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
COLLIERS Colliers INTERNATIONAL International
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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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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market
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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RESEARCHER: Risinee Sarikaputra Manager | Research
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