The number of serviced apartments located in central Bangkok is expected to decline in the coming years as many foreigners opt to stay in cheaper locations further from the central business district.
In its Bangkok Serviced Apartment Market Q2 2014 Research and Forecast Report, Colliers International said that the growth rate of new serviced apartments in Bangkok has decreased every year since 2009, and will continue to exhibit this declining trend going forward.
The total supply of serviced apartments as of the second quarter of 2014 is approximately 18,280 units. This number is expected to increase to approximately 18,720 units at the end of 2014.
Many foreigners and expatriates have decided to stay outside the central areas to take advantage of cheaper rents, choosing locations that are close to the BTS sky train system.
The average occupancy rate and rental rate of all locations in 2Q 2014 slightly increased from that in the previous quarter, but remained similar to last year.
Colliers noted that the supply of serviced apartments will be very limited in the next one to three years due to intense competition in Bangkok. Although the number of expatriates in Bangkok will continue to increase every quarter, they will have many choices for their residences.
A new serviced apartment project with approximately 21 units opened in the first half of the year in Lower Sukhumvit area. The total supply of serviced apartments at the end of the first half of 2014 is approximately 18,280 units. This number is expected to increase to approximately 18,720 units at the end of 2014.
Given the intense competition, especially in the city area, development of new serviced apartments in Bangkok has decreased every year since 2009.
The number of serviced apartments in Lower Sukhumvit area is significantly higher than that in any other area. From 1992 until the first half of 2014, the Lower Sukhumvit area has accounted for the highest share in the market. The Central Lumpini area moved to second place in 2003, and continues to grow its market share up to the present due to the numerous office buildings and retail centres in the area. Moreover, some areas around Lumpini Park are owned by Crown Property Bureau, which can only build leasehold properties, such as serviced apartments, leasehold condominiums and hotels.
The Southern Fringe area only has 960 units, which is the lowest in the Bangkok market.
Looking forward, Colliers reported that the NCPO has enacted many policies and solved many problems that affected the whole economy starting May 2014.
The economic situation in Thailand improved in the second quarter, especially in June, and is even doing better in the third quarter, is said.
Most of the new serviced apartment projects that are under construction in Bangkok are small projects with total units lower than 80. This trend is due to the limited number of large plots of land and the increase in land prices in the city area.
Some foreigners have moved to condominium units or high-end apartments due to their lower rental rates. Serviced apartments are trying to retain existing clients and attract new ones by maintaining their rates, with only a small increase for new clients. In addition, they are now directly offering their services to multinational companies.
Colliers predicted that there will be very limited supply of serviced apartments in the next one- to three-years due to intense competition in Bangkok. Although the number of expatriates in Bangkok will continue to increase every quarter, they will have many choices for their residences. Thus, rental and occupancy rates in the second half of this year should remain similar to those in the first six months of 2014.
Although the serviced apartment market in Bangkok has shown only a slight growth during the past few years, many positive factors will drive the market in 2014 and in the future. The AEC in 2015 and the opening of some countries in ASEAN are the main drivers of demand for serviced apartments.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
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