colliers bangkok retail market report q2 2011

Q1 2011 / Q2 2011

new Supply

RenTAlS

occupAncy

Bangkok RETaIL MaRkETThAilAnd

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Bangkok Retail MarkethighlighTS

occupancy showed small gains q/q with the winter shopping season helping to propel the market. Buongiorno Italia! Thailand’s world class retailers are looking further afield with Central group having purchased one of Italy’s biggest retailers in Q2.

as the hypermarket sector becomes an effective duopoly some differentiation within each company’s own stores seems to be beginning with use of the word “Extra” to denote higher quality. Community malls proliferate throughout Bangkok and are likely to overtake hypermarkets in terms of retail space in the next few years.

Q2 2011 (half year) | reTaIl

mARkeT indicAToRS

COLLIERS INTERNATIONAL | P. 2

approximately 7,400 sq m was completed in Q2 2011, with nearly 6,000 sq m located in the City area and the rest in the Suburban Bangkok area.

More than 356,000 sq m is scheduled to be completed in the second half of 2011.

“The Junction” by SC asset Corporation Plc. is located in front of their own project “Bangkok Boulevard Ratchada – Ramindra” in Suburban Bangkok – north area. This community mall not only serves their own residential project only but also people who live in the vicinity.

The other centre was “The City Viva” by Sun global asset Co., Ltd. which had its official grand opening on 24 May 2011 and is located in the

City area. This project is located on narathiwas Rajanakarin road in a business area including many office buildings, therefore the project aims to support those who work around the project.

Source: Colliers International Thailand ResearchRemark : E = Estimated supply

hiSToRicAl Supply, AS of Q2 2011

hiSToRicAl Supply

Bangkok reTaIl MarkeT rePorT | Q2 2011 (half year)

BReAkdown of ReTAil SpAce in BAngkok By cATegoRy, AS of Q2 2011


Source: Colliers International Thailand Research

Shopping malls represent the highest share in the market with 60% or more than 3.25 million square meters and 29% of shopping mall space is located in the City area. The second largest share of the market is from hypermarkets with 670,000 million square meters, but most of them or 63% are located in the Suburban Bangkok area.

More residential projects also located in Suburban Bangkok, so retailers

and retail developers are focusing their attention on serving the needs of these residents as nearly 50% of the total residential market is located in the Suburban Bangkok area. Shopping venues also provide a significant amount of family entertainment as they are often frequented in the evenings compared to their counterparts in Europe for example.

The RiSe And RiSe of The communiTy mAll

Supply By locATion, AS of Q2 2011


The community mall is starting to become ubiquitous in Bangkok and it is forecast that by 2013 the total area will match that of hypermarkets. The extensions of mass transit lines and the development of small clustered residential areas in the suburbs necessitate the need for some form of shopping complex that can serve the needs of the local community and also are an advantage for the city as a whole in that people do not need to travel long distances to do their regular shopping. This helps to reduce fuel consumption and thus pollution levels.

Unlike in western countries where a local supermarket would suffice; in asia, Thailand included, the shopping experience is less functional and community malls do not only act as a convenient shopping area but also as a food, beverage and entertainment location for the community. That is why a considerable amount of space in community malls is dedicated to this function. also a number of themed malls are beginning to sprout up appealing to a wider catchment area. These retail areas represent an ever growing presence on the Bangkok shopping scene.



The future supply scheduled to be completed in 2011 amounts to nearly 340,000 sq m, with nearly 257,000 sq m as shopping malls. The majority will come from Central Rama 9 which is scheduled to open in Q4 2011

with around 89,600 sq m of retail space. approximately 693,000 sq m is expected to be completed within 2013.

The majority of future supply will be in the outer City area with approximately 326,000 sq m or half of total future supply scheduled to be completed during the years 2011 – 2013. This is primarily from the introduction of a number of large scale shopping malls including Central Rama 9 and In Square. The City area will continue to be a source of new supply with the introduction of Terminal 21 within this year and Central

Embassy which is scheduled to open in 2013. Central Embassy is located along Ploenchit Road and will extend the existing main retail corridor of Rama 1 further east up to the beginning of Sukhumvit road. The location around Central Embassy, including the noble Ploenchit condominiums will be linked by a skybridge.



cumulATive fuTuRe Supply in BAngkok By yeAR And cATegoRy, AS of Q2 2011

cumulATive fuTuRe Supply in BAngkok By yeAR And locATion, AS of Q2 2011

fuTuRe Supply



BReAkdown of hiSToRicAl TAke-up RATe of ReTAil SpAce By locATion, Q1 2010 – Q2 2011


The effect of the attack in May 2010 on central world still remains a year on after the event. although a significant section of the mall began operations at the end of 2010, another section that was more severely damaged and included Zen department store is slated to reopen in november 2011, according to central group.

central group also spent amount 3,600 million baht to renovate central ladprao and it is scheduled to be completed by the end of 2011.

Seacon Square are spending around 150 million baht to renovate outside the center including the facade, addition of more parking space and work on the area in front of the centre. They plan to complete by 2012.

The mall group plans to renovate Bang kae and Bangkapi branches with a total budget of approximately 500 million baht. The renovation is

scheduled to start in 2011 including in and outside the centre and the water park.

central Bangna set up a budget of nearly 1,000 million baht for the development of a new car park building and renovation of the centre in 2011 which is scheduled to be completed in 2012.

Siam discovery center spent around 100 million baht for the renovation of the sixth and seventh floors to create “The Sky Dining” and “Mood” with a total area of approximately 1,000 square metres. The aim is to provide a chic hangout for trendy Bangkokians.

The take up rate in the all areas in Q2 made slight gains from Q1. The first half of the year contains many excuses for spending such as the January new Year holiday, Chinese new Year, Songkran festival and

“Back to School” events and is a strong period for the retail industry which often reflects itself in higher take up.

RenovATion

demAnd – TAke-up



Take up rate of all categories, except supporting retail, is more than 95%, while the take up rate of Supporting retail was nearly 87%. a number of Supporting retail outlets suffer due to low office occupancy rates that

they are intended to support and do not attract a significant number of people not working in the office.


TAke up RATe of cuRRenT Supply By cATegoRy, Q2 2011

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 2010 witnessed a return to the rising 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, earthquakes in Japan and Myanmar, rising oil prices and floods in southern Thailand.

Political uncertainties prior to the July general election may be the reason for the continued slump in Q2 2011.

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

conSumeR confidence index (cci)

demAnd dRiveRS focuS



ReTAil SAleS index By QuARTeR

RenTAl RATe duRing The yeAR Q1 2010 – Q2 2011

Source: Bank of Thailand, Colliers International Thailand ResearchRemark: Year 2002 = 100


Retail sales in Q1 2011 were similar from the previous quarter, however still higher than the past few years. Christmas, new Year and Chinese new Year as well as Valentines Day during the last quarter of last year and the first quarter of 2011 encourage significant spending in retail

centres. Political disturbances only impact spending in the short term, once the situation stabilizes spending returns. In many ways a vibrant shopping dynamic indicates on the surface that things are back to normal even if tensions remain.

The average rental rates in every area increased around the 1.4% mark q/q for Q2 2011. This was less than the rise of the previous quarter,

which was partially the result of pre-election concerns.


ReTAil SAleS

RenTAlS



TRendS

expAnSion ouTSide of BAngkokMany retailers and retail developers not only expanded in Bangkok but they also focused on upcountry. CPn is scheduled to be open Central Plaza Phitsanulok in october 2011 with a total area of approximately 63,000 sq m. Central Plaza Suratthani is expected to be open in June 2012, Central Festival Chang Mai in 2013, in addition to Central Plaza Chiang Rai which opened in the first quarter of this year. CPn has set a five year plan to invest around 60 billion Baht to open 10 new malls in Thailand within 2015 as well as abroad. In fact in May the company bought a 100% stake in the La Rinascente, operating twelve department stores throughout Italy including the flagship La Rinascente Piazza Duomo in Milan. The company is also set to open stores in China, especially in the second tier cities.

Robinson Department Store also has expansion plans to other provinces in Thailand. The company plans to open in Phitsanulok this year and Supanburi, Suratthani next year; however most of them will located in one part of Centralplaza or Centralfestival.

after Big C took over all Carrefour stores last year they now have 115 stores across the country. However they are still expanding with a new hypermarket in Tak province scheduled to open this year as well as many smaller centres using the Mini Big C and Big C Market brands. Big C changed the name of all Carrefour stores to ‘Big C Extra” on 30 June 2011.This was a requirement by Carrefour as part of the takeover. It remains to be seen what Big C’ intends to do with the ex-Carrefour stores and the use of the word “Extra” may be a stopgap solution or part of a long term strategy.

Tesco Lotus has plans to expand around Thailand with various models, due to some locations not allowed to have a hypermarket. Tesco Lotus changed the sign of the Rama 4 branch to “Tesco Lotus Extra” and this is the first Extra brand in Thailand and they will renovate some stores to the Extra concept. Tesco Lotus Extra is positioned more as a premium retail center with a larger space for branded restaurants. This is probably an effort to capture shoppers from the old Carrefour hypermarkets and compete with the new Big C Extra brand. Carrefour was positioned as slightly more premium than Tesco and Big C so there is now some sort of brand differentiation by each of the two big hypermarket players.

not only big players in retail business made progress, but local retailers, retail developers and residential developers also have had development

plans to develop new shopping malls and community malls in some province around Thailand, especially tourist destination as Hua Hin, Phuket, Pattaya, Chiangmai, Hadyai and Udonthani etc. foRecAST - SpReAding TheiR wingS

Even by global standards Thailand’s retail players can stand proud. The country boasts some of the highest quality shopping experiences both in terms of innovative ideas and strong occupancy and rental rates at its higher floors due to exceptional design. The retail experience is not only limited to Bangkok; Pattaya now has Central Festival which draws crowds far beyond the city, Phuket can boast Jung Ceylon, packed to the rafters on a weekend and the popularity of Palio in khao Yai has reached the point where an entrance fee is now charged. The main retailers are now focusing on Thailand as a whole with retail malls being planned and considered all over the country.

The retail sector now has world class players and as such they are now focusing their attention on the global market. Central group recently purchased outright one of the biggest retailers in Italy and it seems that this pattern will continue as companies feel more confident in extending their reach beyond Thailand.

However the market in Bangkok and its neighbouring provinces still remains a target for new opportunities with further large scale shopping malls expected to dot the landscape of outer Bangkok for some time. at the other extreme the popularity of community malls both in urban and suburban Bangkok mean that developers will continue to find areas that require such centres. More of these may become themed and have more innovative designs to appeal to a wider target market than just the immediate neighbourhood.

With the political scene expected to be somewhat calmer than in the past and with the economy continuing to grow, the progress of retail is set to continue. The retail experience permeates far more into the daily lives of people in Thailand than it does in Europe for instance. Retail centres are not only places for shopping but a location where people can socialize and walk, away from the tropical heat. This will provide the foundations for growth in the future along with strong and progressive local players.



Appendix


ReTAil locATionS

ReTAil mARkeT cATegoRieSThe organized retail market in Thailand can be divided into seven main categories, based on size, characteristics, goods sold, and pricing:1) Shopping mall / Shopping centre2) 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 Stores6) 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.



collieRS inTeRnATionAl ThAilAnd mAnAgemenT TeAm

RETaIL SERVICESasharawan Wachananont | Senior Manager oFFICE & InDUSTRIaL SERVICESnarumon Rodsiravoraphat | Senior Manager aDVISoRY SERVICES | HoSPITaLITY Jean Marc garret | Director PRoJECT SaLES & MaRkETIngMonchai orawongpaisan | Senior Manager RESIDEnTIaL SaLES & LEaSIngSunate Lawskul | Senior Manager aDVISoRY SERVICESnapatr Tienchutima | associate Director

REaL ESTaTE ManagEMEnT SERVICESBandid Chayintu | associate Director

InVESTMEnT SERVICESnukarn Suwatikul | associate Director Wasan Rattanakijjanukul | Senior Manager

RESEaRCHantony Picon | associate DirectorSurachet kongcheep | Senior Manager

VaLUaTIon & aDVISoRY SERVICESnicholas Brown | associate DirectorPhachsanun Phormthananunta | associate Director Santipong kreemaha | Senior Manager Wanida Suksuwan | Manager PaTTaYa oFFICEMark Bowling | Senior Sales ManagerSupannee Starojitski | Senior Business Development Manager / office Manager

CollIerS InTernaTIonal ThaIland:

Bangkok office 17/F Ploenchit Center, 2 Sukhumvit Road, klongtoey,Bangkok 10110 ThailandTel +662 656 7000fAx +662 656 7111 emAil [email protected] Pattaya office 519/4-5, Pattaya Second Road (opposite Central Festival Pattaya Beach), nongprue, Banglamung, Chonburi 20150Tel +6638 427 771fAx +6638 427 772 emAil [email protected]

ReSeARcheR:

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colliers bangkok retail market report q2 2011

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