Thailand Research
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The Knowledge Report | 1st Half | 2009 | Bangkok Serviced Apartment Market
Rental Trend In order to combat the threat of global economic depression, many serviced apartments have implemented the price war policy by price reduction as well as additional complimentaries, such as
free electricity charge, daily American Breakfast and much more, in order to attract many customers from various companies.
Grade A Rents
Grade B Rents
The average achieved rental rate (ARR) of Grade A serviced apartments increased annually between 2004 and 2008. The highest ARR growth rate was in 2006, increasing some 12% from 2005. In 2008, the ARR remained stable at THB 1,256 per square metre per month. The slowing demand would push down the average rental rate per square metre of Grade A serviced apartment by 10%, to THB1,130 per square metre per month in 2009.
The ARR of Grade B serviced apartments also showed a general upward trend between 2004 and 2008. The ARR of Grade B serviced apartments decreased in 2008 only 1.8%, as occupancy caught up with new supply and the possible delayed effects of the global economic downturn hitting Thailand in the last quarter. However, the ARR in 2009 is estimated to drop by 5% from THB 881 per square metre in 2008 to THB 837 per square metre per month in 2009.
Figure 10 : Average achieved monthly rental rate of Grade A & B serviced apartments, 2004 – 2009f
Source : Executive Serviced Apartment Alliance Meeting (EXSAAM) & Colliers International Thailand Research
Outlook : Amid the global economic crisis, serviced apartments do not suffer in a downturn as severely as hotels, which are more dependent on tourism. We believe that in the long run demand from expatriates and tourists coming to Thailand will increase. Some property developers who are constructing service apartments are opting to delay their projects and waiting to see how the market performs by the end of this year. We would expect the serviced apartment market to take at least one to two years to recover. Thus, the existing serviced apartment operators will have to focus on achieving a balance of short-stay
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and long-stay guests as well as developing loyalty programmes to maintain occupancy rates. A huge amount of supply will be opened in the second half of this year and will increase market competition. The rental rates are expected to decrease, and this will provide an opportunity for serviced apartments to attract more residents.
The Knowledge Report | 1st Half | 2009 | Bangkok Serviced Apartment Market
APPENDIX
293 offices in 61 countries on 6 continents
Serviced Apartment Locations
USA 99 Canada 19 Latin America 18 Asia Pacific 62 EMEA 95
The serviced apartment area can be divided into five areas or pockets of concentration: • Central Business District Area (CBD) This is the area that encompasses Silom Road and Sathorn Road as well as other sois in between, such as Soi Saladaeng, Soi Convent & Soi Pipat.
US$ 2 billion in annual revenue 868 million square feet under management 11,048 Professionals
• Central Lumpini Area The Central Lumpini covers the areas along Rama I, Rajdamri, Wireless, Ploenchit and Langsuan Roads. This area is convenient for both business travellers and tourists, because of its proximity to many of the office buildings and local attractions. Cape House, Centre Point – Wireless and Natural Ville, among others, are located in this section of the city. • Sukhumvit Area This is the section of Sukhumvit Road between Soi 1 and Soi 69 to the north and Soi 2 and Soi 42 to the south. This popular area with expatriates and tourists spans the Asoke Intersection in the west to the Emporium Mall in the east. The area between Sukhumvit Soi 1 and Sukhumvit Soi 69 is popular as a residential area for western expatriates. Japanese nationals tend to prefer the area from Asoke intersection eastwards, especially Soi Thong Lo. Serviced apartments in the vicinity include Emporium Suites, Jasmine Executive Suites, President Park, Grand Mercure Residence Asoke, Somerset Lake Point and Furama Xclusive Sukhumvit, to name a few. • 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. This is a new area for expatriate serviced apartments; thus, there is a scarcity of Grade A serviced apartment projects in the area. Despite this, many serviced apartments in the area, such as Oakwood City Residence, Centre Point Silom (Bangrak) and Shangri-La Hotel Apartments, have excellent reputations in this vicinity.
Contact information THAILAND: Patima Jeerapaet Managing Director
Risinee Sarikaputra Director | Research
Colliers International 17/F Ploenchit Center Klongtoey Bangkok 10110 Tel: 662 656 7000 Fax: 662 656 7111
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.
• Other Areas Most of the remaining Grade B & C serviced apartments are scattered across the city, including Phayathai, Petchaburi, Rama 9 Roads, Mitmaitri, etc. The total stock in these areas is 1,272 units. There were three serviced apartment project added to the supply here in the first half of 2009.
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w w w. c o l l i e r s . c o. t h
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.