Bangkok’s booming retail real estate

February 28, 2012 / By

In years past, a trip to the mall, even for some basic shopping, often meant a serious commitment of time – because one would often be stuck in traffic and have to search for a parking space – and then face a lack of choice in terms of both products and brands. Over the past five years, however, Bangkok has welcomed 1.25 million sqm of new retail space in new centres across the city, an increase of nearly 25%, bringing the Thai capital much closer towards its goal of being a shoppers’ paradise.

While the Ratchaprasong area still hold the title of Bangkok’s core shopping district, with high-profile centres like Siam Paragon, Central World, Gaysorn Plaza, Siam Discovery, and MBK, all within walking distance of each other, other areas and retail formats have mushroomed across the metropolitan area. Hypermarkets Tesco Lotus and Big C continue to prosper in both the city and the suburbs. The increasingly ubiquitous neighbourhood malls attract residents from increasingly affluent local areas, while specialty retail outlets in locations easily accessible by foot traffic and mass transit stations are benefitting from the ongoing urbanisation of Bangkok. Meanwhile, traditional street-front retail shophouses are undertaking facelifts to remain relevant in the wake of losing customers to modern retail malls.

Driving this trend is continued economic growth, rising incomes, and higher disposable income. Despite numerous negative factors, for example, political turmoil, the global financial crisis and recent natural disasters, Thai consumption has expanded more than 40% this past decade. Better mass transit infrastructure, particularly the Bangkok Transit System (BTS) skytrain, and the underground Mass Rapid Transit (MRT), has made it much easier to get around the city. Higher density and more upmarket residential developments across the city have created new catchments supporting the viability of neighbourhood malls. Finally, competition among retailers, from both established local and new international brands, is resulting in more space being demanded to support their expansion.

So far, most retail projects have enjoyed good returns but the impact of rising rental income on this modern retail boom and the potential pitfalls ahead have yet to become evident. Success does breed competition, and Bangkok will see an all-time record amount of supply in 2012 with over one million sqm in new and renovated malls scheduled to come on stream. Recent success has attracted independent and less experienced retail developers. However, sustaining a successful retail development in Bangkok requires a high level of expertise, proactive management, and innovation. In the near term, the robust consumer demand will mask the lack of experience of these new developers. Over the longer term, however, it will be important for these smaller players to step up to the game through targeted product offerings and active tenant management to compete effectively with the leading Thai retail managers and sustain the city’s long term retail growth.

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