Demand for serviced apartments last year remained unchanged in most areas of Bangkok despite the political turmoil, according to CBRE Thailand, an international real-estate adviser.
The average occupancy rate for the whole year stood at 81 per cent, a slight decrease from 2012, as a result of lower occupancy rates in some serviced apartments located close to the areas where there were demonstrations.
Serviced apartments in Bangkok are usually targeted at two types of customers: long-term tenants who are usually single expatriates working in the city, where serviced apartments compete with non-serviced apartments and condominiums for rent; and short-term-rate tenants who are usually tourists or business travellers, where serviced apartments compete with hotels. Most serviced apartments have one-bedroom or studio units.
The number of expatriates with work permits based in Bangkok increased by 12 per cent year-on-year. Japanese nationals working in Bangkok make up the highest percentage of the long-term rental market for serviced apartments.
Serviced-apartment rental rates did not increase because of competition from the many one-bedroom condominium units available for rent in the long-term market. As of the fourth quarter, the average rent of Grade A serviced apartments in Bangkok was just above Bt1,000 per square metre per month, and the Sukhumvit area achieved the highest average rents of almost Bt1,200 per square metre per month.
According to CBRE Research, there are very few serviced apartments under construction. However, there are more than 5,000 hotel rooms begin built in Bangkok, increasing the competition for the short-term-rate market.
There are more than 20,000 condominium units under construction in downtown Bangkok, of which 70 per cent will be one-bedroom and studio units, many of which have been bought by investors looking to rent them out. This will increase competition in the long-term rental market for studio and one-bedroom units.
To date, the political unrest has had limited impact. The short-term-rate market has suffered from a decline in visitor numbers, especially in those properties located close to the protest areas.
There has not been a decline in expatriates working in Bangkok, and so the long-term market remains largely unaffected.
As of the fourth quarter, the average occupancy rate of the overall serviced-apartment market stood at 80 per cent, only a slight decrease from the third quarter.
Demand for serviced apartments is concentrated in a limited number of areas, principally Sukhumvit, Lumpini and Sathorn. These are the areas favoured by expats living in Bangkok and by tourists.
CBRE believes there will be limited potential to develop serviced apartments outside these core locations as rental rates for such properties decline considerably.
Despite competition from hotels and rental condominiums, the limited new supply of serviced apartments means that there is a possibility that owners will be able to raise rental rates.