Bangkok Serviced Apartment Market Report Q4 2010


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Bangkok Serviced Apartment Market Report Q4 2010. Supply, demand, occupancy, trends.

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Bangkok Serviced Apartment Market Report Q4 2010

  1. 1. year end 2010 | SerVICed apartmemtthailandBangkok Serviced apartmentmarket report Bangkok Serviced Apartment Market executive Summary the year 2010 was a difficult one for the serviced apartment market in Bangkok as occupancy rates plunged during the protests of april and may. although the market picked up in Q3 2010 the figures for Q4 show that occupancy remains moribund and there is now a danger that this will be carried on into 2011. central Lumpini fared worst over the year with significant drops in both occupancy and rental rates. the protests may have dented the area’s image as an upper market location and continuing market indicatOrS protests will likely further impact the area negatively. 2009 - 2010 Supply was down from the 2009 figure but the market is struggling to absorb the surge in supply for 2009; and 2011 is expected to herald a significant amount of new units thus exacerbating Supply current problems. rentalS the silver lining comes in the form of the Late Sukhumvit area which continues to show the Occupancy highest occupancy of all areas. this area could be the main secondary location for serviced apartments outside of the central cBd or even primary area if protests ramp up and violence ensues. Serviced apartments continue to compete head on with hotels for the shorter term stay market. in such challenging times the market will need to look for new niche products such as in medical tourism or hybrid residence/offices. However the strong branding and quality of serviced apartments in Bangkok will be a major pillar of strength in these difficult
  2. 2. Bangkok SerVICed apartment market report | Q4 2010GradinGno 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, in which 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 an Grade cexceptionally high standard. offering recreational facilities and amenities Located in secondary locations. Furnished to a comfortable, but notsimilar to a Luxury or Upper Scale hotel. managed by a top international luxurious, standard. Fewer provisions of facilities and amenities, similarbranded operator or comparable local brand. 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 Saladaeng, road are located in this area.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. 2
  3. 3. Bangkok SerVICed apartment market report | Q4 2010hiStOrical Supply hiStOrical Supply By year Source : colliers international thailand researchFor the first half of 2010 only around 20 serviced apartment units were areas. total supply of serviced apartment units as of 2010 wasadded, and then around 180 units were supplied in Q3 2010, but approximately 16,300 in around 125 apartments.approximately 340 units were added in Q4 of 2010. Supply was in fourlocations, central Lumpini, early Sukhumvit, Late Sukhumvit and other additiOnal Supply in 2010 By quarter Source : colliers international thailand researchadditional supply in Q4 was approximately 340 units and total new this year to next year, due to the halting of construction during the aprilsupply in 2010 was around 550 units, lower than the forecast because and may political protests in the centre.some serviced apartment projects were delayed from the last quarter of COLLIERS INTERNATIONAL | P. 3
  4. 4. Bangkok SerVICed apartment market report | Q4 2010 Supply By lOcatiOn Source : colliers international thailand researchSince 1995 and up until now, early Sukhumvit area has been by far the areas have also grown but on a lower trajectory. in the past few yearsmost popular for serviced apartments. although no mass transit system the Late Sukhumvit area has become a new prime location especiallyexisted until the end of 1999, the appeal to western and Japanese due to the rise of thong Lor as a fashionable area to reside.expatriates meant that this area was the bulwark of the sector. other percentaGe Of Supply By lOcatiOn Source : colliers international thailand researchoverall Sukhumvit road and its vibrant sois contain over half of all entertainment, retail and office facilities creates a strong lure for peopleserviced apartment units in Bangkok with nearly 40% of total supply to stay in Sukhumvit.being located in early Sukhumvit area. the mix of good transport links,COLLIERS INTERNATIONAL | P. 4
  5. 5. Bangkok SerVICed apartment market report | Q4 2010 percentaGe Of Supply By Grade Source: colliers international thailand researchnearly half of total supply is in the grade B category in Bangkok while just over a third is grade a. Supply By lOcatiOn and Grade Source: colliers international thailand researchthe distribution of serviced apartments differs according to location 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 and as such contains more grade a units. Late Sukhumvit ‘other’ areas contain more grade c products due to the distance fromalso contains more grade a units due to the location containing a number the centre.of luxury branded apartments in thong Lor road catering to the large COLLIERS INTERNATIONAL | P. 5
  6. 6. Bangkok SerVICed apartment market report | Q4 2010 expected future Supply in 2011 Source: colliers international thailand researchmore than 1,900 units are scheduled to be completed from 2011. the approximately 525 units in Late Sukhumvit area. the main driver is notserviced apartment is not undergoing a boom like the past due to the only the popularity of this road as a residential destination but also thathighly competitive market in some locations and this has led to the the relative price of land is lower than the more central locations and ispostponement of new projects, especially along Sukhumvit road. also convenient for the BtS line.Sukhumvit road will contain the majority of new supply in the next years.more than 620 units will be located in early Sukhumvit area andhiStOrical 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 the case of grade a apartments. the holiday season should be a strongprotests. this is mainly a result of short term guests cancelling but also period for the serviced apartment market due to the number of tourists.many longer term stays, especially Japanese, leaving thailand to escape However this has not been translated into increased occupancy. Higherfrom the perceived danger. While occupancy rates soared back in Q3 spending tourists are choosing to avoid the city due to the myriad of2010 they have since lost their momentum and have even fallen back in problems the city has in attracting this crucial demand segment.COLLIERS INTERNATIONAL | P. 6
  7. 7. Bangkok SerVICed apartment market report | Q4 2010 Occupancy rateS By lOcatiOn Source: colliers international thailand researchin all locations occupancy fell during Q2 2010 but were more pronounced kudos of staying in this area. However the situation is bright for the Latein some areas than others depending on the proximity to the protest Sukhumvit area which can boast the best occupancy rates throughoutarea. therefore central cBd and central Lumpini suffered the most. in the year. the area is becoming increasingly fashionable, especiallyboth these areas occupancy has since picked up especially in the central thong Lor with easy access to the BtS and now the airport Link; but farcBd but central Lumpini still remains quite depressed and is far behind away from perceived troublethe numbers recorded in Q1 2010. the protests may have dented thedemand driverS numBer Of expatriateS in BanGkOk, q4 2010 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 citizens e = estimated by colliers international thailand researchexpatriates represent the primary source of demand for the serviced more than 10,000, due to the political problems in the centre of Bangkok.apartment medium and long stay market. the global economic crisis However in Q3 – Q4 2010 there was an increase but the total number isaffected expat numbers in Bangkok significantly in 2009, reducing the still similar to 2009 and below 2008 prior to the global Financial crisisnumber by around 15,000. the number of expatriates in Bangkok in Q1 (gFc).2010 decreased very slightly from last year, but in Q2 2010 dropped COLLIERS INTERNATIONAL | P. 7
  8. 8. Bangkok SerVICed apartment market report | Q4 2010 new wOrk permitS iSSued in BanGkOk durinG 2004 – 2010 By quarter Source : office of Foreign Workers administration (Work permit), department of employment of the ministry of Labor and colliers international thailand research remark : the information above does not include Laos, Burmese and cambodians e = estimated by colliers international thailand researchafter the protests in Q2 work permits issued picked up in Q3 - Q4 of with global economic recovery.2010 which indicates a more positive trend going forward combined prOpOrtiOn Of expatriateS in BanGkOk, q4 2010 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 lower pay bracket and the rental rates of serviced apartments would beand are also the main target group for serviced apartments with most of beyond reach.them staying along Sukhumvit road. other nationalities are often in theCOLLIERS INTERNATIONAL | P. 8
  9. 9. Bangkok SerVICed apartment market report | Q4 2010demand frOm extended Stay and cOrpOrate hOuSinG SuB-SetSthe serviced apartment market is divided into two distinct sub-sets in do not use this service. instead they focus on more traditional formsterms of demand for units; corporate housing and extended stay. such as direct marketing, internet websites and personal visits due to thecorporate housing is normally three months or over and is provided for less commoditized and more individual relationship between the longexpats as a package when posted for a new assignment. throughout the staying guest and the apartment. on the other hand in thailand, a greaterworld in general this is the predominant form of demand as this type of number of serviced apartments use the gdS systems which wouldaccommodation is not usually booked using the global distribution indicate greater reliance on the extended stay market, focusing onSystems (gdS) such as amadeus that are prevalent in shorter stay business travelers and even and airlines. in fact two thirds of serviced apartments in the worldrental rate rental rate fOr One BedrOOm unitS By lOcatiOn, q1 – q4 2010 Source : colliers international thailand researchthe protests at rajprasong intersection directly impacted the occupancy rates over the course of the year. in the Q4 2010 average rental rate inrate and rental rate in Q2 2010. the average rental rate in central central cBd increased approximately 7.4% from Qwhile other areasLumpini area decreased by nearly 20% in Q2 and has remained at these remain similar to Q3.lower levels. in fact the area has gone from second to fourth in terms of COLLIERS INTERNATIONAL | P. 9
  10. 10. Bangkok SerVICed apartment market report | Q4 2010 rental rate Of Grade a and B By rOOm type, q4 2010 Source : colliers international thailand researchthe average rental rate of grade a unit are greater than grade B by approximately 1.7 – 12.7% depending on room type.COLLIERS INTERNATIONAL | P. 10
  11. 11. Bangkok SerVICed apartment market report | Q4 2010fOrecaStthe serviced apartment market is dependant on two main variables. one greater comfort and security than that found in an apartment for the number of expats, especially from Japan and the other is business it can therefore be assumed that those who occupy serviced apartmentsand tourist visitors to Bangkok. there are a number of positives for the are more likely to be sensitive to violence and disruption. With ongoingfirst segment as growing industrial activity seems to be translating into demonstrations and the heady election period soon to be upon us thismore expats coming to thailand and therefore increasing demand for trend is likely to continue and even become entrenched for the foreseeableserviced apartments. However the tourism market in Bangkok remains future.very depressed as the city reflects on the neglect of its tourisminfrastructure by failing to refresh itself and providing new attractions. the gloomy prognosis can be tempered by the nature of the sector itself.difficult times for the industry lie ahead especially in light of a slew of the serviced apartment business is one of the most mature in terms ofnew supply coming on stream over the course of 2011. choice and strength of local and international brands. in light of this the sector can weather the situation with emphasis on developing nichethe upmarket appeal of Lumpini seems to be giving way to Late markets such as medical tourism, babyboomer retirees and hybrid hotel/Sukhumvit as the new fashionable and perceived safer area in which to office locations.stay. Japanese are by nature very cautious and sensitive to violentdemonstrations and this has likely led to some relocating away fromLumpini. it must also be considered that people who stay in servicedapartments as long stay guests are there for a reason; enjoying the COLLIERS INTERNATIONAL | P. 11
  12. 12. Bangkok SerVICed apartment market report | Q4 2010cOllierS internatiOnal thailandmanaGement team 480 offices in 61 countries on 6 continentsreSidentiaL SaLeS & LeaSing United States: 135 • the third largest commercialnuttaya Junhasavasdikul | manager real estate services company in canada: 39 the world Latin america: 17oFFice & indUStriaL ServiceS • the second most recognised asia pacific: 194narumon rodsiravoraphat | Senior manager commercial real estate brand emea: 95 globallyretaiL ServiceS • US$2 billion in annual revenueasharawan Wachananont | Senior manager • over 2 billion square feet under managementadviSorY ServiceS • over 15,000 professionalsnapatr tienchutima | associate directorreaL eState management ServiceSBandid chayintu | associate directoradviSorY ServiceS | HoSpitaLitY CoLLIerS InternatIonaL thaILand:Jean marc garret | director Bangkok office 17/F ploenchit center,inveStment ServiceS 2 Sukhumvit road, klongtoey,nukarn Suwatikul | associate director Bangkok 10110 thailandWasan rattanakijjanukul | Senior manager tel +662 656 7000 fax +662 656 7111reSearcH email picon | associate director pattaya officeSurachet kongcheep | Senior manager 519/4-5, pattaya Second road (opposite central Festival pattaya Beach), nongprue, Banglamung, chonburi 20150vaLUation & adviSorY ServiceS tel +6638 427 771nicholas Brown | associate director fax +6638 427 772phachsanun phormthananunta | associate director email info.pattaya@colliers.compattaYa oFFicemark Bowling | Senior Sales managerSupannee Starojitski | Senior Business developmentmanager / office manager reSearcher: reSearcher: thailand thailand antony picon Surachet kongcheep associate director | research Senior manager | research email email this report and other research materials may be found on our website at 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