Bangkok Serviced Apartment Market Report Q4 2010

year end 2010 | SerVICed apartmemt

thailand

Bangkok Serviced apartment
market 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 times.

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Bangkok SerVICed apartment market report | Q4 2010

GradinG

no recognized standard for rating serviced apartments exists in thailand Grade B
and therefore colliers international thailand has classified them based Usually located in the centre but also in less prime locations. Furnished
on 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 c
exceptionally high standard. offering recreational facilities and amenities Located in secondary locations. Furnished to a comfortable, but not
similar to a Luxury or Upper Scale hotel. managed by a top international luxurious, standard. Fewer provisions of facilities and amenities, similar
branded 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 the
the 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 river
this is the area that encompasses Silom, Sathorn, Surawong, Si phraya
on charoenkrung road. narathiwas ratchanakarin road and rama iii
and 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 scattered
the 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 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.

COLLIERS INTERNATIONAL | P. 2


hiStOrical Supply

hiStOrical Supply By year

Source : colliers international thailand research

For the first half of 2010 only around 20 serviced apartment units were areas. total supply of serviced apartment units as of 2010 was
added, 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 four
locations, central Lumpini, early Sukhumvit, Late Sukhumvit and other

additiOnal Supply in 2010 By quarter


additional supply in Q4 was approximately 340 units and total new this year to next year, due to the halting of construction during the april
supply 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



Supply By lOcatiOn


Since 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 years
most popular for serviced apartments. although no mass transit system the Late Sukhumvit area has become a new prime location especially
existed 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


overall Sukhumvit road and its vibrant sois contain over half of all entertainment, retail and office facilities creates a strong lure for people
serviced 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,



percentaGe Of Supply By Grade

Source: colliers international thailand research

nearly 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


the distribution of serviced apartments differs according to location Japanese community there. early Sukhumvit is the king of grade B
based on the particular profile of each area. central Lumpini contains apartments as it is a more unpretentious, relaxed location which also
many large embassies and is therefore seen as being the most prestigious explains the location of more Upper Scale rather than Luxury hotels. the
location to live and as such contains more grade a units. Late Sukhumvit ‘other’ areas contain more grade c products due to the distance from
also 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



expected future Supply in 2011


more than 1,900 units are scheduled to be completed from 2011. the approximately 525 units in Late Sukhumvit area. the main driver is not
serviced apartment is not undergoing a boom like the past due to the only the popularity of this road as a residential destination but also that
highly competitive market in some locations and this has led to the the relative price of land is lower than the more central locations and is
postponement 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 and

hiStOrical Occupancy rate

Occupancy fOr BanGkOk Serviced apartmentS On BOth extended Stay and cOrpOrate hOuSinG SuB-SetS


average occupancy rates in Q2 tumbled due to the april and may the case of grade a apartments. the holiday season should be a strong
protests. 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. Higher
from the perceived danger. While occupancy rates soared back in Q3 spending tourists are choosing to avoid the city due to the myriad of
2010 they have since lost their momentum and have even fallen back in problems the city has in attracting this crucial demand segment.



Occupancy rateS By lOcatiOn


in all locations occupancy fell during Q2 2010 but were more pronounced kudos of staying in this area. However the situation is bright for the Late
in some areas than others depending on the proximity to the protest Sukhumvit area which can boast the best occupancy rates throughout
area. therefore central cBd and central Lumpini suffered the most. in the year. the area is becoming increasingly fashionable, especially
both 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 far
cBd but central Lumpini still remains quite depressed and is far behind away from perceived trouble
the numbers recorded in Q1 2010. the protests may have dented the

demand 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 research

expatriates 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 is
affected expat numbers in Bangkok significantly in 2009, reducing the still similar to 2009 and below 2008 prior to the global Financial crisis
number 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



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 research

after 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 research

the Japanese still represent the largest group of expatriates in Bangkok lower pay bracket and the rental rates of serviced apartments would be
and are also the main target group for serviced apartments with most of beyond reach.
them staying along Sukhumvit road. other nationalities are often in the



demand frOm extended Stay and cOrpOrate hOuSinG SuB-SetS

the serviced apartment market is divided into two distinct sub-sets in do not use this service. instead they focus on more traditional forms
terms of demand for units; corporate housing and extended stay. such as direct marketing, internet websites and personal visits due to the
corporate housing is normally three months or over and is provided for less commoditized and more individual relationship between the long
expats as a package when posted for a new assignment. throughout the staying guest and the apartment. on the other hand in thailand, a greater
world in general this is the predominant form of demand as this type of number of serviced apartments use the gdS systems which would
accommodation is not usually booked using the global distribution indicate greater reliance on the extended stay market, focusing on
Systems (gdS) such as amadeus that are prevalent in shorter stay business travelers and even tourists.
hotels and airlines. in fact two thirds of serviced apartments in the world

rental rate

rental rate fOr One BedrOOm unitS By lOcatiOn, q1 – q4 2010


the protests at rajprasong intersection directly impacted the occupancy rates over the course of the year. in the Q4 2010 average rental rate in
rate and rental rate in Q2 2010. the average rental rate in central central cBd increased approximately 7.4% from Qwhile other areas
Lumpini 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



rental rate Of Grade a and B By rOOm type, q4 2010


the average rental rate of grade a unit are greater than grade B by approximately 1.7 – 12.7% depending on room type.



fOrecaSt

the serviced apartment market is dependant on two main variables. one greater comfort and security than that found in an apartment for lease.
is the number of expats, especially from Japan and the other is business it can therefore be assumed that those who occupy serviced apartments
and tourist visitors to Bangkok. there are a number of positives for the are more likely to be sensitive to violence and disruption. With ongoing
first segment as growing industrial activity seems to be translating into demonstrations and the heady election period soon to be upon us this
more expats coming to thailand and therefore increasing demand for trend is likely to continue and even become entrenched for the foreseeable
serviced apartments. However the tourism market in Bangkok remains future.
very depressed as the city reflects on the neglect of its tourism
infrastructure 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 of
new 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 niche
the 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 violent
demonstrations and this has likely led to some relocating away from
Lumpini. it must also be considered that people who stay in serviced
apartments as long stay guests are there for a reason; enjoying the



cOllierS internatiOnal thailand
manaGement team 480 offices in 61 countries on
6 continents
reSidentiaL SaLeS & LeaSing United States: 135 • the third largest commercial
nuttaya Junhasavasdikul | manager real estate services company in
canada: 39
the world
Latin america: 17
oFFice & indUStriaL ServiceS • the second most recognised
asia pacific: 194
narumon rodsiravoraphat | Senior manager commercial real estate brand
emea: 95 globally
retaiL ServiceS • US$2 billion in annual revenue
asharawan Wachananont | Senior manager • over 2 billion square feet under
management
adviSorY ServiceS • over 15,000 professionals
napatr tienchutima | associate director

reaL eState management ServiceS
Bandid chayintu | associate director

adviSorY 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 thailand
Wasan rattanakijjanukul | Senior manager tel +662 656 7000
fax +662 656 7111
reSearcH email info.th@colliers.com
antony picon | associate director
pattaya office
Surachet kongcheep | Senior manager
519/4-5, pattaya Second road (opposite central Festival
pattaya Beach), nongprue, Banglamung, chonburi 20150
vaLUation & adviSorY ServiceS tel +6638 427 771
nicholas Brown | associate director fax +6638 427 772
phachsanun phormthananunta | associate director email info.pattaya@colliers.com

pattaYa oFFice
mark Bowling | Senior Sales manager
Supannee Starojitski | Senior Business development
manager / office manager

reSearcher: reSearcher:
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
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Bangkok Serviced Apartment Market Report Q4 2010

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