Bangkok to see three new retail projects in the next 12 months | Real Estate Asia
, Thailand

Bangkok to see three new retail projects in the next 12 months

This will add over 300,000sqm to the city’s prime retail stock.

Renovation has been ongoing in several retail centres in Bangkok, which are expected to transform into lifestyle destinations and attract international brands to prioritise Thailand as a key target for launching special concept stores. 

Moreover, a JLL report says retailers will likely offer a wide range of products and services both online and offline to improve the customer shopping experience.

“In the next 12 months, three projects are expected to be completed, adding 311,000 sqm to prime retail stock. We expect that new supply and ongoing renovation of malls will lead to an increase in vacancy in the near term, although this should also result in a rental increase after renovations,” the report says.

Here’s more from JLL:

The first quarter saw a significant decrease in absorption at -75,900 sqm, owing to a -99,200 sqm reduction in prime occupied stock. However, the partial completion of renovations in certain malls, notably in the CBA, led to more positive leasing activity in the overall market. In contrast, some non-CBA malls struggled with tenant movement after announcing renovation plans, which limited demand growth.

In the quarter, more than 36 brands officially announced plans to open new stores following the recovery of footfall and consumer confidence. Notable brands that continued to launch their new stores included SUSHIRO, Boost and SSamthing Together.

Renovation projects lead to an increase in vacancy rates

In 1Q23, the addition of 23,300 sqm to prime grade stock was mainly driven by the reopening of Central Ramindra after renovation and the completion of ICS. However, only half of ICS’s total NLA was added due to its soft opening in the quarter. As a result, Bangkok’s prime retail stock stood at 3,595,600 sqm.

Prime grade vacancy increased from 4.9% in 4Q22 to 5.0% in 1Q23. The increase in vacancy was primarily attributed to waiting for demand to fill up and renovations in some buildings, which resulted in tenants moving out.

Increasing cost of financing limits rental growth

Prime gross rent dropped slightly by 0.6% q-o-q to THB 2,101 per sqm per month after adjustments following the public reports. However, the rental rate is expected to increase following economic improvement, increased footfall and asset enhancement, while net effective rent growth was limited by the rise in inflation rates and CAM fees, which inflated operating expenses.

Capital value rose slightly to reach THB 186,589 per sqm, increasing by 0.3% q-o-q and decreasing by -2.0% y-o-y in 1Q23 due to asset enhancement, while market yield compressed to 8.9% as capital value increased at a faster rate than rent. Historical yields were adjusted to accurately reflect the actual market.

Note: Bangkok Retail refers to Bangkok's prime retail market.

 

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