Developing condominiums is one of the most profitable real estate investments with the fastest return. However, it comes with a higher risk, especially in a challenging market.
Developing condominiums is one of the most profitable real estate investments with the fastest return. However, it comes with a higher risk, especially in a challenging market.
This has led condominium developers to diversify their real estate investment portfolio by investing in different types of income-producing properties, such as hotels and offices, to provide a more stable income stream.
Recently, CBRE Research has seen some condominium developers investing in serviced apartment developments, including Origin Property, Nusasiri, and Ananda. Origin Property and Nusasiri have appointed international chains to manage their serviced apartment projects.
Origin Property has expanded by acquiring Proud Residence's flagship condominium project, Park 24, which includes 245 condominium units, to be managed by The Ascott Ltd, as a serviced apartment. The SET-listed company also plans to build a serviced apartment and hotel on a recently leased plot opposite to the Park 24 project.
Mövenpick Hotels & Resorts, a Switzerland-based hotel management company, has signed an agreement with Nusasiri to manage three properties in Thailand.
One of them is a serviced apartment, Mövenpick Residences Ekkamai Bangkok, the first Mövenpick Residences in Asia. The project consists of 160 serviced apartment units of one, two and three bedrooms. Mövenpick Resort Khao Yai and Mövenpick Resort Mai Khao Phuket, both full-servicehotels, are expected to open in 2018.
Ananda has announced that they have leased a three-rai site on Ratchadapisek Road for a mixed-use development project which will include a serviced apartment development. This project is expected to start its operation in 2020. Ananda has also leased a site on Sukhumvit 8, for a hotel or a serviced residence development.
There are 2,000 planned and under-construction serviced apartment units which will be clustered mostly around the Sukhumvit-Thonglor area, where the established expatriate community is.
Serviced apartments which offer daily rates will compete directly with downtown Bangkok hotels where supply is expected to grow by approximately 8,300 rooms by 2021.
Serviced apartments also compete with rental condominiums and furnished non-serviced apartments, but the competition is almost exclusively for one-bedroom units as budget constraints limit demand for two-bedroom or larger serviced apartments.
Demand for serviced apartments is split between expatriate employees of multinational companies for longer-term rentals and daily-rate business travellers and tourists. Japanese employees continue to be the largest market for longer-term rentals for serviced apartments.
Although expatriate numbers only grew slightly year-on-year, CBRE Research expects that newer projects with high standards in good locations will attract tenants, but the market will be competitive as some operators of older serviced apartments have started to renovate their projects.
Tornbonkot Patcharaprakiti is a senior analyst, and Aishwarya Bajaj is an analyst, Research and Consulting, CBRE Thailand. They can be reached at bangkok@cbre.co.th Facebook: CBRE.Thailand Twitter: @CBREThailand LinkedIn: CBRE Thailand website: www.cbre.co.th
