Q3 2010 | serviced apartment

thailand

Bangkok Serviced Apartment

Market Report

Bangkok Serviced Apartment Market

Executive Summary
The Bangkok serviced apartment market continues to face challenging times in 2010 following
events in April and May which caused both long term and shorter stay occupancies to drop.

From the beginning of 2009 to the end of 2011 overall supply of serviced apartment units could
rise by over 40%. This will be difficult for the market to absorb.

Occupancy has risen from the lows of Q2 2010 as the political situation stabilizes. However the
market indicators long term trend still seems to be downwards.

Q2-Q3 2010
Early Sukhumvit continues to be the mainstay location but Late Sukhumvit is well and truly on the
map with the growth in Thong Lor in particular.
Supply

Demand Serviced apartments continue to compete head on with hotels for the shorter term stay market.

Rentals
In such challenging times the market will need to look for new niche products such as in medical
occupancy tourism or hybrid residence/offices.

OCCUPANCY

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BANGKOK SERVICED APARTMENT MARKET REPORT | Q3 2010

Grading
No recognized standard for rating serviced apartments exists in Thailand
and therefore Colliers International Thailand has classified them based
on various criteria, in which a summary is given below.
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
Grade A
Located in prime locations and luxury residential areas. Furnished to an
Located in secondary locations. Furnished to a comfortable, but not
exceptionally high standard. Offering recreational facilities and amenities
luxurious, standard. Fewer provisions of facilities and amenities, similar
similar to a Luxury or Upper Scale hotel. Managed by a top international
to that of a Mid-scale or Economy hotel.
branded operator or comparable local brand.

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.

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Historical Supply

HISTORICAL SUPPLY BY YEAR

Source : Colliers International Thailand Research

Remark : E = Estimated supply

For the first half of 2010 only around 20 serviced apartment units added, Sukhumvit and Late Sukhumvit. Total supply of serviced apartment units
and then around 180 units were added in Q3 2010. New supply that was as of Q3 2010 was approximately 16,250 units.
added in Q3 2010 was located in 3 locations, Central Lumpini, Early

Additional Supply in 2010 by quarter

Source : Colliers International Thailand Research

The estimates for Q4 must be treated with some caution as some year to next year, because of the halting of the construction in April and
serviced apartment projects may be delayed from the last quarter of this May, due to the political protests in the centre.

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BANGKOK SERVICED APARTMENT MARKET REPORT | Q3 2010

Supply by Zone

Source: Colliers International Thailand Research

Since 1991 and up until now, Early Sukhumvit area has been popular for on a lower trajectory. In the past few years the Late Sukhumvit area has
serviced apartments. Although no mass transit system existed until the become a new prime location especially due to the rise of Thong Lor as
end of 1999, the appeal to western and Japanese expatriates meant that a fashionable area to live.
this area was the bulwark of the sector. Other areas have also grown but

Percentage of supply by location

Source: Colliers International Thailand Research

Overall Sukhumvit road and its sois contain over half of all serviced Lumpini area. The mix of good transport links, entertainment, retail and
apartment units in Bangkok with nearly 40% of total supply being located office facilities creates a strong lure for people to stay in Sukhumvit.
in Early Sukhumvit area while around 18% can be found in Central

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 BANGKOK SERVICED APARTMENT MARKET REPORT | Q3 2010

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

Source: Colliers International Thailand Research

The distribution of serviced apartments differs according to location
based on the particular profile of each area. Central Lumpini contains
many large embassies and is therefore seen as being the most prestigious
location to live and as such contains more grade A units. Late Sukhumvit
also contains more grade A units due to the location containing a number
of luxury branded apartments in Thong Lor road catering to the large
Japanese community there. Early Sukhumvit is the king of grade B
apartments as it is a more unpretentious, relaxed location which also
explains the location of more Upper Scale rather than Luxury hotels. The
‘Other’ areas contain more grade C products due to the distance from
the centre.

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BANGKOK SERVICED APARTMENT MARKET REPORT | Q3 2010

Future SupplY

Source: Colliers International Thailand Research

More than 2,300 units are scheduled to be completed from Q4 2010 to apartment projects in Bangkok, so the market will face more severe
the end of 2011. Total supply by the end of 2011 is slated to reach nearly competition than now.
19,000 units. Many developers are also planning for further serviced

Cumulative future supply by location during the year 2010 - 2011

Source: Colliers International Thailand Research

Sukhumvit road will contain the majority of new supply in the next two
years. More than 620 units will be located in Early Sukhumvit area and
approximately 525 units in Late Sukhumvit area. The main driver is not
only the popularity of this road as a residential destination but also that
the relative price of land is lower than the more central locations and is
also convenient for the BTS line. More than 1,400 units are scheduled to
be completed in the rest of this year, but some projects may be delayed
to the following year, due to the halting of construction during the political
protests in Q2. The rise of ‘Other” areas is based on the location of the
airport.

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 BANGKOK SERVICED APARTMENT MARKET REPORT | Q3 2010

Historical occupancy

Occupancy for Bangkok serviced apartments on both extended stay and corporate housing sub-sets

Source: Colliers International Thailand Research

Average occupancy rates in Q2 have tumbled due to the April and May from the perceived danger. Levels picked up in Q3 but have still not
protests. This is mainly a result of short term guests cancelling but also reached Q1 2010 figures.
many longer term stays, especially Japanese, left Thailand to escape

Occupancy rates by location

Source: Colliers International Thailand Research

In all locations occupancy fell during Q2 2010 but were more pronounced Sukhumvit probably gained from this as many guests were relocated to
in some areas than others depending on the proximity to the protest this area that was viewed as largely safe at the time.
area. Therefore Central CBD and Central Lumpini suffered the most. Late

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BANGKOK SERVICED APARTMENT MARKET REPORT | Q3 2010

Demand Drivers

Number of expatriates in Bangkok, Q3 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 2010 decreased very slightly from last year, but in Q2 2010 dropped
apartment medium and long stay market. The global economic crisis more than 10,000, due to the political problems in the centre of Bangkok
affected expat numbers in Bangkok significantly in 2009, reducing the However in Q3 2010 a pick up has been estimated but numbers are still
number by around 15,000. The number of expatriates in Bangkok in Q1 down even compared to slowdown in 2009.

New work permits issued in Bangkok during 2009 – Q3 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

A slight pick up in work permits has been estimated for Q3 2010 and shows positive trends going forward.

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 BANGKOK SERVICED APARTMENT MARKET REPORT | Q3 2010

Proportion of expatriates in Bangkok, Q3 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

terms of demand for units. The first relates to corporate housing which
is normally three months or over and is provided for expats as a package
when posted for a new assignment. Throughout the world in general this
is the predominant form of demand as this type of accommodation is not
usually booked using the Global Distribution Systems (GDS) such as
Amadeus that are prevalent in shorter stay hotels and airlines. In fact
two thirds of serviced apartments in the world do not use this service.
Instead they focus on more traditional forms such as direct marketing,
internet websites and personal visits due to the less commoditized and
more individual relationship between the long staying guest and the
apartment. On the other hand in Thailand, a greater number of serviced
apartments use the GDS systems which would indicate greater reliance
on the extended stay market, focusing on business travelers and even
tourists.

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BANGKOK SERVICED APARTMENT MARKET REPORT | Q3 2010

Rental Rate

Rental rate for one bedroom units by location, Q1 - Q3 2010

Source: Colliers International Thailand Research

The protest at Rajprasong intersection has directly impacted the around 10% in Q3, but is still lower than the first quarter. Central CBD
occupancy rate and rental rate in Q2 of 2010. The average rental rate in retains by far the highest rental rates and has shown ever more signs of
Central Lumpini area decreased by nearly 20% in Q2, although increased strength.

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 BANGKOK SERVICED APARTMENT MARKET REPORT | Q3 2010

Forecast

The serviced apartment landscape has become far more competitive

over the past few years as internal and external problems are exacerbated
by the growth in new supply. This is set to continue and become more
pronounced.

Overall, despite the occasional small scale terrorist attack, the situation
has calmed and life in the city has returned more or less back to normal.
Tourism has rebounded but it is still too early to say how the market will
be affected in the high season. Business travelers are flocking back and
expats have returned but not in the numbers prior to the Global Financial
Crisis and the period of instability in Thai politics.

Serviced apartments, like hotels, must focus on standing out from the
crowd and developing products that can be accommodated by its larger
sized configurations compared to hotels. Some may move into the
provision of home office functions for both short term and long term
stays offering flexible fit out that allows a unit to be altered from purely
residential into a hybrid or even to a fully fledged office/meeting location.
The growth in medical tourism spells good opportunities for those who
can grasp them. Many Middle Eastern travelers come for this service and
are noted for bringing their families along to provide support as well as
a holiday. In this case two or three bedroom configurations are in demand
and even personal maids may need to be accommodated. Modifications
may be necessary such as wheelchair access, larger door frames and
adequate bathroom access for people with a disability.

The serviced apartment owners and operators must come to terms with
their own identity as to whether they provide for the extended stay or
corporate housing sub-set. Although some form of mix is preferable
serviced apartment must define themselves as places to live or places to
stay.

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