Colliers Bangkok Retail Market Report Q1 2010

The Knowledge Reportc o l l i e R s i n T e R n aT i o n a l | T H a i l a n D

executive summaryThe retail market remained stable for Q1 2010 due to growing consumer confidence but was adversely affected by protracted political uncertainty.

Only one new retail outlet was added to supply in Q1 2010 in the form of a community mall located in Sukhumvit.

Retail is downsizing in Bangkok due to a number of factors. Community malls and convenience stores are becoming a ubiquitous part of the city. But shopping malls still dominate the market.

New mass retail development in the centre will be limited due to impending legislation that is expected to curtail new large scale retail projects in the centre. The intention is to protect non mass retail outlets. Key hypermarket businesses, notably Tesco Lotus and Carrefour, are further expanding their smaller supermarket and convenience store brands throughout Thailand.

The future for new retail developments in urban Bangkok will consist of further downsizing in terms of community malls instead of larger shopping malls and smaller express stores rather than hypermarkets. This ironically will lead to greater head-on competition with traditional stores and the large scale players have the advantage of greater pricing power and more sophisticated logistics.

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2009 - Q1 2010

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B a n g Ko K R e Ta i l M a R K e T | 1 s T Q U a RT e R | 2 0 1 0

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The Knowledge Report | 1st Quarter | 2010 | Bangkok Retail Market

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The organized retail market in Thailand can be divided into seven main categories, based on size, characteristics, goods sold, and pricing.

1) Shopping Mall / Shopping Centre 2) Department Store (figures for this report include stand alone stores only, those located in shopping malls are not included) 3) Hypermarket 4) Community Mall 5) Specialty Stores 6) Entertainment Complex (this does not include entertainment areas in shopping malls as these represent an intrinsic part of the shopping mall mix) 7) Supporting Retail

Note: For the purposes of the report retail refers to organized retail services and excludes traditional single proprietor outlets often located in shophouses and markets consisting of predomi-nantly small traders. Also supermarkets have been excluded from this report.

For more information regarding retail zoning and market catego-ries please contact Colliers International Thailand Research.

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Shopping malls consist of the majority of retail space in Bangkok. Apart from these the only significant movement over the past few years has been the development of community malls.

In fact the only addition to overall supply in Q1 2010 was in the form of “K Village” with 7,891 sq m which had its official grand opening on 26 March 2010 and is located on Sukhumvit soi 26.

Source : Colliers International Thailand Research

sUPPlY of ReTail sPace in BangKoK BY caTegoRY, Q1 2010


The development of community malls can be traced to a number of factors; the move away from large scale retail centres, an oil price surge that led to a focus for reduced car usage and the development of new residential projects that facilitated a need for smaller retail centres serving these residents. Since 2007

there has been an over 70% growth in community mall space and they are now becoming an intrinsic part of the lives of many people in Bangkok.


BReaKDown of ReTail sPace in BangKoK BY caTegoRY, Q1 2010 exclUDing sHoPPing Malls




sUPPlY BY Zone

City AreA :


BReaKDown of ReTail sPace in ciTY aRea BY caTegoRY, Q1 2010

Shopping malls dominate the City area as this is the commer-cial hub of Bangkok and most have very strong brand identities. The centre, especially in the Siam area, has come to be defined by the retail experience provided by shopping malls, therefore the predominance of such malls has become self sustaining. Siam Paragon and Centralworld are the two largest in terms of leasable space. Supporting retail takes up a significant proportion due to the large number of office buildings located in the CBD.

The new retail legislation will likely curtail new developments to just 300 metres floor space. Therefore the retail landscape will remain largely unchanged for the foreseeable future. While on the surface this may seem negative it will provide the opportu-nity for retailers to become more innovative with the design and configuration of their existing mall space. Retailing offers more flexibility than other property sectors in this regard.


Outer City AreA :

SuburbAn bAngkOk - eASt AreA :



BReaKDown of ReTail sPace in oUTeR ciTY aRea BY caTegoRY, Q1 2010

BReaKDown of ReTail sPace in sUBURBan BangKoK - easT aRea BY caTegoRY, Q1 2010

The Outer City area contains a more diverse base of outlets than the City area. Cheaper land prices allow hypermarkets to spring up which require significant car parking space due to volume purchases. While shopping malls are ubiquitous in the centre, their greater scarcity in the Outer City opens the way for devel-

opment of stand alone department stores and community malls filling the void. Many of the malls range from 40,000-60,000 sq m but none are of the size of the largest malls in the City area.

Two very large shopping centres, namely Seacon Square and Fashion Island make up a significant proportion of total shopping mall space in the East. Hypermarkets play an important

role in the area due to number of expressways driving car traffic to these locations.



SuburbAn bAngkOk - WeSt AreA :

Shopping malls take up a far lower proportion of supply in West area with only Central Park Rama III taking up a sizable area. With its high density residential profile and lower socio-econom-

ic level, hypermarkets and community malls make up a greater slice due to their focus more on non-discretionary purchases.

The dominance of shopping malls came about with the recent development of Future Park Rangsit and IT Square. The iconic

Crystal Design Center explains the specialty store share.

SuburbAn bAngkOk - nOrth AreA :




BReaKDown of ReTail sPace in sUBURBan BangKoK - wesT aRea BY caTegoRY, Q1 2010

BReaKDown of ReTail sPace in sUBURBan BangKoK - noRTH aRea BY caTegoRY, Q1 2010


Shopping malls will continue to dominate the retail market in the next two years with more than 250,000 sq m and most of them will be located in the Outer City area. About half of the area will be supplied by Central Rama 9 on Ratchadapisek – Rama 9 Intersection, scheduled to be completed in 2011 with a

total area of approximately 120,000 sq m. Only community malls show real signs of life in the other categories with around 50,000 sq m scheduled to be added until the end of 2011.

fUTURe sUPPlY

BReaKDown of fUTURe sUPPlY in BangKoK BY caTegoRY, Q1 2010




Future changes of the zoning regulations based on the upcoming census are likely to curtail retail development in the suburbs in the short term. It is expected that the higher den-sity of many locations in the suburbs will lead to a relaxation of current building restrictions and developers are in all probabil-ity putting planning on hold until future changes in zoning are put in place. Limitations on available land and new legislation is also restricting future supply in the City area. The lion’s share of future supply will be focused in the Outer City area especially in the form of Central Rama IX shopping mall.

In June 2010 Paradise Park shopping mall will open its doors in Suburban Bangkok East after a major renovation and change of name from Seri Center following the purchase of the property by MBK plc and Siam Piwat plc. The previous mall struggled to compete with its neighbour Seacon Square and has boasted 100% occupancy of its 90,000 sq m of leasable area prior to its official opening.

BReaKDown of fUTURe sUPPlY in BangKoK BY locaTion, Q1 2010




DeManD - TaKe UP

Take up rate in city area increased from last year by approxi-mately 3%, although Q1 2010 represented a difficult period for the retail market in the City area, due to the political situation. It would be appear that take up in the City is more volatile than other areas due to its greater reliance on tourism and discre-tionary spending which are far more affected by political and

economic dislocations such as health scares and global economic downturns. The sharp drop in take up in 2005 in the City area was the result of renovations being undertaken in a number of shopping malls in order for them to be more competitive. The subsequent rise occurred on the reopening of these malls.

Take up rate of all categories is more than 90% and has remained robust throughout the past turbulent 18 months.



BReaKDown of HisToRical TaKe UP RaTe of ReTail sPace BY locaTion, 2000 - Q1 2010

TaKe UP RaTe of cURRenT sUPPlY BY caTegoRY, Q1 2010




Colliers International Thailand ResearchSource : Ministry of Commerce

TaKe UP RaTe of cURRenT sUPPlY BY locaTion, Q1 2010

The highest take up rate is in the City area with approximately 97% followed by suburban Bangkok – West area with approxi-mately 96%. The lowest rate is in suburban – East area is at about

94%. This is likely due to the significant amount of existing supply available at Seacon Square and Fashion Island which makes it difficult to maintain full occupancy.

DeManD DRiveRs focUs

CONSuMER CONFIDENCE

The second half of 2009 showed a general rise in the CCI due to the turnaround of the economy and a more stable political situation. The return of protests in Bangkok from the end of February has dented sentiment for Q1 2010. The situation has

also been exacerbated by a number of protests being directly located among prime retail centres in the city.



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Along with the development of a sophisticated banking system comes the actual growth in the number of bank branch-es in Bangkok, serving the needs of the local and foreign residents alike. This trend has helped to support the retail market,

especially in shopping malls, supporting retail and commu-nity malls that are more likely to accommodate retail banking outlets.

There has been a significant increase in credit card usage over the past five years that has been instrumental in spurring retail spending. The global trend for cashless societies is reach-ing Thailand and even anecdotal evidence points to an ever

greater number of shoppers paying by card. In fact about 12.6% of personal consumption is paid for by credit cars compared with 8-5% in 2005.

Colliers International Thailand Research Source : Bank of Thailand

Colliers International Thailand Research Source : Bank of Thailand



RenTals

Rental Rate


The rental rates provided give only a very general indication of pricing trends in the market. Significant differences occur in rental rates depending on floor level, access to BTS stations and tenant mix. The surge in rental rates was the result of ren-ovations at a number of shopping malls creating a squeeze for tenants requiring selling space as well as the opening of Siam

Paragon, a high end mall which subsequently increased the average rates for the area. The fall in rentals two years later was caused by newly renovated malls coming on stream as well as the coup. Since then rentals have remained stable up to Q1 2010.



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As at the end of Q1 2010 a number of shopping malls in the centre of Bangkok have been directly affected by the protests taking place in the capital. Therefore in the short term retail in the City area could come under some stress due to direct affects as well as a reduction in consumer sentiment affecting discretionary spend-ing. In the longer term Colliers International Thailand predicts that rentals will firm in the centre of Bangkok due to the lack of new supply and future renovations leading to a further up scaling of the City area. Over time the centre will be the focus of new retailing concepts both imported from other countries and domesti-cally inspired.

The emergence of new community malls throughout Bangkok will be the ongoing trend for years to come as the new mass transit lines weave their way through the suburbs of the city, creating new high density residential areas and community malls servicing them. Administrations are likely to encourage their development to reduce car usage.

The scaling down of retail will also occur with the move away from hyper-markets in the urban area to smaller express stores and supermarkets such as Tesco Lotus Express and Carrefour Market. Along with the continual growth of convenience stores throughout Thailand; small independent retailers, nicknamed “Mom & Pop” stores in the west, will be subject to direct competition from large multi-national players.

In the suburbs planning is on hold until new zoning restrictions are announced in the next few years. Based on Colliers International Thailand residential analysis it can be predicted that a large area, especially in the east would have a high enough density for looser restrictions on building sizes and usage. Therefore over the course of the new decade new large scale retail developments will spring up.



conTacT infoRMaTion

THailanD: Patima Jeerapaet Managing Director [email protected]

Antony Picon Senior Manager | Research [email protected]

Surachet Kongcheep Manager | Research [email protected]

This report and other research materials may be found on our website at www.colliers.co.th. Questions related to information herein should be directed to the Research Department at the number indicated above. This document has been prepared by colliers international for advertising and general information only. colliers international makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. any interested party should undertake their own inquiries as to the accuracy of the information. colliers international excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. colliers international is a worldwide affiliation of independently owned and operated companies.

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ASSET MANAGEMENTWasan Rattanakijjanukul | ManagerNukarn Suwatikul | Manager

CONSuLTANCYNapart Tienchutima | Manager

COMMERCIAL / INDuSTRIAL /RETAILNarumon Rodsiravoraphat | Senior Manager

INVESTMENTNukarn Suwatikul | Senior Manager

RESIDENTIALPatima Jeerapaet | Managing Director

RESEARCH & ADVISORYAntony Picon | Senior ManagerSurachet Kongcheep | Manager

VALuATIONNicholas Brown | Associate DirectorThanussorn Aukkrararerksaponk |Manager


Colliers Bangkok Retail Market Report Q1 2010

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