APPD Market Report Article
BangkokMay 31, 2022
Ongoing pandemic continues to limit demand recovery
- Net absorption reached -18,200 sqm, mainly owing to the withdrawal of Peninsula Plaza and poor leasing management in some centres. Moreover, recently opened projects such as the Central Rama 2 expansion in 4Q21, and Central Village phase 2 in 1Q22, have experienced slow take-up amidst the economic uncertainty. The occupancy rates in both new retail spaces stand at about 60%-70% in 1Q22.
- Nevertheless, at least 25 brands have opened a new branch, and two out of these brands have opened a flagship in Bangkok. F&B and Fashion took the majority share of newly occupied space in 1Q22. The notable brands in the quarter include SUSHIRO, Kam’s Roast, Saemaeul, Bang & Olufsen and Don Don Donki.
A new completion increases Bangkok’s retail stock
- Prime grade stock increased by 12,000 sqm after the completion of Central Village phase 2, but the withdrawal of The Peninsula Plaza for redevelopment also decreased the stock by -9,000 sqm, resulting in a net increase of stock by 3,000 sqm. As a result, prime grade stock slightly increased by only 0.1% q-o-q and 2.9% y-o-y in 1Q22.
- With one project withdrawn from the stock and limited demand during the period, prime grade vacancy rate rose by 58 bps q-o-q to 5.5% in 1Q22. Moreover, the ongoing renovation in existing malls such as CentralWorld, The Mall Lifestore Thapra and Seacon Bangkae partially lifted the vacancy rate in the quarter.
E-Commerce competition drives asset enhancement activities
- Despite no further lockdowns in 1Q22, the slow recovery and poor consumer confidence has limited the rental growth in the retail sector. Prime gross rent increased by only 0.4% to THB 2,255 per sqm in 1Q22. The rate in the quarter was still lower than the pre-COVID-19 rate.
- Regardless of the economic uncertainty driven by the pandemic and inflation, prime capital values rose by 7.4%% q-o-q and 5.8% y-o-y to THB 190,230 per sqm in 1Q22. As capital value growth outpaced that of rents, the market yield shrank by -74 bps q-o-q and -117 bps y-o-y.
Outlook: Adaptation and partnership will be key for future retail
- Despite most prime grade projects being developed by highly experienced developers, adaptation and partnerships are expected to become more common in order to share development risk and to help adjust to the fast-moving retail trend.
- New supply over the next 12 months will come from two projects including Terminal 21 Rama 3 and ICONSIAM phase 2. If all two projects are completed as scheduled, a total of 68,300 sqm will be added to prime grade stock by end-2022.