Competition increases in Bangkok retail-property market

Competition increases in Bangkok retail-property market

8 April 2019

Competition is increasing in the Bangkok retail-property market, according to international property consultant CBRE.

The competition is focused on the bricks vs clicks sector as e-commerce grows, and the bricks vs bricks market, as developers build new malls.

“All over the world, e-commerce is challenging traditional retail stores, and Thailand is no exception,” said CBRE in a report.

Currently e-commerce only forms a small percentage of total retail sales in Thailand, but CBRE expects that to change rapidly.

In the UK, 18 per cent of retail sales are now online rather than through traditional stores.

Globally, retail tenants are having to pursue an omnichannel approach with both online e-commerce sales and offline traditional sales in stores. In many cases, this has led to a rationalisation of their retail portfolio and a reduction in the number of stores.

In the Bangkok retail-property market, the threat to landlords is not just from the rise of e-commerce, but also from the increase in supply.

Based on the latest survey by CBRE Research, there is more than 600,000sqm of space under construction due for completion by 2023, mainly in large-scale shopping malls like EmSphere, Bangkok Mall and One Bangkok. There are also new malls being planned where construction will start soon, such as the redevelopment of the Dusit Thani Hotel.

Competition in the Bangkok retail-property market is going to be fierce and landlords are going to have to adapt to the new environment to survive. That, according to CBRE Research, will mean big changes to their business model.

Historically, landlords have leased out space on three-year leases at monthly rents. Landlords have set rents based on the tenant’s ability to pay driven by business type, size of shop, which floor in the building and which location on the floor. Landlords have tried to extract as much rent as the tenant can afford to pay with the tenant bearing the obligation of a fixed amount of rent and assuming much of the business risk.

Source: https://chandercaller.com/2019/04/08/competition-increases-in-bangkok-market/