Thai retail property industry must take into account changing preferences
February 24, 2014 00:00 By Pichaya Changsorn The Nation
Since consumers nowadays convenience their top priority, Thailand's retail property industry still has a long way, a shopping mall consultant said.
Despite the mushrooming of community malls and other retail outlets over the past few years, consumers still choose convenience over prices owing to traffic congestion and other such problems, Veena Arunyakasem, managing director and founder of One Click, a shopping mall and property development consulting company, said last week.
This presents a vast opportunity for developers of commercial property such as condominiums and office buildings to incorporate retail shops and service facilities into their projects to serve their occupants and tenants.
“They should ride on this new trend that will help them reap more revenue, especially with projects that are located far away from existing shops,” she said.
Many office building owners still have not made full use of their available space on the ground level to accommodate retail shops, food courts and service facilities, or have not done so in a professional manner that will help improve the quality of life for their tenants.
Leading hospitals such as Bangkok Hospital are stepping into the commercial property business by leasing out space to Starbucks, Au Bon Pain and other shops. Bumrungrad Hospital is constructing a building that is more or less a shopping mall within its premises.
“Interestingly, it also has a hotel offering packages bundled with healthcare treatments.”
Even universities are now running their own malls. Bangkok University has already opened one while Thammasat is planningg one.
“They have 40,000-50,000 students who have purchasing power and are ready to spend all they have,” she said.
Flea markets are also booming and the trend will continue as long as new housing estates and communities continue popping up. A flea market operator in Bangkok said he earned Bt1.6 million a month from utilising his 3.5 rai of land. To serve the new generation of consumers, more flea markets should be developed with unique themes, cleanliness and fresh designs.
Retailers expanding to meet demand
On the demand side, many retailers are still expanding, including newcomers like Lawson and existing operators like 7-Eleven.
Commercial rents in major cities such as Phuket, Chiang Mai and Samui are also continuing to rise.
Internal rates of return for commercial property projects are normally higher than 10 per cent and can go even up to 50 per cent in some cases. Zeer Rangsit, for instance, reports 50-per-cent ebitda (earnings before interest, tax, depreciation and amortisation) on sales of Bt400 million-Bt500 million per year.
Developing commercial property projects is more complicated and requires longer commitment than residential projects because many more issues have to be dealt with including construction permits, public hearings, mall operations and management, as well as pre- and post-marketing.
“But after reaching the breakeven point, it can be a cash cow. Millionaires can be made from a vacant space,” she said.
Targeting landlords and existing shopping mall operators, One Click will arrange a seminar on “You have the land, we have the way” from April 1-2 at the Swissotel Le Concorde Bangkok. Featured speakers include Sopon Pornchokchai, president of the Agency for Real Estate Affairs; Suvapa Jreanying, managing director of Thanachart Securities; Jakarin Kerdsamutra, legal director at Central Corp; Anchalee Pattana-anantsuk, general manager for leasing development at The Mall Department Store; and Sittichai Gasornsombat, deputy managing director of DNA 2002 Plc.