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Shopping to Economic Recovery

Posted by niveth-admin on January 9, 2020
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Shopping to economic recovery

While the economy is hardly booming at present, the reality is that business still continues, albeit at a slower pace, and major players across all sectors recognize that they need to keep planning for the future.

Bangkok remains the centrepoint in the country, but the imminent start of the Asean Economic Community (AEC) at the end of the year means focus is also directed towards other major centres such as Chiang Rai, Tak, Nong Khai, Nakhon Phanom, Mukdahan and Songkhla.

Tourism has once again proven to be the mainstay of the economic ship during the first half of this year and the retail industry in Thailand is banking on this trend continuing well past the 31 December start date for the AEC.

Although political turbulence dominated the first few months of 2014, figures showed that tourists spent 37.5 billion baht on shopping by the end of the calendar year, the second-largest expenditure after hotel accommodation.

The World Tourism Organisation has forecast that the approach of the AEC will increase the numbers of tourists visiting the Southeast Asian region to 120 million people in 2015. Just why the advent of the AEC would produce this effect is not clear; although if the figures are correct then the result will be almost a 50 percent increase in tourism numbers over 2014. [1]

Although the export sector has contracted by almost four percent in the first quarter of this year, the bright spot for the Thai economy has been in the quite tremendous surge in tourist numbers, up by a whopping 23.9 percent for the first four months of this year to 10.3 million arrivals.

These sorts of numbers mean it is no real surprise that leading retail firms are prepared to invest quite substantial sums in building shopping malls. Prime retail locations in Bangkok, such as Ratchaprasong, Siam Square and Sukhumvit, are being consistently transformed by the retail sector.

For example, The Mall Group in particular is currently shaping a new shopping district in the Sukhumvit area of Bangkok. It, along with other retail developers, are expecting to add around 250,000 square metres of shopping space in the capital by the end of 2017.

property graph thailand

The Thai Retailers Association believes the industry will grow by around 6.3 percent this year, compared to its sluggish 3.2 percent growth in 2014, with Bangkok accounting for 28 percent of total retail sales in the country. [2]

The other 72 percent of retail sales will come from some greatly expanded developments in all corners of Thailand, mainly centred on the new Special Economic Zones (SEZs).

A survey by the Bangkok Post earlier this year revealed that at least two million square metres of retail space is under development in tourist cities and border locations, from shopping malls to cash-and-carry stores, and hypermarkets to community malls.

The main centres for this rapid expansion include Chiang Rai, Chiang Mai, Khon Kaen, Udon Thani, Nakhon Ratchasima, Ubon Ratchathani, Rayong, Chonburi, and Mukdahan, as well as the city of Hat Yai in Songkhla province.

Much of this retail expansion is due to the massive infrastructure programs which are intended to bring Thailand well and truly into the twenty-first century in terms of mass transit, with high-speed railways and expanded highways, all aimed at creating transport corridors that will connect Malaysia and Myanmar with Laos, Cambodia and on to Vietnam and southern China.

Figures released by the supermarket chain Tesco-Lotus reveal to some extent the increased prosperity being witnessed in many of the border provinces. ‘Spending per bill by customer in border locations connected to Laos, Cambodia and Myanmar such as Tak, Mukdahan and Nakhon Phanom is 600 baht, nearly double the average for other provinces.’ [3]

Nonetheless, Bangkok still remains the one place where developers believe they can make substantial and ongoing profits. The expansion of the mass-transit facilities are viewed as primary reasons for the continued interest of retail developers.

For example, at the end of June, BTS Group Holdings submitted a plan to the Ministry of Transport that it be allowed to develop land owned by the State Railways of Thailand (SRT).

BTS officials met with the Minister of Transport and outlined a 10-billion baht development plan that would encompass four projects across 359 rai of SRT land.

The four projects would be: 1. The construction of a 5,000-unit condominium for SRT employees; 2. The development of a retail centre; 3. Create a public park; and, 4. Develop accommodation for middle-income people as well as leaving enough room to develop commercial space. It is the latter area where BTS Group Holdings would expect to make a return on their investment over time. [4]

BTS also said they would invest in constructing a monorail which would be linked with mass transit lines for greater local mobility.

The response from the SRT was that the BTS offer is ‘attractive because it gives [a] minimum income guarantee in exchange with [for a] 50-year concession. We are considering BTS’s proposal carefully [but] we cannot grant the benefit solely to [a] private firm. Once we…get a final conclusion, we should hold…bidding as per our rules.” [5]

Elsewhere, so-called community malls are proving to be popular with retail developers. An estimated 25 new community malls, covering 320,000 square metres, were due to be developed and opened this year, with 14 of these in western Bangkok and six in the northern part of the capital. Four western-based community malls opened in the first quarter of this year.

Space occupied by community malls grew by a whopping 83 percent from 524,370 square metres in 2010 to 962,410 square metres in 2014.

According to figures from Colliers International (Thailand) Co., Bangkok had 6.88 million square metres of total retail space at the end of last year. Shopping malls, not surprisingly, accounted for slightly over four million square metres, followed by community malls and then hypermarkets at almost 817,000 square metres, specialty stores just over 414,000, and department stores at nearly 290,000. The remainder is made up of supporting retail and entertainment complexes [6]

 

[1] Property Focus 2015, Bangkok Post, p.34

[2] ibid, p.36

[3] ibid.

[4] http://www.dealstreetasia.com/stories/bts-in-talks-with-thailands-transport-ministry-to-develop-srt-land-8474/ accessed 30/6/15

[5] ibid.

[6] http://www.colliers.co.th/research-publications/detail-research.asp?rsch_id=463&link=market-reports.asp&link_txt=Market%20Reports&strRsch=Market%20Reports , accessed 30/6/15

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