Over-supply of serviced apartment feared in Bangkok

A leading real estate provider has feared that an over-supply of serviced apartment will soon occur at Sukhumvit Road in Bangkok, Thailand due to the 78 percent drop of occupancy in the first half of 2009.

In a data gathered by Colliers International in Thailand, it was noted that despite the decline in occupancies, developers are planning the construction of 21 new serviced apartment blocks with a combined 3,671 new units that will hit the market in 2011.

The Colliers revealed 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.

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

The real estate provider bared 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.

Furthermore, Colliers said 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 explained 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 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.