Thailand's leading real estate agent

Rocketing retail sector unlikely to slow down

By on Mar 26, 2013 in Property News

In Bangkok and upcountry the market is being fed by both local and foreign sources and fundamentals look sound for continued explosive growth

One of the most promising sectors in Thailand’s property market is undeniably retail. At present there are a total of 6.21 million square metres of retail space across 323 developments in Bangkok. With an occupancy rate of up to 96.5%, the retail market offers good growth prospects over the next five years. According to the Thai Shopping Centres Association, up to 120 billion baht worth of additional investment will be pumped into the retail sector.

The Bangkok retail market has been stable with an average occupancy rate above 90% and retail supply has grown steadily at 5% per year over the last 10 years. In the next five years, retail space is expected to grow by a further 15% to 20%. This year alone, 23 new retail developments are expected to be completed in Bangkok with a total of 441,000 sq m.

There have been many key drivers in this rapid expansion of Thailand’s retail market, both from the demand and supply side.

The first and most obvious supply driver is the expansion of residential domiciles to new and emerging areas, which creates retail opportunities in new locations. Retail trends tend to mirror residential trends in terms of development areas. This has created demand for both large-scale malls and community malls in emerging residential areas.

Demand for large-scale retail is no longer confined to the inner city, as consumers living on the city fringes want the same retail facilities without the need to commute. This has led to the opening of major retail centres such as Mega Bangna. The growth of community malls has also been in part driven by the convenience factor.

Another key supply driver is the growth in the number of retail tenants to support demand for retail space. There has been expansion in both local and new international brands entering Thailand, whether food and beverage or fashion, as well as demand from small startup retail businesses. In the region, F&B has been the fastest growing retail segment in terms of leased space.

Thailand is benefiting from the entry of new international brands with large space requirements, as well as local retailers seeking a more modern setting. In recognising this growth prospect, retail developers have continued launching new developments.

A change in the approach by which developers draw in retailers has also prompted untapped demand. Previously, developers tended to adopt a more passive marketing approach. Today, they are taking a much more active approach to seek out local potential tenants who may not previously have been looking for a space. These include good small businesses or mom-and-pop shops that have the potential to grow in a more organised retail environment and format. By drawing in this new market of retailers, developers are creating new demand and a growing pool of retail tenants to support future supply. There has been great potential for specialty retail businesses such as wholesale garments and furniture in traditional shophouses to move to more modern retail facilities. For example, specialty centres such as Platinum Mall attracted shop owners who previously started off in the old Pratunam market and have moved into a more sophisticated retail format. This not only helped improve the image of their businesses, but also increased their exposure to a wider consumer base. The concept of Platinum has the potential to be replicated in other sectors aside from the fashion industry.

On the demand side from consumers, not only has there been an increase in spending and confidence resulting in retail growth, but factors such as lifestyle evolution and the strength of the tourism market are also key drivers. The lifestyle evolution toward condominium living in a more confined space has inevitably forced consumers to spend more time outside their homes. More time is spent in shopping malls, restaurants or entertainment spots, and this is increasing Thailand’s consumer spending with direct impact on retail sales.

Aside from local demand, the influx of tourists to Bangkok is also creating a rise in domestic spending. With record arrivals of more than 22 million tourists in 2012 and growing further, and the highest recorded credit card expenditures by foreigners in Thailand, the prospects for the country’s retail sector have never been more positive.

In addition to the booming retail sector in Bangkok, there is much more room for expansion in provincial cities for both large-scale malls and community malls. Many key provincial cities started off with big-box retailers such as Tesco Lotus and Big C, but continue to lack other modern retail outlets.

We believe the market is now ripe for modern retail formats that are on par with Bangkok to expand to major provincial cities or secondary cities for smaller-scale malls. Large-scale developers such as Central Pattana Plc are continuing their expansion up-country.

Despite the bright prospects for retail, caution should be taken to manage the growth in this sector to maintain its long-term success. Both retailers and developers should be prepared for future economic downturns. Retail is the first and most affected sector in any downturn. As consumer confidence and spending drops, so does retail demand. At the end of the day, the expansion of each development should always be based on the right fundamentals.

Aliwassa Pathanadabutr is the Managing Director of CBRE Thailand. She can be reached at; Twitter: @CBREThailand; Facebook:

Source : Tha Nation 24 March 2013

Nora has been in the Corporate Communications arena for a number of years. Nora's role is to communicate all newsworthy items that are of a PR nature.

No comment


emailSubscribe Via Email

Privacy guaranteed. We will not share your information.

Follow Me on Twitter

Follow Me on Facebook

Subscribe via RSS Feed

Copyright © 2021 CBRE (Thailand) Co., Ltd. All Rights Reserved.