New brands continue to drive retail demand

• A prevalent trend in the market has been the outperformance of Prime Grade malls compared to non-Prime Grade malls. This trend was also evident in new launches, with robust absorption rates at the time of opening. Furthermore, there is a strong pipeline for Prime Grade supply, with future completions and openings for mega projects such as One Bangkok and Dusit Central Park.
• We expect strong demand for Prime Grade mall supply, driven by tenants and consumers seeking modern, well-located retail spaces. Evolving shopper preferences for convenience, experiences and amenities have boosted this trend. Top retail developers’ new supply is expected to outperform non-specialised developers.

Top-of-the-market supply continues to be the main driver

• We anticipate a substantial influx of supply into the market from various mega projects, such as One Bangkok, Bangkok Mall, Dusit Central Park and North Pole. These developments are poised to introduce a significant amount of new space into the market. As the supply increases due to these mega projects, it is likely that the overall market vacancy rates will also rise.
• We anticipate that malls developed by renowned retail operators will continue to perform well. As a result of their strong track records, they are likely to attract strong footfall and maintain low vacancy rates. Conversely, newer retail developers may encounter challenges with higher vacancy rates in their projects.

Saturated market compresses

• We expect that capital values will experience positive changes due to the revitalisation of ageing Prime Grade malls and the development of new mega projects.
• Furthermore, we anticipate that market yields will continue to decline, although the rate of compression will be slower as the market approaches maturity in this particular cycle. The growth of rents is expected to counterbalance the increase in capital values, thus slowing down the pace at which yields compress.

Outlook: International brand expansion boosts Prime retail

• Retail leasing in Thailand is experiencing growth due to the influx of international brands. However, the country’s retail foot traffic growth relies on tourism. Amid geopolitical tensions, there is a potential for retail foot traffic growth to stagnate.
• Thailand’s top retail developers are poised to maintain market dominance due to their strong tenant relationships and capacity for creating innovative concepts. Nevertheless, they will also face pressures associated with mounting supply, as the forthcoming pipeline is anticipated to consist primarily of top-tier-grade offerings.