Thai retail market set to roar back with big malls
Consumption, one of the key drivers of the Thai economy, is set to roar back to robust levels with the opening of several large shopping centers in Bangkok where American and foreign brands are popular, with over 81 percent of over 2.2 million square feet of new retail space in 2017 devoted to large and community malls, according to an international real estate analyst.
The significant investment in physical retail space and the affinity among Thais for purchasing in “brick-and-mortar” stores represent a divergence from the global trend towards online shopping, but not a rejection of it. On a parallel track, e-commerce is also on the rise in the Kingdom. Expanding mobile penetration rates – especially outside of large commercial centers such as Bangkok – and the emergence of entrepreneurs, both Thai and regional, developing cyber-commerce sites and platforms are driving strong growth in online consumption.
“All retail developers are concerned about how online and mobile shopping could keep a growing number of people out of brick-and-mortar stores. It is a relatively new trend in Thailand, but most of the big-name retail developers and operators are developing their own mobile applications or platforms for supporting the trend, so that their online and offline businesses will complement each other,” wrote Surachet Kongcheep, associate director for research at Colliers International Thailand, in a guest column in the Bangkok Post newspaper last week.
During the first nine months of 2017, about 60 percent of the new retail space that opened in Bangkok was in shopping malls, while community malls accounted for 21 percent and other retail made up 15 percent. After a burst of development, however, the building of community malls is now slowing, according to Colliers. Nonetheless, the mammoth-sized shopping malls that have come to punctuate the Bangkok landscape also appear to have reached a saturation point.
“The age of the mega-mall may be coming to an end, however. The main retail players are focusing more on smaller formats and categories that can be developed quickly and can be expanded easily to all areas around Thailand,’’ Surachet wrote.
The boom, bubble and bust cycles that are often characteristic of real estate development don’t appear to have hit the Thai retail market yet. In the third quarter of 2017, according to Colliers, the average occupancy rate in the retail sector was 96 percent, an extremely healthy figure and slightly higher than for the same period last year.
Suburban Bangkok malls are nearly fully occupied, according to Colliers, while community malls are struggling to attract famous brands.