Average rental rates of more than THB 800 per sqm have been achieved at a new 32-unit apartment in Bangkok three months before its completion.
Real estate firm CBRE has reported it has fully let the eight-storey The Philo Residence (pictured) on Sukhumvit Soi 24 with average rents of more than THB 800 per sqm per month, one of the top rental rates achieved for apartments (single-ownership) or condominiums (multi-ownership) in the area where rents are on average only THB 500 per sqm per month.
According to Theerathorn Prapunpong, Director of Residential Leasing Services at CBRE, the development consultant and sole leasing agent for the project, the reason for the high rentals and speed of leasing is that the apartments matched expatriate tenant requirements in terms of size, layout, specification and furniture,
“CBRE closes about 400 leases on average for expatriates every year, and by studying requirements and transaction data in our comprehensive database, we are able to analyse the market and have a good understanding of where expatriates want to live, what they want, and, most importantly, what they can afford to pay.”
Many expatriates still receive a housing allowance and are willing to spend all of it – but not more. They are not willing to top-up the allowance with their own funds. It is important for any apartment developer to know what budget the majority of expatriates have for a one-, two- or three-bedroom unit, the firm said.
Developers want to maximise the rent per sqm but there is a limit on how small a unit tenants are willing to accept, so developers cannot simply shrink the unit size to increase the per sqm rent. The attractiveness and efficiency of the layout are critical, therefore the right design can produce an optimum size for each type of unit that will lease quickly and maximize per sqm rents.
More than 60 percent of the tenants in The Philo Residence are Japanese, while the remaining 40 percent are from other Asian countries as well as Europe and North America, according to CBRE.
In order to lease an apartment building quickly and get top rents, the units must appeal to a wide range of tastes and be able to make the tenants feel like they are living in their own homes.
There are now more than 80,000 expatriates with work permits in Bangkok, an increase of 8.55 percent from last year. Generally, expatriates want to live in a limited number of areas – primarily, Sukhumvit, Lumpini and Sathorn.
The main options for residential accommodation for expatriates are apartments or condominiums for rent. The demand for apartments still remains strong with 90 percent occupancy overall due to the fact that tenants still prefer a building that is managed by a single owner.
Most apartments have been well-maintained and regularly refurbished and redecorated. Apartment rents range from THB 250 to more than THB 800 per sqm per month. Condominium occupancy in the main expatriate residential areas, including owner occupation and leased units, is more than 80 percent.
There are only about 11,000 apartment units in the popular expatriate areas, with about 300 new units that will complete by the end of 2016.
With such limited supply and the continuing renovation and refurbishment of older apartments, CBRE said it believes that the rental price per sqm will increase.
Obviously all apartment developers want to get the highest rent per sqm and so the key is to understand what tenants want in each location and what they are willing to pay.