Bangkok faces glut in serviced apartments

Bangkok´s Sukhumvit Road could be facing an over-supply of serviced apartments as occupancy rates for existing apartments fell to 78 percent in the first half of this year, according to Colliers International Thailand, the real estate service provider.

Despite the decline in occupancies, developers are planning the construction of 21 new serviced apartment blocks with a combined total of 3,671 new units that will hit the market in 2011.

Moreover, Colliers said the 21 new blocks in the Sukhumvit area comprised only 61 percent of the 39 new serviced-apartment projects to be completed which would generate some 5,923 new units by 2011.

However, construction of serviced apartments scheduled for completion this year and next is beginning to slow, said Colliers, as the economic crisis forces developers to rethink their strategy.

Occupancy rates for existing serviced apartments in the Sukhumvit area declined from 80 percent last year to 78 percent in the first half of 2009.

With the construction of both grade-A and grade-B serviced apartments in the Sukhumvit area reaching completion in the next 18 months, occupancy rates could fall even further, Colliers said.

To stay competitive, the majority of serviced apartments in the Sukhumvit area have revised their approach – focusing more on tourists and expatriates in order to compete with hotels in the area.

Colliers said 67 percent of tenants in Sukhumvit´s serviced apartments averaged stays of only three to seven days at a daily rate of Bt1,000 to Bt2,000 for grade-B accommodation, while grade-A tenants averaged Bt2,000 to Bt3,000 for the same period.

Five-star hotels usually charge between Bt4,000 and Bt5,000 a night.

According to Colliers, the additional 17 percent of serviced-apartment tenants stay for more than a year, while 16 percent stay one to three months.

The average rental price for both grade-A and grade-B serviced apartments in the Sukhumvit area is now lower than four-star hotels – a key factor in shaping their strategy to compete directly with hoteliers, said Colliers.

Asia Property Report - 2009 July 03 - News