Q1 2011 | Retail

thailand

Bangkok RETAIL Market

Bangkok Retail Market Executive Summary Supply growth slowing q/q for Q1 2011 with just around 14,180 sq m being completed, all being community malls. Rentals rates escalated q/q by around 4% and take up increased by approximately 1% for the same period. Consumer confidence and spending over the past year are positively affecting the retail sector as a whole. market indicators Q4 2010/Q1 2011 new Supply RENTALS Occupancy

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The trend is not only the development of new retail centres but the renovation of older buildings with outdated retail designs and mix. This flight to the top can only be of benefit to customers and the sector as a whole. The area encompassing the northern part of the neighbouring province of Samut Prakan along with Bang Na, which borders the province in Bangkok’s suburbs, is increasingly being seen as a strategic hub for the wholesale and logistics market due to its location close to the city, Airport and Eastern Seaboard.

Bangkok Retail Market REPORT | Q1 2011

Additional Supply by Quarter

Source: Colliers International Thailand Research

Approximately 14,180 sq m was completed in Q1 2011, with nearly 10,400 sq m located in Suburban Bangkok and the rest in the Outer City area. A section of Central World, including Zen department store, is still undergoing renovation following the damage caused by the fire in May 2010, however CPN announced the closure of Central Ladprao for

Two new community malls opened in Q1 and these remain a very popular and fashionable sector of retail business, especially in the Suburban Bangkok area. One is the “Amorini Boutique Lifestyle Hall” with approximately 5,000 sq m which had its official grand opening on 21 March 2011 and is located in Suburban Bangkok – East. The other is “The Circle Ratchapruk” in Suburban Bangkok – West area. This centre is on the Ratchapruk road in amongst the new high end villa developments that exist or are being constructed. The centre is on one level and

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renovation for six months from 14 February to the end of July 2011. The closing of this center has led to other retail centers attempting to attract customers from Central Ladprao by launching many campaigns and promotions.

contains eclectic architectural designs. On 21 March, Big C started the process to rebrand the Carrefour hypermarkets which the company purchased in 2010. Big C have already announced that 34 branches out of the total of 42 will undergo a rebranding makeover but the remainder will be sold as they are already in close proximity to existing Big C supercentres.

Bangkok Retail Market REPORT | Q1 2011 Breakdown of retail space in Bangkok by location, Q1 2011

Source: Colliers International Thailand Research

Retail developers are trying to develop projects closer to their catchment areas in the suburban areas, where more people live. However only half of total retail space in Bangkok is located in the suburban Bangkok area; with every department store in Bangkok located in the urban area due to

the attraction, as in most cities, of shopping in the centre. Before the advent of cars for the masses the centre was the area that people flocked to for the retail experience. The vast majority of luxury shops are located in the City Area.

Future Supply Cumulative future supply in Bangkok by year and category, as of Q1 2011

Source: Colliers International Thailand Research

The future supply scheduled to be completed in 2011 amounts to more than 300,000 sq m, with approximately 217,000 sq m as shopping malls. The majority will come from Central Rama 9 which is scheduled to open

in Q4 2011 with around 150,000 sq m of retail space. Approximately 63,000 sq m is expected to be completed in 2012.

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Bangkok Retail Market REPORT | Q1 2011

Outside of Bangkok An area in the province of Samut Prakan but adjacent to the Bangkok Metropolitan area will become a shopping hub. In the eastern part of Bangkok along Bangna – Trad Road, Mega Bangna by Siam Future Development Plc. and IKEA with a total area of approximately 400,000 sq m is scheduled to be opened in Q3 2012 However IKEA with around 40,000 sq m of store space is slated to open by the end of 2011. Currently retail statistics for this area are not contained in this report. Other significant retail centers can be found in the same vicinity, such as SB Design Square, Index Living Mall, Tesco Lotus, Big C in Central Bangna as well as Seacon Square and Paradise Park on Srinakarin

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Road. In addition a developer from China plans to invest up to 45 billion baht in a major wholesale trade centre which will be named “Thai – China International Products City” on Bangna – Trad Road near Suvarnabhumi International Airport with a total space of two million sq m with the first phase of 700,000 sq m scheduled to be opened in October 2012. However this project has come under some controversy from Thai traders who feel the project will crowd Thai products out of the market with an influx of Chinese made ones.

Bangkok Retail Market REPORT | Q1 2011 Demand – Take-up Breakdown of historical take-up rate of retail space by location, Q1 2010 – Q1 2011

Source: Colliers International Thailand Research

Small increases were registered in all zones for Q1 2011. The City and Outer City areas were up by around 0.7 - 0.9% while in the Suburban area an increase of approximately 1.1% was recorded. This reflects the

growing consumer confidence after the difficult local and global events of 2009 and 2010.

Take up rate of current supply by category, Q1 2011

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 that the retail component supports. Lower levels of office occupancy over the past few years

account for this as this means less people using the outlets. In some situations the space for supporting retail is too large for the size of the office it supports and some convert to office use or other functions such as educational/training centres.

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Bangkok Retail Market REPORT | Q1 2011 Demand Drivers Focus Consumer Confidence Index (CCI)

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

The slump in consumer confidence for much of 2008 and 2009 was the result of the Global Financial Crisis, which caused Thailand’s GDP to shrink. While confidence began to assume a sustained upward path 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 rising

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trend and Q4 was the highest quarter in the last four years. In Q1 2011 this fell from Q4 by approximately 24%, due to many factors, such as the unrest in the Middle East and North Africa, seismic disasters in Japan and Myanmar, rising oil prices and floods in southern Thailand.

Bangkok Retail Market REPORT | Q1 2011 Retail Sales Retail sales index by quarter

Source: Bank of Thailand, Colliers International Thailand Research Remark: Year 2002 = 100, E = Estimated by Colliers International Research

The protests in Q2 2010 had impacted the retail market but in Q3 2010 the overall pattern of spending returned, and this shows optimism for the future. For Q4 2010, the Bank of Thailand forecast retail sales showing the highest levels in the last five years, even compared to the previous Christmas and New Year holiday seasons.

recent numbers indicate a fall in spending during the protests and a pickup in Q3 2010. The fourth quarter, the last quarter of the year, includes the Christmas and New Year festivals, so credit card usage volume in this quarter of every year is usually the highest.

Credit card usage over the past five years has increased by around 60%, and these cards are more often used in organized retail centers. The

Trends Digital retails The National Electronics and Computer Technology Center (NECTEC) reported the number of internet users in Thailand in 2010, based on survey results from www.truehits.com, to be more than 21 million, an increase of nearly 15% from 18.3 million people in 2009; and according to the NECTEC report the number of internet users is at around 33% of the population in Thailand with a greater number expected for Bangkok. Retail developers are therefore looking at opportunities to expand their sales channels, by opening their own online stores. However the number of Thais who shop online is still lower than many countries in Asia. The air conditioned shopping experience in Thailand reflects a way of life that includes a significant entertainment component which allows family and friends to enjoy their time together out of the tropical heat and the internet will have difficulty competing with this for some time to come.

and will promote more than 30,000 products in 11 categories. They also plan to increase the number of products available for online shopping to about 100,000 next year. Central group launched their own shopping online website, www.central. co.th in which TNT will be responsible for the logistics. Big C also have a website for shopping online www.atbigclick.com, but buyers must go to a Big C outlet to pick up the product. In addition to the major retail players there are new entrants into the market such as “Uber Mall” the first 3D shopping mall online and www.2010MegaSale.com by Kasikorn Bank. A survey by Master Card Worldwide found that Thai people are interested in shopping online, with an average value of products bought online increasing to 18,150 baht per person, more than the last survey of approximately 5,000 baht.

In the last quarter of 2010 two big players in retail business stepped into the online shopping business. The Mall Group officially launched the M Online Department Store (Mods: www.mods.co.th) on December 8 2010

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Bangkok Retail Market REPORT | Q1 2011 Rentals Rental rate during the year Q1 2010 – Q1 2011

Source: Colliers International Thailand Research

The rental rates in every area increased around the 4% mark q/q for Q1 2011 reflecting the growing confidence in the retail sector and the affect

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of renovations of older properties.

Bangkok Retail Market REPORT | Q1 2011 SWOT Analysis Strengths Retail centres are places not only for shopping but entertainment locations in their own right. Bangkok scores well in this regard and can grow from this in further enhancing the retail experience. Even in times of uncertainty shopping still remains a key focus of people’s lives as well as a necessary activity and therefore the sector is more immune from cyclical events than other sectors. Many centres are undergoing renovation and this adds to the retail experience as well as increasing rental rates. Improved design helps to increase traffic flow to the upper floors of a modern retail centre and therefore this allows higher rental rates to be charged.

Weaknesses Many retail centers in Bangkok have been open for more than 15 years and many more are in a state of decay, obsolete, or with bad layout and retail mix, therefore developers and owners are starting to renovate or re arrange the layout and concept again in the next few years. With limited players in the retail market the design of retail centres may need to be refreshed. More innovation in the architecture of retail centres, especially Community Malls would help to invigorate the market and add to the Bangkok shopping experience.

Opportunities The opening up of ASEAN economies culminating in the Asian Economic Area in 2015 could lead to a greater demand for wholesale centers to cater for growing trade. The Chinese project in Bang-Na is a reflection of this. The development of new condominiums in previous Greenfield or older development areas presents continued opportunities for the creation of community centres catering for these new population clusters. Future relaxation of zoning restrictions based on a new census should allow for the further development of larger scale retail and entertainment centres outside of the city centre.

Threats Current global economic uncertainties and a looming general election still haunt sentiment going forward. Future restrictions on the development of large scale retail centres in the centre could stymie growth in the main shopping area of Bangkok. However a move from quantity to quality by the constant innovative redevelopment of existing retail space could lead to further dynamism. Consolidation of the Hypermarket sector into effectively two main players could lead to more monopolistic practices. However a duopoly can be just as competitive and consumers have other choices such as department stores and community malls if price becomes a problem.

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Bangkok Retail Market REPORT | Q1 2011

APPENDIX

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Bangkok Retail Market REPORT | Q1 2011 Retail Locations

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

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Bangkok Retail Market REPORT | Q1 2011 COLLIERS INTERNATIONAL THAILAND MANAGEMENT TEAM

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researcher:

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Thailand Antony Picon Associate Director | Research email [email protected]

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