Thailand’s retail sector continues its struggles as the economic slowdown as well as weak consumer spending and confidence during the first half of 2015 contributed to another lacklustre performance, according to CBRE Thailand. Community malls in particular have seen growth slow after a significant rise over the past few years.
CBRE noted that during the last five years, community malls expanded in Bangkok at an average growth rate of 32 percent per year, compared with an average growth rate of five percent per year in overall retail supply. Bangkok saw 200,000 square metres of community mall space open last year.
However, there has been a significant slowdown in the number of new community malls announced in 2015 with less than 100,000 square meters schedule to be completed by the end of the year. There are several reasons this slowdown has occurred including small developers, who have built most of the community malls around Bangkok, now understanding the challenges of operating them. More conservative bank lending and the banks increasingly only lending to experienced developers could be another reason behind the slowdown, CBRE added.
International luxury brands from Europe and the United States looking for space in downtown Bangkok led the demand in the second quarter in the retail sector while domestic retailers continue to slow down expansion. Construction continued on many new shopping centers that will continue to add to Bangkok’s supply of retail property stock. Most of these projects will be finished during the next three years.
The large supply will add to already growing property stock and continue to increase competition in Bangkok. Many landlords are renovating their existing malls as they hope attract new brands, which in turn brings more consumers to the mall. Central, The Mall Group, Siam Future, and Siam Piwat have all announced plans for developments and if they do go ahead and there is little improvement in the economy, then competition for tenants will become heated.
Online retailing has started to emerge in Thailand and is another area to keep an eye on. Investment in the E-commerce sector have started and CBRE said they expect that “clicks“ will start to compete with “bricks”, further hitting shopping centers that fail to adapt.
