Strong growth of Bangkok’s shopping centres in the second half of 2023 – Knight Frank

Market Overview:

The disruption caused by the competition for market share from E-commerce businesses, compounded by the COVID-19 crisis, has presented significant challenges for the Bangkok Shopping Centre Business sector in Thailand. However, the Bangkok Shopping Centre Business has made a robust recovery in the second half of 2023, driven by a resurgence in foreign tourism. Bangkok’s shopping centres, including those operated by Central and Robinson groups, command approximately 27% of the market, closely followed by hypermarkets at 28%. The Mall Group holds a 5% share, Siam Piwat 3%, LH Group and Seacon Square 2% each, and Future Park 1%. Other groups collectively account for about 32%.

Net Leasable Area (NLA):

By the end of fiscal year 2023, the NLA of Bangkok Shopping Centre space in downtown and midtown areas totaled 3 million square meters. Downtown areas concentrate 56% of this space, with the rest distributed in midtown areas like Silom-Sathorn (13%), Ratchada (10%), Sukhumvit-Phetchaburi (6%), Ramkhamhaeng (4%), and Phaya Thai-Bang Sue (4%). The market saw a significant addition with “The EmSphere” near BTS Phrom Phong Station, offering over 200,000 square meters of retail space.

Adaptations During the COVID-19 Crisis:

From 2020-2021, the pandemic forced a 30%-40% drop in shopping centre revenues due to consumer behaviour shifts and travel restrictions. Rent reductions of 30%-70% were necessary for survival. The business model shifted to Gross Profit (GP) arrangements, and vacant spaces were used for market events to generate revenue.

Recovery and Growth:

Since mid-2022, easing restrictions and reopening borders led to improvements. By the end of 2022, rental discounts reduced to under 15%, with large downtown centres recovering quickly. In 2023, the return of international tourists, reaching 71% of pre-crisis levels, spurred significant recovery. Service usage exceeded 80%, and rental discounts decreased to no more than 4%.

Revenue and Profit Growth:

Shopping centres saw a 43% revenue growth and a 38% profit increase compared to pre-COVID-19 levels. Total revenue reached approximately 1.2 trillion baht by the end of fiscal year 2023, with profits around 250 billion baht.

Key Factors Driving Growth:
 

1. Return to Office: Over 70% of employees unable to work from home have returned to offices.
2. Strong Partnerships: Establishing brand strategic partners leading to over 90% rental rates.
3. F&B Dominance: Increased space allocation for food and beverage outlets.
4. Medical Tourism: Leveraging Thailand’s reputation in healthcare with medical and beauty clinics.
5. Tourist Spending: Increased spending due to visa-free policies and tourist preferences for offline shopping.
6. Events and Influencers: Celebratory events and influencer marketing boosting tourism and footfall.
7. Mobile Apps: Enhanced online shopping experience with rewards and discounts.
8. Global Partnerships: Expanding business ecosystem partnerships with international shopping centres.
9. New Developments: Large-scale township projects, such as One Bangkok, The Forestias, and DUSIT CENTRAL PARK, support economic transition and integrate various real estate businesses.

Mr. Nattha Kahapana, Managing Director of Knight Frank Thailand, stated “The Bangkok Shopping Centre Business is set to expand by no less than 650,000 square meters in 2024, primarily through large-scale township projects. Fresh markets and modern flea markets may emerge as indirect competitors due to their lower costs and flexibility. Additionally, new VAT laws on goods under 1,500 baht will enhance fair competition, benefiting local entrepreneurs despite potential consumer price increases.”

For further information, please contact Nattha Kahapana, Managing Director of Knight Frank Thailand as the details below.