APPD Market Report Article

Bangkok

February 28, 2022

-2.6%

THB 2,245

Rents
Falling

Positive net absorption observed following release from lockdown

  • Prime grade net absorption recorded a positive figure of 77,300 sqm in 4Q21, mainly owing to the completion of the Central Rama 2 expansion and The Mall Lifestore Thapra Renovation. Both malls demonstrated successful leasing management with over 85%-95% occupancy rate, especially considering the prevailing COVID-19 uncertainty. Moreover, an increase in F&B brands could be observed in both centres.
  • Due to new completions in 4Q21, several brands had expanded the number of branches including The Alley, OWNDAYS, Boon Tong Kee, Breadtalk. Apart from the new tenant in new centres, there were notable brands that had significantly expanded during this period including Mr. DIY, SUSHIRO, Don Don Donki and Boost Juice.

Two new completions drive an increase in prime stock

  • In 4Q21, prime grade retail stock increased to 3.6 million sqm after the completion of two projects including Central Rama 2 expansion (10,000 sqm NLA) and The Mall Lifestore Thapra (88,000 sqm NLA). Central Rama 2 expansion was mainly focused on new F&B tenants, while the Mall Lifestore Thapra was the 2nd centre of the Mall group which was significantly renovated with the new “lifestore” concept.
  • Despite net absorption being positive in 4Q21, the vacancy rate largely rose from 4.5% to 4.9% primarily due to the outflow of tenants in some retail centres, For example, Zpell at Future Park, Emporium, and Central Pinklao. Most closed-down stores, particularly in education and entertainment category were affected by the lockdown period during the previous quarter.

A new COVID-19 wave has limited the rental recovery

  • In 4Q21, prime grade gross rent remained unchanged at THB 2,245 per sqm per month, but net effective rent increased by 14.2% q-o-q to THB 1,693 per sqm per month due to the end of lockdown restrictions and the reopening of the country for vaccinated visitors. However, rent still decreased by -3.1% y-o-y. The economic slowdown and the uncertainty caused by COVID-19 restrained leasing activity.
  • Capital Value slightly rose by 0.2% q-o-q and 2.7% y-o-y to THB 198,352 per sqm. Capital value growth was positive due to the asset enhancement and expansion in several retail centres. For example, about THB 3,000 million by the Mall group was invested for The Mall Lifestore Thapra Renovation and about THB 1,200 million by CPN was invested for Central Rama 2 renovation and expansion.

Outlook: Retailers forced to adapt in a challenging market

  • Due to challenges in the market, adaptation will be found in most retail businesses. A change in format maybe considered by some specific retailers, while tenants may have alternative products and online platforms for supporting its business and expanding the target customer. Thus, 2022 may be another tough year for retailers and tenants, but a gradual recovery may begin.
  • New supply over the next 12 months will come from two projects including Central Village Phase 2 and Terminal 21 Rama 3. If all four projects are completed as scheduled, a total 68,000 sqm will be added to prime grade stock by the first half of 2022. Apart from these two, there were no new projects announced or completed in 2022.

Note: Bangkok Retail refers to Bangkok's prime retail market.

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