By Pitsinee Jitpleecheep, Bangkok Post
04 January 2016
Massive investment in infrastructure is expected to brighten the Thai retail outlook in 2016 after a year of economic and consumer weakness. Retailers are pinning their hopes on growth returning to 2013 levels.
Retail sales growth is projected at 6% in 2016, up from an estimated 2.8% to 3% in 2015, said Chatrchai Tuongrattanaphan, director of the Thai Retailers Association (TRA).
Infrastructure projects and property tax incentives are among the factors expected to stimulate housing and retail development.
Among retail segments, supermarkets will continue to expand along with largescale shopping complexes in Bangkok's suburban areas. Retail developers are also looking to invest in many provinces, especially those being developed as special economic zones or bordering Asean neighbours.
The provincial market, particularly in the Northeast, has been attracting big retailers ahead of the launch of the Asean Economic Community (AEC) at the end of 2015.
And while the economy has not shown clear signs of recovery, at least 60 billion baht has been budgeted to expand various retail chains nationwide in 2016.
"Retailers will continue to expand their stores because they believe consumer purchasing power will improve after the enactment of various stimulus measures," Mr Chatrchai said.
Growth will be fuelled by investments from two major retailers, Central Group and The Mall Group.
CP All Plc, which runs 7-Eleven convenience stores, will spend up to 5 billion baht to open 600 new branches and renovate existing ones.
Other chains planning new stores include FamilyMart, Lawson, Boots, Watsons, Tsuruha, Tesco Lotus, Big C and Makro. Some retailers are chasing middleclass growth in provincial areas, where demand for beauty, fashion and lifestyle products is on the rise.
TCC Group, owned by billionaire Charoen Sirivadhanabhakdi, will play a bigger role in Thailand's 1.5-trillion-baht retail industry in 2016.
At least 17 new retail complexes in various formats will be built between now and 2020, including megaprojects at Sam Yan intersection, near Lumpini Park and in tourist destinations such as Pattaya and Hua Hin.
In the northeastern region, two large-scale retail complexes in Nakhon Ratchasima will come from Central Pattana Plc, the commercial property arm of Central Group, and Siam Retail Development Co, which runs Fashion Island on Ram Intra Road in Bangkok.
IconSiam, a luxury retail project on the Chao Phraya River, will see construction proceed in 2016.
Retail developers planning to set aside funds to renovate existing projects include MBK Plc, which runs MBK shopping mall, and Siam Piwat Co, operator of Siam Discovery and Siam Center. Central Pattana and The Mall Group will also improve their high-profile properties.
According to Colliers International Thailand, more than 10 retail projects (mostly community malls) will open in Bangkok in 2016, such as Happy Avenue in Don Muang and Suanploen Market on Rama IV Road.
The TRA forecasts that 72% of new retail projects in terms of store numbers will be located upcountry and 28% in Bangkok.
With the formation of the AEC, Thailand is being positioned as a key transport and logistics hub for the region. More than 1,000 brands from various product categories, especially fashion and food, are expected to parade into Thailand over the next few years.
At least 375,000 square metres of retail space will be added in Bangkok and suburban areas in 2016, bringing total retail space to 7.74 million sq m, said Sunchai Kooakachai, deputy managing director of Colliers International.
Another 574,000 sq m will be added in 2017, bringing overall retail space in Bangkok and suburban areas to 8.3 million sq m.
Big retail players will dominate further. Shopping malls will have the biggest share of retail space with 4.2 million sq m, followed by community malls and hypermarkets.
According to Colliers research, retail space and occupancy rates at new retail developments in Bangkok in 2015 increased the most when compared with other Asean capitals.
It said that 165,690 sq m of retail space was added to the market in the third quarter of 2015, with an estimated 186,500 sq m added in the fourth quarter by 10 new projects such as TCC Group's The Street community mall on Ratchadaphisek Road, Zpell at Future Park Rangsit and Central Festival EastVille on Pradit Manutham Road.
Community malls are the fastestgrowing retail segment, with an estimated 1.15 million sq m at the end of 2015, compared with 300,000 sq m in 2007.
As for overseas expansion, many retailers and manufacturers are still cautious about investing abroad without a clearer picture of life under the AEC. Analysts expect a wait-and-see approach from most Thai companies.
Rangsit Plaza Co, the operator of Future Park Rangsit, plans to cash in on opportunities from the AEC with a focus on northeastern Thailand, said chief executive Pimpaka Wanglee.
"Though many provinces in the Northeast are crowded with several modern trade operators, we will go in and focus on provinces that are linked to neighbouring countries," she said.
The first upcountry version of Future Park will emerge within the next five years, she said.
CP FreshMart, under the umbrella of Charoen Pokphand Group, is also eyeing the broader Asean market.
Central Group will remain the leader in foreign expansion in 2016. Apart from Vietnam and Indonesia, Central is studying Myanmar but is wary of unclear business regulations there.
Similarly, Siam Makro Plc, the operator of Makro cash-and-carry stores, is exploring the possibility of branching into Myanmar, chief executive Suchada Ithijarukul said after meeting with the Thai ambassador in Yangon.
"We have conducted feasibility studies in many Asean countries, with Myanmar, Vietnam and Indonesia being the priority destinations," she said.
The TRA's Mr Chatrchai said it would probably take three years to see a significant effect from the creation of the AEC. In 2015, the Thai retail industry fell short of expectations and the TRA cut its full-year sales growth projection to 3.2%, compared with 6.3% in 2014.
The decline in retail sales growth stemmed from the combined impact of mounting household debt, drought and the slow pace of government investment, said TRA president Jariya Chirathivat.
Sales at convenience stores and hypermarkets rose by 2.8% and 1.5% respectively in the first half of 2015. Specialty store sales rose by 2.7%.
Supermarket sales, however, grew by 8.5% as middle-class purchasing power began to improve.
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