Market Serviced Apartment Bangkok

7/28/2019 Market Serviced Apartment Bangkok

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Real Estate HighlightsThailand 1st Half2004

Research

Contents

Bangkok Condominium Market 2

Bangkok Serviced Apartment 4

Bangkok Office Market 6

Phuket Market 8

The condo market is showing signs of a declining take up rate while the supply

side is steadily launching more projects. Oversupply may play into factor as

competition is heating up for companies selling condominiums.

Propensity in the office market is on a steady incline. Take up is sharply increased

in the Grade B sector due to the Grade A sector becoming more congested. There

is no new supply for 2005 while demand is expanding from business and

economic growth. Rentals and prices are on steady continuous incline and KF

estimates that for the following year-on-year there may be an increase by more

than 10%.

Apartments (non serviced) sees potential oversupply in the market due to many

new condominium developments being built are sold as investment properties

to be used as apartments for rent. With estimates of more than 3,000 condos

possible to become rental apartments, the apartment market may see more

competition.

Service apartments are steadily increasing in occupancy rates despite having

large amount of new supply recently made available to the market.

Phuket is showing a booming take up for villas. Now there is more supply and

villas are selling at an accelerated pace than previously.

Executive Summary


2/11

Bangkoks growth spurt for the last 2 to 3 years has some people questioning is

there another bubble (circa 97) that will soon pop up again? Is there a valid

concern on oversupply or are we finally seeing Thailand well on its way to a full

recovery? Condominiums are being developed and are still selling at a

noticeable pace although current data shows that the number of units sold this

year is not as soaring as was the case last year at this time. And with newly

developed units to unload in Bangkok in the near future now is a good time to

look and see how the other market sectors are fairing.

KF research concludes that the remaining markets are secure and boosting in

terms of market growth and potential. The villa market in Phuket is poised for

great opportunities for the short as well as near term gains. In addition, the

office market sector is gearing to be quite ambitious as business flourishes and

expands in Bangkok. And naturally as business continues to prosper, the serviced

apartment markets are in place to benefit from the companies that export

workers from abroad and place them in these types of apartments. A short

synopsis of each market is given to see where we are for the year and where we

are heading.

The Bangkok Condominium Market 1H 2004

According to Knight Frank Thailands half yearly Bangkok condominium market report,

the three areas under survey, namely, Sukhumvit, CBD (Silom/Sathorn) and Rama 3

have seen some sharp increases in the supply of condominiums last year and during the

first 6 months of this year. In general, the take-up rates are showing signs of slowing

down in these surveyed areas.

Supply

Sukhumvit area (Sois 1 to 77) is the most popular area for condominium developers

with new launches increasing by 28 times from 2002 to 2003 with only 100 units

launched in 2002 and multiplied to 2,891 newly launched units in 2003. In the first six

months of 2004, our research revealed that 3,140 units were added into the supply of

new units. The first six months of this year has already exceeded the whole of last years

new supply in Sukhumvit. New supply are now coming out of higher Sukhumvit Sois

i.e. from Soi 63 to Soi 77 due to lack of development lands within lower Sukhumvit and

its attendant high land costs. The Central Business District (CBD) comprising Silom/

Sathorn areas has the second largest number of new condominium launches with 655

new units in 2002, 1,211 in 2003 and 2,654 new units for the first six months of 2004.

An increase of about 119% is registered over last years new supply, from 1,211 new

units in 2003 to 2,654 units during the first half of 2004.

2 Thailand Real Estate Highlights 1H 04 Knight Frank


3/11


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The Rama 3 area has also shown an impressive new condo supply from 49 units

launched in 2002 to 1,255 new units in 2003 or a 24-fold increase. The first 6 months

of this year saw an increase of 21% over last years figure or a total of 1,520 units.

Demand

Demand is still firm despite increasing supply with the range of selling prices going

from Baht 65,000 to Bath 95,000 per square meter for Grade A condominiums in our

3 areas of survey. Investors have started to shift to Rama 3 area where the ranges of

selling prices are lower. Our research revealed that for the first 6 months of 2004,

Rama 3 area has the highest take up rate of 70% as compared to an average of 41%

and 39% respectively for the Sukhumvit and Silom/Sathorn areas. The chart below

shows the cumulative supply and take-up rates since 2002. For the period 2002 to

end June 2004, the cumulative take-up of condominiums in these 3 areas alone

totaled 8,449 units as against a cumulative supply of 13,473 new units. Sukhumvit

has the largest percentage of new supply with 45% of the total new supply followed

by Silom/Sathorn with 35% and Rama 3 area with 20% over the same period.

Source: Knight Frank Thailand Research

0

2000

4000

6000

8000

No. of Units

Sukhumvit Silom Rama 3

Area

Bangkok's Condominiums - New Supply

(Sukhumvit, Silom/Sathorn & Rama 3)

2004 1H

2003

2002

Bangkok Condominiums(New Supply & Take-Up Rates for 2002 - June 2004)

0

2000

4000

6000

8000

10000

12000

14000

16000

2002 2003 2004 1H

Year

No. of Units

Sukhumvit

Silom

Rama 3

Cum. Total

Take-up



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Selling Prices

The range of selling prices for new projects for these 3 areas are as follows

Grade A range of selling prices from 65,000 Baht to 95,000 Baht per square

meter.

Grade B range of selling prices from 50,000 Baht to 65,000 Baht per square

meter

Trend For Second Half 2004

The condominium market is expected to be more competitive for the second half of

2004 whilst prices will remain firm. Due to the shortage of lands or rather, reasonably

priced development lands, developers are now shifting out of the Sukhumvit and CBD

areas to peripheral areas such as Rama 3, Riverside, Phaholyothin etc. where land prices

are considerably lower. We are also expecting to see more developments coming from

these areas with less new launches in the hot areas of Sukhumvit and Silom/Sathorn

areas. For the rest of this year, Knight Frank believe developers will also intensify their

marketing campaigns due to much higher competition. For 2H 2004, areas with

greater potential and to watch out for will be peripheral areas such as the Rama 3,

Riverside and Phaholyothin, etc.

Bangkok Serviced Apartment Market 1 H 2004

Overview

Bangkok is seeing a sharp increase for the past year and a half in the Serviced Apartment

sector. The area primarily seeing the greatest surge in growth is the CBD district. The

take up rates are currently in a steady upward trend.

Supply

Supply as a whole has grown 20% the past one and a half years. That is based on there

being a total of 7,979 units as of the end of 2002 to now currently having 10,000 units.

The CBD district is by far the most popular area for the serviced apartment sector with 6

of the 9 launches from last year being in that sector. This year CBD is still the choice for

most developers with 3 of the 5 projects launched being located there as well. The total

amount of units within the past year and a half opened in the CBD is 1,303. Knight

Frank research indicates there are currently more units being added in buildings that

opened last year and some are still in the process of being completed. An example

being whilst Meritus Suite currently has 180 units available, there will be an additional

282 upon completion. Sukhumvit is seeing the second largest number of new serviced

apartments launches with 423 units now open. However, only 141 units were from this

year.Knight Frank research indicates that there is only one serviced apartment building

scheduled for release in 2005 and it is scheduled to have 78 total units.



5/11

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Demand

Demand over the last year and a half is on an increasing incline. Growth is likely to

continue as long as the economy continues to flourish .

Research concludes that take up is split between tourists and business executives for

those staying in Serviced Apartments. Knight Frank research indicates that last year the

occupancy rates were 82.07% and now these rates are up to 87.03%.

W ork Permits Applied for and Issued as of June25, 2004

Total Japan China UK India Burm a

June '04 96,766 17,972 6,724 6,708 6,310 5,883

All '03 86,025 16,738 6,008 5,917 6,216 N/A

US Taiw an Phillippines Australia S. Korea Others

June '04 4,996 4,451 3,029 2,502 2,411 35,780

03 4,827 5,247 4,245 2,819 2,399 29,684



Source: Department of Labour


6/11

Outlook - Serviced Apartments

The outlook for the rest of 2004 remains positive. With already more work permits issued

this year than all of last year it is likely this trend will continue through the year. This

increase will spill over to the Serviced Apartments sector since the business executives

tend to stay in Serviced Apartments.

The Bangkok Office Market 1H 2004

Overview

The market has experienced consistent growth over the last 3 and a half years coupled

with relatively low amounts of new commercial office space buildings coming on

stream, has seen rents increase as vacancy rates continue to fall. The Thai economy is

continuing to recover and businesses are growing at a steady pace. These factor are

helping the office market. Office market research indicates that the market will steadily

grow and expect take up rates rising sharpest in the Grade B sector.

Supply

Currently there are only four commercial buildings scheduled for completion this year

adding 170,500 Square Meters to the grade A market. Some of which are already

receiving strong interest in the form of pre-completion commitments, for example

Central World Tower now has expressions of interest on approximately 50% of its

space, which is not due to be released until September this year. Vacancy rates in the

Grade A office space is down to 7.95%. This is affecting the Grade B sector, which was

the hardest hit during the Asian Crisis, as many companies are now forced into settling

for this Grade. Since there is now limited supply, refurbishing older B and C Grade

properties to the coveted A Grade position is currently being put into practice. Even

some so called ghost buildings, or abandoned office projects left over from the crisis

era, are being purchased and in the process of being refurbished for owner occupiers

who intend to lease out their surplus space.

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000

5000000

1996 1997 1998 1999 2000 2001 2002 2003 Mar

2004

Jun

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

Beginn ing Stock Vacancy


www.knightfrank.com


Grade A Supply and Vacancy Rates

0.00

500,000.00

1,000,000.00

1,500,000.00

1996 1997 1998 1999 2000 2001 2002 2003 Mar

2004

Jun

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

Grade A Stock Grade A


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Demand

The demand has been consistently moving upwards for the past three and a half years and

as long as the economy continues its growth it will most likely remain doing so.

Demand is coming primarily from the expansion of existing tenants in the ICT (Information

Communications Technology), Insurance, and the Consumer Products sectors. Companies

growing affecting take up rates in the near future are household names such as Kohler

obtaining 1,500 sq.ms, SME Bank growing from 2,000 to 5,000 sq.ms. The Minister of

Culture procuring 5,000 sq.ms and Teleinfo Media following suit securing 5,000 sq.ms as

well.

www.knightfrank.com

Outlook - Office Market

The outlook for the rest of 2004 is positive. With limited new supply coming on stream

and robust outlooks for the economy it is likely that this upward trend will continue

throughout the rest of the year. Since the Grade A sector is now over 92% occupied,

Knight Frank expects to see the Grade B sector to benefit the most in the latter half of

2004, vacancy rates plunging in the Grade B sector will put increased pressure on rents

to climb. Knight Frank views the certainty that with the vacancy rates of Grade A

dropping now nearly to 8% that rental will also rise accordingly in this sector.

Established companies naturally migrate to and are predisposed to having the Grade Aoffice space. Knight Frank sees this, in turn, will pave the way for the rental of both the

Grade B and C to feel the positive affects and rise as well.

Companies Square Meters

Kohler 1,500

SME Bank 5,000

Minister of Culture 5,000

Teleinfo Media 5,000

Total Square Meters = 16,500 SqMs



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The Phuket Market 1H 2004

Overview

The Phuket market is booming, seeing a very buoyant market for the past 2 years. During

that time the market from 2001/02 had less products and sold slower, compared to today

whereby there are more projects and are selling a lot faster.

Supply

Currently 78% of current and past Phuket development of international quality is

located on the West Coast, between Kata Beach and Layan Beach. The high-end villa

market continues in the areas at south Kamala, Laem Sing, Surin Heights, Bang Tao

Beach and Layan Beach representing 74% of the total high-end supply. According to

data compiled by Knight Frank, the total existing supply of residential units of

international quality in Phuket is only 2,833 of which approximately 41% have been

sold to date. Knight Frank research concludes that currently as well as the future will

never be faced with an oversupply situation of villas because there is no speculative

building and villas are constructed as they are sold. Projects such as East Coast Ocean

Villas(AO PO), Royal Phuket Marina, Sai Taan and Surin Heights are selling so well

because of their pricing, location, style of product, management and credibility of the

developer and their team. The credibility of the developer should be stressed because

there are a number of inexperienced and under capitalized developers in this market. A

glossy brochure doesnt necessarily mean a good project, buyers should look for an

investment report that Knight Frank Phuket gives to clients. This gives an outline

detailing the reasons that Knight Frank Phuket is backing the project and is supported

with detailed research.


www.knightfrank.com


0

100

200

300

400

500

600

700

1996 1997 1998 1999 2000 2001 2002 2003 Mar

2004

Jun

THB/SQM/MonthGrade A Grade B Grade C

Prices per SqM per Month


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Demand

Demand is strong and KF believes this trend will continue for a long time. To give an

example of how demand has increased over the past 1 and a half years, in 2002 for every

3.9 villas in the market one sale was generated. However, today the take up rate is 3.3 of

product equals 1 sale.

Buyer Profile Pattern

Hong Kong is predominately the most active market for purchasing Phuket property followed

by Singapore, with Europe (mainly United Kingdom, Belgium and French markets) accounting

as the third largest market. Thais have traditionally focused on the Bangkok, Chaing Mai,

Pattaya and Hau Hin areas because of the perception that Phuket is too expensive, the

leasehold structure and the design and layout of villas is only focused on the expatriate

market.

Origin of Buyers, Vacation Home Market

Buyers from Hong Kong typically purchase for lifestyle or seeking a holiday home in the

region and arent troubled to purchase off plan. Singaporeans however are more callous in

their approach and prefer to seek returns on their investments. Subsequently, they are

more cautious about buying off the plan, and prefer to view completed product, estate

infrastructure, management and the overall fabric of the estate. Knight Frank expects

that the European market will grow considerably over the next 3 5 years, as pricing in the

Spanish Coastal resorts continue to multiply in value (but reflect poor quality and value for

money), the expected strengthening of the Euro as a leader in world currency and the

aggressive marketing push by the Tourism Authority of Thailand into the European and

Scandinavian countries. The historical and projected supply of residential units through

2006 based on the actual and scheduled completion dates of the identified residential

supply/projects is presented in the graphs, which follow:

Source: Knight Frank Phuket (data as of May 7,2004)


www.knightfrank.com


10/11

Years 2000 to 2003 showed a limited supply of homes in each market segment with the

majority of developments due to come on to the market in 2004/2005. It should be

noted that most projects soft-open before the development is finished completely.

Many developments are slated for completion in December of any particular years so in

some cases there may well be overruns.

Outlook - Phuket

The outlook for the rest of 2004 as all as the future remains bright so long as buyers

follow the golden rule of aligning themselves to a credible developer backed by a good

solid management company then they will be rewarded with good growth,above

average yield returns and a property that they can combine their investment objectives

with lifestyle. More affordable products will be entering the market in the next 5

years, i.e. in the 3-7 million baht pricing, which will be aimed at first time investors.

Mid Market Villas High End Villas High End Villas

Apartment & Condominiums Lower Market Villa


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Apartments / Condominiums

8

173

122

4242

25

0

25

50

75

100

125

150

175

200

2000 2001 2002 2003 2004 2005

Source: Knight Frank Phuket

ResidentialUnits

illas Priced Up To THB20 Million

8

191

163

84

298

0

50

100

150

200

250

2000 2001 2002 2003 2004 2005


ResidentialUnits

illas Top Market

illas price above 40 million THB

122

30

122

95

51

3730

0

50

100

150

2000 2001 2002 2003 2004 2005 2006


ResidentialUnits

222

6

210

125

45186

0

50

100

150

200

250

300

2000 2001 2002 2003 2004 2005 2006


ResidentialUnits

Villas Middle Market

Villas price from THB20 Million to THB40 Million


11/11

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Research

Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range of

clients woldwide including developers, investors, financial and corporate institutions. All recognise the need

for the provision of expert independent advice customised to their specific needs.

Knight Frank Research Reports are also available at www.knightfrank.com.

Knight Frank 2004This report is published for general information only. Although high standards have been used in the

preparation for the information, analysis, views and projections presented in this report, no legal responsibil-

ity can be accepted by Knight Frank research or Knight Frank for any loss or damage resultant from the

contents of this document. As a general report, this material does not necessarily represent the view of

Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or in part is

allowed with proper reference to Knight Frank Research.

Phanom Kanjanatheimthao, Managing [email protected]

Chaturawit Wattanapruk,Executive [email protected]

Stephen OBrienManaging Director Phuket [email protected]

Surasak Limpa-Arayakul, Associate DirectorValuation Department

[email protected]

Roong Phanchang, Associate DirectorValuation [email protected]

Colin Wong, Assistant DirectorValuation [email protected]

Marcus Burtenshaw, Associate DirectorBusiness Space Agency [email protected]

Anirut Kanchanakhuha, Associate DirectorInvestment [email protected]

Chalee Wongrachata-aree, Associate DirectorResearch & Consultancy [email protected]

Sasitorn Chatpinyakoop, ManagerResidential Leasing [email protected]

(662) 643 8223

Market Serviced Apartment Bangkok

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