Retail rentals in Bangkok have continued to increase during the past few years as a result of high occupancy rates, and the fact that many new projects have been added to the market. This trend will continue in 2015, according to new research from Colliers International Thailand.
More than 165,690 sqm of retail supply was added in the market in Q3, which pushed total retail supply in Bangkok and its surrounding areas to 7,250,820 sqm. In addition more than 225,000 sqm is also expected to be completed in the last quarter of 2015.
One mega-shopping mall was completed in Bangkok suburban – West area, and many community malls opened their doors throughout Bangkok during the quarter.
Shopping malls had the largest share in the market with approximately 4.23 million sqm in total, followed by community malls and superstore malls or hypermarkets with 0.82 million sqm.
Some large-scale shopping malls are still in the pipeline and are scheduled to be completed ibetween Q4 2015 and 2019.
Community malls comprised the fastest growing category in the retail industry, starting from 300,000 sqm in 2007 and rapidly growing every quarter to 1,073,460 sqm in Q3. By the end of this year, the number will be up to 1,150,460 sqm. Nonetheless, many community malls were not successful and were less popular than in the first few months after they officially opened.
Retail developers/operators in Thailand are looking to invest in bordering provinces around Thailand, especially the provinces that are scheduled to become special economic zones. This is because they are also looking for foreign buyers from neighbouring countries in the future, according to the report.
The average occupancy rate at all locations in Q3 was similar to that in the previous quarter, which is higher than 96 percent in all locations. Average occupancy rate in all locations sdid not decease, although Thai purchasing power during 2015 continued to decline, reflecting the country’s economic situation.
Some retail spaces in large shopping malls in the City Area, and even in prime retail locations, are still available. The Bangkok suburban area has the highest occupancy rate with many superstores and shopping malls in the area being almost fully-occupied. However, some community malls are empty.
The Consumer Confidence Index in 3Q continued to decreae from the previous quarter due to many negative factors that still directly affected Thai confidence. Although the Index showed positive signs during August, it increased only by a few percentage points
Meanwhile, retail sales index also reflected the Thai’s confidence, showing a declining trend from Q1. However it has shown positive signs since June 2015 onwards. Most Thais are still not sufficiently confident of Thailand’s economic overview, as many negative factors are still affecting the economy.
Many private firms have been trying to push the government to spend more on infrastructure development to boost confidence. Some retailers are trying to develop their shopping malls into destination retail centres with large-scale shopping malls, especially in the Bangkok suburban area.
The Thai Shopping Center Association still has confidence in the Thai’s purchasing power that could recover in the high season at the end of 2015. This will push overall market growth by 10 percent.
Average rental rates in all locations in Bangkok and the surrounding areas during Q3 were still similar to those recorded in the previous quarter. However many international brands and shops are still more focused on increasing the number of their stores as Thailand still has room to grow in the long-term. Therefore rental rates have continued to increase during the past few years.
The city area has the highest rental rates, which are probably higher than THB 4,000 per sqm per month at some shopping malls in prime locations, or those with direct access to BTS stations. The rents in the Bangkok suburban area start at THB 800 per sqm per month for retail space in some community mall projects.
Many large-scale shopping malls in the Bangkok suburban area are expected to open during between the end of 2015 and 2017, and may push up average rents in the near future.
In its forecast, Colliers International noted that although the Confidence Index and Retail Sales Index showed positive signs in Q3 it was only by a few percentage points of increase from H1 2015. Therefore minimal impact occurred in the retail industry, and improvement may be seen in the last quarter of 2015.
Retailers of International and Thai brands are still confident of Thai purchasing power in the long-term. Many are still looking for new stores or shops, while existing retailers are increasing their retail centres in Bangkok, suburban Bangkok and other provinces around Thailand.
Community malls will grow, but with a declining trend in the future because many projects have been unsuccessful in the past. As such community malls would not be able to maintain their popularity in the long-term.
Some major retailers in Thailand are planning to renovate their retail centres after more than 10 years in operation, adding some new brands/shops to increase the appeal of the centres, as well as relocating some of the tenants.
Foreign retailers and foreign retail developers are continuing to looking to develop their first retail centres in Bangkok and in the vicinity, as well as in other tourist destinations in Thailand.
