An aerial view of the shopping area of Ratchparsong intersection where many department stores are located within walking distance. (Bangkok Post file photo)
Retail space supply in Bangkok is continuing to grow in 2017 despite the challenges faced by operators from low purchasing power and the growing trend in online shopping.
Colliers International Research expects about 300,000 square metres of new retail space to enter the Thai market this year.
"Shopping malls have multiplied in numbers over the past few years, and currently occupy the highest share in the retail supply in 2017-18," said Surachat Kongcheep, associate director at Colliers International.
Around 114,350 sq m of new retail space opened in the first half of 2017, pushing the total retail area in Bangkok to over 7.6 million sq m. The recently added space mostly covers new malls and office buildings in the Bangkok outer city area, which comprises over 60% of total retail supply.
Although Thailand's economy has not fully recovered in 2016-17, many developers are still continuing to develop new retail projects as long-term investments.
Show DC shopping complex is the only large retail complex to have opened so far this year.
According to a source at Iconsiam, the developer has postponed the opening of the Iconsiam Project, a 750,000-sq m retail space on the Chao Phraya River, from this year to next year. Takashimaya, a luxury department store in Japan, is one of the company's main anchors.
Mr Surachat added that the growth of community malls, which boomed in Bangkok's retail sector in 2014, started to slow down from 2016 because of developers' lack of expertise in the retail business.
As of the second quarter of 2017, shopping malls in Bangkok and surrounding areas covered 4.4 million sq m, or 58% of the city's total retail supply which is about 7.6 million sq m.
According Colliers' research, the major players in the retail sector will continue to increase the number of shopping malls in Thailand, especially in major cities, while other retailers will focus on expanding their portfolios internationally.
Mr Surachat said that despite the weak spending power, most hypermarkets, speciality stores and large shopping malls in Bangkok's suburban areas are currently at a 100% occupancy level.
Occupancy rates in all retail categories in the second quarter of this year were nearly the same as those in the previous quarter, at rates above 96%. Most of these areas are occupied by hypermarkets and surrounded by speciality stores and entertainment complexes.
Meanwhile, shopping malls also show high occupancy rates due to their popularity for local and international brands.
"Total retail area in Bangkok has quickly risen within the past quarter due to the addition of many new office buildings," Mr Surachat said.
Office buildings have added retail areas in addition to office space to serve as tour and travel services, convenience stores and dessert cafes.
Average rental rates of all locations in Bangkok in the first half of 2017 have risen by 5-10% from 2016. Large shopping malls have the highest rents, due to them being expensive projects designed to serve a wealthy demographic, according to Colliers.
Rental space in Bangkok's city area can add up to more than 3,000 baht per sq m per month, especially in centrally located shopping malls with direct access to BTS stations.
Meanwhile, community malls located beyond the main roads have much lower rents. Rent in these areas start at around 800 baht per sq m per month.
Despite the increasing average rental rate, Bangkok's community malls in suburban areas are unlikely to increase their rents in the next two quarters due to their decreasing popularity among suburban shoppers, said Colliers.
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