Retail companies spreading their wings and have potential to be global champions

The past quarter was an active and fascinating one for the retail industry in Thailand with significant developments outside of Bangkok and a consolidation within the hypermarket sector according to the latest report from Colliers International Thailand.

Since the takeover of Carrefour by Big C at the end of 2010 there has been the process of rebranding with the obvious change in name but also the beginning of a differention of hypermarkets by the addition of “Extra” to a number of both Tesco Lotus and Big C stores. “Extra” stores will contain more F&B and entertainment options and be slightly more upmarket as a result. According to Patima Jeerapaet, Managing Director of Colliers in Thailand, the new duopoly that exists in this sector may be positive. “The intensive rivalry between Boeing and Airbus for example, has led to dramatic efficiencies in aircraft manufacturing because of economies of scale being combined with fierce competition and the same may be applied to the Tesco Lotus/Big C situation”, he said.

Nearly 340,000 sq m of new supply of retail centre space is expected to be completed by the end of 2011. Notable additions expected for the Christmas shopping season include Central Rama 9 with nearly 90,000 sq m of space in what many are considering an emerging business district. Terminal 21, by Asoke BTS station will supply 35,000 sq m and hasten the elongation of the main retail thoroughfare from the beginning of Rama I to the Emporium and new developments by Phrom Phong station. “In five years there will be an extended shopping corridor covering six BTS stations that will be very positive for residents but also for tourism”, added Mr Patima. He also looked forward to the reopening of the rest of CentralWorld in Chit Lom at the end of the year after the damage caused in 2010. “It will be a great symbol of Bangkok’s spirit in the face of adversity”, he added.

Two community malls opened in Q2 2011 in which one is “The Junction” on Ratchada – Ramindra by SC Asset Corporation, located in front of their own residential project .The other mall is “The City Viva” by Sun Global Asset Co., Ltd. which had its official grand opening on 24 May 2011 and is located on Narathiwas Rajanakarin. In fact the total area of community malls is expected to continue to increase and is estimated to be around 700,000 sq m by 2013 compared to 300,000 sq m  in 2006. Antony Picon, Associate Director of Research at Colliers believes that community malls are becoming ubiquitous throughout Bangkok for good reason. “They cater for the needs of the growing condo community in the city and reduce the amount of car travel thus supporting the environment”, he said. Mr Picon also believes that the F&B component is vital for their success. “In many respects the community mall serves as a kind of focal point for new residential growth areas and so places to eat, drink and be entertained are a key component”, he pointed out. Mr Picon also mentioned that total area of community malls will match that of hypermarkets in a couple of years.

Occupancy levels and rental rates showed small gains q/q as the city shows continued signs of growing confidence and future stability after the elections could lead to even greater bullish sentiment. One of the interesting features is the expansion of Thailand’s retailers out of Bangkok and into the provinces and more importantly the region and the world. Central Group acquired La Rinascente, a leading department store in Italy which includes the iconic Piazza Duomo in Milan and the same company is making strides in China. Mr Picon is not surprised about Thailand’s retail giants spreading their wings. Due to the cooler weather, Europe’s retail experience is mostly centred in open air high streets and squares while the USA has the space for large but low level shopping malls. Constraints on land area and the tropical climate mean that tall air-conditioned retails centres are a dominant aspect of the retail market in Asia. “Developers have therefore significant challenges and also opportunities in Thailand’s cities and many have responded extremely well with very well designed malls that are able to drive shoppers up its many floors and thus command higher rentals throughout”, said Mr Picon. Mr Patima believes the retail sector can showcase the best that Thailand can offer. “Why not expand and show the world what we are made of?  Our retailers can be global champions”, he remarked.

The community mall is starting to become ubiquitous in Bangkok and it is forecast that by 2013 the total area will match that of hypermarkets. Mass transit line extensions and the growth of small clustered residential areas in the suburbs means the requirement for some form of shopping complex that can serve the needs of the local community. These retail areas represent an ever growing presence on the Bangkok shopping scene.

The take up rate in the all areas in Q2 made slight gains from Q1. The first half of the year contains many excuses for spending such as the January New Year holiday, Chinese New Year, Songkran festival and “Back to School” events and is a strong period for the retail industry which often reflects itself in higher take up.

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