Bkk Serviced Apartment Report Q1 2010

c o l l i e R s i n T e R n aT i o n a l | THailanD

The Knowledge Report
B a n G Ko K s e Rv i c e D a Pa RT M e n T M a R K e T | 1 s T Q U a RT e R | 2 0 1 0

executive summary
The Bangkok serviced apartment market is facing a difficult 2010 with a significant increase in
supply while demand has fallen and is not likely to increase discernibly for Q2.

From 2009 to 2011 it is expected that overall supply of serviced apartment units will have risen by
MaRKeT inDicaToRs
40%. This will be difficult for the market to absorb.

2009 - Q1 2010 Occupancy has continued to fall in Q1 2010 to the 65-70% mark for long term stays. This pattern
is likely to continue until supply stabilizes and demand picks up again.

sUPPlY Thong Lor is the new darling of the market with a number of high end apartments springing up in
this fashionable, sought-after area.
DeManD
Serviced apartments continue to compete directly with hotels for the shorter term stay market.
RenTals
GRaDinG
occUPancY No recognized standard for rating serviced apartments exists in Thailand and therefore Colliers
International Thailand have classified them based on various criteria, in which a summary is given
below.

Grade A
Located in prime locations and luxury residential areas. Furnished to an exceptionally high stan-
dard. Offering recreational facilities and amenities similar to a Luxury or Upper Scale hotel.
Managed by a top international branded operator or comparable local brand.

Grade B
Usually located in the centre but also in less prime locations. Furnished 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-end international or domestic operator.

Grade C
Located in secondary locations. Furnished to a comfortable, but not luxurious, standard. Fewer
provisions of facilities and amenities, similar to that of a Mid-scale or Economy hotel.

www.colliers.co.th

The Knowledge Report | 1st Quarter | 2010 | Bangkok Serviced Apartment Market

ZoninG

Zoning
The serviced apartment area can be divided into five areas or
pockets of concentration:

• Central CBD • Southern Fringe Area
This is the area that encompasses Silom, Sathorn, This is the area that stretches along the bank of the Chao
Surawong, Sipraya and Rama 4 Road as well as other Phraya River on Charoenkrung Road. Narathiwas
sois in between, such as Soi Saladaeng, Soi Convent, Ratchanakarin Road and Rama III Road are located in
Soi Pipat. this area.

• Central Lumpini Area • Other Areas
The Central Lumpini covers the areas along Rama I, Most of the remaining Grade B & C serviced apart
Rajdamri, Wireless, Ploenchit, Langsuan, Payathai and ments are scattered across the city including Phayathai,
Phetburi Roads, as well as other sois in between, such as Phetchaburi, Ratchadapisek, Mitmaitri, Srinakarin
Soi Langsuan and Soi Ruamrudee. Bangna and Ramkhamhaeng Road.

• Early Sukhumvit Area
This is the section of Sukhumvit Road between Soi 1
and Soi 35 to the north and Soi 2 and Soi 24 to the
south.

• Late Sukhumvit Area
This is the section of Sukhumvit Road between Soi 37
and Soi 77 to the north and Soi 24 and Soi 50 to the
south.

2 collieRs inTeRnaTional


HisToRical sUPPlY

sUPPlY oF seRviceD aPaRTMenT UniTs

Source : Colliers International Thailand Research

The majority of supply came in the form of five surges over the ended in bust following the Asian Financial Crisis that began in
past 16 years. The first serviced apartment started operation in 1997. Foreign investment returned in the early 2000’s and an-
1991 but the first rapid increase came in 1993 with over 1,100 other 1,500 units came onto the market in 2003. While Thai-
units added. The emergence of serviced apartments on the real land entered its period of political uncertainty in the second half
estate scene in Bangkok was a consequence of the dramatic of the decade, confidence in the economy was still strong and
growth in FDI into the country which necessitated the need for significant supply was added in 2007 and 2009 which can also
expat accommodation. This was particularly noticeable from Ja- be partly explained by the focus on shorter term stays targeting
pan following the Plaza Accord that increased the value of the holidaymakers and business travelers. In fact 2009 represented
Yen and led to its relocation of manufacturing outside its borders. the biggest influx so far with nearly 2,200 units added.
The Japanese have been considered the mainstay of serviced
apartment demand ever since.

The growth of foreign investment and expats coming to Thai-
land led to an even bigger flood in 1997. The addition of nearly
2,000 units was also the result of the property boom that finally

collieRs inTeRnaTional 3


sUPPlY BY Zone/ GRaDe

PeRcenTaGe oF sUPPlY FoR eacH aRea


The majority of supply is situated in the early Sukhumvit area, significance of the Central Lumpini area is due to the number of
followed by Central Lumpini area. The dominance of early embassies as well as the prime office and retail space located in
Sukhumvit is explained by the presence of a large number of of- the area. The Central CBD remains popular due to the density
fices as well as shopping and entertainment facilities. This area of offices.
continues to be a main draw for residents and tourists alike. The

PeRcenTaGe oF sUPPlY FoR eacH aRea


Almost half of serviced apartment supply in Bangkok are grade B are located in Central CBD and early Sukhumvit area. Grade C
projects with most located in the early Sukhumvit area, followed is less popular due to competition coming from higher end apart-
by grade A projects with 32%. Nearly two thirds of grade A units ments for lease.



sUPPlY BY locaTion anD GRaDe


TYPes oF UniTs FoR seRviceD aPaRTMenTs


One bedroom units are the most popular in the Bangkok people or couples without children as well as temporary stays
serviced apartment market with 44% of the total market. The requiring more hotel style accommodation.
fact that 70% are either in a studio or one bedroom configura-
tion is an indication that much of the demand comes from single



UniTs siZe BY RooM TYPe


The sizes of the various unit configuration varies little between pini and Central CBD account for the slightly bigger floor area
area. The greater number of A grade apartments in Central Lum- for most arrangements.

FUTURe sUPPlY

FUTURe sUPPlY in BanGKoK


More than 1,300 units are scheduled to be completed in 2010 Bangkok. This will be a significant amount for the market to
and about 2,000 units in 2011. This means that 2009-2011 will absorb.
witness around a 40% increase in serviced apartment supply in



FUTURe sUPPlY BY Zone


Sukhumvit will contain the majority of new units over the next emergence of Thong Lor as a fashionable location and arguably
couple of years. However considerable growth will be registered the wish to be located away from the tourist trap environment in
in the late Sukhumvit area. This trend is the result of access the early Sukhumvit area.
to the BTS, shortage and prices of land, lower rental rates, the

HisToRical occUPancY

occUPancY in BanGKoK


From 2005 there has been a steady decline in occupancy for both uncertainties and global recession have dampened demand from
A and B grades from the high eighties to about 65% in Q1 2010. both tourists and expats.
This can attributed to the influx of new supply while political



occUPancY RaTe BY locaTion, Q1 2010


The occupancy rate in late Sukhumvit was measurably higher to the mass transit lines but with cheaper rental rates as they are
than other locations with a healthy 85%. This is due to the fac- located outside the central area. The low rates in the Southern
tors given above making it into an attractive location compared Fringe area are due to its perennial problem of being located far
with Central CBD, Central Lumpini and early Sukhumvit area. away from any mass transit lines making the location unappeal-
The Other areas also have high take up due to them being close ing to both expats and tourists alike.

occUPancY RaTe BY GRaDe, Q1 2010


In terms of grades, grade C projects performed better than an- to them being located away from prime areas but close to mass
other grades. The important factor is the lower rental rates due transit lines.



DeManD DRiveRs

Expatriate demand

nUMBeR oF exPaTRiaTes in BanGKoK, Q1 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

The global economic crisis affected expat numbers in Bangkok The number of expatriates in Bangkok in Q1 2010 has decreased
significantly in 2009, reducing the number by around 15,000. very slightly from last year.



new woRK PeRMiTs issUeD in BanGKoK, 2004 – Q1 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 is not included Laos, Burmese and Cambodians

The number of new work permits issued dropped significantly life in theses types of residences before moving onto apartments
in 2009 and the same pattern has continued for the first quarter for lease or even purchasing a condominium unit if they intend
of 2010. Employees new to Thailand are an important source of to reside in the city for a long time.
demand for serviced apartments as many expatriates start their

PRoPoRTion oF exPaTRiaTes in BanGKoK, Q1 2010

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

Japanese constitute the largest foreign contingent residing in such as English teaching and therefore do not have the pay levels
Bangkok. The numbers of Japanese carries enormous conse- and benefits that would create any noticeable demand for ser-
quence for the serviced apartment market. A large proportion of viced apartments. It is likely that Japanese represent the majority
other nationalities work in occupations involving local contacts of long stay residents.



sHoRT TeRM sTaYs

The serviced apartment market has always competed with opposed to two individual rooms at a hotel in order to save on
hotels for the short term stay market from both business travel- costs.
ers and tourists. The attractions of a larger floor area, kitchen
facilities and a more homely atmosphere can make a compelling The risk for serviced apartments is that for the end-user hotels
alternative for jaded frequent flyers. In Thailand only establish- and serviced apartments are different products. For the longer
ments with hotel licenses are allowed to offer a daily rate and it term resident the choice of serviced apartments is somewhat
is unclear which serviced apartments have such a license. The emotional as this will be where they and perhaps their family
distinction between serviced apartments and hotels is becoming will live for part of their lives. Hotels are seen more as a com-
increasingly blurred as both compete for each other’s markets. modity where guests will consider facilities and price in a more
cold hearted way. Therefore serviced apartments must be careful
Many companies are booking two bedroom units in serviced how they position their product.
apartments for two people travelling on business together as

RenTal RaTe

RenTal RaTe BY RooM TYPe & locaTion, Q1 2010


Rental rates are highest in the Central CBD and Central Lumpi- vit has higher rentals for apartment configuration. The reason
ni due to the location of many embassies in these areas as well as for this is the greater number of newer serviced apartments in
financial institutions. The interesting comparison is between ear- late Sukhumvit with internationally branded operators.
ly and late Sukhumvit. While Early Sukhumvit is located close
to Grade A office space and nearer to the centre, Late Sukhum-



RenTals - BRanDeD veRsUs non-BRanDeD aPaRTMenTs

The market can be divided into three main types of players. One erset. In terms of rentals the foreign branded residences tend to
is the non-branded apartments in which the management struc- command a premium due to them being of higher grade. Thai
ture is similar to the high end apartments for lease except for the branded apartments on average command higher rental prices
fact that they are serviced. A number of Thai brands have been than non-branded ones but lower than foreign branded.
established such as Centerpoint and Bandara and also foreign
brands have also set up in Bangkok such as Marriott and Som-

FoRecasT

The serviced apartment market faces a few challenging years due New markets and products should be targeted such as retirement/
to the influx of new supply and operators will be hard pressed to medical stay packages for the greying babyboomers in Japan,
maintain occupancy rates. Even with Thailand’s political situa- Europe and the USA as well as kitting out units to be used as
tion stabilizing it is difficult to envision the substantial number temporary home offices in some instances.
of new foreign workers required to absorb the new supply for long
stays. The long term political situation may deter foreigners from
investing as well as taking on postings if the instability becomes
It is likely that operators will continue to compete directly with endemic and this will seriously harm the market in the longer
hotels for short term stay guests and the hotel market itself is term.
facing serious difficulties with increasing new supply.

As in any other industry the serviced apartment market must
innovate and be flexible to weather the difficult times ahead.



collieRs inTeRnaTional THailanD 480 oFFices in 61 coUnTRies
on 6 conTinenTs
ManaGeMenT TeaM
Us$ 1.9 Billion in annUal RevenUe

1.1 Billion sQUaRe FeeT UnDeR
ASSET MANAGEMENT ManaGeMenT
Wasan Rattanakijjanukul | Manager 15,000 PRoFessionals
Nukarn Suwatikul | Manager

CONSULTANCY
Napart Tienchutima | Manager

COMMERCIAL / INDUSTRIAL /RETAIL
Narumon Rodsiravoraphat | Senior Manager

FACILITY / PROPERTY MANAGEMENT
Viroj Piromthong | Management Advisor
Bandid Chayintu |Associate Director
conTacT inFoRMaTion
HOSPITALITY DIVISION
Jean Marc Garret | Director
THailanD:
INVESTMENT Patima Jeerapaet Antony Picon
Nukarn Suwatikul | Senior Manager Managing Director Senior Manager | Research
patima.jeerapaet@colliers.com antony.picon@colliers.com

RESIDENTIAL
Surachet Kongcheep
Patima Jeerapaet | Managing Director Manager | Research
surachet.kongcheep@colliers.com
RESEARCH & ADVISORY
Antony Picon | Senior Manager
Surachet Kongcheep | Manager
Colliers International Thailand
VALUATION
Nicholas Brown | Associate Director Bangkok Office : 17/F Ploenchit Center, Klongtoey
Thanussorn Aukkrararerksaponk |Manager Bangkok 10110 Tel: 662 656 7000 Fax: 662 656 7111
Email : info.th@colliers.com

Pattaya Office : 492/2 Thappraya Road, Nongprue,
Banglamung Chonburi 20150 Tel: 6638 364 411-2
Fax: 6638 364 414 Email : info.pattaya@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.

www.colliers.co.th collieRs inTeRnaTional 13

Bkk Serviced Apartment Report Q1 2010

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