Bangkok retail rents won't recover until end-2022: JLL

The lack of direct government support for retailers will definitely take its toll on the sector.

According to JLL, net absorption in Bangkok’s prime grade retail centres in 4Q20 totalled more than -11,000 sqm as a number of small tenants in centres like Terminal 21 and CentralPlaza Rama IX that rely on tourists and expats for foot traffic moved out.

At the same time, F&B brands continued to underpin new leasing activity across the market with notable 4Q20 openings including Garrett Popcorn, Tim Ho Wan, Beard Papa’s, gram, Bonchon and Taco Bell.

No new supply completed in 4Q20

Prime grade stock remained unchanged at 3.5 million sqm. The latest new prime grade project to open was the retail podium at The PARQ which completed in 3Q20. The next prime project in the pipeline is the second phase of Siam Premium Outlets, scheduled to open in 1Q21. However, we expect the opening to be postponed in relation to the COVID-19 situation.

With negative net absorption in the quarter and no new supply, the vacancy rate increased to 3.9% in 4Q20. Most brands that handed back space in the quarter were domestic brands and operating in the fashion segment.

COVID-19 continues to exert downward pressure on rents

Prime grade gross rent decreased by -2.9% q-o-q while net affective rents declined by -3.3% q-o-q in 4Q20. Rents are continuing to slowly decline as centre operators seek to maintain a full house to entice guests to visit.

Capital values rose by 1.0% q-o-q in 4Q20 as operators continued to make investments in technology, materials, and human resources required to conform to government-mandated COVID-19-related hygiene practices. That said, capital values, declined by -10.0% y-o-y, impacted by the loss of revenue due to COVID-19.

Outlook: Hard times should persist for the forseeable future

The Thai government continues to waver on how it intends to stimulate domestic spending and facilitate the return of foreign tourists. The lack of clarity around stimuli and the lack of direct support for retailers is likely to negatively impact the sector over the coming quarters. We do not expect rental values to reach pre-COVID-19 levels until the end of 2022 at the earliest.

Two new projects are expected to complete in 2021 including the second phase of Siam Premium Outlets and The Mall Ramkhamhaeng 2, which is being redeveloped from the ground up. The completion of the two projects will increase stock to 3.6 million sqm by end-2021. The new wave of COVID-19 transmission in December 2020 is expected to affect the completion and opening dates of both projects.

Note: Bangkok Retail refers to Bangkok's prime retail market.