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Bangkok Serviced Apartment Market Q1 2011
 

Bangkok Serviced Apartment Market Q1 2011

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The serviced apartment sector continued to show further signs of recovery from the lows of Q2 2010. Overall rental rates and occupancy were up q/q....

The serviced apartment sector continued to show further signs of recovery from the lows of Q2 2010. Overall rental rates and occupancy were up q/q.

It appears that the lingering effects of the April/May events of 2010 which directly impacted areas seems to be dissipating rapidly with Central Lumpini and Central CBD recording very positive figures for Q1 2011.

However this is no time for complacency as the sector faces another significant infusion of supply over the course of the year that will put pressure on the gains made over the past six months.

The earthquake and tsunami in Japan may have a small short term negative influence, however in the longer term expected increased Japanese investment into Thailand will also positively affect the serviced apartment sector.

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    Bangkok Serviced Apartment Market Q1 2011 Bangkok Serviced Apartment Market Q1 2011 Document Transcript

    • Q1 2011 | SERVICED APARTMENTThAilAndBangkok Serviced apartmentmarket Bangkok Serviced Apartment Market execuTive SummARy the serviced apartment sector continued to show further signs of recovery from the lows of Q2 2010. overall rental rates and occupancy were up q/q. it appears that the lingering effects of the april/may events of 2010 which directly impacted areas seems to be dissipating rapidly with central Lumpini and central cBd recording very positive figures for Q1 2011. mARkeT indicATORS However this is no time for complacency as the sector faces another significant infusion of supply over the course of the year that will put pressure on the gains made over the past six months. Q4 2010/Q1 2011 the earthquake and tsunami in Japan may have a small short term negative influence, however new Supply in the longer term expected increased Japanese investment into thailand will also positively RenTAlS affect the serviced apartment sector. OccupAncywww.colliers.co.th
    • BANgkok SERVICED APARTMENT MARkET REPoRT | Q1 2011hiSTORicAl Supply hiSTORicAl Supply by yeAR Source: colliers international thailand researchin 2010 around 540 units were supplied to the market. over the course will come online by the end of 2011 including the centre point at the newof the previous decade the main surges occurred in odd years rather terminal 21 complex with 500 units. total supply of serviced apartmentthan even and this year is no exception. even though no new serviced units as of the end of 2011 is expected to be approximately 18,200.apartments began operation in Q1 2011 it is expected that around 1,770 Supply by lOcATiOn And gRAde, Q1 2011 Source: colliers international thailand researchthe distribution of serviced apartments differs according to location, large Japanese community there. early Sukhumvit is the king of grade Bbased on the particular profile of each area. central Lumpini contains apartments, as it is a more unpretentious, relaxed location, which alsomany large embassies and is therefore seen as being the most prestigious explains the location of more Upper Scale rather than Luxury hotels. thelocation to live in and as such contains more grade a units. Late ‘other’ areas contain more grade c products, due to their distance fromSukhumvit also contains more grade a units, due to the existence of a the centre.number of luxury branded apartments in thong Lor road, catering to theCOLLIERS INTERNATIONAL | P. 2
    • BANgkok SERVICED APARTMENT MARkET REPoRT | Q1 2011 expecTed FuTuRe Supply in 2011 Source: colliers international thailand researchmore than 1,700 units are scheduled to be completed in 2011. despite 470 units in Late Sukhumvit area. the main driver is not only thethis robust addition to supply to the market the highly competitive market popularity of this road as a residential destination but also that theconditions are leading to some projects being postponed, especially in relative price of land is lower than the more central locations and it isthe Sukhumvit area. also convenient for the BtS line.Sukhumvit road will host the vast majority of new supply this year. morethan 620 units will be located in early Sukhumvit area and approximately COLLIERS INTERNATIONAL | P. 3
    • BANgkok SERVICED APARTMENT MARkET REPoRT | Q1 2011hiSTORicAl OccupAncy RATe OccupAncy FOR bAngkOk SeRviced ApARTmenTS On bOTh exTended STAy And cORpORATe hOuSing Sub-SeTS Source: colliers international thailand researchaverage occupancy rates in Q2 tumbled due to the april and may although Q4 2010 produced mixed fortunes, the first quarter of 2011protests, mainly as a result of short-term guests cancelling. the was very encouraging for both grade a and B segments on the back ofcorporate housing subset also suffered with many expats, especially improved figures for tourism.Japanese, leaving thailand temporarily to escape from perceived danger. OccupAncy RATeS by lOcATiOn Source: colliers international thailand researchthe positive news for Q1 2011 relates to robust recovery in the areas residing in these locations but these worries have clearly been abated.directly affected by the protests in april/may 2010, that is central cBd However in all zones occupancy recorded rise q/q and Late Sukhumvitand central Lumpini. this is important as there were concerns that continued to be the star performer, topping 80%.continuing occasional peaceful protests may still deter people fromCOLLIERS INTERNATIONAL | P. 4
    • BANgkok SERVICED APARTMENT MARkET REPoRT | Q1 2011demAnd dRiveRS numbeR OF expATRiATeS in bAngkOk, Q1 2011 Source: office of Foreign Workers administration (Work permit), department of employment of the ministry of Labor and colliers international thailand research remark: above information does not include Lao, Burmese and cambodian citizensthe number of expatriates in Bangkok still continues its upward trend 2009 and below 2008 prior to the global Financial crisis (gFc).the totalfollowing the nadir in Q2 2010. However the number is still similar to number of expatriates in Bangkok in Q1 2011 shows a modest rise q/q. pROpORTiOn OF expATRiATeS in bAngkOk, Q1 2011 Source: office of Foreign Workers administration (Work permit), department of employment of the ministry of Labour and colliers international thailand researchthe Japanese still represent the largest group of expatriates in Bangkok are often in the lower pay bracket and the rental rates of servicedand are also the main target group for serviced apartments, with most apartments would be beyond reach.staying along Sukhumvit road and its numerous sois. other nationalities COLLIERS INTERNATIONAL | P. 5
    • BANgkok SERVICED APARTMENT MARkET REPoRT | Q1 2011RenTAl RATe RenTAl RATe FOR One bedROOm uniTS by lOcATiOn, 2010–2011 by QuARTeR Source: colliers international thailand researchrentals rates continued their slight assent in Q1 2011 except the Southern all bunched in the high 50,000 baht per month level. although LateFringe which more or less flatlined and central cBd which recorded Sukhumvit is further out many high end newer branded apartments haveanother quarter of strong growth and has now reached the 100,000 baht appeared in the past few years raising the average rental price and theper month barrier. the other key markets for high end serviced area is particularly popular with Japanese corporate housing residents.apartments, namely early and Late Sukhumvit and central Lumpini, are RenTAl RATe OF gRAde A And b by ROOm Type, Q1 2011 Source: colliers international thailand research the average rental rate of grade a unit is greater than grade B by approximately 2 – 8%, depending on room type.COLLIERS INTERNATIONAL | P. 6
    • BANgkok SERVICED APARTMENT MARkET REPoRT | Q1 2011SwOT AnAlySiSSTRengThS overseas and this could be of benefit to thailand. the Japanese provide the mainstay for the corporate housing segment of the market andthe serviced apartment sector in Bangkok is very strong in terms of further growth in expats living in Bangkok will directly benefit thebranding and overall quality of accommodation and facilities. most of the serviced apartment sector.top international brands have a presence and local names also provide apowerful underpinning for the market.the sector competes strongly with hotels for the long stay market aswell as corporate accommodation for expats, especially Japanese.a number of clusters of serviced apartments exist in various parts of thecity and disruptions in one area mean that the other locations are able toprovide back up accommodation. most of the chains have apartments inthese various locations. this was evident during the april/may events in2010 and Late Sukhumvit benefitted as a result.companies are continuing to consider the use of serviced apartmentsinstead of hotels for their travelling employees as the use of kitchenfacilities and more homely, informal atmosphere appeal to the jadedbusiness traveler. they also remain cheaper and provide more roomthus providing greater flexibility for use as a temporary office, forexample.weAkneSSeSSignificant new supply in the sector could lead to pricing pressures inthe future as serviced apartments compete in a harsher competitiveenvironment.reliance on the Japanese market for the corporate housing subsetmakes the sector vulnerable to any large scale disruption involvingJapan. the recent earthquake and fears of a direct hit on tokyo sometimein the future have highlighted such concerns.OppORTuniTieSthe development of trade within aSean and between aSean and largeeconomies such as india and china could spell a boom both in thecorporate hosing and long stay sectors. many expats like to stay isserviced apartments in the initial period of their stay before moving tolower cost apartments for lease.Limited new supply of expatriate high end apartment for lease buildingsmeans that serviced apartments can continue to compete successfully inthe corporate housing sector.ThReATSa resumption of disturbances in the centre around the election periodcould cause the fragile recovery in occupancy to fall again in those areaslikely to be affected such as Lumpini.increasing cost pressures are causing companies to scale down theaccommodation provided to their expat staff thus threatening the higherend apartments.the earthquake and tsunami in Japan is likely to lead to a drop in thenumber of arrivals from that country in the short term. However it isexpected that more industrial activity will eventually shift from Japan top COLLIERS INTERNATIONAL | P. 7
    • BANgkok SERVICED APARTMENT MARkET REPoRT | Q1 2011 AppendixCOLLIERS INTERNATIONAL | P. 8
    • BANgkok SERVICED APARTMENT MARkET REPoRT | Q1 2011gRAdingno recognized standard for rating serviced apartments exists in thailand gRAde band therefore colliers international thailand has classified them based Usually located in the centre but also in less prime locations. Furnishedon various criteria, ofwhich a summary is given below. to a high standard but usually offers recreational facilities and a variety of services similar to an Upper or mid Scale hotel. managed by a lower-gRAde A end international or domestic operator.Located in prime locations and luxury residential areas. Furnished to anexceptionally high standard. offering recreational facilities and amenities gRAde csimilar to a Luxury or Upper Scale hotel. managed by a top international Located in secondary locations. Furnished to a comfortable, but notbranded operator or comparable local brand. luxurious, standard. Fewer provisions of facilities and amenities, similar to that of a mid-scale or economy hotel.ZOning • Late Sukhumvit Area this is the section of Sukhumvit road between Soi 37 and Soi 77 to thethe serviced apartment area can be divided into five areas or pockets of north and Soi 24 and Soi 50 to the south.concentration: • Southern Fringe Area• Central CBD this is the area that stretches along the bank of the chao phraya riverthis is the area that encompasses Silom, Sathorn, Surawong, Si phraya on charoenkrung road. narathiwas ratchanakarin road and rama iiiand rama 4 road, as well as other sois in between, such as Soi road are located in this area.Saladaeng, Soi convent, Soi pipat. • Other Areas• Central Lumpini Area most of the remaining grade B & c serviced apartments are scatteredthe central Lumpini covers the areas along rama i, rajadamri, Wireless, across the city, including phayathai, phetchaburi, ratchadapisek,ploenchit, Langsuan, phayathai and phetchaburi roads, as well as other mitmaitri, Srinakarin Bangna and ramkhamhaeng road.sois in between, such as Soi Langsuan and Soi ruamrudee.• Early Sukhumvit Areathis is the section of Sukhumvit road between Soi 1 and Soi 35 to thenorth and Soi 2 and Soi 24 to the south. COLLIERS INTERNATIONAL | P. 9
    • BANgkok SERVICED APARTMENT MARkET REPoRT | Q1 2011 cOllieRS inTeRnATiOnAl ThAilAnd mAnAgemenT TeAm 480 offices in 61 countries on 6 continents adviSorY ServiceS | HoSpitaLitY United States: 135 • the third largest commercial Jean marc garret | director real estate services company in canada: 39 the world Latin america: 17 proJect SaLeS & marketing • the second most recognised asia pacific: 194 monchai orawongpaisan | Senior manager commercial real estate brand emea: 95 globally reSidentiaL SaLeS & LeaSing • US$2 billion in annual revenue napaswan chotephard | negotiator • over 2 billion square feet under management oFFice & indUStriaL ServiceS • over 15,000 professionals narumon rodsiravoraphat | Senior manager retaiL ServiceS asharawan Wachananont | Senior manager adviSorY ServiceS CoLLIERS INTERNATIoNAL ThAILAND: napatr tienchutima | associate director Bangkok office 17/F ploenchit center, reaL eState management ServiceS 2 Sukhumvit road, klongtoey, Bandid chayintu | associate director Bangkok 10110 thailand Tel +662 656 7000 inveStment ServiceS FAx +662 656 7111 nukarn Suwatikul | associate director emAil info.th@colliers.com Wasan rattanakijjanukul | Senior manager Pattaya office 519/4-5, pattaya Second road (opposite central Festival reSearcH pattaya Beach), nongprue, Banglamung, chonburi 20150 antony picon | associate director Tel +6638 427 771 Surachet kongcheep | Senior manager FAx +6638 427 772 emAil info.pattaya@colliers.com vaLUation & adviSorY ServiceS nicholas Brown | associate director phachsanun phormthananunta | associate director Santipong kreemaha | Senior manager Wanida Suksuwan | manager pattaYa oFFice mark Bowling | Senior Sales manager Supannee Starojitski | Senior Business development ReSeARcheR: ReSeARcheR: manager / office manager thailand thailand antony picon Surachet kongcheep associate director | research Senior manager | research emAil antony.picon@colliers.com emAil surachet.kongcheep@colliers.com 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. accelerating success.www.colliers.co.th