Bangkok Serviced Apartment Market 2008 by Colliers International Thailand

Market Research B angkok serviced apartment M arket BANGKOK SERVICED APARTMENT SECTOR OVERVIEW | M arc h | 2 0 0 8

c o l l i e r s i n t e r n at i o n a l

| Thailand

B a n gko k s e rv i c e d a pa rt m e n t M a r k e t

|

march

|

2008

BANGKOK SERVICED APARTMENT SECTOR OVERVIEW 2008

• After 2 years of uncertainty linked to political issues, the property market in general

and the serviced apartment market in particular is expected to experience renewed

activity and growth in 2008.

Market Indicators 2007

2008F

Supply

Demand

OCCUPANCY (%)

AVERAGE achieved rent (thb / sq.m.)

By 2011, the total amount of serviced apartment investment will be approximately THB 27 billion for the new supply of 6,580 units in 38 serviced apartment projects. This investment cost is exclusive of land prices.

• At the same time, competition will intensify further as 6,580 new serviced apartment

units in 38 projects are set to enter the market by 2011.

• Total new investment in these 38 projects is estimated at around THB 27 billion.

• Many investors are attracted to this sector by strong income potential combined with

lower investment and operating costs and offered higher yields than hotels.

• International operators, such as Oakwood Asia Pacific, Frasers Hospitality and The

Ascott Group, are expanding aggressively throughout Asia and all have new

properties underway in Bangkok.

• The advantage of a strong brand name, either local or international, will become

more apparent in a more competitive environment.

• As new supply outpaces new demand, operators have turned increasingly to short stay tourists and business travelers, rather than the traditional serviced apartment

long-stay market (1-3 months), competing with hotels.

• Some serviced apartments are currently taking in 30-35% long-stay and 65-70%

short-stay business.

•

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• With new supply of hotels also increasing sharply, the market is expected to enter a

very competitive phase in 2008.

With increased supply coupled with licensing requirements for short-stay operators, a strategy for success could be a return to focus on the traditional longer-stay market. Offering guests staying a month or longer a well-designed product that meets their needs would be preferable to engaging in a price-cutting war with hotels.

• Appreciation of the Baht is putting some Grade A properties outside the budget

allocation of some long-stay expatriates, which could benefit the Grade B market in

the near term.

The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

SUPPLY BY LOCATION

Currently, there are approximately 10,685 units in 75 serviced apartment projects located in Bangkok. After more analysis, the serviced apartment area can be divided into four 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.There are approximately 1,687 units in serviced apartment located in this area. The below table shows future supply of serviced apartment projects in this area.

Central Business District Area covers - Silom Road

- Sathorn Road - Other sois in between such as Soi Saladaeng, Soi Convent & Soi Pipat

New supply in Central business district area (CBD) Serviced Apartment Name

Location

No. of units

Expected completion

For your residence

Silom Soi 17

24

2008

Sathorn Vista - Marriott

Soi Suanplu

195

2008

Sathorn Garden

Sathorn Road

155

2009

Istitmar Residence

Sathorn Road

77

2010

Soi Saint Louise

NA

2011

Metro Sathorn Tower Source : Colliers International Thailand Research

• Central Lumpini Area The Central Lumpini area covers areas along Rama I, Rajdamri, Wireless, Ploenchit and Langsuan Roads. This area is convenient for both business travelers 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 with approximately 1,984 units. However, an additional 578 units will be added in this area by 2011.

New supply in Central Lumpini Serviced Apartment Name

Location

No. of units

Expected completion

Bliss Residence

Soi Ruamrudee

78

2008

Baan Rajprasong

Soi Mahadlekluang 3

70

2008

Soi Ruamrudee 2

108

2008

Rama I

150

2009

St'Regis

Rajdamri Road

22

2010

Planned Project

Ploenchit Road

150

2011

Planned Project

Ploenchit Road

NA

2011

Noble Ambience Ruamrudee Siam Kempinski

Central Lumpini Area covers - Rama I Road

- Rajdamri Road - Wireless Road - Ploenchit Road - Langsuan Road

Source : Colliers International Thailand Research

COLLIERS Colliers INTERNATIONAL International

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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

• 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 as well as other sois in between. This popular area with expatriates and tourists includes the Asoke Intersection on the west to the Emporium Mall to 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 from Asoke intersection upwards, especially Soi Thonglor. Serviced apartments in the vicinity include Emporium Suites, Jasmine Executive Suites, President Park, Sofitel Residence Asoke, Somerset Lake Point and Unico Grand Sukhumvit, to name a few. The serviced apartments in this vicinity are 5,273 units, with a huge amount of new supply in this vicinity being added of approximately 3,659 units.

Sukhumvit Area covers - Sukhumvit Road between Soi 1 and Soi 69 to the north

- Sukhumvit Road between Soi 2 and Soi 42 to the south.

- Other sois in between

New supply in Sukhumvit Serviced Apartment Name

Location

No. of units

Expected completion

Sukhumvit Park View by Marriott

Sukhumvit Soi 24

300

2008

Compass

Sukhumvit Soi 24

340

2008

NA

Sukhumvit Soi 19

42

2008

Admiral Suite II

Sukhumvit Soi 31

122

2008

Citadines 8

Sukhumvit Soi 8

130

2008

Citadines 11

Sukhumvit Soi 11

134

2008

Citadines 23

Sukhumvit Soi 23

138

2008

Column Residence

Sukhumvit Soi 16

238

2008

Somerset Amar Garden

Sukhumvit Soi 3

122

2008

Eight Thonglor

Sukhumvit Soi 55

148

2009

The Royal Suite Serviced Apartment

Sukhumvit Soi 13

170

2009

Somerset Sukhumvit Thonglor

Sukhumvit Soi 55

268

2009

Oakwood Residence Thonglor

Sukhumvit Soi 55

NA

2009

Somerset Grand Sukhumvit

Sukhumvit Soi 23

265

2010

Jasmine Resort & Park Hotel

Sukhumvit Soi 69

300

2010

Benchasiri Place by Marriott

Sukhumvit

92

2010

Fraser Suites Sukhumvit

Sukhumvit Soi 6

250

2010

L&H Sukhumvit 19

Sukhumvit Soi 19

600

2011

Source : Colliers International Thailand Research

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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

• Outer Central Business District (Outer CBD) Area

This is the area that stretches along the bank of the Chao Phraya River on Charoenkrung Road.

Narathiwat Ratchanakarin and Rama III Roads are located in this area. This is a new area for expatriate serviced apartments since this area is located on the border of the CBD, with easy access to the CBD area. 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), Shangri-La Hotel Apartments have excellent reputations in this vicinity.

The serviced apartments in this precinct boast a total supply of 987 units. Additional Grade A serviced apartments of 560 units will be added in this vicinity.

New supply in OUTER CENTRAL BUSINESS DISTRICT (Outer CBD) AREA

Outer Central Business District Area covers - Charoenkrung Road - Narathiwat Ratchanakarin Road

- Rama III Road

Serviced Apartment Name Riverside Garden Marina

Location

No. of units

Expected completion

Charoenkrung Road

260

2008

Narathiwat Road

300

2009

Radisson Suite 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. The recent addition of the Amanta in Ratchadapisek added about 116 units to the total stock in this area. The total stock of this area is 754 units. Since the new international airport has been moved, the area around Suvarnabhumi International Airport is in the investment consideration area for investors. There will be approximately 468 units added in the area around the new airport.

New supply in Other Areas

The remaining areas scattering across the city - Phayathai Road - Petchaburi Road - Rama 9 Road - Bangna Road

Serviced Apartment Name

Location

No. of units

Expected completion

Four Wing Residence

Srinakarin

128

2008

McKenna Serviced Apartment

Phayathai

169

2008

Fragrant Real Estate

Makkasan

350

2009

Somerset Ratchatewi

Phayathai

225

2009

Chamchuree Square

Rama IV

120

2008

Oakwood Garden Tower

Bangna

340

2009-2010

Source : Colliers International Thailand Research

COLLIERS Colliers INTERNATIONAL International

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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

SUPPLY BY GRADE

The market share of serviced apartments targeting expatriates can be categorized into two grades which are Grade A and Grade B. Grade A serviced apartment projects are in good locations and easily accessible. The layout must be practical for living, with good design and nice interiors. The property must be managed by reputable management -/- operator. There must be adequate facilities for the residents.

Definition of Grade A serviced apartments - Good location

Total supply of Grade A-serviced apartments is approximately 3,978 units, representing 37% of the total number of serviced apartments, while the supply of Grade B-serviced apartments is approximately 6,707 units, representing 63%.

Figure 1 : Bangkok current supply of serviced apartments by grade (units)

- Easy accessible - Pratical layout for living - Reputative property management -/- operator - Adequate facilities.

Grade A 3,978 37%

Grade B 6,707 63%

Source : Colliers International Thailand Research

Recently, there were 22 projects of Grade A serviced apartments, while Grade B serviced

apartments had 53 projects in Bangkok as of end of 2007.

Figure 2 : Number of serviced apartment projects by grade, as of 2007

No. of projects 60 50 40

53

30 20 10 0

22

Grade Grade A

Grade B

Source : Colliers International Thailand Research

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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

Central Lumpini area has the highest numbers of Grade A serviced apartments, with approximately 1,651 units, followed by sukhumvit area, with 1,501 units and the CBD area, with 826 units.

The supply of Grade A serviced apartments is mainly located in three areas which are the CBD, Sukhumvit, and Central Lumpini area. Central Lumpini has the highest number of Grade A serviced apartments, with approximately 1,651 units, followed by Sukhumvit area and CBD area. Earlier, Grade A serviced apartments were concentrated in the Sukhumvit area, however many landlords didn’t renovate their properties, thus the quality of their properties have dropped to Grade B. Another factor is that an increasing number of new serviced apartment buildings were developed in good locations, near BTS and MRT stations, and also managed by international chains. However, the

majority of the supply of serviced apartments is concentrated in the Sukhumvit area as this area is popular for expatriates and tourists. The Sukhumvit area is also popular for Japanese, especially Sukhumvit Soi 39 and Sukhumvit Soi 55 where the Japanese community in Bangkok is. There are many Japanese supermarkets such as Fuji Supermarket, located in Sukhumvit Soi 39 and Soi 33. In Sukhumvit Soi 55, there is J-Avenue which is a neighbourhood mall - serving Japanese and expatriates residing around the area. The graph below illustrates the number of Grade A and Grade B serviced apartments in each area.

Figure 3 : Number of units of Grade A & B serviced apartments current supply by location, as of 2007 No. of units 4000 3,772

3500 3000 2500 2000 1,651 1,501

1500 1000

987

826 861

754 333

500 0

0

CBD

Sukhumvit

Central Lumpini

Grade A

Outer CBD

0

Location

Others

Grade B

Source : Colliers International Thailand Research

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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

There are approximately 75 serviced apartment projects as of 2007, with 39 serviced apartment projects located in Sukhumvit. It is noticeable that the projects of serviced apartment in Central Lumpini have more units than the projects of serviced apartment in the CBD

since the total projects of serviced apartment in the CBD are higher than the total projects of serviced apartment in Central Lumpini.

Figure 4 : Number of projects of Grade A & B serviced apartments current supply by location, as of 2007 No. of projects

There are approximately 75 serviced apartment projects as of 2007, with 39 serviced apartment projects located in Sukhumvit.

30

30 25 20 15 10 5 0

8

9 8 6

5

0

CBD

6

3

Sukhumvit

Central Lumpini

Grade A

0

Outer CBD

Location

Others

Grade B

Source : Colliers International Thailand Research

The supply of Grade A & B serviced apartments added in 2007 was approximately 1,596 units in 15 projects. In 2007, the Sukhumvit area had

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the highest additional number of supply, with 892 units in 12 projects added in this area.

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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

New serviced apartments added in the year 2007 Project Name Adelphi Suite

The highest additional supply in 2007 was in the Sukhumvit area, with 892 units in 12 projects.

Location

Opened

No. of units

Sukhumvit Soi 8

Nov-07

93

Citadines 16

Sukhumvit Soi 16

Jan-07

79

Civic Park II

Sukhumvit Soi 55/13

Dec-07

24

Sukhumvit Soi 19

2007

60

Chatra Court Exclusive Residence

Room Type Studio - 36 Sq.m.

1BR - 48 Sq.m.

Studio - 30 Sq.m.

1BR - 36 Sq.m.

1 BR - 100 Sq.m.

2 BR - 110 -120 Sq.m.

Studio - 30 Sq.m.

1BR - 60 Sq.m.

2BR - 60 Sq.m.

Studio - 52 Sq.m.

1 BR - 60,73,80 Sq.m.

Fraser Suites Sukhumvit

Sukhumvit Soi 11

Oct-07

163

2 BR - 95, 100 Sq.m.

3 BR - 130, 134, 140, 160 Sq.m.

1 BR - 65, 69 - 72 Sq.m.

2 BR - 104, 119 -124,

Fraser Urbana Sathorn

South Sathorn Road

Jan-07

142

136 -142, 157 Sq.m.

3 BR - 180 Sq.m.

PH 3 BR - 271, 313, 335 Sq.m.

Studio - 44, 54 Sq.m.

Grand Centre Point Rajdamri

Soi Mahadlekluang 2

Oct-07

526

1 BR - 69, 72 Sq.m.

2 BR - 111 Sq.m.

3 BR - 148, 179 Sq.m.

Legacy Suite Malee Suites Serviced Apartment Oakwood Residence Sukhumvit 24

Sukhumvit Soi 29

Dec-07

108

Narathiwat Soi 24

Sep-07

36

Studio - 39, 48 Sq.m.

1 BR - 46, 65 Sq.m.

Studio - 38, 44 Sq.m.

1 BR - 60, 61, 66, 72 Sq.m.

Studio - 29, 42 Sq.m.

Sukhumvit Soi 24

Dec-07

112

1 BR - 53, 55, 58 Sq.m.

2 BR - 80, 84 Sq.m.

1 BR - 55.5 Sq.m.

Premier Thonglor

Sukhumvit Soi 55/9

2007

60

2 BR - 69.37 Sq.m.

2 BR - 83.25 Sq.m.

Studio - 44 Sq.m.

Prommitr Place

Sukhumvit Soi 39

Feb-07

16

2 BR - 88 Sq.m.

3 BR - 132 Sq.m.

PH - 168 Sq.m.

The Tropical Residence The Alcove Unico Grand Sukhumvit

Sukhumvit Soi 49

Jun-07

59

Sukhumvit Soi 55/23

Mar-07

20

Sukhumvit Soi 1

Nov-07

98

Total : 15 properties

Studio - 40, 45, 50 Sq.m.

2 BR - 80 Sq.m.

1 BR - 60 Sq.m.

2 BR - 110 Sq.m.

Studio - 35, 40, 45, 65 Sq.m.

1,596 units

Source : Colliers International Thailand Research

COLLIERS Colliers INTERNATIONAL International

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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

NEW SUPPLY

Sukhumvit area is considered a residential area for expatriates residing in Bangkok, similar to South Kensington in London. Thus, new supply of serviced apartments has focused on this area recently. By 2011, there will be additional new supply of serviced apartments in Sukhumvit of approximately 3,659 units, representing an increase of 69% of total supply of serviced apartments in this area. The new supply in Central Lumpini area will be 578 units, and in CBD area about 451 units. It is

By 2011, an additional 6,580 serviced apartment units in 38 projects will be added in all area.

interesting that there will be new supply in other areas for the amount of 1,332 units, of which 36% of total new supply will be located nearby Suvarnabhumi International Airport which will be managed by an international chain. Within four years, an additional 6,580 serviced apartment units in 38 projects will be added in all areas.

Figure 5 : Future supply of serviced apartments in Bangkok by location between 2008 & 2011 No. of units 4000 3500 3,659

3000 2500 2000 1500 1,332

1000 560

500

578

451

0

Location CBD

Sukhumvit

Central Lumpini

Outer CBD

Others

Source : Colliers International Thailand Research

With a huge amount of new supply of serviced apartments and hotels will increase competition in this area.

The increasing number of new supply of serviced apartments as well as the existing supply will increase competition in the Sukhumvit area. Not only is there a huge amount of new supply of serviced apartments, but also a large number of new hotels will be added in this area by 2011. The competition will not exist only between serviced apartments themselves, but between serviced apartments and hotels as many serviced apartments have applied for hotel licences in order to cater to the tourists and business travelers who travel

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for short stay periods. Though, many serviced apartments have not yet applied for the hotel licences since the properties are unable to pass the standard qualitification to receive the hotel licences, these serviced apartments still offer daily rates in order to get the better occupancy rate as well as higher yields. The extreme competition will start in Sukhumvit area in the very near future. The reason why serviced apartments focus more on short stay customers is as follows:

• The number of supply exceeded the number of new expatriates or • The higher yield from getting a daily rate.

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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

The increasing new supply of serviced apartments was approximately 3-7% between 2004 & 2006. The sharp increase started

in 2007 & 2008 with 17.56% & 25.44% respectively as illustrated in the following table:

CURRent & new supply of serviced apartment units between 2004 & 2011

The highest increase supply of serviced apartments will be in 2008 with 25.44% yeay-on-year in 2007.

Year

Current supply

New supply

% change y-o-y

2004

7,708

247

3.2%

2005

7,955

537

6.8%

2006

8,492

597

7%

2007

9,089

1,596

17.56%

2008

10,685

2,718

25.44%

2009

13,403

2,106

15.71%

2010

15,509

1,006

6.49%

2011

16,515

750

4.54%

Source : Colliers International Thailand Research

Figure 6 : Number of current and new supply of serviced apartments between 2004 & 2008F No. of units 14,000 2,718

12,000 1,596

10,000 597

8,000 6,000

537 247

10,685 9,089

8,492

7,955

7,708

4,000 2,000 0

Year 2004

2005

2006

2007

2008F

Current supply New supply added in the year Source : Colliers International Thailand Research

COLLIERS Colliers INTERNATIONAL International

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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

Summary of new supply of serviced apartments in Bangkok by 2011 No.

By 2011, there will be approximately 6,580 units in 38 projects added the supply of serviced apartment.

Project Name

Location

No. of units

Est. completion

1

Admiral suites II

Sukhumvit Soi 31

122

2008

2

Baan Rajchaprasong

Soi Mahadlekluang 3

70

2008

3

Benchasiri Place by Marriott

Sukhumvit

92

2010

4

Bliss Residence

Soi Ruamrudee

78

2008

5

Chamchuree Square

Rama IV

120

2008

6

Citadines 8

Sukhumvit Soi 8

130

2008

7

Citadines 11

Sukhumvit Soi 11

134

2008

8

Citadines 23

Sukhumvit Soi 23

138

2008

9

Column Residence

Sukhumvit Soi 16

238

2008

10

Compass

Sukhumvit Soi 24

340

2008

11

Eight Thonglor

Sukhumvit Soi 55

148

2009

12

For your residence

Silom Soi 17

24

2008

13

Four Wing Residence

Srinakarin

128

2008

14

Fragrant Real Estate

Makkasan

350

2009

15

Fraser Suites Sukhumvit

Sukhumvit Soi 6

250

2010

16

Istitmar Residence

Sathorn

77

2010

17

Jasmine Resort & Park Hotel

Sukhumvit Soi 69

300

2010

18

L&H Sukhumvit 19

Sukhumvit Soi 19

600

2011

19

McKenna Serviced Apartment

Phayathai

169

2008

20

Metro Sathorn Tower

Soi Saint Louise

NA

2011

21

NA

Sukhumvit Soi 19

42

2008

22

NA

Ploenchit Road

NA

2011

23

Noble Ambience Ruamrudee

Ruamrudee Soi II

108

2008

24

Oakwood Residence Garden Tower

Bangna

340

2009-2010

25

Oakwood Residence Thonglor

Sukhumvit Soi 55

NA

2009

26

Planned Project

Ploenchit Road

150

2011

27

Radisson Suite

Narathiwat Road

300

2009

28

Riverside Garden Marina

Charoenkrung Road

260

2008

29

Sathorn Garden

Sathorn Road

155

2009

30

Sathorn Vista - Marriott

Soi Suanplu

195

2008

31

Siam Kempinski

Rama I Road

150

2009

32

Somerset Amar Garden

Sukhumvit Soi 3

122

2008

33

Somerset Grand Sukhumvit

Sukhumvit Soi 23

265

2010

34

Somerset Ratchathewi

Phayathai

225

2009

35

Somerset Sukhumvit Thonglor

Sukhumvit Soi 55

268

2009

36

St'Regis

Rajdamri

22

2010

37

Sukhumvit Park by Marriott

Sukhumvit Soi 24

300

2008

38

The Royal Suite Serviced Apartment

Sukhumvit Soi 13

170

2009

6,580

units

Total : 38 properties Source : Colliers International Thailand Research

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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

DEMAND

Currently, the demand for the serviced apartment market can be divided into two groups which are short stay tourists & business travelers and new coming expatriate arrivals in Bangkok each year.

The demand of serviced apartments market can be devided into two groups which are I. New expatriates II. International tourists -/business travelers.

• New expatriates moving to Bangkok The amount of demand from expatriates for serviced apartments market comes from the increasing number of expatriates each year since the serviced apartments are the temporary residences for expatriates once they have moved to Bangkok. They will stay for a length of one - three months until they can select their permanent residences such as Apartments and Single houses. Though, there are some expatriates choosing to stay on a yearly contract at serviced apartments, after

we have undergone our study, the average length of stay of expatriates staying in serviced apartment is three months or 90 days. The data from the Office of Foreign Workers Administration (Work Permit), Department of Employment of The Ministry of Labour has shown the total number of expatriates in Bangkok between 2004 and 2007. The new work permits issued was estimated from the proxy of growth in demand between 2004 & 2007 as shown in the below chart:

Figure 7 : New work permits issued, Bangkok 2004-2007

No. of new work permits 10,000 8,670

8,000 6,000

7,592

6,928

7,574

4,000 2,000 0

Year 2004

2005

2006

2007

Source : Office of Foreign Workers Administration (Work Permit) Department of Employment,The Ministry of Labour & Colliers International Thailand Research

From the assumption that the average length of expatriates staying in serviced apartments is 3 months and another 2% of the total number of existing expatriates staying in a yearly contract at serviced apartment, therefore we

have estimated the number of room nights expatriates residing in serviced apartments between 2004 & 2007 as follows:

Figure 8 : Annual room nights for long stay in Bangkok serviced apartments between 2004 & 2007 No. of room nights 1,200,000 1,000,000

372,942 317,521

436,233

486,808

800,000 600,000

683,280

780,300 623,520

681,660

400,000 200,000 0

Year 2004

2005

2006

2007

3 months length of stay 1 year length of stay Source : Executive Serviced Apartment Alliance (EXSAM) & Colliers International Thailand Research

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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

Another demand of serviced apartments comes from short stay visitors which are tourists and business travelers for leisure and business purposes.

If we compare the room nights growth of new supply of serviced apartment with the room nights growth of demand from expatriates relocating to Bangkok. It is shown that the growth rate of new supply increased in a higher rate than the growth rate of demand from new expatriates. The growth rate of room nights of new supply increased by 167% year-on-year in 2007 while the growth rate of room nights demand increased by 9.3% yearon-year. However, the number of expatriates are exclusive of diplomatic or United Nation expatriate staff. Therefore, this figures are not entirely representative of expatriates based in Bangkok. We believe that there are a number

of expatriates based in Thailand without working permits. However, the majority of these do not have accommodation budgets large enough to account for a significant amount of demand in the serviced apartment sector. There are, of course, also a number of expatriates relocating to Bangkok who do not stay in serviced apartments. Nevertheless, new work permits issued can serve as a proxy for serviced apartment supply on a relative basis.

The below graph is the comparison of the growth rate of supply and the growth rate of demand.

Figure 9 : Estimated growth in room nights demand & supply, 2004 & 2007 No. of room nights 800,000

780,300 683,280

681,660

623,520

582,540

600,000 400,000

0

217,905

196,005

200,000

90,155

Year 2004

2005

2006

2007

Growth in room nights demand Growth in room nights supply Source : Executive Serviced Apartment Alliance (EXSAM) & Colliers International Thailand Research

The core business of serviced apartment is to serve the demand residing in Bangkok in a period of more than a month. However, the slightly increase in demand was unable to • Number of tourist arrivals at Bangkok accommodation Another demand of serviced apartments comes from short stay visitors which are tourists and business travelers for leisure and business purposes. Official figures from the Tourism Authority of Thailand (TAT) has revealed that the number of tourists-/-business

catch up the high increase in supply, as a result, the serviced apartments have moved more into the short stay from tourists -/- business travelers.

travelers arriving Bangkok accommodation between 2004 & 2007 with the average length of stay between 2004 & 2007, we can get the anually number of room nights as shown in the following chart:

Year

No. of tourist arrivals at Bangkok accommodation

Avg. length of stay

Total room nights

2004

9,907,832

2.01

19,914,742

2005

10,519,754

1.97

20,723,915

2006

10,673,145

1.83

19,531,855

2007

9,678,773

1.87

18,099,305

Source : Tourism Authority of Thailand (TAT), Thai Hotels Association (THA) & Colliers International Thailand Research

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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market

Though, the number of tourists at Bangkok accommodation increased annually between 2004 and 2006, the decrease in average length of stay in 2006 caused the decrease of room nights at Bangkok accommodation in 2006. We have assumed that each tourist occupied a single room.

With the high increase in supply of both hotels and serviced apartments, while the decrease in annual room nights of demand from tourists -/- business travelers, the extreme competition will exist in the near future PROPORTION OF DEMAND OF SHORT TERM AND LONG TERM

With the average occupancy rate of serviced apartment markets between 2004 & 2007, we can estimate the total room nights in a year between 2004 & 2007 as shown on the following table:

Though, the number of tourists at Bangkok accommodation increased annually between 2004 and 2006, with the decrease in average length of stay in 2006 caused the decrease of room nights at Bangkok accommodation in 2006.

OVERALL AVERAGE OCCUPANCY RATE OF SERVICED APARTMENTs BETWEEN 2004 & 2007 Year

Avg. occupancy rate

Total supply units

Take up units / day

Take up units / year

2004

86.33%

7,955

6,868

2,506,820

2005

89.81%

8,492

7,627

2,783,855

2006

85.06%

9,089

7,731

2,821,815

2007

83.33%

10,685

8,904

3,249,960

Source : Executive Serviced Apartment Alliance (EXSAM) & Colliers International Thailand Research

With the average occupancy rate of serviced apartment between 2004 & 2007, it is noticeable that the proportion of short term was greater than the proportion of long term and the trend of short term increased annually between 2005 & 2007. The future trend of serviced apartments is to serve short stay which is the core market of hotel. Below chart shown the average proportion of customers staying in serviced apartments for the length of

1. Between 1-3 months period.

2. Minimum 1 year period.

3. Daily / weekly period.

Figure10 : Proportion of the length of stay at serviced apartment between 2004 & 2007 Percentage 100%

It is noticeable that proportion of short term was greater than the proportion of long term and the trend of short term increased annually between 2005 & 2007.

90% 80% 70%

60%

59%

13%

13%

27%

28%

2004

2005

62%

64%

60% 50% 40% 30% 20% 10% 0%

15%

15%

22%

21%

2006

2007

Year LT (1-3 months)

LT (1 year)

ST (daily)

Source : Executive Serviced Apartment Alliance (EXSAM) & Colliers International Thailand Research

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OCCUPANCY RATE: Grade A Year

The occupancy rate of Grade A serviced apartment decreased annually between 2005 & 2007, However, the average occupancy rate of Grade A in the CBD increased in 2007 which was different from Grade A in other areas due to little supply of serviced apartments in this area.

Overall

CBD

Sukhumvit

2004

82.70%

69.57%

87.63%

2005

90.24%

85.75%

2006

85.47%

2007

84.01%

Grade B Central

Central

Outer

Lumpini

CBD

94.98%

85.16%

80.98%

77.42%

93.57%

90.02%

84.65%

85.47%

77.83%

82.90%

81.69%

82.88%

86.01%

79.18%

87.23%

88.94%

74.84%

Overall

CBD

Sukhumvit

80.44%

91.86%

82.80%

93.07%

89.20%

91.38%

78.53%

86.94%

86.35%

81.45%

84.73%

84.31%

Lumpini

Source : Executive Serviced Apartment Alliance (EXSAM) & Colliers International Thailand Research

The occupancy rate of Grade A serviced apartment decreased annually between 2005 & 2007.

There are several factors that caused this which are as follows:

•

The revaluation of Thai baht which made Grade A serviced apartment rent go over the accommodation budget after visitors converted their currency into Thai baht, so that the amount they got was less. The demand of long stay shifted to Grade B serviced apartment.

•

The trends of the Grade A serviced apartment focused on short stay, thus the occupancy rate varied from the number of tourist arrivals at Bangkok accommodation, rather than the number of new expatriates coming to Bangkok, since there was an increase of number of expatriates in 2007 but the demands poured to Grade B serviced apartment.

• The political uncertainty in Thailand in 2006 & 2007 has slowed down the foreign business interests as well as the international tourist arrivals at Bangkok accommodation.

However, the average occupancy rate of Grade A in the CBD increased in 2007 which was different from Grade A in other areas due to little supply of serviced apartments in this area.

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ACHIEVED RENT

For the overall market, the big difference of the average achieved rent of Grade A & B serviced apartment was 14% in 2004. The slight difference between Grade A & Grade B rent was found in 2006 which was just 2.7% difference. In 2007, the average rent of Grade B decreased by 4% since there was an additional

The slight difference between Grade A & Grade B rent was found in 2006 which was just 2.7% difference.

of supply of serviced apartment added with approximately 1,596 units, with 943 units of Grade A and 653 units of Grade B. During the opening of new properties, the new supply offered special prices which affected Grade B serviced apartments.

Figure 11 : Average achieved rent of Grade A & B serviced apartments between 2004 and 2007 THB / SQ.M. 1,400

1,000 800

1,157

1,132

1,200

1,045

975

1,102

1,058

962 853

600 400 200 0

Year 2004

2005

2006

2007 Grade B

Grade A Source : Executive Serviced Apartment Alliance (EXSAM) & Colliers International Thailand Research

• THE AVERAGE ACHIEVED RENT OF GRADE A SERVICED APARTMENTS

The highest achieved rent in 2007 was found in Central Lumpini, with THB 1,222 / sq.m. followed by the CBD and Sukhumvit area, with THB 1,210 / sq.m. & THB 1,093 / sq.m.

respectively. There was a huge supply of serviced apartments in the Sukhumvit area which increased the competition.

Figure 12 : Average achieved rent of Grade A serviced apartments in CBD, Sukhumvit and Central Lumpini area between 2004 & 2007

Average achieved rent of Grade A - Central Lumpini = THB 1,222 / sq.m.

- CBD = THB 1,210 / sq.m.

- Sukhumvit = THB 1,093 / sq.m.

THB / SQ.M. 1,400 1,200 1,000 800 600 400 200 0

Year 2004 CBD

2005

2006 Sukhumvit

2007 Central Lumpini

Source : Executive Serviced Apartment Alliance (EXSAM) & Colliers International Thailand Research

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• THE AVERAGE ACHIEVED RENT OF GRADE B SERVICED APARTMENTS

The highest achieved rent of Grade B serviced apartments was found in Central Lumpini, with THB 1,100 / sq.m., followed by Sukhumvit and the CBD, with THB 1,057 / sq.m. & THB 738 / sq.m. respectively since there were only a few Grade B serviced apartment in Central Lumpini. The majority of Grade B serviced

apartment units in Sukhumvit have compact size which gives a higher rate per sq.-m.-, therefore the achieved rate of Grade B in Sukhumvit was in the second rank between 2004 & 2007

Figure 13 : Average achieved rent of Grade B serviced apartments in CBD, Sukhumvit, Central Lumpini area between 2004 & 2007

The highest achieved rent of serviced apartments in 2007 was found in Central Lumpini, with THB 1,100 / sq.m., followed by Sukhumvit and the CBD, with THB 1,057 / sq.m. & THB 738 / sq.m. respectively.

THB / SQ.M. 1,400 1,200 1,000 800 600 400 200 0

Year 2004 CBD

2005

2006 Sukhumvit

2007 Central Lumpini

Source : Executive Serviced Apartment Alliance (EXSAM) & Colliers International Thailand Research

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Notes The serviced apartment rating used in our research is solely based on property rating and achieved rates obtained from market research. The rating system used in our report is not by Colliers International.

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Contact information THAILAND: Bangkok Patima Jeerapaet Managing Director Colliers International 17/F Ploenchit Center Klongtoey Bangkok 10110 Tel: 662 656 7000 Fax: 662 656 7111

RESEARCHER: Risinee Sarikaputra Manager | Research

This report and other research materials may be found on our website at www.colliers.com/thailand. 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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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.

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