Focus: Build it and they will come: Thai developers pour billions into retail
09/11/2018 08:07
* Developers have $4 billion in retail projects in pipeline
* Retailers confident tourism will pick up
* Landlords, shops urged to share data to increase spending
By Chayut Setboonsarng
BANGKOK, Nov 9 (Reuters) - Thailand's new ultra-luxurious
Iconsiam shopping complex opens its doors on Saturday, shrugging
off a decline in tourist arrivals and political uncertainty
ahead of next year's elections.
"I wanted to build something that would tell the million
stories of 'Thainess'," says Chadatip Chutrakul, chief executive
of Siam Piwat, the firm behind Iconsiam, a half-million-square
meter (sqm) complex sits on the banks of Bangkok's Chao Praya
River.
The retail sector is a rare bright spot in Thailand where
the economy lags regional peers, even while growing at 4.6
percent.
Developers have $4 billion in retail investments in the
pipeline, outstripping new projects in Jakarta, Singapore or
Kuala Lumpur. urn:newsml:reuters.com:*:nL3N1T735U urn:newsml:reuters.com:*:nL3N1S11VP
Retail sales growth reached a five-year high in August this
year, up 17 percent from a year ago, much of it in malls.
This growth may be the dominant factor in Chadatip's
rock-solid confidence. Bangkok is expected to add more retail
floor space than any city in Southeast Asia this year.
Siam Piwat’s malls at the centre of Bangkok's shopping
district were closed off at the height of civil unrest that
ultimately led to Thailand's 2014 military coup.
"There were mobs in front of our shopping centres...we
closed for three months - I survived," she said in an interview
with Reuters. "We announced Iconsiam three weeks after the
coup."
New retail projects are being planned even as Thailand
prepares for elections that senior government officials have
said would likely be on Feb. 24.
The elections will pit supporters of the military and
royalist establishment against populist political forces led by
the Puea Thai Party that was ousted by the military in a 2014
coup. urn:newsml:reuters.com:*:nL4N1XH3EV
Thailand's political turmoil discouraged tourism growth,
which also slowed after a boat accident killed dozens of Chinese
tourists in July, but these concerns have not deterred
developers. https://tmsnrt.rs/2PgR9wd
Siam Piwat's Chadatip says she believes there are good
opportunities in Thailand and tourism will recover.
MORE CLICKS WITH BRICKS
Even e-commerce in Thailand is turning to malls.
JD.com-backed JD.O fashion retailer Pomelo saw an untapped
customer segment after experimenting with pop-up stores, said
CEO David Jou.
"We found that some customers didn't feel comfortable making
their first purchase online, but liked our products."
The Bangkok-based startup, which has its fifth store in
Iconsiam, where e-commerce is growing, says physical stores
familiarise customers with products before they place digital
orders.
Shops create brand recognition and double as a pick-up point
for online orders, simplifying logistics, he said.
SHOPPING BUT NOT SPENDING
But with mammoth retail developments going up and Thai
household debt at 77.6 percent of GDP, some are questioning the
sustainability of recreational shopping.
"People like going to malls...but are they purchasing
goods?" asks Adithep Vanabriksha, Chief Investment Officer at
Aberdeen Asset Management (Thailand).
Bangkok currently has 7.5 million sqm of retail space with
another million in planned, nearly double what similar cities
have lined up.
This breakneck expansion risks creating a supply glut such
as seen in Kuala Lumpur and when foot traffic through malls
doesn't lead to sales, Thai retailers and developers are already
working together to boost spending.
Pomelo is looking into partnerships with stores to tap into
customer loyalty programs.
There must be data-sharing on footfall and spending between
landlords and tenants, which will require big investments in
data analytics, says James Pitchon, Executive Director of real
estate consulting firm CBRE in Bangkok, noting that "retail's
not dead, but it's very complicated".
CHANGING UP THE MIX
Another retail approach is to harness the convenience of
the mixed-use project.
One Bangkok, a venture of Thai billionaire Charoen
Sirivadhanabhakdi’s Fraser Property FRPL.SI and TCC Asset’s
$3.5 billion, will devote half of its 1.83 million sqm
development to offices, a quarter for retail, and the remainder
for hotels and attractions.
"We already have a captive population right there," Su Lin
Soon, CEO (Development) of One Bangkok told Reuters in an
interview.
Infrastructure investments and a government policy that
draws in foreign investors will also benefit the project, which
is expected to complete its first phase in 2022, Soon adds.
LA Staples-owner AEG and the Mall Group also announced $300
million in ventures including a 16,000 seat entertainment and
retail complex.
The challenge to Thailand's retail success is keeping
shopping centre visits engaging and fresh, says CBRE's Pitchon.
"You need a reason to go...and it has to be a unique
experience. Is it instagram-able?"
($1 = 32.8200 baht)
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Thai retail sales growth https://tmsnrt.rs/2QsTPUj
Thailand tourist arrivals by month https://tmsnrt.rs/2PgR9wd
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(Reporting by Chayut Setboonsarng, Additional reporting by Liz
Lee in Kuala Lumpur and Aradhana Aravindan in Singapore)
((Chayut.Setboonsarng@thomsonreuters.com; +6626506126; Reuters
Messaging: chayut.setboonsarng.thomsonreuters.com@reuters.net))