Bangkok saw increased demand for suburban malls during the third quarter of the year.
In its latest market research on the sector, real estate firm CBRE said the number of international tourist arrivals increased by 24 percent year-on-year across Thailand, and the number of international passengers disembarking at all Airports of Thailand-managed airports also increased by 23 percent year-on-year in Bangkok.
The increase in tourist numbers improved retail sales in central Bangkok. Despite the economic slowdown there is currently more than 1.1 million sqm of retail space under construction in Bangkok and due for completion by 2017.
Some 44 percent of future supply will be in suburban areas of the city, while 41 percent and 15 percent will be located in midtown and downtown Bangkok, respectively.
CBRE said that big retail developers are not only planning large-scale projects in the midtown and suburban areas, but they are also continuing to renovate their retail centres in downtown Bangkok.
The large supply in the pipeline will intensify competition in Bangkok, and major retail developers are renovating their existing malls to attract new brands and more customers. Examples of renovated major malls include Siam Discovery, MBK Centre, Central Plaza Pinklao and Central Plaza Bangna
Both international and domestic retailers are becoming more interested in expanding their business in suburban areas, noted CBRE.
During Q3, leasing demand was driven by international fashion brands from Europe and the United States, however if there is little improvement in the economy, CBRE said Thailand is likely to see weak performance in some shopping malls.
The weak economy has led to a slowdown in retail developments in provincial cities. There also seems to have been a slowdown in community mall development, the real estate agency noted.
Many community mall developers were first-time developers building on family land. There appears to be a realisation that developing community malls is not easy, and banks may be reluctant to lend to first-time developers. Taking into account the combination of a significant increase in new supply and continued weak consumer sentiment, CBRE said it thinks it will be very challenging for developers to be able to raise rents. It is predicting little or no rental growth for the next 12-months unless there is a significant increase in consumer spending.
Looking forward, CBRE reported competition in the Bangkok retail market will be fierce with the new malls trying to take shoppers away from existing malls.
To read the full CBRE Retail Research Report click here.
