Downtown residential rental opportunities
With expat accommodation budgets flat, apartment and condo owners need to improve appeal to tenants, says CBRE
The downtown residential rental market in Bangkok is driven by expatriate tenants working in Thailand who want to rent in a limited number of areas and mainly choose either apartments, rental units in a condominium or a serviced apartment, according to CBRE, an international property consultancy company.
However, expatriate numbers have been growing at a slow rate and there has been no increase for many years in the average monthly budgets these tenants are willing to spend on rent. There are only a few new apartments under construction, but many new condominiums, according to CBRE Research.
The increase in supply and limited growth in demand means that the market is competitive, but there are still opportunities for both apartment developers and buy-torent condominium investors. The key is to understand tenant requirements so that investors can maximise their occupancy and rent per square metre.
There is a constant turnover of expatriate tenants as the average length of stay in Thailand is about three years, so each new incoming tenant makes a fresh decision about where they want to live.
The latest survey by CBRE Research in the second quarter of 2018 shows that there are about 10,000 single-ownership, multifamily apartment units in the most popular expat rental locations of Sukhumvit, Lumpini and Sathon. There are around 76,000 condominiums in the same areas and CBRE Research estimates that between 25,000 and 30,000 of these are owned by investors who are renting out their units.
There is still a preference, especially from Japanese tenants, for single-ownership apartment buildings rather than multiownership condominiums because they like to be able to talk to the owners’ representative about unit maintenance issues. In a condominium, the property manager is responsible only for maintenance of the common areas and it is the individual owners’ responsibility to maintain the interior of the unit. It is more challenging for tenants to get things fixed inside a condo unit.
In Bangkok, few condominium owners use a managing agent to look after their unit and deal with all tenant issues. The ability of an individual owner to quickly arrange maintenance or repairs is mixed depending on their experience, and is especially challenging for overseas owners.
In some cases where the condominium is managed by a hotel and provides concierge services, the owner pays a premium common area fee, in return for which the property management will help to deal with maintenance issues in units.
Apartment developers who build in preferred locations and understand tenant requirements continue to be successful, achieving high occupancy and good rental
rates, says Theerathorn Prapunpong, head of advisory and transaction services (residential leasing) at CBRE Thailand. He has advised developers of two recent apartment projects on design and specifications and acted as sole leasing agent.
Piya Residence on Sukhumvit Soi 28 and 30 was completed in the first quarter of 2018. The developer optimised the units’ layout and size to maximise the functionality and rental per square metre. More than 60% of the units have been leased.
Chani Residence on Thong Lor Soi 13 was completed in 2017 and has been designed to match Japanese tenants’ requirements and is now more than 70% leased.
Both these buildings have a mixture of mainly two- and three-bedroom units for which there is still high demand, because many of the rental units in new condos are one-bedroom units.
Mr Theerathorn has advised on another development, Jittimon Residence on Thong Lor Soi 16, which will be ready for occupancy in early 2019. The eight-storey building will have units ranging from one to three bedrooms, low density and large garden, unique features in a market where most developers maximise the plot ratio.
One of the most important factors in determining the success of a rental apartment project is to match tenants’ requirements in terms of size, layout, specifications, location and facilities.
CBRE is able to provide apartment developers with practical advice, drawing on real market data based on over 1,000 expatriate tenant agreements over the last three years, said Mr Theerathorn. “That includes knowing what tenants want and how much they will spend.”
The Central Business District residential rental market will remain competitive and owners of existing apartment buildings and individual owners of condominiums need to maintain and renovate interiors and common areas to ensure their properties remain attractive to tenants.
‘‘ Japanese expats prefer apartments because they can talk to the building owner directly about unit maintenance. Contacting the owner of an individual condo unit can be more difficult.