Opportunities Still Present in a Declining Bangkok Apartment Market
How building condition, the right unit mix, full range of facilities and services ensure high occupancy
Apartment. For most Thais, this word conjures images of an austere looking structure with a fair level of amenities built when their grandparents could still do the twist.
They have three saving graces for expatriate families; large unit size, a desirable address and experienced staff whose responsibilities extend to maintenance of their unit, all at affordable rates.
The economic slowdown and brighter economic growth prospects in neighbouring countries are prompting multi-national corporations (MNC) to re-allocate expats to greener pastures. CBRE Research indicates that the number of Japanese expatriates was down by 2.8% Year-on-Year (equivalent to almost 1,000 Japanese work permit holders, excluding their dependents) in Q3 2019. This has dragged the number of the largest expatriate nationality in Thailand down to a six-year low.
As a result, Bangkok apartment occupancy is also at a six-year low at approximately 92% based on CBRE’s survey as Japanese MNCs have sent their key expatriates to Thailand either without their family, on a project-by-project basis or replaced Japanese staff with Thais to save on cost.
However, a basket of Grade A apartments in the Sukhumvit and the Central Lumpini areas are bucking that trend with an impressive 98% occupancy rate. All of which are under 9 years old or recently renovated older projects, feature a variety of unit types including studio- and 1-bedroom units and offer a full suite of facilities.
This demonstrates that in a declining market, it is still possible to maintain high occupancy with projects in fresh condition at the right location with a variety of unit types.
CBRE expects to see a “survival of the fittest” phenomenon as some older projects in average condition with irrelevant unit mix are seeing very low occupancy rates. Should owners not adapt to new market conditions, their projects may join the list of apartments facing redevelopment.
Having said that, some projects are becoming “Serviced Residences” (similar to serviced apartments, but do not offer daily rental) by presenting optional cleaning and laundry services and offering shorter rental terms (down from yearly to monthly lease) to tenants, thus providing a competitive tool against serviced apartments and an edge over condominiums.
CBRE believes that a declining market does not always mean low occupancy if projects maintain competitive building condition, incorporate more family-friendly features to please traditional audiences which still exist in smaller numbers, are at the right location, and offer a relevant unit mix for the new market reality.
An article written by Supawit Mahaguna, an Analyst at Research and Consulting, CBRE Thailand for Bangkok Post dated 27 November 2019.