Research
B angkok serviced apartment M arket
• As new supply outpaces new demand, operators have turned increasingly to short-
stay tourists and business travelers, rather than the traditional serviced apartment
long-stay market (1-3 months), competing with hotels.
By 2011, the total amount of
• Some serviced apartments are currently taking in 30-35% long-stay and 65-70%
serviced apartment investment will
short-stay business.
be approximately THB 27 billion for
the new supply of 6,580 units in 38
• With new supply of hotels also increasing sharply, the market is expected to enter a
serviced apartment projects. This
very competitive phase in 2008.
investment cost is exclusive of land
prices.
• With increased supply coupled with licensing requirements for short-stay operators,
a strategy for success could be a return to focus on the traditional longer-stay
market. Offering guests staying a month or longer a well-designed product that meets
their needs would be preferable to engaging in a price-cutting war with hotels.
• Appreciation of the Baht is putting some Grade A properties outside the budget
allocation of some long-stay expatriates, which could benefit the Grade B market in
the near term.
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The Knowledge Report | March | 2008 | Bangkok Serviced Apartment Market
SUPPLY BY LOCATION
Currently, there are approximately 10,685 units in 75 serviced apartment projects located in
Bangkok. After more analysis, the serviced apartment area can be divided into four areas or
pockets of concentration:
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• Sukhumvit Area
This is the section of Sukhumvit Road between Soi 1 and Soi 69 to the north and Soi 2 and
Soi 42 to the south as well as other sois in between. This popular area with expatriates and
tourists includes the Asoke Intersection on the west to the Emporium Mall to the east. The
area between Sukhumvit Soi 1 and Sukhumvit Soi 69 is popular as a residential area for western
expatriates. Japanese nationals tend to prefer from Asoke intersection upwards, especially Soi
Thonglor. Serviced apartments in the vicinity include Emporium Suites, Jasmine Executive
Suites, President Park, Sofitel Residence Asoke, Somerset Lake Point and Unico Grand
Sukhumvit, to name a few. The serviced apartments in this vicinity are 5,273 units, with a huge
amount of new supply in this vicinity being added of approximately 3,659 units.
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SUPPLY BY GRADE
The market share of serviced apartments Total supply of Grade A-serviced apartments is
targeting expatriates can be categorized into approximately 3,978 units, representing 37% of
two grades which are Grade A and Grade B. the total number of serviced apartments, while
the supply of Grade B-serviced apartments is
Grade A serviced apartment projects are in good approximately 6,707 units, representing 63%.
locations and easily accessible. The layout must
be practical for living, with good design and
nice interiors. The property must be managed
by reputable management -/- operator. There
must be adequate facilities for the residents.
Definition of Grade A
serviced apartments
- Good location Figure 1 : Bangkok current supply of serviced apartments by grade (units)
- Easy accessible
- Pratical layout for living
- Reputative property
Grade A
management -/- operator 3,978
- Adequate facilities. 37%
Grade B
6,707
63%
No. of projects
60
50
40
53
30
20
10 22
0 Grade
Grade A Grade B
The supply of Grade A serviced apartments majority of the supply of serviced apartments
is mainly located in three areas which are is concentrated in the Sukhumvit area as this
the CBD, Sukhumvit, and Central Lumpini area is popular for expatriates and tourists. The
area. Central Lumpini has the highest Sukhumvit area is also popular for Japanese,
number of Grade A serviced apartments, especially Sukhumvit Soi 39 and Sukhumvit
with approximately 1,651 units, followed by Soi 55 where the Japanese community
Sukhumvit area and CBD area. Earlier, Grade in Bangkok is. There are many Japanese
A serviced apartments were concentrated in supermarkets such as Fuji Supermarket,
the Sukhumvit area, however many landlords located in Sukhumvit Soi 39 and Soi 33. In
didn’t renovate their properties, thus the Sukhumvit Soi 55, there is J-Avenue which is
quality of their properties have dropped to a neighbourhood mall - serving Japanese and
Grade B. Another factor is that an increasing expatriates residing around the area. The graph
number of new serviced apartment buildings below illustrates the number of Grade A and
Central Lumpini area has were developed in good locations, near BTS Grade B serviced apartments in each area.
the highest numbers of Grade and MRT stations, and also managed by
A serviced apartments, with international chains. However, the
approximately 1,651 units,
followed by sukhumvit area,
with 1,501 units and the
CBD area, with 826 units.
Figure 3 : Number of units of Grade A & B serviced apartments
current supply by location, as of 2007
No. of units
4000
3,772
3500
3000
2500
2000
1,651
1,501
1500
987
1000 826 861
754
500 333
0 0 Location
0
CBD Sukhumvit Central Outer CBD Others
Lumpini
Grade A Grade B
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There are approximately 75 serviced apartment since the total projects of serviced apartment
projects as of 2007, with 39 serviced apartment in the CBD are higher than the total projects
projects located in Sukhumvit. It is noticeable of serviced apartment in Central Lumpini.
that the projects of serviced apartment in
Central Lumpini have more units than the
projects of serviced apartment in the CBD
No. of projects
75 serviced apartment
25
projects as of 2007, with 39
serviced apartment projects 20
located in Sukhumvit. 15
10 9
8 8
6 6
5
5 3
0 0 Location
0
CBD Sukhumvit Central Outer CBD Others
Lumpini
Grade A Grade B
The supply of Grade A & B serviced apartments the highest additional number of supply, with
added in 2007 was approximately 1,596 units in 892 units in 12 projects added in this area.
15 projects. In 2007, the Sukhumvit area had
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NEW SUPPLY
Sukhumvit area is considered a residential area interesting that there will be new supply in
for expatriates residing in Bangkok, similar other areas for the amount of 1,332 units, of
to South Kensington in London. Thus, new which 36% of total new supply will be located
supply of serviced apartments has focused nearby Suvarnabhumi International Airport
on this area recently. By 2011, there will be which will be managed by an international
additional new supply of serviced apartments chain. Within four years, an additional 6,580
in Sukhumvit of approximately 3,659 units, serviced apartment units in 38 projects will be
representing an increase of 69% of total supply added in all areas.
of serviced apartments in this area. The new
supply in Central Lumpini area will be 578
units, and in CBD area about 451 units. It is
By 2011, an additional
6,580 serviced apartment
units in 38 projects will
be added in all area. Figure 5 : Future supply of serviced apartments in Bangkok
by location between 2008 & 2011
No. of units
4000
3500
3,659
3000
2500
2000
1500
1,332
1000
560
500
578
451
0 Location
CBD Sukhumvit Central Outer CBD Others
Lumpini
The increasing number of new supply of for short stay periods. Though, many serviced
serviced apartments as well as the existing apartments have not yet applied for the hotel
With a huge amount of new supply will increase competition in the licences since the properties are unable to pass
Sukhumvit area. Not only is there a huge the standard qualitification to receive the hotel
supply of serviced apartments amount of new supply of serviced apartments, licences, these serviced apartments still offer
and hotels will increase but also a large number of new hotels will be daily rates in order to get the better occupancy
competition in this area. added in this area by 2011. The competition rate as well as higher yields. The extreme
will not exist only between serviced apartments competition will start in Sukhumvit area in
themselves, but between serviced apartments the very near future. The reason why serviced
and hotels as many serviced apartments have apartments focus more on short stay customers
applied for hotel licences in order to cater to is as follows:
the tourists and business travelers who travel
The increasing new supply of serviced in 2007 & 2008 with 17.56% & 25.44%
apartments was approximately 3-7% between respectively as illustrated in the following
2004 & 2006. The sharp increase started table:
CURRent & new supply of serviced apartment units between 2004 & 2011
No. of units
14,000
2,718
12,000
10,000 1,596
10,685
597
9,089
537
8,000 247 8,492
7,955
7,708
6,000
4,000
2,000
0 Year
2004 2005 2006 2007 2008F
Current supply
New supply added in the year
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DEMAND
Currently, the demand for the serviced apartment market can be divided into two groups which
are short stay tourists & business travelers and new coming expatriate arrivals in Bangkok each
year.
• New expatriates moving to Bangkok
The amount of demand from expatriates we have undergone our study, the average
for serviced apartments market comes from length of stay of expatriates staying in serviced
the increasing number of expatriates each apartment is three months or 90 days. The
year since the serviced apartments are the data from the Office of Foreign Workers
temporary residences for expatriates once Administration (Work Permit), Department
they have moved to Bangkok. They will stay of Employment of The Ministry of Labour
for a length of one - three months until they has shown the total number of expatriates in
The demand of serviced can select their permanent residences such as Bangkok between 2004 and 2007. The new
apartments market can Apartments and Single houses. Though, there work permits issued was estimated from the
be devided into two are some expatriates choosing to stay on a proxy of growth in demand between 2004 &
groups which are yearly contract at serviced apartments, after 2007 as shown in the below chart:
I. New expatriates
II. International tourists -/- Figure 7 : New work permits issued, Bangkok 2004-2007
business travelers.
10,000
8,670
8,000
7,592 7,574
6,000 6,928
4,000
2,000
0 Year
2004 2005 2006 2007
From the assumption that the average length have estimated the number of room nights
of expatriates staying in serviced apartments is expatriates residing in serviced apartments
3 months and another 2% of the total number between 2004 & 2007 as follows:
of existing expatriates staying in a yearly
contract at serviced apartment, therefore we
1,200,000
372,942 486,808
436,233
1,000,000 317,521
800,000
780,300
683,280 681,660
600,000 623,520
400,000
200,000
0 Year
2004 2005 2006 2007
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If we compare the room nights growth of new of expatriates based in Thailand without
supply of serviced apartment with the room working permits. However, the majority of
nights growth of demand from expatriates these do not have accommodation budgets
relocating to Bangkok. It is shown that the large enough to account for a significant
growth rate of new supply increased in a amount of demand in the serviced apartment
higher rate than the growth rate of demand sector. There are, of course, also a number of
from new expatriates. The growth rate of expatriates relocating to Bangkok who do not
room nights of new supply increased by 167% stay in serviced apartments. Nevertheless, new
year-on-year in 2007 while the growth rate of work permits issued can serve as a proxy for
room nights demand increased by 9.3% year- serviced apartment supply on a relative basis.
on-year. However, the number of expatriates The below graph is the comparison of the
are exclusive of diplomatic or United Nation growth rate of supply and the growth rate of
expatriate staff. Therefore, this figures are not demand.
Another demand of serviced entirely representative of expatriates based in
apartments comes from short Bangkok. We believe that there are a number
stay visitors which are tourists
Figure 9 : Estimated growth in room nights
and business travelers for demand & supply, 2004 & 2007
leisure and business purposes.
No. of room nights
780,300
800,000
683,280 681,660
623,520
582,540
600,000
400,000
196,005 217,905
200,000
90,155
0 Year
2004 2005 2006 2007
The core business of serviced apartment is to catch up the high increase in supply, as a result,
serve the demand residing in Bangkok in a the serviced apartments have moved more
period of more than a month. However, the into the short stay from tourists -/- business
slightly increase in demand was unable to travelers.
Though, the number of tourists at Bangkok accommodation increased annually between 2004
and 2006, the decrease in average length of stay in 2006 caused the decrease of room nights at
Bangkok accommodation in 2006. We have assumed that each tourist occupied a single room.
With the high increase in supply of both hotels and serviced apartments, while the decrease in
annual room nights of demand from tourists -/- business travelers, the extreme competition will
exist in the near future
With the average occupancy rate of serviced apartment between 2004 & 2007, it is noticeable
that the proportion of short term was greater than the proportion of long term and the trend of
short term increased annually between 2005 & 2007. The future trend of serviced apartments is
to serve short stay which is the core market of hotel. Below chart shown the average proportion
of customers staying in serviced apartments for the length of
1. Between 1-3 months period.
2. Minimum 1 year period.
3. Daily / weekly period.
Percentage
100%
90%
It is noticeable that proportion
of short term was greater 80%
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OCCUPANCY RATE:
Grade A Grade B
Year Central Central Outer
Overall CBD Sukhumvit Overall CBD Sukhumvit
Lumpini Lumpini CBD
2004 82.70% 69.57% 87.63% 80.44% 91.86% 82.80% 94.98% 85.16% 80.98%
2005 90.24% 85.75% 93.07% 89.20% 91.38% 77.42% 93.57% 90.02% 84.65%
2006 85.47% 78.53% 86.94% 86.35% 85.47% 77.83% 82.90% 81.69% 82.88%
2007 84.01% 81.45% 84.73% 84.31% 86.01% 79.18% 87.23% 88.94% 74.84%
The occupancy rate of Grade Source : Executive Serviced Apartment Alliance (EXSAM) & Colliers International Thailand Research
A serviced apartment decreased
annually between 2005 &
The occupancy rate of Grade A serviced apartment decreased annually between 2005 & 2007.
2007, However, the average There are several factors that caused this which are as follows:
occupancy rate of Grade
A in the CBD increased in • The revaluation of Thai baht which made Grade A serviced apartment rent go over the
accommodation budget after visitors converted their currency into Thai baht, so
2007 which was different that the amount they got was less. The demand of long stay shifted to Grade B serviced
from Grade A in other areas apartment.
due to little supply of serviced
apartments in this area. • The trends of the Grade A serviced apartment focused on short stay, thus the occupancy
rate varied from the number of tourist arrivals at Bangkok accommodation, rather than
the number of new expatriates coming to Bangkok, since there was an increase of
number of expatriates in 2007 but the demands poured to Grade B serviced apartment.
• The political uncertainty in Thailand in 2006 & 2007 has slowed down the foreign
business interests as well as the international tourist arrivals at Bangkok accommodation.
However, the average occupancy rate of Grade A in the CBD increased in 2007 which was
different from Grade A in other areas due to little supply of serviced apartments in this area.
ACHIEVED RENT
For the overall market, the big difference of of supply of serviced apartment added with
the average achieved rent of Grade A & B approximately 1,596 units, with 943 units of
serviced apartment was 14% in 2004. The Grade A and 653 units of Grade B. During
slight difference between Grade A & Grade the opening of new properties, the new supply
B rent was found in 2006 which was just 2.7% offered special prices which affected Grade B
difference. In 2007, the average rent of Grade B serviced apartments.
decreased by 4% since there was an additional
600
400
200
0 Year
2004 2005 2006 2007
Grade A Grade B
sq.m. 1,000
sq.m. 600
400
200
0 Year
2004 2005 2006 2007
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400
200
0 Year
2004 2005 2006 2007
Contact information
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Tel: 662 656 7000
Fax: 662 656 7111
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