|
Scramble to join Bangkok's serviced-apartment expansion threatens to turn
into cut-throat competition.
While many high-end residential developments, including luxury condominiums,
have suffered from sluggish sales so far this year, serviced apartments in
central Bangkok that target foreigners have been enjoying the opposite
experience.
The number of foreigners working in Bangkok keeps increasing, and the number of
serviced apartments under construction keeps rising. The allure of high returns
and long-term revenue is drawing many old and new players in the property
industry to invest in the booming serviced-apartment market.
Real-estate-services firm Jones Lang LaSalle (Thailand) says Bangkok had 10,350
serviced apartments as of July, with 68 per cent of them pitched at the high end
of the market. Of these, 449 units were finished in the first half of the year.
Sukhumvit Road remains the most popular area. It had three new projects -
Citadines, Two Three Mansion and Alcove Residence - completed in the first half.
Two new projects - Arasia Luecha Park and Tango - opened in the Phaholyothin
Road area. There was only one new project - Fraser Suites Sathorn - in the
central business district (CBD), which was a second Bangkok project for
Singapore's Frasers Hospitality.
And the frenzy continues, with construction expected to finish on another 1,404
serviced apartments by the end of the year, the highest six-month figure in
about a decade. Next year, 1,537 new apartments are expected to open, and
construction has already begun on a further 1,058 units to be completed in 2009.
Most of the new projects will be managed by big names in the business. The
Ascott Group will manage eight new projects for a total of 1,500 units,
scheduled for completion in 2009. Centre Point will manage 1,400 units in three
new projects, and Oakwood will pick up three projects for a total of 400 units.
From now until the end of 2009, the Sukhumvit area is expected to get 2,504 new
serviced apartments, the CBD will get 1,010, and 260 new units will open along
the Chao Phya River.
At the same time, more and more foreigners are expected to arrive in Bangkok to
work here.
As of June, 63,410 work permits had been issued this year, up 10.7 per cent year
on year.
However, there are many factors affecting demand for serviced apartments, and
occupancy rates do not automatically follow the rising supply of foreigners.
First, the appreciation of the baht has resulted in an increase in room rates,
particularly for those who pay in US dollars. Second, many foreigners are
choosing to rent units in existing condominiums rather than serviced apartments.
Overall, there has been a slight increase in rental rates, and the occupancy
rate in grade-A serviced apartments has fallen to 80.8 per cent this year, from
85.6 per cent last year.
Most new customers prefer serviced apartments around Sukhumvit Road,
particularly Japanese and other East Asians, so the occupancy rate in this area
has fallen only marginally, from 85.4 per cent to 84 per cent.
Rental fees have increased at a slower pace than normal. Earlier this year,
rates had increased only 0.4 per cent to Bt1,196 per square metre per month, due
to falling occupancy rates and increasing costs for those paying their rent in
dollars. Some developers were also trying to attract customers by offering lower
fees for those willing to lease rather than rent.
Jones Lang LaSalle believes between now and the end of 2009, all developers of
serviced apartments will face cut-throat competition as market supply increases
significantly. The market will grow 13.2 per cent annually, compared with only 6
per cent over the past two years.
Developers of new serviced apartments are making a big effort to provide
international standards to attract new customers from Japan and Europe. Some
condominium developers are also setting aside part of their projects as serviced
apartments.
Chaiyos Land Development, a relative newcomer to the serviced-apartment
business, has spent Bt1 billion to develop the 33-storey Fraser Suites Sukhumvit,
consisting of 118 units on 1 rai of land. The project will be managed by Frasers
Hospitality of Singapore. Its design is inspired by Thai culture while focusing
on in-house entertainment facilities. For instance, all suite units will be
equipped to play MP3.
The project opens this month and is expected to reach break-even point within
eight years, with a 10-per-cent return on investment. Targeted groups are
medical tourists and corporate customers. It expects an occupancy rate of 60-65
per cent in its first year and 80-85 per cent in its second year.
Meanwhile, Metrostar Property has "adjusted" its Sathorn Terrace
luxury-condominium project into serviced apartments and changed the name to the
Sathorn Vista Bangkok Marriott Executive Apartments. The 31-storey building will
contain 184 units of Oriental design. It is expected to be complete by the end
of 2009.
Metrostar managing director Ratanachai Phatinavin said the adjustment fit the
current economic slowdown and would generate consistent revenue in the long
term.
The main target group for the new apartments is foreign executives. Metrostar
expects an occupancy rate of 50 per cent in the first year and 80 per cent
within three years and annual revenue of at least Bt100 million.
Property reporters
The Nation
|
- - - - - - -