Absorption positive following healthy demand for new supply

• Prime net absorption totalled around 45,900 sqm, mainly due to healthy demand for the recently completed project, Terminal 21 Rama III, which demonstrated successful leasing management with over 98% occupancy rate achieved. Moreover, the return of tourists increased foot traffic in key destination retail centres, which also boosted demand in prime retail centres.
• In 4Q22, the recovery of footfall and the rise in consumer confidence drove positive demand, with more than 27 brands officially announcing plans to open new stores. The notable brands with store openings or expansions in the quarter included SUSHIRO, Gugu Chicken and Saemaeul.

New completion increases Bangkok’s prime retail stock

• Prime grade stock increased by 40,000 sqm after the completion of one centre, Terminal 21 Rama III. As a result, prime grade stock rose by 1.1% q-o-q and 1.0% y-o-y to about 3,672,000 sqm NLA in 4Q22.
• Vacancy rate in 4Q22 declined to 4.9%, which showed a positive demand in prime grade retail centres. This was driven mainly by the healthy demand for recent completions, together with the footfall increase due to the return of tourists during the peak season.

Increasing operating expenses limit rental growth

• The return of footfall and asset enhancement, together with the increase in consumer confidence, resulted in rental growth improvement. As a result, prime grade gross rent increased slightly by 0.7% q-o-q and 2.1% y-o-y to THB 2,292 per sqm per month. Meanwhile, higher inflation rate, economic uncertainty and the increase in CAM fees raised operating expenses, which limited rental growth.
• Prime capital value slightly declined to THB 186,060 per sqm, decreasing by -0.7% q-o-q and 5.0% y-o-y due to the increase in market yield from the raised interest rate. This was then reflected in the higher cost of financing.

Outlook: Old assets forced to enhance in the competitive market

• In view of the large upcoming supply, more than four old prime centres have announced plans to refurbish their centres in 2023 in order to fulfil consumer lifestyle needs, which will likely result in some tenants moving out, and this is expected to increase the vacancy rate in the near term. 
• New supply over the next 12 months will come from five projects including ICONSIAM Phase 2, Central Ramindra Renovation, One Bangkok, Siam Piwat Outlet (PHASE II) and Central WestVille, adding a total of 305,460 sqm to prime stock by the end of 2023.