Q4 2012 | SERVICED APARTMENT

BANgkOk SERvICEd ApARTMENT MARkET REpORT

Bangkok Serviced Apartment Market
execuTive SummARy
Serviced apartments in Bangkok are facing ever greater competition from condominiums, but large numbers of foreign businesses setting up offices in Thailand means there is still some hope for the market. Expatriates, who are the main customers for serviced apartments, increasingly prefer to live in condominiums that offer similar services in the same locations for a fraction of the cost. Just 580 serviced apartment units were completed in 2012, the lowest figure for four years, bringing the total number of units in Bangkok to 18,260. Occupancy rates and average rental price both increased compared to the previous year. The serviced apartment industry is also threatened by a long-running complaint from the Thailand Hotel Association, which is trying to persuade the Ministry of Interior to clamp down on serviced apartments offering short-term and per-day rentals, which officially require a hotel licence to be legal. As a result, there is a trend for serviced apartments to apply for hotel licences. Because a large number of foreign companies are setting up offices in Bangkok ahead of the ASEAN Economic Community forming in 2015, and are therefore bringing more expatriates to the city, there is still some life left in the market, but operators have to fight hard to keep afloat. Many are offering discount deals to corporate clients, and are renewing existing leases at the same or even lower prices before they expire, in the hopes of keeping their tenants for the long term.
hiSTORicAl Supply, Q4 2012

ThAilAnd

mARkeT indicATORS
2011 / 2012 new Supply RenTAlS OccupAncy

Source: Colliers International Thailand Research

Approximately 580 units were completed in 2012, and the total supply of serviced apartment units at the end of 2012 is nearly 18,260. The

number of new, serviced apartment units completed in 2012 was lowest in the past four years.

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BANgkok SERVICED APARTMENT REPoRT | Q4 2012

Supply by lOcATiOn, Q4 2012

Source : Colliers International Thailand Research

More than 50% of the serviced apartment supply in Bangkok is located along Sukhumvit Road, in the areas of Early Sukhumvit and Late Sukhumvit. The total supply in the Early Sukhumvit area has been greater

than in other locations for the past 20 years with more than 7,300 units.

cumulATive fuTuRe Supply fROm 2013 TO 2014, by lOcATiOn And yeAR

Source: Colliers International Thailand Research

More than 150 units are scheduled for completion in2013, approximately 80 of which are in the Late Sukhumvit Area, with the rest in Other Areas. In addition, another 80 units are under construction and expected to be completed in 2014 in the Early Sukhumvit Area. Only a few serviced apartment projects are under construction, due to serviced apartments

having declined in popularity for expatriates during recent years. Many condominium projects and high-end apartment projects have become preferable for foreigners who work in Bangkok because of their lower prices, similar facilities, and their locations being in the same areas as serviced apartment projects.

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BANgkok SERVICED APARTMENT REPoRT | Q4 2012 OccupAncy RATe

hiSTORicAl OccupAncy RATe by gRAde, 2010 TO 2012 by QuARTeR

Source: Colliers International Thailand Research

The average occupancy rates in Q4 2012 for grade A and B serviced apartments increased slightly from the previous quarter. However, the

average occupancy rates in the second and third quarters were lower than in the first quarter of 2012.

OccupAncy RATeS by lOcATiOn, 2010 TO Q4 2012 by QuARTeR

Source: Colliers International Thailand Research

The average occupancy rate in the last quarter of 2012 in all locations was up from the previous quarter. Serviced apartment projects are

trying to retain their current clients for long periods by renewing contracts at the current rate before the expiration dates.

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BANgkok SERVICED APARTMENT REPoRT | Q4 2012 demAnd dRiveRS

numbeR Of expATRiATeS in bAngkOk, Q4 2012

Source: Office of Foreign Workers Administration (Work permit), department of Employment of The Ministry of Labour and Colliers International Thailand Research Note: Above information does not include Lao, Burmese and Cambodian citizens.

The number of expatriates in Bangkok continues to rise. The EU debt crisis is still a major concern for investors and affects the entire global economy. However, Asia has shown it has potential for investment, especially in the ASEAN region. Bangkok is highly attractive for investors who wish to take a first investment step into ASEAN, especially in to the

sub-region of Myanmar, Laos and Cambodia. As a result, several international companies are looking for regional office space in Bangkok, and there is also good potential for serviced apartments. The total number of expatriates in Bangkok in the last quarter of 2012 was approximately 63,400.

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BANgkok SERVICED APARTMENT REPoRT | Q4 2012 RenTAl RATe

RenTAl RATe fOR One-bedROOm uniTS by lOcATiOn, 2011 TO 2012 by QuARTeR

Source : Colliers International Thailand Research

Rental rates in Q4 2012 were similar to the previous quarter. Only the Central CBd and Southern Fringe areas significantly increased from the

previous quarter, but the Central CBd still commands the highest rental rates and Other Areas have the lowest rates in Bangkok.

AveRAge RenTAl RATe by gRAde, 2011 TO2012 by QuARTeR

Source: Colliers International Thailand Research

The average rental rate of grade A and B serviced apartments in Q4 2012 increased slightly from the previous quarter, and the rental rates for grade A serviced apartments are still more than 45% higher than for

grade B. Most grade A serviced apartments are located in prime locations of Bangkok, such as the Central CBd, Central Lumpini and Early Sukhumvit areas.

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BANgkok SERVICED APARTMENT REPoRT | Q4 2012 SummARy 2012 And fORecAST 2013
The serviced apartment market in Bangkok has been intensely competitive during the past three years, with all projects trying to retain existing clients by renewing contracts at the same rates or slightly less. In addition, they directly contact foreign and Thai firms employing expatriates to offer special rates. The serviced apartment market in 2013 will be another difficult year for investors and owners, as condominium and high-end apartments are becoming the preferred choices for expatriates. Although the serviced apartment market in Bangkok has shown slight growth during the past few years, there are still many positive factors to drive the market in 2013 and the future. The increase in Foreign direct Investment (FdI), the political stability during the past two to three years and the opening of some countries in ASEAN are main drivers of demand for serviced apartments. The average rental rate for most serviced apartments in Bangkok did not change much from the previous year. This is due to intense competition, as there are lots of high-end apartments and condominiums for lease in the City area, but in 2013 there is the possibility of a small increase from 2012, of around 5 - 10%, depending on location and project concept. The average occupancy rate of all locations in Q4 2012 is approximately 75%, an increase of around 10% from the same quarter in 2011. Although many factors affected the market in 2012, the occupancy rate has still shown positive signs. The Thailand Hotel Association continues to try to force the Ministry of the Interior to provide control measures on serviced apartments without a hotel license, which are not permitted to allow per day or short-term clients. Should the government take more serious action, this will have an effect on serviced apartments without licences to operate as hotels.

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BANgkok SERVICED APARTMENT REPoRT | Q4 2012

Appendix

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BANgkok SERVICED APARTMENT REPoRT | Q4 2012 gRAding

No recognised standard for rating serviced apartments exists in Thailand and therefore Colliers International Thailand has classified them based on various criteria, of which a summary is given below. Furnished to a high standard and usually offering recreational facilities and a variety of services similar to an upscale or mid-range hotel. Managed by a lower-end international or domestic operator.

gRAde A
Located in prime locations and luxury residential areas. Furnished to an exceptionally high standard, and offering recreational facilities and amenities similar to a luxury or upscale hotel. Managed by a top international branded operators or a comparable local brand.

gRAde c
Located in secondary areas. Furnished to a comfortable, but not luxurious, standard. Fewer provisions of facilities and amenities, similar to that of a mid-range or economy hotel.

gRAde b
Usually located in the city centre but in less sought-after locations.

ZOning
The serviced apartment area can be divided into five areas or pockets of concentration:

late Sukhumvit area

This is the section of Sukhumvit Road between Soi 37 and Soi 77 to the north, and Soi 26 and Soi 50 to the south.

Central CBD
This is the area that encompasses Silom, Sathorn, Surawong, Si phraya and Rama 4 Road, as well as other sois in between, such as Soi Saladaeng, Soi Convent, Soi pipat.

Southern Fringe area

This is the area that stretches along the bank of the Chao phraya River on Charoenkrung Road. Narathiwas Ratchanakarin Road and Rama III Road are located in this area.

Central lumpini area

Central Lumpini covers the areas along Rama I, Rajadamri, Wireless, ploenchit, Langsuan, phayathai and phetchaburi Roads, as well as other sois in between, such as Soi Ruamrudee.

other areaS
Most of the remaining grade B and C serviced apartments are scattered across the city, including phayathai, phetchaburi, Ratchadapisek, Mitmaitri, Srinakarin, Bangna and Ramkhamhaeng Road.

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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BANgkok SERVICED APARTMENT REPoRT | Q4 2012 cOllieRS inTeRnATiOnAl ThAilAnd mAnAgemenT TeAm
AdvISORY SERvICES | HOSpITALITY Jean Marc garret | director RESIdENTIAL SALES & LEASINg Napaswan Chotephard | Manager pROJECT SALES & MARkETINg Monchai Orawongpaisan | Associate director RETAIL SERvICES Asharawan Wachananont | Associate director RESEARCH Surachet kongcheep | Senior Manager OFFICE SERvICES Nattawan Radomyos | Senior Manager INdUSTRIAL SERvICES Narumon Rodsiravoraphat | Associate director AdvISORY SERvICES Napatr Tienchutima | Associate director REAL ESTATE MANAgEMENT SERvICES Thanasit Tonsatcha | Associate director INvESTMENT SERvICES Nukarn Suwatikul | Associate director Wasan Rattanakijjanukul | Senior Manager vALUATION & AdvISORY SERvICES phachsanun phormthananunta | director Wanida Suksuwan | Associate director pATTAYA OFFICE Mark Bowling | Senior Sales Manager Supannee Starojitski | Senior Business development Manager / Office Manager HUA HIN OFFICE Sunchai kooakachai | Associate director

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ReSeARcheR: Thailand Surachet kongcheep Senior Manager | Research emAil surachet.kongcheep@colliers.com

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