.Knight Frank expects |falling room rates

At the same time, about 1,500 new serviced apartments will enter the market in 2009, pushing total supply up by 12 per cent over 2008.

The firm said rental rates would probably fall in the first half of this year to comply with the market demand.

However, the serviced apartment market would show improvement when the country's politics were more stable and government policies could resolve economic problems and regain investors' confidence, it said.

Knight Frank said the occupancy rate of serviced apartments fell from 82 per cent in the first half of 2008 to 75 per cent in the second half. At the same time, the number of serviced apartments in Bangkok rose by 3 per cent from 12,565 units in the first half to 12,969 in the second half.

The firm said the economic crisis and the airport closure had a direct impact on total rooms occupied in Bangkok's serviced apartment market. Cost cutting by many businesses and fewer foreign travellers to Bangkok brought about lower market demand. Lower demand and higher supply had driven many serviced apartment operators to cut rental rates to lift their occupancy rates.

The average rental rate for serviced apartments in all areas of Bangkok fell in the first half of 2008. The average rental rate for five-star serviced apartments in the central business district fell by 3.3 per cent from Bt1,407 per square metre per month to Bt1,360. At the same time, average rates for five-star serviced apartments in the Sukhumvit area fell by 3.9 per cent, from Bt1,425 per square metre per month in the first half of 2008 to Bt1,370 in the second half.

In the four-star market, average rental rates for serviced apartments in the central business district and the Sukhumvit area fell by 4.6 per cent and 4.9 per cent respectively between the first and second halves of 2008, standing at Bt987 and Bt991 per square metre per month, respectively, at the end of last year.