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Despite the challenges of low consumer purchasing power and the growth of online shopping, the supply of Bangkok retail space is continuing to grow.
Colliers International Research expects about 300,000 sqm of new retail space to enter the Thai market this year.
“Shopping malls have multiplied in numbers over the past few years, currently occupying the highest share in retail supply,” says Colliers International associate director Surachat Kongcheep.
Around 114,350 sqm of new retail space opened in the first half of this year, pushing the total retail area in Bangkok to more than 7.6 million sqm. The new space mostly involves malls and office buildings in outer Bangkok, which comprises more than 60 per cent of total retail supply.
Although Thailand’s economy has not fully recovered, many developers are still launching retail projects as long-term investments.
Show DC shopping complex is the only large retail project to have opened so far this year.
A source at IconSiam says the developer has postponed this year’s opening of the IconSiam Project, a 750,000 sqm retail space by the Chao Phraya River. Luxury Japanese department store Takashimaya is one of the project’s main anchors.
Surachat says the growth of community malls, which boomed in Bangkok’s retail sector three years ago, started to slow down last year because of the developers’ lack of expertise in the retail business.
As of the second quarter of this year, shopping malls in Bangkok and surrounding areas covered 4.4 million sqm, or 58 per cent of the capital’s total retail supply, which is about 7.6 million sqm.
Even more malls
Colliers’ research shows the major players in the retail sector will continue to increase the number of shopping malls in Thailand, especially in major cities, while other retailers will focus on expanding their portfolios internationally.
Despite weak spending power, most hypermarkets, speciality stores and large shopping malls in Bangkok’s suburban areas are at 100 per cent occupancy level, says Surachat. Occupancy rates in all retail categories in the second quarter were nearly the same as those in the previous quarter, at rates above 96 per cent. Most of these areas are occupied by hypermarkets and surrounded by speciality stores and entertainment complexes.
Meanwhile, shopping malls also show high occupancy rates as they are popular for local and international brands.
“Bangkok’s total retail area has quickly risen within the past quarter through the addition of many new office buildings,” says Surachat. Office buildings have added retail space for tour and travel services, convenience stores and dessert cafes.
Average rental rates of all locations in Bangkok in the first half of the year have risen by 5 to 10 per cent. Large shopping malls have the highest rents, says Colliers.
Rental space in Bangkok’s city area can add up to more than THB3000 (US$88) a sqm per month, especially in central malls with direct access to BTS stations. Meanwhile, monthly rents in community malls beyond the main roads start at around THB800 a sqm.
Despite the increasing average rental rate, Bangkok’s suburban community malls are not likely to raise their rents in the next two quarters because of their decreasing popularity, says Colliers.