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Q3 2010 | RETAIL

thailand

Bangkok Retail Market Report

Bangkok Retail Market Executive Summary It was nearly business as usual for the prime shopping area of Bangkok as Central World partially reopened at the end of Q3 2010 with the rest of the iconic shopping centre space set to be available by the end of 2010, except for Zen Department store. Rentals rates remained stable with a slight fall being recorded in the centre due to the protests occurring there. market indicators Q2-Q3 2010 Supply Demand Rentals occupancy

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Around 24,000 sq m of retail space was completed in Q3 2010 and a further 28,000 sq m is scheduled to come online in Q4 2010. Refurbishment of older shopping centres is pressuring other centres to revamp to maintain customer interest.


BANGKOK RETAIL MARKET REPORT | Q3 2010 Retail Locations

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BANGKOK RETAIL MARKET REPORT | Q3 2010 Retail Market Categories HISTORICAL BY YEAR The organized retail market in Thailand can be divided into seven main SUPPLY Note: For the purposes of the report retail refers to organized retail categories, based on size, characteristics, goods sold, and pricing. services and excludes traditional single proprietor outlets often located in shophouses and markets consisting of predominantly small traders. 1) Shopping Mall / Shopping Centre Also supermarkets have been excluded from this report. 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

Historical Supply cumulative supply in Bangkok

Source: Colliers International Thailand Research Remark : E = Estimated supply

Almost 24,000 sq m was completed in Q3 2010 and approximately 28,000 sq m. is scheduled to be completed in Q4 2010, however some projects may be delayed due to the affects of the protests in April and May.

open to the public. CPN plans to open the whole of Central World at the end of 2010 and August 2011 for Zen Department Store, which was almost completely destroyed.

Central World reopened its doors again on 28 September after heavily damage by fires during rioting on May 19 although not all space has been

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BANGKOK RETAIL MARKET REPORT | Q3 2010

Additional supply in 2010 by quarter

Source: Colliers International Thailand Research

Additional supply for Q3 2010 was provided by just two retail centres with most coming from The Supreme Complex community mall in Samsen road in the Outer City area. A number of small community malls

and supporting retail centres are scheduled to open their doors in Q4 2010.

Breakdown of retail space in Bangkok by location, Q3 2010

Source: Colliers International Thailand Research

Since 2007 onwards until Q3 2010, retail space in the Outer City area increased by more than 14% while Suburban Bangkok – North area

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increased more than 36%, due to lower land prices in these zones and the proximity of these locations to a strong customer base.


BANGKOK RETAIL MARKET REPORT | Q3 2010

proportion of retail space in bangkok by location

Source: Colliers International Thailand Research

Retail developers are trying to develop retail projects closer to their catchment areas, so almost the half of total retail space in Bangkok area is located in the suburban Bangkok area, as most of residential area are in suburban Bangkok. Also cheaper and available land allows for larger scale shopping centres and hypermarkets. Suburban Bangkok North area showed rapid growth in 2008 and 2009 with an increase of around 35% from 2007. Central Cheangwattana, Future Park Rangsit, Crystal Design Centre and Esplanade 2 provided the bulk of this increase.

Carrefour, the French hypermarket chain, has stepped back from Thailand, Singapore and Malaysia, and they seeking bids for their properties. Carrefour had 44 stores in Thailand and hope to sell all by the end of 2010. Central Group and Berli Jucker are the remaining bidders after PTT withdrew. If Central group win the bidding they may close some stores in the same location as Big C in which they part own. If Berli Jucker, part of the TCC Group, win the auction they plan to keep the stores and renovate them.

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BANGKOK RETAIL MARKET REPORT | Q3 2010 Future SupplY Breakdown of future supply in Bangkok by year and category, Q3 2010

Source: Colliers International Thailand Research

The future supply scheduled to be completed in 2012 is approximately 355,000 sq m and more than 28,000 sq n is expected to be completed in Q4 2010, with approximately 15,800 sq m as community malls. The Outer City area still remains the most popular location for retail. In Q4 2011 Central Rama 9 on Ratchadapisek – Rama 9 Intersection is scheduled to be completed with a total area of approximately 120,000 sq m, increasing the supply of shopping malls. Alongside Central Rama 9 other retail projects are under development, such as Gateway Ekkamai, JJ Center and The Nine.

Refurbishment of existing retail centres Paradise Park opened its doors in Q2 2010 after an overhaul and renaming from the original Seri Center. Future Park Rangsit spent around 1 billion baht and took 3 years for renovation to be completed in October 2009. Fashion Island is still in the process of renovation and is planned to be completed in 2011. CPN plans to revamp Central Ladprao beginning in February next year after Central World is 100% completed at the end of this year. Other CPN centres are planned to be renovated in the future. In the centre Siam Discovery is being partially refurbished and will include Madame Tussauds, a premier worldwide tourist attraction that will further enhance Rama I as the premier shopping and entertainment area in Bangkok. Future Park Bangkae closed its centre in August 2010 for renovation after Seacon Development Plc. Bought the property from Thai Asset Management Corporation (TAMC) in the second quarter of this year. The company aims to complete renovation within early next year, after the renovation the centre may be a new magnet in this area, as the popular theme park “Yo Yo Land” in Seacon Square will also be located in this centre.

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Terminal 21 by Land & Houses was scheduled to be completed in 2011 and will add more than 35,000 sq m of shopping mall space in the City area. The new BTS extension line On Nut – Bearing, planned to commence commercial operations next year will boost up residential projects in the area along the line, so retail developers are likely to pay attention to this location.


BANGKOK RETAIL MARKET REPORT | Q3 2010 Demand – Take up Breakdown of historical take up rate of retail space by location, 2000 – Q3 2010

Source: Colliers International Thailand Research

Small decreases were registered in all zones q/q. The City and Outer City areas fell around -0.6% while in the Suburban area a -0.4% was

recorded. This is likely to be an effect of the troubles in Q2 2010.

Take up rate of current supply by category, Q3 2010

Source: Colliers International Thailand Research

Take up rate of all categories, except supporting retail, is more than 95%. Supporting retail commands only 85% and can be explained by the reliance on custom from workers in the offices the retail component supports. Low levels of office occupancy over the past few years account

for this as this means less people using the outlets. In some situations the amount of space for supporting retail is too large for the office space and some convert to office space or training centres.

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BANGKOK RETAIL MARKET REPORT | Q3 2010

Take up rate of current supply by location, Q1 – Q3 2010

Source : Colliers International Thailand Research

Take up rates for retail in Q3 2010 fell q/q except for the Suburban Bangkok - West and North areas only which increased from Q2 by a

negligible 0.1%. In the future these two areas will be the focus of attention due to the amount of residential development taking place.

Demand Drivers Focus Consumer Confidence Index (CCI)

Source : Bureau of Trade and Economic Indices, Colliers International Thailand Research

The falls in consumer confidence from 2003 until the present day reflect the ongoing political uncertainty in the country, various health outbreaks such as bird flu and the economic downturn that occurred at the end of the decade. While confidence began to take on a sustained upward path

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in the winter period of 09/10, this was severely dented following the protests in April and May. However Q3 witnessed a return to the increasing trend.


BANGKOK RETAIL MARKET REPORT | Q3 2010

Retail sales

Source : Bank of Thailand, Colliers International Thailand Research

The protests in the previous quarter had impacted the retail market but in Q3 2010 the overall pattern of spending returned and this shows

optimism for the future.

Domestic credit card usage volume

Source : Bank of Thailand, Colliers International Thailand Research

Credit card usage over the past five years has increased more than 198% and these cards are often used in organized retail centres. The recent

numbers indicate a fall in spending during the protests and a pick up in Q3 2010.

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BANGKOK RETAIL MARKET REPORT | Q3 2010 Trends Percentage of urban shoppers using Hypermarkets regularly

Source: Retail and Shopper Trends Asia Pacific 2010, The Nielsen Company

Thailand ranks high when it comes to shopping in hypermarkets. The key is likely to be that these centres offer not only the opportunity to stock up for the week but also offer a whole range of services and resemble shopping centres in some ways, even sometimes including

elaborate food courts. Hypermarkets in many senses double up as community malls providing family entertainment facilities for the local community.

Rentals Rental rate

Source: Colliers International Thailand Research

The rental rates in every area still remains the same from the last quarter, although in the City area which was affected by the protest violence, a

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decrease of 2% was registered for Q3 perhaps as a spur to keep tenants in this location.


BANGKOK RETAIL MARKET REPORT | Q3 2010 Forecast As Q4 begins the retail experience in the centre has largely returned to its previous frenetic atmosphere as shoppers ignore the occasional bomb, security checks and still visible damage from the events of May 19. As Christmas and New Year approaches Q4 promises to be another bumper period for the retail industry. When the future status of Carrefour’s existing stores still in the balance the winning bid will have an affect on the hypermarket structure. As of the end of Q3, two players remain in the race. One is Central Group which is likely to introduce its partially owned Big C superstore in current Carrefour locations if none are currently in the vicinity. For locations where a Big C is already in competition a complementary retail/ entertainment centre is likely to be introduced. The other bidder, Berli Jucker, is not currently involved directly in retailing and is therefore expected to find an experienced retail partner probably within Thailand but a foreign retailer cannot be discounted. Some centres have completed renovation, or in the process or planning for this. As one centre undertakes this task, this puts pressure on neighbourhood centres to do likewise, producing a snowball effect, although the decision is also based on a successful extension of a leasehold contract for another 30 years thus justifying the expense involved.

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BANGKOK RETAIL MARKET REPORT | Q3 2010 COLLIERS INTERNATIONAL THAILAND MANAGEMENT TEAM PROJECT SALES & MARKETING Wasan Rattanakijjanukul | Manager ADVISORY SERVICES Napatr Tienchutima | Manager OFFICE, INDUSTRIAL & RETAIL SERVICES Narumon Rodsiravoraphat | Senior Manager

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ADVISORY SERVICES | HOSPITALITY Jean Marc Garret | Director INVESTMENT SERVICES Nukarn Suwatikul | Senior Manager RESIDENTIAL SALES & LEASING Patima Jeerapaet | Managing Director RESEARCH Antony Picon | Senior Manager Surachet Kongcheep | Manager VALUATION & ADVISORY SERVICES Nicholas Brown | Associate Director Phachsanun Phormthananunta | Manager PATTAYA OFFICE Mark Bowling | Sales Manager Supannee Starojitski | Business Development Manager

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researcher:

researcher:

Thailand Antony Picon Senior Manager | Research email antony.picon@colliers.com

Thailand Surachet Kongcheep Manager | Research email surachet.kongcheep@colliers.com

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Bangkok Retail Market Report Q3-2010