Record high in international leasing activity

• The net absorption witnessed a significant decrease from a slowdown in leasing activity across Prime retail centres outside the CBA, as developers began implementing asset enhancement plans for these properties. However, centres in the CBA continue to show resilience, maintaining a high level of net absorption at around 35,000 sqm, only a slight drop from the previous quarter.
• Demand from international tenants showed remarkable strength, with a total of 120 deals recorded. The number of deals in the quarter alone surpassed the full-year figures of 2021 and 2022 and was equivalent to 85.1% of the figure from 2023. This surge in demand from international brands, particularly in the CBA, complemented the top-of-the-market supply that entered the market in 2023.

New openings and refurbishments lead to market fluctuations

• In 1Q24, Bangkok’s retail market registered the addition of three Prime retail centres, totalling 44,200 sqm. Erawan Bangkok and Gaysorn Amarin now house luxury-segment tenants, while the remaining part of EmSphere has introduced entertainment venues. However, with Central Rattanathibet undergoing renovation, the overall Prime retail stock recorded a decrease of 0.8% q-o-q to 3,679,500 sqm.
• By the end of 2024, a significant amount of new supply is expected, along with upcoming renovation plans. This could result in a temporary increase in the market vacancy rate during the first two quarters. However, due to favourable retail sentiment and footfall, it is anticipated that the overall vacancy rate will improve as tenants slowly occupy vacant spaces, leading to market stabilisation.

Rent growth continues to accelerate

• The opening of new projects in the CBA, along with the refurbishment of Prime Grade retail centres across Bangkok, has propelled capital values. Counterbalanced with significant improvements in both gross and net effective rent in 1Q24, the market yield remained stable at 8.85%.
• While we anticipated constant growth in overall gross rent, these increases were primarily driven by rents in new competition projects, which will also lead to an overall increase in capital values. As the growth in net effective rent is expected to moderate, a slight compression in market yield is anticipated in the near term.

Outlook: Retail activities focus on the CBA

• With a promising start in 2024, international tourist arrivals surpassed the government’s forecast and reached 9.4 million people in 1Q24. Tourists are expected to remain a key demand driver for Prime retail centres in the CBA. Conversely, leasing activities outside the CBA are likely to decelerate as landlords seek improvements in their portfolios.
• As competition intensifies after supply additions, developers are poised to seek alternative selling points, such as offering fresh experiences and attracting place-making tenants that can provide a competitive edge. This trend will be reflected in both future projects and the renovation plans for ageing centres scheduled for this year.