Bangkok Retail Market Report Q4 2010

2009 - 2010

Supply

rentalS

Occupancy

Bangkok Retail MaRket RePoRt

thailand

www.colliers.co.th

Bangkok Retail Marketexecutive Summaryaround 185,000 sq m of retail space was completed for the whole of 2010. For Q4 2010, five community malls came online adding approximately 38,000 sq m of space to Bangkok.

the big story of Q4 2010 and probably 2010 was the purchase of Carrefour by the Big C hypermarket chain. this will consolidate the hypermarket sector into something resembling a duopoly between Big C and tesco.

as in the Carrefour bid, some jockeying for position for existing retail centres could occur due to the impending Retail and Wholesale act which will constrain the development of new large retail centres in urban Bangkok.

older retail centres continue to renovate in order to successfully compete with newer retail centres with modern designs.

Small rises in rentals and occupancy were recorded for 2010 despite the dislocations resulting from the protests from March to May.

ongoing demonstrations in the Rajaprasong intersection pose further challenges for retailers in the area and could escalate in what is likely to be a frenetic election year.

year end 2010 | reTaIL

market indicatOrS

Bangkok reTaIL MarkeT rePorT | Q4 2010

COLLIERS INTERNATIONAL | P. 2

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 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 mall5) 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.

hiStOrical Supply



tOtal retail Supply 2007-2010

Source : Colliers international thailand Research

approximately 38,000 sq m was completed in Q4 2010 and a total of approximately 185,000 sq m was completed in 2010, however some projects have been delayed to next year due to the affects of the protests in Q2 of 2010.

Forty two stores of Carrefour in thailand were acquired in Q4 2010 by Big C, a subsidiary of French retailer groupe Casino. after the acquisition

Big C will own 113 hypermarkets in thailand against tesco lotus’s 87 hypermarkets. Big C has no plans to close any of the 42 Carrefour stores although some stores are located in the same area of existing Big C stores.



additional supply for Q4 2010 was provided by five community malls with a total area of around 38,000 sq m. Pure Place Ramkhamhaeng 110

was opened on 10 october 2010 and Park lane Bangkok had its grand opening on 17 november 2010 and is located in the thong lor area.

Since 2007 onwards until 2010, retail space in the outer City area increased by more than 14% while Suburban Bangkok – north area

increased more than 36%, due to lower land prices in these zones and the proximity of these locations to a strong customer base.



additiOnal Supply in 2010 by quarter

breakdOwn Of retail Space in bangkOk by lOcatiOn, q4 2010

tOtal hiStOrical Supply by lOcatiOn tO q4 2010



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.


future Supply


the future supply scheduled to be completed in 2011 is approximately 290,000 sq m with approximately 185,000 sq m as shopping malls and 85,000 sq m is expected to be completed in 2012.

the outer City area still remains the most popular location for retail. in Q4 2011 Central Rama 9 on Ratchadapisek – Rama 9 intersection is scheduled to be completed with a total area of approximately 83,300 sq m, increasing the supply of shopping malls.

terminal 21 is scheduled to be completed in 2011 nearly 35,000 sq m of shopping mall space in the City area. this is likely to herald the end of large scale retail development in the centre for the foreseeable future due to forthcoming restrictions. the new BtS extension line on nut – Bearing, planned to commence commercial operations in Q4 2011 will boost residential projects in the area along the line, so retail developers are likely to pay attention to this location, especially for community malls.


cumulative Of future Supply in bangkOk by year and categOry, aS Of q4 2010




demand – take up

breakdOwn Of hiStOrical take up rate Of retail Space by lOcatiOn, 2005 – 2010

take up rate Of current Supply by categOry, q4 2010



Small increases were registered in all zones for 2010. the City and outer City areas up around 0.3 - 0.4% while in the Suburban area an

increase of approximately 0.4% was recorded.

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 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 centres.


take up rates for retail in Q4 2010 increased q/q in every quarter, albeit slightly. the return of consumer confidence is the likely reason.

the slump in consumer confidence for much of 2008 and 2009 was the result of the global Financial Crisis that caused thailand’s gDP to shrink. While confidence began to take on 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 increasing trend and Q4 is the highest quarter in last four years.


Source : Bureau of trade and economic indices, Colliers international thailand Research

take up rate Of current Supply by lOcatiOn, q1 – q4 2010

cOnSumer cOnfidence index (cci)


demand driverS fOcuS

Source : Bank of thailand, Colliers international thailand ResearchRemark : e = estimated by Colliers international Research

Year 2002 = 100

Source : Bank of thailand, Colliers international thailand ResearchRemark : e = estimated by Colliers international Research

the protests in the previous quarter 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 that will show the highest levels in the last five years, even compared to previous Christmas and new Year holiday seasons.

Credit card usage over the past five years has increased by around 60% and these cards are more often used in organized retail centres. the recent numbers indicate a fall in spending during the protests and a pick

up in Q3 2010. the fourth quarter is the last quarter of the year and includes Christmas and new Year festival, so credit card usage volume in this quarter of every year is usually the highest.


retail SaleS

dOmeStic credit card uSage vOlume


retail SaleS index by quarter

credit card uSage vOlume by quarter


digital retailS

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 this report the number of internet users is at around 33% of the population in thailand. 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.

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 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 and they coordinated with tnt to deliver products to buyers. 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 last survey of approximately 5,000 baht. However the retail experience is not just one of shopping. For many it represents an important form of entertainment both daytime and in the evening and the internet experience is not able to replace this. in a tropical climate, retail centres allow people to walk in a comfortable environment.

trendS

rentalS


the rental rates in every area still remains more or less the same from last year, only in the City area was there a very slight fall due to the

protests in april and May of 2010.

Source: Colliers international thailand Research

rental rate during the year 2000 - 2010


the retail industry is in its typical ‘winter’ boom season with not only Christmas and new Year shopping but also for Chinese new Year, Songkran and Valentines Day. the increase in the minimum wage and is also likely to spur retail spending during this period and beyond it.

Big C won the bidding for 42 stores of Carrefour in thailand and they plan to keep every store, even those located in the same location of Big C. the hypermarket dynamics now consists of primarily a duopoly between Big C and tesco lotus. an issue for the next few quarters will be how the two can target Carrefour’s customer base which tends to be more upmarket. of the two tesco lotus caters more for this market and is therefore likely to have the initial advantage.

Renovation and change is the keyword for retail business in the next few years, as many centres need to refurbish to maintain their customer base in light of newer retail centres providing strong competition. the design of retail centres is radically different from 20 years ago with a greater emphasis on driving visitors up into its higher levels which lead to higher occupancy and rental rates above the first few floors.

the ongoing protests in the Rajaprasong intersection could spell difficulties for retailers in this area as such protests that have begun to take place every two weeks during the busy weekend shopping period

and in the long term could deter shoppers from visiting the area. although what is likely to be an election year will lead to an infusion of money the heat of the campaign will also disrupt normal shopping patterns.

Retail developers will be focusing more on shopping online and improve their websites with more choice and availability. However for the foreseeable future this is likely to complement rather than challenge the existing retail experience. the future of retail in Bangkok will be affected by the impending Retail and Wholesale act, which will address the issue of dominance by large retail centres in the urban areas by restricting new development. the value and importance of existing retail in the centre is likely to increase over time and the various players could be involved in bidding/takeover activity over the coming months and years. Carrefour maybe just the beginning.


fOrecaSt

cOllierS internatiOnal thailand management team

Retail SeRViCeSasharawan Wachananont | Senior Manager ReSiDential SaleS & leaSingnuttaya Junhasavasdikul | Manager PRoJeCt SaleS & MaRketingWasan Rattanakijjanukul | Manager

aDViSoRY SeRViCeSnapatr tienchutima | Manager

oFFiCe & inDUStRial SeRViCeSnarumon Rodsiravoraphat | Senior Manager

Real eState ManageMent SeRViCeSBandid Chayintu | associate Director

aDViSoRY SeRViCeS | HoSPitalitY Jean Marc garret | Director

inVeStMent SeRViCeSnukarn Suwatikul | Senior Manager

ReSeaRCHantony Picon | Senior ManagerSurachet kongcheep | Manager

ValUation & aDViSoRY SeRViCeSnicholas Brown | associate DirectorPhachsanun Phormthananunta | Manager

PattaYa oFFiCeMark Bowling | Sales ManagerSupannee Starojitski | Business Development 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:

thailandantony PiconSenior Manager | Researchemail [email protected]

reSearcher:

thailandSurachet kongcheepManager | Researchemail [email protected]

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Bangkok Retail Market Report Q4 2010