Bangkok Serviced Apartment Q2 2010

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Th Kdg Rprtco l l i e R s i n T e R n aT i o n a l | T H a i l a n D

eut summryThe Bangkok serviced apartment market is acing a difcult 2010 with a signifcant increase insupply while demand has allen and is not likely to increase discernibly or Q3. Events in Apriland May have caused both long term and shorter stay occupancies to drop. The extended stay sub-set o the market has suered in similar ashion to hotels.

From 2009 to 2011 it is expected that overall supply o serviced apartment units will have risen by40%. This will be difcult or the market to absorb.

Occupancy has continued to all in Q1 2010 to the 65-70% mark or long term stays. This patternis likely to continue until supply stabilizes and demand picks up again.

Thong Lor is the new darling o the market with a number o high end apartments springing up inthis ashionable, sought-ater area.

Serviced apartments continue to compete directly with hotels or the shorter term stay market.

GRaDinGNo recognized standard or rating serviced apartments exists in Thailand and thereore ColliersInternational Thailand have classifed them based on various criteria, in which a summary is given

below.

Grade ALocated in prime locations and luxury residential areas. Furnished to an exceptionally highstandard. Oering recreational acilities and amenities similar to a Luxury or Upper Scale hotel.Managed by a top international branded operator or comparable local brand.

Grade BUsually located in the centre but also in less prime locations. Furnished to a high standard butusually oers recreational acilities and a variety o 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 comortable, but not luxurious, standard. Fewerprovisions o acilities and amenities, similar to that o a Mid-scale or Economy hotel.

MaRKeT inDicaToRs

Q1 2010 - Q2 2010

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www.colliers.co.th

Ba n G Ko K se Rv i ce D a P a RT M e n T M a R K e T | 2 n D Q Ua R T e R | 2 0 1 0


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ZoninG

The Knowledge Report | 2nd Quarter | 2010 | Bangkok Serviced Apartment Market

ZoningThe serviced apartment area can be divided into fve areas orpockets o concentration:

CentralCBDThis is the area that encompasses Silom, Sathorn,Surawong, Sipraya and Rama 4 Road as well as othersois in between, such as Soi Saladaeng, Soi Convent,Soi Pipat.

CentralLumpiniAreaThe Central Lumpini covers the areas along Rama I,Rajdamri, Wireless, Ploenchit, Langsuan, Payathai andPhetburi Roads, as well as other sois in between, such asSoi Langsuan and Soi Ruamrudee.

EarlySukhumvitArea

This is the section o Sukhumvit Road between Soi 1and Soi 35 to the north and Soi 2 and Soi 24 to thesouth.

LateSukhumvitAreaThis is the section o Sukhumvit Road between Soi 37and Soi 77 to the north and Soi 24 and Soi 50 to thesouth.

SouthernFringeAreaThis is the area that stretches along the bank o the ChaoPhraya River on Charoenkrung Road. NarathiwasRatchanakarin Road and Rama III Road are located inthis area.

OtherAreasMost o the remaining Grade B & C servicedapartments are scattered across the city includingPhayathai, Phetchaburi, Ratchadapisek, Mitmaitri,Srinakarin Bangna and Ramkhamhaeng Road.


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HisToRical sUPPlY

sUPPlY oF seRviceD aPaRTMenT UniTs

The serviced apartments in the city area, especially around theRajprasong intersection have been directly impacted rom theMay protests as some customers canceled their rooms or moved

to other serviced apartments, due to concerns about theirsecurity.

Most o the customers or serviced apartments are expatsrepresenting the corporate housing sub-set or oreigners, otenrepeat ones, coming to Thailand or business or pleasure in theextended stay sub-set. The global economic crisis in 2008 has

directly aected the serviced apartment market with occupancyrates alling continuously in both sub-sets. New supply addedin 2009 was approximately 2,200 units and then only nearly 20

units were added in Q2 2010. Total supply in Bangkok amountsto more than 16,000 units.

Source : Colliers International Thailand Research

Remark : E = Estimated supply


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Source : Coll iers International Thailand Research

Source : Coll iers International Thailand Research

UniTs siZe BY RooM TYPe

FUTURe sUPPlY in BanGKoK

The sizes o the various unit confgurations vary little betweenareas. The greater number o A grade apartments in Central

LumpiniandCentralCBDaccountfortheslightlybiggeroorarea or most arrangements.

More than 3,600 units are scheduled to be completed duringthe year 2010 2011, total supply in 2011 will be nearly 20,000units. Many developers are also planning or urther serviced

apartment projects in Bangkok, so the market will ace moresevere competition than now.

FUTURe sUPPlY




Sukhumvit road will contain the majority o new supply in thenext two years. More than 800 units will be located in EarlySukhumvit area and approximately 950 units in Late Sukhumvitarea. The main driver is not only the popularity o this road as a

residential destination but also that the relative price o land islower than the more central locations but is also convenient orthe BTS line.

Q1 2010 was a very challenging time or the serviced apartmentmarket in Bangkok, as occupancy rates have tumbled due to theApril and May protests. Many Japanese let or a long period

and this aected the long term occupancy as well as the drop intourism aecting the short stay market.

HisToRical occUPancY



FUTURe sUPPlY BY locaTion

occUPancY FoR BanGKoK seRviceD aPaRTMenTs on BoTH exTenDeD sTaYanD coRPoRaTe HoUsinG sUB-seTs




The average occupancy rate in Q2 2010 or all locations o Bang-kok ell although Late Sukhumvit registered limited alls due toits distance rom the protest site and its higher ratio o long stayguests. Central Lumpini occupancy nearly halved in one quarter

whiletherewasa 32% fallinCentralCBD.Thiswasadirectresult o these areas being the ocus o the protests when residentshad to directly enter the protest site to access a large number othese apartments.

occUPancY RaTes BY locaTion




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The Japanese still represent the largest group o expatriatesin Bangkok and are also the main target group or servicedapartments with most o them staying along Sukhumvit road.

Other nationalities are oten in the lower pay bracket and therental rates o serviced apartments would be beyond reach.

DeManD FRoM exTenDeD sTaY anD coRPoRaTeHoUsinG sUB-seTs

The serviced apartment market is divided into two distinctsub-sets in terms o demand or units. The frst relates tocorporate housing which is normally three months or over andis provided or expats as a package when posted or a newassign-ment. Throughout the world in general this is the predominantorm o demand as this type o accommodation is not usuallybookedusingtheGlobalDistribution Systems (GDS) suchasAmadeus that are ubiquitous in shorter stay hotels and airlines.In act two thirds o serviced apartments in the world do not use

this service. Instead they ocus on more traditional orms suchas direct marketing, internet websites and personal visits due tothe less commoditized and more individual relationship betweenthe long staying guest and the apartment. On the other hand inThailand,agreaternumberofservicedapartmentsusetheGDSsystems which would indicate greater reliance on the extendedstay market, ocusing on business travelers and even tourists.

PRoPoRTion oF exPaTRiaTes in BanGKoK, Q2 2010

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




RenTal RaTe BY RooM TYPe & locaTion, Q2 2010

RenTal RaTe

The protest at Rajprasong intersection has directly impactedthe occupancy rate and rental rate. The average rental rate in

Central Lumpini area decreased by nearly 20% in order to attractcustomers back to their establishments.





FoRecasT

Whether the April and May protests were a one o event or aportent o things to come will be the key determinant or the

serviced apartment market going orward. Protracted politicaldisturbances will not only lead to businesspeople and touristsavoiding the city but longer term guests packing up. This twinvulnerability means that the market can only hold its breathover the next year or two.

Even with a solution to the current impasse the uturesupply coming on stream will still create enormous pressureson apartment operators on competing or customers. Thetendency to attract short term stays will likely continue but withuture record hotel supply expected this does not represent thepanacea to the markets problems.

Serviced apartments, like hotels, must ocus on standing out

rom the crowd and developing niche products. Some may moveinto the provision o home ofce unctions or both short termandlongtermstaysofferingexibletoutthatallowsaunitto be altered rom purely residential into a hybrid or even to afullyedgedofce/meetinglocation.Theimpendingretiremento the baby boomer generation leads to opportunities to attractwealthy retirees who wish to spend a couple o months in awarm climate in the winter. Special wellness and even medicalacilities would be necessary.

Future disturbances would create the need or back up locationsor both residential and ofce unctions, and serviced apartments

would be wise in preparing plans to benefting rom this whileproviding a vital service or the economy.

The dierent bedroom confgurations o serviced apartmentsmean that there is greater opportunity or innovation in the usethat is ascribed or those units and operators and owners must bebold in enhancing demand or their products in these difculttimes.

The serviced apartment owners and operators must come toterms with their own identity as to whether they provide or theextended stay or corporate housing sub-set.



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Bangkok Ofce : 17/F Ploenchit Center, 2 SukhumvitRd. , Klongtoey, Bangkok 10110Tel: 662 656 7000 Fax: 662 656 7111Email : [email protected]

Pattaya Ofce : 519/4-5, Pattaya Second Road(Opposite Central Festival Pattaya Beach),Nongprue, Banglamung, Chonburi 20150Tel: 6638 364 411-2 Fax: 6638 364 414Email : [email protected]


collieRs inTeRnaTional THailanDManaGeMenT TeaM

PROJECT SALES & MARKETINGWasan Rattanakijjanukul | Manager

Nukarn Suwatikul | Manager

ADVISORYSERVICESNapatr Tienchutima | Manager

OFFICE&INDUSTRIALSERVICES/RETAILSERVICESNarumon Rodsiravoraphat | Senior Manager

REALESTATEMANAGEMENTSERVICESVirojPiromthong|ManagementAdvisorBandidChayintu|AssociateDirector

ADVISORYSERVICES|HOSPITALITYJeanMarcGarret|Director

INVESTMENTSERVICESNukarn Suwatikul | Senior Manager

RESIDENTIALSALES&LEASINGPatimaJeerapaet|ManagingDirector

RESEARCHAntony Picon | Senior ManagerSurachet Kongcheep | Manager

VALUATION&ADVISORYSERVICESNicholasBrown|AssociateDirectorPhachsanun Phormthananunta |Manager

PATTAYAOFFICEMark Bowling | Sales ManagerSupanneeStarojitski|BusinessDevelopmentManager

THailanD:Patima JeerapaetManaging [email protected]

Jean Marc GarretDirector of AdvisoryServices | [email protected]

Antony PiconSenior Manager | [email protected]

Surachet KongcheepManager | [email protected]

Documents

Bangkok Serviced Apartment Q2 2010