Serviced apartments in oversupply

The area around Bangkok’s Sukhumvit Road is heading for a significant oversupply of serviced apartments.

With occupancy rates at existing serviced apartments falling to 78 per cent in the first half of the year, property developers have embarked upon the construction of 21 new serviced-apartment blocks that will see 3,671 new units hit an already-crowded market by 2011.

Moreover, real-estate services firm Colliers International Thailand says the 21 new blocks in the Sukhumvit area represent only about 61 per cent of a total of 39 new serviced-apartment blocks being built in Bangkok that will offer 5,923 new units by 2011.

Risinee Sarikaputra, head of research and advisory, said construction on most of the serviced-apartment projects scheduled for completion this year and next had been slowed down. Developers saw the oversupply looming when the economic crisis forced multinational firms to close Bangkok operations, downsize offices and cut back on accommodation expenses for expat staff.

The average occupancy rate of existing serviced apartments in the Sukhumvit area declined from 80 per cent last year to 78 per cent in this year’s first half. If construction of new serviced apartments – both grade A and grade B – in the Sukhumvit area is completed in the second half and next year, the occupancy rate may fall even further, Risinee said.

Following market trends, most serviced apartments on Sukhumvit Road have revised their businesses to focus on tourists and expats, in order to compete with nearby hotels.