Economic constraints have lifted demand for rental apartments, which are more affordable than condos, driving up average rents as supply remains limited due to fewer new projects, says Horga, a real estate solutions provider.
Tanawit Tonekunya, Horga founder and chief executive, said the rental apartment segment is typically less affected by economic conditions than other housing segments. Rental apartments are smaller and offer fewer facilities.
During a healthy economy, middle-income tenants tend to shift towards condos, while apartments are an alternative for lower-income groups that previously lived in shared houses. In contrast, during downturns apartment operators report an influx of renters seeking more affordable options than condos, said Mr Tanawit.
Based on Horga's client database covering 1.65 million apartment rooms nationwide, owners are commanding higher monthly rents this year, attracting more first-time workers in addition to its main market of university students, who account for 60% of tenants. The average monthly rent rose from 3,000 baht to 3,800-3,900 baht as supply growth failed to keep pace with rising demand, particularly from younger people putting off property purchases amid economic uncertainty.
"Investors have been less interested in building new apartments due to rising construction costs and strong competition from condos in recent years. As rental demand picked up this year, apartment rents have been driven higher due to limited supply," said Mr Tanawit.
Horga's database of 27,000 apart- ments, which mostly covers the B+ to A segments, saw occupancy rise to 70% from 60% as owners upgraded services to compete with condos among first-time workers.
"Fresh graduates starting their first jobs have not switched to condos as quickly as in the past. Instead of renting a condo unit for 10,000 baht per month, they may stay longer in the same apartments as remote working no longer requires relocation. Some compare apartments offering services similar to condos, but at lower rental rates, offering fast-moving apartments an advantage," he said.
Horga completed its rebranding this year, aiming to accelerate revenue growth through broader coverage of real estate segments, said Mr Tanawit. In addition to heavy investment to develop apartment solutions, the company is expanding its services to 17 central wholesale markets nationwide.
"Talaad Thai" (Thai market), the largest agricultural wholesale market in Southeast Asia, is one of Horga's main clients, helping it gain experience in developing management solutions for both lessors and tenants in the wholesale marketplace.
"We consider rental apartments a cash cow, providing a steady revenue stream, while wholesale markets could become rising stars. This year, revenue from markets is expected to account for 50% of total revenue, as rental apartments dip from 70% to 50%," he said.
The company is also eager to expand into budget hotels, partnering with a local budget hotel chain to identify apartments that could qualify for a hotel licence, said Mr Tanawit.
