Market Research B A N G KO K R E TA I L M A R K E T BANGKOK RETAIL MARKET HIGHLIGHTS | 4 th q u arter | 2 0 0 8
c o l l i e r s i n t e r n at i o n a l
| T H AILAN D
The Knowledge Report B AN G KO K r e ta i l M A R K E T |
4 th Q u a rt e r
|
2008
BANGKOK RETAIL MARKET HIGHLIGHTS • Retailers cannot expect profit growth in 2009 to match that of 2008, as the slowdown in consumer spending drives them to increase discounting and promotional campaign spending to attract buyers, thus cutting into gross profit margins. Market Indicators Q4 2008 Q1 2009F
SUPPLY DEMAND rental rate occupancy rate
• The total supply of Bangkok retail space as at the end of 2008 was 4.97 million square metres. The majority of this was shopping malls, accounting for 2.98 million sq m of the total Bangkok retail supply, followed by hypermarkets and community malls, accounting for 0.67 million sq m and 0.38 million sq m, respectively. • The largest share of retail space is concentrated in Suburban Bangkok, representing about 2.34 million sq m. The Outer City area and the City area account for 1.36 million sq m and 1.23 million sq m, respectively. • The overall occupancy rate in the retail market was still high, averaging 94.67% as of 2008. • The average rental rate for retail space varies depending on location and business category. The highest rental rates tend to be for fashion outlets in the City area, with the average rental rate of THB 1,800 – 2,800 / sq m / month, whilst the lowest rental rates tend to be for supermarkets, ranging from THB 300 – 400 / sq m / month. • Prospects for the retail market do not appear bright for the remainder of 2009. While shortterm Government-led boosts to consumer spending will help to some extent, overall purchasing power and consumer confidence are flagging in the face of continued economic and employment uncertainties.
Although, customers have been spending less money because of the global economic crisis which has affected the Thai economy and has contributed to a decline in consumer purchasing power, the retail market keeps expanding as indicated by the new supply projected from 2009, as well as an increase in branches planned by various brands, especially in 2009.
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The Knowledge Report | 4th Quarter | 2008 | Bangkok Retail Market
BANGKOK RETAIL MARKET OVERVIEW Supply Trends Due to the pinch of the global economic downturn in 2008, consumers have been cutting back on their spending and changing their buying behaviour to save money. Retailers hoped for gains during the festive season in December 2008, but massive lay-offs, slumping home prices and tight credit kept shoppers tight-fisted. Consumers are not confident about their work status. In the end of the year and continuing into the new year, retailers are trying to encourage consumer spending through sales and other
promotions. Retailers are cautiously optimistic that the year 2009 will bring improved sales, especially with the boost given by the new Government’s THB 2,000 cash hand-out, but without better employment prospects, it is very hard to have confident shoppers to go and spend. As a result, 2009 will be a challenging year for retailers as well as retail developers.
Total Current Supply The total supply of Bangkok retail space as at the end of the year 2008 was 4,968,228 square metres. The majority was shopping malls, accounting for 2,976,665 sq m of the total Bangkok retail
supply, followed by the hypermarket and community mall, accounting for 669,950 sq m and 367,401 sq m, respectively.
Figure 1 : Supply of retail space by category, Q4 2008
Source : Colliers International Thailand Research
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The Knowledge Report | 4th Quarter | 2008 | Bangkok Retail Market
Around half of Bangkok’s retail space is found in Suburban
Bangkok and half in the City and Outer City areas.
Figure 2 : Supply of retail space by location, Q4 2008
Source : Colliers International Thailand Research
Future Supply Despite the economic slowdown, developers have announced plans that will see the supply of retail space continue to increase every year, within total projected new supply of 1,355,837 sq m planned to come onstream by 2013. Based on the above plans, in 2009, there will be an additional 687,194 sq m. or 13.83% of the total supply in 2008, with another 116,200 sq m to be added in 2010, and approximately 552,453 sq m planned for 2011 or later.
packages approved by the Government are also designed to spur investment by the private sector. Instead of relying on the Government’s stimulus measures, retail developers will need their own strategies to stimulate the consumer spending, particularly given the huge increase in new development planned for this sector, amounting to some with Suburban Bangkok projected to have an additional 560,316 sq m by 2011, followed by the Outer City area with 489,145 sq m and the City area, with approximately 306,376 sq m.
The new Government is active in launching various campaigns and measures to stimulate the economy and to bolster the confidence of consumers. The pump-priming and social welfare
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The Knowledge Report | 4th Quarter | 2008 | Bangkok Retail Market
Figure 3 : Future new supply of retail space by location, 2009 -2013f
Source : Colliers International Thailand Research
Demand Trends Although, customers have been spending less money because of the global economic crisis which has affected the Thai economy and has contributed to a decline in consumer purchasing power,
the retail market keeps expanding as indicated by the new supply projected from 2009, as well as an increase in branches planned by various brands, especially in 2009.
Occupancy and Rental Rates In the year 2008, despite the opening of several new retail centres such as Chamchuri Square, The Horizon and The Park,
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the overall occupancy rate in the retail market was still high, averaging 94.67%
• City Area
The City area has a well diversified demand base, comprising international tourists, business travellers
• Outer City Area
The average occupancy rate in this area was approximately 95.45%, as of Q4 2008.
• Suburban Bangkok
Although 49% of total supply is in this area, the overall occupancy rate is quite high at 93.96%, but in the year
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and Thais, and the overall occupancy rate has remained high at 95.19%, as at Q4 2008.
2009 the occupancy rate may be lower, because of the large amount of new supply that will be added.
The Knowledge Report | 4th Quarter | 2008 | Bangkok Retail Market
The rental rate of retail centres varies depending on location, with both vehicular and foot traffic being major determinants. The average rental rate for retail space in the City area decreased by on average 13% in 2008, while the average rental rate of retail space in Outer City area and Surburban Bangkok decreased in
the range of 10% - 12% as retail developers offered discounts to maintain their retail tenants during the period of economic uncertainty.
Table 1 : Average rental rate for retail space by location, Q4 2008
Location
Average rental rate (THB / sq m / month)
City Area
1,400 – 2,500
Outer City Area
1,200 – 2,000
Suburban Bangkok Area
800 – 1,200
Note : The average rental rate is based on the rent that an established brand can expect to pay for a medium location on the ground floor of the retail centre with the average size of 50 sq m. Source : Colliers International Thailand Research
While location is the most important factor in determining the rental rate, the rent that different types of retail business can spend and the size of the space are also important. The rental rate of retail space has decreased more in some business categories, especially in the fashion, beauty salon and restaurant sectors, as
many customers are putting off non-essential purchases. Below is the approximate rental rate typically paid by each type of retail business.
Table 2 : Average rental rate for retail space by type of retail business, Q4 2008
Business Category Fashion Restaurant Banking Fitness Centre Coffee Shop Bookshop
Average rental rate (THB / sq m / month) 1,800 – 2,800 800 – 1,400 1,500 – 3,000 300 – 600 1,000 – 2,000 500 – 1,000
Supermarket
300 – 400
Beauty Salon
900 – 1,000
Services eg. Mobile, Laundry, Post Office, Flower Shop
1,000 – 1,300
Source : Colliers International Thailand Research
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The Knowledge Report | 4th Quarter | 2008 | Bangkok Retail Market
Outlook: Prospects for the immediate future of the retail business depend to some extent on the ability of the Thai Government to stimulate an economy where purchasing power and consumer confidence is flagging. The new Government has announced various plans to boost consumer spending, some of which will have a short-term impact on retailing, but the long-term effect remains to be seen. If the overall global economy remains in a period of recession, as most observers expect, it is unlikely that purchasing power will return to the Thai market strongly within 2009.
293 offices in 61 countries on 6 continents USA 99 Canada 19 Latin America 18 Asia Pacific 62 EMEA 95 US$ 2 billion in annual revenue 868 million square feet under management 11,048 Professionals
Nevertheless, plans for new development of retail centres have not seen a sharp downturn as yet. In the period 2009 – 2011, developers have announced substantial new plans, especially in the Suburban Bangkok area, for new shopping
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