NO SHORTAGE OF NEW PLACES TO SHOP TILL YOU DROP
With malls popping up all over the city and older ones being revamped, Bangkok’s retail rents remain stable and competition fierce
The retail market in Bangkok is now the most competitive it has ever been. The expansion by retail developers in the central business district and suburban areas and the entry of new local and international retailers come at a time when the economic outlook is challenging and consumer sentiment is weak.
Despite a slowdown in retail sales, there are still 1.1 million square metres of retail space under construction in Bangkok, which will bring the total completed supply in 2017 close to eight million square metres.
Within the CBD, the latest major retail developments to open are EmQuartier and Central Embassy, intensifying competition for existing malls such as Siam Paragon, Gaysorn and CentralWorld. In addition, big developers continue to renovate their downtown centres such as Siam Discovery and MBK.
Since these major retail centres are chasing after the same group of consumers, retail events and promotions have become ubiquitous, leading to cut-throat competition and heightened promotional campaigns, particularly gearing up to the festive season when consumer spending typically peaks.
The expansion by major retail developers to suburban areas may also draw some consumers away from CBD malls, although the impact may be limited. Bangkok’s suburban areas today are well served by quality retail centres, reducing the need for consumers to travel into the CBD.
To the north, Zpell@Future Park opened on Friday. Opening on the same day in eastern Bangkok on Ekamai-Ram Intra was Central EastVille, adding competition to existing malls in the area such as Crystal Park and Crystal Design Centre.
The Mall Group is also now planning The Bangkok Mall on Bang Na-Trat Road, which is expected to be completed in 2017. To the west, CentralPlaza WestGate opened in August in the Bang Yai area, adding a major shopping destination to an area where there had been limited retail developments.
The Chao Phraya riverside will also get its own luxury shopping complex in 2017 with the opening of IconSiam, a 500,000 square metre retail and entertainment complex. It will include a 36,000 square metre, seven-storey Takashimaya department store, which will be the Japanese retailer’s first in Thailand.
Amid all this competition, the segment that will find business the most challenging is community malls. They will be forced to adjust their strategies and have clear, unique selling points and propositions to draw consumers; otherwise they are likely to be overshadowed by major retail developments that have bigger budgets for events and promotions.
It is essential for community mall developers to understand their target consumers’ needs and retain anchor tenants in order to compete in the long term.
The plus side of the retail expansion is that it will create room for both domestic and international retailers to expand to suburban areas. International fashion brands including H&M, Uniqlo, Aldo and Charles & Keith have already expanded to CentralPlaza WestGate.
The expansion will also create room for new brands and retailers to enter the market. In addition to the newcomers in the fashion and food and beverage segments, both locally and internationally, a major area with growth potential is the lifestyle and recreational activities sector.
Virgin Active is one lifestyle brand that has expanded from its original location in Empire Tower on Sathon Road to EmQuartier, and now to CentralPlaza WestGate. A new activities and lifestyle brand that will soon enter the market is Bounce, offering a trampoline park concept. The first branch of Bounce will open at The Street in Ratchada by the end of the year.
Recreational activities for children also represent a retail segment with growth potential. The opening of Kidzania several years ago at Siam Paragon set the trend for children’s activities zones in shopping malls. The Emporium has recently launched EmPlayground, an interactive playland separated into 19 different zones.
This type of attraction will play a significant role in space take-up because such activity centres have larger space requirements, which new retail developments can plan for and provide. In many cases, they also have the potential to be one of the anchor tenants in a new development. While major international brands will typically enter CBD locations first, the completion among quality suburban malls will pave way for their future expansion.
Another positive aspect for retailers is the expected growth in the tourism industry. Tourist arrivals from January to October 2015 increased by nearly 25% year-on-year, with expected arrivals of at least 29.5 million by year-end. We believe the growth trend will continue into 2016, providing positive benefits for retailers, particularly for key CBD malls.
Although 2015 has been a competitive year for the industry, retail rents have remained stable. It is often difficult to measure retail rents as there is a big range even within a single development.
Prime retail rents in Grade-A downtown shopping centres range from 1,800 to 4,500 baht per square metre per month for ground floor spaces, and 1,200 to 2,380 baht for suburban malls. This level has been maintained throughout 2015 despite the growing competition.
In the upcoming festive season, we expect to see major retail developers competing with heavy promotions and themed shopping events in a bid draw consumers and capture their holiday spending.