APPD Market Report Article
BangkokNovember 28, 2022
Jeremy O'Sullivan, Head of Research, Thailand
Prime demand continues growth at a slow pace
- A positive inflow of new tenants into existing malls was seen in the quarter, which resulted in an increased net absorption for prime malls. However, this was countered by store closures in some malls. Overall, prime net absorption increased slightly to 69 sqm in 3Q22, marking a gradual return in market activity.
- As of 3Q22, more than 23 brand openings were tracked. Examples include Uniqlo, which has expanded their store in an existing centre, and Cartier, which opened a pop-up store. Other notable brands that opened include SUSHIRO, Saemaeul, Boost Juice and MUJI.
Total prime stock remains unchanged due to delayed construction
- In 3Q22, prime grade retail stock remained stable at approximately 3,631,500 sqm due to delayed construction, which has resulted in developers postponing their opening.
- Despite the presence of new tenant activity, there were several stores in existing malls which closed for partial renovation, hence net absorption only recorded a minimal increase. Vacancy rate remained unchanged at 5.1%.
Economic uncertainty limits rental recovery
- Concerns over the high inflation rate, which has increased cost of living, have limited rental growth. Prime gross rent increased slightly by 0.5% q-o-q and 1.4% y-o-y to THB 2,275 per sqm per month. However, this has yet to reach pre-COVID-19 levels.
- Capital values rose slightly to THB 191,279 per sqm, increasing by 0.2% q-o-q and 6.9% y-o-y due to asset enhancement, which remained the key factor driving asset value. Market yield remained unchanged, due to minimal rental and capital value growth, both of which grew at the same pace.
Outlook: New supply pressures old assets to adapt and enhance
- Due to the large amount of supply coming into the market and limited occupier demand, the majority of retail developers have started to plan new strategies in order to survive and protect their margins. Asset enhancement of old malls is expected, likely showcasing new concepts or adjusting the tenant mix to focus on lifestyle and F&B.
- New supply over the next 12 months will come from two projects – ICONSIAM Phase 2 and Terminal 21 Rama 3. If all two projects are completed as scheduled, a total of 68,000 sqm will be added to prime grade stock by the end of 2022.