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While it remains questionable whether the Thai economy has bottomed out, continued development activity and a determination to keep rents stable reflect a more optimistic outlook from retail operators towards the Bangkok retail sector, Jones Lang LaSalle, a professional-services firm specialising in real estate, said yesterday.

Managing director Suphin Mechuchep said that over the past three years, the Bangkok retail market was hit hard by continued political unrest and the global and domestic economic meltdowns, all of which resulted in sluggish consumer confidence.

That sluggishness was reflected in the latest economic report from the Bank of Thailand, which said private consumption continued to contract in the first quarter. While the number of visitors to retail centres appeared unchanged, the centres reported lower sales.

In response to weak consumer confidence, retail-space rentals dropped further in the first quarter.

Jones Lang LaSalle's study indicated the average rental for ground-floor space in prime retail centres dropped slightly, from Bt2,079 per square metre in January to Bt2,046 in March.

Dan Tantisunthorn, head of research, said in fact retail rents had declined gradually over the past two years, due mainly to continued political unrest and economic problems exacerbated by the political turmoil. Retail operators reduced rentals further in the first quarter, in an effort to retain retailers.

"However, over the past few months, retail operators have tried to hold firm when negotiating leases with retailers," Dan says.

"This may be because sentiment in the Bangkok retail market has improved, with retail operators anticipating that the numerous marketing campaigns and government stimulus packages launched this year will help boost sales. In addition, the market continues to enjoy relatively low vacancy rates, particular in prime retail centres, where vacancy rates are averaging 5 per cent. We also continue to see certain retailers looking to expand business," he explains.

Late last year, US fashion brand Forever 21 opened a 3,450-square metre outlet in CentralWorld, and early this year Japanese speciality store The Loft announced plans to expand its space in Siam Discovery Centre to 3,000 square metres.

One factor indicating improving confidence among retail operators is an increase in development activity in the second quarter.

Central Pattana recently announced it would proceed with development plans for Central Rama IX after the project had been put on hold for years. Having seen no movement for some time, Mega Bang Na, a 464,000-square-metre shopping-complex project by Siam Future Development and Ikea, has kicked off its construction plans, with the development site now being cleared.

Depending on scale, construction of a retail development takes one to three years. Retail operators beginning construction now may anticipate overall economic conditions picking up by the time their retail projects are opened, Suphin said.

Bangkok's community-mall sector continues to grow. In the second quarter, Siam Future Development opened the first phase (about 24,000 square metres) of its new community mall, Nawamin City Avenue.

Three other neighbourhood malls are planned for completion this year: Monopoly Park (more than 6,700 square metres) on Rama III Road, K Village (18,000 square metres) in Sukhumvit Soi 26 and one by MBK Co on Rama IX Road.